Heroes: Tick, Tick, Tick, Boooooom! 

 

‘Yeah I’ve done it before, 

And I can do it some more, 

So what you waiting for?’ 

 

Looking back over the last 13-years of Tory governments it resembles a breakers yard, debris, wreckage, and victims abound. 

 
Let’s start at the beginning with the Ant or Dec of politics, Messrs Cameron and Osborne. 

Prior to being elected Cameron said this at the Tory party conference in September 2009: 

‘Don’t get me wrong, I have no illusions. If win this election, it is going to be tough. There will have to be cutbacks in public spending, and that will be painful. We will need to confront Britain’s culture of irresponsibility and that will be hard to take for many people. And we will have to tear down Labour’s big government bureaucracy, ripping up its time-wasting, money-draining, responsibility-sapping nonsense. 

Why is our society broken? Because government got too big, did too much and undermined responsibility. 

Why are our politics broken? Because government got too big, promised too much and pretended it had all the answers.’ 

What did we get? Austerity and no government. Austerity, we were promised, would mean that by cutting back government spending we would produce economic growth. What we got was more food banks, more rough sleeping, fewer police, stagnant wages and longer NHS waiting lists. 

Which leads me neatly onto the Covid enquiry and our level of preparation for dealing with a pandemic. 

Ant or Dec’s defence was always ‘we don’t want to end up like Greece‘. To avoid this they had to cut health budgets. Greece had principally lost control of its national debt and its budget deficit, because, after joining the Euro, they had no control over their currency and were struggling to pay creditors. We weren’t in that position. 

Interestingly ,Greece also had a much lower per capita death rate than the UK during the pandemic.  

Cameron seems to have learnt little in his time away from politics. When Kate Blackwell KC for the inquiry asked Mr Cameron a straightforward question about the effect of cuts to public health budgets being the largest in the most deprived areas, he suggested that she use a different measure of council spending power that his government preferred, which showed this not to be the case.  
 

‘Cameron seems to have learnt little in his time away from politics’

 
Former chancellor Osborne was equally deluded and convinced of his own importance., saying; ‘Reducing the deficit and placing debt as a percentage of GDP on a downward path was … essential to rebuild fiscal space to provide scope to respond to future economic shocks.’  

This highlights yet another example of their stunning incompetence; the UK’s national debt was higher in 2016-17 when Mr Osborne left office than when he arrived. 

 

In May this year, our national debt exceeded 100% of annual national income for the first time since 1961 as state borrowing more than doubled, according to official figures, as figures from the ONS showed was now £2.6tn. 

There was a brief spell during pandemic when it was higher, but that was later revised down because of stronger GDP figures. 

Undeterred by this, the TaxPayers’ Alliance, a right-of-centre pressure group, said Hunt should respond with even deeper cuts to public spending to free up funds for tax cuts. 
 

‘our national debt exceeded 100% of annual national income for the first time since 1961 as state borrowing more than doubled’

 
In response, Samuel Tombs, the chief UK economist at Pantheon Macroeconomics, said financial markets would only tolerate the government reviving tax cuts after the debacle of last autumn’s mini-budget if inflation had fallen sharply and interest rates had ‘risen to a lesser extent‘ than the markets currently envisaged. 

Covid proved many things, one was to finally discredit neo-liberalism; governments can run large fiscal deficits. Central banks can make these fundable at close to zero rates. Despite this success for Keynesian economics, we immediately turned back to neo-liberalism, as high inflation, driven by war in Ukraine, allowed Sunak to return to the stupidity of Ant or Decs. 

What they all fail to understand is Ant and Dec’s austerity led directly to Brexit. Without austerity ‘remain’ would have prevailed.  

Somehow its fitting that Ant or Dec became their own victims. Only, it’s us that is left to suffer! 

Ah, yes, Brexit, 7-yrs on, it isn’t looking to popular. 

A YouGov poll in May found that: 
 

• 56% said Britain was wrong to leave the EU against 31% who said it was right 
• 62% said Brexit has been ‘more of a failure’ against just 9% for ‘more of a success’. 

 
In a poll by Opinium, which offered four options for the future relationship, 36% of British respondents chose ‘we should rejoin the EU‘ and another 25% ‘we should remain outside the EU but negotiate a closer relationship with them than we have now‘. 

Sunak, whilst he understands the pragmatic case for better economic relations with the UK’s biggest single market, he is still a far more genuine Brexiter than Johnson ever was. 

For Labour Starmer believes that to win the next election they need to retake the ‘red wall’ seats which supported Brexit and, therefore, switched to the Conservatives in Johnson’s 2019 ‘get Brexit done’ election.  

Starmer, in a recent article in the Eurosceptic Daily Express wrote; ‘Britain’s future is outside the EU. Not in the single market, not in the customs union, not with a return to freedom of movement. Those arguments are in the past, where they belong.’ He went on to say that ‘the paper-thin Tory deal has stifled Britain’s potential and hugely weighted trade terms towards the EU. Every day it isn’t built upon, our European friends and competitors aren’t just eating our lunch – they’re nicking our dinner money as well.’ 

If Labour wins the next election we can expect to see us trying to secure a better deal with the EU, which could include some compromises over the single market and customs union, with corresponding regulatory alignment.  

What is clear is that if Labour wants to achieve its target of ‘securing the highest sustained growth in the G7‘, then we have to reduce trade friction with our largest market. 

Turning to interest rates, today we saw clear panic from Threadneedle St as the Bank raised interest rates by 50bps to 5%. 

Compare this to the US, where the Fed is sitting back and monitoring its decision to maintain rates at their current level. Whereas the Fed could emerge looking like smart as US inflation naturally slows and the numbers downtrend, the BoE is being described in the Sun as ‘the plank of England’! 
 

‘the BoE is being described in the Sun as ‘the plank of England’!‘

 
For a country trying to persuade the global economy it is on track, this isn’t a good look; markets are about confidence, not a lack of credibility. 

There is a consensus that the US will avoid recession. The economy is strong, housing costs are dropping, and energy prices have stabilised. Despite a labour shortage there is little sign of a wage demands overwhelming the economy.  

In the UK, business owners and consumers are preparing for worse to come, cutting spending and investment plans, cutting expenses, and cutting jobs. Rising mortgage rates pile more pressure on households already overwhelmed  by 20% food inflation, de-facto rising taxes, and unconstrained energy inflation. 

As a result, stagflation or inflationary flat-lining appears certain. Beside the housing market and real wages being lower than during the last millennium, there is Brexit which has cut us off from not just Europe, but the global economy.  

Whilst the housing market is seen as a key measure of national confidence, it has served only rentiers and owners. The market is, in the immediate future, blown; house prices now equate to 12x average incomes, and new homes are being built at C.30% of the level required. 

It is this last point that, in the longer-term, drives the housing market; for owners and investors it’s the perfect imbalance of supply and demand. 

The following quote from Centreforcities.org says it all: 

‘Compared to the average European country, Britain today has a backlog of 4.3 million homes that are missing from the national housing market as they were never built. 

This housing deficit would take at least half a century to fill even if the Government’s current target to build 300,000 homes a year is reached. Tackling the problem sooner would require 442,000 homes per year over the next 25 years or 654,000 per year over the next decade in England alone.’ 
 

‘in the immediate future homeowners face a mortgage payments crisis, possibility some will  lose their homes’

 
However, in the immediate future homeowners face a mortgage payments crisis, possibility some will  lose their homes. Naturally, the government does nothing, instead it tries to defend £4bn of support for Ukraine that we clearly cannot afford. 

The natural beneficiaries of rising interest rates are the banks. 

Last year our major banks posted profits in excess of £30bn. Analysis by the Unite union in May found that UK banks made an extra £7bn by refusing to pass on higher interest rates to savers. As an example, in April 2023, many of those banks were paying customers rates of less than 1.3% on their easy-access savings accounts, despite the Bank of England base rate being 4.25%. 

As a result Q1 figures showed profits continuing to increase. Lloyds reported £2.3bn profits, a 46% increase on the previous quarter; Natwest reported £1.9bn profits, a 50% increase on the previous quarter. NatWest said its net interest income, I.E., the difference between what it pays savers and what it charges to borrowers, increased 43% to £2.9bn. 

Our biggest building society, Nationwide, announced last month it would pay £340m directly into customer accounts for the first time, after an increase in deposits and higher interest rates drove annual profits up 40% to £2.2bn. The payout is worth about 15% of its annual profits. 
 

‘Last year our major banks posted profits in excess of £30bn’

 
In yesterday’s ‘Guardian’, John McDonnell the Labour MP for Hayes and Harlington and a former shadow chancellor, suggested that the banks should share some of homeowners pain. 

‘If the UK’s big five banks were required to pay a windfall tax of 15% (equivalent to Nationwide’s customer payout), it could fund a mortgage interest relief scheme of £5.5bn for 2022, and likely significantly higher in 2023. A 15% tax on Q1 2023 profits alone would be £3bn.’ 

Of course, under the Tory’s this will never happen. I cant help but wonder what ‘light blue’ Kier would do.  

In truth, it is policies such as this which are the reason people vote Labour; big state helping little people, opposed to small state screwing little people. 

‘I wonder to myself 

Could life ever be sane again?’ 

 

As Philip prepares to squeeze into his budgie smugglers, he leaves us for a well-earned break with some pretty gloomy statistics:

As we all melt in the heat, everything around us is melting too!

Mercifully, I shall be sunning myself on the Amalfi coast for the next few weeks, and the column will return in mid-July.  

The week started with the mass exodus of Tory MPs as Parliament voted to support the Privileges Commission report on former PM Johnson.

One of the few that displayed any backbone was backbencher Angela Richardson, who called the extra security that some privileges committee members needed in the face of threats since Johnson stood down, “deeply shameful”.  She specifically deplored the “attacks” on a Conservative member.

“He is a voluntary magistrate as well as serving his constituents in this place,” she said. “Shame, shame, shame on those who are working to undermine him and his future prospects. He is a decent and honourable member, as are all members of the privileges committee.”

Johnson appears not to have moved on from his hissy fit, as, whilst the debate took place, he was giving a speech to the International Democratic Union in which a source said he called the privileges committee “biased and wilfully ignorant”. The source said he added there was “always another innings”.

Let’s hope he gets a bouncer somewhere nasty. He seems to have more use for that than he does his brain.

Next up was the newly ennobled former mayor candidate, Shaun Bailey, and his “mingle and jingle” Xmas party during lockdown.

I found the following quote which serves to highlight just how callus their behaviour was.

“My mind keeps coming back to 13-year-old Ismail Mohamed Abdulwahab. Described by his family as a “gentle and kind” boy with a “heartwarming” smile, Ismail died in hospital at the height of the pandemic without his family by his side. Neither his parents nor his brothers or sisters could go to his funeral. Two of his siblings had Covid-19 symptoms and the family self-isolated. They followed the rules. They followed the rules and they watched their little boy’s burial on a live-stream from home.”

I can’t add anything to that.

Musically we start with The Hives and “Tick, Tick, Tick, Boom!” We end with “Panic” by The Smiths which is dedicated to the Bank of England. Enjoy!

 

@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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