Blain’s Morning Porridge – Friday 13th October, 2023: Will a new Labour Government boost the Investibility of the UK?
“I beseech you, in the bowels of Christ, think it possible you may be mistaken.”
It seems to be the fate of The Labour party to inherit a nation riven by the consequences of previous governments. What is the likelihood Sir Keir Starmer will be able to steer the UK back into relevancy and attract foreign investment?
Am I unique in that I spend my days in a state of ongoing mild anxiety as I ponder how wrong I might be? I admit I make a lot of mistakes. My finger hovers over the delete button for longer than you’d think each morning as I scribble the Porridge. (If only I had a similar facility for when I speak….!) I fear what I write makes me look even more an idiot that I suspect I already am… I admit to being human and my capacity to er (and um). Oh well… pen to paper once more…
…….
Friday 13th? Bring It On!
That was a long week. It was dominated by events in Israel/Palestine, meaning it was possible to miss important details; energy, gas and oil prices, entrenched US inflation, the essentially ungovernable US because of a tiny number of malcontent Republicans (much the same as triggered crisis in Israel and Brexit), Kennedy Jr quietly ensuring a Trump Victory next year, and China’s economy remaining strained.
It’s therefore almost a relief to return to my small island at the unfashionable end of Europe, and to consider the implications for the investibility of the UK following the Labour Party Conference. I’m relatively positive.
This week’s Labour Party conference looked triumphal. (Caesar, remember thou art mortal.) Some of the press assume it’s a done and dusted win – even that Labour looks like it’s in Government, and it’s the Tories who are the ones struggling in opposition. Labour like to sing: “Things can only get better”, and they may even succeed because they will be starting from such a low base….
Labour winning the next election should be a slam-dunk. The outcome of 13 years of Conservative government is dire. In typical British style we muddled through, survived the Pandemic, and demonstrated to the World no one can do Pomp and Circumstance like we can, before tripping over our own shoelaces on the Trusserf*ck.
The reality is Brexit triggered the end of the Conservative’s political competence – the business of delivering Brexit and running the nation was neglected in the internal power struggles that followed. Again; I recommend Laura Kuensberg’s excellent State of Chaos BBC series.
I blame Labour for the Tory failure. If they had done their job as Her Majesty’s Loyal Opposition, they would have kept the Tories in check and focused on the economy. Instead, they factionalised and elected the unelectable Jeremy Corbyn as leader – a man the nation considered a worse choice than Boris. (If, only we’d known…. I joke. Boris was only the second worse choice of leader.)
The story of the past 13 years has really been about the broader failure of the UK political dualism, leading to economic confusion and dither. Most folk agree it’s time for change. Maybe this time things will get better.
But a Labour victory is not a done deal. There are multiple hurdles still to overcome:
- Labour has talent for seizing defeat from the jaws of victory.
- There is the small matter of winning 124 seats (a huge number) to achieve a modest majority. Scotland is not a given.
- Winning just because the other side has been so bad is no substitute for policies that will enable the UK recover.
- Remaining in power for 2-3 electoral cycles to enact the changes Sir Keir Starmer has sketched to reform and rebuild Britain will be a challenge in front of a UK electorate that’s sick of politics and sceptical of politicians.
- And there is the risk that a small Labour majority will give the extreme left a platform to dominate policy – dooming Starmer to failure.
If I was an international investor looking at when to buy UK Inc – because its basically cheap – I’d be looking closely for clues from the following:
- How big a majority Labour are on course for – the bigger the better to silence the left, and bear in mind Polls have been increasingly wayward in recent years as voters hide their truths?
- How solid is Starmer’s control of the party? (The ungovernable state of the Conservative party was its downfall – that and a succession of dismal leaders: Theresa, Boris and Lizzie.)
- How detailed, considered, costed and executable are Labour policies – can they deliver in a way the Tories forgot to while overseeing the business of government? Are Labour ministers going to be up to the job?
- Will the electorate give them time? The young will, rightly or wrongly, remain focused on the environment, net-zero, equality and justice, while the olds want their pensions protected.
- What are the dangers to the UK’s virtuous sovereign trinity: will a return to competent UK politics strengthen Gilts (allowing govt to fund change through costed borrowing) and Sterling (on the basis the UK returns to economic relevance and strength)?
Labour starts off with an advantage. It’s not just UK voters who have had enough of the Tories. UK business supports Starmer – fed up with the dither, policy chop’n’change and the failure of Tory ministers to engage with the business of running the country. I was talking with the CEO of one of the largest UK companies a while back and he told me: “If the UK was managed by a board, they’d have been thrown out years ago.”
The electorate are more stuck in their ways. Conventional wisdom in the Troy Shires holds that Conservative Governments are good for markets and business, while Labour Governments are bad because they espouse socialism, are anti-commercial, anti-wealth and are all free-spending Woke worshipping trannies hell-bent of handing the nations wealth to LGBTXYZ+ and Terrorist causes.
Conventional wisdom is not always to be trusted. Even arch-Tory tub-thumpers admit the current Conservative government is “Woeful” to cite Alison Pearson of the Torygraph. I know a number of Conservative politicians, and privately not one of them thinks they will win the next election. Off camera they accept their time is over. If they win, it will be a fluke.
As Sir Keir Starmer pointed out in his mildly impressive Conference Speech the three great Labour governments – in 1945, 1964 and 1997 – triggered new phases in UK growth: Post War reconstruction and avoiding the despair of the 1920s, relevance, technological investment and the genesis of consumer society in the 1960s, and the renewed confidence of Cool Britannia under Tony Blair in the late Nineties. Each of these government’s inherited a nation suffering extreme trauma: of War, Suez and the long-term consequences of Margaret Thatcher.
Yep, criticising Thatcher is the ultimate Heresy. You can lay many of the issues facing the UK at the Iron Lady’s feet; the distrust of Europe and “foreigners”, the illusion of affluence funded by mortgage and credit-card debt, house price inflation, the dearth of industry, the financialisation of the London-centric economy, and the threat of break-up of the Union, plus many, many more.
All UK governments eventually fall – brought low by events and voters hankering for change. My sense is Labour has only ever countered the consequences of previous Conservative governments This time, arguably, a new Labour government inherits an even wider polycrisis to resolve, even more so that rebuilding shattered and broke Britain in 1945 – which, to be fair, it set in motion rather well.
The at a glance list of “stuff” on the to-fix list of neglected Britain that This time Labour has to solve is massive, and can’t be done without changes in taxation and spending priorities:
- Brexit consequences – trade, Europe, polarisation, Ireland, Union.
- UK relevance in World – trade, alliances, geopolitical heft
- Domestic Infrastructure – Utilities, Road, Rail,
- Society – The NHS, Education, Care, Social Justice, Welfare, Equality,
- Security – Defence, Migrants, Law and Order
Personally, I would urge readers to be cautious about my political pontifications. I’ve made spectacularly foolish decisions on my last visits to the poll booth, voting for Brexit and Boris. These turned out well then….
But.. hey ho, and on we go..
Out of time, back to the day job, and enjoy a fantastic weekend of World Cup Rugby. Sorry England, but I’m wearing my new Fiji Shirt on Sunday.
Bill Blain
Strategist – Shard Capital
8 Comments
Comments are closed.
Just to say it is not fair to criticise Mrs Thatcher for being anti-European – she was a driving force for the single market that has driven growth and prosperity since….
Between Thatcher and John Major we got a really good deal from Europe.
Close alignment with EU – even entry to the single market – could on its own boost growth by up to 4% pa.
“Consequences of Thatcher” is what I wrote.
Historically we all know Thatcher loved Europe, had a portrait of Louis 15th on the wall, a bidet in No 10, loved brie and bagettes, and spoke only French at home with Dennis and the kids.
However, when she postured all hard and steely while she seduced the fight-them-on-the-beaches rabid-little-brittan Tory Party, somehow they mistook her professed love of Europe (her criticiscms being the kindly advice of a loving aunt to her errant European nephews and nieces), as a distrust of Europe.
And so it became the mistaken haddith of the party.. I have watched Tory MPS scream at each other in the Reform Club (yes, I managed to envagle myself in a few times) at what Thatcher would think about how awful Europe is.
THe fact is – whatever Thatcher really thought and achieved as a voice of European sanity, (and I agree with your comment broadly), much of the party believes it is their duty to remain profoundly sceptical of Europe.
Such is the tragedy of The Iron Lady…
BB
I am no expert on British politics, but an English dissident said that he feels Starmer is at least saying all the right things after a rocky start. This fellow compares Starmer to Blair (whom he considers a master at wielding power and political control). And the economy did pretty well under Tony Blair, So if Kier Starmer can convince enough Tories that he’s “New Labor” and not some crazy radical, he could win and get the economy chugging. I don’t know whether there’s another Gordon Brown available to help Starmer, and succeed him.
There are a new breed of Labour thinkers coming through. Rachel Reeves as chancellor is getting high marks. However, any party only has a few years to succeed. Labour will ultimately prove as tired and bankrupt of ideas as the Tories. Its a never ending cycle.
Hi Bill,
It’s a funny coincidence that you wrote this post. I have been saying to people over the past few days that I think so much of the discount applied to the UK stock market relates not just down to Brexit, anemic economic growth, or the composition of the FTSE, but also the political incompetence we have endured for much of the past decade.
While the broader issues facing the UK stock market (and economy) are deep-rooted and more structural, I do think that a change of government (and, to be fair, some of the recent reforms announced by the present government may help) could act as a catalyst for both domestic and international investors to reappraise the UK market, removing some of the negativity that persists.
However, as you noted, Labour does have a talent for stealing defeat from the jaws of victory…
Timing wise, writing about Labour this week was…. “predictable”. :)
Haha – of course.
Chancellor Reeves would have a lot she could ‘kitchen sink’!
Bill: “Am I unique in that I spend my days in a state of ongoing mild anxiety as I ponder how wrong I might be? ”
Your creative angst is what makes you one of the most readable financial commentators. As they say, Wall Street climbs a wall of worry.
In this environment anyone without feeling of anxiety is a Mug.