King Charles launches weak government policy amid falling gold leaf

Britain’s King Charles III set out his agenda for the fragile British government on Wednesday after Prime Minister Keir Starmer faced calls for his resignation at its last meeting, triggering intense selling pressure on the gold price.

The King’s speech, a grand event in which he laid out the government’s legislative agenda for the next parliamentary term, came after Mr Starmer’s political leadership remained under threat following the political fallout from the ruling Labor party’s poor performance in last week’s local elections.

For now, Mr Starmer appears to be holding off on an imminent leadership challenge, hoping that today’s glitz, glamor and policy agenda will shift attention away from the current crisis.

However, this does not mean that the threat of leadership has disappeared. Ahead of King’s speech in the House of Lords on Wednesday morning, Starmer had a brief meeting with one of his main leadership rivals, Wes Streeting, reportedly lasting just 17 minutes.

Mr Street, the UK health secretary, reportedly requested a private meeting with Mr Starmer on Tuesday but was refused. The comments came after a tense cabinet meeting in which Mr Starmer vowed to continue leading Labor, despite (at the time) more than 80 MPs calling on the prime minister to resign.

Markets had their own opinions on Britain’s political crisis, which has seen four prime ministers in the past four years. Yields on British government bonds, known as gold, rose by double digits on Tuesday as investors feared that this would lead to a loosening of fiscal discipline introduced by Starmer’s Chancellor of the Exchequer Rachel Reeves.

Yields fell between 2 and 6 basis points on Wednesday, with the benchmark 10-year government bond rate hovering around 5.067%, as Mr Starmer’s presidency became more certain.

Jim O’Neill, former chairman of Goldman Sachs Asset Management and former UK finance minister, told CNBC on Wednesday that the UK needs to be “a little more grown up”.

“I’m shocked that, as the scale of support for reform in the parliamentary elections shows, voters are treating the country’s leadership like a game show where we get a few months of the year and if we don’t like it, we’re out,” he told CNBC’s Squawk Box Europe.

“It doesn’t seem like some of these voters are concerned about the growth or lack of stability in financial markets…And then there’s also the idea that constitutionally ambitious people could replace the current prime minister…I think that’s a real danger given the vulnerability of the current electoral position,” he added.

Neil Wilson, investment strategist at Saxo UK, said today’s King’s Speech may give Starmer a suspended sentence, but it may not result in a suspended sentence.

“The King’s speech may put an end to the intrigue, but the bond market is clearly on edge. I wouldn’t be surprised if ministerial resignations start after the King’s speech, or even tomorrow morning.”

“Labour is calling on Mr Starmer not to lead the party in the next election. The Prime Minister has just met with one of the main leadership candidates, Wes Streeting. At the time of sending, no one has the numbers to challenge Mr Starmer yet,” he said in emailed comments.

The prime minister appears to have thrown out a gauntlet to potential challengers on Tuesday, but so far no one has come forward publicly. Support for the prime minister is also emerging. As of Wednesday morning, 93 Labor MPs had called for Mr Starmer to resign, while 158 said they supported him continuing as leader.

One saving grace for Starmer is that while many Labor MPs agree that they want a new leader and prime minister, there is no overall agreement on who they want to replace him. Some back Street, while others support former deputy prime minister Angela Lynagh and Greater Manchester mayor Andy Burnham, who need to become MPs before challenging the leadership.

Mr Street’s allies told the BBC today they expected him to challenge Mr Starmer’s leadership as early as Thursday.

In the King’s Speech, the monarch outlines the government’s agenda for the coming year to Parliament.

The speech was written by the government, not the monarch, and gives Downing Street an opportunity to reset the political narrative this year, at a time when many voters have voiced frustration at the slow pace of change and improvement in Britain.

Although high inflation and slowing economic growth related to the wars in Iran and Ukraine are largely outside the government’s control, the Labor leadership has been criticized for failing to grasp pressing domestic issues, particularly illegal immigration and cost-of-living pressures.

Growing political dissatisfaction with Starmer from many of his colleagues, and the fact that he appears to be on the verge of a near-term leadership challenge, has prompted the government to reassess its legislative agenda.

Ahead of this year’s King’s Speech, the government announced it would include an “ambitious plan” to “strengthen public services, transform the country and reverse decline”.

“A stronger, fairer country that can weather the storm of global shock and restore hope will be the focus of the new law set out in today’s King’s Speech,” the government said.

More than 35 bills and draft legislation will be announced in the speech aimed at strengthening the UK’s foundations through measures to strengthen the economy, energy, national security and our relationship with the European Union, he added.