Time to abandon failed Bidenomics

The contrasting market reactions for Trump’s election and the Labour Government’s Budget are a warning sign for Britain

The verdict of the US electorate was that Donald Trump was best placed to steer the country towards prosperity. Early on, it appears that the verdict of the market is that the American public were right.
The Dow Jones gained 3.6 per cent to close at a new record high, the S&P 500 rose 2.5 per cent, the Nasdaq index rose 3 per cent and the US dollar enjoyed its largest gain in eight years. While the full effect of Mr Trump’s tariffs remains to be seen, and there are still concerns over potentially inflationary deficits, the early signs are positive for growth and investment.
The verdict on the Labour Government’s recent budget in Britain, on the other hand, has been less favourable. The immediate reaction saw the pound fall and gilts rise, a combination that suggested a likely surge in inflation. 
The Bank of England has now agreed, warning that inflation will creep up and that, despite yesterday’s cut, interest rates are likely to remain higher than they would otherwise have done. Some mortgage lenders appear to be sufficiently concerned to have actually raised their rates.
The contrast between these market reactions should give Sir Keir Starmer pause for thought. Economic growth may be seen as an esoteric concern, secondary to the immediate concerns of funding the NHS or pursuing net zero, but the unceremonious ousting of the Democratic party in the USA should serve as a warning as to how voters will react to perceived underperformance.
Of particular concern should be the reflection that Britain now appears to be the lone country still standing by its version of “Bidenomics”. The relief in markets at its abandonment in the US should surely lead to reconsideration of Labour’s investment plans here. In particular, the rush to decarbonise the grid by 2030 – estimated to cost as much as £116 billion – looks increasingly infeasible.
Ed Miliband’s signature policy may well require more so-called demand “flexibility” – persuading households to switch off washing machines or factories to cut their energy use at peak times. Such a system seems unlikely to be consistent with the economic growth Britain needs to pay its way, and the Labour Party needs if it wishes to retain office.
Rather than slavishly imitating his predecessor, it might be better for all if the Government were to heed the warnings in the market, and follow Mr Trump in pursuing a policy agenda of deregulation and growth.