But the reality might be more nuanced. The infamous 2022 “mini budget”, which sparked a sharp though relatively short-lived spike in yields – and mortgage rates – is well etched into the political memory in Westminster. No politician wants to risk triggering a re-run.
Sure, leadership hopefuls may criticise the Office for Budget Responsibility, the independent arbiter of Britain’s fiscal rules. Angela Rayner, the betting markets’ favourite to become the next Labour leader, has said the OBR fails to account for the wider benefits of public investment.
But that is not the same thing as proposing a new set of fiscal rules. Leadership contenders will be under heavy pressure to rule out changes.
Remember, too, that a leadership contest can only be triggered if 20% of Labour MPs (that’s 81) back a single rival candidate. Labour lawmakers might ultimately agree on the need for a new leader, but will they back the same horse?
It might not come to that. Leaders often go when their cabinet turns against them; we saw that with the departure of Boris Johnson in 2022. Nevertheless, a successful leadership candidate will need to command support from across the party. And that might require them to pick a chancellor from a different faction.
A leadership contender on the left of the party might pick someone from its right to head up the Treasury as the price of gaining sufficient support. Doing so might also help calm investor nerves about an impending surge in borrowing.
There also don’t appear to be loud calls from within the party for big fiscal loosening right now. A recent speech by two Labour MPs, representing opposite wings of the party, pitched a new economic agenda focused on supply-side policies like tax reform, over big increases in public spending. There haven’t so far been widespread calls for a large universal energy support package, either.
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