Daily Brief – Conference

Conference

This week sees the Labour Party hold its annual conference. Taking place in Liverpool, the conference is an opportunity to rally the back benches, party members and the electorate alike. The primary focus allows the party’s leadership to take to the stage and espouse their vision for the period ahead. Gulp. For Prime Minister Andy Burnham, that will leave no opportunity to hide. Today is a big day for the Prime Minister with Conference’s headline speech due to be delivered by Andy Burnham early this afternoon. The PM is expected to announce and flesh out his plans for the remaining term of this Parliament. The one big problem: the cost.

No Prime Minister wants to be beholden to the bond market. However, as we’re constantly reminded, every Prime Minister is. The government’s planned fiscal headroom of just in excess of £20 billion is thought to have been eroded by as much as 50%. Against this backdrop markets are going to be scrutinising exactly how much Burnham‘s efforts will cost. Within the Prime Minister’s sights is expected to be efforts on youth unemployment, NHS reform, and social care. These are typically big-ticket items, with big ticket costs.

Therefore, unless the Prime Minister wishes to use his opportunity at the conference to declare a new tax regime ahead of the Autumn budget, he may invite the ire of the Bond market. The other option for self and party-preservation would be cheap (read: weak) policy initiatives – not a great selling point for the Prime Minister to his party members. Sterling has remained offered into this morning versus recent highs. GBP is likely to do so until this risk event has passed at the very least. Yesterday, we heard from the Chancellor, John Healey, who as expected pledged the party’s commitment fiscal discipline – a message which is likely to be quickly forgotten if the prime minister does not show restraint in his spending ambitions later today.

Discussion and Analysis by Charles Porter

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