The government has all it’s ducks in a row— Let’s hope the content of the budget does not spoil the party!
14 October 2024, 07:17 | Updated: 14 October 2024, 07:19
Regardless of any reader’s political persuasion, few can have been impressed by Labour’s first hundred days in the saddle.
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It goes without saying that to judge the government’s performance over such a short period of time is unrealistic and probably unfair.
There have been some howlers, but I have no intention of dwelling on perceived sleaze, nor the trials and tribulations of the ‘Sue Gray/Morgan McSweeney Saga.’
However, as a taxpayer and someone who is desperate to see the UK’s economy expand, resulting in growth increasing and multiplying, I am amazed that it will have taken the Government, Chancellor Rachel Reeves and Chief Secretary Darren Jones the best part of four months to present its Budget.
Whether that decision was taken, because of advice proffered by HM Treasury, coupled with concerns from the OBR, the country has been left in limbo for far too long, resulting in excessive speculation as to the precarious state of the public finances.
The spurious £22 billion ‘Black Hole’ has been an unhelpful conundrum, attracting far too much angst and unpleasantness, as to whether it was entirely of the previous government’s making, or whether the excessive outcome of the wage negotiations for NHS and teachers contributed £9.8 billion to the ‘Black Hole.’
The former chief economist at the Bank of England and now successful CEO of the Royal Society of Arts, Andy Haldane made what many felt was a very salient point in suggesting it would have been better to have ‘filled in the ‘Black Hole’ and the reason for doing so at the time of the Budget on 30th October.
This terrible vacuum of four months has led to a high degree of uncertainty and negative speculation on how much the Government will borrow and how much will come from increased taxation to balance the books.
What has become apparent to me and many others is the lack of ‘great hairs’ of experience. Many ministers do not seem to be ‘street wise’ enough. The PM, the Chancellor and Business Secretary Jonathan Reynolds did a great job schmoozing business and the City of London, prior to coming into Government. Most were very impressed. However, concerns as to whether the Government has done enough to attract the inward investment required to drive growth, is now in question.
It appears, mainly through comment and speculation that there could be a shortfall of £25 billion if the government is going to balance the books and pay for its part of their ambitious infrastructure plans. There is a school of thought that is encouraging the Government to increase its borrowing for infrastructure spending – considered ‘good borrowing.’
This idea is gathering momentum, though in recent weeks we have seen gilt yields rise. Since 17th September 2024 5-year gilt yields have risen from 3.58% to 4.07% and 10-year Gilt yields from 3.75% to 4.20%. They represent a high percentage increase for servicing debt. This is a worrying development. Could it discourage inward investment? Hopefully not.
The PM’s investment symposium takes place this Monday and will be attended by 300 of the ‘good and the great’ from the banking, investment and wide-ranging business sectors especially technology. It is hoped that Transport Secretary Louise Haigh’s ‘gaff’, when she injudiciously and indirectly insulted P&O Ferries and its owner DP World, won’t derail their fresh investment plans.
Frenetic diplomatic activity should abate the issue. DP World already has huge investments in the UK such as the port of Southampton, which should result in good sense prevailing.
PM Starmer in a recent podcast, was confident that £40 billion investment had been secured for infrastructure projects. I hope he is not referring to the US private equity firm Blackstone’s £10 billion investment for an artificial intelligence data centre in northeast England. The construction of the AI data centre next year will create 4,000 jobs, including 1,200 roles dedicated to the construction of the site. I believe this deal was negotiated by Rishi Sunak in 2023 and signed by the Prime Minister.
The same applies to clean energy titan Iberdrola, the largest electricity company in Europe and one of the two largest worldwide. It has announced plans to more than double its UK investment plans, ahead of the UK’s International Investment Summit in London next week. Again, I think there might be evidence of Mr Sunak’s dabs on this deal as well.
I am sure the Prime Minister was not being disingenuous in claiming full credit for these deals; I hoped he might have acknowledged his predecessor’s contribution. He has also made two appointments – Poppy Gustaffson, DarkTrace’s co-founder as a Minister of Sate for Investment and Microsoft UK’S CEO, Clare Barclay to head the government’s industrial strategy council – both sound ideas.
Ahead of today’s investment symposium, the Government will be greatly encouraged by comments in the Times today from signatories by 14 international banks, insurance companies and private equity to include JP Morgan, Goldman, Bank of America, Citibank, UBS, KKR, Blackstone, Fidelity and IFM Investors, that Britain is ready for investment, enhanced by a strong technology and energy sectors, supported by universities, legal expertise and financial services.
Separately, five major UK banks said UK could achieve the ‘prize’ of economic growth, if collaboration between the private and public sector identified a ‘step change’ in attitude.
Despite the euphoria over the prospects that could emanate from this conference, there are dark cumuli nimbus clouds gathering over it. It’s called the level of taxation that could be levied on the country due to the potentially parlous state of the public finances. A rumoured increase to 39% for CGT is not a good idea; also, the implementation of draconian inheritance tax and savaging retirement pensions pots would be 'disastrous' initiatives.
The taxation choices for Chancellor Reeves are extremely sensitive, if the Government wants to turn the investment jamboree into an unqualified success. Let’s hope she can also make peace with the ‘non-dom’ brigade, who number 74,000, whilst at the same time, staying clear of too draconian employment legislation, which, helpfully, won’t go on the statute book until 2026.
Preventing their exodus could be extremely influential in terms of setting the right atmosphere for aspiring investors to make the plunge in supporting expansion plans for UK PLC’S businesses.
