Does politics matter for markets? - with Jens Larsen of Eurasia Group

Luke Bartholomew

Hello and welcome to MacroBytes, the economics and politics podcast from Aberdeen. My name is Luke Bartholomew.

Lizzy Galbraith

And I'm Lizzy Galbraith.

Luke Bartholomew

And today we are joined by Jens Larsen, who is Practice Head of Geoeconomics at Eurasia Group, a political risk consultancy. Jens, thanks so much for joining us today.

Jens Larsen

And thank you very much for having me.

Luke Bartholomew

Well, Jens, it is a very auspicious time that you are joining us because it feels like we are surrounded by political risk at the moment across a whole swathe of different dimensions, geopolitics, domestic politics, trade, perceptions of institutional quality and degradation, challenges to the security architecture. I mean, at the risk of sounding like a Billy Joel song, there's Greenland, Venezuela, Russia, Ukraine, the fate of Starmer, the Donroe Doctrine, Taiwan, Japanese elections, politicised Fed, trade wars and capital wars, French budget crisis, possible sanctions in Cuba, Indian trade deals, and no doubt the song goes on. And I want to talk about a couple of those flashpoints with you in due course, specifically Iran and the UK, what might happen, what they might mean for markets. But before getting into specifics, I want to step back and ask a few framing questions, how to think about geopolitical risk in general, and what some of the structural drivers behind all of those seemingly disparate events might be. So perhaps a good place to start is, do you think the world is objectively more politically risky for markets today, given that list that I just went through, or is that because of near-term bias or maybe changes to the way in which politics is mediated and discussed through things like social media, that there is this perception? So how much is it reality versus perception, this sense that we are surrounded by all of these risks?

Jens Larsen

I think it's reality. And that's not just because I'm selling geopolitics to all our clients. I do think there's a marked increase in political volatility, but also in the structural changes in the political sphere that matters for the way we think about macroeconomics, the way we think about investments in both the short and long term. So we've gone from a world where it was mostly about economics and markets, it was mostly about efficiency, it was mostly about level playing field and so on, to one where you are talking politics as a fundamental factor. In the same way that, you know, three or five years ago, we learned to talk about climate change as a fundamental factor, I think you now need to think about geopolitics as a fundamental factor when you're thinking macro markets.

Lizzy Galbraith

And I suppose then you come on to this question of how much of that shift is due to those sort of big structural drivers, like the end of the unipolar world order, and how much of it is actually due to, as you said, that more domestic policy shift, governments actually trying to do more in response to that sort of changing world? So we now are living in a situation in which we're starting to see governments across all political stripes become more interventionist, seeking to pursue a fiscally expansive policy across a broader range of areas, trying to shore up supply chain security, rebuilding manufacturing bases, expanding defence capabilities after quite a few years, in many cases, of that being a significantly lower priority than it now does seem to be. So should we be seeing that rise in political risk as being due to those big, big structural drivers, and that's the sort of the way we should be focusing on those? Or is this also about domestic policy risk, as governments are expanding their concept of national security and thinking about economic and fiscal strategy in a different way?

Jens Larsen

I think you start with the big thoughts and the big picture and those big fundamental drivers of international political risk. So we talk about the ‘G zero world’, the world in which there's no, you know, the US has rescinded its leadership, the US now is a source of volatility, the US is breaking down the international political and economic order that it has been an anchor of for so long. The G zero world is a key concept for us. So I think that's very important when you're thinking about the relationship between the US and China. Another stable is the intense strategic competition. You may have less periods of less intensity, as you do now, where there's a truce between the two, we think, but basically that driver, that intense strategic competition is a feature that is very important for the way we are thinking about the responses. So I think those are absolutely critical. I think you can create or we can discuss a narrative around how populist politics have become more prevalent, are creating new pressures, whether that's responding to those underlying changes, whether that's responding to technology, whether it's responding to social media and so on. I think it's a very interesting conversation. But the point I want to make here is that that all of these are creating pressures on the political system that, as you said, as you outlined, I think perfectly, governments are under stress to show that they are addressing the concerns of the electorate. They're under stress to respond to these big strategic shifts with an approach that both responds to the needs for demonstrating that they care for their voters, but also to respond to the geopolitical and strategic and security needs.

Luke Bartholomew

And then as you said there, Jens, there was a moment where it felt like the thing that really mattered to markets was just get the macroeconomic fundamentals right. And then from there, everything sort of takes care of itself. And that's still a thought that you sometimes hear articulated - this idea that politics doesn't really matter very much. It's all just so much noise, and maybe it's exciting, but perhaps that's not really what drives the fundamentals. And I think it is worth dwelling on that thought for a moment and where it might have come from, because I think it tells us potentially something quite interesting about what has changed in the world. And to start with, I think like my favourite or perhaps the most apt version of that kind of thought comes from Alan Greenspan, you know, the Chairman of the Federal Reserve from 1987 to 2006. And he was asked in 2007, who he was going to be voting for in the upcoming US election. And what he said was, basically, thanks to globalisation, policy choices at a domestic level hardly mattered anymore. You know, outside of national security, the world was governed by market forces, so who really cared who won the election. Now, I'm pretty sure that national security carve out is doing quite a lot of work in Greenspan's thinking that we need not delve into too much. But the deeper idea there, I think it is worth focusing on is this idea that a large part of economic life had been successfully depoliticised, in some sense, either handed over to markets or ostensibly neutral, technocratic institutions. So what I wonder is, you know, when we say today that political risk has risen, maybe that framing is a little bit misleading, it suggests that the world is, in some sense, become exogenously more dangerous. But another way of seeing that, I think, is that we live through a period roughly starting in the 1980s, where there was this very successful political project that was aimed at removing overt political control from large parts of the economy. And that project genuinely reduced political risk from the perspective of market participants. And that was sort of the mechanism by which it meant that politics didn't matter that much. So to be concrete on this, you know, if you go back to 1970s, it would seem like the most banal observation in the world that politics really, really matters to markets right between oil shocks, capital controls, industrial policy, political business cycles, highly intrusive regulation of finance and trade. And then what changed from the 1980s onwards, what's often labelled ‘neoliberalism’ was the deliberate move to shift questions of allocation, production, distribution, the management of the business cycle, away from explicit political decision making. And that's the era that we lived through up to at least the financial crisis. And it's the unravelling of that moment that we're observing right now. And that's what's allowing this sense of political risk to come back. That's the feeling. Again, it's not that there's been this exogenous shock to the world where political risk has come back. It's more like this project to de-politicise the world has failed at some level or is starting to come apart. So I'm wondering, how much does that kind of explanation resonate with you at all?

Jens Larsen

I do think geopolitical risk has risen. Of course, what you're describing as sort of separate, I think, are deeply intertwined. I think the more interventionist approach that Greenspan would have loathed, but was also a response to the failures of his time and of his reign was that the global financial crisis, the massive expansion in central bank balance sheets, the massive fiscal interventions, that basically, I think, was the end of this regime of believing that if you had achieved fiscal stability, financial stability, not actually financial stability - we didn't talk about that - fiscal stability and monetary stability, then all the rest of it would sort of look after itself. In retrospect, that now seems extraordinarily naive, and I don't think anyone really thinks we are going to end up back there. I think you can argue that that kicked off the subsequent change in attitude, the need to respond to that crisis. Maybe the first part of the response wasn't sufficiently profound. Maybe that is why you saw this rise in populist economic forces. I would throw in there the absence of growth. That arguably started earlier. You have that period of productivity growth bursts and with that associated bursts in income growth, real income growth, but you have also had long periods where the median European or US voter has seen very little by way of economic progress. That sense, I think, of policy and politics not being able to respond in the economic space, in the security space, in the identity space to the needs of  the median voter, I think is a key driver here. So yes, the end of neoliberalism, I tend not to think about that. So my level of thought tends to be a level below anything that ends with isms. But I do think you're right that the world has changed. It is much more, as Lizzy said in the earlier question, a much more interventionist world where politics as practice is trying to do more to show that you can grapple with issues. The corollary of politics not mattering very much was that politicians didn't have any leverage. Couldn't do very much because the world was what it was and everyone now wants a handle. Why do you want industrial policy? That's because you have some handle to pull. Trump can intervene in the pharmaceutical sector and show that he cares, even if I can say this is probably not going to work even in the short run and definitely not in the long run. My view as an economist on interventions of that kind is it's unlikely to be very efficient. It's unlikely to generate higher growth. But as a political tool, it's very powerful to respond to. So I think there's an element of that, the activist agenda response to this need to demonstrate that you have got leverage in a much more complicated world. And with that comes, associated with that comes a breakdown in the international order. Again, what drives what is a longer discussion, but that we have observed a US government that is very deliberately now, but arguably for a long period of time has been undermining the international order that they were themselves the architects of. Trump is doing that disowning of that framework and reducing the US's role as an anchor, as a leader of that system more rapidly than we've seen in the past. But we've been on this trend for a while. So again, what drives what, what is isms and what your underlying driver is, I think there's a mix of global integration that isn't delivering, there's a technology that is driving dispersion. There's definitely trade as an issue. And to that you have a response where politicians are keen to show that they’ve got handles and levers that can affect the allocation of resources that can affect the lives of your voters.

Luke Bartholomew

And Jens a lot of what we've talked about so far is this sense from a market participant perspective that perhaps the range of possible outcomes has widened quite significantly. There's more extremity to distributions, there's more at stake politically and geopolitically. But I guess risk, you know, we typically think of it as being a function of, on the one hand, how extreme an outcome might be, but also how likely that event is. And I'm wondering, at the same time as this sense that the range of possible outcomes has expanded, we've also maybe lost some confidence in our ability to assign reliable probabilities to certain outcomes. You know, these tools that investors have traditionally relied on, like polling or betting markets, have perhaps had some high-profile quote-unquote failures over recent years. And some of the standard rational choice theories that people might apply to a political setting, perhaps those have become less reliable as the key actors are arguably acting in a less rational way, or perhaps at some sort of meta strategy, they're deliberately being less rational to put people off balance, whatever it might be. But the thought is that those models have become less powerful at predicting behaviour. So yeah, I'm wondering how you think about the use of, say, scenarios and probabilities to try and pin down the likelihood of certain events and how confident we should be about assigning probabilities in that kind of way.

Jens Larsen

I don't think there is an alternative to having, for many events, and for many ways of thinking about scenarios and outcomes, you do need to be able to formulate a scenario and attach a probability. And in most cases, that's a sensible thing to do. We can do that about Iran or a UK election or the next budget or the UK economic outcomes for the next five years, defence spending over the next decade. All of that, I think, are analysable within that framework. Of course, sometimes the uncertainty becomes too fundamental and the capacity to actually create a framework that works is restricted. Mervyn King famously wrote about that. And there's a lot of theories about fundamental uncertainty, about ‘Nietzschean uncertainty’. But I think it is kind of a little too easy to say most events are not analysable, we cannot use these frameworks, we cannot attach probabilities, when actually, in fact, that discipline is still very useful. And I think you can definitely, when you're thinking for the next three, six, twelve months, think about political risks in that way. And I think it's useful. How confident you should be about your probabilities. Having tried both the economic and the political forecasting business, I am humbled even more than I was as an economist by the politics business. It's just very, very difficult to do. As you say, the range of outcomes is wide, that's one thing, but it's also an extraordinarily uncertain business.

Lizzy Galbraith

So after that defence of the use of scenarios, we'll try and do the difficult work now of talking about some specific flashpoints and how we can use that type of scenario thinking to try and decipher some outcomes or some possible outcomes within those, and what types of channels through which financial markets might experience the effects. So the early part of this year has seen extremely large-scale protests in Iran, very significant in terms of the diversity of the participants and their scale. What has also been significant is the scale of the crackdown that followed, which of course has drawn the attention of President Trump. He's repeatedly threatened military action against Iran since, and the two sides do now appear to be engaged in some sort of negotiation process. The outcome there is, I think, safe to say, highly uncertain. We do not, as of yet, have any conclusion from those talks, but in terms of the expectations that you have for both the durability of the current Iranian regime and the role that the US may play within that, what's your sort of expectations there?

Jens Larsen

So I think this can serve as a good example of how you can try to split things up. So we have tried to describe the scenarios for Iran by distinguishing between the risk of airstrikes, the prospects for a deal or de-escalation, or some form of continued noise where the US ups its rhetoric, puts pressure on the government, but doesn't actually strike. And our base case is that we're going to get airstrikes. The probabilities vary a bit, and by the time this conversation is put out, we may have changed probabilities. But for now, our base case is that airstrikes are more likely, not with an aim to cause a fundamental regime change, but a strategy akin to the one that the US applied in Venezuela, where you are not going for a complete regime change, but where you're trying to take out a leader and install a more friendly version of that same leadership. It's an extraordinarily difficult thing to do politically. So we still think that regime change in Iran is unlikely. That's still compatible with the airstrikes. So regime change is unlikely, but there’s a very significant tail risk that the regime falls apart under pressure from these military interventions. Again, what can inform our thinking here? We can be informed by what happened in Venezuela, the way Trump reacted to those. We can be informed by the fact that the US and Israel did militarily intervene last year, have stated objectives about restraining Iran's capacity, both on nuclear developments, but also on the missile capacity. So there's some clear policies and politics. There's a clear precedent. There's a sense of a US administration that has a risk willingness that you might not have seen in the past. And that certainly informs our thinking when we're thinking about the scenarios for Iran.

Lizzy Galbraith

And to broaden out the impacts slightly, how do you see that potential for intervention, that potential for either a period of, again, an uptick in military activity in Iran and potentially a destabilisation, although as we've discussed, not necessarily your base case, but the risk is still very much there within that distribution. How do you see those types of events as affecting regional and the international kind of balance of power? We talk about this as being obviously incredibly significant for Iran, and currently quite a significant facet of US foreign policy focus. But in terms of that geopolitical balance, or imbalance that we might be living in right now, does this act as a significant shift? Or is this something that doesn't necessarily move the needle too much when we're thinking about sort of the global geopolitical structure that we're in at the moment?

Jens Larsen

Let me take a step back first and say, if you had looked at this through the traditional lens, you would have thought about the geopolitical risk as being, if not solely, then primarily through the impact on oil prices. And markets still look at it very much of the crisis through the lens of does it affect oil prices or commodity prices more broadly as the channel through which such a crisis can manifest itself in economic outcomes. And I mean, there's an argument for that. If oil prices doubled, that would obviously be significant. We think Trump is not in the business of doubling oil prices exactly because he's concerned about his domestic electorate that are already unhappy with his performance on economic policy. So no desire to massively increase uncertainty or to have an impact on oil prices through a conflict, through an escalation. So again, part of our framework is to say the US is confident that they should be confident if they choose to strike that they can avoid an Iranian retaliation that impacts the neighbours, that has an impact on oil flows through the Strait of Hormuz. So you could call that assumptions, but you have to build an analysis or a framework around whether that is a plausible statement. We think it probably is. So there's upside risk to oil prices from a US strike, but they're not that big. So that's the sort of the standard way. And I think the broader question that you are asking Lizzy I think is the right one, is the important one. How does this affect relationships in the region more broadly? How do US allies in the region, the US has got strong strategic desire to strengthen its relationship with the GCC countries, to strengthen the relationship between the US and those, and eventually to strengthen the relationship between those countries and Israel. And does a strike help or hinder that? And our assessment is that the regional partners are not that keen on a strike and fear the consequences and the stability in the region. The US record, or the record of peaceful and orderly regime change in the Middle East is not a good one. And that there would be very substantial risks associated with a regime change. So we don't think they're going to go that far. We don't think they're aiming to go that far. But again, risks of, you know, being able to control these risks is certainly a question that is worth discussing if you are discussing this military intervention. So I think, you know, there's an open question here, if you had a client, Iran, that was, that was less of a source of disruption, that might be more of a source that may lead to a more stable Middle Eastern environment. It could be supportive for the US strategic objectives in that sense. But there's a clear risk here that you, it becomes a source of instability in the region and would undo some of the results that the US has had over the last few years, in particular, the Abraham Accords, which were one of Trump's most significant foreign policy achievements in the first term.

Luke Bartholomew

And I think the point you make on oil prices is an interesting one, Jens, because you're of course, right, that the standard channel through which people typically think of geopolitical action mattering to markets is through oil prices. You know, quite notably, the oil price wasn't moved, particularly by Venezuela, there was some changes to local bond prices and local equity markets, perhaps, but, you know, it didn't really do much to oil markets. And that's what led many people to dismiss it as ultimately not mattering very much to the global macro. And, you know, perhaps the case is that Iran would be different for the extent of its supply and the significance of the Strait of Hormuz and global distribution of oil. But I think the case you want to make there is that, you know, we often talk about how politics affects markets, but I think you want to turn the arrow of causation the other way and think about how markets might be a constraint on politics and the way in which the change in asset prices actually might stop or constrain political action in one way or another. How do you think about that sort of interaction and that two-way causation between politics and markets?

Jens Larsen

So when I'm thinking about what we saw last year in April, which was definitely a geopolitical moment when Trump had unveiled his new tariff policies, and the markets were looking at that and not liking it one bit. I think he realised that having a trade war with China would have very significant costs for the domestic economy, for the domestic consumer, for his supporters, and that there was a substantial risk that it could cause a market rupture. And on the back of that, plus, and I think that's very significant, the fact that China has demonstrated its leverage in rare earths, I think was, you know, if you take that triumvirate, I think you've got an explanation for why he backed down on those policies. So I think the market is, the interaction between politics and markets is important. It is two ways. And there are certain examples where it matters. I think you could see that again, in the case of Greenland, I think the economics of the European response to Trump was that by the time Trump had threatened higher tariffs on the UK, Germany, France and other European countries to create leverage on Denmark and to create leverage over Greenland, it turned out he couldn't do that, and that the strategy came with a substantial economic risk. That, I think, was one of the factors that put him off. The market responded arguably, well, not arguably, indisputably, not nearly as much as during the April event. But I think the market pressure was there. And critically, again, domestically, US electorate didn't seem to care very much for taking Greenland either using coercion, economic coercion or using military might. So all of these factors matter. And I think it does, you know, the channels through which you describe them, the immediate impact are important, the market impact, the impact on oil price and so on. But I think it's also, again, important to think about the strategic impact. Venezuela, in and of itself, might not be that important, but it was the US striking into and demonstrating unilateralism and aggressive unilateralism in a new way. It is the Dunroe Doctrine as applied to Latin America. But I would say you can also see echoes of that in the approach to Greenland. It does have consequences. It does mean that the trust in the US in the foreign policy space is reduced. It does mean that the political trust, the economic, the trust in the economic and political financial systems are eroded. And I think Mark Carney has captured the zeitgeist very well with his statements about how countries and I think companies, asset managers, need to think about how they're responding to these changes. How do you respond to the call for de-risking or diversifying your economy or your portfolio when the US is no longer that source of reliability? It's a less reliable partner. And as you said earlier, Luke, in your questions or in your comments, the range of outcomes is much wider than they were previously.

Lizzy Galbraith

So to move things closer to home, Jens, I think it is quite notable that in a podcast about geopolitical and geopolitical risk, one of the countries that we have mentioned is the UK, which if you go back a decade or so probably would not have been on the list or certainly would have been a bit of a curveball. Recent weeks have seen quite a significant uptick in speculation that the British Prime Minister, Sir Kier Starmer, will be forced out of office. Now, 18 months ago, Starmer was elected with 174 seats majority. Support for that government has since eroded really quite rapidly. And the pace of change there in terms of the polling shifts has been really quite significant. And you also mentioned, you know, the rise of economic populism earlier. The UK is maybe one of those countries where you would point to that as potentially being a factor in that domestic political shift at the moment. You can point to things like Labour's historically low vote share to seats gained at the 2024 election and, of course, the fiscal inheritance to suggest that maybe the honeymoon period for that government would always have been fairly short. But what, in your view, is behind that collapse and support for the Labour government in the UK? And, of course, Starmer himself so soon into a parliamentary term with such a large majority?

Jens Larsen

I mean, there's obviously a confluence of factors. You said going back a decade, we wouldn't have talked of the UK as a geopolitical risk. I'm not entirely sure about that. Wasn't Brexit about a decade ago. And I think the UK has been unfortunate in placing itself at the forefront of geopolitical risk through those choices. And I think in the foreign policy space, the notion that you can navigate the space between Europe and the US easily and successfully is, I think, a challenging one. Let's put it that way. I don't think Starmer is unpopular or is down in the polls because of his foreign policy. But the absence, I think, of a response to these the pressures that you mentioned on fiscal terms, in terms of absence of income growth, a decade of pretty arguably a decade and a half of pretty poor macroeconomic outcomes. And the absence of a response that makes sense, that is convincing for the electorate, I think, is the principal argument. So the absence of a strategy of a macro strategy is certainly what resonates with markets. I'm sure you are seeing that, too, in your conversations with your clients. It's certainly one we are seeing a lot. I think the other is a sequence of bad decisions. About personnel, about strategy, about policies, where, frankly, the political intuition, both of the prime minister, but also of the government more broadly, doesn't seem to have been very strong. So the inability to come up with a coherent plan that you were able to stick to, I personally think, is very important, maybe more important for investors than it is for the electorate. But certainly, I think that the absence of that convincing narrative is part of the story. But you're also right. We are not the only ones who are seeing these shift in polls. If you're looking at the polls in Germany, if you're looking at the polls in France, then you see the same rise in the populist right wing that offers solutions or seemingly offers solutions to migration issues, to fiscal issues, to the absence of growth that are perhaps easy to sell, but much, much harder to deliver on. I think, for my money, Starmer and his government have failed to come up with a strong narrative that could convince the electorate. But also, and I can stress that, it's also the absence of that narrative that I think that has the market concerned.

Lizzy Galbraith

Yeah, you are absolutely right. It is 10 years ago that we saw Brexit in the UK. So time really does fly when you're having fun. I've clearly got my timelines a little bit compressed. And of course, there have been seven prime ministers now in the UK, assuming that Starmer does resign this year in 15-years. So the churn in the British political system has been significant over that point in time. But if we look at the outlook from here, there are a number of hurdles Starmer is going to face over the next six months that could end his time in office. We have the Gorton and Denton by-election coming up later this month. We, of course, have the Intelligence Committee investigation into the appointment of Peter Mandelson as US ambassador. And of course, those May elections coming up as well, which seem to be the biggest hurdle of them all. We've already spoken about why voters are feeling like they can't rely on the Labour Party or possibly any of the establishment parties as a sort of a reliable place to kind of put their trust in. And we're seeing a quite significant fracturing of the vote across all the political parties in the UK at present. So assuming that Starmer is unable to weather that storm, of course, the question then becomes what comes next? Can any alternative prime minister turn the Labour ship around, given that there is at least constitutionally still quite a bit of time until the next general election in the UK? So there is one thing this government does have, at least notionally, is time. Former Deputy Prime Minister Angela Rayner and Health Secretary Wes Streeting do appear to be the early front runners to secure the required levels of support from the parliamentary Labour Party. So each leadership challenger to Starmer requires 81 MPs to stand in any future leadership election and will allow them onto the main ballot. But one thing I actually find more interesting, and there appears to be just as much speculation over this, is who the eventual winner would choose as their chancellor and how markets may respond to that potential shift in fiscal policy. And again, as we've talked about previously, governments having a more interventionist approach as they respond to these shifting global challenges do mean that fiscal policy and that shift in strategy is being noticed by markets. There is more interest in these fiscal strategies than maybe we would have seen previously. So Ed Miliband, Yvette Cooper and Pat McFadden, among others, have all been mentioned as possible choices. But that still leaves us with quite significant speculation over the outcome there. And of course, a debate over fiscal strategy is likely to be a feature of any future contest.

Luke Bartholomew

Well, actually, I wonder if this question of fiscal strategy is another example of this two-way relationship between politics and markets we were just discussing there, Jens, in the sense that the gilt market has been pretty volatile over the last couple of weeks as it's watched the goings-on of the parliamentary Labour Party on speculation about what it might mean for the path of fiscal policy under a new government and chancellor. But at the same time, it's entirely plausible that a big sell-off in the gilt market or the possibility of one, acts as a big constraint on what a new chancellor would do in terms of fiscal policy. So Jens, I'm wondering, how radical a break in UK macro policy is on the table, given potential changes to the UK prime minister and chancellor?

Jens Larsen

I don't think we are very likely to see a very radical change. But you say there will be a lot of pressure in a leadership election to accommodate, you have to win the vote, but the grassroots, there will be a lot of pressure to move in the direction of a less tight fiscal path. I mean, the budget implies a significant fiscal tightening over the years ahead, including a very tight budget for the spending departments. And that was a challenge, frankly, before we had talks of a leadership election and a new chancellor. And so I think this is still going to be an issue. And you would certainly, we think the most likely way this would be expressed is in a slightly slower fiscal adjustment. So rather than finish by the time of this parliament, maybe go back to a five-year horizon or something that that doesn't sound too radically different, and in many ways, isn't too radically different. Because I think the Labour Party, whatever the outcome, will remain committed to fiscal discipline. But you can define how quickly you get there in many different ways. So the exact nature and shape of the rules is obviously up for debate. I think the issue again here is, I think you could do that if you came up with a clear plan, a credible plan, one that didn't backload the fiscal tightening. If you're presenting a plan that doesn't look like something a government can deliver, then you're not going to get away with it. A Labour government will not get away with it. And I think that is the pressure coming up with a credible plan that addresses the underlying economic issues, which are the need to fiscally consolidate, the need to address the savings investment imbalance. We have a poor record in terms of investment, the weakest in the G7, but we have an even worse record in terms of savings, meaning we have a continued current account deficit. We need to strengthen our investment record. The government has a plan for public investment, but does it have a plan for private investment? How are they going to draw that in? How are they going to get construction going? And how are they going to strengthen our infrastructure spending beyond public spending? So I think if you can come up with a reasonable strategy, and I wouldn't rule that out, then I think you could do a lot and you could have flexibility in terms of the path for the fiscal adjustment. But in the absence of a plan, it's very hard to do anything other than look at the numbers. And that, I think, is what the market is doing. Not being quite sure how to assess the different candidates, Streeting seems like the fiscally more conservative, and Angela Rayner maybe less. I think the difference is probably not that big. But as I said, the key issue, do you have a clear plan that achieves the objectives of fiscal consolidation, that raises investment sustainably, and ultimately delivers on the growth agenda?

Luke Bartholomew

Alright, well, that is all that we have time for this week. So as ever, please forgive me if I ask you once again, if you've not already done so to like or subscribe, whatever it is that you get the podcast, then all that remains is for me to thank Jens for joining us and to thank you for listening. So thanks very much and speak again soon.

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