Heroes: Governments Should Serve the People Not Themselves 

 

‘Punch in punch out, eight hours, five days a week,

‘Sweat, pain and agony, on Friday I’ll get paid’

 
That the Tory government serves only to help the wealthy is well documented, therefore last week’s news that pay rises for the top 10% of UK earners, including City bosses, have clearly outstripped those for the rest of the workforce should be no surprise. New analysis of official figures confirms that this has been a prime driver of recent inflation leading to soaring interest rates. 

At the same time, Andrew Bailey, who must rank as one of the worst Bank of England governors, raised interest rates rise for the 13th consecutive time, by 0.5 percentage points, to their highest level since 2008. He then angered union leaders by appearing to blame low and middle earners for wage demands that had fuelled the crisis. 

Clearly his finger isn’t on the pulse as figures from the ONS show that since January, annual wage increases are only becoming more generous among the top 10% of earners, while the rest of the working population is suffering a decline in wage growth. 
 

‘wage increases are only becoming more generous among the top 10% of earners, while the rest of the working population is suffering a decline in wage growth’

 
Analysis by the TUC of official figures also shows that workers among the top 1% of earners, with an annual income of at least £180,000, were paid 7.9% more than last year, up from 3.7% in January. 

By contrast, those who are paid £59,000 a year saw the rate of their wage rises fall from 7.2% to 5.5% a year, while workers receiving £26,300 a year saw an even bigger fall in annual wage rises, from 9.5% in January to 4.7% in April. 

But the ONS said May’s 8.7% inflation rate, unchanged from April, was mainly due to a surge in demand for discretionary services, including restaurants, hotels, entertainment and flights abroad. 

Those in the latter category will be those most impacted by increases in mortgage rates. Analysis shows that some households will face paying more than £5,000 a year extra on their mortgages as a result of rising rates. 
 

‘some households will face paying more than £5,000 a year extra on their mortgages as a result of rising rates’

 
One Tory MP called on the government to look at ‘politically unpalatable‘ options to help spread the pain of tackling inflation away from mortgage holders, such as slashing state-backed support for the wealthy. 

A better question might be, why do they actually get state support? 

Lucy Allan, the Telford MP who is standing down at the next election, seems to get it, saying: 

‘Why, for example, should someone earning £100,000 receive free childcare? Why should someone with a generous public-sector pension also have their state pension raised in line with inflation? Why should the wealthiest in society be eligible for the energy support scheme? Financial support schemes for affluent people fuel inflation. Government will have to apply the brakes as well.’ 

As a result, my prediction of a Tory fightback and winning the next election looks decidedly mis-placed! A poll by Opinium poll for the Observer suggests Labour now has a 31-point lead among mortgage holders, up from a 19-point lead in April. Labour’s support among the group has increased from 44% to 53%. 
 

‘my prediction of a Tory fightback and winning the next election looks decidedly mis-placed!’

 
Rachel Wolf, a founding partner of Public First who co-authored the 2019 Tory manifesto, said: ‘The consequence of ever-rising house prices, particularly for squeezed millennials and those in the ever more expensive south-east, will be devastatingly clear in the next year. With the end of low interest rates, the parts of middle Britain that aren’t yet retired will suffer in a way that for them will dwarf the energy bill crisis.’ 

Now, you would think that an economic crisis of such magnitude would concern the government, especially with an election due. But, no the chancellor continues to say that he is comfortable with the prospect of a recession. 

Ever since the inflation of the last 1960’s, policymakers have struggled to manage the situation, as a result we have been continually been trying to manage the balance between encouraging economic growth and employment and trying to avoid inflation. Attempts to avoid or mitigate inflation usually involve higher unemployment via curbs to spending by businesses or consumers. 

The BoE has borne the brunt of the criticism in recent months as UK inflation is proving stickier than it is with our former EU partners and other G7 countries.  

Whilst the BoE hasn’t covered itself in glory, our contemporaries haven’t had the self-inflicted madness of Brexit to content with. For the past 7-yrs post the Brexit referendum pound has been weak, which raised all import prices, not least food from the EU. The BoE could rightly point out that the then governor, Mark Carney, warned forcefully against Brexit. 
 

‘Whilst the BoE hasn’t covered itself in glory, our contemporaries haven’t had the self-inflicted madness of Brexit to content with’

 
Brexit has discouraging many EU workers from coming here to work, harming many businesses that had come to depend on them. Brexit has aggravated inflationary pressures further, on top of the negative impact of higher import prices.  

Raising interest rates isn’t the solution to inflation, reversing Brexit is. 

Once again Tory self-interest has damaged the nation they were supposed to govern. 

Aside from economic chaos, Brexit also offers the freedom to queue at ports and airports, disrupt parcel services, enjoy empty shelves, stop your children from enjoying educational opportunities abroad, and severely limit how much time you can spend in the EU, even if you own property there. 

The electorate were the first to suffer from Brexit and the first to want it changed  
 

‘Raising interest rates isn’t the solution to inflation, reversing Brexit is’

 
The veteran pollster Peter Kellner says in the current issue of the New European: ‘The latest poll of polls reported by the National Centre for Social Research shows that a referendum held today would produce a decisive 56%-44% majority for rejoining the EU rather than staying out.’ Many Leave voters have lost their faith – surprise, surprise. Many old, predominantly Leave, voters have died: ‘Over the same period, almost 5 million people have reached voting age, and they overwhelmingly want Britain to be in the European Union.’ 

Reversing Brexit is pushing against an open-door, yet Labour refuses to do so. 

Even sceptics like me now accept that the Tory’s could be past the point of no return. However, if Starmer doesn’t take this opportunity and endorse a policy of re-entering the single market on day one, he will inherit an economic disaster that will inhibit what his administration might achieve. 

Starmer now that the route to No.10 passes through pockets of pro-Brexit opinion and he doesn’t want to upset swing voters with an appearance of contempt for their judgment.  

However, he has the benefit of hindsight, Brexit he can say, was an experiment worth trying (it wasn’t but he has to be conciliatory)  but it isn’t working. 

Whilst he cannot be specific about the actual cost of Brexit on the economic crisis, it is beyond debate that raising barriers to trade and impeding labour flows have increased costs, blocked supply chains and stoked inflation. Business investment has been flat since the referendum – a reflection of general uncertainty and mistrust in a incompetent British government. 

There are signs that Labour is noticing the change. In a speech to a trade conference earlier this week, David Lammy made an emphatic commitment to European rapprochement. ‘The EU are our biggest trading partners and our allies as we face war on our continent. If you do not think Britain’s relationship with Europe is of fundamental importance to our future, you are living in a fantasy.’ 

On what a closer relationship might look like, he was less forthcoming. It would be appear to be a series of half-measures; alignment with EU regulations as a precondition for lowering trade barriers; more liberal visa policies; renewed partnership with cultural and scientific institutions that make up the wider constellation of the European project. 

In effect it is an agenda for reintegration at the periphery of Europe, sound and sensible but little will change whilst we remain outside the single market and customs union. Here, Labour appears wedded to what we already have, presumably to avoid reopening old wounds, such as sovereignty in the run-up to a general election. There may be a growing audience for reversing Brexit but  how much if that is concentrated in seats that already vote Labour?  

No reversal of Brexit can be achieved whilst in opposition. Labour’s caution is frustrating, but there are clear signs that they are heading in the right direction
 

‘Some people work very hard,

But still they never get it right,

Well, I’m beginning to see the light’

 
A farewell treat from Philip as he makes his way to the airport; he seems to have cooled rather on the prospect of Rishi keeping hold of the keys to No10 after the next election; he’s still far from convinced by Starmer though.

Mind you, I’d wager he’ll get little sympathy with homeowners that have been forced to hand back their keys after interest rate rises that, for many, are just unaffordable.

Anyone as surprised as me that supermarkets appear to have been filling their boots in the teeth of a cost of living crisis and banks have been making billions by imposing rate rises immediately, and savings rates sometime; maybe. Leopards and spots and all that.

So, what was he thinking:

Since my predictions of Sunak sneaking into the next election several things have happened.

Firstly, the inaction that I took as him playing the long game and burying issues such as public sector pay, now looks more like he just doesn’t know what to do. We have gone from small government to no government.

The situation with Johnson showed just how divided the party, especially the non-parliamentary party is. It does feel like they have started to realise that Johnson is no longer the charismatic crowd pleasing vote gatherer, but a failed shaman who had had his 15-minutes of fame. Although, his legacy, Brexit and Covid are shameful.

Lastly, there is the next leg of the cost of living crisis. The mortgage situation is awful, at some point the government will have to intervene, although, like always it will be too little too late.

We finish where we started, with Brexit. I hate to say I told you so, but like so many, I did, and I was right. Until that is reversed we are going nowhere quickly.

Musically, we will ignore Glastonbury which, with every passing year, resembles a Tory party convention; no cutting edge and decidedly uncool!

Instead we start with “This Ain’t No Picnic” by Minutemen, and wind with “Beginning To See The Light” by The Velvet Underground. For all our sakes let’s hope Starmer is listening. Ciao!

@coldwarsteve

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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