Mel Stride: Markets have issued ‘damning verdict’ on Labour
Shadow chancellor Sir Mel Stride is set to claim that markets have issued the Labour government a “damning verdict” after continual leadership speculation and tax rises, warning that taxpayers will be left on the hook.
In a speech at the Centre for Policy Studies, Stride will argue that investors have taken an ill-view of the government’s economic policies, linking higher gilt yields to the government’s instability.
His comments echo similar warnings made by Reform UK’s Robert Jenrick, who used a video on X to warn that Labour’s political turmoil was costing taxpayers more.
But Stride’s speech will represent the current Conservative Party’s renewed effort to distance itself from the Liz Truss era, when a violent bond market reaction to the mini-Budget led to her resignation in 2022.
He will tell think tankers that traders have added a “Burnham penalty”, referring to the Manchester mayor’s bid to return to parliament and challenge Sir Keir Starmer.
“Markets do not care about personalities – they care about the fundamentals,” Stride will say.
He will blast Burnham by suggesting that markets view a “new Prime Minister coming in with a plan to borrow even more, to raise anti-growth taxes even higher than those baked into existing plans, and with an insufficient understanding of the connection between these actions and market movements”.
Away from Westminster, global bond traders have also grown increasingly concerned by the lack of any US-Iran peace deal, a situation that threatens to prolong disruption across the Strait of Hormuz leading to elevated oil prices in the months ahead.
City analysts have said that the UK is particularly affected by developments taking place across the Middle East and domestically, with Deutsche Bank warning that investors believe a Burnham government would lead to “higher fiscal spending”.
Ten-year gilt yields have stubbornly remained above 5 per cent, an uncomfortable position for a government that paid around £110bn in debt servicing costs last year.
Stride doubles down on economic agenda
Burnham has previously voiced his frustration at being “in hock to the bond markets” – although he has claimed he “supports” the current fiscal rules. He has also floated treating defence spending as outside the fiscal rules.
According to the Conservatives, if the current gilt yield increase were sustained across the five-year Office for Budget Responsibility forecast, it would add a cumulative £5.4bn to debt interest costs, a near-£300 bill for every working household in the country.
Setting aside Labour leadership speculation, Stride argued that Starmer’s government had already lost control of fiscal policymaking given pressure from backbenchers over welfare reform and wealth taxes.
“Investors are rational,” Stride said. “If they see people who they think will borrow more or mismanage the economy taking the reins of power, they price that in.”
He also hit out at Reform UK for announcing fiscal policies that “don’t add up”.