The British Pawnshop: This is no way to run the British Economy

Quantitative Easing or QE became a buzzword when governments wanted to increase cashflows to keep the economy going. The Covid Pandemic was one of those periods. QE was not meant to be a permanent way of dealing with circulation but, I am afraid, it keeps going on. But there is another factor. At one point, the British government decided to recover public bonds by buying them back to reduce the wait of public debt. This should be the most normal thing to do. What happened now? Imagine buying something by paying 100 Pounds for it and soonafter selling it for 50 Pound. Selling bonds of public debt at discounted prices means selling bonds making losses. Why should the British government want to do that? Well, interest rates payed for bonds are rising and many investors are not so interested in buying public blonds without getting higher returns. So I guess that lowering prices of bonds is a way to incentivise investors to take bonds of public debt. But what does this mean for the Treasury and the Bank of England?

In a few days time, the Chancellor of the Exchequer will have to produce the Autumn Budget and he will be doing so at a time when variables are changing so fast that by the time the Autumn Budget is printed most of the calculations in it will have to be remade. I do not khow how much will the Government be able to keep to deal with emergency adjustments, but given the nature of the British budget there will have to be substantial amounts kept as reserves to deal with emergencies. In March 2025, Wes Streeting made statements confirming that Health was going to be substantially supported in the budget as one of the number one priorities. I do suppose that Wes Streeting, now in charge of Defense will be expecting important increments of the Defense Budget. Isn´t it that the now Chancellor of the Exchequer John Healey went as far as resigning his post because the then Chancellor of the Exchequer Rachel Reeves did not allocate enoughs funds for Defense? Some talking about increasing the amounts from Defense up to 3.5% of the national budget, or even up to 5% of the national budget.

Ed Davey, Liberal Democrat Leader, said that the Liberal Democrats are preparing themselves for a snap election. Before Andy Burnham become Prime Minister there was talk about a snap election as a way to give Andy Burnham a national mandate even at the expense of coming back to the House of Commons with a lesser number of Labour MPs. Why? Because given the measures that the Prime Minister will have to implement, having a big majority can be a liability and could lead to internal wrangglings. Imaging having to tell your own MPs that austerity policies that they so much hate will have to implemented.

Under Keir Starmer, the man that won a historical majority for the Labour Party, there was a series of upheavals. I lost count of the many times the Labour Cabinet had to re-reshuffled. Ultimately, the Prime Minister himself had to go and so he did by leading to a by-election to choose a new Member of Parliament. Labour avoid a leadership by getting Andy Burnham onboard when he won a by-election in Makerfield to be able to apply to be the Labour Party Leader and become Labour Prime Minister, something that he managed to do without any challengers. The Labour Party was desperate to show the country an image of unity. Unfortunately, that could happen only before the announcment and implementation of real policies, something that is bound to open wounds in the Labour Party.

So will Andy Burnham call a snap Parliamentary Election to cement his leadership even at the expense of having less MPs in the House of Commons? Many say that he will not take such a risk. Others says that if he has to confront the Trade Unions and party members with very unpopular policies, he will have to be stronger as a leader. Any rebellions, any upheavals, any confrontation with trade unions, could led him to face the same challenges his predecessor Keir Starmer had to face and that ultimately led to Keir Starmer´s political demise.

Some in the Labour Party have said that Andy Burnham is the Labour Party´s last opportunity to keep the hope of winning the next General Election. What they do not mention is how difficult it will be for a Labour Leader to please all segments of the Labour Party. 

The approval of the so called Made in Europe legislation could prove to be very negative for the British Economy. Made in Europe is designed to counter Chinese competition that is creating massive job losses in the European Union. It is not meant to damage British interests, but it isnot meant to promote British interest either. The fight for markets is intensifying. War in Europe and in Middle East does not benefit Britain either. The volatility of energy prices is costing Britain dear. Everything will have to be taken into account when writing the new Autumn Budget.

United Kingdom: bills keep piling up with prices that are rising almost on a monthly basis

For many people, the way rates of inflation are calculated is an absolute mystery that bears no relationship with the their cost of living. The cost of utilities and the cost of the shopping basket (itens that you need to buy or buy because you could not possible be without) is rising and often by 100%. 

No sooner you are trying to digest the cost of recent increases you get another letter informing you about additional costs to be introduced next month. In my mind, this amounts to devaluation. You are getting less for your monies. Your pounds are worth less and less and less and there is end in sight.

Another issue that should have more and more people worried is the fact that house prices are dropping and for those who have mortgages and loans used to acquire the property that live this means the certainty of having to deal with negative equity - when the value of the assets is less than the financial commitments you signed for in order to acquire the said assets.

You could have a mortgage for 1,000,000 Pound when in fact your property value is now 700,000 Pound. Even if you sell your property you will still owe the lender the amount of 300,000 Pound. No property left. Just debts. Those who have been faced with negative equity can tell you that it is not a nice experience.

For you is a very bad experience. For the financial system it could be even more catastrophic. Northern Rock was bankrupted. Many of the big banks had to be rescued with taxpayers monies. When Gordon Brown made the decision to rescue the banks, he did it because the alternative was financial paralysis.

If peoples incomes go down because of additional taxation, rising cost of borrowing and inflation, it is to be expected that disposable income will go down dramatically thus affecting consumption. Less consumption, more unemployment and more support needed to keep the unemployed and those do not earn enough alive.

We have not seen the nex budget being prepared by the Chancellor of the Exchequer John Healey. The Prime Minister says that increases in defense expenditure will not happen at the expense of welfare and of vital services. The cost of public debt is rising and the country is left with unsavoury alternatives - more borrowing, tax increases and budget cuts.

UK Prime Minister Andy Burnham: calming the markets....?

 

The Guardian, the London newspaper talks about Prime Minister Andy Burnham trying to calm bond market, as more and more investors are getting rid of bonds of public debt. It must be said that it is not just Britain that might be losing its capacity to borrow billions of US Dollars (althougn bonds might be valued in Pounds) to paid a public debt that amounts to trillions US Dollars.

Any budget must be based on reliable data, but nowadays data has a habit of changing even before any budget is formulated. So by the time the Chancellor of the Exchequer John Healey (former Secretary for Defense) rises in the House of Commons to deliver the so called Autumn Budget all numbers in it might be totally outdated. Without the capacity to borrow more then taxing more and budget cuts could be the only way left to adjust public expenditure. Both options are deeply unpopular because they both go for one word: Austerity.

For a Labour Prime Minister having to start by imposing new taxes and cutting budgets because there is no money to go around is not what was promised during the first short campaign for an election that never happened. When the amount of monies available is significantly reduced, the impact of increasing defense expenditure makes cuts in other areas of the public administration even more painful. As Paul Samuelson, the American Economist stated, it is butter or cannons. You cannot have them both in equal measure. Something has to go. Will it be welfare payments? Whatever the previous Prime Minister did that was considered to be done against Labour values will be nothing compared with the limitations the new Prime Minister will have to impose.

Suddenly, recent electoral successes in Makerfield and Manchester will feel like a pyhrric victory. The joy and celebratons might turn into a funeral. More taxes will certainly means less buying power in the pockets of already suffering taxpayers. Budget cuts will mean more unemployment. But in actual fact both measures can accelerate the rise of unemployment. If you raise taxes, you cut private investment and consumption. Taxes will be higher but the amount of monies collected will be reduced due to less economic activity. Keir Starmer´s exit from Parliament will help him distance himself from then nightmare that is coming and Andy Burnham´s time as Prime Minister could be cut short.

Right after Andy Burnham was appointed, there were rumours that he would go to the country, that he intended to have his own Parliamentary majority, even by losing many of the seats that Labour managed to win in 2024. Going to the country, having a General Election preceded by a whole bunch of bad news does not look, sound and feel like a good idea. Labour MPs that did not want Keir Starmer as Leader and Prime Minister made the choice to remain under Keir Starmer not to risk losing their seats.

When Andy Burnham threw his hat on the right they could have rocket the boat and go for internal elections in the Labour Party. Instead, they chose to have Andy Burnham appointed without any contest. The idea was pure and simple. No contest to challenge Andy Burnham would show the Labour Party as something that the Labour Party is not: a united Party. When the new budget is presented in the House of Commons, factional rivalries will reappear. 

Having a majority in Parliament might look like a blessing, but having too many MPs might be inconvenient. A majority that cannot be controlled becomes a liability.

At a distance, Labour MPs that are no longer Cabinet Members could have been disappointed, hurt because they were no longer at the forefront of the Labour government. Now, many of them like Rachel Reeves might be congratulating themselves because they do not have to face the mess the new government will have to deal with. She was being forced to calculate and recalculate budgets before they were even presented in Parliament. Now the man who complained and even resigned as Secretary for Defense because he was not getting enough money for defense will have to face reality. Now, it is John Healey´s time to face the music.

Sue Gray did not last long as Chief of Staff under Keir Starmer. She said that she felt that she was being spied on, that her private conversations were being recorded and leaked to the mass media. Has the political environment inside the Labour government changed overnight? As pressure mounts, one can expect that internal tensions will rise. As the expression goes "keep your friends close, but keep your enemies closer". 

 

  

 

Andy Burnham: UK General Election in October or November 2026?

The talk about a General Election in October or November 2026 might be just talk or there could be justifiable reasons to mention the possibility of such election taking place. Andy Burnham inherited a historic majority from Keir Starmer but it is still Keir Starmer´s majority. 

If the idea is to introduce measures in the Autumn Budget that many in the Labour Party might not like or would be tempted to vote against, then the threat of a General Election in which they could lose their seats might make many Labour MPs reconsider any kind of opposition to the Autumn Budget. What does the Labour Cabinet think about it? Being a Member of the Cabinet is not only about prestige and about the challenges of the job. It is also about financial issues. If you are a Member of the Cabinet, you often get paid both as Member of Parliament and as a Secretary of State. A General Election means taking the risk of losing both positions at once. 

How ready are political parties to fight a General Election? By-Elections are one thing, but a General Election is a different cup of tea.

Wednesday, October 30th, 2024 - Budget Day

 

This is personal, stated the Chancellor of the Exchequer, Rachel Reeves. She refers to realities of the 1980s and 1990s. The Chancellor's efforts to gather capital will drag hundreds of thousands more people into paying tax and even more into higher rates as their pay rises, indicates none other than The Guardian.

Could a personal crusade turn into a nightmare? Changing fiscal rules to disguise debt making it appear as something else does not change the fact that it will still be borrowing. So more taxes and more borrowing that will be increased for public interest, according to the Chancellor.

Ordinary folk and many business were badly hit by the Covid Pandemic and the measures implemented to deal with the Covid Pandemic. After that, people and many business were hit by the energy crise generated by the conflict in Ukraine and the measures adopted against the Russian Federation. 

Now, they stand to be hit again by taxation and potentially higher prices of utilities, housing and daily shopping.

But the Chancellor of the Exchequer still says that she will implement the budget in a way that she will 'protect the living standards of working people'. 

Well, in an interview made in Washington, USA, Rachel Reeves - perhaps inadvertently - made promises that she will have to deliver. If she does not deliver and if the measures implemented by the Labour government become a de facto nightmare, then this will create a widely open door for another Conservative government.

Starting on Wednesday, October 30th, 2024, the government will have to deliver and with every failure, and every new crise, there will be many by-elections along the way in which people will express their discontent.

She talks about building schools and hospitals. Well, what will she do about nurses salaries that are not enough to rent a one bedroom flat? If living costs keep rising, this will be a de facto devaluation of salaries and a worsening of living standards. Before she goes around building schools and hospitals, she will have to look carefully at salaries actually paid to teachers and NHS staff. 

Even with the triple lock, state pensions are not enough to rent a one bedroom flat. State pensions are totally insufficient. Taxing state pensions and private pensions can only worsen an already bad situation. And this is going to do nothing to 'protect living standards'.  

Jeremy Hunt: November 17th 2022 - Tax Day

 

November 17th 2022 - Tax Day

A hole in public finances of  more than 50 billion Pound will have to be plugged. Apart from the prospect of budget cuts affecting services, the alternative is a massive amount of tax increases.

Kwasi Kwarteng was slaughtered, thrown to the wolves, because he wanted to implement Liz Truss policies of tax reductions. What will happen to Jeremy Hunt when he announces a budget that contains punitive measures?

Let us remember that on the first round of the leadership election that led to the Premiership of Liz Truss the now Chancellor of the Exchequer didn't manage to progress beyond the first round. He was not popular among MPs and was not popular among the Membership of the Conservative Party. Now, the same man is going to propose a budget that goes against what is the declared ideological stance of the Conservative Party. Rising energy costs, rising interest rates plus rising taxes. If you are a business owner struggling to survive in the present financial environment, how are you going to react? Will you minimize your business to reduce fixed costs and in doing so sent your staff to the queue of the unemployed? A very harsh winter coming for those who lose their jobs when families are already struggling to pay for rental accommodation because they don't have the means to afford mortgage payments.

Wasn't Rishi Sunak the one who suggested that we should have a long term approach instead of shock therapy? Will such a budget be compatible with long term thinking? If Jeremy Hunt goes to far, this could the end of Jeremy Hunt and also the end of an already wavering Rishi Sunak? What next? Another leadership election?

Just a few months ago it was reported that recent interest rates will put more than 500,000 mortgages in jeopardy. Will more taxes and more unemployment make the situation better or worse? If the mortgage business falters, the financial system as a whole will be in serious trouble. We don't need even to explain what a wave of mortgage and load defaults will do to the economy.

There is no point in complaining about lack of public services when people vote for budget cuts

You cannot have your cake and eat it. There is no point in complaining about lack of public services when people vote for budget cuts.

If the moves towards Austerity go beyond what is reasonable, perceived financial problems will turn into dramatic social problems.

It is a well known fact that families affected by acute financial problems are the ones most affected by domestic violence because in the end something must give way.

There is a direct correlation between extreme poverty and deprivation with things like crime, domestic violence and ghetto realities including substance abuse and a wide range of anti-social activities.

A vibrant economy is not an economy in which poverty and deprivation prevail and extreme austerity measures can lead straight towards poverty and deprivation.. Disenchanted people are the ones who are more prone to get into trouble as they see society as prey instead of seeing it as something they would like to be part of.

In a society where extreme austerity measures are in place, public services are bound to suffer because people faced with very harsh realities are bound to put pressure on services like Health Services and Police. Alcoholism and other forms of substance abuse and related acts of violence are the root cause of many incidents that end up consuming much of the resources given to Health Services and Police.

It seems unreal that at the time when so many incidents are related to mental health problems, resources devoted to mental health services are evaporating for the sake of budget cuts. The legislation coordinating services like Police and NHS is quite inadequate and Police Forces end up having to release individuals that should have been referred for mental health treatment.

When Police forces are consulted they say that only in very extreme situations individuals detained are sectioned and forced to receive mental treatment. In other words, in the vast majority of cases people that would really benefit from mental health treatment get no mental health treatment whatsoever and sooner than later become involved in new incidents that could have even more dramatic consequences.

Police forces say that even when individuals who have been involved in acts of violence because of mental health problems get arrested and go to court the probability of the said individuals having mental health treatment is almost non existing.  

As this point, all the talk about prevention simply evaporates and public services like NHS and Police are overly burdened because there is no proper legislation in place and resources are being reduced.