A Labour leader arrives, shirt and smile ironed into place, in his hands a big idea. He has polished one slogan, prepped three anecdotes, memorised eight bullet points. He wants more cash for vital services, or workers to have a stake in their employers, or to take some utility into public control. Not so big an idea, really, but, right on cue, the attacks come from almost every side – breathless lobby reporters, sententious columnists, zombie Blairites. And they all agree on one fatal thing: the bond markets will never wear it.
The death sentence having been pronounced, all that remains for the politician’s proposal is a pauper’s funeral.
It happened to Ed Miliband and Jeremy Corbyn. Today, before he has even become leader, it’s happening to Andy Burnham.
Catch the news on any given day and gilt yields are the reason why Ed Miliband can never be chancellor, but Wes Streeting could be. They’re why people with disabilities should lose their income and Thames Water must stay in private hands.
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Believe Westminster, and the bond vigilantes are the ever-present, always hovering threat to political stability. For every Labour bonehead telling bond investors to “fall into line”, there are Keir Starmer and Rachel Reeves pleading to stay in Downing Street to keep the peace in financial markets. The message is clear: go too far and Britain becomes Greece, or the king of the north turns into Liz Truss.
Lovely scare stories, to be sure, but based on precious little evidence. The greatest threat to the stability of a Burnham government does not lie in bond markets but among his own Labour MPs on the backbenches behind him.
Consider this moment in politics. Whatever you think of Starmer and, as I might have mentioned, the man did not rank high in my estimation, he is not leaving No 10 because of Peter Mandelson or Gaza or welfare cuts, or any other moral or political failing. Just like Boris Johnson, he is getting kicked out by MPs fretting over approval ratings. They are thinking with their polls.
Starmer and Johnson were both judged incredible winners and MPs applauded their every clap line and mouthed their slogans. Then they were historic vote-losers and they were out.
Far from exceptions, these two are simply the most extreme examples of the rule of the past decade. David Cameron and Theresa May also had to stand at the lectern and each time, there to drum them out and size up their own chances, were our professionalised politicians. Forget about policy or political causes or party institutions or the health of our supposedly representative democracy; this lot were obsessing over focus groups and social media and their own job security.
In this era of liquid politics, ideology is just baggage and every constituent a stepping stone because all that matters is the direction in which loyalty and power flow. Today, Burnham is judged a winner and so everything goes his way. A man who this time last week was not even an MP is today our incoming PM. Rather than interrogate the ideas of a man most Labour MPs barely know (two-thirds were elected to parliament after he left in 2017), they line up for a witless photo. Power is conferred by group selfie.
That is a threat to democracy from within the home of democracy. Against that, the spectre of financial markets really isn’t so grim. Take these two rules for understanding gilt-market commentary.
First, if you’re getting your news about bond markets from political hacks, especially those posting on social media, you can safely ignore it. They only talk about bond markets when they’re shaky. On Monday, when Starmer did his goodbye speech outside No 10, the interest rate on the 10-year gilt actually fell a touch, yet no political editor mentioned that on the evening news.
Second, most of the time the UK simply isn’t that important. A hedge-fund manager based in Connecticut is more likely to be making their investment choices based on bigger things than whether the prospective MP for Makerfield is for or against trans rights.
In an analysis last month, the National Institute of Economic and Social Research looked at what was driving UK bonds. Political uncertainty did count, it found, but far more important was the spike in oil prices. “The global energy shock is clearly the single largest identifiable driver of the UK’s … underperformance.” Because the UK imports energy and other basics, it imports inflation.
That is not to say there is nothing to worry about. I have written here before about how reliant the UK is on what Mark Carney called “the kindness of strangers” abroad to buy its financial and other assets. Rather than pushing ordinary investors into the FTSE, Reeves and any successor would be better off pushing them into a specialised bond to build council housing, issued for 30 years and with a reliable rate of return. As the New Economics Foundation argues, Burnham should also stop the Bank of England selling government bonds as part of its quantitative tightening programme. If he doesn’t, then Nigel Farage, if he enters No 10, will.
These are serious issues but they have identifiable solutions. Far harder to deal with is the public’s consistent desire for change – a change that governments fail even to identify let alone meet. Brexit was about change, May promised change, Johnson vowed to bring it about, Starmer slapped the word on his manifesto cover. And now Burnham pledges to make it happen.
What if he fails to make a big enough change? Let us say this heatwave means crops spoil, harvests disappoint and food prices soar this autumn; or the strait of Hormuz never fully reopens and so oil prices remain volatile. Let us also imagine that some new Green and Plaid voters drift back to the new-look Labour party, while others judge it isn’t new-look enough. A regime fronted by Shabana Mahmood and James Purnell with a leader who has a record of support for Israel may not feel all that different from the one led by Starmer.
At which point, Burnham will no longer seem like a winner but will look like a loser and the door will revolve again. When Westminster invokes the bond market it does so as a tool of discipline, to constrain radicalism. But the public is crying out for radical action. The punishment for not taking it could be vast.
