Aug
2024
Mr Brightside: Reset
DIY Investor
2 August 2024
“Sharing horizons that are new to us
Watchin the signs along the way”
Wow! We have gone from boring first week of term to getting stuck-in.
This morning (Wednesday, 31st) saw the announcement of a draft new National Planning Policy Framework (NPPF). Angela Rayner, the deputy prime minister and secretary of state for housing, described this dismal state of affairs as “the most acute housing crisis in living history”, as Labour pledged to build 370,000 homes a year during the course of the next parliament. Amid industry scepticism that this can be done so quickly, the fast-track planning consultation Ms Rayner launched on Tuesday was a spiky declaration of intent.
Labour is restoring the mandatory local housebuilding targets that Rishi Sunak removed when he attempted to placate a nimby-led backbench rebellion. History has shown that without such intervention, necessary building does not get done. Two-thirds of local councils do not currently have an up-to-date plan addressing the need for new homes, and too many have shown themselves resistant to coming up with one. The housing situation is dire that it requires a nationwide response.
Whiat there is much detail still to come, the plans appear well thought out. The move to redesignate areas of wasteland on the edge of towns as “grey” rather than green belt, for example, is a smart way to address a perennial problem. Yes, there is a need to protect the actual “green belt” but that shouldn’t extend to disused car parks and former petrol stations.
There is a great deal to be done if we are to build so many new homes, additional councils planners, to ensuring a supply of skilled construction workers, made more difficult with the immigration restriction in situ post-Brexit.
Then there is ensuring that local government is adequately funded, a considerable challenge in itself given the finances of the majority of them. Within this there is our dependence on profit-hungry private developers which raises questions about how the government will deal with the need to provide decent levels of affordable and social housing. Properly funded local government with the necessary powers to what is necessary will be needed if homes that the less well-off can afford to live in are to be built in sufficient quantity.
However, this weeks headlines have been stolen by the spat between the current and former chancellor.
On Monday the chancellor, Rachel Reeves, was accused by her predecessor Jeremy Hunt, of “providing incorrect information” to Parliament, about the $22 bln budget hole.
This time around the accusations made by the chancellor appear correct, as the Office for Budget Responsibility (“OBR”) has sent a letter confirming a £21.9 bln “net pressure”; which appears to be OBR speak for enormous, gaping black hole in the Departmental Expenditure Limits set by Treasury.
Paul Johnson, the director of the Institute for Fiscal Studies (IFS) thinktank, tweeted: “1 Last govt left public finances in bad state; 2 it does appear that funding for eg asylum was not provided but 3 c. half of spending ‘hole’ is public pay over which govt made a choice and where pressures were known; and 4 overall challenge for spending was known and remains.”
‘appears as if the Tories employed a policy of scorched earth in their final days’
In some ways it almost appears as if the Tories employed a policy of scorched earth in their final days. For example, despite the dire state of the nation’s finances, why did former Chancellor James Hunt give away £20 bn in a 2p cut to national insurance rates shortly before in a blunt election bribe, when everyone knew they were likely so lose?
The Treasury’s audit shows all manner of fantasies; unfeasible commitments for Boris Johnson’s fantasy 40 new hospitals, roads without budgets, every public service burned out and numerous councils fighting bankruptcy. As a result of the Tories poison pill Reeves has been forced to make unpopular cuts: the winter fuel allowance made no sense for pensioners not on benefits. Social care charging caps, endlessly delayed, will not go ahead. Public employees will, at long last, get the raise they deserve.
What is of concern that Labour appears wedded to the fiscal caution that characterised its election campaign. Aside from naming and shaming the Tory record of reckless economic opportunism, she also tried to manage expectations, however much of what she said and did harked back to Osborne’s austerity budget of 2010, E.g., the removal of winter fuel payments as a universal benefit.
‘much of what she said and did harked back to Osborne’s austerity budget of 2010’
In 2010, Osborne decried “thirteen years of fiscal irresponsibility”, this week Reeves ranted against “fourteen years of … economic irresponsibility”. Osborne unveiled an “emergency budget”, Reeves launched a “public spending audit”. He vowed to “fix the roof”; Reeves pledges to “fix the foundations”.
She tried to compare one of the richest economies in the world to families budgets: “When household budgets are stretched, families have to make difficult choices. And government needs to do the same.” Osborne told us about Gordon Brown’s “broken Britain”, she accuses whilst Reeves told us that Sunak had left a Britain that is “broke and broken”.
In March, Reeves, in her Mais lecture said austerity did “severe damage to our social fabric and to our public services” and the Tories’ failure to borrow to invest “was an act of historic negligence”. But, as Monday showed little has changed; she is cutting > £5bn from this year’s public spending, cancelling most winter-fuel payments, and hospitals and railway work. And, in three months’ time, she will return back for another £16bn, largely in tax rises.
Osborne made £3 of spending cuts for every £1 he clawed in tax rises. Reeves looks to be doing the inverse: a quid of spending cuts for £3 in extra taxes.
If Labour need reminding of the damage austerity does this is it: in 2010 there were 35 food banks provided by the Trussell Trust, today there is nearly 2,900.
‘in 2010 there were 35 food banks provided by the Trussell Trust, today there is nearly 2,900’
Labour will be hard-pushed to justify more billions for public services after arguing that tax is merely a burden on hardworking families. They tell us we have suffered chronic underinvestment for decades, yet first in the bin go investment projects. Public services are failing, and there remains a £20bn shortfall every year in funding them – and yet the government has promised no big tax increases. This isn’t change, merely a tribute act.
In 1942 when Keynes described his wholesale reimagining of a bombed-out Britain’s bombed-out…. “Assuredly we can afford this and much more. Anything we can actually do we can afford … We are immeasurably richer than our predecessors….”
Reeves turned this on its head; “If we cannot afford it, we cannot do it”.
In her defence, paying underfunded public employees and the junior doctors their due is a good start. This is just the beginning, raising benefits is essential, not just abolishing the two-child cap, but restoring what was stripped from families since 2020.
The NHS needs £38bn in this parliament, says the Health Foundation, just to keep pace with rising major illness, mainly among older people. Yet children should come first: early years and skills after 16 are the emblematic investment for any country that thinks about future life and growth.
‘The NHS needs £38bn in this parliament, just to keep pace with rising major illness, mainly among older people’
The obvious question is where does the money come from?
Well, there is equalising CGT and income tax. Despite what the right-wing media tell us, this would impact very few, only 0.5% of people had a taxable capital gain last year. Within CGT there is her commitment to stopping private equity fund managers misrepresenting their earnings as a capital gain to pay less tax than their cleaners.
Then there is the national insurance exemption for the self-employed that costs the Treasury £5.9bn, mostly from well-off “self-employed” partners such as City lawyers or private medics. Pensions tax relief is ripe for reform: high earners get 40% and 45% relief subsidised by the state, while ordinary earners get just 20%.
Labour is misreading the publics thoughts on taxation, much of the above is ensuring everyone contributes, it impacts only the minority. YouGov finds most people expected it to happen before the election. Attitudes towards tax changed when the bankers’ crash, Covid and the cost of living crisis reminded everyone how much we relied on the state.
- A British Social Attitudes survey found 52% in favour of higher taxes,
- The Financial Fairness Tracker survey shows more than half of people are happy for spending increases on public services, even if it meant personally paying more tax.
- Another study found that 64% said they’d be more likely to vote for a party committed to higher taxes on the wealthiest to invest in the NHS and public services.
Thatcherism, tax cuts and a small-state are history. The Tories should have learnt that in June, but as continue their journey rightwards this failed experiment will still be their mantra.
Which brings me neatly onto “Carry on Picking a Leader.”
The last to throw their hat in the ring was Kemi Badenoch, who chose to rubbish her colleagues as “deserving to lose”, and as, “unsure of who we were”. Her vision of renewal is returning to the parties core values, a belief in capitalism and the nation state.
Just as I wrote above they have learnt nothing from the election results.
There was no shifting of public opinion to the left. Labour polled 3m fewer votes than under Jeremy Corbyn in 2017. If there is voter drift it is to the right; the Lib Dems, Tories and Reform splintering the anti-Labour vote. First-past-the-post gave Starmer his thumping majority.
Badenoch doesn’t represent traditional conservatism, she is just another populist, no different to those prospering in recent elections across Europe. As with them all, her platform is based on the what; the nation state, refreshing capitalism, rather than the how.
‘today’s capitalism fails the majority by serving only the minority’
As I have written before, today’s capitalism fails the majority by serving only the minority. We need less privatisation, selective renationalisation, and if she really wants to turn the economy round, reversing Brexit and returning to open borders and free trade.
Then there is the “nation state”, a terms often used by rarely explained. I found this definition: “A nation-state would be a sovereign territory with one group of individuals who share a common history. Today, a true nation-state in the academic sense of the world does not exist. Nearly every state (country) in the world contains more than one national group.” (1)
In short, it cannot be achieved here because we have people who claim to be Scots, Welsh, Irish, not to mention people from the empire. She herself probably wouldn’t qualify.
Put simply, she wants to stop immigration.
As we have seen in Europe when major parties try to take on radical minorities, all they achieve is legitimising radical policies, and all too often the radical party gains support as a result. If Braverman wants to recreate Reform she would be better served joining them. Perhaps all that is stopping her is Farage; does he needs her? Probably not. And, with him at the helm she will always be a bit-part player.
The real task now for the Tories is to restore their popularity among middle-class voters in Tory heartlands, who voted LibDem. Achieving this means a reverting to traditional conservativism, and being seen as reliable and competence, rather than radical revolutionaries taking on the establishment.
‘reverting to traditional conservativism, and being seen as reliable and competence, rather than radical revolutionaries taking on the establishment’
The parties rush to find a solution has led them down a slippery slope, as the final say-so is with party members. The same party members who selected Truss over Sunak. Sunak might never have been a great PM, but his inheritance after Liz’s 45-day rampage was tainted.
The country needs a viable opposition, and if the Tories continue to radicalise that is likely to be Reform and Farage, unless MPs pick two from the three moderates standing for election.
This is especially important as Labour have much to contend with, not least public sector reform, with an ever opportunistic Farage waiting in the wings.
“The future’s uncertain and the end is always near”
‘It must be the heat, everyone has gone mad.
The chancellor, Rachel Reeves, after naming and shaming Tory mismanagement, went full circle and became a Geore Osborne tribute act.
“If we cannot afford it, we cannot do it”, Thatcher would have been proud of that statement.
She criticised under-investment and then slashed investment projects. The future isn’t looking rosy.
Then, up-stepped Angela Rayner with plans to build 370,000 new homes a year. Good luck with that one. Everything aside, who will build them? Councils are strapped for cash, which leaves the rapacious private developers, who themselves are short of builders under current, post-Brexit, immigration rules.
Turning to the Tories we had the amusement of the faux indignation of former chancellor Hunt whose pre-election NIC bribe, which we couldn’t afford, still couldn’t salvage the election.
Their leadership race will be fascinating, and ultimately decided by a bunch of octogenarian swivel-eyed loonies. Cue Kemi…..
Ah yes, Kemi Badenoch and the nation state. Aside from it appearing to be unattainable when correctly defined, would she qualify?
Clearly, the worst event was the knife attack in Southport which, so far, has seen 3-children die. By any stretch of the imagination it’s a tragedy.
Unfortunately, as I have written before this is what the right seeks to exploit. They have exploited the situation, using social media and other internet platforms, spreading misinformation and pet theories and flyers, calling on others to come to Southport. A name for the attacker was circulated, along with allegations of motive. “Mask up,” the messages advise.
This is the result of the Tories journey to the right, and the rise of Farage and Reform taking with them policies that were last seen in a National Front manifesto.
Whilst politicians of that ilk will condemn the violence, they know full well the impact of their actions. Nigel Farage knows what he is doing when he disingenuously follows the attack with a video asking, in mock-innocence, “if the truth is being withheld from us”.
The leader of the UK’s third-most popular political party has been accused by one of our leading counter-terrorism experts of inciting violence. Sadly, what was underground now has a voice in parliament.
Lyrically, it’s a mixed bag; we start with the Carpenters and “We’ve Only Just Begun”, and hopefully the government will improve. We end with the Doors and “Roadhouse Blues”.
Enjoy! Philip’
@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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