AD 69 was the year of Four Emperors in Rome – contenders for the Imperial Purple successively bidding the Praetorian Guard for the right to lead the Empire. The speed at which the Boris regime unravelled in July was shocking enough, but there was something redolent of Imperial back-stabbery in the way his potential successors immediately began bidding for the Dispatch Box with promises of tax cuts and balanced budgets to appeal to the 200,000 odd Conservative Party Members who notionally determine the next party leader and hence the next Prime Minister of the UK.
Much mud was slung between the contenders with accusations of every kind of chicanery – but amid the promises, threats and personal attacks, there has been precious little discussion of policy and plans to make the UK fit for purpose as a modern, stable, competitive, and fair economy. Instead, the choice boils down to a hard Brexiteer vs a we-simply-don’t-really-know Brexiteer – who will each try to appeal to the party vote on their anti-European credentials.
Determining how to put the UK on the right economic course is critical. We need a plan that addresses micro and macroeconomic issues – not political slogans; outlining the key objectives necessary for the UK to remain relevant in the modern Global Economy and how we get there.
There is absolutely no reason the UK should not succeed. Many of the key parts are in place. Our national finances were strained, but not irretrievably damaged by the pandemic. The economy is functional. There are wage inflation strains – that can be addressed. We remain a wealthy, diverse and demographically advantaged nation. The UK is strong in terms of global soft-power – and still punches above its weight in terms of military strength. The danger is that our increasingly factionalised and populist politics remain unfocused on the key economic issues to solve. These are essentially simple – and I’m sure the strategists in Treasury have already got the plans on file ready to hand out to whoever wins:
The issues to solve range across the micro and macroeconomic spectrum - policies to boost productivity, invention, and innovation, facilitating trade and export growth, optimising tax structures, securing micro and macro funding structures, determining and funding the changing role of state and maintaining the UK’s soft and hard geopolitical power in a constantly changing world. Simples. They are long-term objectives, and all of them could be done with enough political willpower.
Boris’ swift tumble from grace will become another footnote on how all political lives are doomed to failure – and the reasons will merit little more than a footnote in the history books.
Politics is the business of being elected and staying elected. Since Brexit, making the country actually work has been somewhat neglected. Populist politics and polarisation have dominated the agenda. Even though the Tories were left internally riven by the referendum, they had two key vote winners: i) Jeremy Corbyn, the left-wing leader of the Labour party horrified many natural Labour voters, and ii) a popular populist leader in Boris Johnson who exploited his personal popularity and Corbyn’s unsuitableness to win a landslide in 2019.
Boris’ swift tumble from grace will become another footnote on how all political lives are doomed to failure – and the reasons will merit little more than a footnote in the history books. But post-Boris, the brutal reality is there are no more excuses. Conservative Politics have to deliver. The problem for the UK is there are some topics which the Conservative Party simply can no longer address or even discuss without immediately self-immolating. It has become factionalised. Either the Conservatives sort their internal division, or we need a new government pronto.
The key issue is Brexit. Six years after the Leave vote, it is still impossible to answer the “Webster Question”: Name a single thing Brexit has made better? (Full disclosure – I voted to leave.) Brexiteers will cite the UK’s swift pandemic response and the AZ vaccine – but that’s a one-off highlighting just how good the UK can be when we put our minds to it! For all the talk of opportunities, new trade deals, and money flowing back into the economy from Brussels – the only real thing Brexit has delivered thus far is hardening antipathy with Europe. Not a single major trade deal outside Europe has been agreed upon. Terms of trade and travel with Europe have got increasingly worse.
The right economic response would be to find a compromise with Europe to solve trade issues and increase trade flows – mutually beneficial. In an era when global supply chains are in flux, inflation is rampant, where energy and food security are under threat, the UK needs access – not blocks. Yet, none of the Tory contenders will dare talk about “that which cannot be named”: the UK’s ongoing relationship with Europe. To even mention a Brexit rethink or a more constructive dialogue with Brussels – is Conservative suicide. Such talk would drive the European Reform Group into apoplexy. The Brexit Taliban’s idea of engagement with Europe is to immediately refuse it. No Tory contender can dare upset them.
The second issue is the NHS. It is Europe’s largest employer and consumes state resources at a furious rate. It is becoming the black hole at the core of government spending. The Tories know to mention reform plays into the hands of Labour to accuse them of wanting to privatise the much loved (but hopelessly mismanaged) national darling – so Tory policy is to simply feed it more cash and leave reform to the next government.
Reforming the NHS can no longer be put off. Government pensions – of which the NHS is the largest part – are going to cost more and more, fuelled by inflation. It has to be reformed, made fit for purpose, and that means a new solution that rewards staff and meets the needs of patients at an affordable cost. That’s the real business of politics – making tough and hard decisions.
London’s benchmark index was up 1.2% after opening, while the CAC rose 1.1% in Paris, and the DAX was up by 0.9%.
Johnson will resign as Conservative leader and UK prime minister today, but will remain in the role until the autumn, with a Conservative leadership race to begin this summer. A new leader is set to be in place in time for the Conservative party conference in October.
Amongst the resigning MPs were Secretary of State for Health and Social Care Sajid Javid and Chancellor of the Exchequer Rishi Sunak. Nadhim Zahawi replaced Sunak as chancellor and soon urged Johnson to resign.
On Tuesday, it was confirmed that Johnson had been previously informed about an investigation into the inappropriate conduct of MP Chris Pincher, who he appointed as deputy chief whip.
"You must do the right thing and go now,” Zahawi told Johnson.
“I want to be one of the most competitive countries in the world for investment,” Zahawi commented, arguing that corporation tax was the “one tax [investors] can compare globally.”
“I want to make sure we’re as competitive as we can be while maintaining fiscal discipline,” he added.
The new Chancellor also said his priority would be rebuilding and growing the UK economy as the country grapples with record-high inflation and the looming threat of recession. The UK is currently facing the worst cost-of-living crisis in decades.
Despite reshuffling his cabinet, Prime Minister Boris Johnson is still facing significant doubts over his future as the country’s leader.
This latest Number 10 scandal emerged as it was confirmed on Tuesday that the Prime Minister had been previously informed about an investigation into the inappropriate conduct of MP Chris Pincher, who he appointed as deputy chief whip.
Government sources have not denied reports that Sunak will use his announcement later on Thursday to scrap the requirement to repay a previously announced £200 discount on energy bills for households, or that he could possibly increase the grant to as much as £400 per household.
Additional measures, such as announcing an increase in the warm home discount scheme for low-income households, are also expected. The government may also bring forward a planned increase in benefits that had been expected next year.
Earlier in the month, Boris Johnson refused to rule out a windfall tax when questioned by Ferrari, though the prime minister said he did not like them. He added, “I didn’t think they’re the right thing. I don’t think they’re the right way forward. I want those companies to make big, big investments.”
When asked whether there would be a European ban on oil imports from Russia, Johnson replied, "There are different dependencies in different countries, and we have to be mindful of that, and you can't simply close down the use of oil and gas overnight even from Russia.”
"We can go fast in the UK...what we need to do is to make sure we are all moving the same direction... and that we accelerate that move and I think that's what you are going to see."
The UK prime minister also said that the government must ensure a substitute supply, though warned that impacts to the UK population can be expected.
Johnson’s announcement follows on from previous remarks from Europe minister James Cleverly who said that the UK will consider banning Russian oil imports as the US moves to do so.
Analysis of Office for National Statistics data by the TaxPayers’ Alliance has revealed that the lifeline tax bill for the average household in the UK is equivalent to 18 years of work. Meanwhile, the study showed that the bottom 20% of households with an income of £19,171 will need 24 years of income to pay their lifetime bill.
The findings come as Prime Minister Boris Johnson and the Chancellor of the Exchequer Rishi Sunak are urged to reconsider a planned increase in National Insurance set to go ahead in April this year. However, last week, Johnson and Sunak defended the tax hike, arguing that it is vital for the country’s Covid-19 recovery.
The study revealed that, even before the planned hike, the average UK household is set to pay close to £180,000 in employer and employee National Insurance contributions over a lifetime.
Chief executive of the TaxPayers’ Alliance, John O’Connell, said: “With the tax burden at a 70-year high, typical families are now tax millionaires.”
“Taxpayers already toiling half their working lives just to pay off the taxman cannot be asked to endure any further crippling tax hikes. Planned rises, like the national insurance hikes, must be scrapped.”
Boris Johnson has come under pressure from some Conservative MPs to scrap or at least delay the increase to regain public support as he awaits the findings of police inquiries into claims of Downing Street parties held when the country was supposed to be abiding by lockdown measures.
Critics, including former minister David Davis, are also pressuring the Prime Minister to abandon the national insurance plans due to the immense financial pressures many households are already facing amid inflationary cost increases and the imminent increase in the energy price cap.
However, on Friday, a spokesperson for the Prime Minister said, “The Prime Minister and Chancellor are fully committed to introducing the health and social care levy in April.
“We’ve spoken before about why we are doing that – in order to give the NHS the funds it needs to tackle the backlog that has built up, as well as tackling the long-term issue of social care.”
Soon after government scientists raised the Covid-19 alert level to 4 on a 5-point scale, the Prime Minister announced that the UK’s booster vaccine programme must speed up.
“A fortnight ago I said we would offer every eligible adult a booster by the end of January. Today in light of this Omicron emergency I’m bringing that target forward by a whole month,” the Prime Minister said in a hurriedly arranged national address on Sunday night. “Everyone eligible aged 18 and over in England will have the chance to get their booster before the New Year.”
The pound sterling dropped 0.4% to $1.3225, though remained largely steady against the euro at 85.29 pence.
Earlier in December, the World Health Organization (WHO) designated Omicron as a “variant of concern”, with scientists currently unsure as to whether or not the Omicron strain is more severe than previous Covid-19 variants.
Delegates from 200 countries around the world arrived in Scotland on Sunday to unveil how they plan to cut emissions by 2030 and help save the planet. The UK prime minister Boris Johnson called the COP26 summit “the world’s moment of truth” and said that “the question everyone is asking is whether we seize this moment or let it slip away.”
Each of the 200 countries has been urged to revise its non-binding national target, known as nationally determined contributions, or NDCs, in line with a 1.5C target ahead of the summit. Scientists estimate that emissions need to be reduced by 45% by 2030 compared with 2010 levels, and from there to net zero emissions by 2050. Without this reduction in emissions, the world won’t remain within the 1.5C threshold.
As COP26 gets underway, the FTSE 100 gained 0.4% by 1.30pm in London, while Germany’s DAX rose 0.6% and France’s CAC increased by 0.7%.
US stocks also opened higher amid the summit. The S&P 500 and Dow Jones were up 0.3% and 0.4%, while Nasdaq increased by 0.2%.
Following Boris’ vaguely described promise of a “high-wage, high-skill, high-productivity” economy during his speech to the Tory Conference, the right-wing Adam Smith Institute called the plan “bombastic, vacuous and economically illiterate.” The CBI warned it’s a “fragile moment” and how empty ambitions and promises on wages and productivity could lead simply to higher prices.
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.
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.
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.
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 unlimited government spending – but the markets are open for smart, credible governments to sell more debt and create more money. The key word is credibility – and avoiding policy mistakes. The UK spending itself out of its current hole should be entirely feasible. Rather than hiking taxes and cutting the modest £20 a week targeted helicopter money of universal credit to the poorest 10% of the economy, the government could keep the economic wheels spinning through the current supply chain/recession/stagflation threat.
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.
Sunak’s plan to impose austerity and tax hikes as we enter a potential stagflationary environment could prove a recipe for a confidence breakdown. It looks a classic policy mistake.
What’s the alternative? Well, that’s difficult. Politically it’s impossible to tackle the ever-hungry spending behemoth the National Health Service has become. But it’s critical it’s done – refocusing it to deal better with the modern age and the diseases of the old and infirm. It’s now in long-term crisis as it scrabbles to refocus post-pandemic – costing billions. Staff are underpaid and demotivated – costing more billions. Yet the NHS was recently advertising 200 plus senior managerial roles paying more than the prime minister. Modern tech can help – fitness and diagnosis can digitise, but the government has a peculiar ineptitude with new systems. Unless the government addresses the growing burden of public sector pensions – the entire UK tax take will soon be directed to paying the retirement costs of state employees. But to even suggest it – would again be political suicide.
There are a host of other policy initiatives the government could consider, but sadly they are the kind of concepts Boris and his fellow Oxbridge PPE rejects don’t have the imagination or political bravery to explore. I reckon Sunak probably does – but he’s got to bide his time.
As a primer Boris needs to understand good and bad government spending – and integrate them into his political calculus. Creating economic growth through a fiscal boost to companies to create jobs, growth, and build infrastructure is good. Solving skills shortages by paying doctors, nurses, engineers and HGV drivers to train, rather than charging them, would work. Spending money on fast, small Nuclear energy solutions and tidal power – tick. Helicopter money has been shown to work in a crisis. Markets accept the QE money creation trick – it works.
Ask difficult questions: Why are we charging students for their education? Why aren’t we paying them to upskill? Why aren’t we spending more on the armed forces in a period of rising tension to generate greater security, but also multiplier effects across the economy? There are a million more to be posed…
There are positive signals beginning to emerge – but aside from lots of words, there seems to be very little strategic thinking going on in the party of government to actually deliver these hi-skill jobs and raised productivity.
Words are cheap. Action is difficult.
Bill Blain is Strategist at Shard Capital and author of the Morning Porridge markets blog: www.morningporridge.com
Analysis by think tank Resolution Foundation suggests the plan comes in contrast to the prime minister's pledge of a high wage economy. It also contradicts low tax plans favoured by several Tory MPs, the think tank says.
The foundations for the Autumn Budget were laid by a better-than-anticipated outlook for public finances, handed down by the Office for Budget Responsibility, as the UK saw £141 billion lower borrowing windfall. However, family finances across the country are deteriorating, with household incomes set to stagnate due to rising inflation.
According to the Resolution Foundation, half of this windfall has been used to increase public spending while the other half is used to meet the chancellor’s new fiscal rules. The think tank warns that, with higher growth, inflation and public spending than previously predicted, along with tax rises, the UK could be set for a flat recovery for household living standards.
By 2026-27, tax as a share of the economy is expected to be at its highest level in seventy years, amounting to a £3,000 increase per household since Boris Johnson became prime minister.
This petrol and diesel ban could help cut car emissions to 46m tonnes of carbon dioxide by 2030, down from an equivalent of 68 MtCO2e (metric tons of carbon dioxide equivalent) emitted today.
The sale of electric vehicles has increased in the UK by 185.9% year on year; however, the majority of cars that are imported from other countries still have an internal combustion engine (ICE) – meaning they are either petrol, diesel, or hybrid. Around 26 countries are huge exporters of ICE vehicles to the UK, including the Czech Republic, Turkey, South Africa, Poland, and Italy. In the Czech Republic, the car industry accounts for 9% of the country’s gross domestic product (GDP). 154,468 petrol and diesel models were exported to the UK in 2019.
While yes, the move to electric vehicles will drive down global emissions, which is becoming a crucial consideration for governments and populations worldwide following the United Nations’ ‘code red for humanity’ climate change warning, it will be expensive.
Road Haulage Association Managing Director Rod McKenzie told Sky News that alternative fuels for transport such as hydrogen and electricity will be too costly or won't offer enough range. For such a drastic shift to a different method of fuel, there needs to be less doubt and more certainty for something that is hugely relied on.
McKenzie commented: "This proposal is unrealistic. Alternative HGVs don't yet exist. We don't know when they'll exist, and we don't know how much they'll cost, and it's not clear what any transition will look like.
"So this is blue-sky thinking way ahead of real-life reality. For many haulage companies, there are big fears around the cost of new vehicles and a collapse in the resale value of existing ones."
Businesses involving heavy goods vehicles will be faced with many significant challenges – it will likely take a while for the price of alternative HGVs to be driven down while we wait for research and development to innovate them and make them cheaper to manufacture and run. Transitioning an entire fleet to alternative fuel won’t be cheap. However, there is a huge need for the transport industry to be electrified – according to the UK Government, 79% of domestic freight was moved by road in 2019, and the transport was the largest sector for emitting domestic greenhouse gases.
Greg Archer, UK Director of the European green transport campaign group Transport and Environment, argued for the ICE vehicle ban and the ever-growing need for this ambition. He said: "This plan is a milestone in the shift to a more sustainable UK transport system. The decision to only use zero-emission road vehicles – including trucks – by 2050 is world-leading and will significantly reduce Britain's climate impact and improve the air we breathe."
In a bid to help businesses, seven major British companies have joined forces to accelerate the transition to hybrid and electric vehicles – some of which have some of the largest commercial fleets in the UK.
Businesses can save money on fuel – a report by British Vehicle Rental and Leasing Association report found that electric vehicles cost between 2p and 4p a mile whereas the equivalent in diesel costs 12p per mile. Tax refunds are also available for the purchase of electric vehicles, meaning you can relieve some costs.
The government is offering grants towards the cost of a new van of up to 20% and 75% towards the cost of installing a rapid charge point at your place of business. Congestion charges such as ultra-low emission vehicles (ULEVs) have been introduced in some cities to achieve cleaner air to breathe. While a great initiative for local ecosystems, it makes some cities impractical or expensive to drive through with ICE vehicles. All of these considerations make van leasing deals seem a more attractive prospect for businesses relying on fleets.
What do you think about the plan to ban the sale of petrol and diesel vehicles? Is this giving you the push you need to adopt greener alternatives in your life?
Sources https://www.autoexpress.co.uk/news/108960/2030-petrol-and-diesel-ban-what-it-and-which-cars-are-affected https://www.theguardian.com/environment/2020/nov/18/uk-ban-on-new-fossil-fuel-vehicles-by-2030-not-enough-to-hit-climate-targets https://www.autocar.co.uk/car-news/industry-news-environment/analysis-uk%E2%80%99s-ice-ban-have-global-impact https://www.cnbc.com/2021/08/09/ipcc-report-un-climate-report-delivers-starkest-warning-yet.html https://news.sky.com/story/climate-change-sale-of-new-diesel-and-petrol-hgvs-to-be-banned-after-2040-12355349 https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/945829/tsgb-2020.pdf https://www.openreach.com/news/major-british-companies-come-together-to-accelerate-the-electrification-of-transport-in-the-uk/ https://www.coversure.co.uk/redditch/blog/couriers-time-to-ditch-the-diesel