Markets would take Miliband chancellor appointment ‘worse’ than Streeting, predicts Cavendish chief
The boss of a London-listed investment bank has warned that markets would react “worse” to Ed Miliband as Chancellor than Wes Streeting, as speculation grows over who will take over the Treasury
Starmer’s resignation and Andy Burnham’s widely expected coronation have caused investors to swing their gaze to his future neighbour in No 11. Burnham, the former Manchester Mayor, has sparked nerves among economists and analysts in the past for his comments on bond markets, tax cuts and nationalisation.
Allies of Burnham have said that Rachel Reeves will soon be shown the door if he is to win the leadership, according to reports, with energy secretary Ed Miliband and former health secretary Wes Streeting the frontrunners to replace her.
Julian Morse, co-chief executive of Cavendish, said Miliband would not be welcomed with open arms.
“I think if the Chancellor is Miliband, I think the markets will take that in a worse way than if it’s Streeting,” he told Morning Wire.
“He absolutely thinks we should be spending as much as we can on the welfare state and as energy minister he’s blocking any of our natural energy.”
Miliband and the net zero fight
Miliband’s tenure in Starmer’s cabinet has triggered backlash from some in industry and the City, with the former Labour leader pushing the UK toward net zero and pledging to make 95 per cent of the national grid carbon-free.
He has also stalled on giving the green light to new exploration projects from Shell and Equinor, refused to ease North Sea drilling licences and argued the government should stick to its electric vehicle mandate, which requires a majority of new car sales to be of all-electric models by 2030.
The Zero Emission Vehicle (ZEV) mandate legally requires that 80 per cent of new car sales must be of all-electric models by 2030, but the government is preparing to consult on softening this to 50 per cent after industry backlash.
While Morse acknowledged that Miliband’s net zero plans were “for good reason”, he noted the UK is pursuing a net zero policy far more aggressively than major polluters like the US and China.
“We’re at a massive disadvantage, which is costing money, costing us tax receipts which we could be spending on renewables,” Morse said.
“He’s a smart chap…but I think he’s got the wrong angles that he’s going after, the markets would take his appointment worse.
“They’d come off a bit if he became Chancellor.”
The Streeting difference
In contrast, Morse said the Square Mile would receive’s Streeting more favourably, believing markets could “actually strengthen a bit”.
Streeting has already set out his economic ambitions, previously endorsing a growth report by Mark McVitie for the Labour Growth Group.
The report calls for capital gains taxes to be equalised with incomes taxes alongside an “investment allowance” to be offered to assist start-ups. In contrast to Miliband, Streeting also promised to use emergency laws to fast-track the construction of data centres and critical infrastructure as well as allowing North Sea oil and gas projects to go ahead, arguing that infrastructure investment was advancing at a “glacial pace”.
During a speech last Tuesday, Streeting also took a swipe at Miliband’s 2030 net-zero green house gas emissions deadline, calling it a “short-term arbitrary target”.
He said: “We can’t play fast and loose with public finances. Not when the risks are so high and faith in politics is so low.”
Lurch to the left
Burnham is widely expected by economists and analysts to pursue a more left wing economic agenda than his predecessor. However, he has turned to a group of economic heavyweights in recent weeks, including former Bank of England economist, Andy Haldane, and sacked OBR chief Richard Hughes, to advise on economic policy. In a bid to soothe the markets, he is set to deliver a speech on the economy next week and reiterate his commitment to Rachel Reeves’ fiscal rules, the Times reported.
“Burnham has traditionally been a tax and spender. You go back in history and any high tax economy, growth has suffered. That said, this time round…it sounds like he’s taking advice from people who know what they are talking about,” Morse said.
Morse hailed this move as “really encouraging”, adding that leaders have realised they cannot “ignore the bond markets” and cut taxes in a bid to fuel growth.
“Burnham’s realised the interest rates are already too high, it’s costing us a lot of money to just service our debt…so he’s understanding that he’s got to be really, really careful with that. You can’t just tax everyone to annihilation,” he added.