Political rant time. Feel free to skip and go straight to the money and investing links below.
One of oldest tropes in storytelling – right next to the posh British actor being the villain – is that chickens come home to roost.
There’s that same sense of reckoning in our national drama this weekend. There’s even a posh British actor ruining running the country.
Nearly six years after Johnson won his Pyrrhic Brexit victory, we’ve still almost nothing to show for it except a slower economy, a lorry car park in the South East, and the Pythonesque return of crown stamps on pint glasses.
True, the pandemic makes it’s hard to gauge how much weaker trade is down to our lousy new economic reality (lousy unless you deal in paperwork, red tape, or customs booths).
But it’s not looking good:
Source: Politico
Europe, you’ll remember, was also hit by Covid. It’s shrugged off Brexit.
Meanwhile Northern Ireland teeters, thanks to the consequences of Johnson ditching Theresa May’s deal for political points then whining about it later.
There’s no sign of £350m a week for the NHS either. Shocking.
Indeed National Insurance will be hiked from April to help plug a shortfall in health and social care funding.
Regret
NHS funding would have been stretched even if we hadn’t decided in 2016 to commit the most bizarre act of self-harm in Europe since that poor bloke went on a date where he asked if could be fried in garlic and eaten.
But we did, and that’s made the post-Covid reckoning even worse.
Beside the human toll, Covid has cost the economy untold billions. Much money was well spent, plenty not. But aside from the direct medical costs, shutting down the economy and keeping millions on furlough was always going to leave an immense bill. While we can certainly debate when we should start repaying it, nobody should be surprised it’s in the post.
The bill won’t be covered by any oxymoronic Brexit dividend. As the Financial Times opined this week:
Although unemployment is low, evidence of a labour force problem is mounting, with 1mn fewer people either working or seeking work than we would have expected had the pandemic not occurred. That is roughly a 3% hit to the available labour supply.
As spending has increased, this has stoked inflation far more than almost anyone expected. It means the scope for catch-up growth is running out, now that unemployment is back at pre-pandemic levels.
Worse, the UK growth rate is also artificially boosted by £25bn of corporate tax incentives this year and next, but investment remains weak. In the third quarter of 2021, it was still 4% below pre-pandemic levels, lower than any other economy in the G7. UK exports have also not joined in the global boom.
All this suggests that businesses are looking relatively unfavourably on this country, even before corporation tax rates rise from 19% to 25% in 2023. The IMF also reports good growth now will soon be followed by a slide to near stagnation in the pre-election year. It reckons the UK economy will end 2023 only 0.5% larger than at the start, the lowest in the G7.
What’s that? What about leveling up?
Besides the whiff of pork belly politics, the Welsh government for one has already run the numbers and concluded Wales will be £900m worse off compared to what was lost in funding from the EU.
Again, nobody should be surprised. Smaller pie. Smaller slices.
This is the UK economy in 2022.
Blue Monday
Beset by near-anarchy, when quizzed Johnson obfuscates over all this to tout the UK’s vaccination record like a broken droid stuck on repeat.
I’m glad that an adult was put in charge of the vaccine program, that the NHS and volunteers delivered, and that Britons mostly got their jabs.
But a rich country securing and deploying the Covid vaccine is table stakes at this point. We were quick out of the gate, but that was a year ago.
Figures show Germany and Spain are now more fully vaccinated than us, for instance. Those countries suffered fewer deaths per capita too, for what it’s worth.1
But perhaps the success of the rollout does seem singularly incredible if you were partying throughout much of 2020, in the same way a stoned student might be pleased they can still recite their own name to an officer when pulled over for drink driving.
Bizarre Love Triangle
As if friction-full trade, higher taxes on a weaker-than-otherwise base, and our leaders being under a police investigation wasn’t enough, household energy bills are also rising.
This one we can’t lay at Downing Street’s door. Wholesale prices have soared globally. That’s the main driver here.
However the spectacle of MPs cheering the suspension of planned fuel duty rises for ten Budgets in a row does fit with the Day of Reckoning theme.
The fuel duty escalator was introduced as a (token) measure to help wean us off fossil fuels. Yet even this small gesture was too much.
Now here we are decades into scientific consensus that curbing carbon emissions is vital – stat – to prevent catastrophe, and we’re still at the mercy of what autocratic regimes will dig up and sell us to burn.
The pandemic did precipitate this immediate crisis. Energy demand plunged in early 2020. Oil was briefly worthless. As the global economy has spluttered back to life, supply chains have been pulled all over the place.
Also yes, it doesn’t help that at the margin Western energy companies have been deterred from developing new resources by ESG factors (though the oil price touching $0 a barrel in 2020 must have entered their calculations.)
But here’s the thing – those ESG concerns are warranted. Global heating from fossil fuels continues apace (if you don’t believe that you’re irrational) and we must transition to another path, yesterday.
Politicians and voters alike are complicit in not biting the bullet and investing hugely in renewables – and probably nuclear – decades ago.
Instead, the government slashed green incentives in 2016 and MPs wave their ballot papers every Budget as fuel duty rises are put off again.
Why aren’t all our homes insulated? Why isn’t our coast festooned with offshore wind farms? How did my friend just fly to London from Spain for £9? Why aren’t solar panels on your roof a no-brainer? Why don’t we have several new nuclear power stations? Why are SUVs even a thing?
I guess we had bigger issues to worry about. Like blue passports.
World in Motion
Finally there’s the tension with Russia over Ukraine. In my opinion (worth taking with even more salt than usual here) Putin’s posture is enabled by Europe’s need for Russian gas, at this time of elevated energy prices.
In addition – and again reaping what you sow – years of divisive US foreign policy as absurdist theater under Trump must have emboldened the Russian hawks. The UK has been an international laughing stock since 2016 obviously, but with Angela Merkel off the stage Europe also looks suddenly lightweight. And the Americans are only just re-finding their feet.
NATO seems to be holding together, but 30 years on from The End of History should it really be touch and go?
Again, imagine if we’d spent the past five years on things that mattered instead of a grand delusion. Climate change, the real causes of growing disparity in economic outcomes in the UK, cancer, world peace – maybe even the threat of a new pandemic that Bill Gates was talking about in 2015.
Instead we voted to injure our economy indefinitely2 and only afterwards argued about how to do the deed, for years on end, on the nightly news.
To make it happen we elected the worst Prime Minister in living memory – a man who has fully lived down to his reputation.
Well played Britain. Well played. What a waste of time and effort.
Vanishing Point
So we’re a country where millions can’t afford their fuel bills even as the planet broils, presided over by people who broke their own lockdown rules as even the Queen mourned alone, belatedly attracting police attention.
All with Union Jacks cast about like confetti at a shotgun wedding.
If this doesn’t look a bit ominous, read more history.
I don’t see this as a party political issue. To the dismay of my friends, I have occasionally voted Conservative in the past and I imagine I could again.
But key figures in this government lied to win the Referendum, and have kept the fantasy going since. Johnson is no fool, but his biggest strength is unfortunately his weapons-grade charisma. Less winning personalities might have had occasion to reflect on the consequences of their actions, and even learn a thing or two.
Well, maybe he’s never had to, but we can.
This is not fine. Technology has screwed politics everywhere – it’s hardly just a British thing – but we can only sort out our own house.
Something must change before our will is exhausted and we give up caring.
Have a nice weekend.
- I continue to believe we can’t be conclusive about deaths per capita until the pandemic is over and all the data is in and normalized. [↩]
- Reminder: I never thought Brexit would be a nuclear bomb for the UK economy. It’s more like a dead-weight that we’ll have to carry for decades, hampering trade and investment, and reducing GDP by perhaps 0.25% in a bad year. And that will seriously add up. [↩]
