In my last blog, I discussed the daunting administrative and political challenges in exiting an organisation we have been a member for 43 years and of negotiating a new relationship with the EU and the rest of the world. When to trigger Article 50 will be a critical issue given the political timetable of elections in Germany and France, of European Parliamentary elections and finally UK elections in May 2020. This is particularly so when Article 50 gives us just two years from when it is triggered which is not a lot of time when you are dealing with 27 countries and given how long it takes to negotiate trade deals. Thus one likely option is an interim deal before a final agreement.
One of the principal options the UK could go down is the so-called Norway option. This involves membership of the European Economic Area (EEA). This gives full access to the single market but we would not need to participate in a number of EU policies including agricultural, fisheries, security, foreign, and justice. We could also negotiate trade deals with non-EU countries. However, I think this is exceedingly unlikely to be the favoured route. It would require free movement of labour which is clearly unacceptable to the majority of the population who voted to leave. Furthermore, it would also require us to be subject to EU regulations. Given the importance of sovereignty to much of the population and the Tory right, again this would be a red line that could not be negotiated on. Furthermore, the City has also said it does not like the idea of financial regulation being imposed over which it has no influence over. Finally, we would still have to make contributions to the EU budget, which could even exceed what we pay now, without any rebate being on offer.
More appetising would be some sort of Swiss-style deal. Switzerland has access to the single market without some of the burdens of membership. Even so it has involved some contributions to the EU budget and some acceptance of regulations. But the main downside has been acceptance of free movement of labour. In February 2014 Switzerland voted narrowly for quotas on EU immigration. This has put existing bilateral deals under threat. Yet there is talk of introducing an"emergency brake" procedure to halt immigration if the country becomes overwhelmed. Similarly there is now talk of an emergency brake lasting up to 7 years for the UK. This option is possible for the UK and given its greater leverage than Switzerland they would hope to negotiate a more favourable package although it could work against us. This is now seen as the favoured option for the City, an industry critical for the wealth of this country and potentially badly impacted from lack of access to the single market. It hopes to negotiate trade deals in individual sectors and secure asort of Swiss plus deal. While a number of EU leaders have expressed a willingness to secure a special deal, success will not be easy given not only the complexities but also that many EU players want to penalise the UK.
The final option I wish to mention is the World Trade Organisation (WTO) option. This is much favoured by the Brexiteers as it would not only enable us to "get back" our national sovereignty including control of borders and regulation but also have the freedom to agree trade deals with third countries and avoid contributions to the EU budget. Here the UK would rely on WTO rules for access to European markets but would be subject to the EU's external tariffs as well as non-tariff barriers. But this will not be easy either and take a number of years to achieve.
Given that the UK and EU's likely negotiating positions will start very far apart, this is perhaps still the most likely option. However I personally feel that the Swiss plus option will in the end be the path that we will go down and achieve, albeit over many years of painful negotiations.
Friday 19 August 2016
What type of Brexit will we get?
In my last blog, I discussed the daunting administrative and political challenges in exiting an organisation we have been a member for 43 years and of negotiating a new relationship with the EU and the rest of the world. When to trigger Article 50 will be a critical issue given the political timetable of elections in Germany and France, of European Parliamentary elections and finally UK elections in May 2020. This is particularly so when Article 50 gives us just two years from when it is triggered which is not a lot of time when you are dealing with 27 countries and given how long it takes to negotiate trade deals. Thus one likely option is an interim deal before a final agreement.
One of the principal options the UK could go down is the so-called Norway option. This involves membership of the European Economic Area (EEA). This gives full access to the single market but we do not need to participate in a number of EU policies including agricultural, fisheries, security, foreign, and justice. We can also negotiate trade deals with non-EU countries. However, I think this is exceedingly unlikely to be our favoured route. It would require free movement of labour which is clearly unacceptable to the majority of the population who voted to leave. Furthermore, it would also require us to be subject to EU regulations. Given the importance of sovereignty to much of the population and the Tory right, again this would be red line that could not be negotiated on. Furthermore, the City has also said it does not like the idea of financial regulation being imposed over which it has no influence over. Finally, we would still have to make contributions to the EU budget, which could even exceed what we pay now, without any rebate being on offer.
More appetising would be some sort of Swiss-style deal. Switzerland has access to the single market without some of the burdens of membership. Even so it has involved some contributions to the EU budget and some acceptance of regulations. But the main downside has been acceptance of free movement of labour. In February 2014 Switzerland voted narrowly for quotas on EU immigration. This has put existing bilateral deals under threat. Yet there is talk of introducing an"emergency brake" procedure to halt immigration if the country becomes overwhelmed. Similarly there is now talk of an emergency brake lasting up to 7 years for the UK. This option is possible for the UK and given its greater leverage than Switzerland they would hope to negotiate a more favourable package although this would not necessarily be so. This is now seen as the favoured option for the City, an industry critical for the wealth of this country and potentially badly impacted from lack of access to the single market. It hopes to negotiate trade deals in individual sectors and secure a sort of Swiss plus deal. While a number of EU leaders have expressed a willingness to secure a special deal, success will not be easy given not only the complexities but also that many EU players want to penalise the UK.
The final option I wish to mention is the World Trade Organisation (WTO) option. This is much favoured by the Brexiteers as it would not only enable us to "get back" our national sovereignty including control of borders and regulation but also have the freedom to agree trade deals with third countries and avoid contributions to the EU budget. Here the UK would rely on WTO rules for access to European markets but would be subject to the EU's external tariffs as well as non-tariff barriers. But this will not be easy either and take a number of years to achieve.
Given that the UK and EU's likely negotiating positions will start very far apart, this is perhaps still the most likely option. However I personally feel that the Swiss plus option will in the end be the path that we will go down and achieve albeit over many years of painful negotiations.
One of the principal options the UK could go down is the so-called Norway option. This involves membership of the European Economic Area (EEA). This gives full access to the single market but we do not need to participate in a number of EU policies including agricultural, fisheries, security, foreign, and justice. We can also negotiate trade deals with non-EU countries. However, I think this is exceedingly unlikely to be our favoured route. It would require free movement of labour which is clearly unacceptable to the majority of the population who voted to leave. Furthermore, it would also require us to be subject to EU regulations. Given the importance of sovereignty to much of the population and the Tory right, again this would be red line that could not be negotiated on. Furthermore, the City has also said it does not like the idea of financial regulation being imposed over which it has no influence over. Finally, we would still have to make contributions to the EU budget, which could even exceed what we pay now, without any rebate being on offer.
More appetising would be some sort of Swiss-style deal. Switzerland has access to the single market without some of the burdens of membership. Even so it has involved some contributions to the EU budget and some acceptance of regulations. But the main downside has been acceptance of free movement of labour. In February 2014 Switzerland voted narrowly for quotas on EU immigration. This has put existing bilateral deals under threat. Yet there is talk of introducing an"emergency brake" procedure to halt immigration if the country becomes overwhelmed. Similarly there is now talk of an emergency brake lasting up to 7 years for the UK. This option is possible for the UK and given its greater leverage than Switzerland they would hope to negotiate a more favourable package although this would not necessarily be so. This is now seen as the favoured option for the City, an industry critical for the wealth of this country and potentially badly impacted from lack of access to the single market. It hopes to negotiate trade deals in individual sectors and secure a sort of Swiss plus deal. While a number of EU leaders have expressed a willingness to secure a special deal, success will not be easy given not only the complexities but also that many EU players want to penalise the UK.
The final option I wish to mention is the World Trade Organisation (WTO) option. This is much favoured by the Brexiteers as it would not only enable us to "get back" our national sovereignty including control of borders and regulation but also have the freedom to agree trade deals with third countries and avoid contributions to the EU budget. Here the UK would rely on WTO rules for access to European markets but would be subject to the EU's external tariffs as well as non-tariff barriers. But this will not be easy either and take a number of years to achieve.
Given that the UK and EU's likely negotiating positions will start very far apart, this is perhaps still the most likely option. However I personally feel that the Swiss plus option will in the end be the path that we will go down and achieve albeit over many years of painful negotiations.
What type of Brexit will we get?
In my last blog, I discussed the daunting administrative and political challenges in exiting an organisation we have been a member for 43 years and of negotiating a new relationship with the EU and the rest of the world. When to trigger Article 50 will be a critical issue given the political timetable of elections in Germany and France, of European Parliamentary elections and finally UK elections in May 2020. This is particularly so when Article 50 gives us just two years from when it is triggered which is not a lot of time when you are dealing with 27 countries and given how long it takes to negotiate trade deals. Thus one likely option is an interim deal before a final agreement.
One of the principal options the UK could go down is the so-called Norway option. This involves membership of the European Economic Area (EEA). This gives full access to the single market but we do not need to participate in a number of EU policies including agricultural, fisheries, security, foreign, and justice. We can also negotiate trade deals with non-EU countries. However, I think this is exceedingly unlikely to be our favoured route. It would require free movement of labour which is clearly unacceptable to the majority of the population who voted to leave. Furthermore, it would also require us to be subject to EU regulations. Given the importance of sovereignty to much of the population and the Tory right, again this would be red line that could not be negotiated on. Furthermore, the City has also said it does not like the idea of financial regulation being imposed which it has no influence over. Finally, we would still have to make contributions to the EU budget, which could even exceed what we pay now, without any rebate being on offer.
More appetising would be some sort of Swiss-style deal. Switzerland has access to the single market without some of the burdens of membership. Even so it has involved some contributions to the EU budget and some acceptance of regulations. But the main downside has been acceptance of free movement of labour. In February 2014 Switzerland voted narrowly for quotas on EU immigration. This has put existing bilateral deals under threat. Yet there is talk of introducing an"emergency brake" procedure to halt immigration if the country becomes overwhelmed. Similarly there is now talk of an emergency brake lasting up to 7 years for the UK. This option is possible for the UK and given its greater leverage than Switzerland they would hope to negotiate a more favourable package, although this is hardly guaranteed. This is now seen as the favoured option for the City, an industry critical for the wealth of this country and potentially badly impacted from lack of access to the single market. It hopes to negotiate trade deals in individual sectors and secure a sort of Swiss plus deal. While a number of EU leaders have expressed a willingness to secure a special deal, success will not be easy given not only the complexities but also that many EU players want to penalise the UK.
The final option I wish to mention is the World Trade Organisation (WTO) option. This is much favoured by the Brexiteers as it would not only enable us to "get back" our national sovereignty including control of borders and regulation but also have the freedom to agree trade deals with third countries and no contributions to the EU budget. Here the UK would rely on WTO rules for access to European markets but would be subject to the EU's external tariffs as well as non-tariff barriers. But this will not be easy either and take a number of years to achieve.
Given that the UK and EU's likely negotiating positions will start very far apart, this is perhaps still the most likely option. However I personally feel that the Swiss plus option will in the end be the path that we will go down and achieve albeit over many years of painful negotiations.
One of the principal options the UK could go down is the so-called Norway option. This involves membership of the European Economic Area (EEA). This gives full access to the single market but we do not need to participate in a number of EU policies including agricultural, fisheries, security, foreign, and justice. We can also negotiate trade deals with non-EU countries. However, I think this is exceedingly unlikely to be our favoured route. It would require free movement of labour which is clearly unacceptable to the majority of the population who voted to leave. Furthermore, it would also require us to be subject to EU regulations. Given the importance of sovereignty to much of the population and the Tory right, again this would be red line that could not be negotiated on. Furthermore, the City has also said it does not like the idea of financial regulation being imposed which it has no influence over. Finally, we would still have to make contributions to the EU budget, which could even exceed what we pay now, without any rebate being on offer.
More appetising would be some sort of Swiss-style deal. Switzerland has access to the single market without some of the burdens of membership. Even so it has involved some contributions to the EU budget and some acceptance of regulations. But the main downside has been acceptance of free movement of labour. In February 2014 Switzerland voted narrowly for quotas on EU immigration. This has put existing bilateral deals under threat. Yet there is talk of introducing an"emergency brake" procedure to halt immigration if the country becomes overwhelmed. Similarly there is now talk of an emergency brake lasting up to 7 years for the UK. This option is possible for the UK and given its greater leverage than Switzerland they would hope to negotiate a more favourable package, although this is hardly guaranteed. This is now seen as the favoured option for the City, an industry critical for the wealth of this country and potentially badly impacted from lack of access to the single market. It hopes to negotiate trade deals in individual sectors and secure a sort of Swiss plus deal. While a number of EU leaders have expressed a willingness to secure a special deal, success will not be easy given not only the complexities but also that many EU players want to penalise the UK.
The final option I wish to mention is the World Trade Organisation (WTO) option. This is much favoured by the Brexiteers as it would not only enable us to "get back" our national sovereignty including control of borders and regulation but also have the freedom to agree trade deals with third countries and no contributions to the EU budget. Here the UK would rely on WTO rules for access to European markets but would be subject to the EU's external tariffs as well as non-tariff barriers. But this will not be easy either and take a number of years to achieve.
Given that the UK and EU's likely negotiating positions will start very far apart, this is perhaps still the most likely option. However I personally feel that the Swiss plus option will in the end be the path that we will go down and achieve albeit over many years of painful negotiations.
Thursday 18 August 2016
The complexity of implementing Brexit
One of the main themes of my blogs will be Brexit. I have largely avoided focusing on this so far. We all know in the words of PM May that "Brexit means Brexit" is her government's slogan. Yet in reality we dot not know what Brexit will be. There are so many options to consider with the trade-off between access to the single market and the control of the borders at the root of most of them. Certainly a key decision for the government will be to set out its strategy including its red lines. I shall return to these options in future blogs.
What is becoming clearer is the complexity of these negotiations. Not only will there need to be talks covering the UK's divorce from the EU, but there will have to be talks on securing a free-trade agreement with the EU, one likely for interim measures, another with the World Trade Organisation to regain full membership, some on securing free trade deals with non-EU countries and even more talks with the EU on foreign and defence policy etc.
None of these talks will be easy, yet the civil service and the three key departments of the Foreign Office, Brexit and international trade are ill-prepared. There is now talk that article 50 of the Lisbon Treaty, which gives us just 2 years to sort everything out before leaving the EU, may not be triggered until late 2017, with additional problems of the French elections next May and German elections next September to be considered. Yet this would push back Brexit to late 2019 dangerously close to our own general elections in May 2020. Furthermore, such a long period of uncertainty will be damaging economically.
Thus it is imperative the new government not only makes clear it's negotiating situation, but unifies it's own party and the nation as a whole - neither of which will be easy. It must emphasise business as usual, reassuring different sectors of the economy such as farmers and science that they will not lose out, and that EU nationals can still work here. The country should take maximum advantage of a more competitive currency and loosen fiscal policy to boost aggregate demand in these uncertain times.
What is becoming clearer is the complexity of these negotiations. Not only will there need to be talks covering the UK's divorce from the EU, but there will have to be talks on securing a free-trade agreement with the EU, one likely for interim measures, another with the World Trade Organisation to regain full membership, some on securing free trade deals with non-EU countries and even more talks with the EU on foreign and defence policy etc.
None of these talks will be easy, yet the civil service and the three key departments of the Foreign Office, Brexit and international trade are ill-prepared. There is now talk that article 50 of the Lisbon Treaty, which gives us just 2 years to sort everything out before leaving the EU, may not be triggered until late 2017, with additional problems of the French elections next May and German elections next September to be considered. Yet this would push back Brexit to late 2019 dangerously close to our own general elections in May 2020. Furthermore, such a long period of uncertainty will be damaging economically.
Thus it is imperative the new government not only makes clear it's negotiating situation, but unifies it's own party and the nation as a whole - neither of which will be easy. It must emphasise business as usual, reassuring different sectors of the economy such as farmers and science that they will not lose out, and that EU nationals can still work here. The country should take maximum advantage of a more competitive currency and loosen fiscal policy to boost aggregate demand in these uncertain times.
Tuesday 16 August 2016
First hard data for UK economy post-Brexit
This week is being seen as an important week by many in the markets for evidence of the impact of the Brexit vote on the UK economy. We have the first hard data for July for inflation, for unemployment, for retail sales and for the public finances.
Sterling has fallen further against a background of a package of monetary policy easing measures and the disappointment of the latest gilt auction, reinforcing the prospect of further monetary policy easing, with Base rates likely to be reduced to 0.1% from their present 0.25% in the coming months, and raising the likelihood of fiscal policy measures in the forthcoming Autumn Statement. Certainly prospects are that sterling will remain weak against this background and little expectation of clarity regarding the UK's Brexit negotiating position.
But I don't believe in reality that there will be much light shed on the initial impact of the Brexit vote on the UK economy this week. The plunge in the pound is unlikely to have fed through in July's CPI numbers much, with base effects and a sharp rise in petrol prices predominating. The excellent UK economists at Oxford Economics expect the inflation rate to remain at 0.5% y/y. I personally believe the impact further out will be more modest than consensus. Unemployment is a lagging indicator so expect the rate to remain at its near 11 year low of 4.9% or even fall back slightly. Perhaps the most eagerly expected release will be retail sales, given the importance of consumer spending for driving UK growth. Key survey data has given us conflicting stories. The official data has been especially volatile of late and I would anticipate we will not be able to conclude anything much because of the noise.
The plunge in sterling should be very positive for the UK economy as we aim to boost exports particularly in light of poor current account data. Anecdotal data shows a very strong upturn in tourism from foreigners taking advantage of a cheap pound and increased staycation.
The feelgood factor from our sporting successes continues too. The UK amazingly lies second in the Olympic medals table equal to the combined total of Germany and France, and ahead of China. It could even be more successful than in London 2012! The success of the National Lottery, introduced by the Major government, has contributed most of the £350m into UK sport for the Olympics and Paralympics. Money is focused on those sports where we are successful. But the fact is that the number of sports we are successful in is increasing. We have also done well in swimming, diving and gymnastics this time as well as in rowing, sailing, cycling and equestrian where we lead the world. The National Lottery may be a regressive tax in effect but this is not a reason to abolish it.
Sterling has fallen further against a background of a package of monetary policy easing measures and the disappointment of the latest gilt auction, reinforcing the prospect of further monetary policy easing, with Base rates likely to be reduced to 0.1% from their present 0.25% in the coming months, and raising the likelihood of fiscal policy measures in the forthcoming Autumn Statement. Certainly prospects are that sterling will remain weak against this background and little expectation of clarity regarding the UK's Brexit negotiating position.
But I don't believe in reality that there will be much light shed on the initial impact of the Brexit vote on the UK economy this week. The plunge in the pound is unlikely to have fed through in July's CPI numbers much, with base effects and a sharp rise in petrol prices predominating. The excellent UK economists at Oxford Economics expect the inflation rate to remain at 0.5% y/y. I personally believe the impact further out will be more modest than consensus. Unemployment is a lagging indicator so expect the rate to remain at its near 11 year low of 4.9% or even fall back slightly. Perhaps the most eagerly expected release will be retail sales, given the importance of consumer spending for driving UK growth. Key survey data has given us conflicting stories. The official data has been especially volatile of late and I would anticipate we will not be able to conclude anything much because of the noise.
The plunge in sterling should be very positive for the UK economy as we aim to boost exports particularly in light of poor current account data. Anecdotal data shows a very strong upturn in tourism from foreigners taking advantage of a cheap pound and increased staycation.
The feelgood factor from our sporting successes continues too. The UK amazingly lies second in the Olympic medals table equal to the combined total of Germany and France, and ahead of China. It could even be more successful than in London 2012! The success of the National Lottery, introduced by the Major government, has contributed most of the £350m into UK sport for the Olympics and Paralympics. Money is focused on those sports where we are successful. But the fact is that the number of sports we are successful in is increasing. We have also done well in swimming, diving and gymnastics this time as well as in rowing, sailing, cycling and equestrian where we lead the world. The National Lottery may be a regressive tax in effect but this is not a reason to abolish it.
Thursday 11 August 2016
Hinkley. Should we say no?
Last year, the Conservatve government under PM Cameron and Chancellor Osborne, announced a series of economic initiatives with China which was said to have started a "golden era" between the two countries. But new PM May's government, surprised everyone recently when they put on hold final approval for a new nuclear power station at Hinkley Point, in South-West England, so they could review it. The new French-built power station, was set to receive some US8bn in Chinese investment for the project.
It has been said that PM May is reviewing it principally because of security concerns with China's role in the project. That this is the reason, is based on a blog post from her chief of staff and comments from former government (but Liberal-Democrat) Vince Cable. In any case such fears are probably overblown given that security checks are rigorous, that China's role is purely on the money side and that any attempt of China to compromise our national security would damage China's reputation and ability to work on infrastructure investments in the West again.
In any case, there are far more important reasons to cancel this project. John Maynard Keynes, the greatest economist of the 20th century, is purported to have said, "that when the facts change, I change my mind. What do you do sir?" Well the facts have changed since the original decision to back the project was made in 2010. As the Economist magazine reported on August 6th the project now looks "extraordinarily bad value for money". The UK has promised to pay some £92.50 per megawatt hour for Hinkley's output compared with wholesale prices of some £40 today, and perhaps lower in 2025 when it due to open. Furthermore we have promised to pay this for 35 years! Yet the government has reduced the forecast cost of producing electricity from various renewables in 2025 by a third for onshore wind and by nearly two-thirds for solar power - both well below the £92. They will only come down further after 2025. Renewables are the future, and big new nuclear power stations like Hinkley (which would fulfil some 7% of our needs) have no real future and certainly with such price guarantees. In the short-run we will need more electricity, but these should be from gas-powered plants, that can be built quickly, run cheaply and turned on and off quickly to offset fluctuations in renewable supply.
What of the relationship with China? Well the Chinese are clearly not happy. And it is not great timing, when we have a Brexit to implement, when we are emphasising trade deals and being open to the rest of the world and when our economic relationship was already lagging Germany and France's relationship with the Middle Kingdom. However, it should be made clear that the decision to not go ahead with Hinkley is purely a financial one. There may be a short-term impact on the relationship but I am confident it can flourish. There is a lot more than nuclear power out there. However, there is a final point. At this time of a possible economic downturn and virtually 0% gilt yields, there is no reason why the UK cannot fund far more infrastructural projects itself!
It has been said that PM May is reviewing it principally because of security concerns with China's role in the project. That this is the reason, is based on a blog post from her chief of staff and comments from former government (but Liberal-Democrat) Vince Cable. In any case such fears are probably overblown given that security checks are rigorous, that China's role is purely on the money side and that any attempt of China to compromise our national security would damage China's reputation and ability to work on infrastructure investments in the West again.
In any case, there are far more important reasons to cancel this project. John Maynard Keynes, the greatest economist of the 20th century, is purported to have said, "that when the facts change, I change my mind. What do you do sir?" Well the facts have changed since the original decision to back the project was made in 2010. As the Economist magazine reported on August 6th the project now looks "extraordinarily bad value for money". The UK has promised to pay some £92.50 per megawatt hour for Hinkley's output compared with wholesale prices of some £40 today, and perhaps lower in 2025 when it due to open. Furthermore we have promised to pay this for 35 years! Yet the government has reduced the forecast cost of producing electricity from various renewables in 2025 by a third for onshore wind and by nearly two-thirds for solar power - both well below the £92. They will only come down further after 2025. Renewables are the future, and big new nuclear power stations like Hinkley (which would fulfil some 7% of our needs) have no real future and certainly with such price guarantees. In the short-run we will need more electricity, but these should be from gas-powered plants, that can be built quickly, run cheaply and turned on and off quickly to offset fluctuations in renewable supply.
What of the relationship with China? Well the Chinese are clearly not happy. And it is not great timing, when we have a Brexit to implement, when we are emphasising trade deals and being open to the rest of the world and when our economic relationship was already lagging Germany and France's relationship with the Middle Kingdom. However, it should be made clear that the decision to not go ahead with Hinkley is purely a financial one. There may be a short-term impact on the relationship but I am confident it can flourish. There is a lot more than nuclear power out there. However, there is a final point. At this time of a possible economic downturn and virtually 0% gilt yields, there is no reason why the UK cannot fund far more infrastructural projects itself!
Friday 5 August 2016
How is new UK PM May's policies evolving?
Theresa May has come to power being dealt a difficult and constraining hand in terms of the Brexit vote. But most indications are that she was at best a reluctant Remainer and that she believes in controls on immigration and looser ties with Europe anyway.
Her brand of Consevatism is very much pragmatic, but like Cameron, also modernising and certainly not idealistic like Mrs Thatcher who she has superficially been compared with. Though she does have two key advisers that provide idealistic input to her thinking now and when she was at the Home Office. Her stated aim is to help those that have been left behind by the UK economy's success which has partly fed on globalisation. They are mainly the white working classes, particularly in the North. There is a clear shift to the left which will do the party no harm electorally. Not only is the main opposition, Labour party, sadly for democracy, tearing itself apart, but it is shifting sharply left with policies even to the left of previous leader Ed Miliband who was soundly beaten at the previous general election. And current leader Corbyn, unlikely to be beaten by challenger Owen Smith, is seen as even more incompetent than Miliband. Indeed polls already give the Conservatives a massive 14% point lead over Labour. Furthermore the Liberal Democrats will take a generation to recover from electoral defeat, and UKIP having achieved their main objective of Brexit are squabbling over some new policies without their highly effective leader Nigel Farage, and could become sidelined like the Liberals..
So as I see it, the key changes will be greater emphasis for industrial policy, hence a new department and a commitment to rein in foreign takeovers. She dispensed with a department dedicated to climate change, reflecting reduced emphasis there. There will be a greater emphasis on reducing inequalities. so do not expect cuts in direct taxation especially corporate and income taxes but increases in infrastructure spending and generally more state intervention. Also controls on corporate pay and an emphasis on multinationals paying their "fair share" of taxes. Expect to see less emphasis on globalisation with not only cooler ties with Europe, but also China (look at Hinkley power station being put on hold) and even the US. Commonwealth ties will likely be revived. Finally expect tough measures against crime and new grammar schools being permitted.
However, I have some concerns. Firstly an industrial policy or strategy smacks of the failed policies of the 60s and 70s. More of this another time. .Secondly as I mentioned above the UK's rapid growth rate in comparison to its European peers over the last 30 years has been due to taking full advantage globalisation, open to foreign direct investment, to immigration, to flexible labour markets, to free trade, to low taxation and so on. But at this difficult time we should be careful not to abandon these things or to permanently increase state spending when we are left with a massive government debt burden following the excesses of previous Labour administrations and the impact of the global financial crisis. More equality could mean much less wealth for every one, lower growth and ever rising government debt.
Her brand of Consevatism is very much pragmatic, but like Cameron, also modernising and certainly not idealistic like Mrs Thatcher who she has superficially been compared with. Though she does have two key advisers that provide idealistic input to her thinking now and when she was at the Home Office. Her stated aim is to help those that have been left behind by the UK economy's success which has partly fed on globalisation. They are mainly the white working classes, particularly in the North. There is a clear shift to the left which will do the party no harm electorally. Not only is the main opposition, Labour party, sadly for democracy, tearing itself apart, but it is shifting sharply left with policies even to the left of previous leader Ed Miliband who was soundly beaten at the previous general election. And current leader Corbyn, unlikely to be beaten by challenger Owen Smith, is seen as even more incompetent than Miliband. Indeed polls already give the Conservatives a massive 14% point lead over Labour. Furthermore the Liberal Democrats will take a generation to recover from electoral defeat, and UKIP having achieved their main objective of Brexit are squabbling over some new policies without their highly effective leader Nigel Farage, and could become sidelined like the Liberals..
So as I see it, the key changes will be greater emphasis for industrial policy, hence a new department and a commitment to rein in foreign takeovers. She dispensed with a department dedicated to climate change, reflecting reduced emphasis there. There will be a greater emphasis on reducing inequalities. so do not expect cuts in direct taxation especially corporate and income taxes but increases in infrastructure spending and generally more state intervention. Also controls on corporate pay and an emphasis on multinationals paying their "fair share" of taxes. Expect to see less emphasis on globalisation with not only cooler ties with Europe, but also China (look at Hinkley power station being put on hold) and even the US. Commonwealth ties will likely be revived. Finally expect tough measures against crime and new grammar schools being permitted.
However, I have some concerns. Firstly an industrial policy or strategy smacks of the failed policies of the 60s and 70s. More of this another time. .Secondly as I mentioned above the UK's rapid growth rate in comparison to its European peers over the last 30 years has been due to taking full advantage globalisation, open to foreign direct investment, to immigration, to flexible labour markets, to free trade, to low taxation and so on. But at this difficult time we should be careful not to abandon these things or to permanently increase state spending when we are left with a massive government debt burden following the excesses of previous Labour administrations and the impact of the global financial crisis. More equality could mean much less wealth for every one, lower growth and ever rising government debt.
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