Reeves Rearguard Holds — Blair Warning, Bond-Market Fear of Miliband
Chancellor Rachel Reeves’s backbench-lobbying push continues. Friends of Reeves believe there is a world in which she survives the transition to a Burnham premiership precisely because it would reassure the markets. Former Prime Minister Tony Blair warned the Labour Party this week against a “lurch to the left”, stating a move to the left would not work electorally and supporting cutting spending. The intervention translated — via market reception — into easing UK gilt yields. One Labour MP close to the chancellor: “The biggest fear for the bond markets and the unions is Ed Miliband.”
Burnham’s allies have suggested Energy Secretary Ed Miliband as his pick for chancellor if he wins Makerfield; Reeves’s allies counter that Miliband “would not be trusted by the bond markets”. The Blair-Burnham combination — Burnham’s recent softer fiscal-rules tone and Blair’s broader intervention — reduced the political-risk premium on UK debt by 34 basis points off the 13 May 5.17% peak by Wednesday close. The Iran escalation overnight is likely to reverse some of that gilt-yield rally as imported-inflation expectations re-anchor higher. The Reeves cost-of-living package this week — fuel duty cancellation, VAT cuts, food tariff removals and £120m ceramics support — lands into a re-tightened macro backdrop.