Boris’s “New Deal” and Events in Hong Kong

It’s summer and normally this is a quiet period for both financial news and stock markets, but not this year. Economic news is consistently terrible with job losses mounting rapidly, Government debt is rising to record levels (over 100% of GDP) and Brexit negotiations are still not concluded. The Covid-19 epidemic is still rampant in some locations even if overall UK deaths are falling but there is still no clear evidence of a workable vaccine to stop the disease and the available treatments are still not a certain cure.

Boris Johnson has revealed a “New Deal” in imitation of President Roosevelt. He hopes to use this to enable the UK to build its way out of the recession. This is what he said yesterday in an announcement by the Conservative Party which was headlined “Boris Johnson unveils a New Deal for Britain”:

“Because we have already seen the vertiginous drop in GDP and we know that people are worried about their jobs and their businesses. And we are waiting as if between the flash of lightning and the thunderclap, with our hearts in our mouths, for the full economic reverberations to appear.

And we must use this moment – now – this interval to plan our response and to fix of course the problems that were most brutally illuminated in that COVID lightning flash. The problems in our social care system. The parts of government that seemed to respond so sluggishly, sometimes it seemed like that recurring bad dream when you are telling your feet to run, and your feet won’t move. And yet we must also go further and realise that if we are to recover fully, if we are to deal with the coming economic aftershock, then this COVID crisis is also the moment to address the problems in our country that we have failed to tackle for decades”.

This is all stirring stuff is it not? He goes on to say:

“I can tell businesses that next week the Chancellor will be setting out our immediate plan to support the economy through the first phase of our recovery. But this moment also gives us a much greater chance to be radical and to do things differently. To build back better. To build back bolder.

And so we will be doubling down on our strategy. We will double down on levelling up. and when I say level up, I don’t mean attacking our great companies or impeding the success of London – far from it – or launching some punitive raid on the wealth creators.

I don’t believe in tearing people down any more than I believe in tearing down statues that are part of our heritage, let alone a statue of our greatest wartime leader. I believe in building people up, giving everyone growing up in this country the opportunity they need, whoever you are, whatever your ethnicity, whatever your background”.

You must admit he writes interesting prose. You can find the whole document on the web. It includes a good snipe at HS2 which he says is going to cost the equivalent of the GDP of Sri Lanka! One of my least favourite projects.

Usage of railways has fallen dramatically as people have been avoiding public transport. But unbelievably some London Councils such as Lewisham have been closing roads and forcing people to get on buses or trains, or even better, cycle while TfL are narrowing Park Lane and Euston Road by removing lanes – a couple of the key roads in London. All this is justified by the emergency of the virus epidemic and “social distancing” which the Government has encouraged with rushed through regulations. It’s not helping at all, just making matters worse.

All this rhetoric may not quieten the social unrest in the country though because the lower paid are the ones that are most likely to be losing their jobs. This country is suffering from a bout of mania about imagined wrongs – to black people, to those of different sexual inclinations, to those of every other kind of minority. This is going to be damaging to the economy unless some control is re-established by the forces of law and order soon.

Hong Kong is an example where the demand for more democracy and even independence finally caused China to clamp down. The riots in Hong Kong were threatening the economy and major companies actually support the new laws that China has imposed. The reaction of Western democracies to these events has been extreme to say the least. The UK is even willing to allow 3 million Hong Kong residents to migrate to the UK. Do we not have enough people already in this crowded country?  When immigration and overcrowding in our major cities brings pressure on housing and jobs which is one of the causes of social unrest, this seems a most bizarre decision. And I bet they will all wish to live in London!

Hong Kong was leased by the British from China and we have always conceded that the lease had to end and that Hong Kong was and is part of China. The Chinese will never concede otherwise. There was an agreed transition period to retain some local autonomy so as to not undermine the economic success of the territory, that was all. But the riots were destroying the basis of that so it’s not surprising that China intervened. The UK should have accepted that and not indulged in damaging steps just to show our displeasure.

I don’t often write about politics but some aspects of the current political situation are very important for economic prosperity in this country. Firm leadership is certainly one thing that is required at the moment. Will Boris’s New Deal revive the economy? On the principle that having people in employment, even if the state effectively has to pay for it rather than having them doing nothing is a good thing, then it is a sensible policy. It might actually work.

Roger Lawson (Twitter: https://twitter.com/RogerWLawson  )

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Tory Leadership Contest and Brexit

It’s Sunday morning and time to talk politics, which I have not done for some time. A satisfactory resolution of Brexit is of some relevance to the performance of many UK companies which is a key focus of my readers.

How did we get into the current mess? Weak leadership and a lack of consensus both among Government ministers and in Parliament. Our negotiating position with the EU was confusing with changes of policy and people leading the team changing whereas the EU Commission decided what they wanted and stuck to it. The EU insisted early on that any post exit trade relationship would not be part of the withdrawal negotiations which the UK meekly conceded. The Withdrawal Agreement looks like it was drafted by the EU as a result.

It was very interesting watching the Storyville TV documentary that followed Guy Verhofstadt, MEP and leader of the EU Parliament team during the Brexit negotiations. Consistently it seemed that Britain did not know what they wanted. It was also clear of course that in the EU elected Parliament members (MEPs) have little influence and the Commission and the Council dictate policy – a good example of how undemocratic an institution it is.

Where to from here? Firstly the Conservative party need to elect a new leader who will be appointed as Prime Minister. The bookies seem to be tipping Boris Johnson who is popular among Tory party members. He also managed to get elected twice as Mayor of London despite London being generally very left wing in outlook due to the number of immigrants now living there. For those readers who do not live in London, here’s a brief summary of his record there. He removed the Western extension of the Congestion Charge, a popular move, but retained it otherwise and proposed a ULEZ scheme for the central zone. On the Environment his steps were reasonable but he fell in love with cycling and cycle superhighways which has made traffic congestion much worse. His support for the Garden Bridge was a mistake but he otherwise did keep the TfL budget in some kind of order, unlike his successor, and public transport was improved. He did not make unwise promises to the electorate to ensure his election. His record on crime and policing was OK, and better than his successor, but housing in London remained a major issue mainly because of the policies of his predecessor (and since followed by his successor), to encourage immigration and more business development when the needed infrastructure and housing lagged behind.

As Foreign Minister Boris was prone to gaffs and he is certainly not appreciated by some. My wife’s latest comment on him was: “he just needs to grow up”. His chances of unifying the Tory party behind him seem low.

Another leading contender is Dominic Raab, but like all the others, he lacks a lot of public recognition. But he did give a very polished performance on the Andrew Marr show this morning. He was very definite about wanting Brexit to happen on the 29th October with no further delays, and would accept a “No Deal” Brexit if it is impossible to change the Withdrawal Agreement before then. That to my mind is the right approach to take and I do not see a No Deal Brexit as a disaster like some. The economy would soon recover from any temporary disruption and the money saved from our EU contributions would help a great deal.

Some are tipping Michael Gove but I just do not see him as a personality that could win a general election for the Tories. Sajid Javid might be a better bet, but none of the other declared runners looks a winner to me.

The ability to win a general election, and face down Nigel Farage and his Brexit Party, is quite essential because Jeremy Corbyn is still fence sitting in the hope of forcing a General Election. He is 70 today so must realise that his chance of winning power may be slipping away.

Any new prime minister needs to tackle the issue of the Irish border and the “backstop” in the withdrawal agreement. He needs to appoint a cabinet that will back his chosen approach and either conclude that with the DUP or call a general election. That needs to be done quickly if it is to take place before October 29th when we exit the EU unless something else is put into law.

Apart from the Irish backstop proposal in the Withdrawal Agreement, which tied the UK into a Customs Union potentially for ever, there were other aspects of it which were not favourable. If the EU sits on its hands and refuses to renegotiate it a No Deal exit might be best so we can go back to square one and settle on a new trading relationship with them.

Economically the EU needs a good trading deal with the UK just as much as the UK needs one with the EU, if not more so taking into account the balance of trade. But if you have weak, inconsistent or muddled leadership then the chance of the UK getting what it wants is low. To my mind, Dominic Raab might be a better bet to achieve that than Boris Johnson.

Roger Lawson (Twitter: https://twitter.com/RogerWLawson )

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