Finance Monthly - November 2021 Edition

30 Finance Monthly. Bus i ne s s & Economy Boris shrugged it off. He says all the necessary things for the Tory faithful: “I’m a staunch, low-tax Conservative who believes in an enterprise economy”, which is probably what Margaret Thatcher was thinking before she junked the UK’s ageing manufacturing base 40 years ago. A political lifetime is next week. Political consequences can take decades to emerge – Thatcher’s programme ignited the fire of Scottish nationalism and set the UK on course for a potential breakup. Boris Johnson is a master of the soundbite moment. Now he’s telling the world the UK will be the “Qatar of Hydrogen” – yet I doubt he has any real familiarity with the enormous problems that will accompany the hydrogenisation of the Global Economy. Still, it sounds good ahead of COP26. The City of London’s markets are concerned with immediate threats. They fear the multiple storms lurking on the horizon: inflation/stagflation, trade, recession, government debt, taxes, consumer confidence, and geopolitics. These are the normal ups and downs of markets that competent governments and functional economies take in their stride. These economic squalls only become truly dangerous storms when they trigger serious economic damage, or the ship of state is no longer fit to ride them out. And that’s what really worries markets deep down about the UK. It’s the absence of a discernible joined-up strategy to address the UK’s economic reality that scares the City. The government’s competency is increasingly being questioned. The reality is the crises are already upon us: supply chain fractures, diminished opportunities and social mobility, Brexit, Europe, a dearth of innovation and entrepreneurship, rising real and relative poverty, insufficient wages in unattractive jobs, decaying infrastructure, crushing bureaucracy, a dysfunctional housing market, and ossified unfit- for-purpose public services. They can be solved – but not separately. Addressing these issues holistically requires time, money and joined-up thinking. But, there is little joined-up thinking – just triage offering sticking plasters to be slapped on gaping economic wounds, or telling the victims it’s “transitory”. Not enough lorry drivers? Let’s bring in Europeans on three-month contracts! Energy bills unaffordable? Wrap up well then! Rather than address these issues through policy, it feels like the UK’s economic future is being gambled away by Boris betting his political popularity will see him through. He’ll bluster past any problem hoping that it all sort-of-comes- together around the “hi-wage, hi-skill, hi-productivity” soundbite economy he promised us. If it doesn’t, he’ll wage the next election promising it’s coming – assuming he doesn’t jump ship into some high-paying private sector role. Politics and Policy sit uneasily together. Yet, never has the UK required joined-up economic policies as much as today. The big question is – do the Tories have the political competency to deliver? There is – apparently – “tension” between Chancellor Rishi Sunak and Boris. • Sunak has a problem. In the absence of his party being able to put together any viable alternative plan, he sees the need to anchor the government’s credentials via economic orthodoxy; austerity and spending cuts, reining back borrowing and raising business and personal taxation to pay for it all. • Boris’ political senses are appalled – he’s not minded about concepts like spending limits. He regards government borrowing as his personal piggy bank of political popularity. Why not build a new Royal Yacht? Why not borrowmore to rebuild a stronger economy. Which one is right? Perversely, it might be Boris. The success of governments around the globe in raising and distributing billions in pandemic support spending packages without causing government debt markets to implode should have been a light bulb moment. Since the last economic crisis in 2009, we’ve proved devasting austerity is not an answer while other solutions, including printing money, are available and proving practical. Wake up to the possibilities of fiscal boost and new monetary policy. Let’s be clear: there is no free Magical Monetary Tree of