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Archive for the ‘Government’ Category

Restructuring the Civil Service – is the government ready for post-Brexit Britain?

Now that the country has decided it is time to get Brexit done, the Prime Minister can use his whopping majority to push through the necessary legislation over the coming weeks and, hopefully, move onto the much-neglected domestic agenda while the trade talks carry on in the background.

But this need to push through the legislation to have us out, as promised, by the end of January is leaving many of those on the frontbench enjoying a lengthy interview process for their own jobs – or one higher up the ladder – while we all wait for the much-anticipated epic reshuffle in February. Rumours in and around Westminster about who is out (Truss? Wallace? Barclay?), who could be coming up (Sunak? Dowden?) and who may have to be moved to allow them to spend more time with their constituents (Raab saw a huge drop in his majority in Esher & Walton) are making some hopeful and many nervous.

Talk of a significant reconfiguration of Whitehall departments is being played down, with a smaller-scale re-jig now looking more likely but Dominic Cummings’ determination to shake-up the Civil Service machine is anything but dimmed. You only need to look at his blog from 2014, where he says: “If we want serious government then we need fundamental changes in the way ministers and officials are selected, trained, paid, managed and held accountable”. His recent blog post calling for “weirdos and misfits” to apply for roles should not be seen in isolation but the first step in him seeking to put his ideas into action. With the backing of the Prime Minister, this could be more than just an expensive change of the Whitehall stationery.

 

“With the backing of the Prime Minister, this could be more than just an expensive change of the Whitehall stationery.”

 

Unnamed cabinet ministers were quick to warn about the destabilising effect of shaking up a civil service that has gone largely unchanged since its creation, pointing out that it is the ‘envy of the world’, but many acknowledge that it is far from as efficient as it could or should be to deal with the demands of 21st-century government.

But should anyone really be surprised?  Changes made during Cummings’ time at DfE were surely just the warm-up act, confined to a single department and clearly with the full support of Gove as secretary of state, but the resulting anger from teachers and many parents had an impact of the 2017 election result.  Later, running the Leave campaign, he seemingly had no issue with sidelining lifer-Brexiteers including Bill Cash and Bernard Jenkin, as well as keeping those with much to say on the subject such as Mark Francois away from media.  Upsetting Cash, Jenkin, Francois et al. might have bruised a few egos but ultimately it was in the name of a greater cause they all believed in and hasn’t had longer-term consequences for the Party’s ability to win a convincing majority.  Can the same really be said for Cummings’ radical plans for the Civil Service?

Much noise is coming from the left about all this meaning that Boris is now running a right-wing, revolutionary Conservative government.  But remember – Cummings isn’t a Tory, he’s a disrupter.  An unpredictable force who enjoys mischief.   Yes, he is a very serious person who genuinely believes in what he is doing, but if he has a fault it is perhaps that he is over-impressed by people who know things about the stuff he doesn’t.  Take his call for all those “weirdos and misfits”, about not wanting “confident public school bluffers” and “Oxbridge humanities graduates”.  Cummings, a former Durham School pupil, with a first in Ancient and Modern History from Oxford, is not seeking to create a civil service in his own image but instead is putting his faith in those with the skills he considers the civil service is lacking.

 

“Cummings isn’t a Tory, he’s a disrupter.”

 

As Jill Rutter has made clear in her recent piece for the FT, Cummings is right to point to the lack of scientific expertise in the heart of government, noting that those with science degrees made up less than 20 per cent of the Civil Service fast stream intake in 2018.  With so few scientists coming through the door, it’s hardly any wonder there is a lack of expertise higher up.  While Cummings may be right about the lack of those in our civil service with science and maths degrees, he is wrong that the solution to all of Whitehall’s problems is a load of bright disrupters at the top.  Much deeper change is needed and Jonathan Portes , writing in the Guardian, is right that Cummings’ plan doesn’t make getting a GP appointment any easier for the millions who are frustrated by their lack of access.

In any case, while the political world may well be obsessed while they play the waiting game until the Brexit deadline, what may well matter far more in the long-term for the Prime Minister is whether UK troops are killed for something that Trump has done.  Forget Cummings and his disruptive tendencies, this is real statecraft.

Ultimately though, change is coming to the Civil Service and it is long overdue.  Whether Cummings’ radical vision is the right one at the right time, or too much too soon is yet to be seen but civil servants, ministers and those of us in public affairs would do well to pay close attention over the coming months.  There will be implications for business and, combined with the renewal of the domestic policy agenda and the upcoming Budget in March we will soon learn where No10’s priorities lie. Being ready to make the case to ministers and departments, in the context and language of Cummings’ changes and vision will ensure closer alignment with the Government’s priorities and a much better chance of success.

Black Friday: What the parties are selling to voters this Christmas

Much has been said about the parties’ “retail offers” to the electorate in this campaign, and there have been plenty. With manifestos now published, let’s focus in on the Conservatives and Labour as if they were, in fact, retailers, the electorate being the customer.

 

We know from our retail clients that what their customers mainly want is: to have their needs met; the price to be right; an ability to make a choice within a choice; to have a pleasant shopping experience. Let’s look at how the Conservatives and Labour perform on each of these criteria.

Meeting needs

Britain leaving the EU has consistently topped voter preferences in issues trackers this year, averaging about 65% since January. Second is NHS improvement, which has averaged nearly 40% so far this year, albeit catching up in recent weeks.

 

If, simplistically put, these are the most important things voters want, Conservatives are currently in front with a clear-cut Brexit offer. Although Labour lead on whether they’d reinvest in the NHS, this is still less of an issue overall to the voting public compared to Brexit. Nevertheless, Labour’s proposition is catching up with voter sentiment.

 

The price is right

Both Conservatives and Labour have put forward big spending plans. This is what most people want after over a decade of poor growth and real terms wage decreases. There doesn’t seem to be too much concern from voters about who will end up footing the bill from extra borrowing in the long term, either, so there are few immediate downsides to making big pledges.

 

But who has the edge?  Compared to Labour, the Conservatives favour capital over day-to-day spending, making their promise to end austerity a little dubious. Labour, on the other hand, are promising an immediate, and huge, cash injection into public services. Also in Labour’s favour is their commitment to reduce utility and rail bills through nationalisation, which is playing well in the polls.

 

So, on the face of it, Labour are out in front, but nationalisation might end up undermining Labour here. Customers will only buy something they see as workable and easy to understand (as opposed to the benefits being dependent on a long term, complex process). The qualitative research we’ve seen suggests people might be viewing nationalisation as slightly clunky, unworkable solution which could leave Labour struggling to make a sale.

 

Making a choice within a choice

Customers choose a retailer, but they like to have a choice within that choice e.g. to select different brands from the same shelf. This might be what voters have traditionally looked for in centrist “big tent” parties – choosing a party because they like its overall direction of travel and broad inclusive appeal. There’s a hedging of bets in voting for a broad church; you’re less likely to get extreme or binary positions and be pushed down a certain path, you’re keeping your options open.

 

For decades, we saw the tents of the Conservatives and Labour expand onto centrist ground so much that the canvas was almost touching.  Now, at this election, we see the two parties taking completely opposed positions on the two biggest issues – putting clear distance between themselves in the eyes of the electorate.

 

The Conservatives’ promise of completing Brexit with a free trade deal with the EU in place by the end of next year is an extreme position for a lot of people who voted to Remain – even those who accept that the UK must leave. Meanwhile, Corbyn’s far left platform will be too radical for many.

 

But the Tory’s offer outside Brexit is fairly vanilla, with a similar offer on tax, spending, consumer markets and public services to any centrist European party of the last couple of decades. Labour on the other hand offer a more all-encompassing restructuring of the UK’s political economy, irrespective of Brexit.  Which of these two options voters prefer in marginal constituencies like Newcastle under Lyme and Preseli Pembrokeshire will ultimately decide who gets the keys to Number 10.

 

A pleasant shopping experience

Let’s set aside the actual experience of voting: it’s not going to be pleasant heading to polling stations on one of the darkest and most wintery days of the year. However, it’s worth mentioning that there is currently no evidence to back up the claim that bad weather and dark nights reduces turnout.

 

Instead, one of the most striking aspects of this election is how many people are weighing up which leader and party they find least unpleasant. Boris Johnson has almost double the approval ratings of Jeremy Corbyn, and twice as many people disapprove of Corbyn than approve of him, so in terms of leadership ratings Johnson is out in front.

 

In terms of the parties, the Conservatives’ campaign has been very carefully managed, and despite a wobbly start there have been no major upsets. Labour started well, but repeated accusations of anti-Semitism and Corbyn’s uncertainty on numbers in front of Andrew Neil have required them to go on the defensive. While the Conservatives are ahead in approval ratings, the Conservatives can only win a majority if they persuade voters in historically Labour seats to ‘hold their nose and vote Tory’. The latest constituency polling suggests the Conservatives have made progress here and could win 44 seats from Labour.

 

By this reckoning the Conservatives are the more saleable retail proposition, and this is reflected in their comfortable poll lead over Labour of around 13pts. I’ve focusing on the two main parties for brevity, and of course no one can discount the impact that the Lib Dem’s, the Brexit Party or the SNP could have, although the first two have underperformed against original expectations in recent weeks.

 

I’d be interested to hear what you think – I’m on dominicchurch@wacomms.co.uk

General Election 2019: This time it’s personal

The 2019 General Election is turning out to be a 650 seat bun fight like never before. Rules are being rewritten and expectations are soaring. And a dark, cold six week campaign is no walk in the park.

The team at WA Communications has analysed these seats against key criteria and have found some interesting characteristics coming through. We looked at the remain vs leave vote and recent results in national, local and EU elections; as well as assessing the new breed of high-profile independents and the factors potentially putting heartland seats in play.

What becomes apparent is that constituencies with seemingly little else in common share many traits. In fact it’s clear that it’s not just voters – seats have personalities too. We’ve identified our top seven constituency personalities and where in the country you find them.

So move over Workington Man and Worcester Woman. Let us introduce you to our cast of seven constituency characters.

Has the government hammed itself in with Budget 2018?

Politics is a process of managing competing priorities. Resource is notionally limited, so policy decisions are a case of choosing between trade-offs. We can increase NHS funding if we cut pension tax relief – but will that reduce the incentive to save and cost the state more in the long term? And, more importantly, what do our backbenchers, the main lobbies, and perhaps even the public think about it?

But this budget may be different. Government has so many competing priorities, so many policies it has already committed to, and so small a majority that there are no easy options.

Constrictions

The first issue for the Chancellor is timing. Even though it’s been brought forward from the usual November date the amount of uncertainty over the future of the British economy makes it very difficult to forecast. The figures Hammond is basing his Budget on may well be obsolete in two months’ time. We don’t know whether there will be a Brexit deal, the outcome of which is expected to have a huge impact on our economy. The Chancellor has talked about a “deal dividend”, which he doesn’t know if he can spend or not. He also doesn’t know whether he’s going to have to invest in infrastructure for a no deal, like turning the M26 into a lorry park or chartering ships to deliver food. This uncertainty means, while he’s pledged to only hold one fiscal event per year, it wouldn’t be too surprising to see a ‘beefed up’ Spring Statement in 2019 including more policy detail or decisions delayed until the Comprehensive Spending Review also due in 2019.

The timing doesn’t help with his second problem – the deep divisions between the government and its backbenchers on Brexit.  Hard Brexiteers are already rebelling in Parliament, causing the Offensive Weapons Bill (a relatively minor bill limiting the sale of acid and knives) to be repeatedly delayed as a show of strength. There is a suggestion the Finance Bill could be amended to limit government’s ability to provide extra funding to the EU, which it would have to do if the transition period was extended beyond the currently proposed two years. Chair of the European Research Group Jacob Rees Mogg has reiterated that the Budget is no longer a confidence vote so there’s no problem in voting against it (whether this is borne out in reality is another question). As well as concerns over Brexit, there is also the usual Conservative reticence towards tax rises – the last time the Chancellor tried to raise taxes he came off worse for wear and had to cancel the planned changes to NICs for the self-employed.

The DUP are also making threatening noises. DUP leader Arlene Foster refused to say whether her MPs would vote against the Budget despite being repeatedly asked, and the DUP abstained from a vote on the Agriculture Bill – considered a warning shot. Technically, voting against the Budget would break the confidence and supply arrangement agreed with the Conservatives in 2017 (and the state could ask for that £1 billion investment back),  but the DUP’s support for an unchanged union may be a greater driver. Either way, May hasn’t shown any indication of going back on her red line against a trade barrier between Northern Ireland and Britain so their support may be secured.

Finally, the economic elephant in the room is the end to austerity which Theresa May promised in her speech at Conservative Party conference. For this to be borne out in the facts, there will be pressure to cancel planned cuts or increase investment in government services over time – particularly when Hammond sets out the funding envelope for the Comprehensive Spending Review next year. Not to mention the Chancellor already has to find £20 billion for the NHS, keep in place the freeze on fuel duty, potentially invest £2 billion in Universal Credit to dampen criticism of the policy, and money for any of the pork barrel policies currently being circulated (here’s looking at you Scottish Tories, pushing for frozen whiskey tax).

Solutions

So how will he manage it? The issues in Parliament may mean it is death by a thousand cuts rather than a headline increase in income tax. People over 65 may have to start paying for National Insurance. Planned cuts to income tax may be scrapped, as cancelling a future policy is more palatable than a straight increase. There may be new taxes in areas where there is relative consensus, such as a on unrecyclable plastic or some more detail on the digital services tax Hammond threatened at party conference.

While Brexit uncertainty means this budget may not tell us much about the future state of the British finances, it will tell us a lot about government’s stability and power over its own backbenches, or lack thereof. In many ways it will be good practice for when the Brexit deal (if there is one) comes back to Parliament for its approval, because if there’s rebellion now you can bet there will be twice as much in the new year.

Four takeaways from Matt Hancock’s vision for prevention

Matt Hancock has made a typically energetic start to his time as Health Secretary. Unlike many cabinet colleagues, Hancock has been on the front foot with a steady stream of new policy announcements since he took on the role.

And one theme has emerged as a unifying thread through much of his public commentary on health: Prevention – the idea that if you stop the causes of ill health early, you won’t have to pay the larger costs of treatment further down the line. Simple in theory; harder in practice.

This week, DHSC launched Prevention is Better than Cure, a vision document outlining the government’s direction of travel on prevention, to be followed up with a Green Paper in the first half of 2019. Matt Hancock followed this up with a keynote speech to the Social Prescribing Summit, a term which has come to embody Hancock’s health philosophy.

Over the past decade, the warmth of words on this topic would have sufficiently heated several Whitehall buildings, but Hancock is turning that rhetoric into action. Here are four takeaways from Matt Hancock’s prevention drive:

  1. The ‘prevention vision’ will define Hancock’s time as Secretary of State

In focusing in on prevention (and technology) Hancock has been able to apply some of his strongest-held political principles to the health brief. Integrated communities, the role of culture, music and sport in health, and personal responsibility all feature highly in his political back-story.  They’ve now come to the forefront in his prevention vision and are likely to feature in the coming Social Care Green Paper too.

As an economist by trade, he is naturally drawn to the nudge theories of behavioural change, and the big savings that, theoretically, are delivered through early prevention.

Since the Health and Social Care Act there is no need for the Secretary of State to be involved in the minutiae of NHS decision-making, and Hancock has been content to say to Simon Stevens et al “Here is your extra £20bn, keep the NHS running,” as Hancock focuses on other projects.

This is good news for those organisations – providers of leisure, sports, arts, voluntary and community groups – who will be the ultimate delivery vehicle of the prevention agenda.

Although, as many have pointed out, the very real issues of winter crisis, staffing shortages and impact of Brexit mean Hancock’s time spent on ‘pet projects’ may be short-lived.

  1. The Spending Review will be make-or-break for this agenda – but Hancock isn’t calling the shots

The NHS has just received a funding boost, but public health (where prevention currently sits) has not. The opposition, and many commentators, focused their response to Hancock’s (as yet unfunded) prevention vision around the £700m cut to public health budgets.

If Hancock is to truly deliver a prevention agenda, it must be funded. That means diverting more NHS funding to support prevention through the integrated care systems, or securing a major uplift in public health funding at the spending review.

Unfortunately for Hancock, neither of these outcomes are within his gift. CCG leads and local authority chiefs will decide how money is spent at a local level, and the funding gaps for things like social care are so extreme that prioritising social prescribing will be a bold choice. Meanwhile the Treasury is in the driving seat for the Spending Review, and currently sees more value in investments in infrastructure and digital technology than public health.

Some of the language around personal responsibility and the call on employers to ‘do their part’ from the prevention vision document suggests Hancock recognises this agenda will not be flush with new cash. The same old cries of ‘warm words not action’ will resurface if Hancock cannot manage to drum up new funding for this policy.

  1. Predictive prevention is on its way

The use of genomic testing to determine future likelihood of medical need may be reminiscent of a Black Mirror episode, but it is here, and it works.

The government says predictive prevention – understanding who needs what intervention and when – will be a crucial part of the UK’s 21st century health system. Innovation in public health tends to be limited compared with other areas of the economy, but predictive prevention could kick-start a new industry and put an end to a ‘one size fits all’ approach to healthcare.

The DHSC and Public Health England will convene an expert group to explore how digital services and personalised genomic testing kits can tell what kind of treatment a person is likely to respond to.

Of course, the use of personal health data has been a controversial topic, not without its challenges. There are references in the government’s prevention vision to ‘safeguards in place’ but these will need to be sufficiently robust before any public roll-out.

  1. The life sciences sector is out in the cold

The life sciences sector (once regularly described as a ‘jewel in the crown’ of British Industry) is largely on the outside looking in to this debate.

Matt Hancock has made no secret of wanting to cut the medicines budget, and has been far more vocal than his predecessors in publicly dressing-down pharma companies on pricing. With PPRS and Brexit to deal with, the Health Secretary that doesn’t appear to be in-step with the life sciences sector’s needs.

What is more, Hancock’s prevention vision has little time for pharmacological interventions. Speaking at the Social Prescribing Summit this week, he called out industry for trying to ‘convince us drugs are better than free social cures’ and said he wanted better outcomes for patients ‘without popping pills.’

The rhetoric in this debate is currently one-sided. Bizarre as it may seem, life sciences has to remake the case about the fundamental role of medicine in health, and the value of medical interventions in a fully-fledged prevention pathway.

So far, Hancock has proven that he’ll stick to his guns in focusing on his three main priorities -workforce, technology and prevention. For the time being, engagement and communication on those issues will be the way into Hancock’s good-books.

How could investors benefit from Boris Johnson’s passion for science?

Yesterday saw the unusual event of a government with a majority of -43 putting forward a Queen’s Speech to kick-off its legislative programme for the next parliament. This has created the possibility that we will see a Prime Minister lose a vote on a Queen’s Speech for the first time since 1924. Given these parliamentary mathematics, a general election taking place over the next few months is extremely likely. Despite Johnson’s inability to win a vote in the House of Commons, significant uncertainty about whether he can agree a Brexit deal with the EU, and a healthy dose of personal scandal, Boris Johnson is (currently) still favourite to be Prime Minister following a general election.

Since becoming the leader of the Conservative Party in July, Johnson has attempted to establish the Conservatives as a ‘post-austerity’ party. The spending taps have been turned on, with the Chancellor Sajid Javid announcing the largest increase in public spending for 15 years in September’s spending review. While many of the spending pledges have focused on the NHS and education, Johnson’s government has signalled its intent to financially support specific industries to help the UK succeed economically outside of the EU. The ambitions set out in the spending review and the Queen’s Speech may be on hold for now, but they offer valuable insights into the industrial strategy and economic priorities of a potential Boris Johnson government.

In September, Boris Johnson made a commitment to ‘supercharge science’ through more liberal immigration rules and increased government funding for R&D. The emphasis on science is believed to be driven by Johnson’s Chief of Staff Dominic Cummings, who is reported to have been behind the government’s new fast-track visa rules to attract leading scientists to the UK. Johnson has also set out ambitious funding plans for the science and technology sector. September’s Spending Review committed the government to ensuring total R&D spending increases from its current level of 1.7 per cent of GDP to 2.4 per cent by 2027, which would mean an extra £6 billion at the current rate of economic growth.

As part of this effort to boost long-term economic growth through increased R&D spending, the government has made a number of specific funding and policy pledges to support the development of UK science and technology. The Queen’s Speech announced the creation of a National Space Council to launch the UK’s Space Strategy, as well as a new funding body based on the United States Advanced Research Projects Agency. The new body, a brainchild of Cummings, will aim to cut bureaucracy and back emerging technological fields. Johnson has also stated the government will provide over £200 million to help deliver the world’s first commercially viable nuclear fusion power plant by 2040.

Johnson’s plans are bold and represent a clear attempt to shine a path towards the promised post-Brexit sunlit uplands, while also compensating for the loss of significant amounts of research funding from the EU. In the wider context of the UK’s long-term economic performance, a focus on science and technology certainly makes sense. The UK’s most successful exports have always been high-value, capital and research-intensive goods, such as the aerospace industry, and any successful industrial strategy will seek to build on this platform.

The details of the R&D funding framework Boris Johnson will seek to introduce are due to be finalised this autumn and will set out the opportunities available for investors focused on the cutting edge of technology. However, to take advantage of the government’s strategy, investors will need to be aware of the wider political trends that will dictate how and where any additional funding is directed. While the government wants to reduce the amount of bureaucracy in how science and technology is funded, the process itself will still be a political one.

What if he fails? A public affairs guide to an unsuccessful Boris Johnson premiership

We are on the eve of a Boris Johnson government.  In the context of the many challenges it faces, WA is scenario planning around whether it succeeds or fails.

Yesterday we published our thoughts on what a Johnson government might look like, if it succeeds.  Here are our thoughts on what a Johnson government may look like if it fails, and our advice for companies looking to work with the government.

As part of this ‘failure scenario’ we cannot dismiss the iceberg that is Brexit. It is inevitable that the first 100 days of a Johnson government will be consumed by the same challenges that eventually brought down Theresa May.

His chances of getting a deal? Slim, and getting slimmer every time he hardens his red lines as he did earlier this week. He faces exactly the same structural challenges as Theresa May:

  1. No overall majority: even with DUP support his working majority will start at three, likely to be reduced to two in the Brecon and Radnorshire by-election
  2. An apparent majority against no deal in Parliament
  3. No indication whatsoever that the EU is willing to make any significant concessions on the deal offered to Theresa May

These inescapable facts are on a collision course with Johnson’s clear and repeated pledge that the UK will leave the European Union on 31st October. A technical majority of two isn’t worth much when you factor in known ardent remainers such as Dominic Grieve, as well as the recent pronouncement of Guto Bebb that he essentially won’t support a Johnson government.

Put simply, just getting past October 31st will be a major challenge. But supposing he does. What then can we expect?

A court of competing factions, each seeking to curry favour with the Prime Minister and following competing agendas. The risk being that policy making across government is even less joined up than usual with separate fiefdoms jealously protecting their own turf. Contentious issues such as immigration will, in particular, fall victim to internal spats over what the future direction of the UK should be post-Brexit. Demonstrating the benefits of ending freedom of movement will quickly run up against the economic reality of an economy held back by more vacancies than it can fill at a time of record high employment. This is not a recipe for certainty for business.

Detail-light, unachievable announcements. Impressive sounding proclamations and policy targets will be made before any credible, worked through plan to deliver them is in place. Ministers and advisers will be left to back fill the detail of how to actually make them happen. Rolling out full fibre broadband by 2025 is just the first example of a welcome but very stretching ambition that will be handed over to others to realise. Some of these announcements will turn out well, but many will waste time, money and effort, both of civil servants and industry, on white elephants – think Boris Island and the Garden Bridge.

Enduring Brexit splits. Whether a deal has been done or not, the Conservative Party’s deep Brexit wounds won’t heal overnight. Under a deal scenario, we will face another two years of debate over the future relationship while sitting in the transition phase. Many policy debates will be distorted by whether the desired outcome is to further distance the UK from Europe or to steer a course keeping us closely linked to the Single Market. Johnson’s attempts to promise different things to different factions will only exacerbate this problem. Following a no deal, there will be blame shifting and recriminations.

Our public affairs advice to companies looking to work with the new government under this scenario is as follows:

Johnson reshuffles his cabinet, what does it mean for investors?

Boris Johnson announced his arrival at Number 10 last week with one of the most comprehensive -and arguably ruthless – Cabinet reshuffles in modern history. With so many new arrivals in Cabinet, the biggest questions for investors will be the style of governance of the new PM, his policy priorities (other than Brexit, of course), and whether and to what extent his infamous “f*ck business” comment will reflect his approach now he’s in office.

Whilst the immediate priority within government remains that of no-deal preparations, Johnson has started his time in Number 10 with a bang, announcing a raft of new spending initiatives designed to boost domestic growth, particularly in the “left behind” regions, such as the post-industrial communities in the Midlands and North that swung heavily behind the Leave campaign in 2016. Johnson is likely to stick to this approach in the coming months, combining tough talk on Brexit with a feel-good domestic agenda based on significantly increased government spending.

With so little policy decided, the most useful indicators are the new Cabinet Ministers themselves, and their own priorities in key sectors. Johnson’s preference as a leader will be to delegate much of the decision making to Cabinet Ministers while positioning himself as a ‘figurehead’ for the government, in much the same way he did at City Hall. Investors should expect each government department to have significantly more free rein to pursue policy objectives than under Theresa May’s tenure, setting the scene for a faster pace of policymaking, driven by the individual goals and interests of Ministers.

A key player in unlocking all this newly promised money will be Chancellor Sajid Javid, who has championed increased spending across government in the past. Johnson’s early priorities of increased spending on schools, the police, housing and infrastructure are all causes Javid has supported in the past, often clashing with May in doing so. He continued this advocacy during the leadership campaign, promising a £100 million infrastructure fund and greater support for house building should he be chosen to lead the party. With Javid now settling in at Number 11, expect considerably less resistance to higher spending from the Treasury than we saw during Phillip Hammond’s tenure.

Health and Social Care

Although Matt Hancock remains in post at the Department of Health and Social Care, there is likely to be a shift in some of Hancock’s core policies – from softer issues like prevention and tech, to stronger vote-winners, including significant investment in hospital upgrades and progressing social care funding reform.

During his leadership campaign, Johnson’s libertarian instincts prompted him to suggest a rethink on the expansion of ‘sin taxes’ – including the controversial sugar tax – which was a key aspect of Hancock’s newly announced prevention model. So while Hancock had made a big push on prevention over the past year, his main proposals may never be implemented.

On the capital investment front, NHS trusts and providers have become increasingly strident in their calls for more money for buildings and equipment. Getting more money to the frontline is seen as a potential vote winner and a way to counter Labour’s traditional strength on the NHS. For investors, it also opens up opportunities for providers of services, upgrades and equipment across healthcare estates.

Social care reform continues to be challenging as the government balances the need to be seen to take action on the issue with the risk of public backlash against the proposals. If Johnson ploughs on without calling a general election, his working majority of two means getting any legislation through parliament – particularly on a sensitive and historically intractable issue– will remain a potentially Sisyphean task.

Prior to Johnson’s election, Hancock had stated that he had been beavering away on his own solution to social care funding, namely an additional £3.5 billion-a-year from Treasury coffers, combined with a voluntary insurance model. This solution has been heavily criticised by the House of Lords Health and Social Care Committee, and the likely tax increases needed to fund this approach are unlikely to go down well with Hancock’s new Cabinet colleagues, or with the Conservative grassroots. Hancock may well be forced into adapting yet another policy to suit the changing political winds. The long-delayed social care green paper, which the sector has been awaiting since the summer of 2017 and is now provisionally slated for publication this autumn may be the first indication of whether the government’s approach to social care has changed, and how bullish it intends to be in pushing forward with its proposals.

Any new funding for social care is likely to be positive for investors. Hancock has already shown his ease with the delivery of health and social care services by private and independent providers, and innovation driven by the private sector will remain a key part of his strategy to make sure the UK’s health system is fit to meet 21st century demands. Innovative, cost-effective solutions to social care, public health and disease prevention are likely to be the order of the day, with healthcare businesses offering these solutions likely to benefit from government support and funding.

Energy

The appointment of Andrea Leadsom as Secretary of State for Business, Energy and Industrial Strategy (BEIS) is likely to signal continuity for the energy aspect of her brief, but businesses may be wary of her pro-Brexit stance. Leadsom’s predecessor, Greg Clark, was a committed Remainer who was incredibly mindful of the concern businesses felt over a possible no-deal Brexit. Leadsom, on the other hand, is openly comfortable with no-deal, something that is unlikely to sit well with the UK’s industrial and manufacturing sectors.

Leadsom is likely to combine green energy initiatives, like promoting electric public transport and decarbonisation, with advocacy for the continued use of gas, nuclear energy and fracking. She has previously stated that “fracking is one industry that represents a huge opportunity for the UK, and our regulatory environment for it is the safest in the world.” Leadsom has previously called for the end of renewable energy targets and was involved in the reduction of green energy subsidies during her tenure as Minister for Energy and Climate Change. However her approach to energy at BEIS is now likely to be tempered by her new boss wanting to showcase the government’s environmental credentials.

Johnson’s early statements on energy are good news for investors, having stated that he intends to ensure the private sector is at the forefront of efforts to tackle climate change. He has pledged to keep the current target for net-zero carbon emissions by 2050 and has developed a notable habit of referencing climate change in his speeches.  Could this be to distract from the fact that little in the way of concrete policy has emerged so far? Brexit, and the extent of the Cabinet reshuffle, means that the long-awaited energy white paper is likely to be delayed until late autumn 2019 at the earliest. Key issues likely to be addressed in the white paper, when it emerges, include a new approach towards the funding of nuclear power plants and carbon capture and storage. Alongside this, BEIS and Ofgem are planning a shake up of the energy retail market and are currently consulting on proposals to ensure customers are able to benefit from a low carbon, flexible energy system. This is likely to include changes to the regulatory framework and measures to ensure energy remains affordable for customers following the end of the energy price cap, which is currently due to end in 2021. Given the consistent focus of Labour on energy prices and the behavior of utility companies in general, the Conservatives are likely to develop and adopt consumer protection and green energy policies as a priority to counter this narrative.

Outsourcing

The prevailing mantra of the Conservatives will continue, namely that the private sector is good for the public sector. Nevertheless, the post-Carillion approach to outsourcing within government is still in the midst of major change, with former Cabinet Office Minister David Lidington having published a new ‘Outsourcing Playbook’ to guide all government departments through the process of future outsourcing of public sector contracts. Lidington resigned from his post with work still unfinished on the social value aspect of the government’s new outsourcing policy, designed to act as an extension to the guidance laid out in the Playbook. While most of the work has already been completed, Boris Johnson’s libertarian instincts may push outsourcing reform further down the government’s agenda, meaning Lidington’s work may remain incomplete, at least for the time being. Lidington had been working towards the introduction of a social value model for outsourcing, which would ensure government considers the wider value of their contracts, rather than awarding them to businesses on cost grounds alone. It was hoped this would ensure outsourcers demonstrate transparency and a strong ethical background well before contracts are approved. This would mark a significant change of direction for a Conservative government, which has traditionally relied on a strictly market-based approach to outsourcing. Given that Lidington’s successor, Michael Gove, has defended the government’s outsourcing policy in the wake of Carillion’s collapse, describing its failure as “business-specific,” he may be keen to focus on other, more pressing matters.

The government will also need to find a replacement for Private Finance Initiatives (PFI), which were scrapped for new projects by Chancellor Philip Hammond at the 2018 Budget. It is highly likely that at least some of the major infrastructure plans currently being announced by Johnson and his team will need to be delivered in partnership with the private sector, something that the PM and his Cabinet are keen proponents of. Johnson has already discussed working with the private sector to improve regional bus services and increase green energy usage. How exactly he plans to work with private companies to finance his ambitious infrastructure plans is not yet clear, but investors can be almost certain that Johnson envisages a key role for the private sector in seeing his grand plans through to fruition.

Education

While new Education Secretary Gavin Williamson is something of an unknown quantity at the Department for Education (DfE), there is one aspect of his brief he has maintained a long-standing interest in: apprenticeships. Williamson has previously described apprenticeships as “vital” in reducing youth unemployment and has said that he wants them to be seen as “equal to if not better than, going to university.” We can anticipate that Williamson is likely to deviate from his predecessor, Damian Hinds, who largely focused on schools policy within his brief. Williamson has taken over direct responsibility for the old skills portfolio, including apprenticeships, signaling the importance with which the government views the issue. However, as the skills brief was formerly the responsibility of an individual minister, there are risks it will no longer receive the attention it needs from the new Secretary of State, who will have to balance the brief with other issues in his portfolio.

Other education policies have been dictated by Johnson in the form of early promises of funding increases. Education funding was in danger of becoming a toxic issue for the Tories during the final months of May’s tenure, with government statements on increased funding contrasting badly with tales of schools being forced to close early due to a lack of funds. Johnson has made it clear he wants to address this and has already pledged to increase the education budget by £4.6 billion a year by 2022-3. However, all this would do is return the education budget to its 2015 level, a settlement unlikely to satisfy the powerful teaching unions.

Responding to the Augar Review of further education will be a near-term priority for the new Education Secretary. Recommendations include a cut to tuition fees for domestic university students (a policy strongly opposed by Jo Johnson, Universities Minister and younger brother of the new PM). The report also calls for increased funding for alternative forms of higher education, which is likely to be viewed positively by Williamson and his new team. Williamson’s existing interest in apprenticeships will mean these recommendations are received sympathetically, while an increase in funding for regional further education colleges is also likely as part of the Prime Minister’s pledge to reinvigorate ‘left behind’ towns.

Transport and Infrastructure

Echoing his priorities as London Mayor, transport has been an early focus of Johnson’s, forming a major part of his strategy to create economic prosperity across all parts of the UK. In addition to the likely continuation of HS2 despite opposition from some in cabient (Andrea Leadsom remains strongly against the new line) Johnson hasn’t been deterred from announcing a new high-speed rail network from Manchester to Leeds as part of the Northern Powerhouse project. Further big transport projects are likely in the near future as Johnson tries to bolster his credentials as a Prime Minister unafraid of large investment projects, drawing a further clear distinction between himself and his spending averse predecessor.

The appointment of Grant Shapps as Transport Secretary suggests some big projects are on the cards. Until his appointment he was Chair of the British Infrastructure Group of MPs, championing greater investment in airports and broadband across the UK. Shapps is a vocal proponent of the Heathrow expansion and his appointment indicates that Johnson will be quietly sweeping his previous opposition to the project under the political carpet.

Rail is also likely to be in for a shake up. Shapps’ Welwyn constituency is a commuter town that was seriously affected by the Thameslink timetable meltdown in 2018 and he has previously called for Thameslink to be stripped of the contract with immediate effect. There is plenty in the way of both large-scale and shovel-ready infrastructure projects that Shapps could focus on, including the expansion of the East Coast Mainline and greater investment in modernising the UK’s rail network.

Beyond transport, Johnson has made an ambitious commitment to accelerate the roll out of full fibre broadband, bringing forward the government’s target for achieving national fibre coverage from 2033 to 2025. Johnson has made this a key part of his domestic policy platform, referencing it in every major speech he has given so far, though without providing any detail on how he hopes to achieve this. The pledge is ambitious given the roll out is dependent on the work of private companies, but Johnson has nonetheless put pressure on Nicky Morgan in her new role as Secretary of State for Digital, Culture, Media and Sport to deliver on the target.

Financial Services and the City

The appointment of Sajid Javid as Chancellor is likely to be one of the most complex for investors to negotiate. On the one hand, Javid is a former investment banker who knows the City and is sympathetic to its concerns. On the other, Javid has signed up to manage the finances of a country openly moving towards a no-deal Brexit.

In the run-up to October 31st at least, we can expect Javid to preside over the kind of spending increases that will make former Chancellor Philip Hammond despair. Having been in office only a week, Boris Johnson has already signed off on policies worth more than £9 billion, not including those made during the leadership campaign. It is now Javid’s job to find the money while doubling-down on no-deal preparations and ensuring the UK is prepared for the potential economic disruption that may come on its coattails.

On broader fiscal policy, Javid is likely to increase support for entrepreneurs and small businesses, potentially through tax cuts or other financial incentives. Investors should expect an emergency budget in October following the Conservative Party Conference, in which Javid will set out his plans in more detail. This is likely to include broad tax cuts to support the economy through Brexit-related uncertainty, and further investment in infrastructure and public services.

Since Johnson entered Number 10, he has been noticeably quieter on fiscal policy, preferring big infrastructure announcements to generate headlines. However, neither his supporters nor his opponents will let him forget the pledges he made during the leadership race, during which both Javid and Johnson set of a similar vision for taxation. Johnson’s most headline-grabbing pledge proposed raising the higher rate income tax threshold from £50,000 to £80,000. According to estimates by the Institute for Fiscal Studies (IFS), this would deliver a tax break worth £9 billion to 4 million people in the UK, with top earners benefitting the most from the changes. Javid also spoke in favour of tax cuts for high earners during the leadership debate, though he steered clear of any specifics.

How can we help

Much of Johnson’s early approach to government rests on generating economic optimism through high spending, and more widely by trying to harness what’s left of the UK’s joie de vivre. Nevertheless, there are clouds on the horizon and Johnson’s honeymoon period already looks swiftly to be coming to an end.

WA Investor Services can support investors in scenario planning for the new government in the months ahead, ensuring you are ahead of the curve when it comes to the restless world of policy and regulation in the current climate.

Has Boris blown it?

The declaration this afternoon from the opposition parties that they won’t back an election on Monday and are now unlikely to back one before 31st October is a significant step. It doesn’t change the fact we are heading for an election, but it could change the context in which that election takes place.

The political calculation is clearly designed to maximise the electoral damage the Brexit Party can inflict on the Conservatives in the event Boris is forced to request an extension, as he will now be required to do by law should he remain Prime Minister. This risks opening the opposition parties up to criticism of running scared from an election but they appear prepared to take this on the chin, at least for the moment.

If they stand firm on this, the government may try to find a route to an election that only requires a simple majority, such as a simple Bill or the humiliating step of calling a Vote of No Confidence in itself. However, even finding a simple majority now looks unlikely for this government following this week’s purge of the anti-no deal rebels.

This leaves the Prime Minister three options (discounting the unlikely event of him negotiating and passing a deal) all of which appear deeply unpalatable.

  1. Bite the bullet and request the extension while making it very clear his hands are being tied by Parliament. This could play to his parliament vs the people narrative but leaves him massively exposed to the Brexit Party when a poll is eventually called.
  2. Resign as Prime Minister and let Jeremy Corbyn form a minority government that requests the extension (Corbyn wouldn’t have the backing to anything else). This still exposes him to the Brexit Party as he will have essentially ceded control of the process voluntarily, but he will be able to categorically paint Labour as an anti-Brexit Party.
  3. Refuse to obey the law.

This appears to leave the Prime Minister snookered over the timings of the election. His gamble that the opposition parties would bite his hand off for an election looks to have backfired. But this doesn’t change the basic battle lines of the election. Johnson will present himself as the only option to deliver Brexit while casting his opponents as anti-Brexit remainers.

A later election presents a more difficult challenge for the Prime Minister but his message to electorate will remain unchanged: I am the only true Brexit candidate. The outcome rests on whether this message resonates with the electorate.

What if he succeeds? A public affairs guide to a successful Boris Johnson premiership

We are on the eve of a Boris Johnson government.  In the context of the many challenges it faces, WA is scenario planning around whether it succeeds or fails.

Here are our thoughts on what a Johnson government may look like, if it succeeds.  In the next couple of days, we’ll provide an alternative analysis of what failure looks like.  In both we provide our advice for companies looking to work with the new government.

The success story obviously assumes that Johnson somehow delivers Brexit.  Taking this as a starting point, his government will be busy:

Generating a sense of national optimism.  There will be carefully managed cross-country visits, flag waving and the odd zip wire moment.  Johnson’s joie de vivre will contrast to the seriousness of our other politicians to capture some of the 30-35% of the electorate who don’t normally vote.  The approach will be continuity with his Brexit narrative of hope.  It will be framed as GB unity – echoes of winning back a lost ‘global Britain’ – but will mainline to English nationalism to shore up leavers across the country in preparation for an election.

Unveiling a framework economic strategy to make Brexit a genuine success.  Expect a more bullish positive economic vision of the opportunities for the industries of tomorrow.  There will be activism on innovation, high-tech hubs and collaboration between entrepreneurs, finance, universities and government.  Government will play even more of a role as funder and pump-primer of innovation, and as opener of new market access opportunities.  There will be an immediate deregulatory drive and the beginnings of an overhaul of the structure of regulation, in order to promote more competition and support high-productivity sectors.

Preparing for an Early General Election.  This means campaigning and not policy-making in any great detail.  Proven campaigners will be given the prime Cabinet positions and will focus on big announcements of retail policies that start a long election campaign.  Detailed policy-making will be left to departments, largely centred on junior ministers, SpAds and the civil service.  More controversial areas like social care funding will be left unaddressed.  Manifesto development will get fully underway, and the manifesto will be about tone, not detail.

Under this successful scenario we don’t believe that there will be a cabal of ideologically-driven advisers, waiting in the wings e.g. drawn from the ERG, Lynton Crosby or Steve Bannon.  No one group of advisers will ‘run’ Johnson.  He is a liberal and he will delegate and distribute power across a wide group of people, keep an extremely powerful but non-ideological Chief of Staff close, and as we expect with all good politicians, play the many different factions – left and right, Brexit and Remain – against each other in order to remain safely in place for longer than most are expecting.

Our public affairs advice to companies looking to work with the new government under this scenario is as follows:

Endgame for May, but what comes next?

Theresa May’s speech yesterday afternoon represented a last roll of the dice, gambling on cobbling together a cross party consensus to land a Brexit deal. It is clear this morning that this has manifestly failed. The headlines will make for painful reading in Number 10.

The ‘new’ deal has been resoundingly rejected by all of the key parliamentary caucuses it needed to win support from, and yet the government is insisting this doomed deal will be put to a parliamentary vote the week after next. It would take a remarkable turn of events for this to pass.

And then what? May has confirmed she’ll set out a timetable for her departure following the vote. This is likely to happen quickly, a contest that has already begun, and is moving rapidly into an open battle between candidates (now numbering at least 15) ahead of Summer recess in late July.

The prospective leaders jostling for position fall broadly into three camps – the Brexit purists, the One Nation Conservatives, and those that are trying to appear as potential unifiers sitting somewhere in between, or even with a foot in both camps. Clearly Boris Johnson is an early front runner. But history shows that the leading candidate does not always win. The key milestone is whether Boris makes it into the final two candidates put into the run-off to be voted on by the Conservative membership.

Received wisdom in Westminster is that if Boris is in the final two, then he wins. Conservative Home’s polling of members (admittedly self-selecting) indicates this is likely with Boris leading the field with 32%, followed by Dominic Raab with 15% and Michael Gove as the best of the rest with 8%. But already there is an ‘anyone but Boris’ campaign gearing up with some MPs asserting they wouldn’t serve under PM Johnson, including the Scottish Conservatives who, led by Ruth Davidson, have said they would break away and form a separate group. Questions remain as to whether the anti-Boris movement is as strong as it was last time around. Some conservative commentators have suggested a Boris-led campaign would be most likely to shake the confidence of the Corbyn-led Labour Party, and even Amber Rudd welcomed his endorsement of One-Nation conservative values.

Which candidate the European Research Group supports will be key. There is likely to be at least three prominent pro-Brexit candidates, and it is not clear that Boris can automatically command total support. He’s already starting to triangulate by trying to appeal to more centrist minded colleagues – tweeting a glowing endorsement of the One Nation caucus’ principles in response to their launch earlier this week. It’s quite a high wire balancing act as the more of the old Boris we see (liberal minded, open to immigration, keen on public spending), the less support from his ERG comrades he can automatically rely on.

As the contest evolves, the support attached to individual candidates will coalesce around a small number of front runners – probably in pro and anti-Brexit camps. At this point king or queen makers can trade in their committed supporters in exchange for a promise of a plum job in the new administration. It is quite possible that Michael Gove, Sajid Javid and Amber Rudd will fall into this category. Dream tickets may emerge as prospective Chancellors add their support and run alongside their preferred leadership candidate.

Throughout the campaign Boris will also have to carefully consider what type of PM he actually wants to be. If he’s successful, the commitments he makes in this campaign will be hung around his neck for years to come. Political strategists would argue that a candidate runs most effectively by appealing to their base to gain the nomination, and then pivots to the centre once in power as open tent unifier of the divided country. But if he is bound by his campaign commitments (particularly on Brexit), he may find it difficult to command a majority of MPs once he gains the top job.

In that situation a General Election becomes almost unavoidable. However, with the two main parties facing a mauling in this week’s European Elections, no Labour or Conservative MP is likely to be relishing the idea of going back to the country any time soon.

Buckle up everyone. It’s going to be a bumpy ride – and it’s only just getting started.

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