Morning Update

…has been very election-centric. Rishi Sunak probably won the battle for the headlines with his proposal for National Service for all 18-year-olds. The plan would be that by the end of the next parliament, all 18-year-olds would have the choice of a year in the military full-time, for which they would be paid, or a weekend a month volunteering in the local community, or with blue light services. It will be compulsory; there will be exemptions from it, but they haven’t worked out how to enforce it as James Cleverly confirmed that there’d be “no criminal sanctions” – though parents might get a fine!

The “Triple Lock Plus” is another pledge aimed squarely at the retiring and retired voter. It’s basically the promise to maintain the triple lock and increase the tax-free allowance in line with the same measures of the existing triple lock (the higher of 2.5%, inflation, or average earnings).

That was the good news from Rishi; the bad news was that he’s lost a few more MPs from the re-election campaign, including Michael Gove and Andrea Leadsom. Perhaps more damning was MP Lucy Allan, who is also standing down at the election, publicly backing the Reform candidate in her constituency! Ms Allan has been suspended from the party, but given that she won’t be standing again, that feels like a pretty hollow punishment!

Jeremy Hunt was in Italy for the G7 finance ministers meeting. The Chancellor used the platform to warn other nations about the potentially damaging “creep back into protectionism”. Mr Hunt was referencing the tariffs that the US and EU are preparing against China. Though the UK government will have no doubt been considering whether they align with the US and Europe, the election stops them from passing any new laws for the next couple of months.

His tone does suggest that the UK position is more balanced, though with the UK automotive industry so important to the UK economy, there will no doubt be calls from the industry to match tariffs that the US is imposing or risk the UK becoming a dumping ground for cut-price Chinese EV vehicles that UK manufacturers cannot compete with on price.

…have agreed in principle to use frozen Russian assets to fund loans to Ukraine. The agreement paves the way for the G7 leaders’ summit in June to potentially sign the proposal off. Russia has about £160bn in assets frozen in Euroclear, based in Belgium, for which the interest could comfortably support large loans to Ukraine.

There’s an awful lot still to be worked out, not least how the burden is to be shared if Ukraine were to default, or the returns on the Russian funds weren’t to materialise. Still, this feels like a step forward.

Well, not quite, but the person that coined that phrase, James Carville, has hit out at Joe Biden for risking the election for talking about ‘the wrong issues’. He’s critical of Biden for focusing on Gaza and student loan forgiveness, which are really far down the list of things that Americans care about, according to polls. He says Biden shouldn’t be sitting back and assuming that people will be voting for him because the economy is so strong when people’s big three issues are inflation, immigration, and the economy/jobs.

Mr Carville is suggesting taking more imaginative approaches to policies that would excite voters – one that he’s proposed is taxing universities with endowment funds greater than $5bn and using that money to give their former students relief on their student loans – rather than just pledging to write it off. He puts it succinctly: “come up with simple, understandable, popular proposals… don’t spin the polls, change the polls”.

We’ve got US consumer confidence numbers today, The Fed’s Beige Book tomorrow, Thursday sees US GDP numbers, and on Friday we get European inflation data and German retail sales – both key numbers in the markets’ narrative that the ECB will be the first central bank to cut. Meanwhile, the dollar remains on the back foot, while equities continue to push higher.