Yesterday, The Sunday Telegraph newspaper reported that one of the biggest investors in UK government debt has sold off ‘fragile’ UK bonds in what it describes as a warning for Labour leadership contender Andy Burnham.
Aberdeen Investments, which manages £390 billion of cash from its international financial clients, said it had sold off part of its £10 billion UK bonds portfolio following the political crisis tearing the Labour government apart.
Matt Amis, investment director at Aberdeen, told the Telegraph that investors had given successive UK governments leeway to borrow increasing amounts to finance spending despite the UK record of having gone through six Prime Ministers and eight Chancellors in the last decade.
Amis said: ‘Probably every Chancellor in recent history has always been given some kind of room for manoeuvre,’ adding: ‘I don’t think this is the case here. I think the gilt market is incredibly fragile given the price of oil and the Strait of Hormuz remaining closed. The room for manoeuvre now is close to zero.’
Labour’s National Executive Committee cleared the way for Manchester Mayor Andy Burnham to fight a by-election in Makerfield and, if elected, stand against Keir Starmer, and former health secretary Wes Streeting confirmed at the weekend he would also be standing.
Aberdeen was not the only international financial speculator to raise the alarm. Guillermo Felices, a global strategist at PGIM, which oversees $1.5 trillion in ‘assets’, said: ‘Bond markets and markets generally hate uncertainty’, and that the leadership crisis meant ‘we’re in a political vacuum for almost two months, and that’s terrible for the markets’.
Meanwhile, Moyeen Islam at Barclays warned in a note to clients that ‘persistent worries over fiscal loosening’ could be permanent and lead inevitably to billions of pounds being added to the interest charged by capitalist financial institutions for servicing the UK’s massive national debt of around £3 trillion.
Burnham is being portrayed as the main threat to financial ‘stability’ by the international money markets because of his promises to bring ‘more things back under stronger public control’ along with previous comments that he would not want to be ‘in hock’ to the bond markets.
In an interview with Channel 4 News at the weekend, Burnham was quick to row back on this pledge insisting he would not be reckless with public finances and would ‘never ignore’ strict borrowing rules to finance his vague promises to renationalise rail and social housing. The capitalist bond markets are cracking the whip, leaving Burnham, Streeting and any other contender for Starmer’s job in no doubt as to who exactly runs the country.
This was made clear by Nuwan Goonetilleke, chief investment officer at Standard Life, who referred to the destruction of Liz Truss’s leadership within days of her mini-Budget in 2022.
He said: ‘All politicians now remember that unfunded free giveaways effectively don’t work,’ before proclaiming: ‘They know that they’ll be shackled in by the bond market pretty quickly. And ultimately, if you want a very, very short tenure as leader, that’s the way to go.’
The capitalist money markets, international financial speculators and hedge funds are bluntly telling the working class that it doesn’t matter who becomes Prime Minister after Starmer – we are in charge and will dictate the policies of any Labour government.
The message is finance capital is in charge and will demand that the working class pay for the capitalist crisis through savage austerity cuts to welfare, the NHS, wages and jobs.
The powerful British working class will never accept being driven back to the days of starvation and the destruction of all the gains of the welfare state by a handful of ‘bond vigilantes’ determined to dump economic recession on their backs.
The only way forward for workers and youth is to demand that the TUC intervene by organising an immediate general strike to bring down the Labour government and bring in a workers government.
A workers government will expropriate the bosses and bankers replacing bankrupt capitalism with a planned socialist economy.
Now is the time to build the WRP and Young Socialists to organise the victory of the British Socialist Revolution.
