Mind the clutter is the message from the UK local elections, and markets rotating.
The local elections highlighted Starmer’s inability to fight another general election, but perhaps not more than that. They also demonstrated Kemi can’t win either. Indeed, it is odd to see Starmer having once conquered his own party, suffering from exactly the same divisive splits that took the Tories down.
I can still see him holding on. True, the Cabinet could unite and agree to axe him, and sort out a new leader afterwards, but it will be messy. If the prime motivation is to avoid electoral extinction next time, then making that more likely is an odd way to do it.
I am sure he would love to walk, but there is a fierce pride in not being trussified into defeat. For markets, I have long said Rachel is the best you can get for this Parliament. But it still gets worse until Labour leaves office, plenty of damage still to do.
Scores
From this page on the BBC website
Labour lost almost 1,500 seats, some 60% of those they were fighting, almost directly to Reform. The wipe out in Scotland and Wales created noise, but their combined population is still less than London. I have long said devolution only ends with Scottish independence; Labour will get no help from there. Although that was a Tory disaster too, shedding 19 of 31 seats, almost all to Reform.
Reform is still looking to be the biggest party, after the next general election, nothing on Thursday changed that.
And what of the Tories?
They have big beasts still, they have election winners, but Kemi is sadly not one of them. They lost almost 600 seats, 40% of those they were defending, that is political carnage too. Even in Croydon, they held the Mayoralty, but lost five councillors, to Reform and The Greens. A slightly hollow victory. They are polling below the Sunak shambles, and to have any hope next time, they need to be doing far better, not worse.
At the same time the Lib Dems are quietly consolidating in the centre, a block which the Tories must also dislodge to win. They do need to clutter up the yellow shaded area.
Politics 101
I am amazed the winter fuel issue still matters, but it does. The answer is not some complex, intellectually satisfying fudge involving HMRC, clawing it back, but a confession. “We got it wrong. It is being reinstated, exactly as it was, but it will be 50% higher than under the Tories. And tax free”. That’d help.
If growth to pay for welfare matters, don’t just talk, act. Get rid of some more dumb taxes and levies. A start has been made on energy, but Starmer needs a growth czar, looking for cuts in old sterile laws. Can he ever do that? I doubt it. Kemi could.
Voters must above all feel he is on their side, that’s what Labour was for.
He has introduced a lot of long term, reasonable steps, far better than the stasis and dreams under the last five prime ministers, but no one cares.
But the Bulls Make Money
I can find myriad reasons to be fearful of the markets, but I know that staying invested, following momentum and avoiding traps remains the way. Everything is simply speeding up, if you hold something that’s not going up this week, markets simply sell it and buy something that is.
Whether that is logical is not relevant; whether it makes sense, seemingly a tedious detail. There is still lots of liquidity – not enough to buy everything, but enough to force prices up. While a bit like Ukraine, whatever the justification, the effect of the Iran campaign is to make US energy companies richer, boosting the US economy, while impoverishing states that either believe in Net Zero, like those in Europe, or who are too poor or dysfunctional, or who have placed too much faith in globalisation, to have secured their energy needs.
A lesson that seems to need endless repetition.
But markets won’t wait.
The US also became a safe haven, an expanding economy, with deep, liquid markets. Plus, nice enough real interest rates, which are not going down. The US jobs report on Friday is the latest in a long line where so-called economic experts underestimated the growth inherent in Trumps de-reguluation and lower tax economy.
Tech is shedding a lot of high-profile jobs, but the base economy keeps adding them.
To me the slowdown in both the US and UK, from the extreme gloom of the last winter, is now over. Although, if so, so are hopes of interest rate cuts.
It was notable that in Powell’s last press conference, he never mentioned fiscal issues, nor to be fair did the so-called financial journalists. They fixated on the personalities at the Fed, not the substance of policy.
But fiscal expansion is still the key, higher oil prices mean more jobs, more taxes, more exports in the American energy sector.
This incidentally includes Canada, and also Brazil.
Out of China, Crost the Bay.
And what of India?
Well Modi keeps doing what look to be the right things, but I was doubtful of the long term for his reforms, after a 2024 electoral defeat forced him into a welfare heavy coalition. His nationalism has led him to cripple indigenous oil and gas investment, because of fears about multi-nationals; a shame.
But Modi has roared back, there is even talk of another term. Like Reform he learnt to take the detail of politics seriously, not just for the campaign, and has been well rewarded by finally taking West Bengal. Just one state, but with a population of over 100 million, at a key hub on the Bay of Bengal, and a strategic point to interface with China, and its satraps.
A long time coming, but if Curzon’s curse can be lifted a far brighter future lies ahead, fittingly, exactly one hundred years since New Delhi was named, to steal Kolkata’s crown.