Beginning to See the Light: Russian Roulette

 

Dateline 8th September

 

‘Oh my, my, my, I’m the lone crap shooter 

Playin’ the field ev’ry night’ 

 
After the sombre articles of the last few weeks, I thought we would start on a lighter note, with Johnson’s farewell speech as PM, which was wonderfully summarised on Twitter by Carol Vorderman: 

Even lies in the final speech from the Prime Minister who’s brought this country to its knees. 

Boris Johnson has had many relationships through his life…. but sadly for us, he’s never had a relationship with the truth. 

Another subject in the news this week is brewing. The Old Dairy Brewery in Kent, a SE export  champion for the Department for International Trade featured in a triumphant video last year promoting the potential of Brexit to boost exports. 

Unfortunately, due to Brexit and the burdensome customs checks and paperwork, the brewery has lost all but one of their EU customers, a Berlin pub operator who travels to England by van to pick up the beer. 

Their EU export business has collapsed from £600,000 to £2,000. 

Nigel Farage, a man better known for beer, is marketing his own gin, made by an ‘artisan distillery in the heart of Cornwall’. 

Farage Gin comes in red, white and blue, his ‘patriotic take on this quintessentially British drink’ . 

A spokesperson for a Cornish separatist group, ‘All Under One Banner Kernow’, said Farage was ‘mostly to blame‘ for the UK leaving the EU. ‘He’s trying to latch on to the image of Cornwall. He’s a Great England chauvinist. Farage will do nothing for Cornwall; he’ll cause division and hatred.’ 

Nigel doesn’t see himself that way, in fact he is keeping the name of the distillery  secret as he feels, ‘there is a hard-left violent hate mob out there and I wouldn’t expose anyone to that. That would be most unfair given the level of hate in this country.’ 

As far as I can see Nigel, the only violence in politics come from the hard-right stirred up by nationalists and fascists filling their tiny minds with hate. 

Fun over, we turn to our new PM, Liz Truss. This column extends its warm congratulations to her and hopes her stay will be mercifully short. 

Liz, as you may have read, flip-flops between parties, leaders, and ideologies, seemingly of no fixed abode other than being in the right place at the right time. This is the Liz that, as a young idealistic LibDem, wanted the monarchy abolished, now she is kissing the monarchs hand.   
 

‘This column extends its warm congratulations to her and hopes her stay will be mercifully short’

 
The burning question is, will Liz flip-flop on the energy crisis, or is she still anti-bungs and handouts?  

If she does turn to bungs and handouts what will be the reaction of the hard-right which seems to hold the balance of power within the parliamentary party. Truss doesn’t have a strong  mandate ; her majority with party members was modest, and more of the parliamentary party voted against her rather than for her. 

The strength of the hard-right can be seen in her choice of cabinet members. The hard-line Suella Braverman as Home Secretary; a choice that ensures immigrants will be unwelcome, although Rwanda seems more appealing by the day. 

Other interesting point regarding her choice of cabinet members include: 
 

• The majority are from the SE, there are 4 from the North, 1 from Scotland, and none from the ‘red wall’ constituencies. 
• No dedicated Brexit opportunities minister. Presumably because they haven’t been able to identify any opportunities 

 
Suella aside, my personal favourite is Jacob Rees-Mogg being given responsibility for energy. That’s the end of carbon neutral, he’s the man who said that the drive to getting to net zero emissions is responsible for high energy prices. He favours getting ‘more oil out of the North Sea, we want to get more gas out of the North Sea.’ 

In addition, he previously criticised the UK government’s policy for pushing to move away from cheap and dirty forms of energy such as coal due to ‘climate alarmism.’ 
 

‘That’s the end of carbon neutral’

 
This issue with the hard -right is that everything is dominated  with ideological issues; clean energy appears to equal socialism to them. Truss is dancing to their tune; considering issuing C. 130 drilling licences for oil and gas firms, and fracking is back in favour. Whilst ecological disastrous, both are long-term answers to an immediate problem. The same can be said of nuclear power, and the costly infrastructure required. 

Traditional fuels are expensive, the current  cost of running gas-fired power stations is around £450 per MWh, by comparison: 
 

• Onshore wind costs only £50 per MWh, and has the support of 75% of voters, including a large majority of Tory voters. Despite this it has been all but banned by the government despite 
• Solar energy costs  £55 per MWh; unfortunately, Truss has committed to change planning laws to hinder the development of solar power, saying, ‘Our fields shouldn’t be full of solar panels’. 

 
Renewables would be 9x cheaper, and offer a quick fix. To discard them as they are ideologically unsound is foolish. Perhaps Truss will learn this the hard way when Tory faithful’s are shivering, and starving this winter. Already a growing number of people in affluent areas of the country are struggling financially because of the spike in energy bills and the soaring cost of living. 

 Jake Morrison, chief executive of Wokingham Citizens Advice, said: ‘Wokingham is one of the least deprived areas in England. In normal times we might refer a handful of people to the food bank a week – now we are doing that in half a day.’ 

In August 2021 the Wokingham branch helped 643 people, this August they have already helped 956 people – a 48% increase. 

Without help this will only get worse, and Russia seems intent on increasing its stranglehold on energy markets. 

On Monday, Dmitry Peskov, the Kremlin’s spokesperson, blamed sanctions ‘introduced against our country by western countries including Germany and the UK’ for Russia’s failure to deliver gas through the Nord Stream 1 pipeline. ‘Other reasons that would cause problems with the pumping don’t exist.’ 

Peskov added that Russia’s full resumption of gas supplies via Nord Stream 1 was ‘undoubtedly’ dependent on whether the west would lift its sanctions on Moscow. ‘It is these sanctions imposed by the western states that have brought the situation to what we see now.’ 

This is now Russian Roulette, what are our choices. Truss really has no options; sacrificing Ukraine is 1930’s appeasement and we know how that ended.  
 

‘That’s the end of carbon neutral’

 
Leaving people to the mercy of energy markets will push many households into debt and heating poverty, and creating mass unemployment as businesses fail. 

It is reported that, as things currently stand, up to 2 million people will not be able to pay October’s fuel bills. Of those who can pay, it is estimated that, by January, 66% of all households will be plunged into fuel poverty. In one poll, 66% of parents fear they will not be able to pay for essentials for their children this winter.  

An online movement, Don’t Pay UK, resembles the anti-poll movement of the late-1980s. The latter led to C. 17 million people refusing to pay the Poll Tax, forcing the government to cave in and hastening Thatcher’s demise. 

Don’t Pay is hoping 1-million signatories by 1 October, when the £3,600 price cap kicks in, who will simultaneously cancel direct debits to energy companies. A safety in numbers approach, but one which could have repercussions for participants, E.G., being cut people off, being forced to have the more expensive pre-payment meters, or an adverse credit history making future borrowing more expensive. 

Currently the campaign has C. 140,000 signatories, making it unlikely that they will hit their target. What could change this is  Truss’s response to the crisis. If she sticks to her campaign promises there is little to help the majority, and, as we discuss above, she is in debt to the right meaning that  renewables are out in favour of expensive, carbon-intensive fossil fuels.  

At the heart of this is Thatcherism; Truss is revisiting policies that were far from an overwhelming success the first time around, aided and abetted by the same failed thinkers, such as Patrick Minford.  Undeterred by getting every prediction about the impact of Brexit wrong, he is now suggesting that interest rates would need to rise to 7%  to offset the inflationary effects of Truss’s proposed tax cuts. 

The base concept of Thatcherite economic policy was the belief that collective prosperity is based on the efforts and ingenuity of businesses, investors and workers, sometimes referred to as ‘supply-side economics.’ 

Economic slow-downs happen because something restricts these institutions and individuals, possibly government, or trade unions. The states’ role is to ensure that entrepreneurs, investors and employees all have clear incentives to maximise their efforts. 

Taxation, especially on the wealthy, is seen as the biggest inhibitor of innovation and productivity as it reduces the incentive of people and businesses to put their money to work. Allied to this is the belief that the welfare state creates ‘dependency’, reducing peoples incentive to work and to take responsibility for themselves.  

The Laffer Curve was used to illustrate that beyond a certain level taxation disincentives workers and they cease to receive the full reward for their efforts. Equally, regulations dissuade entrepreneurs from setting up businesses in the first place. Inflation punishes people for their success and reduces confidence in the system overall as it reduces the value of their savings. 

Of course all of this is rubbish if there are no dynamic entrepreneurs. Also, it demeans workers portraying them as lazy.  
 

‘the impact will be far worse than the impact of Thatcherite dogma in the early 1980s which led to 3m unemployed, and the destruction of  whole industrial regions’

 
As this economic theory fell from grace during the Blair / Brown years, Thatcherism sought a new scapegoat; the EU. Their Euroscepticism was the focus of thinktanks such as the Bruges Group and  Thatcherites such as John Redwood. The pot simmered until it boiled over in 2016, retargeting the supply-side argument against regulation originating in Brussels. Minford was one of the few economists that supported Brexit. 

Much of this supply-side revisionism features in  ‘Britannia Unchained’, the book Truss co-authored, which is almost a tribute to the nationalistic, anti-state philosophy of the Tory Eurosceptics. 

Thus it is no surprise that Truss’s proposed policies are focused on supply-side reforms. There will be no ‘hand-outs’. Unions are holding back the economy. Tax cuts will make people richer. Drilling and fracking will bring down the cost of energy. Brussels is still impeding business.  

Given that Truss favours the winning side does really mean all this, or was it this just for the benefit of the 180,000 Tory party members? 

If she does what she said, the impact will be far worse than the impact of Thatcherite dogma in the early 1980s which led to 3m unemployed, and the destruction of  whole industrial regions. The impact of this is still being played out today in the ‘red wall.’  

However, it is becoming apparent that either Truss or her Chancellor have realised the error of her boastful pledges to the Tory faithful. There is talk of £100bn+ package to help absorb the massive increase energy bills. 
 

‘pandering to the hard-right and forcing the population to ultimately subsidise the bail-out’

 
Unfortunately, she seems to have absorbed the tricks of the previous government. Penny Mordaunt, the new leader of the Commons, told the house that the PM will present her plans for a general debate on the subject, rather than the normal ministerial statement, with Labour saying this could allow her to evade proper scrutiny. 

Thangam Debbonaire, her Labour shadow, said that the format of a ministerial or prime ministerial statement means that the person presenting it, in this case Truss, would have to answer repeated questions from MPs. A debate means she will most likely only speak once, at the start. In addition, there is no need for the government to provide any details of the policy to the opposition or MPs in advance. 

Mark Harper, the Tory former chief whip, supported Labour’s request that MPs get proper sight of the plan. 

From what we know the expected price freeze is a copy and paste of Labour’s proposal made some few weeks ago. Unlike the original it appears that funds will come from the public purse, meaning that taxpayers will foot the bill, enabling her to keep her pledge of ‘no new taxes’ and ‘no windfalls.’ Whereas, Labour’s plan was funded via a windfall tax on energy companies’ £170bn profiteering. 

This is an ideological mistake, pandering to the hard-right and forcing the population to ultimately subsidise the bail-out, and allowing their friends in the energy providers and City to enjoy unjustifiable profits and dividends.  

The situation for business is unclear as they are not covered by the cap. Red Flag Alert, which monitors the financial health of firms, is warning that more than 75,000 larger firms that are high energy users are at risk of insolvency or are likely to lay off staff without government support. 

Nicola Headlam, Red Flags’ chief economist, said; ‘Businesses can’t absorb these costs and they’re going to be forced very quickly into a decision about headcount or being able to pay energy bills.’  

According to Red Flag Alert, there are 355,000 companies with a turnover > £1m that are designated as high energy users, industries such as steel, glass, concrete, and paper production. Of those, the company estimates 75,972 are at risk of insolvency, and they estimate 26,720 of them could fail because of energy costs. That is in addition to the 26,000 insolvencies they had already predicted this year. 

‘A business turning over a million pounds 2-years ago would have spent C. 8% of that on energy costs and made profits of around £90,000. If the cost of energy doubles to 16%, that instantly wipes out profitability, and they’re straight into a scenario where it threatens the viability of the business within a year.’ 

In conclusion, where are we? 

Plus ça change, the more things change, the more they stay the same.  This government is no different to the last, right-wing, quasi fascist with a PM flopping in the wind try to appease lunatics and, at the same time, serve an electorate who deserve better.  
 

‘Grass grows greener 

On the other side 

Corn grows sweeter 

On the other side’ 

 
 
Philip’s copy was filed a day after Her Majesty the Queen asked incoming Prime Minister Liz Truss to form a government and just hours before the country was plunged into a period of mourning on the sad news that our Queen of 70 years had unfortunately passed away.

On that basis, these were Philip’s thoughts as Ms Truss took the reins and before the news agenda changed so dramatically:

This week we start with some more light-hearted comments, then we extend our welcome, through clenched teeth, to Liz Truss as PM, hopefully a short-term appointment.

Liz appears to resemble Johnson; she has no fixed ideology, and flits around seeking to be on the winning side. She has been an anti-monarchy LibDem, then a middle of the road Tory and remainer under “call me Dave”. Now she has osmosed into a rabid Brexiter, picking fights with Brussels and proposing Thatcherite policies that aren’t quite Thatcherite but appeal to the loony right.

The question is who is she? What is she? For 8-weeks it was tax cuts to deal with the energy crisis not bungs and handouts. 48-hours into the job and it’s all change, £100bn+ of handouts.

Only she can forget who her paymaster is, the loony right. So she steals Labour’s idea but stamps Tory on it, by refusing to levy a windfall tax on energy providers, meaning that, ultimately, we pay for our own bailout.

Her cabinet reflects this, not a “red waller” insight. Suella, formerly of “Dallas”, “you’re a drunk, a tramp and an unfit mother”, is now Home Secretary. One who will make Priti Patel look positively humanitarian.

Rees-Moog dealing with energy is laughable, it’s sad. Him, and his ilk see green energy as “crap” so that Carbon Neutral done with

The loony right economic beliefs are based on what is “supply-side economics” and the Laffer Curve. Put simply, high tax is inefficient, and the government should do everything to boost productivity, if that fails, it’s the workers, lazy bastards. If that isn’t the case its regulation, oh oh it’s EU basing time, again.

Nothing has changed, the loony right still holds the balance of power. As the anti-abortion movement in the US proved you don’t always need numbers, it organisation, and the ability to apply pressure when needed that matters.

Truss is Johnson with a marginally better hair-do. She will flap around in the wind, but underlying it all is one thing; the rich will get richer and the poor will remain just that.

Musically, we visit the casino that is energy / Russia / Ukraine with the Stones “Tumbling Dice”. We play out with the chaotic noise of the Jesus and Mary Chain “In a Hole”. The chaos resembles the country and, for many, they are in a hole that only gets deeper.

 
@coldwarsteve
 
Rest in peace ma’am
 

 
Philip 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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