Is this a reference to the 1979 classic Disney sci-fi film when the USS Palomino emerges from a ‘white hole’ heading for a bright ‘fiscal star’, or a year when an incoming Conservative Chancellor (Sir Geoffrey Howe) was faced with high levels of debt and borrowed from the International Monetary Fund. Anyway, ‘Broke & Broken’, not words you want to hear from Chancellor Reeves but the economic blame game could soon be an Olympic sport.
Are we really going to get a Treasury that says ‘If we cannot afford it, we cannot do it; whilst meeting public sector pay increases in full? An 1100% increase in percentage offered to junior doctors compared with the plan, all eyes on the 30 October Budget for news on how we are going to balance the books.
In 1997, Chancellor Brown stealthily made a tax grab on pensions. Ms Reeves could be on this page as she looks to fund some form of spending. Middle England beware – a potential autumn tax raid looms on the back of ‘I’ve only just seen the books’ especially on news that inheritance tax liabilities have reached a record £6bn after a 15-year freeze in thresholds.
Chancellor Osborne’s legacy was the Office of Budget Responsibility (2010) to ensure financial transparency, so it’s difficult for Labour to claim the latest accounts are a work of fiction. Interestingly, 75% polled said they didn’t believe Ms Reeves’ surprise over the state of public finances. A further survey confirmed the public remain split on tax rises to close the gap.
The Ministry of Administrative Affairs
Labour’s war on waste is aimed at bridging the fiscal pothole, with some £7bn set to be saved as consultants get chopped in Whitehall. Reminiscent of Yes Ministers Jim Hacker, a new ‘Office of Value for Money’ will be established to check spending before it happens, as opposed to the National Audit office who comment when all the money’s gone.
Labour’s first Budget since 2010 will set out a new fiscal landscape. It is possible that the ‘definition of debt’ could be revised. If we exclude losses from UK Gilt sales, then Ms Reeves could potentially triple borrowing. This would provide extra spending headroom but does little to help keep within the government’s 3% debt to GDP target. Must exclude losses next time I talk to my bank!
Nine Billion Bricks
The headlines read ‘thousands of affordable homes stand empty’. Housing Associations, the traditional route, are cash strapped, leaving housebuilders with unsold stock, whilst citing poor quality and overpriced affordable homes as further barriers.
With Labour plans to build 1.5 million homes in 5 years, the construction industry training board says an extra 150,000 brickies are required. That’s on top of 55,000 current vacancies. To build you need bricks’ for brickies – 9 billion in total for 1.5 million average homes. With kilns mothballed the UK is importing more bricks than ever.
Perhaps cash strapped ‘red brick’ Universities can offer degrees in Bricklaying given that 68% of construction SMEs are struggling to hire. With qualified brickies earning £37,000, this outpaces typical graduate salaries at £29,900. Higher bricklaying salaries might mean that more student debt gets repaid!
Rooftop Revolution
Did you know – 450 panel systems are fitted each day, up 600% over 5 years. Energy Secretary Ed Millband plans to get millions of panels on UK roofs and garden fences. Great British Energy has arrived, promising £300 off bills and an army of wind farms to power employment and homes galore. Smart sensors are set to turn council lights off, in a bid to slash CO2 emissions and redirect electricity to power 300,000 more homes.
Blenheim Palace, Winston Churchills birthplace, could soon host Europe’s largest solar farm. Ultimately, the site could power 330,000 homes, all part of Ed’s masterplan to triple the amount of solar energy in the parliament.
All this could be cold comfort as energy prices are forecast to increase 10% this autumn, especially after cuts to Pensioner’s Winter Fuel payments. Politically, a ‘Winter of Discontent’ could lie ahead – tax rises, local spending cuts and the next crisis. Even if you still get the £300 winter fuel allowance, you’ve got to have power to spend it on.
Taylor Swiftonomics
Eight Wembley nights, played to 1.2 million fans, generating an estimated £1bn for the UK economy and could even inflate September’s inflation reading. Taylor Swift’s reach is global. Her economic impact has been recognised in the Federal Reserve’s ‘Beige Book’ which charts current economic conditions as US hotel revenues boom.
With Sir Kier seen singing along to ‘Wildest Dreams’, perhaps Ms Reeves will give us a budget rendition of ‘Don’t Blame Me’.
Simon Cossey is Dafferns’ Business Development Consultant and part of our Strategic Advisory team. Any political views in this post are his own.
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