The race to 10 Downing Street is now a race to Number 11. With the general election looming, the City of London has turned its steely gaze on the contenders for Chancellor of the Exchequer. The verdict is in: fiscal credibility is the currency of the hour.
In a poll of analysts, Rachel Reeves (Labour) and Jeremy Hunt (Conservative) top the list, with both seen as safe pairs of hands. Reeves is praised for her cautious approach to borrowing, while Hunt’s recent Budget has won over some sceptics. But this is not a beauty contest.
It is a calculation of risk. The market is watching for any sign of fiscal incontinence. One whiff of unfunded spending and gilt yields will spike, mortgage costs will rise, and the pound will take a hit.
The shadow chancellor, Reeves, has signalled she will stick to strict fiscal rules. Yet the City remains wary of Labour’s spending plans on infrastructure and net zero. The Conservative campaign, meanwhile, is fighting to regain trust after the Truss debacle.
Hunt’s talk of tax cuts is welcome, but investors fear he may overpromise. Ed Miliband? Out of the running.
The verdict, from Threadneedle Street to Canary Wharf: stability, stability, stability.
