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The result of the Caerphilly by-election will have come as no surprise to most students of politics. However, the magnitude of the result will have sent shock waves, not only through the valleys of South Wales, but also across the length and breadth of the UK. It looks as though, for the time being, Labour politics have been thrown into the dustbin of anonymity and that the way back, will be long and tortuous for years to come, unless PM Starmer and Labour start to understand a phrase coined by James Carville, when advising President Bill Clinton - “It's the economy stupid” - in his successful run for the White House, back in 1992. That by-election blood bath, was an official warning from voters that the economy has been poorly run – no growth, with standards of living being unacceptably low, inflation too high and an unsustainable bloated public sector. Also the country is now excruciatingly bored of hearing every government minister and MP blaming the previous Tory administration for all its woes and the invidious position it finds itself in. Labour’s Cabinet, however troublesome the ‘left’ of the party tries to be in bringing its influence to bear, needs to understand that growth will only come from stimulating and incentivising business, industry and commerce. So long as night follows day, it does not come from a public sector, whose cost to the taxpayer is now completely out of control, especially with 9.2 million people in the UK now economically inactive, with 3 million also permanently on the sick list. I remember Harold Wilson, telling us at a lunch, that I hosted back in 1984, that a Labour Government with a substantial majority, was all but unable to deliver its manifesto. He felt that he was a much more effective Prime Minister with a small majority. He could get his legislation through, knowing that any strong rebellions could see his government capitulate. Sir Tony Blair’s administration seemed to be the exception to the rule. Perhaps the party was less militant in 1997, after eighteen years of Tory rule. Labour’s policies back then were less strident and not so spiteful, as they appear to be today. Most people are still trying to fathom why it was necessary for Chancellor Rachel Reeves to serve all but three months’ notice on 4th September that the Budget would be presented on 26th November 2025. She told us that ‘Britain's economy isn't broken. But I know it's not working well enough for working people.’ That’s hardly the sort of comment that instils confidence. Speculation on the content of this Budget has been rife for weeks. How much ‘head room’, if any, for increasing expenditure, would be available? How much in the way of public sector cuts could be implemented – not too many, by the sound of the noises coming from the back benches? Taxation has been the main topic at most peoples’ breakfast table rather than focusing on the cornflakes and the boiled eggs! A slew of rumours on taxation have spewed out from Labour sources with help from a very imaginative media – Inheritance tax, a gaming tax, a bank windfall tax, an increase in the community charge, a wealth tax, a tax on pension contributions, with even talk of an increase in income tax have all been under intense speculation. These levels of supposition are unhealthy and might well be counterproductive for the government. The market has been less than enamoured with the Government’s borrowing requirement - £2.8 trillion, with borrowings for the last year up on the previous year. Gilt yields have dropped about 30 basis points in the last month, much of this easing is down to speculation that the Federal Reserve may have further cuts in rates to implement. These lower yields are going to save the Chancellor a significant amount in debt interest payments. The yields are still higher than when Liz Truss was PM and in almost every country in Europe. Trust me, if the market does not like the content of the Budget, yields will head north. The Chancellor is on notice. She must produce a Budget that invites a confident reaction from investors and business alike. Positive sentiment is a prerequisite. Through the economic gloom and political darkness, a few green shoots of recovery in terms of corporate activity are beginning to appear, which could be encouraging for the City of London. Greece’s Metlen Energy & Metals PLC, was promoted to the FTSE 100 index in September after making its London stock market debut in August. It was very reassuring to hear that Metlen felt London was the place to be and that no other European financial citadel was close to eclipsing London, despite initial concern over Brexit some months ago. There are also hopes that the IPO market might be rekindled. A list of well-known companies includes Monzo, BrewDog, Starling, Zopa, McLaren, Waterstones, Boots, Unilever Ice Cream, Virgin Atlantic and Asda. Several from them could well come to the altar of public ownership in the months to come. We have had a recent false start with Unilever Ice Cream. However, Beauty Tech was a recent success and Shawbrook, a retail bank is expected to start conditional trading this coming Thursday. Also there is the possibility of a joint $75 billion listing in New York and London of Revolut, a British multinational neobank. This could be an exciting period for business and the ‘City.’ Since the beginning of the year up until the end of September, there have been 240 IPOS in the US, but only 16 in London, most of which have been on the AIM market or Aquis Exchange. In the light of improving conditions for investment opportunities in the UK, we do not need another anti-business Budget on 26th November 2025. Of course we understand that the Chancellor has limited room for manoeuvre and that an increase in taxation is inevitable to finance a purported £25 billion ‘black hole’. However, what would be a ‘death knell’ for the City, as a result of the introduction of visceral taxation, such as implementing a windfall tax on the banks, or a raid on our pension contributions and a gaming tax, and a tax on limited liability partnerships, which could jeopardise thousands of jobs, especially in racing, resulting in many of these betting operations going off shore. Banks have taken sixteen years to recover from the credit crisis. Hammering them would damage business and housing irrevocably. As well as shoring up the UK’s acute debt problem, the Chancellor must focus on attracting investment, which can only be achieved if sentiment is positive. Without it, growth is doomed. So, stamp duty must be abolished on trading shares, to compliment the government’s great success in alleviating the burden of excessive regulation. This would enable the City of London to further its reputation, as the leading financial centre in Europe. Also, any continuous moaning about the damage Brexit has inflicted on the economy, is unhelpful and exaggerated. Trade deals with US and India would have been pipe dreams with continued membership of the EU. Chancellor, creating an upbeat atmosphere is key for growth, so PLEASE ‘don’t throw the baby out with the bathwater!’
