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Woo, no medal Way, no medal wandyjus what we believe this true?

Woo, no medal Way, no medal wandyjus what we believe this true?

Oh it's ninety ninety eight, my heart, it is Boyzone. They're at the top of the charts. The Labor Chancellor, Gordon Brown faces his first full year in government and bond yields are more than five percent. Well, Boyzone are no longer top of the charts, so I really need to say that, But there is a Labor Chancellor at the start of this new year looking at guilts above five percent. Hello, I'm Caroline Hepge. You're listening to Blueberg UK Politics.

Oh it's ninety ninety eight, my heart, it is Boyzone. They're at the top of the charts. The Labor Chancellor, Gordon Brown faces his first full year in government and bond yields are more than five percent. Well, Boyzone are no longer top of the charts, so I really need to say that, But there is a Labor Chancellor at the start of this new year looking at guilts above five percent. Hello, I'm Caroline Hepge. You're listening to Blueberg UK Politics.

And I'm Lizzie Burton. Now it's a bit of a merry go round. The UK government spending more, borrowing more well, the economy is barely growing. Net debt stood at two point eight two trillion pounds ninety eight point one percent of GDP to be exact in November, debt levels last seen in the early nineteen sixties. The government's deficit is higher than OBR forecasts one hundred and thirteen point two billion pound budget deficit in the first eight months of the fiscal year. The Labor Government plans to sell more bonds this year, but it's coming at a time, Caroline, when the strong US economy means higher US interest rates are pushing up global bond yields four countries and the UK's long term borrowing costs surged to the highest level in more than a century over the past twenty four hours.

And I'm Lizzie Burton. Now it's a bit of a merry go round. The UK government spending more, borrowing more well, the economy is barely growing. Net debt stood at two point eight two trillion pounds ninety eight point one percent of GDP to be exact in November, debt levels last seen in the early nineteen sixties. The government's deficit is higher than OBR forecasts one hundred and thirteen point two billion pound budget deficit in the first eight months of the fiscal year. The Labor Government plans to sell more bonds this year, but it's coming at a time, Caroline, when the strong US economy means higher US interest rates are pushing up global bond yields four countries and the UK's long term borrowing costs surged to the highest level in more than a century over the past twenty four hours.

It's a huge challenge for the Chancellor of Rachel Reeves. So joining us to discuss this and what it means for the government. Bloomberg opinion columnist Marcus Ashworth and Bloomberg's UK politics correspondent Lucy White join us to discuss. Marcus I started and Lizzie started with a few numbers there to try to illustrate the fiscal position in the UK for our listeners who are not knee deep in the market. Why is a high bond yield a problem for the government and why is it such a challenge for Rachel Reeves.

It's a huge challenge for the Chancellor of Rachel Reeves. So joining us to discuss this and what it means for the government. Bloomberg opinion columnist Marcus Ashworth and Bloomberg's UK politics correspondent Lucy White join us to discuss. Marcus I started and Lizzie started with a few numbers there to try to illustrate the fiscal position in the UK for our listeners who are not knee deep in the market. Why is a high bond yield a problem for the government and why is it such a challenge for Rachel Reeves.

Well, very simply because they have to pay more back to investors. And I think that's the issue here. We have to look at is the UK special here and in some ways it isn't, in some ways it is. So the US bond yields are also very high we're pretty much around the same sort of levels, and that's been driven not so much by the strength of the US economy a bit because it means the Federal Reserve may not cut rates so much, but really because they're spending awful lots. I want to spend a lot more, which is precise the position that this government is in and inherited. So the question is will they borrow more. We'll find out on the twentye of January what their plans are probably going to be or certainly is a big feedback meeting, but we expect next year they'll probably issue a further ten percent more guilts, so something like three hundred and thirty billion. The question is the Bank of England is no longer buying these bonds in the quite the way it was. Huge redemptions coming off. It's a lot of pressure on the investors in guilt market. They are getting paid for it, though so in some senses, if the banker anger were to cut interest rates more than perhaps the market's currently pricing only two cuts, the banking is trying desperately to tell the market could before ubs iss sent could be as much as six if those last two are right, and the market is wrong, then maybe guilt yields and today they're up to this high. Bear in mind in nineteen ninety six they were up over eight percent, so they can go higher. But equally, I think that if you see this is a very good auction today, a lot of supply coming, the market's pricing for it. It's all about guilt dealers making yields go higher so they can buy a nice and cheap good for them. They've got lucky today. The question is, well, if there's a March budget, then maybe things will continue to get worse, but possibly I wouldn't get too excited about just the levels today.

Well, very simply because they have to pay more back to investors. And I think that's the issue here. We have to look at is the UK special here and in some ways it isn't, in some ways it is. So the US bond yields are also very high we're pretty much around the same sort of levels, and that's been driven not so much by the strength of the US economy a bit because it means the Federal Reserve may not cut rates so much, but really because they're spending awful lots. I want to spend a lot more, which is precise the position that this government is in and inherited. So the question is will they borrow more. We'll find out on the twentye of January what their plans are probably going to be or certainly is a big feedback meeting, but we expect next year they'll probably issue a further ten percent more guilts, so something like three hundred and thirty billion. The question is the Bank of England is no longer buying these bonds in the quite the way it was. Huge redemptions coming off. It's a lot of pressure on the investors in guilt market. They are getting paid for it, though so in some senses, if the banker anger were to cut interest rates more than perhaps the market's currently pricing only two cuts, the banking is trying desperately to tell the market could before ubs iss sent could be as much as six if those last two are right, and the market is wrong, then maybe guilt yields and today they're up to this high. Bear in mind in nineteen ninety six they were up over eight percent, so they can go higher. But equally, I think that if you see this is a very good auction today, a lot of supply coming, the market's pricing for it. It's all about guilt dealers making yields go higher so they can buy a nice and cheap good for them. They've got lucky today. The question is, well, if there's a March budget, then maybe things will continue to get worse, but possibly I wouldn't get too excited about just the levels today.

Do you see before the election Labor is kind of smug about how economically responsible it could be, and they kept talking about how the bond vigilantes came for Liz Trust at the mini budget. Do you think do you get the sense now in Westminster the Labor government's actually quite worried they'll come for them.

Do you see before the election Labor is kind of smug about how economically responsible it could be, and they kept talking about how the bond vigilantes came for Liz Trust at the mini budget. Do you think do you get the sense now in Westminster the Labor government's actually quite worried they'll come for them.

I think it is dawning on the Labor government, just quite hard a job they actually have. I mean, they've talked about the black hole that they found in the public finances when they came into power, but at the moment, Rachel Reeves is really limited by her own fiscal rule of not borrowing for day to day spending by twenty twenty nine to thirty that fiscal year, and that means that, you know, she's really left herself with very very little headroom, under ten billion pounds of headroom in terms of meeting that goal. And as yields get higher, as borrowing costs get higher, that's really really putting pressure on her. I mean, she has said that she's not going to come back in the spring in the spending the fiscal statement that she has in the spring. She's not going to come back with a load of time raising measures as she did in the autumn budget last year. But you know she's going to be under pressure. She's got bills to pay exactly, and you know, if it's not going to be you know, more tax risers, then that's going to mean more spending cuts, and that's going to you know, really be felt by the economy, by public services, by people.

I think it is dawning on the Labor government, just quite hard a job they actually have. I mean, they've talked about the black hole that they found in the public finances when they came into power, but at the moment, Rachel Reeves is really limited by her own fiscal rule of not borrowing for day to day spending by twenty twenty nine to thirty that fiscal year, and that means that, you know, she's really left herself with very very little headroom, under ten billion pounds of headroom in terms of meeting that goal. And as yields get higher, as borrowing costs get higher, that's really really putting pressure on her. I mean, she has said that she's not going to come back in the spring in the spending the fiscal statement that she has in the spring. She's not going to come back with a load of time raising measures as she did in the autumn budget last year. But you know she's going to be under pressure. She's got bills to pay exactly, and you know, if it's not going to be you know, more tax risers, then that's going to mean more spending cuts, and that's going to you know, really be felt by the economy, by public services, by people.

I think she's going to get away with it. I told you why she's going to get away with it. She won't next year round, but this term she will because the obr of budget responsibility decided to assess how the active concentative tightening program for the Bank of England will be measured, and they did it in a way They have about ten billion up their sleeves so to speak, which is they recalibrate it later in the year. I think that that Reeves has got about well, certainly eight or nine billion extra there. Plus I think she's got a few other things up her sleeve, so I think she'll get away with this time.

I think she's going to get away with it. I told you why she's going to get away with it. She won't next year round, but this term she will because the obr of budget responsibility decided to assess how the active concentative tightening program for the Bank of England will be measured, and they did it in a way They have about ten billion up their sleeves so to speak, which is they recalibrate it later in the year. I think that that Reeves has got about well, certainly eight or nine billion extra there. Plus I think she's got a few other things up her sleeve, so I think she'll get away with this time.

The other issue though, to all of this goes to the heart of the Labor Plan, doesn't it. And this is also kind of where you can draw parallels with Tony Blair and Gordon Brown and the Labor government. Then it is all about growth. And you know, if the cost of boring and you're boring more, you're spending more on the cost of that boring is getting tougher. The way out of it is to earn a bit more, ie to grow the UK economy. And that's the kind of real channel.

The other issue though, to all of this goes to the heart of the Labor Plan, doesn't it. And this is also kind of where you can draw parallels with Tony Blair and Gordon Brown and the Labor government. Then it is all about growth. And you know, if the cost of boring and you're boring more, you're spending more on the cost of that boring is getting tougher. The way out of it is to earn a bit more, ie to grow the UK economy. And that's the kind of real channel.

Well you can't text your way to it. And that's exactly what she's doing. And what she's essentially doing is moving capacity or whatever you want to call it, away from the private sector towards the public sector artificial that's going to keep GDP up, which means weirdly, the bank will be less inclined to cut interest rates. She's doing precisely the two wrong things she should be doing if she really wants private sector growth, and there's no level of improvement and productivity in the public sector.

Well you can't text your way to it. And that's exactly what she's doing. And what she's essentially doing is moving capacity or whatever you want to call it, away from the private sector towards the public sector artificial that's going to keep GDP up, which means weirdly, the bank will be less inclined to cut interest rates. She's doing precisely the two wrong things she should be doing if she really wants private sector growth, and there's no level of improvement and productivity in the public sector.

And this week, if you look at the private surveys of the economy, if you look at next results warning about the effect of the budget on business, Actually it speaks to what you're saying, Marcus, that there are budget seems to be doing the opposite effect when it comes to growth. Let me ask your left field question, Lucy. There is speculation that the Chancellor could be, you know, not safe in the government because all of the bad stuff seems to route back to the treasury. Is that wild speculation or do you sense that this theory that Rachel Read is going to have to do all the unpopular measures, the tax rises, and then she'll be off. Is that just far too extreme?

And this week, if you look at the private surveys of the economy, if you look at next results warning about the effect of the budget on business, Actually it speaks to what you're saying, Marcus, that there are budget seems to be doing the opposite effect when it comes to growth. Let me ask your left field question, Lucy. There is speculation that the Chancellor could be, you know, not safe in the government because all of the bad stuff seems to route back to the treasury. Is that wild speculation or do you sense that this theory that Rachel Read is going to have to do all the unpopular measures, the tax rises, and then she'll be off. Is that just far too extreme?

I think it's a little premature at the moment to be thinking about that. I mean, you know, we are we have seen Labour's popularity plummets since they came into power, and that is due to measures that have probably come from the treasure, you know, the winter fuel allowance cuts, the tax hikes that we saw in the budget. But at the moment, if you follow Labour's plan that does seem to be held widely by the cabinet, they're not. They don't really have any alternatives, you know, if they want to project this image of being fiscally responsible, it's it's not going to work well for them to just boot out the Chancellor at the first opportunity soolutely.

I think it's a little premature at the moment to be thinking about that. I mean, you know, we are we have seen Labour's popularity plummets since they came into power, and that is due to measures that have probably come from the treasure, you know, the winter fuel allowance cuts, the tax hikes that we saw in the budget. But at the moment, if you follow Labour's plan that does seem to be held widely by the cabinet, they're not. They don't really have any alternatives, you know, if they want to project this image of being fiscally responsible, it's it's not going to work well for them to just boot out the Chancellor at the first opportunity soolutely.

But then I listened back to Gordon Brown in a full head of dark hair nineteen ninety eight doing the budget, and the contrast is so stark, isn't it. He was promising we will spend only what we could afford. That was one of the famous phrases, and the other being families could take home more of what they earn. I was really reminded when I watched a few minutes of that in just what a different position this Labor government is in.

But then I listened back to Gordon Brown in a full head of dark hair nineteen ninety eight doing the budget, and the contrast is so stark, isn't it. He was promising we will spend only what we could afford. That was one of the famous phrases, and the other being families could take home more of what they earn. I was really reminded when I watched a few minutes of that in just what a different position this Labor government is in.

Yes, boy, he came in and Curtsey of a very very strong economy, He did the dividend tax, raid on the pensions, he sold all our gold and since had a massively easier time compared to what Reeves has got. Look, she's in a difficult position. I think I totally agree with Lucy. I think she's there for as long as Starmer will tolerator. He'll certainly cut it out before he cuts himself. But for the moment, they've just got to grin and barrett and literally hold on for the next year or two. If things you know, they are putting a lot of money into the economy on the fiscal side of that goes on the public sector side, that may do some good for GDP. Whether or not the pub private set goes into a session is a thing that will kill them. But they need the Bank of England to cut igist rates and they need to get it out of the way of the banking to allow them to do it.

Yes, boy, he came in and Curtsey of a very very strong economy, He did the dividend tax, raid on the pensions, he sold all our gold and since had a massively easier time compared to what Reeves has got. Look, she's in a difficult position. I think I totally agree with Lucy. I think she's there for as long as Starmer will tolerator. He'll certainly cut it out before he cuts himself. But for the moment, they've just got to grin and barrett and literally hold on for the next year or two. If things you know, they are putting a lot of money into the economy on the fiscal side of that goes on the public sector side, that may do some good for GDP. Whether or not the pub private set goes into a session is a thing that will kill them. But they need the Bank of England to cut igist rates and they need to get it out of the way of the banking to allow them to do it.

It's worth saying as well that we do have a few sort of markers coming up over the next few months. I mean, obviously, we've got the Spending Review sort of late in the spring, in which Rachel Reaves will set out that, you know, the kind of spending plans for each department, and she is looking to before that to make make departments find spending cuts. But we also have the Industrial strategy that will come alongside that in which she's going to be you know, essentially the government is going to try and focus on particular areas of the economy that they want to be able to help out, that they want to grow, that they want to kind of fund that growth. Whether that's actually going to be helpful or not, I don't know, because you know, we've not seen the British governments have particular luck with industrial strategies over the past few years, and we've seen very many of them. But you know, there are a few things that can be moved in the meantime.

It's worth saying as well that we do have a few sort of markers coming up over the next few months. I mean, obviously, we've got the Spending Review sort of late in the spring, in which Rachel Reaves will set out that, you know, the kind of spending plans for each department, and she is looking to before that to make make departments find spending cuts. But we also have the Industrial strategy that will come alongside that in which she's going to be you know, essentially the government is going to try and focus on particular areas of the economy that they want to be able to help out, that they want to grow, that they want to kind of fund that growth. Whether that's actually going to be helpful or not, I don't know, because you know, we've not seen the British governments have particular luck with industrial strategies over the past few years, and we've seen very many of them. But you know, there are a few things that can be moved in the meantime.

Are you giving a lot of agency here to the UK government? Of course, guilts operate in a global market, Marcus. Can the UK really shield itself against the influence of the treasury market? And we've got Donald Trump coming to the White House a.

Are you giving a lot of agency here to the UK government? Of course, guilts operate in a global market, Marcus. Can the UK really shield itself against the influence of the treasury market? And we've got Donald Trump coming to the White House a.

Very searching point. My big call for twenty twenty five is the dollar is going to weaken and bonniles are going to collapse, and that is determined by really what I think Donald Trump will want to do. And literally I think the hedge funds I've Gottenseelves built into a very big short in the US their proxy trade where they spread their riskers. I think they're quite heavily short UK as well. Why not, It's got similar dynamics, possibly worse. But I think there's a reasonable chance that Bonniles could snap back around. But it is all driven by the US and what happens there, and we are unfortunately just cast a drift without really any purchase or any control of our own destiny, much as the same as Europe.

Very searching point. My big call for twenty twenty five is the dollar is going to weaken and bonniles are going to collapse, and that is determined by really what I think Donald Trump will want to do. And literally I think the hedge funds I've Gottenseelves built into a very big short in the US their proxy trade where they spread their riskers. I think they're quite heavily short UK as well. Why not, It's got similar dynamics, possibly worse. But I think there's a reasonable chance that Bonniles could snap back around. But it is all driven by the US and what happens there, and we are unfortunately just cast a drift without really any purchase or any control of our own destiny, much as the same as Europe.

Yeah, I mean that is a really big call for twenty twenty five, isn't it, Lucy. I mean, this is the kind of big and boring problem, isn't it that the government's got to deal with? And yet there are so many distractions Donald Trump. It's also Elon Musk. It's all the issues around trade, around migration, you know, and it's channeled very pointedly right now via Musk and Farage, Whereas you know, the stuff that we're talking about, the kind of financial side of it is the difficult and kind of dull bit, isn't it.

Yeah, I mean that is a really big call for twenty twenty five, isn't it, Lucy. I mean, this is the kind of big and boring problem, isn't it that the government's got to deal with? And yet there are so many distractions Donald Trump. It's also Elon Musk. It's all the issues around trade, around migration, you know, and it's channeled very pointedly right now via Musk and Farage, Whereas you know, the stuff that we're talking about, the kind of financial side of it is the difficult and kind of dull bit, isn't it.

Yeah, exactly, we are seeing a lot of these distractions. I mean, from the trade perspective, the UK is not likely to be super high on Donald Trump's hit list. You know, we don't have a huge deficit with with Marcus praying there and we you know, there's many countries, you know, Canada, China, Germany who are likely to you know, fall foul of Trump's Aya before we do. But at the same time, you know, we can't discount ourselves from the fallout of that. I suppose, you know, if Trump is levying huge tariffs on China, then where's China's excess supply going to go? Is that going to mean dumping of various goods in the UK? Is that going to damage our own manufacturers? So, I mean there's a lot of unknown at the moment. There's a lot of questions around how much Trump is going to stick to the promises that he made before he was elected. So you know, there's a lot to be senior in twenty twenty five.

Yeah, exactly, we are seeing a lot of these distractions. I mean, from the trade perspective, the UK is not likely to be super high on Donald Trump's hit list. You know, we don't have a huge deficit with with Marcus praying there and we you know, there's many countries, you know, Canada, China, Germany who are likely to you know, fall foul of Trump's Aya before we do. But at the same time, you know, we can't discount ourselves from the fallout of that. I suppose, you know, if Trump is levying huge tariffs on China, then where's China's excess supply going to go? Is that going to mean dumping of various goods in the UK? Is that going to damage our own manufacturers? So, I mean there's a lot of unknown at the moment. There's a lot of questions around how much Trump is going to stick to the promises that he made before he was elected. So you know, there's a lot to be senior in twenty twenty five.

I think, if we've learned anything in twenty twenty five so far, it's a year of volatility uncertainty ahead and unfortunately we're having to mind every post on social media in these times. But both of you, thank you so much for setting us up for the year ahead in the guilt market and what it means for the Chancellor. Bloomberg Opinion Columists, Marcus Ashworth and Bloomberg's UK Politics and Economics correspondent Lucy Whitey.

I think, if we've learned anything in twenty twenty five so far, it's a year of volatility uncertainty ahead and unfortunately we're having to mind every post on social media in these times. But both of you, thank you so much for setting us up for the year ahead in the guilt market and what it means for the Chancellor. Bloomberg Opinion Columists, Marcus Ashworth and Bloomberg's UK Politics and Economics correspondent Lucy Whitey.

Thank you now.

Thank you now.

That's it from us for today. If you like the program, don't forget to subscribe and give it five stars so that other people can find it on Apple, podcast, Spotify or wherever you listen.

That's it from us for today. If you like the program, don't forget to subscribe and give it five stars so that other people can find it on Apple, podcast, Spotify or wherever you listen.

This episode was produced by James Wilcock. You can tell because of the boys' own intro and our audio engineer was Sean Wassomachia. I'm Mozzie Burden.

This episode was produced by James Wilcock. You can tell because of the boys' own intro and our audio engineer was Sean Wassomachia. I'm Mozzie Burden.

And I'm Caroline Hepka Yesterdaving of the nineteen nineties. We will be back with more tomorrow. This is Bloomberg.

And I'm Caroline Hepka Yesterdaving of the nineteen nineties. We will be back with more tomorrow. This is Bloomberg.

Bloomberg UK Politics. Listen weekdays at noon on DAB Digital Radio in London.

Bloomberg UK Politics. Listen weekdays at noon on DAB Digital Radio in London.