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What elections in France and the UK mean for markets

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This is an audio transcript of the Unhedged podcast episode: ‘What elections in France and the UK mean for markets

Katie Martin
Before we begin, we’d love to hear a bit more about you and what you like about this show. We’re running a short survey and anyone who takes part before August the 29th will be entered into a prize draw for a pair of Bose QuietComfort 35 wireless headphones. You can find a link to the survey and terms and conditions for the prize draw in our show notes.

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We’ve had a serious outbreak of democracy in Europe over the past couple of weeks. First France, then the UK, then France again. And it’s been exhausting, quite frankly. But markets seem to be taking it all in their stride despite success for left of centre parties that investors don’t generally like. Today on the show, we’re gonna ask: is this very silly and complacent? This is Unhedged, the markets and finance podcast for the Financial Times and Pushkin. I’m Katie Martin, a markets columnist here at the FT in London, and I’m joined by a man who is no stranger to picking through government spending plans, Chris Giles. Chris, thanks for joining us on the show again.

Chris Giles
It’s a pleasure, Katie.

Katie Martin
First off, somehow it’s not even a week since the UK election, if you can believe it. Have you recovered?

Chris Giles
Only just. I was up all night on Thursday night, and I was scoring it on a little wall chart I’ve had, and had a . . . 

Katie Martin
You had felt-tip pens, all different colours and everything.

Chris Giles
Felt-tip pens, everything. It was great fun.

Katie Martin
What was your standout moment of the night?

Chris Giles
I think my standout moment of the night actually was in the following morning at about 7.00, when the former prime minister, and often known as a bit of a lettuce, Liz Truss, lost her seat in the biggest swing of all. Essentially, everyone in that part of Norfolk, which is in East Anglia, ganged up against her and another candidate squeaked through.

Katie Martin
She looked sort of confused by the whole situation.

Chris Giles
Yeah. She wasn’t expecting it. I don’t think any of us were, really.

Katie Martin
No.

Chris Giles
But it’s not entirely surprising after you blow up the country in 49 days.

Katie Martin
We will come on to that in a second. So we’ve got UK and France. Let’s start with the UK. We have a new Labour government. We have a new chancellor, Rachel Reeves, a woman.

Chris Giles
The first woman.

Katie Martin
What will these ladies think of next?

Chris Giles
I don’t know. They’ve been prime minister. They’ve been chancellor.

Katie Martin
Mixed results. But yes, she’s the first woman to be chancellor of the UK in like 800 years that the role has existed. So props to Rachel Reeves. What is she up to so far?

Chris Giles
She’s been actually really rather busy. I mean, it’s not been the fireworks when Labour came in in 1997 of giving the Bank of England independence in the first week. But she has done about everything you could do to tear up restrictive planning regimes which have stopped building of housing, particularly in rather affluent areas, and essential infrastructure like onshore wind farms. And there’s stuff you can do overnight. You can sort of change planning guidance because that’s just written by whatever governments in power. And they’ve done that. So they’ve done about as much on that as they can very quickly.

Katie Martin
Yeah. It’s only Tuesday.

Chris Giles
It’s only Tuesday.

Katie Martin
The election was only on Thursday.

Chris Giles
And today they’ve also essentially merged the UK Infrastructure Bank and the British Business Bank to create a National Wealth Fund, I think they’re calling it, which has got former Bank of England governor Mark Carney seeking approval. But essentially that’s just going to try and lever in by partnering with the private sector to try and encourage private sector investment. I mean, those things already exist. It’s not gonna be that large, I’ll say that quietly, but doesn’t mean it’s a bad thing at all.

Katie Martin
Yeah, yeah. Now, the thing is, all of this is sort of quite showy and it’s like, look at us, we can like, rip up rules and we can get things done quickly. But over the longer term, something has to give, right, because in the election campaign, the Labour party was saying, we’re not gonna put up taxes. There’s a little cluster of taxes that we’re gonna put up, but by and large, we’re not gonna put up taxes. And we’re gonna stick to the previous government’s promise to keep cutting debt effectively over the next few years. Have they painted themselves into a bit of a corner here? Because that’s the bit that investors care about, isn’t it?

Chris Giles
Yeah. So they have made it clear that they’re going to be responsible government. There’s gonna be no return to any form of getting rid of the institutions that look, oversee the economy. So the Bank of England will be independent, will be able to set monetary policy. The Office for Budget Responsibility will set, do the forecasts, and so the government won’t intervene there. And that really does limit what governments can do.

So there was a very interesting line in Rachel Reeves’s speech on Monday, which was to say that she’s asked the Treasury to do an assessment of public spending and she’s gonna bring that to parliament before it packs up for the summer holidays. Now, obviously, the Treasury could do that today. I mean, this is something they do all the time. Let’s be . . . 

Katie…



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2024-07-09 22:05:08

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