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I work in finance and there the political consensus is, in general, conservative. Now and again you see the cracks in that ideology showing through though. Before Brexit, Fund Managers would discuss the basic premise that the Conservative-Liberal Coalition was to make this country more like the USA, ie low tax, low benefits, fire-at-will, entrepreneurial, patriotic. The “alternative” European model of higher taxes, higher benefits, higher wages, manufacturing, protected jobs, and sharing of sovereignty being seen to be anti-competitive and old-fashioned.
I also remember though many fund managers, if you like the arch-capitalists, who manage billions of pounds worth of investments, hoping for a kind of “one-nation” government stimulus in infrastructure, education, and hi-tech manufacturing. I remember when the “going for growth” budget of George Osborne reduced the value of the pound exacerbated poverty at home due to the dollar/euro denomination of imports and increased the value of FTSE shares (as 80% of those shares earn in those same currencies). This “unintended” result made the rich richer and the poor poorer and continued with the fall of the pound following Brexit (actually the minute after Sunderland’s result was declared). Unsurprisingly, the rapid growth (damn it) of foodbanks followed from around then and now we have Gordon Brown writing that they are, to our shame, a part of the Social Security system. A rich man in his castle, a poor man at his gate….
The Kwasi-Budget that the Rt. Hon. Mr. Kwarteng has just announced will take a few days to process as the details emerge, but the main theme is division between rich getting richer and poor getting poorer. The sub-headlined “enterprise zones/freeports” could be indicative for example. In those, there are no public streets, just private property. No begging, no loitering, no graffiti, no chewing gum, no problems except the big fence surrounding it and that if you lose your job or get ill or old, you’re outside.
Budget headlines
The headlines of the Budget; the reversal of the National Insurance levy, the reduction of the basic rate of Income tax and the abolition of the higher rate of 5% are a great contradiction in many ways because of the fundamental issue of personal debt. For example, if you pay tax at basic rate it is probable that you will be paying rent or a mortgage and the rise in interest rates will erode most or all of the benefit in your net income. You will not have more money for spending, or saving or anything much; you’ll be wearing jumpers, making sandwiches and economising. The result is no consumer growth there. If you’re paying the 45% tax rate, you’ve likely paid your mortgage so the extra net income will be invested (remember 80% of FTSE funds earn in overseas currency), or spent on holidays (overseas), or fashion (Paris, Milan) or cars (Stuttgart, Turin) or jewellery (Place Vendome). Certainly car dealerships and Osborne Road boutiques may improve their cashflow but will they pay their workers enough to buy a sandwich at Pret?
UK assets
More fundamentally, the crash in sterling and the historically low valuations of UK assets means that they are being bought up as never before. It isn’t just football teams that are owned by foreign capital, it’s going to be everything else too. The first duty of a company is to their shareholders (It’s in the 1987 Insolvency Act) and that duty to pay dividends will be discharged once the 19% Corporation Tax is paid on whatever profits are visible. If you hold assets in a private pension fund that should benefit as it has since QE and austerity. So what does a de-industrialised, post-manufacturing country do when its consumers (who make up 70% of GDP) are pauperised?
Go for growth? As my friend in London, who is a senior international architect asked, “Grow what? What’s left?”
Industry
Industry? – I suppose the proponents of the plan for Enterprise Zones in Brexit-towns will make the case that inward investment to low regulation/low tax areas could result in economic growth. Many people will remember the companies coming in with similar promises; some succeeded, some failed. The idea that a CEO in Cincinnati will see a brochure for a dilapidated part of Hartlepool and think “Let’s put our European manufacturing hub there” is fanciful when the domestic market is skint. More likely we’ll get warehouse storage and “assembly not manufacture” of imported items with a minimum waged, unskilled, de-unionised workforce overseen by a zealous security apparatus with kwasi-legal authority will prevail. That this will just be another “assistance zone” with a variable record like everything from the Team Valley to the Tyne Wear Devco. If we’re unlucky, it’ll be like the Bund in Shanghai. If we’re lucky the companies being bought will not be asset-stripped and sold.
Transport
Transport? – maybe they’ll dual the A1 and put a passenger train to Blyth. It’s not exactly a MAG-LEV to London and, of course we’ve just had to spend £350 million on importing trains for the Metro from Switzerland (!) but maybe we’ll get a train museum or HQ in Newcastle one day.
Energy
Energy? – I was in a meeting with Jupiter Merlin Fund Managers on Tuesday. They pointed out that the projected cost of £170 billion energy subsidy would pay for 100 Rolls Royce mini-nuclear reactors sufficient to power the whole country (I don’t want them anywhere near me either by the way). That this would free the UK from having to import EU energy, as it had to do to keep the lights on this year – talk about taking back control….The point being made was that a serious government would think strategically, consider the bond markets and have an economic policy that answered fundamental questions. The consideration of solar, tidal, wind and even using the coal under our feet to produce energy without taking the carbon are all unmentioned. On the other hand our national GDP to borrowing rate is lower than France, Italy the USA and Japan so maybe they think we can afford it. The difference is those countries manufacture things and our government does not inspire world confidence. We’re a small (3.8% maybe) part of world market capitalisation (USA is 60%), we’re not famous any more..
The overall problem that this Kwasi-budget is its admission of total national failure and this is the last flailing effort of a fading power gambling the house on the outside bet. Maybe he’ll be lucky; but his ideologists answer is always more ideology and I doubt anyone will invest a penny on his say so. In his world, he’ll always be the man that tried, and no doubt, the speaking engagements, directorships, and opportunities at Davos will always be there. Maybe if we can survive this, the British people (if there is still a Britain in five years) will resolve never to indulge in such stupidity and waste again. Any tin-pot authoritarian state can clamp down on unions, reduce tax on business and incentivise investment. If it has a supine media it can dictate the agenda and keep its people divided by various identity politics games. There’s no likelihood that poverty creates resistance and progressive politics; it normally encourages racism, sectarianism and crime; think Alabama and Belfast.
Instead of a participatory inclusive democracy we’re in a Brave New World of the public school mafia monopolising all power and pretending that all is well. Meanwhile, clever companies who wish to invest in a new manufacturing site don’t just talk to government apparatchiks in Pall Mall clubs; they send people to look at the cities. Mayor Jamie Driscoll reported that Newcastle gets high marks for friendliness, schools, proximity to beautiful countryside and a wonderful cityscape full of history and identity. But no matter how much you earn you can’t avoid the poverty revealed in the beggars, the lost mentally ill, the foodbanks, the old, the ill, the cold and the frightened. Fundamentally we all see each other in the North, and there’s no point in being rich if you get pestered or made to feel guilty or helpless.
I would like to think that there’s a better way, but I still hope it works and I’m wholly wrong. I’m not an ideologue, when Ian Byrne MP took his “Right To Food” proposals to the government, he was told that “this is such a good idea, Boris might steal it”. He said, “Let him”. Politics is now too important to be left to lobby groups or even political parties, we need implementation of better policies that make people richer and happier.
Britain’s Treasury is supposed to be a great office of state to govern for the benefit of the nation. Unfortunately, this Kwasi-budget is a declaration of war on the majority of this country. Food, energy, goods, and services will get more expensive, wages will stagnate, rights will reduce, the rich will get richer but not happier, and the poor, disabled, old, and ill will suffer cold, hunger, misery and fear. Racial and identity differences will be used to terrify people about their neighbours and the media will tell you how wonderful the country is. It sounds more like Argentina under Peron. It sounds like fascism. I hope we’re strong enough to withstand it. Enough is Enough.
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