The markets decided from the first hour of his arrival to forcefully punish the UK public debt and the British pound, for the thousandth change in direction of the Prime Minister, Labor Keir Starmer, and his economic team. A government that acts in fear and insecurity is taking hits from all sides, and no matter how much Starmer wants to camouflage his constant corrections as paragons of wisdom, markets have interpreted what he conveys as indecision and opportunism.
The last bandage in Downing Street, worn by diaries on a July night Financial Times (FT), the decision was made to abandon the announced increase in income tax for the middle and upper classes. Economy Minister Rachel Reeves discussed the tax increase last week in a speech. It was an apparently brave decision, breaking an initial election promise not to increase fiscal pressures, but it was praised by experts as a necessary response to alleviate the current imbalance in public accounts of around €34,000 million.
In the end, the growing unpopularity of Starmer and his CEO that has raised all these questions, and the tension at the drums of internal rebellion in the Labor parliamentary group – whether real or imagined, because nothing has materialized yet – will spark another turning point and the ensuing crisis.
Sources from the Oficina de Responsabilidad Presupuestaria (OBR, in its English abbreviations) cited by the Financial Times confirm that the Ministry of Economy has referred to the body the change of its plans through what is technically called “offer of relevant measures”, as an initial and obligatory step before announcing the next assumption on 26 November. The Ministry did not want to confirm or deny this information.
The Office of Budget Oversight (OBR) is an independent body that monitors and analyzes the feasibility and consequences of economic decisions adopted by the government. Your judgment, given to you every time assumptions are made, gives you a stamp of credibility or generates reasonable doubt about the overall calculations.
The aforementioned sources confirmed that Minister Reeves decided not to pursue the proposal – a tax increase – that was drawn up at the time by the Center for Economic Analysis Decision Foundationvery close to the PT government, was christened Two Up Two Down (Dos Arriba, Dos Abajo).
It consisted of a percentage point increase in the middle and high parts of income tax (which Labor committed not to address in its election programme) and a reduction in other contributions to social security for employees (in the British tax system, National Insurance). The result assumed, in theory, that the working classes would decline as stable, but in the fiscal balance the decline would increase dramatically.
In the final proposal that Reeves submitted to the Office for Budget Responsibility, the decision to reverse this rise is matched by a variety of plans that do not convince experts, which involve raising the ceiling of some tax brackets to increase income, as well as raising the risk and risk or tax on their property. Luxury real estate.
In the face of the turmoil, the government explained that its correction was in response to the apparent improvement in the Office for Budget Responsibility’s own forecasts, which led to a reduction of nearly €15,000 million in estimated losses in the accounts. Markets have calmed down a bit on average this morning and state earnings have regained some strength. But the doubts were not dissipated at all.
“Without higher income taxes, the rest of the measures included in this package designed to balance the public accounts will be far less credible,” said Lee Hardman, chief financial analyst at MUFG. He added, “The government conveys the impression of its desire to give priority to its popularity and internal political stability in the face of financial stability.”
Reeves, who has been heavily criticized within the Labor parliamentary group and his party for his apparent authority to lead at a time of fiscal protectionism, which has translated into social cuts and austerity measures, has become increasingly vulnerable, despite the fact that the Prime Minister has publicly committed to keeping him in power until the end of the term. Last July, Chambers showed how Looraba was sitting on the town council as Starmer tried to defend it from attacks coming from its ranks.
All of this has led to increasing insecurity, with steps continuing beyond previously announced measures, both in terms of cuts and increases in taxes.
Internal threat
As always happens when the direction is unclear in the middle of a storm, Starmer’s team have dedicated themselves all this week to chasing supposed ghosts and trying to fix the flaws in their own goal. Several media outlets published the report issued from the Prime Minister’s entourage, stating that Downing Street is prepared to confront a supposed challenge to its president’s leadership. Starmer will fight, I assure you. He was named as the head of the alleged conspirators by the Minister of Health, Wes Streeting, who was increasingly regarded by Labor affiliates as a future government leader.
The minister’s response was a round of interviews on various radio and television stations, where he negotiated to be part of the conspiracy, while at the same time displaying political dignity and skill that raised his status. Meanwhile, Starmer was forced to apologize to Stretching, publicly condemn the nomination process and try to calm things down.
With an issue as sensitive as public accounts and turbulent markets, the government finds itself in the unpleasant position of having its hands tied when it comes to correcting its blunders. “We cannot comment on speculation about possible financial changes,” he said, limiting himself to speaking to a spokesman for the Ministry of Economy. “The minister will put forward a premise that includes fair procedures to build solid foundations that will ensure the future of the United Kingdom,” he added, in a response that seemed to have the sole aim of getting out of the way.
During his five months at the helm of Downing Street, Starmer was able to demonstrate his weakness to voters, who did not see any clear change. To your party members, who are disappointed by the lack of resolve and the few policies left; And now to the markets, they are starting to smell blood.
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