Long-Term Forecasts and Court Verdicts: The Latest in British and French Politics

Editors’ Note: MarketMinder Europe is politically agnostic. We prefer no party nor any politician and assess developments for their potential market implications only.

Whilst the FIFA World Cup nears its close in North America, politicians in two of the semifinalists have been preoccupied with the homefront. In Britain, a new deficit forecast is whipping up tax hike speculation amongst commentators we follow as presumptive new Prime Minister Andy Burnham prepares to take office.^[i] Across the Channel, a French appellate court reduced National Rally (NR) stalwart Marine Le Pen’s ban on running for office—freeing up a 2027 presidential run for the party’s spiritual leader.^[ii] Whilst we doubt these will prove massive game changers for markets, we think both have aspects worth considering from an investment standpoint. Let us dive in.

UK Deficit Forecast Spurs Policy Speculation

After officially clinching the Labour leadership race, former Manchester Mayor Andy Burnham will become UK Prime Minister 20 July. Yet before he has even loaded up the moving van to 10 Downing Street, his plate is full of perceived fiscal policy headaches, much like his predecessors’. The latest came from the Office for Budget Responsibility (OBR), which issued its annual Fiscal Sustainability Report last week. And buried in these 148 pages of 50-year debt forecasts was a warning that His Majesty’s Treasury must cut the projected federal budget deficit by 3.8% of GDP by fiscal year 2031/2032 to keep Britain’s debt-to-GDP at 95%.^[iii] Financial commentators we follow did the maths and now argue that translates to £120 billion of new annual tax revenue or spending cuts.^[iv]

The OBR pins this primarily on the State Pension’s triple lock guarantee, which some estimate adds £130 – 140 billion in annual public spending.^[v] Thus, the OBR’s admonition theoretically amounts to ditching the triple lock, cutting other spending or raising taxes to keep debt-to-GDP at bay.^[vi] And given Burnham’s policy plans (and Labour’s reputation) point to steady public spending and investment, commentators we follow warn big tax rises are on the way.

This is all too hasty, in our view. For one, the OBR’s report is yet another long-term forecast relying on assumptions about economic growth, demographics and financial markets. The 50-year (50!) projection ignores myriad factors—economic ups and downs, policy changes, global trends, new innovations, you name it—that could (and will likely, in our view) change between then and now. We also find that targeted 95% debt-to-GDP ratio completely arbitrary. In our view, there is nothing significant about 95%, 100%, 105%, 150% or even 60% rendering debt sustainable. Based on our research, interest payments’ affordability is most important for fiscal health, but no report can predict this since no one can forecast interest rates 50 years out, to say nothing of economic activity that sways the tax base.

More importantly, in our view, consider the political realities here. The triple lock has been on MPs’ list for a decade now, and whilst many have suggested it needs reform, none have agreed on what that entails, and none likely want to risk alienating a key voting bloc. Consider the blowback to Rachel Reeves and Keir Starmer’s means-testing the winter fuel allowance in 2024, forcing them to U-turn a year later.^[vii] Their popularity never recovered, based on our observations.

This also generally isn’t the kind of thing any politician would jump to now, five years ahead of the OBR’s (arbitrary, in our view) timing suggestion. Labour’s 2024 election manifesto committed to keeping the triple lock.^[viii] With the next general election due by August 2029, and to the extent state pension changes are actually needed, each party will likely pick their approach, campaign on it and win voter backing. There is a long time between now and then, so we can’t know what will be in any party’s manifesto—never mind which stands the highest likelihood of passing. Plus, there is a chance the UK economy could even grow fast enough before August 2029 that all this speculation becomes moot.

The same goes for austerity measures, in our view. Burnham already committed to major aspects of Labour’s manifesto, including pledging not to raise income tax, value-added tax or employee National Insurance Contributions.^[ix] He (presumably) wants to get re-elected, so immediately veering from these promises probably wouldn’t help. And as for spending cuts, he just outlined a 10-year economic plan that hinges on public investment.^[x] U-turning on that because of a single forecast seems like a political own goal to us. In concert, we chalk all of this up to political noise, unlikely to result in sweeping policy surprises in the 3 – 30 month window our research finds stocks care about most.

Le Pen’s Ban Shortened, Teeing Up Presidential Run

Across the Channel, we think investors received more clarity on France’s presidential ballot next year after a Parisian appeals court reduced Marine Le Pen’s ban on running for office.^[xi] For context, Le Pen was convicted of embezzling EU funds into NR party activities in March 2025—earning her a five-year ban from running for French office.^[xii] She appealed this conviction. And whilst the appellate court upheld the guilty verdict, it effectively ended her ban by reducing it to 15 months (technically, 45 months, but 30 were suspended). Similarly, she was sentenced to a three-year jail term, but two years were suspended and one will be accomplished via wearing an electronic ankle bracelet.^[xiii] She is further appealing that part.

After the ruling, Le Pen confirmed her 2027 presidential campaign with long-time protégé and current NR president, Jordan Bardella, who will become prime minister if she wins.^[xiv] Given the NR’s current poll leadership and other French parties’ long-running struggles, we have seen some suggest Le Pen will win the presidency in 2027, then call a snap legislative election that the NR will sweep—ensuring legislative dominance to enact its agenda.^[xv]

But this, too, seems hasty to us. First and foremost, our research shows polls this far out are rarely predictive. Nobody knows who will rival Le Pen, how they will campaign or how the public will react. And even if Le Pen does get an Elysée and legislative sweep, we don’t think this automatically means vast policy change—for good or ill—follows. In our view, today’s speculation overlooks the NR’s intraparty divide, as seen in Bardella and Le Pen’s divergent economic views. Whilst the two align on issues like immigration, Bardella has historically championed free‑market policies whilst Le Pen pushes a more social‑sovereigntist mix of redistribution and economic nationalism.^[xvi]

Consider their opposing views on France’s proposed windfall profits tax on energy companies. Le Pen backed it as means to claw back crisis‑driven profits to finance fuel tax cuts and consumers’ purchasing power whilst Bardella opposed it, questioning if France’s priority was “to invent taxes and duties.”^[xvii] They also broadly disagree on France’s pension system and taxing big businesses.^[xviii] In our view, this divide creates a tug of war between what commentators we follow would traditionally call right-leaning and left-leaning economic policy (a line we have seen getting blurred globally lately).

Given they represent factions within the party, we find it entirely possible intraparty gridlock would stall legislation if the NR wins. And given commentators we follow have warned an NR government could run up deficits and chill foreign investment, that could mean reality going better than expectations—though we find politics is just one of stocks’ drivers.

At any rate, we don’t think this is a 2026 issue for French stocks—it is too far out and unknowable. Whilst they are underperforming broader markets this year, we think this is less about local politics and more about their relatively heavy weightings toward cyclical and defensive sectors (i.e., Financials, Consumer Discretionary, Consumer Staples), which have lagged tied to war fears, based on our research.^[xix] We suspect that, as those fears recede further, such lag should reverse.