inequality“was dreamin’ when I wrote this
Forgive me if it goes astray” 

 

As our moribund government seeks to reenergise itself with yet more new initiatives there is much to discuss. There is a series of “supply-side” policies to kickstart growth, ranging from sweeping away environmental regulation to bankrolling transport projects 

 

 This strategy, chancellor Reeves tells us, has three elements: stability, reform and investment. 

Stability, she says “it is the rock upon which everything else is built”. She goes on: “Economic stability is the precondition for economic growth. That’s why the first piece of legislation that we passed as a government was the Budget Responsibility Act, so that never again can we see our independent forecasters sidelined, and never again will we see a repeat of the Liz Truss mini-budget.” 

Reeves says the supply side of the economy has been held back. Politicians have lacked the courage to confront the factors holding back growth: “They have accepted the status quo. They have been the barrier, not the enablers, of change.” 

Reeves is, in effect, telling us that removing barriers will be the solution to the country’s challenges. Silly me, I thought we didn’t have any money!  

Not only that, we have a history of delivering grandiose infrastructure projects. Who can forget HS2, years late, enormously over-budget, and only delivering half the plan. 

Undeterred, Reeves confirmed that the government will support a third runway at Heathrow, claiming it will make the UK “the world’s best-connected place to do business”. 

Everything is being subsumed in a hell-for-leather dash for growth. Reeves said the London hub “connects to emerging markets all over the world, opening up new opportunities for growth”. 

And, for any eco-warriors forget emissions, this expansion would be achieved within the government’s carbon emissions targets: “We are already making great strides towards cleaner and greener aviation.” 

 

‘Everything is being subsumed in a hell-for-leather dash for growth’

 

More realistically, she also underlined the importance of establishing a smoother trading relationship with the EU, saying it would be in the “national interest”. She said the business secretary, Jonathan Reynolds, would be travelling to India in pursuit of a new trade and investment deal. 

There was also talk of creating a “growth corridor” between the research hubs of Oxford and Cambridge – including reopening a rail line between the two university cities, via Bedford. 

At the moment, it takes two and a half hours to travel from Oxford to Cambridge by train,” she said, adding that there was also a lack of affordable housing across the region. “We are going to fix that.” 

Reeves also listed a barrage of other projects the government is supporting across the UK, from Trans Pennine rail to efforts to regenerate and reopen Doncaster Sheffield airport and create a new mass transport system for West Yorkshire. 

Phew. And, on the seventh day she rested!! 

There is, as I wrote earlier the issue of cost. This is, after all, the government that since being elected in June has pleaded poverty.  

If they are looking for funding they wont find it in the now moribund City. 

This weeks news that HSBC was withdrawing from investment banking, leaves Barclays Capital as the UKs only significant participant. 

In last weeks “Fascism, Coming soon to a town near you?,” I mentioned the latest, massively oversubscribed Gilt auction. The lead managers were: Deutsche Bank, JP Morgan, Morgan Stanley, Nomura and RBC. All the great British firms of yesteryear, such as  BZW (now Barclays Capital), Lloyds, Hambros, Morgan Grenfell, Philips & Drew, Warburg, Midland Montague, County NatWest, have either closed or were sold to overseas operators. 

If, as would appear to be the case, we do have some spare cash behind the sofa, poverty might be something the government should be considering. Of course, that will be wiped out by the additional tax proceeds generated by all the supply-side projects.  

Which will be much needed as the Joseph Rowntree Foundation (“JRF”) latest report finds that child poverty is on course to increase in most of the UK, with the exception of Scotland, by the end of this parliament. 
 

‘child poverty is on course to increase in most of the UK, with the exception of Scotland, by the end of this parliament’

 
Readers might recollect that Labour’s election manifesto committed it to an “ambitious strategy” to reduce child poverty. 

The JRF analysis, based on OBR growth forecasts, estimates that by 2029 relative child poverty rates will increase to 31.5% in England, 34.4% in Wales and 26.2% in Northern Ireland. In Scotland they are predicted to fall two percentage points to 21.8%. 

And, with report today that the average water bill is set to increase by an average of £132 this year, this a problem that will only get worse. 

This frankly absurd price hike comes into force 1 April, and will take the annual average bill from £480 to £603. The increase is higher than the £86 rise predicted by the regulator Ofwat in December, because water companies are adding inflation on top.  

Customers of Southern Water, the struggling utility company that covers parts of south-east England including Hampshire and Kent, face a 47% rise, to a record £703. The  financially broken Thames Water are levying a 31% increase, taking the an annual bill to £639. 

It is expected that we will receive higher bills until the end of the decade, to pay for what Ofwat and the industry say is an ambitious £104bn programme of investment. 

This is needed in large part because the providers have neglected their infrastructure and squandered their profits on excessive dividends. It would be schadenfreude to see shareholder wiped out and the providers renationalised. 

It begs the question, what is the point of the regulator? So far as I can see they are at the beck and call of the providers. As to the government, they are so Torylite, that even the thought of criticising a business is beyond them 
 

‘providers have neglected their infrastructure and squandered their profits on excessive dividends’

 
This is just another example of Labour losing its identity, with many traditional Labour policies falling by the wayside as PM Starmer struggles between Labour’s self-image as a party with radical purpose and the constant fear of alienating voters with the wrong kind of radicalism. 

Back in 2021, chancellor Reeves promised an annual investment of £28bn in low-carbon technology, she was going to be Britain’s first “green chancellor”. 

Instead, reality set-in and the £28bn figure came to be viewed as a fiscal and political liability, ammunition for Tory election propaganda depicting Labour as debt-addicted spendthrifts. Now, we have what passes for a climate-friendly industrial strategy with a drastically reduced budget. 

Ironically, this pro-growth agenda which is, in part, driven by liberalising of planning regulations, will make it easier to build greener energy projects. It should be feasible for climate policy, growth and political strategy to work together. Transitioning to low-carbon industry can have positive impact for people, national security, and economic growth. 

Where there is conflict is between short and long term impact. Initially, growth will be carbon intensive, and in the early-years transitioning to green tech will impact consumers. This is where right-wing politicians twist the narrative, as consumers who have endured years of shrinking living standards and rising inflation are easily spooked by talk of taxes on gas boilers and deadlines to swap their old petrol cars for electric ones. 

This has proven to be case in a number of European countries, and has been adopted by Reform with their pledge to scrap net zero targets. No doubt, the Tories, under Kemi Badenoch, will jump on this bandwagon, too. 

An example of how transitioning to carbon-neutral and stimulated growth could go hand-in-hand was former President Bidens Inflation Reduction Act, sadly now destined for the bin as Trump sweeps away the past.  

To summarise the situation, Labour seem to overestimated how grateful everyone would be to see the back of successive Conservative governments. Their pain before gain approach as they strive for  fiscal responsibility hasn’t been well received by the electorate, aided by the Tories and adoring media finding the negative in everything. 

In Reeves’s defence, she has been consistent, sticking to plans made during her time in opposition as she seek to build out the country’s productivity.  

 

‘Their pain before gain approach as they strive for  fiscal responsibility hasn’t been well received by the electorate’

 

Whilst these plans could yet work, proposals such as publicly urging regulators to come up with their own ideas, doesn’t inspire confidence. Instead, it paints a picture of a government not confident in its own messaging, and not able to communicate it effectively. 

Perhaps, their communication issues are driven by their own uncertainty as to what they stand for? 

They campaigned with the promise of “change”, but what change did the electorate want? It seems they wanted a new government because the old was tired, corrupt and out-of-ideas, but did they really want traditional Labour? 

They wanted the benefits of traditional Labour; better working conditions, higher wages, better services, but all of those have a cost, which no one seems to want to pay. Labour, by ruling out tax hikes on the rich painted themselves into a corner, and their increase in employers’ NIC was, perhaps, the worst possible choice given our precarious economic circumstances.  

As a result, Labour look like a Torylite government, which is allowing the hard-right Reform to portray themselves as the real purveyors of change. 

Looking left of centre, the interesting option is the Greens, who have used their successful election results to champion public ownership of water, oppose Israel’s genocide, and, of course, climate change. 

As Reform prove, nice guys come second, and the Greens are just too nice. Their moral righteousness and patient persuasion are, unfortunately, the politics of yesteryear. Where is the class struggle? Where is the statements that the country is rigged in favour of wealth and power? Where are the policies that drive levelling-up, forcing down inequality by the redistribution of wealth? 

Post-Brexit politics appear to be driven by fury; inequality, the cost-of-living scandal, the lack of public services. Since 2016 that anger has been used by the hard-right to engender a fear of migrants and minorities. Labour, too, have fallen into this trap, and rather than opposing the wealthy elites, they are taking part in the migrant-bashing, laying the blame on the Tories for being too meek and mild to deal with it.  

 

‘rather than opposing the wealthy elites, they are taking part in the migrant-bashing, laying the blame on the Tories for being too meek and mild to deal with it’

 

If the obvious solution is a wealth tax, then it follows that the focus should be on a rich elite that pays workers bad wages, offers insecure jobs, avoids taxes while Britain crumbles and damages the environment and climate. Whilst the problem is systemic, there are individuals who bear much of the responsibility for perpetuating it, and voters find it easier to focus on individuals.  There is Elon Musk, wealthy beyond credibility, constantly interfering in our politics with toxic quotes, who, the polls show is deeply unpopular. A recent Ipsos poll found that 71% of Britons have an unfavourable view of him. 

 

The Greens are not the minority, not to be taken seriously party, of previous years. They hold 4-seats in parliament, one less than Reform, and came second in 40 seats, overwhelming urban Labour-held constituencies.  

They should look to the LibDems successful strategy of focussing their efforts in these 40-seats, and campaigning on the key issues impacting them,  such as the cost of living and housing.  

At the moment in UK politics, the tail is wagging the dog. Reform, with only 5-seats, are defining the narrative. As with the Tories before them, Labour is starting to understand this, and, as a result their direction of travel is towards the right. Unless, either the LibDems or the Greens, perhaps even together, can counter this, then slowly, but surely we will sink into the same political abyss as the US. 

 

“Oh, thunder only happens when it’s rainin’
Players only love you when they’re playin” 

 
 

Writing this was a great achievement, only one small mention of Trump!

But he cannot be ignored. The US is the biggest, the most powerful; where they go others follow.

We have our own pound-shop Trump in Farage, who is once again being allowed to have an influence far greater than is merited.

The Tories seem to be content to lick their wounds, seeing their role in opposition to be as objectionable as possible. Something in which they are ably abetted by the adoring media.

Labour, or perhaps Starmerism is more accurate, seem to be so spooked by Farage and Trump, that they feel their only option is to move to the right of centre.

This week’s announcement of an infrastructure beano supported by slashing regulations as part of their drive for growth was reminiscent of Johnson and Truss. The whole thing was long on what, and short of how it was going to be paid for.

Readers must forgive my seemingly unhealthy pessimism but we have heard it all before; HS2, 40-new hospitals. Who can forget Truss’s ““growth, growth and growth”, and “the anti-growth coalition.”

The overwhelming issue of poverty seems to have been overlooked, even though it is set to grow.

The water industry does what it pleases, when it pleases, running rings around both the regulator and the government.

The “broadest shoulders” seem to be back in-fashion as we cuddle-up to the non-doms.

To paraphrase Dr Spock, “this is change Jim, but not as we know it”.

Lyrically we follow the theme of Dreams. Starting with Prince and “1999”, and ending with Fleetwood Mac’s “Dreams”.

Enjoy!

Philip.’

 

 @coldwarsteve

 

 

 

 

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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