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.

All eyes on John Healey: Government advised to slow down or to halt sale of bonds of public debt

 

UK Government advised to slow down or to halt sale of bonds of public debt

The latest reports indicate that economists have stated that to prevent an acceleration in terms of the growth of British public debt, selling less bonds of public debt or stopping sales altogether would be the safe thing to do.

This would leave the Chancellor of the Exchequer with two options: more taxes or budget cuts or both options at the same time.

This is a dangerous time for the British economy because as inflation rises, more resources will be needed. Every time inflation rises, salaries are devalued and the currency is naturally devalued. You can buy less and less with the monies that you have in your pocket or the monies that you are bound to receive. This can mean, once again, industrial action.

Whether the Chancellor of the Exchequer decides to slow down or to halt the sale of bonds of public debt, the fact remains that Britain needs money to pay for its budget. The news that the European Union could be about to implement legislation designated as Made in Europe to deal with Chinese increasing competition that could lead to the lost of more than 300,000 jobs across the European Union is not good news for Britain as this could restrict British investments in the European Union.

Things are not becoming any easier for branches of the public sector like the National Health Service that are asked to create redundancies to ease out the pressure on the budgets run by NHS Trusts. Local and regional authorities have been dealing with deficits in their public finances as asking for more financial support from the Treasury as a way not to raise local and regional taxes that could put families that are already under pressure due to rising taxes and rising inflation. The official rate of inflation that was 2.9% (0.9%) is now thought to be 3.1 per cent and could go as high as 4%. Why is this important? Because much of public debt is indexed - linked to inflation rates. So when inflation rates go up, public debt goes up.

Today, the Bank of England will have to decide if it keeps the present official interest rate. This can have a direct impact on how much the financial sector - especially the banking sector - can charge for loans and mortgages. Under pressure, asking prices for sale of properties are falling in an effort to find new buyers. As much of the British economy depends on the capacity of banks to lend and on the capacity of buyers to acquire loans and mortgages, there is financial uncertainty. Financial institutions borrow to lend to potential buyers. If at any point buyers cannot make payments, leading to defaults, then the full weight of having to pay back credits falls on the banks shoulders. Some years ago, the British government had to rescue the banking sector and used government reserves to that end. For the British government to be able to do the same, once again, there would be not enough reserves available.

The British government wants to invest more in Defense, but this means taking resources away from other areas of the public administration. With limited sources of income and facing the prospect of having to pay more to keep public services as they are, there is very little or no room to maneuver.

There is always the danger of increasing industrial unrest and rising unemployment that automatically increases pressure on the so called Welfare State that needs to support those who are unemployed. Already, about 60% of those aged between 18 and 25% have little chances of finding a job to pay the bills and a growing number depend on parental financial support.

All eyes on John Healey: As Chancellor of the Exchequer, he is the Gatekeeper

 

John Healey is the Gatekeeper. All eyes now focused on the Chancellor of the Exchequer who has to decide who gets what

The honeymoon over, Labour must now focus on delivering what was promised. This is a time when national politics and geopolitics could not be more closely linked. The former Secretary for Defense that resigned when the now former Chancellor of the Exchequer Rachel Reeves did not deliver the monies that he needed to beef up Defense. Now, he has his hands on the public purse and resigning is not a viable option.

As always, the promise was 3% for Defense, but what is the timetable and how is it going to be achieved. Prime Minister Andy Burnham has stated that health and other vital public services will not have to suffer budget cuts and he was adamant about it. Words like Austerity, according to Labour thinkers, can only be found n the Conservative Lexicon.

Financial institutions ie Banking sector are already getting in touch with the economics team, afraid of taxes imposed on the banking sector. Lets remember than some years ago the Treasury had to intervene to save the financial sector, including the banking sector, from total destruction. Thanks to that intervention, the financial institutions that survived and did not go the way of Northern Rock, did somehow prospered. Now, it is the State´s time to survive more borrowing at higher interest rates, with less economic activity and rising unemployment. Even the Armed Forces that an inyection of cash should beef up are told to "limit training activities to what is absolutely essential because we need to save money". How is the now mythical 3% going to be spend, if it ever reached? 

And there is the issue of the Welfare State. For a myriad of reasons, local and regional authorities have been forced to pay for uncontrolled migration that includes asylum seekers. The burden is pretty obvious with local and regional authorities dealing with people as if they were pingpong balls, simply because there are not enough resources. Because of immigration with migrants often put at the top of the list for accommodation, waiting lists get longer and longer and Britons complain about the fact that they are often unable to have access to social accommodation "because migrants and refugees are given priority".

There are not enough jobs, there is not enough accommodation, and public services are being squeezed, but due to budget shortages people are not able to work because there is not enough money to fill up vacancies. Even outsourced services are being cut off with contracts that are not renewed. For all the talk about apprenticeships, none other than the BBC had to tell apprentices that there would not be jobs at the end of the line. So you might be training for a job that will not exist when you finish your training. The buzzword when it comes to real jobs that pay real money is "layoffs". Companies are laying off workers to deal with balancesheets.

So the Chancellor of the Exchequer has to deal with the biggest balancesheets. October is just round the corner and this is the time when all will be revealed. 

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". 

 

  

Rachel Reeves and the 5% for Defence expenditure

 

Having seen what we have seen until now when it comes to monies and politics, can you trust the British Prime Minister and his promises about Defence?

I asked and asked again. Can we trust statements made at the latest NATO gathering? Political speeches and posturing do not pay for massive investments and massive borrowing and massive borrowing is already an issue when Britain´s credit rating is at stake. If things become any worse and interest paid on public debt keeps going up, how long before we head for a financial crash?

Any reforms are now compromised for the duration of the present administration and strikes are just beginning. How long will Rachel Reeves be able to keep the boat afloat? There are three ways to get resources and each has a price. We can raise taxes. We can borrow. We can reduce services. For each of the three there is a political cost to pay. Raising taxes can be popular with the left of the Labour Party, but deeply unpopular for the business community and, ultimately, will lead to higher prices of utilities and goods. Borrowing will lean to higher interest paid for public debt. Cutting services will not be popular with members of the public. None of them will be a vote winner in the present environment. 

But what that means for British standing? How reliable can a country that cannot pay its debts be? If one of the core members of NATO cannot afford to deliver what it promises, what does it say about NATO itself?

Labour: Rachel Reeves in tears as the marriage might not last long

 

It is usually said that an image speaks a thousand words. The image of the Chancellor of the Exchequer in tears tells the story of a marriage that might not last long.

If Rachel Reeves goes, the honeymoon is over. The marriage is under enormous stress barely one year after the May 2024 General Election. The knives are being sharpened. Despite the fact that Angela Rayner stated on television that "she has no intention to replace Keir Starmer", a rebellion of not less than 128 MPs is no mean business. Moreover, many of those now standing as Independent used to be Labour Party MPs.

Things are more serious than they actually look. Several Muslim MPs now standing as Independents used to be Labour Party MPs. This means than sooner than later we are going to see a new political party defined along religious and ethnic lines. Ethnic voters are turning against the Labour Party. Blacks and Asians no longer see the Labour Party as their natural home. Actions taken by the official Labour Party in matters concerning geopolitics are not very popular. Ethnic voters have no reason to swear allegiance to a white Metropolitan Labour Party that leans in favour of Israel, despite what amounts to genocide and mass murder.

Going against the vulnerable and supporting violations of basic human rights, the present Labour government is digging its own grave.

John Healey: if the money to support serving military personnel and their families was available, why no support was given until Reform appeared to be winning elections?

 

John Healey: if the money to support serving military personnel and their families was available, why no support was given until Reform appeared to be winning elections?

It is significative important to remark that just a few weeks ago there was massive austerity to the point the winter allowances for pensioners and welfare benefits were being cut, Now, after Reform won against Conservative and againts Labour, suddenly, out of the blue, there is money for everything.

So Rachel Reeves is willing to throw everything out of the Treasury to prevent Reform for winning elections. Sixteen times the Prime Minister mentioned Nigel Farage in a recent political gathering. Nigel Farage stated that he was happy to be living in the Prime Minister´s mind for free without having to pay rent.

Trust? What Trust? We have got a government that is willing to ruin Britain to keep itself in power. So, apparently, there was a budget gap left by the Conservatives. Well, a lot more than that has been spent or promised. More than 10 billion Pound for Mauritius, a very similar amount for Ukraine, 22 billion Pound for Ed Milliband Eco Projects, and now the promiss made by the Secretary for Defense that Britisn expenditure will rise exponentially to pay for defense? Where is the money coming from? From the 22 billion budget gap that Labour said that the Conservatives left behind. Ah, lets not forget billions of Pound promised for transport projects. 

Are you buying British debt bonds? Are you lending money to the British government? Are you afraid? I reckon you should be extremely afraid. One thing is to have to rescue the financial system. Another thing is to have enough money to rescue Britain which, as we know, would be something impossible to do given the size of the British economy.

Labour: Cutting consumption with higher taxes, higher utility prices and higher prices in the shops will lead to mass unemployment

 

Even before the first budget is presented in Parliament, the Labour government has cut disposable income with higher taxes, higher utility prices and higher prices in the shops. 

In a reminder of what happened during the Covid Pandemic when lockdowns reduced economic activity dramatically to the point that the then Conservative government had to implement furloughs schemes to try to save ailing companies and prevent massive job losses, the Labour government now seems to intend to cause yet another financial crise.

Cutting disposable income in the United Kingdom while increasing the amount of monies thrown into a foreign bottomless barrel is a strategy for disaster. Money, money, money but not for Britain. Is this a government for the United Kingdom?

In the meantime, Prime Minister Keir Starmer travels around the world, organising new wars and leaving a trail of Pounds as he smiles for television cameras, but.... never mind... private donations for his wife's wardrobe are always welcomed.

When eve supermarket chains like Tesco are closing down branches, you can foresee what the future will be as numbers of cases of shoplifting in supermarkets increase exponentially.