Beginning to See the Light: If you tell a lie big enough and keep repeating it, people will eventually come to believe it (1)

 

inequality‘You have destroyed my flower-like life
Not once – twice
You have corrupt my innocent mind
Not once – twice’

 
In last week’s article we looked at the government’s spending plans to rejuvenate the NHS and social care, however the commentary overlooked one very important point; there was no need for revised spending plans and an increase in NIC as Brexit gave us an extra £350m per week for the NHS, C.£18bn p.a.!

The fact that it doesn’t exposes the lie for what it was, a trick to con wavering voters. Without this Brexit is simply a self-delusional exercise for little Englanders’ full of nationalism and British exceptionalism.

This belief in British exceptionalism was part of two commitments Johnson made during his campaign to become party leader. The first was to resign from the EU, the second which highlights the delusional beliefs of some Brexiters, was to depart Europe’s customs union and single market, aspects of which embrace other non-EU states such as Norway.

The latter has caused our trade with the continent to tumble. Business is deluged with red tape:
 

  • HMRC estimates traders will be handling 215m more import/export documents a year, at an estimated bureaucratic cost of £7.5bn a year.
  • Tariffs may not apply but rules of origin and health standards do. Every truck, every cargo requires inspection.
  • HMRC calculates those customs duties paid by UK businesses increased from £1.6bn in the first half of 2020 to a record £2.2bn in the same period this year.
  • Trade bodies are reporting that some companies find the rules so complicated that they end up just paying the customs duties for ease of trading.

 
The promise that a free trade deal is cost-free to business is yet more hollow rhetoric.

The impact of Brexit on migrants has led to a shortage of up to 20% of seasonal farm labourers. Care homes in England are short of 170,000 staff, and delivery firms short of 100,000 drivers. Creative industries, which were worth £110bn to the UK economy, were forgotten by the Brexit negotiators and are now virtually isolated from Europe.

Brexit wasn’t about leaving the EU; it had a deeper significance for its instigators encapsulated in Johnson beliefs that European trade standards were somehow ‘not British’. Whether he genuinely believed this or adopted this stance to convince the dinosaurs in the Tory party he was the ‘hard-man’ is open to debate. However, as London mayor Johnson was in favour of EU workers.

Whist it might seem contradictory, it would appear there is a requirement to explain to Tories that prosperity lies in open markets not closed ones. It is often said that negotiating the single market in 1987 was Margaret Thatcher’s finest free-trade achievement.

The problem this is causing the high street was highlighted this week by Marks & Spencer who are proposing to close some of their French stores after new Brexit border controls left it struggling to keep the shelves full.

In the summer, the M&S chairman, Archie Norman, complained that ‘byzantine’ regulations meant only two-thirds of sandwiches were getting to stores. Most of them only have a shelf life of 48 hours, so even short delays can make them unsaleable.

However, the biggest Brexit lie was the ‘£350m each week for the NHS’, whilst this has mysteriously disappeared it is reassuring to see that the bribes are still be handed out to those deemed Tory voters.

The latest bribe is the £86,000 cap on the amount any individual must contribute towards their personal care costs before the state steps. There is no means testing meaning those with the most assets have the most to gain. Or, just another example of the rich continuing to get richer at the expense of the poor.
 

‘care workers, whose median pay is only £8.50 an hour, will be asked to sacrifice some of their very low income so that the property wealth of much richer people is ringfenced for the benefit of their heirs’

 
This bribe is funded by a 1.25% increase in NIC, meaning that care workers, whose median pay is only £8.50 an hour, will be asked to sacrifice some of their very low income so that the property wealth of much richer people is ringfenced for the benefit of their heirs. Low-paid frontline workers will be potentially >£1,000 a year worse off, while also depriving firms of the cash needed to invest.

The combination of higher NICs, Universal Credit cuts and a freeze on the income tax personal allowance, would take £1,040 a year away from the average supermarket worker, according to Labour.  For hospitality workers, nurses, and social care workers the hit is bigger at about £1,100.

Whilst there were grumblings of discontent from Tory backbenchers this was due to their total anathema to any form of tax increase, not because the proposals are manifestly unfair.

Labour was caught between a rock and a hard place; supporting would have legitimised the unfair raid on people’s income, whilst opposing it meant voting against a reduction in waiting times. The party should have prepared its own proposals, Starmer once again has been shown to be pro-active rather reactive. As one member of the shadow cabinet said, ‘We will have to have a proper social care plan before we go into an election.’

However, Starmer did say that the Conservatives were ‘putting the very wealthiest ahead of working people who have to pick up the bill’. On the increase in NICs, he said it would not ‘fix the crisis in social care, will not clear the backlog in our NHS and will not protect homeowners from having to sell their homes to pay for care’.

There is, of course, a reality check; no one who knows anything about the sector believes this will fulfil the Tory leader’s promise to resolve the crisis in social care ‘once and for all’. Making already poorly paid care workers worse off is not going to improve recruitment in a sector already struggling with acute staff shortages and cost pressures.

The government decision to increase NIC was based on the belief that it would be popular with voters. However, whilst nearly all the Conservative MPs voted for the proposal, many fear concerned that Johnson has taken a gamble, a concern endorsed by the Opinium poll The Observer published on Sunday which showed that the five-point lead that the Tories enjoyed a week ago has vanished and Johnson’s approval ratings was the lowest ever recorded by Opinium.
 

‘Johnson’s approval ratings was the lowest ever recorded by Opinium’

 
Johnson’s proposal makes it difficult for the Tory’s to claim they are a low tax party and diminished the credibility of any promises they make in their next manifesto. In addition, he has raised peoples expectations of the performance of both the health service and social care.  As one former Tory cabinet minister succinctly put it: ‘Our problem is going to be demonstrating that the extra money is delivering.’

Positively, the public’s acceptance of that the NIC increase being for the greater good confirms that the electorate is becoming anti-austerity, and willing to countenance higher taxes provided they are put to good use.

Whilst Johnson has been quick in appreciating this change, it shouldn’t be seen as a sign that the government has renounced all its right-wing ideology. They are still going ahead with plans to remove the £20 weekly uplift to universal credit (‘UC’), public sector pay will continue to be squeezed, and there is still no sign of the employment bill that Johnson said would reform zero-hours contracts and the gig economy.

In his protracted discussions with No 10, Sunak also insisted that the policies announced this week were funded by higher taxes rather than extra borrowing. This financial orthodoxy makes sense for the Tories who are trying to tell voters they can have the anti-austerity policies that Jeremy Corbyn offered without losing grip on the public finances.

The removal of the so-called £20 weekly ‘uplift’ to UC, scheduled for 6 October, is the most immediate of the problem highlighted above, and one that will push many claimants back below the ‘breadline’, throwing more doubt over Johnson’s commitment to ‘levelling up’.

A study by the Health Foundation shows that ditching of UC uplift will be significantly impact the poorest households, with the increase in NIC still to come. The analysis comes after the work and pensions minister, Baroness Stedman-Scott, told the House of Lords on Thursday; ‘The department has not completed an impact assessment of the ending of the temporary uplift, as it was introduced as a temporary measure. This is because we have no obligation to conduct an impact assessment as we’re returning to business as usual, as the temporary Covid uplift is expiring as it was always intended to do.’

The Health Foundation charity said areas such as Blackpool, Hartlepool, Wolverhampton, Peterborough, and parts of east London, already suffering some of the worst health outcomes, would be most affected by the income cut.

The decision shows the power of the Treasury, with the chancellor, Rishi Sunak, determined to be tough elsewhere after reluctantly agreeing to NIC insurance rise to pay for the PM’s NHS and social care plan. Many Tory backbenchers fearing that the UC cut will be unpopular among constituents already struggling with a cost-of-living crisis, especially but not exclusively in ‘red wall’ areas in the north of England and the Midlands, which have higher than average rates of UC take=up.
 

‘If you live in the north or earn under £50,000, you’re going to get the worst deal from the government’s social care reforms’

 
The 50-strong Northern Research Group has urged the prime minister not to reverse the cut. Many of its members represent seats that were won by the Conservatives in 2019, handing Johnson his majority. The New Statesman clearly realises that the ‘1.25% manifesto breaking tax hike’ does little to pander to those who ‘lent’ Boris their votes – ‘If you live in the north or earn under £50,000, you’re going to get the worst deal from the government’s social care reforms’.

Polling by the Health Foundation carried out in the last week of August found strong public support for making the £20-a-week UC increase permanent, with 51% in favour and 22% against. Among Conservative voters, 40% want to see the uplift retained, with 33% against.

The foundation said areas with a high proportion of UC recipients were already likely to have significantly worse health. In Blackpool for example, where average healthy life expectancy for men and women is just 55.2 years, the average UC cut per head is £283.

This contrasts with the home counties authority of Wokingham in Berkshire, where average healthy life expectancy for men and women is 71.2 years, and the average loss per head because of the UC cut would be £76.

In summary, all of this provides further evidence of the first two mantras of the Tory party:
 

  1. To do whatever it takes to retain the party’s rightful place governing the country,
  2. The only people that matter are Tory voters.

 
There is an interesting reality check to these mantras; Johnson continues to favour the old over the young, which is deepening the electoral fault-line between the generations. Nature, in its own way, will take care of the old, and the young, having for so long been the victims of Tory policies, are unlikely to replace them. At some point the party will have the address this, or face years in opposition.

Before signing off as this site is dedicated to ‘DIY’ investors, a word to the good.

Black swan events (2) in the investment markets are rarely recognised for what are until after the event. For example, referring to the 2008 crisis, people often look to the gating by BNP Paribas of two of its funds in August 2007, when, with the benefit of hindsight, the first warning came in 2006 when US housing prices started falling and mortgage defaults began rising.

I raise this point because shares in the embattled Chinese property giant Evergrande fell by almost 10% last week after two credit downgrades in as many days amid concerns that it will default on parts of its $300bn debts. Evergrande’s shares have fallen 75% this year.

Trading in one of the company’s bonds was suspended by the Shenzhen stock exchange after the price dropped 20%. After resuming trade, Evergrande’s January 2023 bond fell more than 30%, triggering a second trading freeze.

The online market trading platform IG said Evergrande posed ‘a risk of contagion’ after Bloomberg reported that Credit Suisse and Citibank were no longer accepting the bonds of another highly indebted Chinese property developer, Fantasia, as collateral.
 

‘Only when the tide goes out do you discover who’s been swimming naked’

 
There were also reports on Wednesday of employees protesting outside the company’s offices about salaries not being paid. Evergrande claims to employ 200,000 people and indirectly generate 3.8 million jobs in China.

The business has debts to numerous companies throughout China, meaning that any default could trigger a knock-on effect for the country’s real estate sector, which has been pumped up by ultra-cheap money since the global financial crisis in 2008-09. Investors fear that if Evergrande is allowed to go under, indebted rivals such as Fantasia could quickly follow.

The value of new home sales has fallen 20% in China since the peak in the first three months of this year, and the value of land sales are also sharply down. Along with Beijing’s tougher regulation, these factors have made it much harder for Evergrande to dispose of unsold properties even with huge discounts.

As Warren Buffet said, ‘‘Only when the tide goes out do you discover who’s been swimming naked.’
 

‘Use power for power
Use hate for freedom
Use money for cruelty’

 

  1. https://en.wikipedia.org/wiki/Big_lie
  2. A metaphor that describes an event that comes as a surprise, has a major effect, and is often inappropriately rationalized after the fact with the benefit of hindsight

 
Philip starts with a reminder of the genesis of his column this week and resists every temptation to say ‘I told you so’ as businesses are gradually immersed in a sea of paperwork, shelves remain empty, unpicked crops are ploughed into the deck and Mary Antoinette’s pleas to ‘qu’ils mangent de la sandwich aux crevettes’ falls on deaf ears as M&S beats a retreat from Paris.

When it comes to the große lüge they don’t come much bigger than the £350m a week promised to the NHS on Boris’ bus; that particular fib left a hole of £18bn a year to be filled.

N’importe, rip up another manifesto promise and go and rattle a tin under the noses of those that can least afford it; no one’s going to complain as long as you tell them its to cut waiting times, and sort out the care system once and for all. Assuming the remaining staff haven’t gone off to retrain as HGV drivers.

Anyway, the good news is that nobody of a certain age will have to shell out more than £86,000 of the windfall gain in value of their property (shurely ‘hard earned’ estate?….Ed) although that doesn’t include little luxuries like food.

Obviously youngsters won’t need to worry about any such eventuality on the basis that the chances of them ever getting on the housing ladder are on a par with that of Gavin Williamson conning his way into another job.

Then there is the trifling matter of the removal of the £20 uplift in Universal Credit – honestly, what is all the fuss about? As the cigar chomping Secretary of State for Work and Pensions said, it’s only another two hours work. Or nine.

But even though Boris’ approval ratings have fallen, Sir Kier really isn’t making much headway; to be honest anybody that can’t land a punch on this moth-eaten reshuffled cabinet should really be scanning the job sites.

And the good news just keeps on coming for arch Brexiteers – Border Force cutters have been training to enforce Priti Patel’s latest plan to secure our borders and tow would be migrants back whence they came. The problem seems to be that if the cunning so and sos then jump in the briny, the laws of the sea would requite the agents to rescue them. Maybe they could be charged with littering?

Not to be eclipsed by his little pitbull, in what the Times described as a ‘victory for metric martyrs’ Boris has taken the opportunity to reintroduce imperial measures. Given that travel restrictions have just been relaxed to allow Engerland’s ‘hard working families’ to seek out hitherto undiscovered covid variants, it remains to be seen how they’ll cope when the next lock down comes and they are required to remain three cubits and a span apart

Philip ends this week with a story that had thus far evaded me but sends a shiver; Evergrande had not been on my radar, but will certainly be getting some Google action. He’s not saying what I think he’s saying is he?

Well, just maybe – and to show how seriously the threat is being taken we have recently joined forces with Joe Biden and the, er, bloke who’s name he couldn’t remember from Down Under to sneak up to the Chinese coast and count the For Sale boards.

As COP26 looms, all things environment will be under close scrutiny and I wanted to briefly raise something that Philip may have missed. The delightfully middle-classed ‘Insulate Britain’ activists have been raising merry hell by supergluing themselves to the M25.

I suspect some form of collusion. Anybody that has ever used the product will know that it only glues together fingers and sometimes fingers and packaging. If a bunch of hairy-arsed coppers are having trouble prizing eight stone bell-ringers from the tarmac, I suspect there is something we don’t know about.

Two corking tracks, just for fun, this week – The Smiths with ‘Miserable Lie’ and a new one on me – Swans with ‘Power for Power’. Enjoy.


 


 

Philip Gilbert 2Philip Gilbert is a city-based corporate financier, and former investment banker.

Philip is a great believer in meritocracy, and in the belief that if you want something enough you can make it happen. These beliefs were formed in his formative years, of the late 1970s and 80s

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