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From the Queen’s Speech to the next election: what now for the government’s agenda?
From the Queen’s Speech to the next election: what now for the Government’s agenda?

Archive for the ‘Government’ Category

WA webinar recording: Boris Johnson’s last stand?

WA webinar recording: Boris Johnson’s last stand? The implications of the vote of confidence in Johnson’s premiership and the wider political landscape.

 

Following the dramatic events in Westminster in early June, which saw 148 Conservative MPs votes that they have no confidence in Boris Johnson, WA hosted a webinar with leading broadcaster and journalist Steve Richards on 8th June to discuss the likely implications and ramifications of the vote for the future of the Boris Johnson premiership.

During the session, Steve provided insight into what is happening behind the scenes, answering questions about the rebels’ next steps, the likelihood of a general election, reshuffle and emergency budget, and the future of this Government’s legislative agenda.

 

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The Government’s Food Strategy: a fork in the road

In the build up to the Government Food Strategy, the Prime Minister promised bold action to address the problems in the UK’s food system. This week, health and sustainability campaigners have voiced their disappointment that not all of Henry Dimbleby’s recommendations are being adopted, including the proposed salt and sugar tax.

Seemingly ‘hollowed out’, the publication is seen by many in the agri-food sector as a holding response for a serious long-term strategy that has been conditioned by Conservative backbenchers who the Prime Minister considers key to his survival. In other words, a tactical short-term response to a set of political pressures. Published against a backdrop of the cost-of-living crisis, the effects of the war in Ukraine, and recent party politics, the Food Strategy represents a notable departure from long-term priorities such as environmental sustainability and tackling obesity. Instead, the Strategy focuses on technology and innovation, job creation, productivity. In short, the government sees growth in the UK’s agri-food sector as the remedy.

The government says it is backing British farmers to boost domestic production, increase employment and grow the economy

At the heart of this shift is a concern about food insecurity. Not necessarily as a result of climate change and other environmental concerns (although those can’t be ignored for much longer), but from the impact of the war in Ukraine on food supplies and prices. As a result, the government has pivoted away from longer standing political priorities and is now focusing on plans to strengthen the resilience of supply chains and boost domestic production to help protect against future economic shocks and crises.

While wars don’t necessarily create trends, they do tend to accelerate them. In the case of the war in Ukraine, it has rapidly accelerated the desire of Western governments for freedom from supply chain dependence on Russia and China. It has also increased the trend for food nationalism globally which has lengthened the list of countries Western governments can no longer rely on for food imports as a result, and it has sped up trends towards market intervention. The last significant spike in food prices was in 2010/2011 following a heat wave in Ukraine which impacted crop harvests and can be seen as a catalyst for riots in middle income countries and the Arab Spring, the effects of which are still being felt. The impact of today’s crisis has the potential to be far greater and will be felt particularly acutely in the UK because we have relied so heavily on global markets for cheap food imports.

Agri-food: a growing sector

While new funding programmes to drive innovation will be welcomed by the sector, the government is playing catch up with investors who have recognised the potential of agrifoodtech in recent years.

As with most modern industries, technology plays a key role in the operation of the agri-food sector. However, the pace of innovation has not kept up with other industries and, according to research conducted by McKinsey, agriculture remains the least digitized of all major industries.

The industrial agri-food sector is also much less efficient than others and more susceptible to the demands and constraints being placed on it. A growing global population, climate change, environmental degradation, changing consumer demands, limited natural resources, food waste, consumer health issues and chronic diseases all mean the need for agrifoodtech innovation is greater today than it ever has been, and creates opportunities for entrepreneurs and innovators to create new efficiencies in the value chain. Many of the agrifoodtech start-ups attracting investors are aiming to address some of these challenges, identifying innovative solutions to issues such as food waste, CO2 emissions, chemical residues and run-off, drought, labour shortages, sugar consumption, distribution inefficiencies, food safety and traceability, farm efficiency, and unsustainable meat production.

According to the 2022 Agrifoodtech Investor Report, $57.1 billion was invested in agrifoodtech companies in 2021, an increase of 85% on the previous year. 2021 also saw the UK’s highest ever deal flow with UK-based deals reaching £1.3 billion in value, the highest since data has been collected and up from £1.1 billion of investment in 2020. The UK sits 5th in the global ranking of deals by country, just behind Germany, India, China and the USA, though the UK government has set out its intention to be a world leader in this space. While investment in so-called ‘upstream’ technologies (such as on-farm tech, tools and services) remains high at around $20m, there is a shift beginning to emerge, with interest now moving towards farm management software, indoor farming, ag-biotech (such as gene editing), and e-grocery (which attracted a third of all global sector investment).

The new normal

The challenges with our food system such as supply, distribution and pricing have been propelled by the pandemic, complicated by Brexit, accelerated by the war in Ukraine, and intensified by the cost-of-living crisis. In many ways, this has created a completely different backdrop for the UK’s food system than when Henry Dimbleby published his recommendations to government almost twelve months ago. Many commentators will argue this is why the Government Food Strategy appears to have been watered down in comparison with its original intentions.

Nevertheless, many investors have already recognised the importance and opportunity the agrifoodtech sector presents in terms of investment potential, with many more likely to follow suit. The changes and challenges to the food system we are witnessing today are not temporary. Rising prices, food nationalism, and supply chain challenges are not a blip in the road, they are the new normal. This reality means the agrifoodtech sector is likely to provide an abundance of opportunity for private equity to back exciting, innovative, and high-impact ideas that deliver the ground-breaking change in our food system that campaigners are calling for.  Although this Food Strategy gives the agri-food sector ideas to work with and push the government on, it is also clear that we are now unlikely to see a properly considered long-term strategic response to food insecurity this side of the election.

 

To discuss the government’s Food Strategy in more detail, please email Thea Southwell Reeves on theasouthwellreeves@wacomms.co.uk.

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WA Explainer: What is the Northern Ireland Protocol and why is the government trying to change it?

Many people thought (or hoped) that the need to keep up with Brexit stopped in 2019. As the WA Investor Services team and other seasoned Westminster watchers will tell you, Brexit has been bubbling under the surface since the initial deal was signed, with the UK and EU locked in ongoing, and not entirely productive, negotiations ever since.

Now, after months of hinting at the need for more dramatic action to break the negotiating deadlock, the government has published the highly controversial Protocol Bill, which it argues will solve some of the issues that the current Brexit deal has created in Northern Ireland.

The Bill has huge consequences for UK-EU relations, the stability of power sharing in Northern Ireland and Prime Minister Boris Johnson’s own political fortunes. With all that in mind, we’ve put together an explainer of the position of the UK and EU on the Northern Ireland protocol, what the Bill seeks to change, and what it will mean for both sides in the future.

What is the Northern Ireland Protocol?

The Northern Ireland Protocol is the part of the Brexit deal that sets out special customs and regulatory arrangements for Northern Ireland in light of its land border with the Republic of Ireland, an EU country. Both sides agreed that avoiding a ‘hard border’ between the Republic and Northern Ireland was a key priority. The eventual compromise was to create a customs border in the Irish Sea, rather than on the island of Ireland. Goods crossing into Northern Ireland are checked as though they are entering the European Union. Northern Ireland must, in certain areas, follow the jurisdiction of the European Court of Justice (ECJ).

In return, both sides agreed that Northern Ireland businesses would have access to both UK and EU markets without the need for further checks. This arrangement appears to have resulted in economic benefits for Northern Ireland. Data from the Office for National Statistics shows that the only regions in the UK to have seen GDP recover to pre-pandemic levels are Northern Ireland and London, though Northern Ireland recorded the largest drop in GVA of any region in Q1 2022.

The current terms of the Protocol are strongly opposed by Unionist parties in Northern Ireland, who argue that the presence of a customs border between Northern Ireland and the rest of the UK undermines the union. The Democratic Unionist Party (DUP) is now refusing to form a new power-sharing government in Northern Ireland until a solution to its concerns is found. Despite this, the Protocol is not universally opposed in Northern Ireland. On 13 June, 52 out of 90 members of the Northern Ireland Assembly wrote to Boris Johnson to “reject in the strongest possible terms your government’s reckless new protocol legislation”. The letter is an indication that the government’s proposals do not guarantee an end to Brexit-related tensions in Northern Ireland.

What is the government trying to change?

The government is arguing that the current agreement undermines the Belfast/Good Friday Agreement in Northern Ireland and creates additional, unnecessary bureaucracy for businesses trading between Northern Ireland and the rest of the UK. Protecting the Agreement is key to the government’s reasoning for introducing the Bill. In a summary of its legal position on the protocol, the government said it is relying on the “doctrine of necessity,” which it argues would “lawfully justify non-performance of international obligations” because of Northern Ireland’s “genuinely exceptional situation.”

The Bill proposes to override some parts of the protocol unilaterally. Under its proposals:

Can the government secure the changes it wants?

Johnson has been criticised by opposition parties and some Conservative MPs for seeking to override a deal he only agreed to in 2019. The UK government has argued that the deal has had “unforeseen consequences”, particularly for the stability of the Good Friday Agreement. Some MPs are also concerned about the legality of the Bill. Others are concerned that the UK’s actions will undermine its international standing, particularly as it still seeks to negotiate trade deals with major developed and emerging economies.

As a result of these concerns, the Bill will face a challenging journey through Parliament before it can become law. This process is likely to take months. It is extremely likely that members of the House of Lords and MPs will seek at least to amend the Bill to water down some of the proposals.

The key political test for Johnson, however, will be whether he faces a significant rebellion from his own backbenchers. The European Research Group (ERG) of pro-Brexit MPs have also yet to give the Bill their backing and plan to scrutinise the Bill line by line before announcing how they will vote. It is likely that at least some of the One Nation group of Conservatives will vote against the Bill over concerns that it breaks international law, but they will not have enough votes to defeat the Bill alone. If a broader coalition within the party chooses to rebel on the issue, and Labour chooses to vote against the Bill, there is a risk it could be defeated. However, the size of Johnson’s majority and the lack of organised opposition to Johnson or the Bill itself within the Conservative Party make a rebellion of the necessary size difficult to achieve.

What is the likely response of the EU?

The EU is strongly opposed to the UK’s current action and has stated that there will be serious consequences if the UK moves to change the Protocol unilaterally. In the short term, expect the EU to put forward revised proposals of its own to try to continue dialogue between the two sides. Continuing negotiations are supported by the UK and EU, and therefore we are likely to see ongoing talks take place even while the UK government seeks to pass the Protocol Bill.

The European Commission is also expected to relaunch legal action against the UK, which was previously paused to allow for negotiations between the UK and EU over the Protocol to continue. The EU argues that the UK has already failed to implement large parts of the existing Brexit deal, breaching the terms of the agreement. This process is unlikely to move quickly, but provides the EU with an option of escalating its response.

The EU’s response is likely to be limited to continuing negotiations and its legal proceedings for now, but a significant escalation can be expected in the event the Bill passes in its current form. The EU has been clear that it will trigger a full-blown trade war with the UK — something neither Johnson nor his chancellor Rishi Sunak wants in the middle of the cost-of-living crisis. Compromise remains in the interests of both parties, so the government will hope that the Bill will push the EU into changing its position, rather than expecting the Bill to pass in its current form.

Where do we go from here?

The government has sought to play down the scope of the Bill, with Boris Johnson labelling its proposals as “a trivial set of adjustments”. In reality, Johnson sought a more moderate version of the Bill after Chancellor Rishi Sunak and Health Secretary Sajid Javid raised concerns about the consequences of the original, more hardline version of the Bill proposed by Foreign Secretary Liz Truss. However, fresh from a bruising vote of confidence in which 41% of his party unsuccessfully tried to unseat him, Johnson has been forced to move back closer to the original proposals tabled by Truss. Johnson’s changing position is indicative of the political position he finds himself in. Weakened by the vote, Johnson will now be more vulnerable to the views of his own backbench MPs, making government U-turns – and inconsistent policymaking driven by their views – more likely.

The proposals are also extremely likely to have diplomatic consequences. The EU has warned that the Bill undermines trust between the two sides and makes finding a compromise harder. US President Biden has also warned that the UK’s actions make it less likely that a UK-US trade deal can be agreed. Although the UK’s actions are likely to cool UK-US relations, a trade deal was already unlikely, with lead UK negotiator Crawford Falconer admitting in May 2022 that negotiations had “stalled”.

Johnson is likely to find it extremely difficult to compromise on the Bill to break the impasse with the EU while retaining the support of pro-Brexit backbenchers. This, rather than legal challenges at home or in the EU, is likely to be the real flashpoint of the legislation. Johnson risks finding himself in the same position as former Prime Minister Theresa May, caught between the demands of the party and the need for a workable solution with the EU. The Bill begins the process of establishing whether he can find the solution Mrs May could not to the question of the Northern Ireland Border,  but is unlikely to settle it.

To discuss the government’s approach to the Northern Ireland Protocol, please email Lizzy Cryar on lizzycryar@wacomms.co.uk.

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Hanging in the balance? What we can learn from the local elections

Boris Johnson lives on to fight another day. The local election results were bad for the Conservatives but not good enough for Labour. Johnson’s MPs are not terrified enough to remove him in the immediate aftermath. I suspect the elections were never going to be the trigger. Leaders can always point to a success somewhere in the country. In his case, Johnson notes that parts of the so-called ‘red wall’ are holding firm.

This does not mean Johnson is safe for the long term. Over the weekend I spoke to several Tory MPs alarmed at the collapse of support in London and the south of England. They fear a fatal dynamic, the Liberal Democrats gaining seats from them in some parts of the country and Labour doing the same elsewhere. Their anxieties deepen when they reflect that the cost of living crisis is likely to intensify.

Johnson’s first substantial response to the election losses takes the form of tomorrow’s Queen’s Speech, a legislative programme composed with the next election in mind. The forthcoming Brexit bill is emblematic. Nearly all the initiatives aimed at moving away from EU regulatory frameworks have already been announced. By putting them together in a bill, Johnson seeks to make Brexit a defining issue once again.  Similarly, I am told that some of the proposals that will be included in a ‘levelling up’ bill do not necessarily require legislation. The theme is what matters as much as the content. For businesses wondering what the dividing lines will be at the next general election, Johnson’s words in the Commons tomorrow afternoon following the Queen’s Speech will provide part of the answer.

What is not in the Queen’s Speech is also as significant as the content. For all the huffing and puffing there will be no bill clearing the way for the government to unilaterally disown the Northern Ireland protocol. Even Johnson at his most populist does not want to alienate the Biden administration and the EU in quite such a provocative manner, not least with the Ukraine crisis far from resolved. Even so, expect renewed ministerial attempts to renegotiate the protocol in the next few weeks, accompanied by threats to trigger Article 16.  The other ‘missing bill’ on housebuilding is also a sign that Tory backbenchers are becoming more muscular. Johnson’s plans for what was one hailed as a “house building revolution” are dumped as a result of the insurrectionary threats from Conservative MPs in the south of England.

The calm ceremony of the Queen’s Speech will be in marked contrast to the wider political storms. Politics has rarely been more topsy turvy. For months there was speculation about whether Boris Johnson could survive ‘partygate’. Now there is a near panic at the top of the Labour Party about Keir Starmer’s fate being in the hands of the Durham police.

We do not know what the police will decide in its reopened investigation. But if Starmer survives, shadow cabinet members reflect privately that there are already lessons for him arising from ‘Beergate’. The first is that he will face hostile newspapers that are out to get him and to hail Johnson. Although he has sought to be as inoffensively ‘centrist’ as Tony Blair was in the run up to 1997, he is not going to enjoy a similarly supportive set of newspapers. The Daily Mail, The Sun and The Telegraph have played down Johnson’s partying and propelled Starmer’s work meeting in Durham to the top of the political agenda. At the very least they have succeeded in neutering Starmer. He was due to give interviews at the weekend and attend an event today at the Institute of Government. To the bewilderment of some in the shadow cabinet these were cancelled. If Johnson gets more penalty notices while the Durham police continue their investigation, Starmer’s response will be impossibly constrained. I have spoken to several shadow cabinet members who are genuinely worried about this development and what it might portend. Even if Starmer is cleared, he knows he must be prepared for a newspaper onslaught similar to that experienced by Neil Kinnock. His media operation will need to be much more robust in the face of inevitable further attacks.

The local elections suggest that a hung parliament is a possibility after the next general election. This would mean a minority Labour government or a Lib/Lab coalition. None of the other parties would do a deal with the Conservatives. For businesses trying to make sense of the current wild political context perhaps the most useful comparison is with the two elections in 1974 that took place during an economic crisis even deeper than the current one. There was considerable disillusionment with both major parties then and their leaders. The Liberal party was enjoying a revival and in a minor way so was the SNP in Scotland. The February 1974 election produced a hung parliament and the October election a few months later gave Labour a tiny overall majority. Over the last weekend Number 10 carried out an effective spin operation suggesting Johnson was fairly pleased with the election results. If he was, he must be delusional.

Perhaps the most significant results were in Scotland and Northern Ireland. The SNP wins every election in Scotland almost as a matter of course. Some Tory and Labour MPs wonder whether this will change until there is a second referendum. Nicola Sturgeon can always deploy the Westminster resistance to another poll as a weapon: Scotland votes for independence but Westminster won’t allow us to have a referendum. Labour is taking comfort from coming second in Scotland and some at the top of the party dare to hope it might win a few more seats there at the next general election.

The rise of Sinn Fein in Northern Ireland was perhaps inevitable following Johnson’s chosen Brexit route. Although he protests about the subsequent protocol, he was the one that proposed a border between Northern Ireland and the rest of Great Britain. There would have been no such barrier under Theresa May’s Brexit deal. Inevitably Northern Ireland’s economy moves closer to Ireland’s and is more distant from the rest of the UK, not a bad context for Sinn Fein to make its moves. This does not mean a united Ireland is a feasible prospect in the near term, but it becomes part of a destabilising mood in which a significant number of voters in Scotland and Northern Ireland want to break away from the UK. Johnson is not well placed to address the situation as his presence and conduct fuels the mood.

The key developments to look out for in the coming months are the Gray report and the end of the Metropolitan police investigation, the outcome of the Durham police investigation, embryonic leadership campaigns on both sides, a reshuffle if Johnson survives the Gray report, but above all the build up to Rishi Sunak’s budget in the autumn, a pivotal event and one made more demanding by the failure of his Spring Statement. On many fronts get ready for a turbulent summer and early autumn.

 

Steve will be unpacking what the government’s legislative programme will mean for businesses and, in the wake of the local elections and  what we can expect from the next parliamentary session in the latest WA webinar at 9am on Wednesday 11th May. You can register to join the event here.

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From the Queen’s Speech to the next election: what now for the Government’s agenda?

The Queen’s Speech on 10th May will be one of the Government’s last opportunities to set out its policy agenda ahead of the next general election.

With the Conservatives trailing in the polls and expected to lose seats in this week’s local elections, will Boris Johnson take the opportunity to reset and galvanise his premiership, or will rising inflation and the cost of living mean that the Government continues to lose ground as the general election approaches?

WA’s new report on the Queen’s Speech takes a close look at the Government’s latest legislative agenda, assessing where its priorities are likely to lie in the coming months and what that will mean for businesses.

You can download the full report here:

Queen’s Speech 2022: A look ahead (PDF)

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Boris Johnson is Safe… For Now

On the surface Boris Johnson commands the support of nearly all his MPs. He will derive some comfort from this public display of loyalty. In terms of his future, the relationship with the Conservative parliamentary party is all that matters. Quite a lot of voters may tell pollsters that they regard Johnson as a ‘liar’. Normally calm constitutional historians and Archbishops may fume. Parts of the media and Twitter can be in uproar. But, as long as Johnson keeps his MPs on board he can carry on. The power to remove him lies with Tory MPs alone. During his post-Easter statement to the Commons, the first since he received his penalty notice for the birthday party in Number Ten, only one backbencher called on him to go.

But the surface does not tell the whole story. Over the bank holiday I phoned several Tory MPs including a few who are uneasy about  their Prime Minister becoming a ‘law breaker’. They told me they would not contemplate for a single second speaking out in public against Johnson before the local elections. Their party members are spending their spare time campaigning energetically and they would not undermine such effort by condemning their party leader. They would never be forgiven by activists if they did so. In other words the May local elections are a big protective shield for Johnson and also a threat. In advance of the vote, quite a lot of Tory MPs feel they have no choice but to suspend judgement. Any critical quotes would help Labour. That does not mean their support is guaranteed if the Conservatives perform poorly in the elections.

As has been the case since ‘partygate’ erupted, the mood of the Tory doubters in the parliamentary party fluctuates on a near daily basis. There have been times when they were ready to make a move against Johnson. On other occasions they are resolved not to do so. Ukraine is another factor fuelling the changing judgements, although from my conversations this is becoming less potent compared with the fact that that important elections loom. Political parties are at their most tribal during a campaign. There is another reason why the mood constantly changes. Many of the MPs, especially those from the ‘red wall’, are new to national politics. Suddenly they face the most daunting of decisions, whether or not to remove a Prime Minister. They do not quite know what to think or what to do.

In reality the parliamentary party divides into three sections. There are the Johnson loyalists who will stick with him even if he receives more penalty notices and the Sue Gray report is damning. There is a tiny minority for now calling for him to go. In the middle there is a significant section waiting to see what happens next. That includes some ministers who are unsure how this is going to play out. All are loyal for the time being except for the significant resignation last week of Lord Woolfson, a Justice Minister. It’s easier for peers to resign when local elections are being contested. They are above the electoral fray. In some cases Johnson cannot assume that loyalty will endure across the government after the May elections.

The strategy in Number Ten, a more nimble operation after recent changes, is clear. They call for “perspective” as Johnson focuses on Ukraine, the cost of living crisis and his plans for dealing with the migrant crisis. Johnson’s every move is made with his own survival in mind. He and his new inner circle know he is not safe yet. Johnson seeks to be the indispensable ‘man of action’, visiting Kiev earlier this month and off to India this week. After his act of contrition in the Commons he delivered a different more upbeat performance to his own MPs at a private meeting, linking his plan to send migrants to Rwanda with an attack on the BBC and the Archbishop of Canterbury, suggesting they were soft on Putin. This is a classic Johnson tactic, seeking to tick several boxes in a single assertion. He knows most of his MPs approve of the Rwanda scheme, admire his approach to Putin and are angry about the BBC and the Archbishop. After the May elections Johnson plans to unveil a Queen’s Speech that will again be aimed at pleasing his MPs with bills on ‘levelling up’ and other legislative items that he will claim represents the ‘people’s priorities’.

But Johnson and his advisers are not wholly in control of events. The metropolitan police investigation continues without any indication of which party is being scrutinised and when the next penalty notices will be handed out. No one in Number Ten knows when the investigation will end. When it does the Gray report will be published and, on the basis of her interim findings published earlier this year, it will be damning. In his Commons’ statement Johnson focused only on the Number Ten birthday party. If charged for other events he will have to find new explanations. Johnson has a distinct capacity for climbing out of deep holes. But he is not entirely lacking in self-awareness. Indeed he can be introspective and melancholic at times. Mostly I hear from his allies how he is robustly determined to keep going  but one did note that this crisis is getting Johnson down. With his ‘Churchillian’ sense of destiny, being the first prime ministerial law breaker was not meant to be part of the narrative.

The context is as much a key to his fate as the scale of the law-breaking. If the Conservatives do badly in the local elections and Labour soar, Tory MPs will begin to worry about whether they will lose their seats. The elections next month might not be as clear cut as that. They rarely are. But then there is the Wakefield by-election probably to be held later in the summer, a big test for both Johnson and Keir Starmer.

There are some other big themes that will dominate the coming months. The IMF has forecast that the UK economy will suffer the weakest growth out of the G7 countries. Rising inflation is destabilising for even the strongest of governments and the Johnson administration is fragile. The collapse in the standing of Rishi Sunak might have removed a leadership rival but any government needs a Chancellor with authority when the economy is weak. The dynamic between Johnson and Sunak will be pivotal. At the moment both are vulnerable. Usually one has been in a stronger position than the other. Sunak’s spring statement was framed when the Chancellor was at his most assertive as Johnson fought for his political life. In the past Johnson’s deeper interventionist  instincts have tended to win out because he was in a strong enough position to prevail over his Chancellor. For now at least they dance together after Sunak decided to stay on rather than resign after receiving his penalty notice and with Johnson currently too weak to sack him. If Johnson emerges safely from ‘partygate’ he might be tempted to appoint another chancellor, but none of the options are straightforward. The likes of Liz Truss and Sajid Javid share Sunak’s fiscal conservatism. Javid’s tax affairs are also attracting media interest.

For whoever is Prime Minister and Chancellor this autumn, the budget will be a moment of great significance for the economy and the future of this government. There could well be a further economic statement from Sunak this summer although he is keen to avoid one, wanting to focus on his budget and not give the impression of ‘panic’ reactions before then. Sunak has spent some time studying what happened in the 1970s when inflation raged more wildly than now. He noted that there were endless emergency budgets that tended to fuel further panic.

Even so the autumn is a long way off. There will be many twists and turns before then.

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Are women finally being heard?

Women in the UK are becoming increasingly vocal about the challenges they face in their healthcare and the unjust variation in access to services. When the Government opened their consultation to inform a Women’s Health Strategy in Spring 2021, over 110,000 respondents took the opportunity to make it known that the system does not work for them. Following years of campaigning, it comes as no surprise to women and those in the women’s health community that an overwhelming 84% of people felt their voices are simply not being heard when they seek health care.

By demonstrating an interest in women’s voices and their experiences, recognising failures in the system, and committing to developing a Women’s Health strategy, the Government has taken a positive initial step, albeit an ambitious one. There is no disease-specific focus and no target patient population, unlike other policy areas. This challenge affects 51% of our population and includes natural, life course events that women have, for many years, been told to just live with. With publication of the strategy imminent, the Government now need to demonstrate that they are willing to not only listen to women’s voices but to implement action based on what they are saying.

Women continue to face challenges when it comes to choices about their own bodies. Ongoing variation in access to abortion care, a full range of contraceptive choice, and a holistic range of menopause treatment options, all impact on women’s freedom to choose the treatments that work best for them. The Government’s commitment to prioritising the menopause in the upcoming strategy and cutting prescription costs for Hormone Replacement Therapies (HRT) in response to the Menopause Revolution campaign is hopeful. However, the Government’s initial attempt to reverse progress made in at-home abortion during the pandemic despite women citing a clear preference for this to continue, suggests more need to be done to prioritise women’s voices, choices and rights in practice.

In addition to not being heard, a fragmented system and the pandemic backlog have resulted in services that are increasingly difficult to navigate, leading to the most vulnerable falling through the cracks. Upcoming system reforms focusing on the integration of care offer opportunities to take a patient centered approach and reduce inequalities in outcomes. The Government is also expected to advocate for the establishment of ‘women’s health hubs’, which aim to enable access to all required care in a one-stop shop, in line with calls from advocates including the Primary Care Women’s Health Forum and Royal College of Obstetricians and Gynaecologists. Despite the promise of better integration locally, fragmentation is continuing at a national level. Abortion has been removed from the Women’s Health Strategy and is expected to feature in the upcoming Sexual Health Strategy. With a wider interest in health inequalities, the Government must recognise the connection between these elements of healthcare and align planning nationally to support local areas to integrate care.

Committing to a women’s health strategy is a promising step in the right direction for this Government and has offered women long overdue hope. Action in response to prominent campaigns, such as the Menopause Revolution, to change the way women can interact with the system allow us to believe that the challenges women have faced for far too long could be overcome within their lifetime.

The Government have a real opportunity to ensure women have their voices heard. To do this, they must recognise the challenges they face, capitalise on system reforms to integrate care, collaborate with the women’s health community, and most importantly, commit to funding appropriate and immediate action. In a health system and economy designed by and for men, the time for meaningful, impactful change, is now.

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A day late and a dollar short? Unpacking Sunak’s bid for a global crypto hub

On 4 April 2022, Rishi Sunak announced the government’s ambition to turn the UK into “a global hub for crypto asset technology” as part of the Treasury’s plan to create a new crypto regulatory package.

The government’s headline proposal is to integrate stablecoins (cryptocurrencies linked to traditional currencies or assets) into the payments system, enabling people to use them like conventional currency. The government is also looking to explore ways to catalyse a domestic crypto asset market by making the UK tax system more “competitive”. The Financial Conduct Authority (FCA) plans to conduct an industry-wide consultation in May this year.

Speaking at a financial technology conference on 4 April, the Economic Secretary to the Treasury, John Glenn, said that the government is “going to prioritise” blockchain technology, and could even issue debt and borrow money using the approach. He pointed to the UK having fewer regulators than the EU and US which would enable the UK government to “move very nimbly” in achieving its goal.

However, the government’s renewed focus on crypto may come too little, too late for businesses in the rapidly growing sector, with many having already left for greener regulatory pastures following the FCA’s foray into crypto regulation.

Crypto businesses have faced a rocky road to FCA compliance so far

The FCA became the anti-money laundering and counter terrorist financing supervisor for crypto asset firms from 10 January 2020. Firms that were already operating in the UK prior to the date were directed to register with the regulator by 10 January 2021. Many firms were unable to complete the application process in time, which led the FCA to create the Temporary Registrations Regime (TRR). The regime enabled firms to continue trading if their application had commenced before 16 December 2020 and was still undergoing assessment.

From 10 January 2021, the FCA mandated all existing crypto asset businesses in the UK to be registered with the FCA, or in the process of doing so via the TRR, which was due to close in July 2021. However, delays by the regulator in clearing the TRR resulted in the deadline being extended to 31 March 2022, and then extended yet again – for applications of “all but a small number of firms” that still had not been fully processed. The FCA explained that delays in the registration process were a result of the complexity, and often poor standard of applications it receives, while also pointing to the impact of the pandemic in restricting the regulator’s ability to conduct visits to the companies for the earlier delays.

In January this year, Lisa Cameron MP, chair of the UK parliamentary group on crypto and digital assets, criticised the regulator in how “the lack of clarity from (it) has presented huge challenges to firms in terms of business certainty,” with firms “actively leaving the UK as direct result of the FCA’s approach, costing the UK in terms of jobs, talent and revenue.” Recent research from YouGov shows that growing number of companies are moving to other markets “to ensure they can continue offering crypto services to Brits, but from outside of the new UK regulatory regime,” as the FCA rules still allow companies to serve British clients from bases like Luxembourg, Germany, and Switzerland.

Speaking at a City Week 2022 event on 26 April, FCA chief Nikhil Rathi argued that many businesses fell short of the FCA’s standards for provisions to prevent and identify harm. He added that the regulator looks to work with firms to support their efforts towards compliance and that this “should not be interpreted as anti-innovation.” Blair Halliday from Gemini (a crypto exchange given the green light by the FCA), explained how the FCA’s approach “gave firms that really have that desire to seek regulatory approvals something to demonstrate as a key differentiator.”

The FCA announced a three-year strategy focused on improving outcomes for consumers earlier in April this year. The strategy directs the regulator’s Head of Digital Assets to “build and lead a new crypto department that will lead and coordinate the FCA’s regulatory activity in this emerging market” with, for the first time, published outcomes and performance metrics that the regulator will benchmark itself against. The strategy’s stated focus is on the prevention of serious financial harm for consumers, with online fraud and scams increasing in tandem with growing crypto ownership – latest research shows 1 out of every 5 people own some form of cryptocurrency today.

Will the government’s new approach finally provide the clarity crypto firms have been calling for?

Both policymakers and businesses have been openly critical of the speed and effectiveness of the FCA’s approach and its impact on the sector, with the back-and-forth between the regulator and the industry widely reported in the media as the final deadline for the TRR approached. Several of the UK’s best-known crypto businesses, including payments app Revolut and digital asset custodian Copper, were said to be left in limbo as they awaited the FCA’s verdict on their applications.

Peter Smith of Blockchain.info, one of the UK’s most prominent crypto businesses, welcomed the government’s plans as a “course correction” but lamented how “more than 90% of the sector has left the UK for more progressive countries in Europe.” A similar sentiment was shared by Charles Hayter, of data provider CryptoCompare: “the proof is going to be in the pudding with how the government eases the blockages our industry has faced.”

Investors looking at businesses in the sector should note that while the Chancellor’s announcement may point towards a more flexible, pro-business approach to regulation, it came in stark contrast to the Governor of the Bank of England Andrew Bailey calling crypto the “new front line for scammers” while warning that fraudsters are exploiting digital asset technology, on the same day as Sunak’s announcement, reflecting the emphasis on consumer protection in the FCA’s three-year strategy. Despite the Chancellor confirming that the Treasury will look to work with the industry in developing the future regulatory framework, it is evident that the government must do more to ensure firms can “invest, innovate and scale up in this country.” The new new crypto regulatory package must instill confidence, not confusion, for businesses in the sector if the government’s dreams of a global crypto hub are to come true.

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Mid-term blues or the next step in Boris Johnson’s demise?

With a significant set of local elections taking place across the UK, what are the key takeaways and what does this mean for the stability and direction of the government?

Conservatives down across the country

Despite the Conservative Party’s best attempts to manage expectations over the losses they were likely to face – talking about 800 seats at risk, far beyond what was ever likely – this set of election results is towards the upper end of disappointing outcomes.

The political realignment seen in recent years has been reinforced by this set of election results. The Conservatives were able to stem the losses nationally by holding on – and even making gains – in Leave voting heartlands, particularly in the midlands. However, it was a very different picture in Scotland, London, other metropolitan and urban areas – losing seats in Greater Manchester and Hull – and in large swathes of southern England, the so-called ‘Blue Wall’. In these areas – particularly places like Oxfordshire, Cambridge and Somerset – the party predominantly lost out to the Liberal Democrats.

Labour moving forwards, but slowly

In a mixed night for Labour, the party’s shown progress but the results also highlight the huge mountain it still has to climb. Winning control of councils covering target seats in both southern England – Crawley, Worthing and Southampton – as well as in the so-called ‘Red Wall’, including Cumberland which includes three marginal constituencies allows it to show that it’s building momentum and give some confidence to members that Starmer will enable the party to grow its seats total at the next General Election.

However, the reality is that it’s not currently doing enough to win a majority in 2024 – or before, if speculation is to be believed. Analysis of these results show that translating the national vote share into parliamentary seats would see a hung parliament, with no party even close to a majority. With Labour more easily able to secure the support of other parties, they’re more likely to be in the driving seat but these results will be a reality check for those expecting a Labour majority government in two years’ time.

Other opposition parties have been the main beneficiaries

With Labour improving but not making major gains, it’s the Liberal Democrats and the Greens who have been the main beneficiaries. Over recent election cycles, the Lib Dems have established a much greater foothold across much of southern England, reinforced by these results. For both parties this will build confidence amongst activists ahead of the next General Election, with the Lib Dems likely to go into the upcoming Tiverton by-election feeling bullish.

A constitutional crisis on the horizon in Northern Ireland?

One of the most significant – although largely ignored set of elections this side of the Irish Sea – has been those to the Northern Ireland Assembly. Although the results are still coming in, Sinn Fein are likely to emerge as the largest party for the first time, with the DUP consolidating their position, the liberal Alliance making major strides forward and the more moderate UUP and SDLP the main losers.

With significant concerns over the Northern Ireland Protocol – and perhaps unspoken the prospect of a republican First Minister creating pressure for a border poll – the DUP are likely to refuse to enter power sharing, resulting in the prospect of direct rule from London, fresh elections and a potential constitutional crisis. Unionists will be hoping this will place pressure on the UK government to act definitively on the protocol, making clear to the EU that it’s not sustainable.

What does this all mean for the government’s future direction?

Boris Johnson will come under renewed pressure from his backbenchers to deliver a policy agenda and style of government that will reattract soft Tories in the ‘Blue Wall’ who have wavered to opposition parties. Ultimately this is where the majority of his MPs hold their seats – there will be an increasing cohort of nervous faces in 1922 Committee meetings worried that these results could be replicated at the next General Election.

However, while the Conservatives did reasonably well in the so-called Red Wall, they still need to consolidate. The government faces a critical question as to how to manage the tension between the varying priorities of different voters and constituencies in its electoral coalition.

With interest rates rising and inflation set to reach 10% by the end of the year, the government will come under renewed pressure to act on the cost of living. Next week’s Queen’s Speech is likely to be judged as to how far the government is acting on this.

In the short term this set of election results is unlikely to give Johnson’s critics the cover they need to move against him. However a series of poor by-elections results in the Summer could provide an incentive.

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Tax Rises Now, An Income Tax Cut To Come

Rishi Sunak has just delivered one of the oddest economic statements in recent years. Sunak punctuated his speech to MPs with warnings from the Office for Budget Responsibility that we were living through a period of “unusually high uncertainty”. Indeed, as confirmation of the gloomy economic climate, the OBR’s growth forecasts for the coming years were revised downwards. Ominously, the Chancellor made clear that these forecasts had not considered the consequences of the war in Ukraine. Sunak was blunt. He acknowledged the economic situation could “worsen”.

Yet he felt the need to stride through the foggy future and announce a cut to the basic rate of income tax in 2024. The strange announcement is illuminating for several reasons. For businesses wondering when the next election will be here is a big clue. Boris Johnson and Sunak are targeting 2024 and not an early election next year. They seek a campaign following a tax-cutting budget.

Usually a pre-election tax cut is kept as a surprise until the very last minute to propel a governing party towards a campaign. But, given today’s announcement, two years before implementation, there will now be no surprise in 2024. The far-off pledge shows that Johnson and Sunak are alarmed by the commentary about their tax-rising policies over the last couple of years. As worried Tory MPs have noted, the duo have presided over more tax rises already than Blair and Brown did in ten years. For different reasons both Johnson and Sunak needed some good news now about a cut in income tax. As a result, they announced it early. Johnson wants to keep his job; Sunak would like to be Prime Minister. They tried to give Tory MPs some distant good news, but the pledge is both politically and economically risky. Will they have to find other surprises by 2024? Will the cut seem credible then?

The measures that take immediate effect are broadly unsurprising: a cut in fuel duty and the lifting of the threshold before National Insurance is paid. Some Tory MPs were delighted that the threshold was raised by £3,000, higher than they had anticipated.

But on the whole Sunak did the least possible in the short term. He knows he will have to do more in the autumn when he delivers his official annual Budget. This was only meant to be an economic update, but there has not been a single statement from Sunak during a period of economic calm. This was no exception. He had no choice but to deliver in effect a mini budget.

Looking ahead Sunak could not have been clearer as to how businesses can engage with government in the run up to the Autumn Budget. If he has had a distinctive theme as Chancellor, it is his search for a ‘business-led recovery’. This was the main topic in his Mais lecture, delivered on the day Russia invaded Ukraine and therefore largely overlooked. Sunak had spent huge amounts of time on the lecture, traditionally regarded as the address that defines Chancellors. In his statement to MPs, he expanded on the Mais lecture, telling them he was exploring “tax cutting options” that encourage the private sector to “innovate”, invest in vocational training, spend more on R and D, and on capital investment. He plans a big package of fiscal reforms this autumn and will be consulting with businesses in the coming months. Sunak sees these reforms as a way of addressing the UK’s relatively low productivity and to boost economic growth when the economy is weak.

I sense he genuinely wants to engage with businesses as to how this can be brought about. He has not yet decided on the tax policies that he plans to unveil in the autumn budget.

For businesses wondering how Labour will approach the next election, the Shadow Chancellor, Rachel Reeves, provided several answers in her response. She adopted a similar approach to that of Gordon Brown when he was Shadow Chancellor in the run up to the 1997 election. In her case she attacked Sunak’s National Insurance rise and accused him of wasting taxpayers’ money in spending billions on useless equipment during the pandemic. Brown did the same in 1997, arguing for ‘fair’ taxes rather than ‘higher’ taxes and pledging ‘competent’ spending rather than wasteful expenditure. Reeves also accused Sunak of ignoring the needs of businesses. Like Brown, Reeves wants to be seen as a pro- business Shadow Chancellor. She is keen to engage with business and is struck by how businesses are increasingly keen to engage with her.

For now, the return of inflation has some advantages for Sunak. Higher prices mean higher tax receipts. This has given him some wriggle room to play the fiscal conservative that also intervenes by spending money. But those benefits do not last very long. Soon public sector pay claims will soar in order to meet rising prices. High inflation can also undermine already low levels of economic growth. Inflation – more than any other economic factor -tends to destabilise governments. Sunak is keeping his fingers crossed that he has done enough in the short term. Some Conservative MPs are not so sure. The OBR’s official forecast is that this year, real household disposable income per person – or living standards – will fall by more than at any time since reliable data was collected. His promotion shortly before the pandemic means that Sunak has endured a turbulent time as Chancellor. Arguably the biggest storms are still to come.

 

 

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Statement of Intent: Rishi goes from spender to saver…for now

This article originally appeared in Real Deals on 24 March 2022. 

 

Rishi Sunak might have hoped that his first truly post-Covid fiscal statement could be one brimming with sunny optimism. With the Perspex screens, masks and social-distancing markers gone from the Commons, he perhaps imagined enjoying his time in the spotlight buoyed by impressive growth figures, record employment and harmony throughout the land.

Instead, as the Chancellor rose to deliver his Spring Statement he was faced with an unenviable challenge. Rising energy prices, global disruption to supply chains –exacerbated by the Russia-Ukraine war – have driven up living costs to the point of crisis. Add to this the threat of inflation creeping into double digits before too long and Sunak’s task begins to look Sisyphean.

With this context in mind, it was crucial that the Spring Statement needed to outline the government’s plans for addressing immediate economic imperatives and set out a coherent plan for tackling the economic headwinds that threaten to cause economic hardship for millions over the coming months.

And that’s what we got, to an extent. Sunak’s approach sought both to meet the short-term challenges which the economy faces and to demonstrate something of his own ideology in charting a course for the longer term. Since he took office in No.11, the Chancellor has had little opportunity to set out his stall as a true fiscal conservative. This Statement was a marker, outlining a multi-year plan towards economic strength and sustainability, and looking beyond immediate tax rises and medium-term tax cuts.

Saving today, but more spending likely in the autumn

Sunak’s tone was, for the most part, sombre. He repeated the government’s commitment to provide military and humanitarian resources to Ukraine and to ongoing sanctions on Russia, but warned that this would not be cost-free. He told MPs to prepare for the economy and public finances to worsen – “potentially significantly”. The OBR feels similarly, and has revised its GDP growth forecasts downwards, to 3.8% in 2022 and 1.8% in 2023.

Sunak set out headline-grabbing plans to raise the National Insurance Contribution threshold by £3,000 – bringing it in line with the income tax threshold – alongside a drop in fuel duty by 5p per litre for 12 months, and exempting energy efficiency measures from VAT. The Chancellor will use these as clear examples of the additional – decidedly Conservative-sounding – support he is offering.

He has deliberately chosen not to capitulate to those calling for another spending spree to handle the cost of living, instead choosing to save and to leave a clear “margin of safety” to create fiscal headroom. This has not gone unnoticed. The RAC has already called the fuel duty cut “a drop in the ocean” and the Institute for Fiscal Studies has expressed concern about support for those on means-tested benefits. This may come with a political cost. Sunak has gambled that the benefits of focusing on tax cutting outweigh the risks, but with even the Daily Telegraph focusing on the coming cost of living crisis, there is every chance that Sunak will be forced to revise his fiscal strategy.

Charting a low-tax course

In tone and emphasis, this was a very different Sunak to the one who delivered the Budget last October. Where that Budget made large spending commitments – raising the budgets of every government department – the Spring Statement acknowledged that rising inflation will mean that the real-terms increases will now be less than anticipated. Where last year’s Budget revolved around the ever-present phrase “Levelling Up”, this time the Chancellor didn’t say those magic words once.

Instead, the Chancellor unveiled his new “Tax Plan” – an approach to reduce and reform taxes for people and businesses, with more detail on measures due in the Autumn Budget. The publication of the Plan signals a clear direction of travel for the Conservatives for the remainder of this parliamentary term, and the rationale seems clear: the Chancellor wants to keep backbenchers concerned about the tax burden becoming too high on side. His ambition to lower the basic rate of income tax by 1% by 2024 is a sure sign that reducing the tax burden on voters will be a key part of the Conservative strategy at the next election.

But the government will need to walk a careful tightrope over the next two years. It will have to provide enough support to those in immediate need, maintain sufficient headroom to deal with further uncertainty, and still offer enough eye-catching policies to the electorate to reverse their current deficit in the polls.

The Chancellor has been clear that engaging with businesses will be key to the success of this plan. He has long sought a “business-led recovery” and is likely to provide ample opportunities for businesses to make their voices heard as the next Budget approaches. With changes to R&D tax credits, reductions in investment taxes and new incentives for employee training all under consideration, investors will want to make sure that their portfolio companies think carefully about the changes that they would like to see, and develop clear strategies for conveying those ideas to the government over the coming months.

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Rishi’s recipe for growth: private sector investment

Capital, people, ideas. A simple strategy but one built on much thought and observation about the future direction of the global economy, and Britain’s place in it. These are the strategic priorities outlined by Rishi Sunak in his Mais lecture last Thursday. To be more accurate, the word ‘private’ should be added as a critical pre-cursor to all three words.

This was the heart of Sunak’s ambition, to incentivise much greater private sector investment in all three areas. Sunak’s position as a free-market enthusiast was never in doubt and this belief in the benefits free markets deliver sits at the heart of his political and economic philosophy. As such it is unsurprising that his core aim is to lift private investment rather than deploying the power of the state. This approach will be challenged as pressure grows for intervention to soften the impact of rising inflation and the cost of living crisis but his starting point is fundamentally fiscally hawkish.

But what does this tell us about Sunak’s likely approach to policy development in future and key questions around tax and spending priorities?

No un-funded tax cuts

This message was unambiguous. Sunak wants to cut taxes but emphatically does not believe that all tax cuts automatically pay for themselves. Indeed, the unspoken message here was more about tax rises coming down the line. The example cited was Thatcher and Lawson in their first term – fixing the public finances before going on to deliver lower taxes.
There is already intense pressure from the Tory backbenches to scrap or delay the national insurance rise due in April. It is clear the Chancellor will resist those calls if he possibly can given the premium he is placing on strengthening the public finances. This will be a key test of the strength of his resolve, and political positioning ahead of any future leadership bid.

Capital: options to drive more investment

The Chancellor acknowledged that a ‘cloud of uncertainty’ over Brexit and Covid had played a part in holding back business investment but set out his ambition to turn that around now that the cloud had passed. He accepted that low corporation tax on its own had not been enough and indicated that cutting taxes on business investment will be a future priority. Capital allowances are the most obvious tool to deliver this which is likely to be good news for manufacturers.

People: promoting lifelong learning

Consistent with his central theme, the message was that the state is playing its part with an upbeat analysis of the state of schools and university education in the UK. The gap in the Chancellor’s view is the provision of adult technical skills and the need to promote continuous lifelong learning. He wants to see much greater investment from the private sector in upskilling the UK’s workforce.

He pledged to ‘reform the complexity and confusion’ of the current technical education system, noting people currently must navigate a menu of thousands of different qualification options at levels 3 and 4. Reform is clearly on the agenda. Beyond this, he noted he would examine whether the Apprenticeship Levy ‘is doing enough to incentivise businesses to invest in the right kinds of training’.

There will clearly be opportunities for business to inform the Treasury’s thinking on how best to incentivise skills investment, with greater flexibility in the Apprenticeship Levy a potentially valuable outcome.

Ideas: more R&D required

Once again, Sunak’s diagnosis is that the state’s contribution is already generous enough and the gap that needs to be filled is from the private sector. His vision is optimistic, believing new technology such as artificial intelligence can significantly boost productivity across multiple sectors of the economy. However, he was ambiguous on the mechanism for delivering this.

The tax regime is the clear focus for intervention and Sunak strikingly noted that despite apparently generous R&D tax reliefs available in the UK, ‘business spending on R&D amounts to just four times the value of R&D tax relief. The OECD average? 15 times.’ Clearly the level of the reliefs isn’t the only issue and the Treasury is likely to take a close look at how these reliefs are structured and what more can be done to reform the current approach.

This is likely to open up interesting opportunities for knowledge intensive industries, but those that currently benefit from R&D reliefs will need to be alive to the potential impact of change to the system.

Where’s the green agenda?

Many suspect (and are concerned) that the Chancellor is less interested in the green agenda and decarbonisation than some of his Cabinet colleagues. This speech didn’t assuage those worries. There was no focus on climate change or environmental issues. Indeed, the words ‘green’, ‘sustainable’ and ‘carbon’ didn’t feature at all, with only a passing reference to climate change and a single reference to electric vehicles and offshore wind as examples of areas where productivity increases could be found.

Of course, there will likely be other occasions where he seeks to burnish his green credentials, particularly as he will need a coherent green narrative in the event of any future leadership bid. But this speech tells us is that Sunak’s priority as Chancellor is first and foremost restoring the public finances and driving growth via private sector investment. Where green initiatives and decarbonisation help deliver this, he welcomes them but ‘green for green’s sake’ doesn’t appear to be part of his core focus.

What does this mean for companies seeking to influence the Treasury?

There are three core points to consider from this speech:

  1. If you have suggestions on how to incentivise greater private sector investment in the three priority areas (capital, people, ideas) the Treasury will listen and you have a great window of opportunity this year to shape the Chancellor’s thinking.
  2. If you are already planning investment in the UK then be sure to break down that investment and highlight how it will contribute to these three areas: don’t just give the headline figure, provide examples of the new buildings or machinery you plan to build; outline your skills investment strategy and how it will upskill your workforce; shout loud and proud about the any R&D initiatives you are bringing to, or growing in, the UK.
  3. This Chancellor does not believe that increasing the scale or involvement of the state is the answer to driving growth. So any requests for additional funding or more regulation will simply not cut through unless supported by a clear narrative about how this will incentivise greater private investment.

The Chancellor has a plan, and it centres on businesses investing more. This means the voice of business will be critical in shaping the future economic strategy of this Government.

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Sorry, not sorry

Little more than two years since Boris Johnson won a near landslide election victory he is in deep danger. In this blog I’ll outline Downing Street’s strategy aimed at saving Johnson and why a significant number of Conservative MPs and party members do not believe it will work. I’ll also highlight three other big themes in 2022 that will shape British politics whether Johnson survives or not.

At Prime Minister’s Questions Johnson sought to square a circle. He knew he had to issue an apology, but that the contrition had to be extremely limited. If he had apologised for attending a party, he would have had to resign for misleading the House of Commons, irrespective of whether he broke his own lockdown rules. Instead, he said ‘sorry’ for the way the garden gathering was perceived, admitted he attended but that he regarded it “implicitly” as a work event. Then he hid behind the shield of the investigation being conducted by the senior civil servant, Sue Gray.

The Gray report forms the second part of Number 10’s strategy. Johnson and his closest allies hope that Gray will take a limited view of her remit. She will investigate what happened without making judgements on whether Johnson broke the rules. Johnson’s allies point to her brief. She has been asked to conduct an investigation and not to answer the question “Did the Prime Minister break his own rules?”

On this assumption of Gray’s narrow responsibilities, Number 10 may well prove to be correct. She is a civil servant. Arguably it is not her role to reach a judgement on whether Johnson is lying when he claims he regarded the garden party as a work event. On this basis, Johnson dares to hope he will be able to claim that the investigation clears him of misconduct and mendacity. In the meantime, he has sent out cabinet ministers to defend him on the airwaves, although all are struggling to do so effectively. Jacob Rees Mogg has generated further waves describing the party’s leader in Scotland as a lightweight.

Number 10 do not know for sure what Gray will conclude or when her report will be completed. I have spoken to several politicians investigated by Gray in the past, or who have worked with her. They broadly concur that while she is forensically independent, she will not choose to be the judge over whether Johnson broke the rules and lied about doing so. We will know soon enough. If she does reach such a conclusion, Johnson will resign immediately. If she does not do so he will try to keep going. Johnson is ferociously competitive and seeks a ‘Churchillian’ legacy, Churchill being his great hero. He does not want to be forced out in this shaming context.

The problem with Number 10’s strategy is that the Gray report is bound to be damning even if it is written in measured prose and avoids overt judgments. We know enough already without waiting for Gray’s investigation. Johnson has admitted there was a garden gathering and that he attended. Voters have decided it was a party even if Johnson has not. So have most of his MPs and party members. There is also much speculation at Westminster that there are more revelations to come. Even if that proves not to be the case, there has been plenty of material already.

More immediately the airwaves are punctuated by Tory voices calling on Johnson to go. This is not that unusual. There were plenty of Conservatives demanding that Theresa May went. But note that she did indeed resign in the end. In Johnson’s case his authority over his government and party was derived solely from his ability to win elections and remain popular. After the Conservatives gained Hartlepool in a by-election last summer, he was the most powerful Prime Minister in modern times with no figure in the government or beyond daring to scrutinise him critically. Blair had Brown as a mighty counter. Cameron had to work with the Lib Dems in a coalition. May led an unruly party in a hung parliament. Johnson was master of all he surveyed. Now the Conservatives are ten points behind Labour in the polls and a majority of voters believe Johnson should resign. His mighty authority over his party has collapsed.

The only mechanism that removes Johnson is in the hands of Conservative MPs. If fifty five of them send letters of no confidence to the chair of the 1922 committee, Graham Brady, Tory MPs will vote on his leadership. Theresa May endured such a vote and won, but it was only a fleeting victory. I doubt if Johnson could survive such an insurrectionary move. I know a few of the MPs who have sent in their letters. They are from the older generation in the parliamentary party, ministers from the Cameron era. They had sent in their letters before the latest revelations about the garden party. Brady will never even hint at how many letters he has received, but he will have had a few more in recent days. Neither Sunak nor Truss will seek to overtly topple Johnson, but their much-delayed tweets of support on Wednesday night were one of many signs that they are making feverish calculations about a possible leadership contest.

Whether Johnson stays or goes, this will be a testing year for the government on several other fronts. Sunak had hoped that the coming twelve months would be one of fiscal consolidation. He seeks to hail prudent management of the economy in this mid-term phase so that he has the space for credible pre-election tax cuts. Although Johnson agreed with him in their discussions last year that he would need to keep a tight rein on public spending for now, there are already counter pressures. Sunak has told Gove that there will be no additional money for his levelling up white paper. The publication of the white paper is seen by Johnson as a pivotal moment. One of the many reasons that the much-delayed White Paper will focus on devolution of power is because such constitutional reforms do not cost money. Gove has brought in Andy Haldane, formerly from the Bank of England, to advise him. I suspect Haldane’s private view is that much higher levels of investment are required to make ‘levelling up’ work. Sunak won’t give them an additional penny for now. Nonetheless Sunak will reluctantly spend more in other areas. The government will intervene to cut energy bills and that will cost additional cash in the short term at least.

The NHS will be the other big theme, whether Coivd fades or rages once more. Johnson and Sajid Javid are acutely aware that the backlog of operations, the record-breaking waiting lists, could become a huge issue at the next election. But even with the substantial tax rise being implemented in April they are not confident that the delays can be addressed speedily. Meanwhile the national insurance rise was supposed to pay for elderly care in the long term. Will ministers go into the next election arguing that they are transferring the additional cash from the NHS budget to pay for social care? If not, how will they pay for social care? More widely Javid inherited a White Paper that will introduce further sweeping reforms of the NHS, not all of which he fully supports. These will be big issues for whoever is Prime Minister.

Finally, the year is a challenge and an opportunity for Keir Starmer. An opinion poll lead is a gift for an opposition leader. The media will take him more seriously. He and his Shadow Cabinet will be viewed as a potential alternative government rather than as a bunch of losers. If he rises to this newly elevated perception, the poll lead will feed on itself. If he does not do so, Johnson will not be the only leader in trouble. His challenge will be to connect policies to broadly expressed apolitical values such as ’respect’ and ‘prosperity’. This is not easy, but Starmer has the huge boost of facing a government that appears vulnerable for the first time since the December 2019 election and he is performing more confidently.

The fate of Johnson is not yet decided. For certain, the cost of living, the internal debate in the Conservative party over whether the government should cut taxes or spend more, the future of the NHS and the performance of Starmer will be big themes in 2022…as the next general election moves in to view.

 

Steve Richards is a new member of WA’s advisory board, providing political intelligence and strategic counsel to WA’s extensive client roster. Over the last few turbulent years, it has been imperative for clients and organisations to have unrivalled political intelligence to inform their businesses. This year looks to be no less tempestuous and, consequently, Steve’s insights will be invaluable for all WA clients. 

 

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More bang for our buck, please: the government wants more out of R&D tax credits

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Navigating the NSIA: which way for M&A?

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An historic opportunity…for more of the same? A look at post-Brexit procurement trends

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Solvency II reforms: a key Brexit win for the government?

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A lifelong commitment? What to expect from the Lifetime Skills Guarantee

Skills are a key part of the government’s agenda, seen as vital for unlocking its ‘Levelling Up’ commitments in the light of skills shortages in areas like engineering, IT, and accounting. These shortages are long-standing. A 2018 study by the Open University found that skills shortages were costing UK companies £6.3 billion a year due to factors such as training and additional recruitment costs.

The government has acknowledged these shortages, and the need to ensure the education and training system is able to cope with the ever-increasing demands placed on it. In a foreword to the January 2021 White Paper on skills, the then Education Secretary Gavin Williamson indicated that more opportunities for training needed to be made available. As part of its response, the government has introduced a new policy – the Lifetime Skills Guarantee. It hopes that this initiative will address changing skills needs and employment patterns by giving people the opportunity to train and retrain throughout their lives.

What is it?

The Prime Minister announced the Lifetime Skills Guarantee in a September 2020 speech. The scheme covers a lot of ground policy ground. Pledges include increasing investment in FE colleges, introducing a lifelong loan entitlement, and a new funding system for higher technical courses. Only two policies, however, are being funded by the National Skills Fund: a new Level 3 qualification offer for adults and the extension of digital skills bootcamps.

The qualification offer, which commenced in April 2021, aims to give all adults without a Level 3 qualification (equivalent to A level) access to a fully-funded course. Previously, only adults under the age of 24 could access funding. The courses are taught by a range of state and private providers.

The government maintains a list of eligible courses, with 379 currently listed, and has made digital, engineering, health, and construction qualifications a clear priority with 37, 51, 54, and 66 courses available respectively. Whilst course lists are subject to review, investors in training providers that deliver these courses are likely to be particular beneficiaries of the scheme.

A high priority, and a long-term solution for a long-term problem

The Lifetime Skills Guarantee tackles big challenges, and the government has devoted significant effort to implementing it. The Guarantee was referenced multiple times in last month’s Budget, which also included a wider commitment to increase spending on skills by £3.8 billion by 2024/25 – a cash increase of 42% compared to 2019/20. These are not small pledges. The government has expended serious political capital on addressing the problem of skills shortages and, given this emphasis, is likely to release further funds in future years to support the scheme.

Announcing the Guarantee, the Prime Minister also made clear that the initiative is intended as a long-term scheme, rather than a short-term remedy to fill immediate skills gaps – that the nature of learning demands time and resources. He suggested that other countries have had an advantage over the UK when it comes to skills and technical education “for 100 years”. Indeed, the government’s Skills and Post-16 Education Bill confirmed that the planned rollout of the Lifelong Loan Entitlement, another major Guarantee commitment and one that aims to make it just as easy to secure loans for higher technical qualifications as for full-time degrees, remains over three years away in 2025.

Considering the CBI’s October 2020 analysis that predicted around 90% of employees would need to reskill by 2030, if the government is serious about this issue– and all indications suggest it is – then funding for initiatives like the Level 3 offer is likely to be enduring. The fact that only £375 million from the £2.5 billion National Skills Fund has been allocated for 2021/22 reinforces this. There are an estimated 11 million people who would be able to access the free qualifications under the Level 3 offer. Given the political weight the government has placed on these Level 3 offers – literally labelling them a ‘Lifetime Guarantee’ – the £95 million that is currently funding courses over 2021/22 is very likely to represent a prelude to further funding in the future.

The outlook for investors

The Lifetime Skills Guarantee is a key piece of the government’s education agenda. Both the Prime Minister and the Chancellor have been personally involved in its roll-out and have alluded to long-term planning happening in this space. This suggests that scheme will benefit from ongoing investment, particularly in sectors which government has identified as priorities. Technicians, engineers and social care professionals are consistently namechecked by ministers as occupations that the country lacks, and current course lists reflect this. Providers with speciality in these areas look set to benefit from the increased demand that funding from the scheme is likely to stimulate. As a result, investors in the technical education sector will want to monitor the government’s developing thinking closely in order to identify potential opportunities from future funding allocations for the scheme.

 

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COP26 – What you need to know

At the end of the first week of COP26, Naomi Harris gives her top three takeaways and looks ahead to what next week holds.

Corporate communications haven’t quite gone to plan

The comments by Shell CEO Ben van Beurden that investment in the technology necessary to transition to net zero could only be financed by oil and gas revenue led to questions about the viability of the Anglo-Dutch giant reaching its own 2050 target. Greta Thunberg walking out of a panel on carbon offsetting, arguing that it was just another method of ‘greenwash’ by business illustrated yet again what happens when the corporate world, which is moving – but more slowly than Greta would like – collides with activism. We look to see whether such risks are better managed over the next few days.

The UK (and the UN) are trying to create a drumbeat of announcements but not all the pledges are in tune

More than 130 of the 197 countries attending have so far pledged to reach net zero by 2050, but fewer than a third have pledged to phase out coal. You’d be forgiven for scratching your head and wondering how that circle will be squared. Carbon capture and storage is an option, but the technology and its take-up will have to move on leaps and bounds. Critics argue it won’t and so the net zero pledges of those clinging to coal aren’t worth the paper they are written on.

National political tensions are playing out on an international stage

The Indonesian president committed to halt and reverse deforestation within his country’s borders, but before he could enjoy the warm glow of international approval his environment and forestry minister backtracked by saying Indonesia ‘can’t promise what we can’t do’. The minister added that the country’s natural resources should be used to support development and zero deforestation by 2030 would be ‘unfair’.

Expect another week of wall-to-wall news coverage

The week ahead will touch on the role of innovation and transport in decarbonisation as well as what action needs to be taken across the world’s cities to keep us on track towards net zero.  Going beyond the headlines, WA is conducting primary research to understand what impact COP26 has had on how people engage with the climate debate, how they view business and what this could mean for how organisations choose to communicate.

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Rishi goes for broke: Budget balances post-Covid spending with a nod to fiscal conservatism

Rishi Sunak arguably had a difficult balance to strike with this week’s Budget: to position himself as a Chancellor not afraid to splash the cash to support individuals and businesses in a post-pandemic UK whilst also demonstrating his traditional, fiscally responsible credentials. If Rishi has his sights set on the top job in the future, the former was necessary to shore up support beyond Westminster, and the latter within his own party.

This was a very different Budget from this time last year. With the UK still in the depths of the Covid crisis, the Chancellor’s approach last November was inevitably short-termist – a patchwork of support drawn up and implemented on the hoof. This week’s Budget is more considered, with one eye firmly on the future.

The first multi-year Spending Review since 2015 would not, in the Chancellor’s words “draw a line under Covid”. Indeed, the spectre of the economic hardships faced by families and businesses loomed large over the Chancellor’s announcements. Nevertheless, this was the Chancellor’s first real opportunity to step out from beyond the pandemic’s fiscal and practical constraints. This Budget saw the first real movement towards a longer-term, more business-as-usual approach than has been previously possible. This sense of forward momentum the Chancellor’s speech was designed to create was clearly intentional. He will be hoping that this optimism will be welcomed by businesses and local authorities, and that the additional visibility over the financial and economic trajectory of the UK will allow for greater (and potentially more ambitious) planning over the medium term.

Keen to showcase the government’s flagship spending programmes, the Chancellor majored on the Levelling Up agenda. “Levelling Up” is mentioned in the Budget Red Book no fewer than 91 times – once more than the “economy”. Like chips on a pub menu, Rishi maintained the government’s commitment to Levelling Up With Everything. Improving roads and rail networks, expanding digital connectivity, new skills and employment schemes, housebuilding programmes and R&D strategies all fall under its lengthy banner. The Chancellor emphasised that spending would be directed to all parts of the UK, name checking a number of Tory MPs in Red Wall seats which the Conservatives are keen to hold on to at the next general election.

Seeking to appeal to those on lower incomes, Rishi closed his speech by announcing a cut in the Universal Credit Taper Rate from 63% to 55%. The new rate will mean that workers in receipt of UC will keep more of their benefits the more hours they work. Clearly wary of the potential impact of the rising costs of living and rising inflation on the government’s popularity, the Chancellor told MPs that he had written to the Governor of the Bank of England, reaffirming the Bank’s remit to ensure low and stable inflation. This nudge may influence the Bank’s thinking as it considers an interest rate rise for the new year.

Businesses also benefited from the Chancellor’s laundry list of announcements. The £1 million investment allowance will be extended to March 2023, and a 50% business rate discount for hospitality, retail, and leisure companies will be introduced from April, to aid the post-pandemic recovery of sectors which have been among the hardest hit. Investment relief for businesses looking to scale up or decarbonise was also a key feature, and a precursor to a swathe of further green pledges we can expect at COP26 in early November.

In perhaps the clearest appeal to the Conservative backbenches, Rishi vowed that his “goal” was to reduce taxes, saying “by the end of this Parliament, I want taxes to be going down not up.” For the time being, he has at least managed to avoid further tax rises; Corporation Tax and Capital Gains Tax will be unchanged for 2022, and no further increases in dividends tax rates or National Insurance contributions were announced beyond those already brought forward earlier this year.

But given the murmurings which have already started among Tory MPs that the tax burden is too high, freezes will not be enough for the Chancellor to play to the gallery longer term. His backbenchers will want to see meaningful tax cuts in the coming years but, with record spending commitments and precious little fiscal headroom, Rishi has a very difficult balancing act to pull off.

For the time being at least, “Brand Rishi” remains strong; the Chancellor still tops polls of the most popular Tory politician in the UK. But reconciling his fiscally conservative instincts for low taxes and budgetary restraint with the government’s post-Covid agenda to spend, spend, spend will be no easy task. Only four Chancellors since the Second World War have made it into No 10. Based on today’s Budget, with the Chancellor seemingly trying to offer something for everyone, it seems he is determined to become the fifth.

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Budget Debrief: Our five key takeaways

  1. Hey big spender!

 

  1. Cost of living measures unlikely to be enough

 

  1. Mixed messages on climate policy a missed opportunity

 

  1. Doubling down on levelling up?

 

  1. The election countdown is on
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Autumn offers Johnson a window of opportunity to deliver on his domestic agenda

When Boris Johnson unveiled his 2019 election manifesto, complete with pledges to spend more on recruiting doctors, nurses, teachers and police officers, whilst simultaneously cutting income and corporation tax, some questioned whether it would be possible to balance this ‘spend and reduce tax’ equation.

Just months later, the COVID-19 pandemic pushed public spending to record highs and put the brakes on many of the plans that had previously topped Johnson’s domestic policy agenda as resources were diverted to tackling the immediate crisis.

Now, with lockdown measures lifting after a successful vaccine rollout and pressure on the health service brought largely under control, Johnson is determined to return to delivery of his wider agenda as the country heads into autumn and political attentions turn to the next General Election.

With an ambitious list of more than 30 pieces of legislation set out at the Queen’s Speech in May, the coming months will be a critical time for Johnson to return to his priorities and bring his agenda back on track. However, significant challenges remain on the road ahead.

Spending Review 

One of the Government’s top priorities this Autumn will be passing its spending review (SR), providing much-needed certainty for public services delivery.

Owing to the immediate challenges of the pandemic, Chancellor Rishi Sunak opted for a single-year spending review at the end of last year. This has undoubtedly made it difficult for many areas of public services to effectively plan and calls for a longer-term 3-year financial settlement will be met when the review is presented alongside the Autumn Budget in late October.

The SR will prove a major test for the Government, with the process already marred by speculation that cutbacks will be far-reaching, and that government departments will be asked to make significant cost reductions.

A particular tension comes as schools have warned they will be forced to cut budgets in the aftermath of a touted 5% cut to the Department for Education’s overall spending in the forthcoming SR. Other cuts could hit the construction industry, with West Yorkshire Mayor Tracy Brabin warning this month that a reduction to infrastructure funding would ‘devastate’ the Yorkshire region.

For Sunak himself, the SR presents both risks and opportunities as he attempts to strike the delicate balance between his stated long-term goal of repairing public finances and continuing to deal with the immediate impacts of the pandemic.

Health and Social Care 

Further to the Government’s announcement of its controversial health and social care levy –

designed to inject funds into the ailing adult social care system and help the NHS deal with severe backlogs – the Government’s Health and Care Bill continues its passage through Parliament.

The Health and Social Care Bill, introduced to Parliament earlier this month, will see employers and employees pay an extra 1.25p in the pound for National Insurance from April next year before the levy is collected as a new tax from April 2023, including from pensioners. Critics argue that the new levy will have a disproportionate impact on the lower-paid, and that it breaks the government’s promise not to raise National Insurance. While Johnson insists the measure is necessary in light of the pandemic, we can expect to see fractious debate in the Commons and Lords.

The Health and Care Bill offers an opportunity to improve outcomes for patients and adults reliant on social care, by streamlining services and encouraging greater collaboration. Reforming social care has been a key priority for Johnson – who will be acutely aware that failing to provide a more effective, affordable and joined-up service following multiple commitments from previous Tory Prime Ministers could push millions to withdraw their support for the Conservatives at the next election.

Indeed, the pandemic has further highlighted the vulnerability of the social care system, pushing the issue higher up the political agenda. Given his recent appointment as Health Secretary, Sajid Javid will be keen to successfully shepherd the Health and Care Bill through Parliament without major incident.

Planning 

The Government is widely expected to unveil legislation designed to reform the planning system this Autumn; a move which will make strides towards delivering the Government’s target of building 300,000 new homes each year by the mid-2020s.

However, Johnson faces a deep rift in his own party – with Conservative backbenchers vehemently opposed to the changes which would loosen planning restrictions, and put younger voters at the sharp end of the housing crisis as  the Government pushes to meet its housing targets.

Reports in The Times in September 2021 suggested that the Planning Bill, a centrepiece of the 2021 Queen’s Speech, could be dramatically watered down to ensure a smoother passage and minimise the risk of large-scale opposition. However, as a hallmark issue for governments past, present and future, it’s unlikely to be the last we hear on the Planning Bill.

Environment 

The build-up to COP26 has been more than two-years in the making as the UK has sought to use the hosting of the international climate change summit as an opportunity to demonstrate leadership on the environment, and to re-build relationships with international partners.

In the final few weeks before the event kicks off in Glasgow, we have seen domestic airwaves dominated by concerns about energy security and cost of supply. The situation is complex, and unsurprisingly some climate change sceptics have sought to use it as an opportunity to attack the Government’s ambitions for net zero. However, there is broad agreement that the UK must reduce its reliance on fossil fuel imports.

The Government will seek to diplomatically underline this position in the coming weeks while keeping the agenda with international partners on track, but one major question remains – what will the Government have to show from the last UN conference? Hopes of progress so significant as to capture the attention of people outside of a relatively small bubble sadly look unlikely at this stage, but not impossible.

Online Safety

Elsewhere, the long-awaited Online Safety Bill is currently making its way through pre-legislative scrutiny in the House of Commons. Yet another contentious piece of legislation being introduced in this parliamentary session, government has taken steps to ensure cross-party scrutiny at this early stage helps identify any emerging issues, with amendments from both the Conservative and Labour benches already rumoured to be in the works.

Whilst not as far-reaching as the Planning or Health and Care Bills, this piece of legislation will add to the legislative burden facing the Government in 2022 and MPs, businesses and journalists alike are likely to have a view on the measures it includes.

New faces and next steps 

This month’s reshuffle is a stark reminder that fresh faces and a fresh approach is needed before Johnson can face the polls.

The timely shake-up, and the representative cohort Johnson’s sought to establish, provides a chance for the Government to create a change of pace and introduce fresh thinking to departments that have been in crisis-mode over the past 18 months.

Whilst the ongoing battle against COVID-19 still provides some uncertainty, the Government now has a window in which to push ahead with policy and legislation to realise the ambitious priorities it set out in 2019. With only two years left, the pressure is on for Johnson and his team to deliver.

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The Competition and Markets Authority: new powers and new roles?

The article below was written by Pauline Guénot, a member of WA’s Investor Services practice.

The Covid-19 pandemic has had a profound impact on every part of the UK economy, and this has generated an ever-more complex raft of challenges to which the Competition and Markets Authority has had to respond. The watchdog has had to address, at short notice, new issues facing consumers and businesses in response to restrictions and new ways of working. It reported this year that its increased casework volume had gained “refunds for thousands of holidaymakers, secured landmark changes for leaseholders and given increased protection to people arranging funerals for loved ones”. As businesses and regulators begin to focus on the post-pandemic environment, attention has turned to ensuring that the CMA remains fit for purpose in the longer term.

Digital regulation post-pandemic

As the UK’s competition regulator, the CMA already has a wide-ranging role. Its powers include investigating mergers that may reduce competition, studying entire markets or sectors where consumer problems have arisen, and sanctioning businesses and individuals which it finds taking part in cartels or other anti-competitive practices. Proposals currently being considered by the government may expand and enhance its remit further.

Among the most significant proposals focus on digitisation. The pandemic has increased the CMA’s emphasis on digital markets, with consumers spending more and more time online. Since the beginning of 2021, it has targeted all but one of the Big Five tech giants, opening different investigations into suspected breaches of competition law in digital markets: into Amazon and Google over the numbers of fake reviews on their sites; into Facebook over its collection and use of advertising and single sign-on data; and into Apple and Google for their privacy settings.

In April 2021, the government launched a new digital regulator within the CMA, the Digital Markets Unit. It is initially operating in “shadow form”, on a non-statutory footing, but the government has committed to introducing legislation when parliamentary time allows to formalise its authority. The DMU will be responsible for overseeing the UK’s digital regulatory regime; it will have a duty to promote competition and innovation, holding powers to regulate, investigate and ensure compliance from digital firms. The government has launched a consultation that will remain open until October 2021 to seek external input on its proposals for the new regime. These include proposals that would designate companies with “substantial market power” as having “strategic market status”. Such companies would be subject to an enforceable code of conduct, and to potentially greater interventions in their M&A activities. Investors in such companies will want to monitor these developments closely to understand the precise implications on their portfolios.

New powers for the CMA

Alongside a focus on digital markets, the growth in the number and value of private equity funded buyouts in the UK more generally has spurred debate as to the CMA’s overall ability to protect consumers and employees.

There has been speculation over possible CMA interventions in a number of markets with a significant private-equity presence. Concerns about private equity interest in UK supermarkets including Morrisons and Asda, for example, prompted the chairman of the Business, Energy and Industrial Strategy Committee, Darren Jones MP (Labour, Bristol North West) to write to the CMA’s Chief Executive, Dr Andrea Coscelli, questioning whether it had “insufficient oversight or powers to intervene when new owners act irresponsibly”, particularly in relation to private-equity owned businesses acquiring significant debt.

Dr Coscelli’s response stated that the CMA’s statutory functions covered merger control and market studies/investigations, and that its powers of intervention on the basis that an asset is highly leveraged is very limited. He did, however, add that a study can be launched if the status of providers appears to affect the price and quality of their services, or their financial resilience. While this reply did not itself outline his stance on possible reform, the CMA has already suggested that a stronger and more flexible competition and consumer protection regime would make its work more efficient.

In July 2021, the government announced that enhancing the CMA’s powers to tackle anti-competition business practices was under consideration and opened the consultation “Reforming competition and consumer policy”. The government’s proposals would enable the CMA to conclude investigations faster and impose stronger penalties for non-compliance. Breach of consumer law could entail a fine of up to 10% of the firm’s turnover; civil fines could be given to businesses that refuse to collaborate or that give misleading information to the regulators and penalties could be imposed for companies that do not comply with the CMA’s investigations equating to up to 5% of annual turnover, plus daily penalties of up to 5% of daily turnover while any non-compliance goes on. The length of court processes would also be reduced as the CMA could accept binding, voluntary commitments from businesses at any stage of its investigations, aiming at delivering quicker results and lower costs.

While these proposals signal stronger powers for the CMA, the government has also proposed removing mergers between small businesses with a turnover of less than £10 million from the CMA’s control. The government envisages that this change will allow the CMA to focus its efforts on larger players, and it aligns with its desire to remove some of the bureaucracy within which smaller businesses must operate more widely. Dr Coscelli has welcomed this balanced approach suggesting that the plans “take forward many of the CMA’s suggestions for a swifter, stronger and more flexible competition and consumer protection regime, which will protect consumers and enable businesses to grow and thrive.”

The government consultation is open until 1 October 2021, and, while legislation is unlikely before 2022, investors will want to pay close attention to the development of the government’s approach and prepare their portfolios for any changes in the regulatory landscape, as well as to identify those areas which the government is most enthusiastic to see grow.

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Queen’s Speech 2021 presents a significant domestic agenda

Coming on the back of a successful set of election results for the Prime Minister, this Queen’s Speech represented his Government’s first real opportunity to define its domestic agenda. As expected, levelling up sat at the heart of it, typified by a headline announcement on lifelong learning and a lot of focus on infrastructure investment and boosting economic growth outside London.

Making up for lost time

This administration has effectively lost a year to the pandemic, and there is a sense that they are trying to make up for lost time. The Speech included 30 Bills as well as some substantial White Papers and proposals for reform including on Social Care, Online Harms and Rail Reform – all tricky topics with the potential to be controversial and costly.

The legislative to-do list is now significant: digitisation of the NHS; planning reform; establishing a new immigration policy; overhauling public procurement regulation; new environmental targets and a new Office for Environmental Protection; and tough new criminal sentencing laws to name just a few. These all sit alongside a host of strategies and recovery plans intended to help the country get back on its feet post-Covid.

Levelling up taking shape

In truth, this is a natural consequence of the legislative hiatus that was first caused by Brexit, then the pandemic. But there is also a clearer sense emerging about how the Government wants to realise its core levelling up agenda. We are seeing a Conservative administration more at ease with an activist approach to driving growth in the regions. For example, the emphasis on boosting bus services outside London is a notable policy that has traditionally been championed by Labour but fits perfectly with the attempt to defend Conservative seats in the red wall.

Furthermore, it is clear that skills and education policy are becoming more central to levelling up. The Skills and Post-16 Education Bill, with its lifelong learning loan entitlement, gives the Government something concrete to point at as evidence they are starting to deliver in this area.

We are also set to see a new Levelling Up White Paper, with the Treasury leading on its development, that will help further define this agenda. This looks like one of the most interesting opportunities for companies to engage with if they have proposals that fit the theme.

Benefitting from Brexit?

This programme was also the first opportunity to find legislation that realises the ‘benefits’ of Brexit. While not necessarily eye catching, the establishment of the UK’s own approach to state aid as well as an overhaul of public procurement rules could both have significant implications for UK businesses.

Both policies were previously governed by EU legislative frameworks and have been identified (rightly or wrongly) as areas that can deliver greater freedom or innovation post Brexit. Guiding the vast spend of the public sector to better match strategic policy priorities such as decarbonisation could achieve big benefits if delivered effectively. Meanwhile, greater scope for direct government support to individual sectors / companies opens the door to new ways to incentivise investment and support strategic sectors.

Science and technology remain priorities

One other eye-catching element of this Queen’s Speech was the continued and significant focus on prioritising science and technology. The establishment of a new Advanced Research and Invention Agency – the brainchild of Dominic Cummings – alongside Digitisation of the NHS shows that this area remains a key focus for this administration despite Cummings’ departure.

A new Innovation Strategy, due from BEIS this summer, will be one to watch and may provide new opportunities for companies operating in this space. In particular it is an area that could benefit from cross departmental coordination and play a key role in driving other priorities such as decarbonisation and economic recovery.

Further thought required

While this Queen’s Speech undoubtedly represents an extensive legislative agenda, there are some areas where more progress had been hoped for. Proposals for Social Care will be brought forward in 2021 but there is, as yet, little detail about what the proposals will involve and what the timescale for implementation will be. This is an area that has been waiting for reform for years with successive governments delaying and avoiding the issue. The sector will be hoping this is about to finally change.

Similarly, a White Paper on rail reform looks like it will supersede the long-awaited Williams Review, while also addressing issues around fares and accessibility. This sector is currently still operating on Emergency Measures Agreements with significant uncertainty about what will replace them. Anything that is detailed in the White Paper that requires primary legislation looks like it will need to wait for the next legislative session in 2022/23 to be enacted, so further interim measures may be needed while the reform agenda is defined and delivered.

A sense of progress

Overall , this Queen’s Speech will provide the Government not only with plenty to do but (more important politically) plenty to talk about to voters. As the country opens up post-Covid the Government has a host of domestic policy priorities to get its teeth into, that it can use to be on the front foot in the media and to underline a sense of an administration getting things done.

There will inevitably be bumps in the road, and some of these ambitions will run into difficulty, delay or controversy, but as things stand today the Prime Minister is in a strong position.

 

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Post-election debrief: what do you need to know?

As the dust settles on the local, mayoral and devolved assembly elections and Hartlepool by-election, here are WA’s key takeaways for businesses engaging with government.

1. Stand and deliver (the levelling up agenda)

The Conservative growth into former Labour heartlands still has fuel in the tank.  There is no sense of a government losing momentum after 11 years in power.

Far from it, it seems that 2019 was year-zero, and the appeal of Boris Johnson’s approach is still cutting through.  The scale of the Conservative wins in Brexit-supporting areas also shows the lasting legacy of the EU Referendum, which acts as key dividing line, with Labour seemingly on the wrong side of it.

The promise of ‘levelling up’ now needs to be delivered in earnest.  The race is on ahead of the next General Election for the government to repay the support they’ve been given in areas that feel like they have been left behind. We can expect a continued focus of government investment into the North East and West Midlands – further entrenching the Conservatives electoral position. On the basis of these results, voters do seem likely to give the government the time to deliver.

For businesses looking to engage with government, being able to demonstrate how your proposition can support regional growth and address economic and social disparity will be a crucial success factor.

2. Cracks in the Blue Wall, whilst the Green agenda is here to stay

Amidst the successes for the Conservatives, there are causes for concern. The Lib Dems gained ground across South and East England, whilst Labour and Green Party took council seats in Conservative areas in East and West Sussex, Surrey and Kent.

There a number of potential underlying currents at play.  This may be the beginnings of a backlash from long standing Conservative supporters in the Home County strongholds against the government’s high spending, high borrowing and potentially high taxing approach.  Significantly, the growth of Lib Dems, Greens and Labour in these areas perhaps signifies a wider realignment of UK society. Liberal, middle class, anti-Brexit, graduates and young professionals are moving out of London to affluent Conservative supporting areas, and are potentially put off by the culture-war messaging targeted at blue collar former Labour voters.

Of greatest impact overall, the Green Party’s significant gains highlight the ongoing centrality of the climate agenda.  This is much more than just a protest vote or the defection of leftwing supporters from Labour, and will have all ‘mainstream’ parties looking over their shoulders and seeking to reinforce their own green credentials ahead of the next election.

With COP at the end of the year and the Government keen to lead on the world stage, the expectation is for business to not simply keep pace with the government’s targets, but to set an ambitious agenda and demonstrate how it will achieve a net zero economy. The government has set the framework, but business investment and corporate decision making will make the real difference.  

3. Keir today, gone tomorrow?

There is no avoiding the conclusion that this was a bad set of results for Labour – despite Tracey Brabin securing West Yorkshire, Sadiq Khan holding London and Andy Burnham convincingly winning in Manchester.

Keir Starmer’s leadership is now under very real threat, although there is no viable challenger in the near term.  Andy Burnham is revelling in his position as the ‘King in the North’, and has stated his readiness to come to the aid of the party when they are ready to call on him.   The botched reshuffle over the weekend has not helped matters, and has exposed the fact that in addition to the hard left, there are a number of factions emerging in the PLP that implies more trouble on the horizon for the leadership.

Keir Starmer now has a major task to show to a worried party and sceptical electorate that he has the personal drive, charisma and vision to pose a real challenge to Boris Johnson at the next General Election.  On the current trajectory it would seem likely that Labour are facing at least another term out of power, which could take them to 2029 (19 years out of power) before the prospect of a Labour PM is a real possibility.

Much now depends on how Labour reacts to this defeat.  A descent into in-fighting seems likely, but there is the potential for a re-constituted Shadow Cabinet to land some heavy blows on the government as furloughing ends this autumn and the fiscal ‘chickens come home to roost’. For public affairs campaigners, working with Labour effectively help throw a spotlight on issues where the government’s record is lacking.    

4. Scotland the (un)Brave

North of the border, before the last constituency results had even been declared, Nicola Sturgeon and the SNP were declaring a democratic mandate for a second referendum and challenging Westminster not to stand in their way. Although her party fell one seat short of an overall majority, the Green Party’s 8 seats took the pro-independence representation to 70, against the Conservatives 31, Labour 22 and the Lib Dems 4.

During the campaign, she repeated assurances that a vote for the Nationalists was not a call for a referendum at this time but rather a vote for building a better Scotland post-pandemic. That didn’t last long.

Arguably, what happened in Scotland last week, could have far greater implications for the future of the UK than any local or byelection result, regardless of their apparently “tectonic” shifts.

And in a future independent Scotland, with an enormous deficit and high public spending, who knows what the implications for business might be – but we could make an intelligent guess…

 

If you want to find out more and discuss the implications for your public affairs and communications plans, feel free to get in touch.

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Is it time to level up the Cabinet?

The Conservatives are currently placing a heavy emphasis on their “levelling up” agenda, designed to reduce regional inequalities across the UK. With that in mind, it would make sense for the Prime Minister to use the forthcoming reshuffle (which could come after local elections in May, in tandem with the Queen’s speech) in part as an opportunity to ensure that MPs from across the country are represented in Cabinet, so that all regions have a voice in government policy.

Ahead of the reshuffle, WA has taken a look at where the appointees to five key government posts have historically come from in the post-WW2 era, and which regions have been under-represented in government. The posts are: Chancellor, Home Secretary, Foreign Secretary, Health Secretary and Education Secretary (all have existed in their current or a similar form since WW2, unlike some other key positions).

Figure 1 maps the proportion of post-war Conservative ministers in these 5 positions coming from particular regions, based on which constituency they represented at the time of their appointment. It demonstrates that most Conservative ministers have historically come from the South East, East, and London. The North East and Wales have each only had one Conservative representative in any of these positions since WW2.

The Prime Minister’s position is naturally not up for discussion in the reshuffle. Nonetheless it is also worth noting only two post-WW2 Conservative PMs have represented constituencies outside the South-East, East, and London: Anthony Eden (Warwick and Leamington), and Alec Douglas-Home (Kinross and Western Perthshire). The Conservatives last fielded a leader from a seat outside the South-East, East or London in 2001, with William Hague (Richmond, Yorks).

 

These facts certainly reinforce the classic image of the Conservatives as a party of the Home Counties. This is an image which the current Conservative government is keen to shift in order to be seen as representing Britain as a whole, and keep the seats the Conservatives gained in the North in the last election in order to hold onto their majority.

However, the current Cabinet conforms to the historical pattern. Figure 2, which maps the seats held by those currently in Cabinet, looks remarkably similar to Figure 1. No current Cabinet ministers have their seats in either the North East or Wales, except for the Secretary of State for Wales himself, Simon Hart (Carmarthen West and South Pembrokeshire), while a total of 7 Cabinet ministers have their seats in the East of England.

 

 

This lack of representation in key positions may be particularly concerning for the Conservatives, given their gains in the 2019 election in what have both been traditional Labour strongholds. This is compounded by the fact that, as Figure 3 shows, the North East has been strongly represented during Labour governments, with MPs from Wales also having a strong showing.

 

 

If the Conservatives do decide to increase the representation of the North East and Wales in the Cabinet, who could they choose and for which post?

As Figure 4 shows, Education and Health Secretaries have traditionally been more geographically diverse than the Home and Foreign Secretaries. Both these positions are currently also held by ministers – in Matt Hancock (West Suffolk) at Health and Gavin Williamson (South Staffordshire) at Education – whose performances during the pandemic have come in for criticism. They could be ripe for replacement with a North East or Welsh MP.

 

 

Anne-Marie Trevelyan (Berwick upon Tweed) is, perhaps, a likely candidate from the North East for a top government job. Currently the minister for Business, Energy and Clean Growth, she has held several government posts, including that of Secretary of State for International Development until the Department for International Development was merged with the Foreign Office in September 2020. Elected in 2015, she has also been an MP longer than those elected in the Conservative surge in the North in 2019. For more junior positions, it is worth keeping an eye on some from the 2019 intake – including Dehenna Davison (Bishop Auckland) – being given their first government jobs in a bid to increase the regional diversity of the government.

There is, of course, no guarantee that Johnson will prioritise levelling-up the Cabinet like this. The historic geographic distribution of Conservative ministers has favoured the South East, and many of the party’s most experienced MPs and ministers still represent the region. But such a move could tally with the government’s setting up of Departments outside London and make an important statement as the Conservatives seek to cement their hold over Red Wall seats.

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Video: A critical year for the UK’s economic recovery. What matters most?

2021 will be a critical year for the UK’s future, with a smooth and secure economic recovery not guaranteed. The action by government, regulators and businesses will shape the route back to prosperity and the outlook for consumers and the wider economy.

On Tuesday 9th March, WA brought to together an expert panel, chair by WA’s Rhoda Macdonald, to discuss these issues in the wake the government’s roadmap for easing lockdown and Budget, and hear their perspectives and experiences:

Our expert panel explored the year ahead for the UK including:

 

To receive a link to the webinar’s video, please complete the form below.

 

 

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Budget Boost for Brand Rishi

On Wednesday morning it felt as though anyone that reads the newspapers had essentially already read the Budget. Once the Chancellor had finished speaking, whilst there were few surprises, it was clear this was a carefully crafted Budget that boosted Brand Rishi. The specifics of many measures demonstrate a careful attention to detail and deftly balanced a number of competing pressures.

While many headlines the following day focused uncomfortably on the headline tax rises, the Chancellor fared much better in the editorial section of several papers, particularly The Times, The Telegraph and The Sun. Subsequent polling also paints a positive picture with the Conservatives opening up a 13 point lead this week. Sunak has carefully balanced a generous extension of pandemic support for business and workers with significant steps later in the Parliament to start rebuilding the public finances.

Tax rises successfully navigated but questions over public services

The revenue raising measures are carefully crafted to create flexibility and seek to avoid cutting off the recovery prematurely. The headline increase to corporation tax is cleverly designed coming into force in 2023, far enough away to provide flexibility to soften as a pre-election bonus should the recovery and improved tax receipts allow. It also carefully excludes many smaller businesses with lower profitability. The Chancellor sent a clear message about the importance of maintaining sustainable public finances but wisely declined to box himself in with specific fiscal rules at this stage.

As the dust settles, one clear looming issue is the future of spending on public services. Funding for the NHS and education barely got a mention in the Budget speech, while social care was completely absent. Buried in the Budget documents were significant constraints on future spending on public services and less additional support for the NHS than the NHS Confederation and British Medical Association claim is needed to deal with the fallout from Covid. This has led to accusations of continuing austerity by the backdoor and the optics haven’t improved with the subsequent confirmation that NHS workers will only get a 1 per cent pay rise.

The Chancellor will come under intense pressure to allocate more to public services, with Labour already leading the charge on NHS funding. His ability to do so will depend on driving even greater growth than is forecast by the OBR – a tall order but hard to rule out with certainty given the unprecedented nature of the pandemic – or his ability to find additional revenue raising measures. He has done well to quell concern among his backbenches for the tax rises in this Budget, partly by cynically but effectively giving many colleagues local wins from various levelling up funds. But repeating that trick again later this year or next Spring will be much more difficult.

Pork barrel politics or overdue levelling up?

Accusations of pork barrel politics, while apparently valid, won’t worry the Chancellor too much. These accusations tend to upset the political commentariat much more than most voters. Ultimately, every extra grant in Conservative held towns means another pacified colleague and a better shot at retaining seats that hold the key to a majority at the next election.

Of more significance is whether Sunak’s emerging blueprint for the future economy will have any success tackling the entrenched, structural challenges of poor productivity, low investment and geographic inequality. He is betting big on Freeports, a pet project of Liz Truss and long seen as an exciting prospect by the libertarian grouping of MPs Sunak is most closely associated with such as Kwasi Kwarteng, Dominic Raab and Oliver Dowden. However, they do have their critics who claim they simply displace investment that was already likely to take place in other areas, rather than generating additional economic activity. Until now, these arguments have been academic in the UK context but they can now be tested thoroughly as this policy is rolled out.

Warm Words on Green Growth

In a similar vein, the Chancellor talked a good game on green growth with a new UK Infrastructure Bank located in Leeds the headline new policy in this area. But it can’t be ignored that there is now a not insignificant backlog of policy strategies, plans and white papers that are all seen as key to progress this agenda.

The Build Back Better plan published, alongside the Budget, listed no fewer than 21 different strategy documents due for publication over the next 12 months, many of which are key to decarbonisation and many of which have been promised for months (The Transport Decarbonisation Plan, the Industrial Decarbonisation Strategy and the Hydrogen Strategy to name just three). Otherwise, this Build Back Better Plan was essentially a re-hash of existing polices already set out in the Prime Minister’s ten-point plan and the National Infrastructure Strategy.

Spend now pay later works for Rishi

In summary, this Budget could be crudely characterised as ‘spend now pay later’ but it is nevertheless cleverly crafted politically. He has signed up his backbench colleagues for significant tax increases to start repairing the public finances, gone a long way to meet business requests for continued pandemic support and linked the recovery strategy crudely but probably effectively to the Conservative Party’s electoral strategy. The Party wants to head into the next election with a strong recovery platform, based on a post-Brexit Global Britain narrative. This Budget started to lay those foundations.

There are still some gaps for Keir Starmer’s Labour to target. The planned squeeze on spending for public services, particularly the NHS, is the most obvious. There are also question marks over how well attuned some measures are to the most disadvantaged in society. Ending the £20 Universal Credit uplift at the same time furlough ends may have difficult optics come September.

Nevertheless, the Chancellor will be pleased with his efforts this week. He has delivered a Budget under exceptionally challenging circumstances that has mostly won over his parliamentary colleagues, blunts Labour’s lines of attack in a number of areas and reinforces his status as the heir apparent to the Prime Minister. Nevertheless, delivering a politically smart Budget that looks good for a week is quite different from delivering economic transformation over the next few years. Rishi Sunak has passed an important test, but the examination isn’t over.

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Telling your Net Zero story: communicating the critical role of the energy sector in the transition

COP26 in Glasgow this November will see the eyes of the world focus on the UK. The UK’s green ambitions – and action – are under significant scrutiny. The regular drumbeat of announcements from across government aimed at supporting the green recovery and the UK’s transition to Net Zero are testament to this.

But it is not just government aiming to set their own narrative ahead of COP26. Businesses – particularly those in the energy sector – also have a need to communicate around the summit and to tell their own story on the contribution they are making to achieve the UK’s legal targets by 2050. Brands need to show consumers and other stakeholders that they are doing the right thing. They need to shape the policy frameworks that government is developing that will achieve these ambitions. They need to explain to investors, employees, and customers what the transition means to them and how they are adapting their businesses to reflect this. While the transition to Net Zero presents many opportunities, it also isn’t without its challenges.

All of this means that for businesses in the energy sector, communicating about Net Zero is not as simple as just sharing good news and showing you are ‘green’. Different audiences all have different needs and priorities. They need to hear nuanced messages in different ways. Understanding these complexities and responding to them through simple communications is not easy.

Here we share our thoughts on how best to engage with these different audiences:

Customers

To date, the transition to Net Zero has been largely theoretical for most people. It has focused on how energy is generated rather than how it is used. Where it has been about usage – for example transport decarbonisation – change is still at a relatively early stage and it has had limited impact on people’s lives. This will inevitably change. Net Zero will become a lot more intrusive in people’s lives very quickly – the decarbonisation of heat is just one example of where business must take the lead in explaining to their customers what is happening, why it is happening, and how it will impact peoples’ lives.

Heat decarbonisation could see the mass installation of hydrogen boilers and/or electric heat pumps with old boilers and hobs eventually replaced with lower carbon alternatives. Consumers will be looking to their energy suppliers and other well-known brands – manufacturers and network operators – to guide them through this period of change and uncertainty. They will be looking to these businesses for clarity on what heat decarbonisation is likely to mean for them and their families, what they need to do, when, and how they will be supported.

Consumers risk losing trust in suppliers and others in the sector if they feel they’re not getting the advice they need. The challenge is that not all of these answers are known yet and there is disagreement within the sector about the best pathway to take. In the interim, businesses in the energy sectors have a role to play in explaining the different options and showing that they are actively championing the needs of consumers.

Policymakers

The key milestones and direction of travel on the transition to Net Zero will be set by government. While business has a critical chance through innovation to shape the approach of the UK to decarbonisation, it will ultimately have to align with the policy and regulatory framework.

Communication to policymakers needs to balance two dynamics: what businesses need – whether that be a supportive tax or regulatory framework – and what they can offer. The offer could be innovation that makes it easier for the UK to meet its Net Zero objectives, or it could be jobs. But critically it needs to go beyond narrow business interests and fit into the government’s political agenda: supporting ‘levelling up’ and promoting Global Britain, for example through exports.

Crucially your approach needs to be about talking to more than just BEIS. The shift of industrial strategy policy from BEIS to the Treasury enhances their existing interest in how innovation supports regional investment, and the policy frameworks required to achieve this. But other departments beyond the Treasury can also play a key role as champions for a supportive policy environment and will be keen to hear what you have to say, be that the Department for International Trade on exports or MHCLG on ‘levelling up’ and investing in communities.

 Communities

Net Zero has dovetailed with the government’s ‘levelling up’ agenda. There is a drive to root the transition to a low carbon economy in particular places. The focus on Teesside and the Humber reflects the Conservative Party’s electoral priorities as well as the contribution these areas can make to decarbonisation – in both cases decarbonising industry and as hubs for offshore wind development.

Businesses need to reflect this in their communication. But just suggesting that green innovation will lead to investment in these regions is not enough. It needs to be specific: what will this mean in practice for people living in these places? How many new or higher skilled jobs will be created? How will this investment support local young people – through training – to access high-skilled, long term jobs? How will it upskill existing employees or help them transition from jobs in high carbon sectors to new ‘green’ industries? How will this improve the local communities, high streets and living conditions of people there?  People like Ben Houchen, the Metro Mayor for Tees Valley, are important advocates to have in making this case, but ultimately you need to be persuading local people and not just their elected representatives.

Employees

The transition to Net Zero means significant opportunities, but it also means change for some parts of the energy sector. This is likely to lead to uncertainty for those working in these sectors, particularly in oil and gas. By explaining to their employees what the transition is likely to mean for them and how they plan to help them benefit from these opportunities, employers can show empathy and demonstrate they genuinely understand people’s concerns. This may require reskilling or a focus on training. Employers can tell a story to their staff about how the transition will bring value to them not just the planet or the UK economy more broadly. Importantly, employees aren’t just workers but they are also consumers, part of local communities, and possibly even shareholders in the businesses they work for. Your employees can be your greatest advocates.

 Shareholders and investors

The rise of the ESG agenda highlights that investors recognise the importance of Net Zero. However, the policy and regulatory developments to drive progress towards these targets will still likely to lead to questions for them. Much of the policy detail in certain areas of energy decarbonisation is still to be defined; in some areas there are still more questions than answers. Businesses in the energy sector are having to manage this ambiguity and are seeking to provide clarity to investors as to what the likely pathways to Net Zero are.

In heat decarbonisation for example, government has been careful to date to be seen not to pick technology winners. This could leave shareholders unclear of the implications and therefore at risk of making the wrong choices. It makes it even more important for businesses to paint a picture of the opportunities and risks, and to interpret what policymakers’ choices will mean for them. It’s a circular process: your conversations with investors provide insights to share with policymakers on how best to unlock private capital and investment through a well-designed policy framework.

Concluding thoughts

 

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Three hidden messages in next week’s Budget

Looking ahead to next week’s Budget, WA has set out some of the hidden messages business can expect to find in the Chancellor’s statement.

This is a critical juncture for the Chancellor, HM Treasury and the wider government.  As we emerge from the most damaging economic period of the past 100 years, the decisions taken now have to be finely balanced between continuing the essential life support for the economy, stimulating as fast as possible return to growth, whilst trying to avoid long term damage to the government’s balance sheet.

The biggest fear weighing on HMT will be that the immense levels of spending we have seen in the last year become entrenched permanent features of policy.  This could happen in a combination of three ways:

With these fears front of mind, and with parts of a fractious Conservative parliamentary party uncomfortable with the free-spending Johnsonian approach, here are the three hidden messages we might expect to see in Rishi Sunak’s budget next week:

1. We are still in economic crisis mode

The Chancellor knows he can’t withdraw support too soon for risk of killing off economic recovery at the outset. We should be expecting to see limited extensions to current support measures, with continuations of the furlough scheme, VAT and Business Rates cuts, the uplift to Universal Credit and the Stamp Duty holiday all looking likely.  In each case, these will be presented as temporary and time-limited extensions to see the country through the crisis before a return to “normality” in the Summer.

 

2. This is still a Conservative government  

The government has been forced into levels of spending that would make John McDonnell and Jeremy Corbyn green with envy. They’ve propped up great swathes of industry, nationalised whole sectors, created massive workforce subsidies and expanded welfare provision. Borrowing has risen to £394bn – the highest level since the Second World War – with the government happy to borrow to spend in an era of record low interest rates.  Despite this big-government spending spree, the Chancellor will reaffirm his commitment to fiscal responsibility, sending a signal to the hawks on his backbenches that this largesse cannot and will not last forever.

Now is not the time to start the correction, so Sunak needs to buy time to work out where and when to claw back the money that’s been spent.  In the meantime, we would suspect totemic Conservative measures remain, with no changes to the triple lock on income tax, national insurance and VAT, and a reaffirmation of the government’s belief in private enterprise and confidence in UK business to provide the growth, innovation, productivity gains and job creation that the economy needs to super-charge recovery.

 

3. We are yet to see Sunak’s real Budget – that will come in the Autumn

This is not really his agenda. This will be a place-holder Budget which will focus on the limited continuation of Covid support. He will want to showcase the best bits of the government’s emergency response. We will get the intervention highlights reel, celebrating the vaccine success story, providing reassurance that the UK remains a dynamic economy and that the government has the right ideas to get it moving again.  It will be important for the Chancellor to emphasise the necessity of high levels of vaccine take-up to avoid a resurgence of the virus later this year.

If that can be avoided, then the Budget this Autumn will be the real reset moment and Sunak’s chance to create his own legacy. If economy is open and functioning, he will have leeway to define his true long term economic plan, establishing his desired approach as Chancellor to modernise the economy. It’s worth remembering that every Chancellor, and especially those that ultimately want to be PM, want and need to create their own legacy in No11. As it stands Sunak can’t yet begin to put his own mark on economic policy, beyond that which has been forced upon him.

While the economy remains closed, frankly, there is nothing to shape.

 

On the road back to normality

Overall, this Budget can be seen as a staging post on the road back to normality. There is a long way yet to go, and many challenges to be overcome.  For businesses planning their government engagement activity for the year ahead, it will pay to consider how you can tune into these considerations, presenting constructive policy solutions that align with the government’s underlying agenda, whilst being highly aware of the tensions that are bubbling away beneath the surface.

If you would like to discuss how best to target your public affairs and communications activity in this critical period – please get in touch.

 

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Watch webinar: Hospitality & the Leisure Economy – The Bounce Back

Covid 19 has had a huge impact on the UK’s hospitality and leisure sectors with businesses being forced to close for months. These sectors represented approximately 9% of UK GVA heading into the crisis and helping them bounce back quickly once it is safe to reopen services will be critical to kickstarting the UK’s economic recovery.

On Wednesday 24th February, WA brought together an expert panel, chaired by WA’s Marc Woolfson to discuss these issues and hear their perspectives and experiences:

Our panel explored how the industry and government must work together to support the recovery of this important sector.

The discussion included a question and answer session with the audience.

To receive a link to the webinar’s video, please complete the form below.
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The Government’s messaging machine needs tuning if it’s to reconnect through recovery

This blog first appeared on the PRCA website.

When Boris Johnson was elected by a sweeping majority in 2019, his ability to connect with people beyond the Tory heartlands was critical to his success. His optimistic language and charismatic, if bumbling, communication style was able to gain cut through with the electorate. What no one could have predicted at the time, though, was the impending global pandemic and the communication challenges it would present alongside this.

With both an unprecedented health crisis and economic downturn, Johnson’s 2020 communication strategy quickly became a matter of life and death. However, a natural people pleaser, Johnson has found it difficult to communicate the often-difficult decisions needed through the pandemic, preferring Churchillian rhetoric over well-timed messages grounded in detailed knowledge of the facts.

U-turns and confusion

The Government’s communication approach throughout the pandemic has been marred by policy U-turns, confused messages and increasing backbench unrest – and trust in Boris has plummeted sharply as a result. YouGov research showed that just 32% of the public thinks the government is handling the coronavirus crisis well.

Equally, the support base garnered for Boris throughout the Brexit negotiations seems to be dwindling – recently published stats from thinktank BritainThinks shows that the number of ‘die-hard Brexiteers’ has dropped from 35% in February to 25% at the end of the year, while a YouGov survey showed that only 24% of the public thought Boris was handling Brexit well as 2020 drew to a close.

Is the government out of step on issues the public care about?

Already in 2021, lockdown fatigue and mistrust in government messaging is seeing adherence to coronavirus restrictions falling away. So, as the government looks beyond the pandemic, clear messaging around the issues the public and businesses care about will be critical – both for the recovery of the country, and the reputation of the government.

For this to work, there must first be understanding of what these priority issues are. WA’s recent report, which polled MPs, businesses and members of the general public, found a government that may find itself out of step.  For instance, levelling-up – the much-vaunted flagship priority of the government – has had a lukewarm reception. While 25% of Tory MPs view the levelling up agenda as a key priority, only 6% of businesses and 7% of the general public agreed with them.

At the same time, a perceived increase in the cost of living is a concern at the forefront for the public, yet is at risk of being overlooked by MPs, according to the research. After the three areas of broad alignment – managing Brexit, unemployment and the economic downturn – it is the next highest concern facing the public and businesses alike (24%/19%).

However, this is failing to resonate with MPs, with not a single Conservative MP surveyed choosing it as a top three priority.

Interest in the government’s other focus on skills and training is also at an all-time low, with no Conservative MPs surveyed picking it as a main priority, and only 3% of Labour MPs highlighting it as a key focus for 2021, although a larger slice of the business community (10%) does see this as a priority.

Three areas of universal agreement

There are, however, three areas on which there is universal agreement between MPs, businesses and the general public alike: managing Brexit, economic recovery, and the unemployment crisis.

With four years left to run, this government still has time to reconnect with voters. If it can clearly communicate that is has listened and is addressing these priorities, the country’s collective memory of a faltering crisis communications campaign might yet be erased.

 

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What can we learn from the proposed NHS Standard Contract for 2021/22?

What can we learn from the proposed NHS Standard Contract for 2021/22?

NHS England has published a consultation on its proposed changes to the NHS Standard Contract for the financial year ahead. The final document will be used by Clinical Commissioning Groups and NHS England to contract for all healthcare services bar primary care. The focus of any changes often provides important insight into system priorities for the coming year and the strength of conviction behind them.

With 2021/22 set to be another uniquely testing year for the NHS, one might expect measures to mitigate the impact of COVID-19 to dominate the contract. Instead, there is a sense of defiant ambition, with clear signals for providers to push on with other key NHS and government priorities.

With this year’s consultation now live, here are four key takeaways for the year ahead:

 

1. Don’t get left behind as the NHS pushes on with system transformation

The Contract for 2021/22 shows that NHS England is not letting up in its push for system transformation. It includes several steps to establish more collaborative relationships between commissioners and providers, the most symbolic of which is the removal of financial sanctions for providers that fail to achieve national standards.

This is a significant step towards reversing the transactional, almost adversarial relationship that has proliferated between commissioners and providers over recent years, instead encouraging more collaborative system-level action to identify and address the causes of poor provider performance.

The cogs of system transformation are well and truly turning again so engagement with NHS leaders will need to focus on how to support the achievement of their newly framed outcomes in the most direct way. Additionally, the prospect of major health legislation is looming large for the first time in almost a decade, providing an important opportunity to think bigger picture.

 

2. Get serious about delivering ‘Net Zero’

In October, NHS England published its report on Delivering a ‘Net Zero’ National Health Service, which set out the interventions required to achieve just that, ‘Net Zero’. Yet, the report itself had no legal standing on which to enforce its recommendations or incentivise action.

The inclusion of stronger targets on the reduction of harmful greenhouses gases and air pollution in the proposed Standard Contract for 2021/22, and a requirement for providers to identify board-level officers accountable for delivering ‘Net Zero’ commitments, is a clear indication that NHS England is serious about driving this agenda forwards.

The NHS will increasingly expect everyone who works alongside it to demonstrate that they are also serious about reducing their environmental impact. Medicines, medical devices, services and care pathways can all be made more sustainable. Clearly communicating what you are doing in this space could start to deliver a commercial advantage as pressure builds on providers and health systems to make rapid progress.

 

3. Offer a helping hand on health inequalities

Commitments to reducing health inequalities have been somewhat of a stalwart in NHS policy over recent years. The delivery of coordinated programmes at a local level that actually move the needle have not been so common. This was brought into stark relief by the disproportionate impact of COVID-19 on people of Black, Asian and Minority Ethnic backgrounds.

To create greater accountability at a local level, it is proposed that the Contract include a requirement for each provider to identify a board-level executive responsible for overseeing their actions to address and reduce health inequalities. With broader government and public focus on health inequalities brought on by COVID-19, the pressure on these individuals to demonstrate progress will be palpable.

Those working alongside the NHS should place increasing focus on how they support providers and health systems to address health inequalities. At a time when resources are stretched, we may find that some are actually more open to industry support in delivering staff training programmes, new capacity or improvements to patient pathways, but they’ll have to be able to justify the time investment. Demonstrating how you can contribute to reducing health inequalities could help to secure support for your joint working projects.

 

4. Communicate the benefits of remote consultations and management

Following the rapid up take of video and telephone outpatient appointments during COVID-19, the NHS is now trying to cement their use into everyday clinical practice by requiring all providers to offer patients (where appropriate) a choice between remote and face-to-face consultations. The hope is that this choice will be maintained in primary care too, where uptake of remote consultations has also rocketed.

However, to truly support clinicians and patients to select remote consultations in the long-term, the NHS will need to place additional value on health technologies that support effective remote monitoring and management.

Before some slip back into old habits, the wider health sector can play a role in crystallising broad clinical support for this new way of working. Arming your field force and spokespeople with clear, real-world evidence of how your technology is reducing the need for labour intensive, face-to-face clinical interventions could provide clinicians with the confidence to continue their transformation.

 

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Sustainable returns? Trends to look out for in ESG in 2021

Introduction

Evaluating investments on the basis of environmental, social and corporate governance (ESG) principles has been one of the most visible trends in the investment industry over the last few years. A far cry from the familiar, straightforward screening of traditional “sin stocks”, investors are increasingly demanding a much deeper read of a company’s ESG procedures – from staff welfare and internal governance to supply-chain risk and climate action – in order to assess the sustainability of their returns.

Across the world, the proportion of investors applying ESG principles to at least a quarter of their portfolios has risen sharply from 48% in 2017 to 75% in 2019. The Covid-19 pandemic has brought questions of sustainability to the fore, and looks set to reinforce the trend towards greater awareness and uptake of ESG principles. An estimated 200 new funds in the United States with an ESG investment mandate are expected to launch over the next three years, more than doubling the activity from the previous three years. ESG-mandated assets could grow almost three times as fast as their non-ESG counterparts in the coming years, so that they make up half of all professionally-managed investments by 2025.

This growing trend represents a clear opportunity for investors, yet the consensus of a number of studies and surveys is that the significant variety of approaches to ESG incorporation by investment management firms, regulators, and investors means that its full potential is not being realised. Below, we assess some of the key issues which investors will want to bear in mind when formulating their strategies.

Changing regulatory environments

Over 170 ESG-related regulatory measures have been proposed globally since 2018. This marked increase (it is more than the number of proposals from 2012 to 2018 combined) is a measure of the pace of change in this area and the level of regulatory focus upon it.

The traditional approach in the US, for instance, has been the SEC’s principles-based approach to company disclosure, which applies equally to ESG-disclosures as non-ESG. There, are, however, increasing calls for a more prescriptive approach for ESG, along more “European” lines.

In the EU, sustainability risk has been integrated into MiFID II, AIFMD and the UCITS framework. The changes will dictate how market participants and financial advisors must integrate ESG risks and opportunities in their processes as part of their duty to act in the best interest of clients. It is small wonder, therefore, that 97% of European institutional investors now say that they interested in ESG investments.

The UK is expected to retain an approach similar to that of the EU after Brexit. In December 2020, for instance, the FCA set out proposals to promote better disclosures on climate risk from premium-listed companies and will publish a consultation paper in early 2021 with a view to widening the scope of these measures. The Government is due to consult on measures in the Taskforce on Climate-related Financial Disclosures framework, which would oblige large listed and private companies to disclose the risks to their businesses from climate change. Influential investors have also urged the Government to consult on the idea of introducing mandatory “say on climate” votes for shareholders at AGMs, somewhat akin to “say on pay” votes.

Whilst different regulators have taken different approaches, the overall trend is for more stringent ESG disclosure requirements, with ESG more firmly integrated into the investment advisory and decision-making process. International frameworks, including that drawn up by the Sustainability Accounting Standards Board (SASB) are gaining influence in developing consistency in ESG reporting across companies. Indeed, many companies have already identified the value placed on ESG transparency by investors, and are using these frameworks for reporting and disclosure which goes beyond the requirements set by regulators.

The role of technology

As the amount of ESG data available to investors has increased, so too has demand for analysing it. Spending on ESG content and indices rose by almost 50% between 2018 and 2020, indicating the scale of growth in the field.

The trend has been for investment management firms increasingly to develop their own capacity for gathering and processing data, but emerging technologies including Artificial Intelligence are likely to hold the key to extracting material ESG insights as the volume of data increases. AI engines can, for instance, be used to sift through unstructured data – which may not have formed part of a company’s formal disclosure – with a view to uncovering further material information. Such tools are potentially very powerful, but investors and investment managers would do well to keep an eye on the potential for regulation in this area, given the creation of the Centre for Data Ethics and Innovation in the UK and the EU’s forthcoming legislative proposals on AI.

Emerging technologies also have a large role to play in addressing environmental questions – and are thus a significant contributor to the “E” in “ESG”. Here, again, AI is an important field – with promising applications from energy monitoring and control systems to automation in agricultural production. Alongside it sit emerging technologies in energy generation, including carbon capture, small modular reactors and nuclear fusion.

The impact of Covid-19 on ESG trends

The ongoing coronavirus pandemic has had a profound effect across the economy, with Governments playing much more interventionist roles in economic affairs than they might have envisaged pre-pandemic. The UK Government has spent almost £300bn on coronavirus measures, and the EU has agreed its €750bn Recovery Fund. Recovery plans unveiled to date – whether the UK’s Ten Point Plan or the EU’s Green Deal – have set clear ESG priorities and could, therefore, represent significant opportunities in sectors including clean energy, building technology and electric vehicles. In addition, an increase in demand for hygiene and diagnostic technologies may be a boost to the life sciences sector.

The logistical challenges which the pandemic has presented to many firms may bring about a renewed focus on supply-chain risk. Faced with a sudden shock, the vulnerabilities of many widely-dispersed supply chains were exposed, and this may galvanise efforts by companies to “reshore” some elements of production. To achieve this will likely require greater spending on advanced technologies including AI and robotics if moving production necessitates a move away from low-cost manufacturing elsewhere.

Perhaps the most obvious post-pandemic trend is the move towards remote working and digital commerce. For many, these have become embedded into daily life and will doubtless have long-standing social implications well into the future.

The opportunity for investors

The trend towards ESG investing is here to stay. It is an area of intense regulatory focus and the pandemic has heightened interest further still.

This growth represents a substantial opportunity for investors who can fully integrate ESG principles into their investment process. Such integration is likely to go beyond a mechanical exercise in completing an ESG “checklist”. Rather, it is likely to be a robust, thorough due-diligence process, illuminating past sustainability risks and providing a real picture of how target companies conduct their operations. Using the ever-increasing amounts of available data, and the evermore sophisticated technologies available to harness them, investors can gain deeper insights into their target and portfolio companies than ever before, and have the opportunity to generate genuinely sustainable returns.

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The Spending Review: 5 top insights on what it means for business

Following the Chancellor’s statement this afternoon, WA Communications have set out 5 pieces of advice for businesses as they plan public affairs and corporate communications activity over the coming months.

1. Rishi the realist – Rishi Sunak is using the stark OBR forecasts to claim the Conservative mantle of fiscal responsibility and sound economic management. He needs to shore up support for the Treasury mission to, at some point, restrain, reduce and eventually repay state largesse. This framing will help the Treasury to introduce more precise measures in future.

2. Multiple fiscal events in 2021 – The next three to six months of fiscal planning will be like no other. The Spending Review and Budget processes will coincide with Brexit and the Covid-19 exit. The Treasury won’t have finished spending on COVID-19 emergency measures by end of March. By that point, the future will still be foggy. Economic data will give us only a cursory insight into the state of the economy as we won’t yet have seen a bounce back and the vaccine’s impact will still be unclear. Expect more short-term spending interventions that feel like firefighting, between now and Easter, with longer-term decisions most likely in Autumn.

3. Walking the tightrope – The Chancellor has a balancing act to manage between raising revenues and sticking to Conservative manifesto promises on no rises to personal taxes and VAT, whilst spending on levelling up and infrastructure and any further Covid-19 measures. He’s looking at less visible measures like Corporate and Capital Gains taxes but faces steep opposition from his backbenchers. At the same time, the public sector pay freeze will infuriate many former Red Wall voters.

4. The Treasury will rely on business more than ever – With the Treasury in such a difficult position, it will rely on business to help shape the economic recovery. The priority will be releasing pent-up consumer demand and business investment. Treasury will be looking to business to come forward with solutions to help unlock that potential: regulatory changes, targeted government co-investments, tax reliefs and R&D funding will all be open for discussion. Treasury will be in the mood to spend – within reason – on schemes that can show specific ROI.

5. Creating dialogue between Treasury and business – Businesses that want something from Treasury always need to be crystal clear on their ask, and what they can offer in return – anything that helps restart economic activity will go to the top of the pile. Now, more than ever, it’s essential for these interests to demonstrate a clear vision for what they want that chimes with the sort of longer-term economic recovery the government wants: jobs, jobs, jobs, reskilling and how to lift productivity, particularly through technology and innovation.

Get in touch if you’d like to discuss how WA Communications can help you make your campaign as impactful as possible.

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Balancing the health of the nation with the health of the economy – 10 key takeaways

On 15th October WA hosted an event exploring the difficult decisions facing government in balancing the health of the nation with the health of the economy.

With a second wave of Covid-19 upon the UK and much of Europe, political, media and public pressure is building, and a difficult winter is approaching.

We brought together an expert panel to consider the issues, hosted by WA Director Caroline Gordon. The speakers included Tom Newton Dunn (Chief Political Commentator and Presenter at Times Radio), Poppy Trowbridge (former Special Adviser to the Chancellor and WA Advisory Board Member) and Dr Jonathan Pearson-Stuttard (Epidemiologist at Imperial College London).

It was a wide-ranging debate (watch here if you missed it), but what were the key takeaways?

Here are our top 10 points made during the discussion:

 

1) The prosperity of a nation is inextricably linked to the health of a nation:

The pandemic has taught us the value of public health cannot be underestimated. A legacy of Covid-19 must be a proper review of how we approach public health and what we ask of the NHS.

 

2) Devolved and regional politics has grown in power:

With healthcare devolved to national governments and Metro Mayors exercising influence over local lockdowns, leadership over the pandemic has often come from politicians not based in Westminster. What will this mean for the Government’s agenda beyond Covid-19?

 

3) Government is still stuck in campaign mode and not thinking long term

It’s no great surprise that a government of campaigners would think in campaign terms, but their focus has been too short term and the messaging too ambitious. With the pandemic creating complicated and long-term challenges they need to find a more nuanced way of communicating.

 

4) The libertarian principles of the Government are holding it back from decisive action

The restrictions being introduced to manage the spread of the virus are unprecedented for any democratic government, but they particularly jar with the PM’s brand of libertarianism. That conflict, manifested in hesitation and delays about enacting measures, has surfaced repeatedly through the crisis.

 

5) No 10 and No 11 have been closely aligned, but that could be fraying

There has often been tensions between the inhabitants of No 10 and No 11 Downing Street, but in Boris Johnson and Rishi Sunak there has been unusual harmony up to now. That consensus, however, is coming under strain with the Treasury keen to focus on keeping the economy moving and resistant to overly restrictive measures. How this relationship plays out could come to define the rest of this government’s term, particularly with the Chancellor being tipped as the most likely successor to the PM.

 

6) Internally government realise ‘Test & Trace’ is not working

With no clear vaccine timetable or even the promise that one will work, NHS Test and Trace is the only route back to a degree of normality. A fully functional test and trace system was the only reason SAGE agreed to the unlock over the Summer, but the Government’s centralised approach has been beset by problems. Whilst they have not publicly admitted it, quietly they are beginning to shift people and resources towards local test and trace approach which has been much more effective.

 

7) The government could do a lot more to help businesses navigate the crisis

Government offloaded too much responsibility onto businesses and were not clear about how long restrictions were likely to be in place. This uncertainty has meant businesses can’t plan effectively and many have taken an understandably cautious approach because of this. With unemployment rising, the Government needs to find a way to give business the confidence to invest and create jobs.

 

8) The public consensus is fragile compared to the first wave

People feel ‘cheated’ by being ask to lockdown again – they were willing to trust the process first time around, but a lack of faith in the government a second time around (not helped by the Dominic Cummings affair) could undermine the effectiveness of measures for the second wave.

 

9) England and Wales has one of the worst excess death tolls in Europe

Dr Jonathan Pearson-Stuttard’s research has shown that excess deaths in England and Wales were 37% above normal, second only to Spain’s 38% as the worst performance in Europe. When the public inquiry into the handling of Covid-19 finally comes, there will surely be questions to answer.

 

10) The Government’s long-term ambitions are on hold

It may not feel like it, but we are still in the early days of this Government. Elected back in December 2019 with a strong majority, the crisis has put the brakes on the broader policy agenda as they battle to tackle the virus and shore up an unstable party. The Government is a long way from making strides on its domestic agenda, businesses need to try to understand what each Department is trying to achieve despite the virus and bring solutions and opportunities for good news.

 

These are just a handful of takeaways from a wide-ranging and fascinating discussion, you call watch the full video exploring how to balance the health of the nation with the health of the economy here.

 

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What to expect and how to plan for the Energy White Paper

The last Energy White Paper was published over a decade ago.  It is long overdue a refresh, but what can we expect and how should business plan for the next steps that will follow?

The (truncated) background

There’s been a lot of industry chatter about the continued delay of the Energy White Paper.  Due to be published in summer 2019, it was first delayed so that officials in BEIS could recalibrate the plan to net zero legislation.  Understandable.

Then there was the small matter of the general election; and without warning Covid struck.  Every time officials and ministers thought they had a few quiet weeks to dot the ‘Is’ and cross the ‘Ts’ something has happened to knock them off course.

Knowing that a White Paper like this can only be delayed for so long, Alok Sharma told the BEIS Select Committee in July that he ‘very much’ hoped it would be published with the Heat Strategy and the Building Strategy alongside the Autumn Budget.

Coordination of big-ticket policy announcement – made sense. Waiting until autumn – that was ok.

Two months later and the Chancellor cancelled the Autumn Budget.

What we do know

We don’t know exactly when the Energy White Paper will be published. The Government’s public line on ‘autumn’ has been repeated since the Budget was cancelled, but publication could easily drift into the first quarter of next year.

Timing aside, we know that the White Paper’s central aim is to put the UK on the path towards the decarbonisation of the entire energy system. Its scope is huge.

Importantly, unlike previous Energy White Papers which have been largely left to ministerial and civil service teams, pored over by policy professionals, and written about by energy journalists, this edition is being teed up to support a broader political agenda – namely economic recovery.

The Government wants to be seen, through this White Paper, to support green infrastructure, green jobs and green consumerism.  Balanced against this is the need to keep consumer costs down – households for electoral reasons, and commercials for global competitiveness reasons.

In an attempt to make this balance, the Energy White Paper won’t be bursting with huge sums of money.  Instead it will seek to catalyse investment into generation, smart grids, battery technology, carbon capture and storage in addition to supporting the decarbonisation of transport and heat.  It will also seek to support new and embryonic markets for innovative products and services whether that is hydrogen fuel or renewable heat.

Part of this will be funding allocations, but arguably more important will be the adjustments made to criteria for accessing financial mechanisms, changes to codes covering electricity and gas, the evolution of Ofgem as a regulator, and modifications to the regulatory regime itself.

Generators, suppliers, network operators, system operators, manufacturers, aggregators, brokers and investors – all will be impacted to varying degrees by the Energy White Paper.  Beyond them there will be consequences for all modes of transport.

How you should plan

Here are four points to bear in mind when preparing for the Energy White Paper’s publication:

To book a discussion with our dedicated energy team, please email naomiharris@wacomms.co.uk

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What the delayed Budget means for investors

Last week the Chancellor Rishi Sunak announced that the Budget, due to take place in either late November or early December, was being postponed due to the economic uncertainty caused by the increase in cases of Covid-19. While no new date has been set for the Budget, it is now likely to be held by the end of March 2021. Crucially for the investment community, this means another six months before business taxes, including Capital Gains Tax (CGT), potentially go up.

The postponement of the Budget is useful for Rishi Sunak, giving him more time to assess the state of the economy, before setting out his plan to repair the public finances, but it is just as useful for investors. The extra four months allows them to take advantage of the current tax regime when planning their short-term investment and exit strategies.

The Chancellor has made an important political decision. Debt repayment is – for the time being at least –  manageable, and aggressive tax rises will damage whatever economic recovery is underway. He’ll be disinclined to introduce sweeping tax increases across the board to address the deficit while this remains the case. However, he needs to give some red meat to the more fiscally conservative parts of the party, and that means Sunak may make a calculated decision to introduce targeted tax increases to begin the process of putting the country’s finances on a more sustainable footing.

A rise in CGT is a likely candidate. Prima facie, a rise in business taxes flies in the face of traditional Conservative neo-liberalism, but the party has painted itself into something of a corner by promising in its last manifesto not to raise personal taxes (income tax, National Insurance and VAT). The idea of abolishing the triple lock on pensions has also been stamped on by No.10, so the Chancellor’s room for manoeuvre is limited.

Capital Gains Tax

Should the Budget have gone ahead this autumn, investors would have only a very limited time period in which they could have disposed of assets without being subject to a new higher rate of CGT. While the Chancellor’s plans for CGT have not been finalised, there is the possibility rates could be increased in March so as to achieve parity with income tax bands, representing a significant increase in the tax liability for investors. Even if the Chancellor does not opt for parity with income tax bands, the likelihood is that CGT will increase. The delayed Budget has opened a window of opportunity for exits to take place ahead of the planned increase in CGT, providing considerable tax benefits to investors.

Over the longer-term, changes to CGT are also likely to have implications for carried interest payments. Currently taxed at 28%, any increase in CGT will bring tax rates for carried interest closer to income tax bands. While the timing of the Budget makes little difference to this issue, the six months in the run-up to the next Budget will afford investors the time to plan their tax affairs accordingly in line with a new higher rate of taxation.

Buy-to-let market

The increase in CGT will also have an impact on individual sectors. In particular, the prospect of increasing CGT in spring 2021 could motivate a sell-off of buy-to-let assets. While the housing market remains buoyant, house prices increased by 5% in the year to September 2020 according to Nationwide, the same is not true for rents. Hamptons International forecasts rents to fall nationally 1% this year and next, with London set for even greater reductions.

The delay to any increase in CGT will mean property owners can potentially take advantage of a housing market inflated by the Stamp Duty holiday while avoiding more punitive taxes down the line. Investors, however, will have to act quickly, with many property agents reporting that they are operating at full capacity, causing a lengthening of the time it takes to complete transactions.

The postponement of the Budget has given both investors and the government time to think. With the economy having been through one of the most tumultuous periods in living memory, there is little chance of things returning to normal any time soon. But for six months, things are staying as they were (fiscally speaking at least), and investors should use this time wisely.

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When backbenchers find their voice: Why it’s important to listen and what it means for the how policy is made

Reaction to the Internal Market Bill and Covid restrictions on the Conservative backbenches can offer us insight into the internal politics of the Party and, most importantly, inform how organisations input into policymaking.

Frustration bubbles up from the blue

The Prime Minister’s decision to table a piece of legislation that would allow the Government to break the law in a ‘specific and limited way’ without any form of consultation united tribes within the Conservative Party that have been at loggerheads for years.  From dark blue to bright blue – condemnation came to the surface from across the breadth of the Conservative political spectrum.

The Bill passed its third reading in the Commons earlier this week with a majority of 84 – more than the Government’s majority of 80.  A storm in a Westminster teacup, you could argue.  Not so.

The very public rebellion of lifelong loyalists, like Theresa May, Sir Graham Brady, Geoffrey Cox and Sir Charles Walker, in the early stages of the Bill’s progress; and their decision, along with 18 others to not vote on Tuesday, shows that these Conservative backbenchers do not like being taken for granted.

Fast forward a day to the dressing down Matt Hancock received from Sir Charles Walker, former vice chairman of the 1922 Committee, upon being informed that MPs would be given just 90-minutes to debate the renewal of the Coronavirus Act, and you have further illustration that tempers are running very high with an administration only a year in.

This does not mean that the Johnson Government is quaking in its boots for fear of upsetting its backbenchers and it does not mean that the Government is about to fall.  For all the hullabaloo in the newspapers, let’s remember the Government has a majority of 80 and the next election is four years away.

The very fact that the Government has such a sizeable majority arguably makes it easier for Conservative MPs to rebel without fear of mortally wounding their own side, and it is notable that it was the ‘old guard’ that did not vote at third reading.  Those MPs hoping for a phone call inviting them into Number 10 on the day of the next reshuffle did not put their heads above the parapet but instead went through the aye lobby, even if they expressed disquiet in private.

With that sense of perspective understood, it is fair to say that there is a growing sense of frustration on the Conservative backbenches with a Government that does not automatically consult on big ticket issues.  Where this goes and how it ends depends, in large part, on how the Government chooses to handle the situation.

Lessons from history – don’t push it

There is the potential for the Government to continue pushing forward with its fait accompli approach and for frustrations to multiply and solidify.  In such a scenario we can expect the number of backbenchers prepared to rebel to increase as party discipline breaks down.  Should a ‘devil may care’ attitude take hold on the backbenches, it will make life harder for the Prime Minister to push through his more controversial plans over the next four years.  Changes to planning laws would be just one example where we could see another flare up between Downing Street and the green benches concerned to protect the greenbelt.

“Changes to planning laws would be just one example where we could see another flare up between Downing Street and the green benches concerned to protect the greenbelt.”

If history tells us anything it is that Government backbenchers can eventually be pushed too far and that leaders who test loyalty too often will eventually come unstuck. Most British Prime Ministers in the last 30 years have suffered an unexpected defeat in Parliament shortly before their political downfall, either at the hands of their political colleagues or at the ballot box.

What this means for policy making and campaigns

It’s all to play for.

Yes, bandwidth in Westminster and Whitehall is taken up almost entirely with the Covid response and Brexit preparations, but attention will soon turn to recovery and renewal.  The Government knows that it must show it is making progress against its levelling up agenda and delivering on Brexit promises.

It cannot do this alone. It needs its backbenchers to stay onside if it wants to push ahead at the speed necessary to build up a head of steam ahead of the next general election.  This Prime Minister cannot rely on the fissions of the Labour Party that helped him 2019 and backbenchers can only be tested to a point. To this end we should expect to see a step change in the Government’s approach to communicating with its backbenchers with greater emphasis on consultation.

Any organisation looking to engage with the policy making process may want to consider these three things when designing their campaign:

 

 

 

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The Winter Economy Plan explained

Chancellor Rishi Sunak has this afternoon delivered his Winter Economy Plan to the House of Commons.

In response to the recent rise in Covid-19 cases and the introduction of new restrictions expected to last for the next six months, the Chancellor cancelled the planned autumn Budget and instead made a short statement on the government’s immediate plans to support jobs and the wider economy over the winter. Before the statement was delivered in Parliament, Sunak was pictured outside No. 11 with the heads of the CBI and the TUC, signalling this was a set of measures that had the endorsement of both businesses and workers.

The decision to cancel the Budget, which would have included details of the government’s long-term fiscal recovery plan, was only made over the last few days. Today’s announcement reflects a recognition that the potential impact of a second wave of Covid-19 has made longer-term economic planning difficult and the government needs to take a flexible approach to the economic challenges ahead. The government has today taken the opportunity to act quickly to prevent a sudden increase in unemployment following the end of the furlough scheme in October and instead allow for a more manageable increase in unemployment.

Officially the government is still aiming to publish a multiyear spending review before the end of the year that would set out departmental budgets until 2024. However, a more likely scenario given the economic uncertainty is for the government to publish a one-year settlement to allow departments to plan for 2021/22. It is expected that the next full Budget will take place before the next fiscal year, likely in March 2021.

The main elements of the Chancellor’s Winter Economy Plan are:

The expected value of the package announced is around £5 billion, leaving the government with more firepower to support the economy should Covid-19 restrictions become more severe. Anneliese Dodds, the Shadow Chancellor, said it was “a relief” government had U-turned on the need for more support for workers but criticised the government for not acting soon enough. Paul Johnson, Director of the Institute for Fiscal Studies, has also warned that the limits of the new Job Support Scheme mean that the UK will see a large rise in unemployment over the winter.

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Webinar – From Whitehall to Town Hall

On Monday 23rd November 2020, WA Communications Director, Naomi Harris, hosted an expert panel to explore whether the Covid-19 pandemic has caused political power to shift permanently from national to regional and local government.

Watch the discussion to explore:

The panel was comprised of:

  • Joe Anderson, Liverpool Mayor
  • David Collins, Northern Correspondent, Sunday Times
  • Poppy Trowbridge, Former Special Adviser to the Chancellor and WA Advisory Board Member.

 

 

Watch a recording of the webinar:

 

 

 

 

 

 

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Billed, Billed, Billed – the government sets out its economic recovery mission

WA’s Naomi Harris analyses the Prime Minister’s speech for what’s getting top billing; how big the bill will be; and what Bills we can expect to follow as he promises to ‘build back better’.

What’s getting top billing

The Prime Minister has earmarked £5 billion to ‘accelerate’ infrastructure to create jobs and support his ambition to ‘build back, better’. To turbo charge the stalled delivery of his ‘levelling up’ agenda and to invest in public goods that aid future prosperity, Johnson is carving up the money for capital spending in health, education and local infrastructure projects – the majority to be spent in the next two years.

The Chancellor is expected to go further next week when he delivers his ‘mini Budget’. Although Number 11 is keen for this not to be seen as an ‘emergency Budget’, it will be presented against a backdrop of the worst quarterly GDP figures since 1979 and, so far, the first local lockdown.

It will again focus on job retention with more detail on changes to employment and business support mechanisms and a potential temporary cut in VAT to help stimulate demand. We can also expect more from the Chancellor on job creation with further information on the earmarked ‘shovel ready’ projects and plans to support a ‘green recovery’. These two speeches are, however, stepping stones towards the much anticipated – and much delayed – National Infrastructure Strategy, now slated for the autumn.

How much the bill will be and who will pay

Uncertain about tax receipts and with public borrowing soaring, some have said that £5 billion is too much on top of the £298 billion that the ONS has said could be the final bill for existing support measures. Others say that £5 billion is a drop in the ocean if the Prime Minister truly wants to “use this crisis to tackle this country’s great unresolved challenges of the last three decades”.

It is undisputed that this government has thrown off austerity and has a new outlook. Ministers are happy to acknowledge where mistakes were made by previous Conservative governments and in his speech the Prime Minister spoke of a government that is “powerful and determined and that puts its arms around people at times of crisis”. Positively Keynesian, although this Prime Minister prefers the Roosevelt comparison.

In all of this it should be recognised that the Prime Minister’s ‘New Deal’ is not just about government spending but rather incentivising private sector investment. Just like Roosevelt, who created the Reconstruction Finance Corporation to design lending systems and new finance mechanisms to draw private investment into projects and insulate business from risk, Johnson is looking to encourage business to stump up capital through regulatory changes. Could this be the time for a Contract for Difference 2.0 or PFI 3.0?

The British taxpayer will undoubtedly be asked to start paying in eventually, but exactly who and when is an open question. Those who have been seen to do well from the crisis are likely to be at the top of the list for a windfall tax.

The Bills that we can expect to follow

We can expect the legislative pipeline to increase significantly in the tail end of this year as the government seeks to put its policy ambitions into action. The return of key personnel to Downing Street combined with rumours that the Cabinet Office and Number 10 may merge speaks of a government looking to increase its firepower on delivery.

 

 

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Reshuffle 2020: Opening the doors to Boris Johnson’s new Cabinet

 

Rehuffle 2020 has happened. After all the talk of a Valentine’s Day massacre and a massive departmental shake-up, the only real surprise from the reshuffle has been the resignation of Chancellor Sajid Javid. Even his successor, Rishi Sunak, was tipped for Cabinet and so the top table looks remarkably unchanged post-reshuffle.

For all the rumours, Ben Wallace stays as Defence Secretary, Liz Truss remains at DIT – the longest-serving Cabinet member, possibly against all the odds – and Jacob Rees-Mogg is still Leader of the House. There is no new climate change spin-off from BEIS (yet) and the focus some were hoping a new infrastructure department might bring hasn’t materialised either.

Along with Rishi Sunak, Oliver Dowden has been rewarded for his early intervention in the leadership contest when, along with Sunak and Robert Jenrick (who remains as Communities Secretary), the three backed Boris.

It would seem loyalty continues to be rewarded.

A question of loyalty?

Although it is clear that Sunak is a No10 favourite, that does not mean Boris and his advisers can expect total subservience. The run-up to the Budget (no longer a sure-thing for the 11th March) will probably be a harmonious love-in between numbers 10 and 11, but after that the new Chancellor may well want to demonstrate that he is no puppet. And can Boris really afford to lose two chancellors in a short space of time?

With the merging of advisers from numbers 10 and 11, the once all-powerful Treasury is clearly considered by No10 to be a thing of the past, so who to take on next?

If Dominic Cummings continues to have his way then we can assume that Suella Braverman has been brought in to replace Geoffrey Cox as Attorney General precisely because of her desire to see the judiciary cut down to size, and that Oliver Dowden at DCMS will not be giving the BBC an easy ride. Our institutions may look very different at the end of this parliament.

If it was once true that a bid for the leadership would ensure a job in your rival’s team, then this 2020 reshuffle shows this is no longer be the case. Only three of Boris’ leadership rivals remain in the Cabinet, with five on the back benches, two are junior ministers and two are no longer members of the Tory Party.

How loyal will the clearly ambitious Javid, McVey and Leadsom be now that they are no longer bound by collective responsibility?

Presumably Javid’s (former) SpAds will be feeling far more loyal to their old boss than to the men who forced his hand (making him choose between his job and his team) and so Dom Cummings can surely be expecting some uncomfortable headlines in the coming weeks, now that they are free to take lunch from any journalist they choose.

Making the most of the changes – some advice for businesses

The general election result, with its presidential-style campaign, handed clear power to No10. Yesterday’s reshuffle consolidates that and shows that the Prime Minister and his advisers have every intention of ensuring Whitehall knows who the real decision-makers are.

In advancing a cause or a project, it will not be enough to have the minister or secretary of state on your side in this government – organisations will need to ensure that No10 also give its backing to any asks of a department, particularly if it involves spending.

Don’t assume ministerial support is an end in itself, but instead prepare ministers to be your advocates, ready to make the case for you at the top tier of government.

In that preparation, it’s important to resist the urge to dive straight in with a request that the minister fix your industry / understand how awful your competitors are / tell you what the trade deal is going to look like.

Letters of congratulations that start with an early demand for time/money/legislation at a point when the new minister is trying to understand the full extent of their brief are likely to receive a ‘not now’ response or be fobbed-off to a junior official.

This is a government that we can reasonably assume has ambitions to last well into the decade. Much better to aim for a lasting, meaningful relationship that positions you as a part of the solution and not another problem to deal with.

 

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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.

 

 

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Getting (and keeping) the attention of government

With Parliament in full swing, a ministerial and departmental reshuffle and a budget fast approaching, WA Communications have set out 8 pieces of advice for businesses seeking to make a quick impact with the new government.

Get in touch if you’d like to discuss how WA Communications can help you make your campaign as impactful as possible.

 

Localise campaigns in local issues

Newly elected MPs are being inundated with requests to meet and demands for their attention and time. Their priorities will be to first and foremost serve their constituents and focus on issues in their patch. Many will already be thinking ahead to holding their seat in the next election. Understanding the issues they care about locally and finding alignment with your campaign by interrogating national data and applying it to their concerns can attract energetic and powerful advocates which the government cannot easily ignore.

 

Find new sources of scrutiny

With the official Opposition distracted for the next few months on their internal leadership battle, the role of holding the government to account needs to be fulfilled elsewhere. With the Select Committee Chair elections imminent, getting in quick to engage with clerks and committee members to suggest areas of inquiry and offer up potential witnesses that can shed new light on their chosen topics is essential.  The All Party Parliamentary Groups are re-forming too. When effectively organised and well attended, these cross party groups of Parliamentarians can be hugely influential in conducting deep dive inquiries, supporting pre-legislative scrutiny, and making powerful recommendations to bring oxygen to under-recognised issues. Early signs are that Minsters are taking notice. Understanding the agendas and priorities of the officers is an essential starting point.

 

Get to grips with the parties within the party

In addition to the formal scrutiny provided by select committees and the issue specific work of APPGs, understanding the power and role of factions, groups and caucuses within the Conservative Party is key.  With the One Nation Caucus now numbering around 90 members (c.25% of the parliamentary party) they represent a powerful voting block in their own right – outnumbering the ERG who had the ‘whip hand’ exerting influence over Theresa May’s government.  Understanding how cohesive these groups are, the extent to which they act together as block and the priorities they are pursuing is hugely important when building parliamentary support for campaigns.

 

Understand the dynamics of the class of 2019

Another dividing line to be aware of is how unified the 2019 intake are. There are already signs of fissures and tensions between MPs representing long held traditionally Conservative seats and the new formally ‘red wall’ breakthrough seats, including on HS2 and where further infrastructure investment is to be targeted. Some of the new MPs may feel that their colleagues in safer seats are at risk of taking their electorate for granted. This is only set to continue as this parliament goes on and as the differences in approach and priority come to the surface. It is paramount to make sure you don’t assume all 2019 intake MPs think along the same lines, and inadvertently alienate those with a different perspective.

 

Using the reshuffle to your advantage

We know it’s coming and we know it’s going to be big. It’s easy to get caught up in the Westminster village gossip and schadenfreude-loaded tales of personal ambition missed, hubris punished and new influencers and decision makers rising to the top. But beyond the natural love of gossip, the substance really matters. How will the priorities of the government be advanced by changes in government machinery? For example, will a rebirth of DECC (possibly rebadged as the Dept for Achieving Net Zero?) really herald a renewed focus on carbon reduction across government? Those who remember engaging with the old DECC will fear a department out on a limb and separated from key decision makers in HMT, No10 and Business. Who gets this role as Secretary of State, the extent of their political capital, and their proximity to power will all have a bearing on the impact of this new department with a massive job to do. This time around it should have the full weight of a Conservative majority government behind it, rather than being inherited from a Labour government or being the product of a Coalition, so the next Secretary of State should be encouraged and cultivated to live up to their billing as the true champion of climate issues in this government.

 

Showcase your solutions

The government is in the market for success stories, they’ve laid out their agenda in the Queens Speech and now it’s all about ‘delivery’. But with huge challenges to address ranging from achieving net zero, fixing the social care crisis and carving out a role for the UK in the industries of the future, they need help. So, how can you contribute? What innovative UK companies are plugging away behind the scenes with clever ideas, world leading innovation, and new ways of working that can help solve policy challenges or bring new economic activity to the UK? Evidence is key of course, but the government wants to hear new voices come to the fore – and with investment in R&D, they are willing to put money on the table to help UK business to succeed.

 

Follow the money and make it talk

Despite the much trumpeted ‘end of austerity’ and a new era of public service investment, money is still tight. All eyes are on the Budget on 11th March and reworked rules for the Treasury to target public investment to address regional inequalities, supporting wellbeing in the north and improving productivity in the south. But day to day spending is expected to continue within the current fiscal framework. So, private sector investment is sorely needed to drive growth alongside increased public funding. The role of business, backed by patient capital, infrastructure funds, social impact investors, VCTs and private equity bringing new capital to bear to help deliver social and policy outcomes is clear. This role is under appreciated at present and much more can be done to showcase the vital contribution made by institutional investors and the additional room for manoeuvre they’d seek to do even more.

 

Use people-powered stories

Using data wisely and presenting it in a visually impactful way is only one part of the challenge. What is the human impact of your campaign, who is affected, in what areas of the country? Building a live file of individualised case studies to support your case is a must. Paint a picture of the upside to be gained from a positive policy intervention, and highlight the human impact of the risk of inaction. Bring real voices and faces to the forefront and let them tell their own stories.

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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

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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.

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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.

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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.

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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.

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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:

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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.

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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.

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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:

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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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