Markets Wrap: Inflation Means Bad News for Burnham

"Basically, all of these things are stagflationary," John Stepek says about halfway through this episode, and that one line captures the knot the conversation keeps pulling at. The episode opens with British politics — Simon White and John Stepek sizing up Keir Starmer's early cabinet picks ("he's not scared of horses") against the grim arithmetic of a government that has already maxed out its tax base and can't borrow much more without gilt markets revolting. But the real through-line is something bigger: inflation never went away, it's getting more volatile, and that volatility is about to make life harder for everyone — governments, central bankers, and investors alike.

The Fiscal Trap Starmer Can't Escape

The conversation starts with Starmer's dilemma, and it's a tight one. The UK already has the highest tax burden as a share of GDP in peacetime memory — "outside of war or aftermath of war, it's never been higher," White notes. Borrowing is already stretched. So the only lever left is spending cuts, and the obvious target is the welfare bill, which has ballooned by roughly £50 billion since the pandemic and, unlike in other countries, never came back down. "I can't imagine we were uniquely sick in some way," White says dryly. Fix that, and "your defense problem solved, any chest."