Transcription
Very big moment for the UK, big moment for the economy, enormous moment for politics. And there were lots of claims from the outgoing prime minister outside of Downing Street.
So, let's just look through that and also what the market reaction was. Because of course, you'll be familiar with recent prime ministers when they go, often there's this big guilt market reaction. Did that happen this time around? Short answer, actually no. Um, markets really quite sanguin about this. Barely moving at all. Actually, the the the yield on the 10-year government bond, uh, which is the kind of thing we mostly focus on, that actually came down a little bit, which is the opposite of what it did under Liz Truss. The higher this is, the higher the interest rate that the government faces. Of course, um, the key thing really here, and there wasn't a massive reaction as well on currency markets. So markets, you know, not ftting about what's going on. They, they, you know, everyone's seen the way this is going for quite some time.
But here's what's, you know, significant and I think is going to be a challenge for the next, uh, prime minister, is that when you compare the UK, and this line is obviously showing you the higher this is, the higher the interest rates that we face, uh, are, when you compare the UK with its other kind of G7 peers, so major industrialized economies. This blue area is where the rest start. And the key thing here is back, you know, before 2022, the UK was kind of middle of the pack. Look at the red line versus everyone else. It's kind of in the middle, there isn't it? Then you have the the famous, infamous Liz Truss mini budget. That line shoots up and then it kind of kind of comes down a bit. But really, ever since then, the UK has been the ugly duckling. And you can see that red line going higher and higher and higher to to where we are now. And actually, over the kind of Keir Starmer period in office, our government bond yields have just been consistently higher than everyone else's. And I think a lot of people will look at this and say that one of the litmus tests of what happens next is whether the next prime minister can bring that down. Because it basically means you're not having to pay as much for your borrowing, and that makes everything else easier.
But of course, you know, Andy Burnham has said we should not be in hawk to the bond markets. Well, like it or not, you know, the UK has this enormous budget deficit. It needs to borrow the money from somewhere, or else everything basically shuts down. So, you are kind of in hawk to the bond market. So, that's going to be a key thing to focus on.
Another is growth. Because the stronger the economy is growing, the the more all of your problems basically seem to resolve themselves. And outside Downing Street, Keir Starmer talked about how our economy was going faster than our peers. And it's worth just fact-checking that. Definitely in the last quarter for which we have data, the UK is the fastest. Look, 0.6% growth. That's that's the higher the higher the bars are, the the more the economy is growing. There's the UK, there's the US, Japan, Canada, the rest of, uh, the G7. But that's just the last, you know, three months, basically three months at the start of the year. And a lot of people think that's a kind of bounce that you had before what happened in the Middle East, and so it might go down. Um, if you look faster than G7 over that quarter, if you look just over the year of 2025, actually suddenly the UK is kind of more middle of the pack. It's not not bad growth at all. And actually, the growth record for this Labour latest Labour government, it hasn't been that bad. It's not great in comparison with like the 1990s. It's certainly not the fastest growth in the G7, which remember when Keir Starmer was coming into office, that's what he said he wanted to achieve. It's not that he's failed on that front, but when it comes to, you know, growth, it's stronger than much of, uh, Europe, stronger than Japan. It's just weaker than the US and and Canada to some extent as well. And of course, the US has had this amazing AI story. Same story, by the way. So that that's just last year. Um, if you look as well over the period that Keir Starmer has been in office, so since the middle of 2024, again, same same thing. So mid-table, um, but, you know, considerably weaker than the US, but stronger than much of Europe.
I think the bigger issue here, I'll show you this chart because for me, this kind of tells you so much of the story. The bigger issue here is this long-term problem that the UK faces, which is what what you're looking at here is it's actually not just kind of gross domestic product. It's not just income we're generating. It's that divided by number of people in the country. So GDP per capita. And you can see it's rising and rising up until the financial crisis. And at that point in the financial crisis, if you just kind of took that line and continued it on. And yes, there are big questions over whether you can actually legitimately do that. But nonetheless, if you kind of continued that on in that direction, that's how much richer we would be getting. So that's basically how much richer we would be. But in the event that didn't happen, there was this big dip for the financial crisis. And then it did start growing, but it never got back onto that previous trajectory. And then you have COVID, and you know, we all know again what happened then. It looked like growth was heading in that direction, but the same thing happened. So you had this really big dip, but maybe even more significant than that dip is the fact the line never got back to where it was going before, let alone where it was going before 2008. And if you kind of just a simple difference between that and that, you're talking about the fact that we as a nation are 24% poorer than we would have been had that performance continued. And I think, you know, I think so many of our issues at the moment can be traced back to to this chart. And again, the next prime minister is going to have to wrestle with that. Uh, as well as wrestling with the fact that when you kind of dissect different parts of the economy, there are some bits that doing kind of okay, and there are some bits that are doing disastrously right now.
This is showing you just economic growth in the last few years. This is kind of Britain in total, about 2.8, 3% bigger over that period. And if you look at various different parts of the economy, it's kind of more or less the same. Construction, services, manufacturing, all doing kind of, you know, all right now. Look at chemicals. Just look at that. The chemicals sector, which is down by 20% over that period. And and compare, you know, where chemicals are. And you kind of get a sense, you know, this is one of the most historically one of the most important parts of our manufacturing sector. Britain has been de-industrializing. And of course, this dates back well before Keir Starmer came into office, but we have been de-industrializing, and that de-industrialization has continued.
And part of the issue here is if you look at kind of business confidence. And what I'll do, okay, so this is just showing you when the the bar is above the line, businesses are kind of happy. They just feel confident. They're replying to surveys saying, look, we're happy with where things are going. Um, and then when they're below the line, well, they're not very happy. And what you see here is, look, there's the Truss period. The line, the bars go down quite a bit, but then they kind of recover for the Sunak era. Look over here in the Starmer era, and there's a real pattern, isn't there? Basically, business has just been unhappy, unhappy, unhappy for so much of this period. And you can kind of understand why with higher national insurance and more of these regulations that they're concerned about. Um, and I guess one of the questions now is, you know, does the next prime minister have a more business-friendly, uh, approach?
Um, the other thing that's worth just focusing on economically is the state of the public finances. So, you know, historically Labour's been the party of tax and spend. This is showing you public spending. It's worth asking that question, did that actually happen in the the Starmer era? That's public spending as a percentage of GDP. And Rishi Sunak was going to cut that if he had won the last election. Uh, this is what Keir Starmer has done. So higher public spending. The line is a bit higher. I mean, you know, these are actually quite significant differences when you're when you're kind of talking about percentages of GDP. It's a lot of money. We spend, uh, with taxes. So, that's spending. The tax burden was going to go up under Rishi Sunak, but also under Keir Starmer, it's going up even faster. So, higher taxes under Keir Starmer, at least at the end of the this parliament. That's the the plan.
But the thing he talked about outside Downing Street that I think he would focus on is, look, what are you getting for that spending? And if we kind of look at this line here, that's that's net investment. And what I'll do is I'll just zoom into it. So we'll just, same data, but we're kind of just squeeze squidging up the axis. Net investment. Rishi Sunak was going to cut investment. That was part of the answer for getting how he would get spending down. But look at, um, under Keir Starmer. So higher investment, net investment, and that's, you know, spending on hospitals, spending on schools, spending on the transport system. Um, that I think is going to be one of the key things that Keir Starmer and Rachel Reeves talk about in the coming weeks is, look, we made a big change. The interesting thing is going to be whether whoever the next prime minister is, Andy Burnham, one presumes, is going to keep that in place because, you know, it's quite expensive stuff, but certainly quite dramatic.
Um, few other things worth just noting. Higher investment there. Um, NHS waiting lists. We heard the prime minister saying that he brought them down. Did he bring them down? Well, this is quite a good way of showing it. Okay, so basically, you want this line to be higher because that's showing you the percentage of patients receiving treatment within the 18-week target. There's various different ways of kind of slicing this data up. But the issue, you can see like in recent years, that's come down, then it plunged during COVID. So terrible waiting list performances. Down, down. That is the interim target. It used to be 92%, but that's the interim target that Labour, Labour set. So 65% of people kind of meeting that target. The line did get up. So that's over the Labour, the period of the the last couple of years. It did get up, and it just in the last month or so, it went above that. But then it just came down, only by, you know, fractions of a percentage point. But nonetheless, it's just come down. But yeah, they they hit that target, certainly.
He also talked about small boats. So, you know, there's been a lot of talk about small boats. This is just showing you each year. Yeah, we're going back to kind of 2019 here. And each of these lines follows the year and how the numbers of small boats coming across the channel into the country rose and rose over each of those years. And is it really true that small boat crossings have fallen? Well, they were very high in 2025, which of course was under Keir Starmer. But 2026, for the first time in quite a while, they are, you know, considerably lower. And so these are the different things clearly, kind of he was going through a list of that. Here are the the achievements that we have, uh, that we have come through. Um, that is one of them that he will focus on. And and also, I could show you, you know, the migration numbers, which also have started to come down. Um, but there are going to be, I mean, doubtless over the course of the next few weeks, many more obituaries, many more analyses, both about what Keir Starmer meant for the country, but also about what might have to follow him, and what's the fate of the economy under the next prime minister.