Can Reeves Plug UK Fiscal Hole Without Raising Taxes?

Bloomberg

Watch Can Reeves Plug UK Fiscal Hole Without Raising Taxes? - Bloomberg on Dailymotion

Transcript

00:00I was very interested to see the guilt market reaction after that unusual or extraordinary speech that was last Tuesday, was it?

00:07Feels like a long time ago, yeah.

00:08Feels like a long time ago.

00:09So that tells us a lot.

00:11The guilt market wants to see this fiscal gap filled.

00:16And tweaking at the edges with sin taxes and all...

00:20But they're tweaks, aren't they?

00:21They're tweaks.

00:22They're not meaningfully going to fill this gap because you need to get that headroom filled.

00:27You don't want to be sitting on a £9.9 billion headroom.

00:32It's not enough.

00:33It can be wiped out very, very quickly.

00:35And I think the guilt market response this morning will be very interesting for sure.

00:39They are really...

00:41I think the attitude is let's just fill this gap now, raise income taxes, freeze those income tax thresholds,

00:48make more meaningful policy measures that can actually bring in some revenue

00:53because it's very difficult for them to cut spending, welfare spending.

00:57Given the pressure from the left, obviously there will be pressure from other parts of the...

01:03They're probably concerned about by-elections next year.

01:07There is a very difficult position to be in.

01:10But that's what Mark Dowding was telling us the other day from RBC Blueberry.

01:13He's like, yeah, they can raise taxes, but actually what the guilt market really wants to see is cuts.

01:17Spending cuts.

01:18See spending cuts.

01:18But also you've seen the market street respond to some of these political jitters,

01:21which I thought was interesting.

01:23You saw it in Pound Weakness.

01:25You saw these, you know, rumored or alleged kind of coups on Starmer from Streeting and others.

01:30Do the politics matter here?

01:32I think it does.

01:33I think at the moment these are all rumors.

01:35There's nothing concrete just yet.

01:37I think the market would be very disturbed if we have a change of leadership or change of Chancellor.

01:42We saw that just a few months ago when there were rumors around Chancellor Reeves' position.

01:48The guilt market sold off quite quickly.

01:50And that was a clear signal that we want someone who's going to be, as she said, ironclad about the fiscal rules.

01:55The fiscal rules are very important in all of this.

01:58What if she's not ironclad?

02:00I think that would be very dangerous in terms of how the debt burden will suddenly increase if guilt yields go up.

02:06And I think the fiscal rules can't be touched.

02:08So where do you make the maneuver?

02:11It will have to be in the manifesto pledges.

02:14Otherwise, if those pledges aren't broken, it's going to be very difficult to pull together these tweaks to fill that hole.

Category

Transcript

Be the first to comment

Recommended