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E-scooters at a crossroads
E-scooters at a crossroads

Archive for the ‘Policy’ Category

Labour Party Conference: Five key takeaways

As Labour concludes its annual party conference in Liverpool, Tom Frackowiak Partner and Head of the WA Financial & Professional Services practice outlines his five takeaways for business:

Five takeaways from Labour conference in Liverpool:

1. Conference momentum: Labour will be ecstatic with how the conference in Liverpool went! A record number of attendees, speeches from the Leader and Shadow Chancellor that landed a narrative focused on “national renewal” and rebuilding Britian, packed fringe events and receptions. The business community also turned up en masse to listen and engage with Labour’s vision for the UK economy. As one Shadow Minster said to me slightly tongue in cheek, “we are now the party of business”; having been in Liverpool it is hard to argue with that assertion.

2. Labour engagement will be difficult: Businesses in Liverpool were highly complementary of the efforts made by the Labour team to engage with their sectors, but many still struggle to secure individual meetings with Shadow Minsters and their advisers to have more detailed discussions on policy direction. Again, looking at the number of businesses in attendance in Liverpool this is unsurprising. Clear thought and consideration need to be given to how you achieve cut through! How is your business essential to Labour’s programme for Government?

3. So, listen to the words from conference: To get cut through, business need to show how they will help a Labour Government “build”, “invest”, “innovate” and deliver a “new direction for skills”. With aspirations to be a “Mission Government” how does your businesses corporate agenda align with Labour’s five national missions? Can this be framed in the short, medium, and long-term?

4. Still a lot of policy detail missing: While Labour has set out an overarching vision for Government there is still a lot of detail that businesses to hear for planning and investment decisions. Currently Labour’s ‘national wealth fund’ is doing a lot of heavy lifting for its economic vision for the UK economy. In sectors like financial and professional services – which only has four paragraphs in the final 112-page National Policy Forum paper – there is an eagerness and anticipation to know more.

5. Labour haven’t won the General Election: While clearly momentum is with Labour and national polling gives the Party a consistent double-digit lead over the Conservatives, there may still be over a year to go until a General Election. While there is a clamor from business to get to know Labour the General Election results of 2015 and 2019, plus EU Referendum should be a warning that election results can often ‘surprise’. Any strategic approach to advocacy and engagement should adopt a holistic or multi-stakeholder approach.

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Railing against the consensus – Conservative Party Conference and Transport

After weeks of speculation, Prime Minister Rishi Sunak has used his keynote speech at Conservative Party Conference to wield the axe against HS2’s Birmingham to Manchester leg.

The announcement is the latest shift from the Prime Minister that impacts the transport sector and reiterates the prominence of transport issues as we head towards an election in 2024.

What happened at Conservative Party Conference?

HS2 cast a shadow across the Conference. Whilst rail featured heavily on the fringe – covering topics from rail reform, contracting, rolling stock and decarbonisation – the debate over HS2 predictably dominated discussion.

Leaks meant that industry, Ministers, backbenchers, and regional stakeholders all sought to make their case ahead of the announcement, with West Midlands Metro Mayor Andy Street unsuccessfully trying to fight a rearguard action. Many on the fringe and across the sector will be frustrated by how No10 has handled the comms for this announcement, especially considering reports first emerged weeks ago.

Sunak’s alternative to HS2 is the reinvestment of £36 billion into the new “Network North” plan. Spending will be spread across new road, rail and bus projects aimed to improve interconnectivity across the North and beyond. However, there is little to cheer for the rail sector with DfT subsequently confirming that only about 30 percent of the funding will go to rail, with the remainder for local transport and roads, and no new capacity for north-south rail passengers.

Whilst rail dominated Sunak’s remarks, Transport Secretary Mark Harper reiterated the government’s focus on motorists.

His ‘Plan for Drivers’ brings together 30 measures aimed at improving car journeys at expense of bus lanes, low traffic neighbourhoods and travelable 15-minute communities. It is the latest example of how the Conservatives want to project a ‘pro-car’ image, and position Labour as ‘anti-motorist’.

Other modes of transport – plane, maritime, active travel and more – were largely absent from the focus of senior politicians in Manchester.

The reaction to Conference

Sunak is realistic his announcements will not be welcomed by industry or many politically and predictably the immediate reaction has been largely negative. This was borne out by the criticism from prominent Conservative and Labour Party figures who have been quick to raise concerns and reflect doubt about the Network North alternative.

On social media, for every positive post there are three negative.

Stakeholder reaction

The Prime Minister’s gamble – like with the delay on petrol and diesel cars – is that it reignites support for the Conservatives among the voting public that he needs to win over in more rural and suburban parts of the country.  He will be cheered to see positive support from several Conservative MPs in critical swing seats in the North.

What to look out for from Labour Conference

Yesterday’s announcement is the latest attempt in transport policy from Sunak to create a wedge issue between the parties. Labour must decide if it will support the government’s plans or risk supporting a project widely recognised as poorly run at the expense of many alternative projects that the electorate may prefer.

Like with continued support for the 2030 ICE ban in favour of EVs, Labour is caught between a rock and a hard place. Labour will need to use the Conference to set out its plans and give industry more confidence about what the future could look like, without falling into the Conservative bear trap.

For business, the transport battleground will require careful navigation. To be heard, sectors will need to recognise the competing priorities of both parties and how their case can align with them without becoming the focal point of a new debate. This calls for a balancing act of discreet engagement married with public communication that builds support with both.

To discuss how to achieve this balance, please get in contact with me on jamiecapp@wacomms.co.uk.

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Will consumer scepticism and the cost-of-living crisis remain a roadblock to rolling out electric vehicles?

With just over six years to go until the UK government’s ban on new petrol and diesel vehicles comes into force, decarbonisation policies, EV charging strategies, and infrastructure plans abound – but consumers still need to be convinced that electric vehicles are cost-effective and practical.

Electric vehicles are the cornerstone of the UK’s transport decarbonisation agenda, exemplified in the government’s ambitious deadline for ‘all vehicles to be able to drive a significant distance with zero emissions’ from 2030.

The debate on the practicalities of the ban and the impact it will have on consumers is dominating political debate and it means understanding the challenges facing motorists and their experiences is essential.

With 83% of new vehicles registered in 2022 still fuelled by petrol or diesel, WA polled 1000 members of the public to find out their views on EVs and the potential barriers to adoption. Explore our findings below.

Will consumer scepticism and the cost-of-living crisis remain
a roadblock to rolling out electric vehicles? [PDF]

To find out more about WA’s work supporting high-profile organisations on sustainable travel, net zero, and energy issues, please contact Jamie Capp – by email jamiecapp@wacomms.co.uk or on 07910 004 035.

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The roadmap to Party Conference

Labour’s National Policy Forum plays a leading role in shaping the party’s election manifesto.  

Chaired by Anneliese Dodds and made up of around 200 representatives of Constituency Labour Party, Labour Councillors, affiliated trade unions and socialist societies, and the Parliamentary Labour Party, it oversees the party’s Policy Commissions, and is currently drafting indicative policy documents ahead of the party’s annual conference in October. 

Over the weekend, the Labour Party held its first full National Policy Forum meeting since 2014. (Snap elections in 2017 and 2019 meant that under Corbyn, the policy-making process was expedited to ensure the Party could launch its manifesto on time ahead of respective general elections. Unlike his predecessor however, Starmer has had the benefit of having a long run-in to the policy making forum that will inform the basis of Labour’s next manifesto).  

This has resulted in greater transparency of the outline of the platform Labour will look to take to the next election. 

Whilst the meeting of the National Policy Forum is a private meeting of the Party and the manifesto will not be publicly available until Party Conference, LabourList obtained a full list of the draft policy platform earlier this year.  

In advance of the meeting, Starmer and Reeves have been keen to set the tempo by adhering unfailingly in their commitment to absolute fiscal discipline should they come to power, and have proudly declared that nothing in their manifesto will be uncosted. Starmer asserted to delegates that a Labour Government “is not a magic wand” to undo the last 13 years, recognising that his Party – should they come to power – will inherit a bleak economic outlook. This approach has not come without criticism, and accusations that Labour are not being bolder in their policy development led to major unions Unite and GMB walking out from what has reportedly been ‘hostile talks’ at the meeting. 

Despite concerns over controversial policies such as not scrapping the two-child benefit and promising revisions to anti-protest laws, the Labour Leadership saw off the more radical proposals from the left wing of the party, and avoided any formal votes on amendments; meaning that the draft policy document presented to members after this weekend will be the one debated at Party Conference this October*. 

Over the Summer period Labour will look to hone its messaging around these policies, consider how to market them to the electorate and ensure the rumblings from the more disenfranchised elements of his Party are addressed.  

Labour will begin to slowly change the dial from development of policy to consolidation of it, and businesses should be aware of the narrowing window between now, Conference, and into early 2024 to try and influence manifesto development.

For Starmer and his team, the weekend will bring relief. Despite some friction, he has a clear mandate from his Party and its delegates to take forward to Party Conference in October. Buoyed by the by-election victory in Selby, Starmer has done enough to knit together warring factions to present a united front to the electorate as the general election begins to come into view. 

* Whilst the manifesto would normally be based on elements of policy developed by the NPF and voted on by members at the party’s annual conference, there is no formal obligation for the manifesto to include policy put forward by the NPF and the party’s membership. 

Next Left, our recent Guide to Engaging with the Labour Party, sets out the party’s policy-making processes and timeline in more detail. 

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How can government and business collaborate to create ‘good’ economic growth?

I’m a great believer that there’s something you can call good economic growth. That’s growth which creates real wealth and good jobs, but does so in a way that is lasting and respects the greatest sources of wealth we have – the planet and its people.

There’s never been a time when bringing these things together has been more important – whether to improve the state of Britain’s economy, or to address the most profound challenges of climate change and biodiversity.

For all our recent turbulence, Britain has giant strengths. These can create immense opportunities when we bring them together well: not just great companies and entrepreneurs, but also some great public institutions including our universities, legal system, and the Civil Service. These are globally respected and have huge potential as sources of value.

Most of my 30 year career in and around Government was spent doing what I’ve just described – trying to bring Government and business together to create lasting benefit for society. Then I called it micro-economic policy, and it’s what I did at HMT for 15 years – whether getting private investment into infrastructure or creating a better tax regime for entrepreneurs. It’s also what I did on the Board at Ofcom: I spent 7 years helping to set up the regulator and then run it. It was also a big part of the nearly 10 years I spent as a Permanent Secretary, or CEO-equivalent, across the Department for Transport, Home Office, and for a little while the Department for Business.

In fact one of my proudest achievements as a Permanent Secretary was helping to shift the mindset at DfT so that it was a bit less focussed on extra concrete and steel – the traditional answer to transport problems – and more focussed on radical innovation. The UK’s strong story on EVs today can be traced back to the partnership we created a decade and more ago between business, government and academe: to my mind that’s a model for government and business working together.

Chairing WA’s Advisory Board now gives me the opportunity apply this experience to help WA’s team and clients. One of the reasons I was keen to join WA was that its own approach – the emphasis on collaboration – is really well aligned with my own. And real collaboration starts with really good understanding: not just of the policy challenges and constraints that might be faced by the firms WA advises, but the longer-term goals and the sense of opportunity.

And my hunch is that after the Election, whoever wins, that theme of good growth is itself just going to keep on growing.

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‘Stopping the 8am rush’ – Is the plan for recovering access to primary care an oversimplification?

The primary care access plan is finally here. A comprehensive plan to mull over but difficult to have a full view in the absence of the workforce plan. It is coined by DHSC as “the first step to address the access challenge ahead of longer-term reforms”, but this is not to undersell its transformative potential. Primary Care Networks (PCNs) are now fully focused on delivering this plan which spans the introduction of better phone and online systems, pharmacies supplying medicines for more conditions, and more staff and more appointments – anything else will be deprioritised.  

The plan has been widely praised as championing innovation. However, there is a feeling that the plan doesn’t duly assess the risks and benefits of what has been put forward and is perhaps an oversimplification from DHSC and NHSE.  

On a micro level, in this blog we explore the potential impact on access of changes to the role of pharmacy, the Investment and Impact Fund (IIF) and Quality and Outcomes Framework (QOF).  

Broadening the role of pharmacists presents both opportunities and risks

Pharmacy First has arguably elicited the strongest discourse and feelings both good and bad. Outwardly, a number of high-profile pharmacy leads are supportive of the initiative but there is cautiousness amongst the health sector. In conversation with David Thorne, Transformation Director at Well Up North PCN, he noted the following challenges:

1. Interoperability: It is vital that GP and pharmacy systems speak to each other, and we avoid the fragmentation that has bedevilled GP systems to date. Currently, robust systems are not in place to inform pharmacists of what medication someone is on to support their prescribing decisions ─ apart from placing faith in very early use of the NHS App. We need consistency and safe links, especially when looking to enable people to use a pharmacy distant from their GP practice.

2. Pharmacy closures:  In theory, the enhanced role of pharmacists could make primary care more accessible. However, data reports that pharmacy closures have disproportionally been in the most deprived areas of England ─ so there is a risk that positive changes to the role of pharmacists’ conflict with national priorities around health inequalities. One of the main drivers of the shortages of community pharmacists is the PCN recruitment of pharmacists to work in primary care roles.

3. Right Place, Right Role: Community Pharmacies may not be able to develop responsive clinical governance systems that adequately respond to case mix escalation, for example when superficially routine consultations escalate to issues of drug/alcohol misuse, mental health and safeguarding. How can we support pharmacists to develop the skill, time and governance systems to manage the types of conversations that GPs have?  Extensive training and public awareness will need to accompany these changes.

This is far from a done deal with negotiations on the £645 million supportive investment ongoing. Further, there will be a consultation on upholding patient safety considering greater prescribing powers for pharmacists.

Polling results conducted by WA communications in March 2023 of 1,000 members of the UK public highlight that whilst there is public support for a greater role for pharmacists, there is some way to go to building public awareness of the services pharmacists can provide.

A word of caution surrounding progressive changes to the IIF and QOF

Further details of the streamlining of IIF and QOF were announced within the plan. Redirecting £246 million of IIF funds represents a major shift with 30% to be awarded by ICBs (integrated care board), conditional on PCNs achieving agreed improvement in access and patient experience. DHSC/NHSE guidance is that access improvement plans should prioritise supporting those with the lowest patient satisfaction scores.

Local flexibility must be at the heart of the re-design of incentives, without arbitrary access quotas for certain groups such as ethnic minorities or LGBTQ+, which could lead to under-funding and deepening inequalities. It seems that DHSC/NHSE are cognisant of this, explaining that the plan is designed to move towards a “more equitable approach that will benefit all patients” and “does not call out specific cohort of patients” for that reason. This must be pulled through at an incentive level to ensure certain PCNs such as rural PCNs who may have small numbers of certain communities, are not caught out.

NHSE further announced that, through a consultation this summer, they will explore how to link QOF to key strategies such as the upcoming Major Conditions Strategy. Ultimately, ICBs new commissioning powers will mean ICBs very closely performance manage PCNs. This goes against the ‘neighbourhood’ aspect of integrated care reforms, which will only seek to become more complex as preventative care models are adopted.

As always, implementation will be the true test. The plan comes with no standardisation frameworks or action plans attached. This passes the buck to PCNs and/or ICBs to operationalise, which risks fragmentation in the absence of nationally led advice.

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In Conversation with Toby Perkins MP – Unlocking opportunities to ‘earn while you learn’

Last week, WA Communications hosted a roundtable with Toby Perkins MP, Shadow Minister for Further Education and Skills, to discuss Labour’s approach to skills and lifelong learning, with a particular focus on the party’s views on degree apprenticeships. Bringing together key players within the HE, apprenticeships, and skills sectors, the discussion highlighted the potential of degree apprenticeships​ for learners, industry, and the economy.  

Perkins shed light on Labour’s current thinking around the skills agenda, confirming the party’s support for degree apprenticeships, advocating for FE and HE to “work hand in hand”, and calling for more investment in skills. However, he also stressed that spending the current levy funding should be the priority. 

At the event, WA Associate Director, Lorna Jane Russell previewed WA’s latest education research report on degree apprenticeships, presenting the findings from original consumer polling and setting out the challenges – and potential solutions – to expanding these qualifications throughout the UK. We will launch these publicly next week. 

Key Insights from the Roundtable:  

1. Degree apprenticeships have the potential to be a valuable opportunity for policy in lifelong learning, especially in the context of increasing education costs and the skills shortage. However, they are still not widely available, and there is a lack of awareness about them among the public. There is also a perception gap about the prestige of degree apprenticeships, which may deter potential applicants. 

2. To increase access and participation in degree apprenticeships, there is a need for new models that can widen participation and increase access to industry placements, especially for disadvantaged students who are currently underrepresented within the sector. This should be coupled with initiatives to support young learners in making the transition from school into work, including greater support throughout the qualification.  

3. The government has adopted an employer-led approach to degree apprenticeships, which means less investment and fewer opportunities for students. This approach may also limit the development of new models that prioritise access and participation, rather than just meeting the needs of employers.  

4. Universities and skills providers alike want to see more flexibility and fewer regulatory burdens in order to widen their degree apprenticeship offerings. Employer investment in skills is also down, and the apprenticeship levy needs reforming to be more flexible and help SMEs attract apprentices.  

5. Finally, there is also a need for investment in upskilling the existing workforce to deliver future jobs in decarbonisation and technology. Degree apprenticeships could play a role in this upskilling effort by providing a pathway for workers to gain new skills while also earning a degree and gaining work experience. 

 So, what’s the upshot for the skills sector?  

The cross-party consensus about the need to invest in skills training and degree apprenticeships favours skills providers, though universities that work with employers to offer degree apprenticeship qualifications will benefit. 

Labour’s promise of flexibility in their approach to the apprenticeship levy presents significant opportunities for skills providers to expand their degree apprenticeship offerings, and for universities to access a new funding stream. 

However, higher education could lose out to FE and apprenticeship providers in post-18 education reforms, so they will need to demonstrate how they can work alongside skills providers and local FE colleges to play a critical role in delivering on the reskilling agenda. 

While for policymakers, degree apprenticeships have the potential to be a valuable opportunity for lifelong learning and addressing the skills shortage, more needs to be done to increase access and participation, support new models, and revise funding and regulatory frameworks to support students to ‘earn while they learn’.  

 

If you have any questions or are interested in learning more about WA’s education team, please contact Lorna Jane Russell, WA Communications, at lornarussell@wacomms.co.uk

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E-scooters at a crossroads

E-scooter manufacturers, providers, schemes and riders have been left waiting for certainty on their future.  

After last year’s Queen’s Speech, Ministers confirmed their intention to legislate on e-scooters, moving beyond the time bound and limited role e-scooters currently have. Two Prime Ministers and 3 Transport Ministers later, the future of e-scooters is back up in the air.  

The Transport Bill – that would have been the vehicle for legalisation and legislation – has been a casualty of upheaval at the heart of government. Now Ministers and officials are left having to bid for parliamentary time again, with even fiercer competition for time in the last King’s Speech of this government before an election.  

Despite the transformational role e-scooters could play for travel, particularly in urban areas, there is a risk that new decision makers have lost track of e-scooters’ congestion busting, cost saving and carbon cutting benefits. The Ministers, advisers and champions that secured the announcement from government have moved on, and the new crop have yet to make a full throated endorsement.  

In the face of this challenge, WA’s latest transport temperature check polled public attitudes to e-scooters to analyse the challenges in the road ahead.  

Whilst there is still a route to legalisation and legislation, we have found that more of the public is opposed to e-scooter legislation. It means advocates start on the back foot, and need to both convince the sizeable number of ‘don’t knows’ (one in four people) and address the concerns of opponents. Safety risks to other road and footway users is the most commonly cited reason for opposing legalisation, driven by persistent coverage of dangerous incidents.   

If these and other concerns are not addressed, the case for legalisation will diminish. Ministers, advisers and officials will either be unwilling or unsuccessful in their bids for time to act in the King’s Speech later this year, with Number 10 instead deciding to focus on less controversial and easier to deliver policies. 

In turn, Labour has been able to stay largely silent on the e-scooter debate. There is a narrow window to ensure Labour’s transport team prioritises e-scooters, to keep pressure on the government now and ensure it does not drop off the agenda completely should they win. 

The next 6 months are critical if the industry wants to escape the legal limbo it is in. Only by delivering a gear change in engagement can the industry secure its long term future and make sure that the key political decision makers in both the Conservatives and Labour understand the benefits e-scooters will deliver for their agendas.  

Doing so will help build a new consensus on the future of e-scooters, but missing this opportunity means the wheels could fall off completely.

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The Rise of ChatGPT: Unleashing the Potential of AI and Big Data in Industry 4.0

Since its launch by Open.AI in November 2022, the chatbot software ChatGPT has come to represent a first look at what a world underpinned by artificial intelligence could mean for the everyday person. ChatGPT not only went viral on social media but also became a hot topic of conversation in both the workplace and around the family dinner table. While employees pondered the future of their jobs, students conspired to avoid their homework or university essays. Many speculate that either ChatGPT or another chatbot software will soon replace the traditional search engine and is the first real-life version of Iron Man’s artificial personal assistant, J.A.R.V.I.S. (Just A Rather Very Intelligent System).

If true, it could spell disaster for the Google search engine which commands a 92% share of the global search engine market and which is expected to launch its own chatbot software ‘imminently’.

Why? Because artificial intelligence promises to fundamentally rewire (and speed up) the way humans interact with information and data. Its promises are as grand as the first, second and third industrial revolutions of recent human history. The Chairman of the World Economic Forum, Klaus Schwab, argues that artificial intelligence and big data equates to a fourth industrial revolution that will “raise global income levels and improve the quality of life for populations around the world.”

Popular intrigue in ChatGPT has followed investor interest in artificial intelligence with global private investment doubling from 2020 to 2021, totalling $93.5 billion, and marks the greatest year-on-year increase since 2014.

What does artificial intelligence mean for policymaking and public services?

Artificial intelligence is set to transform public services in the future. For instance, at the end of 2022 there were 1.5 million patients waiting for a diagnostic test, representing a sizeable chunk of total NHS waiting lists. With a workforce shortage in the diagnostics sector, artificial intelligence has demonstrated a remarkable ability to carry out image-recognition tasks and through ‘deep learning’ algorithms can handle complex variations and detect characteristics well beyond the capacity of humans. Embedding its use is a long way off but nonetheless promising.

So much so that during the covid pandemic, NHS AI Lab built a 40,000 strong database of chest scans to enable researchers, analysts and developers to develop AI technologies with the potential to support quicker diagnosis and better targeted treatment. Not only does this programme provide the NHS with an invaluable blueprint for testing and adopting AI models in the health sector, but also attests to the importance of public and private sector collaboration to advance the application of artificial intelligence. Whilst it will never entirely replace the need for humans, it is easy to imagine a healthcare system radically transformed by artificial intelligence, saving the NHS both time and money.

Artificial intelligence will also transform policymaking. Deloitte recently argued that over time “AI will spawn massive changes in the public sector, transforming how government employees get work done.” Certain jobs that are administrative or operational are likely to become redundant, Government functions will be entirely redesigned, and a new army of programmers and coders will rise through the ranks of public sector organisations. Deloitte’s research suggests that automation and artificial intelligence could replace up to 861,000 public sector jobs by 2030, saving the UK Government £17 billion annually in wages compared to 2015.

Unresolved ethical and regulatory questions

As with any advances in technology, questions of ethics and best practice are never far away. Just as electricity enabled the automation of manufacturing and mass production, it also led to the invention of the electric chair, and artificial intelligence blurs the boundaries between what is physical and what is cyber. Decisions made by artificial intelligence are not always intelligible to humans. These decisions are not always neutral but are susceptible to bias and inaccuracies and can entail surveillance practices that invade rights to privacy.

The Government’s Office for Artificial Intelligence has partnered with the Alan Turing Institute to address some of these concerns. Thus far only guidance has been published. Whilst the Government announced a Data Protection and Digital Information Bill to better regulate the use of artificial intelligence in July 2022, it is not a top priority of Sunak’s Government, preoccupied with fighting fires and re-establishing economic credibility in the lead up to a general election. Given the tight parliamentary timetable, regulatory uncertainty is likely to persist in the short- to medium-term.

Despite this uncertainty, the UK artificial intelligence landscape is still an attractive opportunity for investors with the Government recently expanding R&D tax reliefs to include all mathematics supporting artificial intelligence, quantum computing and robotics. But with the introduction of artificial intelligence regulation expected in 2023 in both the US and the EU, the UK risks being late to ride the wave of the fourth industrial revolution.

Ps. ChatGPT authored the title of this blog.

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Major ambitions in a new Major Conditions Strategy

A new health strategy is coming – finally! And it threatens to be a whopper.  

A Major Conditions Strategy will be consulted on – and potentially published – in 2023. After months of firefighting on day-to-day NHS operational performance the Government is looking to get back on the front foot and show the world it still has ambitions to improve the long term health of this nation. 

2022’s political turbulence put the 10-year cancer, dementia and mental health plans on ice, saw off the health disparities white paper, delayed the workforce plan, stalled the implementation of the Life Sciences Vision, and neutered the joint DHSC and NHS England Long-Term Plan refresh. Pressure on NHS services across the country and at every point in the system made long term strategising – however urgently needed – impossible. 

Steve Barclay’s ministerial statement today is an attempt to correct this perception, while streamlining the numerous strategies his predecessors committed the Department to.  

In short, the Government and NHS England will be developing a new strategy for ‘major conditions’ including cancers, cardiovascular disease – including stroke and diabetes, dementia, mental ill health and musculoskeletal disorders.  

The ambition is to develop a ‘strong and coherent policy agenda’ building on the progress of the NHS Long Term Plan to deliver the Government’s manifesto commitment of gaining five extra years of Healthy Life Expectancy by 2035.  

The statement makes for dizzying reading as it sweeps across healthcare hot topics: 

Given the breadth of the scope, it will likely generate cynicism as well as hope. There is no doubt that there are many big challenges that need addressing – conditions like diabetes and dementia have a huge impact on society and individual lives, and have consistently not received the attention they need to drive meaningful improvements in care.  

However, there is also a very real risk that this new attempt at a sweeping strategy is seen primarily as a move to kick action into the long grass, while giving ministers an answer to the persistent questions about progress on long awaited strategies in cancer, dementia and mental health. As healthcare has become increasingly political, today’s announcement is primarily about providing a degree of political cover.  

The consultation will need to address how any new strategy aligns with the wider approach to delivery. A major national review across multiple disease areas doesn’t naturally lend itself to the agenda of greater delegation of powers to ICSs through Hewitt Review or the removal of centrally imposed targets. It is also unlikely that significant funding will accompany reforms when all signals point to the expectation of efficiency and restraint.  

The health community will inevitably, and rightly, want to engage again: sharing evidence, policies, and best practice examples to try and shape this latest attempt at a vision for the future of care.  

But how many times can stakeholders and patients be walked up the hill without seeing any tangible change? 

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Return of the Online Safety Bill

The first month of Rishi Sunak’s premiership has been full of speculation about which of Boris Johnson’s 2019 manifesto pledges he will keep and which he will scrap.

One of the most contentious pieces of legislation coming down the track is the Online Safety Bill. It has been confirmed that the Culture Secretary, Michelle Donelan, is ready to present an amended version of the Bill to MPs after progress on it stalled due to recent political turmoil.

The Bill is intended to regulate social media platforms with the threat of criminal sanctions, including jail terms and fines, if firms do not regulate content. The Bill would assign Ofcom as the enforcement agency for a new “duty of care” that would be placed on platforms included in the scope of the legislation.

With the UK cementing a reputation as the capital of tech investment in Europe, implementing a regulatory framework that is fit for purpose is crucial. Regulatory stability is a core risk assessment tool that can determine the appetite for tech investment.

Coming out of Covid, countries around the world have faced economic downturns, and the tech sector has not been immune. Many firms have cut their online advertising budgets and now some of the largest tech businesses, including Amazon and Meta, are laying off staff.

Investors have also piled on the pressure to cut costs, accusing tech firms of being too slow to react to warnings of an economic slowdown. Now that tech companies are not growing at astronomical rates, investor scrutiny has swung to profitability.

Many investors, faced with inflation, and rising interest rates, are gravitating towards more traditional sectors like energy and consumer staples that deliver tangible goods, make a profit and reward shareholders. Staple stocks are often viewed positively by investors during times of economic uncertainty.

There are obvious headwinds in 2023 for tech companies, and with this backdrop of instability, it is even more important that the sector keeps up with regulatory changes.

Tech businesses have been calling for legal clarity during the period of extensive parliamentary scrutiny of the Online Safety Bill so that they can prepare for the new regulations. New laws contained in the Bill will be applied to companies that host user-generated content, such as images, videos, comments and messaging. The Government estimates around 25,000 search and user-to-user platforms will fall under the scope of the legislation.

With two-thirds of adults concerned about harmful content online, the Online Safety Bill presents an opportunity for investors looking to generate healthy returns in the UK tech space. Tighter regulation will drive out bad actors and grow market share for well-regulated platforms, and there will be a cooling-off period before enforcement activity is initiated, minimising the risk of hefty fines. An online safety regime that is workable and adopts the Government’s aims of addressing illegal content online would make the UK a safer environment for users, where tech companies will have clear responsibilities and greater accountability.

The proposed framework includes giving the regulator powers to compel tech companies to publish annual transparency reports on the content on their platforms. This will incentivise online-service providers to become best in class and allow investors to make informed choices.

Better intelligence sharing on evolving online harms will enable tech businesses to develop products that are safe and less exposed to risk. The Bill proposes a “Safety by Design” framework that’s intended to help companies include online safety features in new apps and platforms from the start of production.

Tech regulation is often presented as a problem child, but it could tackle many of the challenges the digital economy faces. Regulation brings certainty and is critical to value creation. Failing to keep on top of evolving technological trends and threats could have major implications for UK based tech businesses, particularly when other countries are bringing in their own regulations.

There is a fear that the Online Safety Bill could hurt small businesses by hitting them with additional costs, but any teething issues are expected to be temporary and in the long-term, it is anticipated the Bill will boost the competitiveness of smaller tech firms as it disproportionally impacts Big Tech. Curbing the influence of Big Tech will present new opportunities for private equity as it will spur smaller competitors and innovation in the digital market.  If investors aspire to identify the future winners in the tech space, their first concern should be understanding the rules which will govern it.

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Fantasy economics or Frankenstein’s monster?

Billed as a ‘mini-Budget, the Chancellor’s fiscal statement in Parliament this morning turned out very much not to be that.

It amounts to the biggest package of tax-cutting measures since 1972 – even bigger than Nigel Lawson’s in 1988, which had been trailed as the ‘scene setter’ in the newspapers this morning.  Kwasi Kwarteng really wanted to keep some of his ‘surprise’ powder dry for that moment when he abolished the 45% tax rate for the highest earners.

Here on one hand the Government is talking about eye-watering levels of borrowing that will be needed to help with everyone’s energy bills – costing in the region of the furlough scheme, or more.  Traditionally the Conservative Party has defined itself as being for ‘fiscal responsibility and prudence’.  Anyone who remembers the last few General Election narratives would be forgiven for thinking this incarnation of the Party to be an entirely different beast.  What happened to those so-familiar ‘don’t hand the nation’s credit card back to the ones who maxed it out’ and ‘don’t hand the car keys back to the ones who crashed it in the first place’?

The Government’s argument runs that borrowing powers used ‘responsibly’ are justified.  One wonders where they are drawing the line, given that criticism of the last Labour Government and its handling of the global financial crisis.

We then on the other hand have these gigantic tax cuts of £45 billion, including a boost for bankers with the lifting of the cap on their bonuses, that abolition of the top rate of income tax for the highest earners, more ‘sticks’ to encourage those on benefits to get back into work, the cancelling of corporation tax … all this felt very ‘Tory’ in a very definitely not Cameroonian way.

‘Growth, growth growth’ is the mantra being used to lash – to whatever degree of success – the overall package together.  It is all banked on achieving a sustainable trend growth rate of 2.5 per cent.

 

‘Go big or go home’

The Shadow Chancellor Rachel Reeves’ landed a blow in Parliament in her response to Kwarteng, likening him and the Prime Minister to ‘two desperate gamblers in a casino chasing a losing run’.

Was she right?  Is any of it sustainable?

The £60 billion cost for the help with energy bills (by the Government’s own admission, a figure which is liable to fluctuation – and some have put at well over £100 billion) is hopefully a one (two year) off.  But this is an enormous commitment to have made, without a great deal of a sense of an exit strategy.

Then, look at the £45 billion of tax cuts that have been promised.  These are sums which will be ‘gone’ from Government finances within a couple of years as they all come ‘on stream’.  What happens to the year-on-year debt if the gambled-on growth not only isn’t as resurgent as aimed for- but fails to materialize at all.  There are huge variables at play here; the continuation of the war in Ukraine, another vicious variant of Covid, some new Nostradamus-esq upheaval- or indeed as indicators are suggesting, a sterling crisis.

The pound is at a 37-year low against the dollar.  The UK 10 year government bond yields (interest rate government borrows at) are now at 3.38%, the highest level since 2011 – the cost of all this borrowed money is already rising.

 

If all the economists were laid end to end, they’d never reach a conclusion

The Bank of England (with its new interest rates announced yesterday, to dampen inflation) doesn’t seem to agree with the Treasury and Government (who have announced all these tax cuts, that could push inflation up) and no one really knows what the Office of Budget Responsibility thinks (as it won’t be publishing its full economic and fiscal forecast before the end of the year).

If Kwasi Kwarteng’s claims this morning that ‘this is a new era’, and ‘fiscal responsibility remains essential’ were met with some derision, neither did Rachel Reeve’s proclamation that ‘Labour believes in wealth creation’ land particularly plausibly.

Her response has left Labour in a bit of a difficult position.  They have also committed to significant help with energy bills. But whilst they may not agree with the Government-styled ‘growth-promoting’ measures, they have yet to offer up any alternative – whilst also citing the last 12 years as being an ‘economic failure’.  They may well yet need a ‘third way’, to coin a phrase.

We may well, as some economists have said, be in a recession already.  So what matters in the run-down to the election in 2024 is whether this ‘gamble on growth’ has started to kick in, and what people feel in their pockets, from their income, and other tax cuts.

Bonkers or Brilliant?

This is very much the question that is doing the rounds on Conservative MPs’ WhatsApp groups.

I’ve had it described to me by a former colleague as “Watching Liz and Kwasi is like when you are on a plane, and the air stewards’ smiles just stays resolutely in place as the oxygen masks come down.  I can’t tell if it’s terrifying … or in some ways deeply reassuring that everything’s going to somehow be ok.”

One suspects the pound and the polls will show that pretty quickly.

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Who will define Conservatism in 2022?

Down to the last two leadership candidates, the country will now see a string of nationwide hustings for Conservative Party members, meaning an intense (and, at times, uncomfortable) summer-long debate. Like it or not, the choice of the 160,000 Tory party members will define what it means to be Conservative in 2022.

As the two candidates, former Chancellor Rishi Sunak and current Foreign Secretary Liz Truss, go head-to-head, their policy announcements to date promise to take the Party in two distinctly different directions. Who wins will determine the road ahead for Conservatism up to the general election and beyond.

Perhaps most fundamentally, the candidates differ on their approach to tax and spend, butting heads on who has the most legitimate claim to Thatcherism 2.0.  Both want to create a smaller state with (eventually) lower taxes but differ on when and how to implement these. Sunak advocates fiscal responsibility, vowing to tackle inflation before making any cuts. Truss would cut taxes on day one as Prime Minister, with an Emergency Budget and new spending review paving the way, presumably, for shrinking government departments.

Without a doubt, the cost-of-living crisis will be one of the next Prime Minister’s biggest challenges, and how the candidates tackle it will likely define their premiership. With the exception of Sunak, all of the candidates in the race made commitments to do more to support people. Sunak has remained adamant that the best thing he could do to combat the cost-of-living would be to curb inflation. If he wins, he will come under huge pressure to go further.

On Brexit, neither camp will want to appear to the Party membership to be taking a soft approach towards the EU. Behind the scenes, however, the Northern Ireland Protocol is another area of key difference between the two candidates and will redefine the UK’s relationship with Europe. Sunak, after three years in the Treasury, remains alert as ever to the economic impact of policy decisions, and leans towards compromise. Truss, conversely, wants to cement her position as the hardline Brexiteer despite (or because of) voting remain in 2016.

Ultimately, this is a fight for the right of the Party. Sunak wants to distance himself from Boris Johnson’s high-spend ‘Cakeism’, while Truss seeks to woo the traditional heartland with immediate tax cuts. The challenge for both candidates, upon becoming Prime Minister, will be to unite a party that includes the European Research Group, Red Wall and One Nation Tories, and everyone in-between before the next general election.

 

Tax and spend

The candidates have already clashed bitterly on tax and borrowing. Sunak has branded Truss’ policy socialist, whilst she has argued that he would push the country into a recession.

Sunak insists he is a low tax Conservative. However, he will not make specific pledges to cut taxes until inflation is brought under control. In truth, he cannot plausibly pledge tax cuts now, having overseen some of the largest tax rises in recent years. He’s standing on a soapbox of fiscal responsibility, advocating low spend with future cuts on the horizon when the time is right.

Truss, on the other hand, would cut taxes on her first day in office. She has so far pledged to reverse Sunak’s increase to corporation tax and National Insurance, costing the Treasury over £30 billion. She would generate fiscal firepower by paying back the £311 billion Covid debts over a longer period – treating them akin to Second World War loans.

It is difficult to see how two political heavyweights with such opposing economic ideology could work together in a cabinet of collective responsibility. It is highly unlikely that either candidate will serve in the other’s government, instead retreating to the back benches or (in Sunak’s case if he does not win) from politics altogether. The bigger concern for the Conservative Party is whether MPs can unite around the winner to support the implementation of their fiscal policy. Whichever path is chosen, the Parliamentary Party must wholeheartedly support it if they are to stand the chance of winning the next election. If voters get any whiff of squabbling under the new leadership, the new Conservatism may end up being defined by its time on the Opposition benches.

 

Environment

The environment, in particular the 2050 net-zero target, had all the candidates in this race equivocating to a greater or lesser degree. Eventually, all of them pledged to support the 2050 net zero target.

While it is likely that the long-term target will remain untouched, the short-term route towards this goal looks set to be abandoned or revised, in no small part due to the cost-of-living crisis. Sunak has pledged to increase renewable production (offshore rather than onshore) and build more electric car charge points, though he has yet to announce any detailed environmental plans. As Chancellor, he largely avoided talking about net zero and some accused him of blocking green policies that had any associated spending implications.

Truss committed to net-zero reasonably early in the contest, securing the backing of notable green Tories including Vicky Ford and Simon Clarke, both of whom have cited her support of Cop26 as one of their reasons for supporting her. So far though, she has pledged to ‘pause’ green levies on energy bills to save households £153 each to help ease the cost-of-living crisis. She also wants to lift the fracking ban. As Foreign Secretary she rarely bought up environmental issues in speeches or with counterparts, and as Environment Secretary she cut subsidies for solar farms calling them ‘a blight on the landscape’.

The biggest challenge for both the candidates here is that the party membership is at odds with the wider electorate on this issue. A recent poll in The Times puts the environment at the bottom of the top ten concerns of party members, and a YouGov poll found that only 4% of members believe net zero should be a priority. Contrast that with an April poll that put broader public support for net zero at 64%. It’s true that the race for leadership means the candidates have to focus on the first group, but if they want to be serious contenders in the next general election, then what?

 

Levelling Up

There has been a distinct lack of enthusiasm from any candidates for Johnson’s flagship ‘levelling up’ agenda. This may be a decisive move to distance themselves from his premiership, but they have not indicated what they would do for the Red Wall that won them the last election so decisively. Neither candidate wants to make commitments that would be costly to the public purse, and broadly speaking they both want to focus on reducing spending and shrinking the state.

So far, Sunak has committed to keeping a Cabinet Minister for levelling up and has promised to ensure that every part of England that wants a devolution deal gets one. He has also pledged to devolve powers on business rates to mayors and look at the devolution of post-16 education. He said he will work closely with local leaders on the future of transport investments, including Northern Powerhouse Rail.

Truss has promised to create ‘low tax zones’ across Northern England with low business rates and few planning restrictions, making it easier and quicker for developers to build on brownfield land.

Both candidates have committed to the Northern Research Group pledge card but must try harder than this to incorporate the Red Wall into their new Conservatism if they want to count these votes at the next election.

 

Brexit

Sunak voted Leave and his voting record has been consistently pro-Brexit. At the Conservative Party Conference last year he said “I believe the agility, flexibility and freedom provided by Brexit would be more valuable in a 21st century global economic than just proximity to a market.” He has said he will create a Brexit Delivery Department tasked with reviewing all 2,400 laws inherited from the EU. He wants to scrap and replace GDPR, overhaul laws governing the City of London, and speed up clinical trials. It is thought that he might move on the Northern Ireland Protocol and seek compromise with Brussels, though giving any suggestion of doing so at this stage in the leadership contest would be extremely high risk.

Despite voting to remain in the EU in 2016, Truss is seen, counterintuitively, as the hardline Brexiteer. She wants to reform the European Court of Human Rights but is prepared to withdraw from it if necessary. As Foreign Secretary, she introduced a Bill to unilaterally override some post-Brexit trade rules for Northern Ireland. Her supporters claim she plans to drive forward regulatory divergence from the EU, including overhauling business regulation to spur a more dynamic economy.

It’s hard to believe this is still an issue for voters six years on, but perhaps the Conservative Party will never be able to shed its complicated history with Europe. Nevertheless, the candidate that wins the leadership race will be responsible for forging a new relationship with the Continent, and how they do so in the next couple of years is likely to redefine the Party.

 

The missing piece?

Both candidates were participants in the outgoing incarnation of government. This should, in theory, make it a little awkward to disavow everything it has done. Although, it has seemed to trouble Truss rather less, leaving Sunak sharply and repeatedly reminding her of the notion of ‘collective responsibility’.

The candidates need not deny its achievements. But they do need to acknowledge the elephant in the room: that the leader that won them an 80-seat majority was ousted by Conservative parliamentarians less than three years later for serious and serial questions over the ethics of his Government, and of himself. Conservatives fundamentally believe in upholding the unwritten constitution and its conventions, but events of the Johnsonian era have undermined one of the central assumptions of our country’s democracy: that the Prime Minister acts as the guarantor of ethical government. In order to build a new, resilient Conservativism, they must reassure voters that this will never happen again.

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Sustainability Disclosure Requirements: Where do we go from here?

Sustainability Disclosure Requirements have long been on the industry’s radar, supported by wider international actions surrounding the need to combat climate change and protect our environment. However, more recently, clarity around what these requirements entail and how we can appropriately implement them has been notable by its absence – leaving many to wonder, what comes next?

The history of SDR

In July 2021, the Chancellor announced the new Sustainability Disclosure Requirements (SDR) at his Mansion House speech. These requirements were to be focused on combining existing requirements with new ones in an effort to create a new sustainable investment labelling regime which would make it easier for consumers to navigate the investment products available to them.

The SDR were then fleshed out three months later in October, when, just before hosting COP26, the Treasury laid out its roadmap to sustainable investing: Greening Finance.
This detailed what the SDR would need to include, and when; how the SDR should report against the (forthcoming) UK Green Taxonomy; considerations to be made in the day-to-day running of business to ensure responsible stewardship; the potential for ESG data and ratings providers to be brought into the scope of the regulator and Government expectations for asset managers, asset owners and service providers as part of the UK’s transition to net-zero.

Details were “subject to further consideration” and in November, the FCA opened a consultation on SDR and investment labelling, inviting views from the industry at large on the pending obligations. Responses came from far and wide in support of the SDR, with suggestions around labelling, how to make the requirements accessible to consumers, and how the SDR could fit in with other standards.

That consultation was closed in January of this year and the next steps for the SDR were lauded to be in the Queen’s Speech in May. However, while the Treasury stated that it “remained committed to implementing sustainability disclosure requirements” and would “proceed with the necessary legislation in due course”, a reluctance to impose any new regulations on businesses at that time meant that the SDR were notable by their absence in the Financial Services Bill.

This decision was met with notable frustration across the financial industry, with some suggesting that the postponement of the SDRs was a missed opportunity for the UK to reaffirm its position as a global environmental leader as well as denying business the much-needed guidance, clarity and confidence in aligning their processes with a 1.5C future.

Now, the FCA has said it will publish a consultation paper on the sustainability disclosure requirements, including sustainable investment labels, in July, but that formal engagement will not be until Q4 this year.

So, with a moving timeline and a distinct lack of clarity around what the SDR is going to look like, where do we go from here?

 

Join us

On 30th June, WA will be hosting a panel discussion to explore where the industry needs to go next. We’ll explore the Government’s latest developments of the regulation, the main concerns facing the industry and what effective SDR really look like.

 

Confirmed panellists

 

Andrew Death, Deputy Director, Department for Business, Energy and Industrial Strategy

Andrew Death is a Senior Civil Servant in the Department for Business, Energy and Industrial Strategy. He has been a civil servant for 21 years and is currently Deputy Director for audit and corporate reporting. His responsibilities include delivering changes to the corporate reporting framework to implement Government policy of ESG reporting, as well as delivering legislative change to increase competition, choice and resilience in the audit market.

 

Louisiana Salge, Senior Sustainability Specialist, EQ Investors

Louisiana is responsible for overseeing EQ’s ESG and impact integration strategy across all assets, its stewardship efforts and sustainability data reporting.

 

Louisiana first joined EQ Investors in 2018 on an internship during her master’s degree programme at Imperial College London, where she conducted research on impact measurement for her thesis. This formed the groundwork for EQ’s award-winning Positive Impact Report, and she joined the firm as a Sustainability Specialist after graduating. Over the last 2 years, Louisiana has developed, and implemented common sustainability standards across all assets managed at EQ. She also leads as a specialist across the three sustainable portfolios managed at EQ: Positive Impact, Future Leaders, Climate Action.

 

James Alexander, CEO, UK Sustainable Investment and Finance Association
James Alexander joined UKSIF as Chief Executive in October 2020, with a strong vision and mandate to further enhance the organisation’s key role in promoting and expanding sustainable investment and finance in the UK.

 

James has a background in international climate finance and infrastructure finance as well as many years’ experience in leadership roles in membership organisations. Most recently, James supported global megacities to overcome the substantial barriers to financing climate action as Director of the City Finance Programme at the C40 Cities Climate Leadership Group and Head of the C40 Cities Finance Facility – a project preparation facility he developed, now supporting cities across the world to structure nearly a billion dollars of sustainable infrastructure transactions. James has worked on international climate finance issues at the UN level and supported cities across the world to invest their pensions and reserves more sustainably.

James is Treasurer of Eurosif, the European Sustainable Investment Forum, a member of the Green Technical Advisory Group (GTAG) providing advice to the UK Government on implementing a UK green taxonomy and a member of the Disclosures and Labels Advisory Group (DLAG) providing advice to the FCA on the UK’s SDR and fund labelling regime.

 

When:
Thursday 30th June,
08:00 arrival for 08:30 start, close at 10:00

Where:
WA Communications,
6th Floor, Artillery House,
11-19 Artillery Row,
London, SW1P 1RT

 

RSVP AnaNogalesGarcia@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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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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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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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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Battle stations: reflections on the Government’s War on Cancer announcement

When the Conservatives were re-elected in 2019, it was on a manifesto that mentioned cancer in only two specific commitments: the expansion of the Cancer Drugs Fund and the rollout of cancer diagnostic machines across 78 hospital trusts. And yet, at the beginning of February, the Government used World Cancer Day to declare war on cancer, announcing a sweeping consultation for a new 10 Year Cancer Plan for England, designed to “radically improve” outcomes for cancer patients.

There is no doubt that the COVID-19 pandemic has had a significant impact on cancer diagnosis and care, so, despite the surprise nature of the announcement, it’s hard to oppose the Government’s decision to intervene. What isn’t clear yet is the extent to which this will be a wholesale reform backed by serious funding commitments, or a rehash of existing policies in the 2019 NHS Long Term Plan and the 2015 Cancer Strategy for England.

The announcement shows the Government’s intention of taking the reins on cancer policy, and making it political. Following months of political unrest and serious concerns about the elective care backlog, this allows the Government to set its long-term intentions. By making cancer a political priority, the Government and NHS can be held to account on the impact of reform, ensuring delivery against commitments. This is likely to be central to the purpose of the Cancer Plan and will help to give momentum to a programme of change.

It is essential that funding is adequate to achieve targets at an extremely challenging time. Patient groups, who have witnessed years of rhetoric yet insufficient progress, are cautiously optimistic, rightly concerned that years of underinvestment and understaffing will mean that however great the commitments are, the resource to achieve them will not match.

We have also witnessed this week The Treasury being more muscular on making stipulations attached to funding commitments. The tense stand-off with Department of Health and Social Care (DHSC) over the Elective Recovery Plan may indicate what’s to come with the Cancer Plan, with the Treasury not keen to loosen the purse strings for wooly ambitions.

Whether the Plan, when published, is a total reset or momentum for existing policy in a new format, the potential for real change in the diagnosis, management and treatment of cancers is certainly closer.

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Decoding private equity’s video game spending spree

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NHS outsourcing to the independent sector: politicians vs the public

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Politicians signal regulatory change on the horizon for IVF clinics

After a long period of stability, IVF policy is set for a shake up as a result of new regulatory proposals made recently by the Human Fertilisation and Embryology Authority (HFEA), the industry regulator. HFEA is looking to amend the Human Fertilisation and Embryology Act 2008 in a number of areas which would affect access and treatment types.

Scrutiny of IVF clinics has been growing over the past year. In June 2021, the Competition and Markets Authority (CMA) collaborated with the HFEA to develop new guidance which allows couples to initiate legal proceedings against IVF clinics that have falsely guaranteed their success rates. Following on from this, Julia Chain, the newly appointed Chair of HFEA, has called for far reaching changes to be made to current IVF regulations, which would allow HFEA to fine clinics that mislead patients over the efficacy of their treatments, as well as widen access to treatment. Chain has also called for IVF regulatory reform to allow scientists to use embryos for research beyond the present 14-day limit.

Chain has argued that IVF policy has become outdated, with reproductive regulations no longer matching the reality of treatment provided in the UK. She has highlighted several areas of the 2008 Act as being in need of reform, including patient protection and the means of maintaining the quality of care provided for them. Chain has called for a broader range of methods for addressing poor performance, such as economic sanctions against non-compliant clinics. This would also include addressing the increasing commercialisation of the fertility sector, where 65% of treatments are self-funded and public funding is unevenly distributed, resulting in a postcode lottery.

Political awareness of the discrepancy in NHS funding for fertility procedures has been growing. Under pressure from MPs across all parties, in September 2021 the then Care Minister Helen Whately MP announced that the government had conducted an internal review of variations in coverage and was currently considering its next steps.

This additional scrutiny substantially changes the political environment affecting IVF. Government reviews, the attentions of the CMA, a new activist Chair of the HFEA, as well as increased press coverage and ongoing legal cases will all increase the need for careful political due diligence of any investments in the sector. Demand for IVF services will remain high, and indeed is three times higher than it was in 1999, but investors will need to take the political and regulatory changes on the horizon into account as they plan their strategies and make their decisions.

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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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Top takeaways from the UK’s Net Zero Strategy

Alongside the much-anticipated Net Zero Strategy, 20 supporting documents were published by the Government just days before COP26 kicks off.  From the Heat and Buildings Strategy to the Treasury’s Net Zero Review, from the consultation on phasing out fossil fuel heating for homes and businesses off the gas grid to research papers on behaviour change – there are close to 2,000 pages to make your way through as the UK seeks to demonstrate leadership.  To save you time and your personal energy, Naomi Harris gives her top takeaways.

The Strategy meets legal, political and communications objectives

This Government has consistently underlined its support for the transition to Net Zero, but some argue it has – until now – failed to meet the legal obligation of the 2008 Climate Change Act requiring it to set out proposals and policies that would see the UK meet the five yearly carbon budgets.  By publishing the Net Zero Strategy, the Government has met this obligation.  The proximity of the Net Zero Strategy’s publication to the start of the COP26 also puts the UK in a position of leadership as it can say that it has met requirements set out in the Paris Agreement and seek to chivvy other countries along to do the same.  Whether it can do so is another question, but the Government now speaks from a position of greater credibility.

We’re still waiting for a lot of detail

It is a definite step in the right direction, but questions remain as to whether it and its supporting documents are strong enough to meet the sixth carbon budget that takes us close to 2040.  The Heat and Buildings Strategy is a case in point.  Heating our homes and businesses is responsible for 20% of the UK’s emissions so cutting into this is vital if we are going to meet Net Zero.  Delayed by a year, there was an expectation that the contents of the Strategy would set out a panoply of bold actions.  It did not.  It announced £450 million in funding over three years to give people up to £5,000 to put towards a heat pump.  Friends of the Earth calculate this will pay for just 90,000 heat pumps (on top of the 200,000 already installed), and it won’t go towards covering the cost of insulation or new radiators.  To put that into perspective, the Government’s target is for 600,000 heat pumps to be installed every year.  A decision on meaningful support for hydrogen was put off until 2026 – much to the disappointment of the gas network operators.

The Treasury gave the green light on principles, but flashed amber on payments

HMT started its review of the transition to Net Zero in 2019 and its final report this week confirms that the cost of inaction is far greater than action.  It also reflects on the limitations of its own modelling – noting that the cost of technology had fallen far faster than anticipated.  That is not to say that the brakes are off when it comes to public spending.  Rather than reaching for lever of public borrowing to pay for policies outlined in the Strategy, the Treasury expects private sector investment to increase to £90 billion – noting that the UK’s investment levels are the lowest in the G7.  Funding was reserved for kick-starting innovation in heat pumps, supporting the exploration of direct carbon capture and storage, and promoting supply chain development.

This is just the beginning with bumps in the road expected

With the strategy now published we move into action.  Electricity Market Reform 2.0 is on the cards with changes to Contracts for Difference and new finance models expected, while the consultation on moving levies from electricity on to gas and phasing out oil and gas tanks for off grid homes are likely to draw significant political and media scrutiny as the Government seeks to decarbonise without penalising billpayers.  These are just two examples from what is going to be a busy agenda of policy development over the coming months.

For advice on what the Net Zero Strategy could mean for your business, please email naomiharris@wacomms.co.uk.

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Building safety regulations: what to expect from the next phase of reforms

With the return of Parliament from its summer recess, the Building Safety Bill has entered its Committee Stage in the Commons. This marks the latest phase of the government’s plans for far-reaching reform of building regulations. The plans – born of the tragedy of the Grenfell Tower fire – are likely to result in a significantly different operating environment for the construction industry;  investors in the sector will need to pay close attention to the proposals, and the changes are also likely to present a number of opportunities in related sectors.

The fire at the 24-storey Grenfell Tower on 14 June 2017 claimed the lives of 72 people, with dozens more seriously injured. Combustible cladding surrounding the building was found to have exacerbated the disaster, allowing the flames to spread and engulf the tower. As a result, the principal focus of the government’s funding initiatives to date has been to ensure the removal of both aluminium composite material (ACM) cladding and other combustible non-ACM claddings from high-risk buildings. £5 billion has been allocated to cladding-removal schemes, including:

Buildings under 18m tall but over 11m, with a lower safety risk, have access to protection from the costs of cladding removal via long-term, low-interest, government-backed financing arrangements, which will see no leaseholder pay more than £50 per month for cladding removal works. Leaseholder groups have voiced their opposition to leaseholders being liable for the removal of cladding and – while the government has not indicated it will change its approach – it remains under considerable political pressure to do so.

The Hackitt review found widespread shortcomings in current building regulation

The Grenfell Tower disaster has also precipitated a comprehensive review of fire safety and building regulations, led by former Chair of the Health and Safety Executive (HSE) Dame Judith Hackitt. The recommendations of that review have formed the basis for the legislation which the government subsequently introduced.

The Hackitt review published its final report in May 2018, having found a “system failure” in the current regulatory regime. The report found that:

As a result, the review recommended a new, overhauled regulatory framework, designed to be simpler, provide stronger and clearer oversight of dutyholders, and provide more robust means for residents to raise safety concerns than under the previous system. The review recommended that initial focus of this new regime be on multi-occupancy higher-risk residential buildings (HRRBs) or 10 storeys or more, and would include specific safety measures for each of the design, construction, occupation and refurbishment phases of a building’s life.

The Fire Safety Act has been approved by Parliament, but is not yet in force

As part of its efforts to implement the Hackitt review’s recommendations, the government introduced the Fire Safety Bill – amending the existing Regulatory Reform (Fire Safety) Order 2005 – in March 2020. The Bill passed into law on 29 April 2021 but is not yet in force.

The Act applies to all multi-occupancy residential buildings, regardless of their height, and introduces significant new obligations on those in control of multi-occupancy buildings. These “Responsible Persons” (RPs) will now have an obligation to “reduce” as well assess and manage fire risks, and risk assessments will now have to include the risks posed by the structure and external walls of the building, as well as by any individual doors opening on the common parts of the building. In seeking to make these new assessments, there may be increased demand from RPs from specialist fire-safety consultants. Businesses providing these services may represent an opportunity for investors.

The government has said that it will not enforce the Act until it has finalised comprehensive risk-based guidance to aid compliance. The considerable additional duties on RPSs will be accompanied by severe new penalties for non-compliance, with criminal prosecutions and unlimited fines possible in the most significant cases. RPs and investors in the space will therefore want to be very familiar with the guidance, which is likely to be published in the autumn.

The related Building Safety Bill is still before Parliament

The government published the Building Safety Bill in July 2021, having promised it in May’s Queen’s Speech. It will begin its Committee Stage in the Commons on 9 September 2021 and will likely pass into law in early 2023.

As in the case of the Fire Safety Act which it complements, the Building Safety Bill is set to introduce new obligations for the controllers of multi-occupancy builders, and provisions which will have a considerable impact on the sector. Chief among these provisions is the creation of a new regulator – the Building Safety Regulator – which will operate as a division of the HSE and have substantial enforcement and prosecutorial powers. This move represents a centralisation of oversight compared to the current regime, in which developers have been able to choose a local authority of an approved inspector for higher-risk buildings.

The Bill will introduce tougher sanctions for non-compliance. Directors or managers of companies responsible for high-rise residential blocks will be personally liable for safety failures, and the most serious cases will carry the potential for two-year prison sentences. Similarly, neglecting to register buildings with the new regulator, or failure to apply for a buildings assessment certificate when required could result in criminal actions.

Taking up a recommendation of the Hackitt review, the Bill will seek to introduce a “golden thread” of information and documentation sharing through new responsibilities to collaborate between all responsible parties from development to construction, to occupation, to refurbishment. Ensuring that the “golden thread” is comprehensive and robust is likely to require significant digital transformation and expansion activities; investors will want to pay close attention to specialist firms offering promising technologies in support of this goal, as these may present considerable growth opportunities.

The outlook for investors

The new regulations will entail significant changes for the building sector and, while the new regime is unlikely to come into force until next year at the earliest, investors will want to monitor the evolution of the government’s guidance over the next few months in order to ensure that portfolio or target companies remain fully compliant. The new regime also looks set to drive growth in related sectors – not least specialist safety consultants to meet new risk-assessment requirements and digital technologies to ensure reliable information sharing among responsible stakeholders. Investors should pay close attention to these areas to maximise their opportunities under a regime which, the government hopes, will ensure that the tragedies of 2017 are not repeated.

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FinTech needs to find its legs

The UK’s FinTech sector is having its time in the sun.

Major players in the sector are growing into serious outfits. Revolut is now the most valuable private tech company of all time, Wise is setting course on its next decade of business, and a suite of smaller firms being eyed up by investors.

Added to this, political figures are keener than ever to discuss the sector’s role in Britain’s economic future. In the wake of Brexit, ministers have set out on a charm offensive to align themselves with FinTech success stories as part of government’s narrative of the UK at the heart of financial and technical innovation. Whether large or small, government has positioned itself as an ally of these businesses and Britain as the place to be to start, grow and succeed.

This trend is set to continue with announcements planned at attracting talent through ‘new tech visas’ and a new fund aimed at investing in tech start-ups by taking a stake in them. A new consultation will also aim to create a more level playing field for new businesses by curtailing the market dominance of the largest foreign tech companies like Google and Apple.

Despite this overall positive picture there are still considerable challenges for the sector.

Many FinTech businesses are disrupting existing markets and making meaningful improvements for consumers. Whilst a set of engaged customers will reap the benefits of this approach, many do not, due to a lack of awareness, or fears of new brands. Though government will not drive uptake, it has yet to engage coherently in the meaningful action it can take, such as greater transparency or setting new consumers standards. This means that businesses are left communicating with often disengaged consumers on technical issues that they have little experience of, where strategic government intervention would drive consumer benefit.

Government is now also giving greater attention to other (more traditional) financial services to deliver its agenda for ‘left behind’ consumers, such as protecting physical cash infrastructure for those who still use it, or relying on banks to deliver home ownership through the 5% deposit scheme. Whilst this could reflect the strong contacts of existing financial services within government, it also shows that many within departments default to engaging traditional financial services instead of looking to new and innovative approaches.

As scrutiny of online economic harms grow and other issues emerge, FinTech needs to be on the front foot if it is to make its current good standing connect with the priorities of the government and result in meaningful change.

FinTech businesses have a clear and compelling story to tell on their success, benefit for consumers, and role in the future of Britain. As they look to expand beyond their current customer base, and take the UK by storm, businesses will need to work with government more closely. Not as a photo opportunity, but a constructive partner to resolve the challenges of the day.

This can be achieved, but it will need clear messaging, strong alliances, and a proposition that government can get behind.

 

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Fixing a broken market: how to create a thriving housing market

“The housing market isn’t a proper market as we know it. It doesn’t operate like a market. To be blunt, it is a broken market. It is fixable but it’s definitely not operating like a market would”.

These were the words of Ben Everitt MP – leading Conservative backbench voice on housing policy – at our event last week on how to create a thriving housing market that works in the interests of consumers and the industry.

The panel discussion brought together Ben; Melissa Lawford, The Telegraph’s Property Correspondent; Simon Brown, Chief Executive, Landmark Information Group; and Angus Hill, Associate Director at WA who led our recent successful campaign to secure an extension to the Stamp Duty holiday. The webinar can be rewatched by completing the form below.

So how can this ‘broken market’ be fixed and what can the industry do to shape government’s thinking as it tries to drive better outcomes? Here are our four key take-aways:

1. Housing supply remains the primary challenge, but it is politically difficult.

Successive governments have set ambitious targets for new homes, which they have failed to meet. The fundamental challenge remains that the UK needs more homes, but changes – for example to planning policy – intended to speed this up or focus building in particular areas has historically met fierce resistance, especially in the South East. The government’s upcoming Planning Bill is likely to see a repeat of this, with a series of showdowns this Autumn. The crumb of hope for the government is that its new electoral coalition – meaning it’s less reliant on votes in London and the South East – gives it slightly more breathing space.

2. Taxation is a big lever controlled by government that can shape how the market operates.

The success of the recent Stamp Duty holiday has shown that changing property tax policy can significantly impact transaction activity: it has been proven as a mechanism that works, with the reduction creating a more fluid market. The catch is that this is revenue which HM Treasury is highly reluctant to miss out on, and so only wants to use it judiciously and in a targeted way.

3. It is not just the speed at which homes are built that is failing; how homes are bought and sold is broken and needs reform.

It is clear that the current home moving process causes significant stress for movers. The time it takes – on average nearly six months – from wanting to move to completion, and the significant risk of transactions failing, means this isn’t an easy experience for consumers. Whether it’s through government policy reform, or industry innovating and taking the initiative itself, it’s clear that how homes are bought and sold is ripe for reform.

4. Building houses for sale isn’t the only solution; social housing providers have a key role to play.

The government is strongly committed to home ownership. Talking about getting First Time Buyers on to the housing ladder is politically attractive and rewarding. But it’s unlikely to be the best policy solution if the objective is to create more homes that provide better places to live. Social rent homes should be a key part of the mix, but historically have lost out to supply side interventions – such as Help to Buy – designed to get young people onto the housing market.

Two points came through loud and clear in this week’s discussion that shape these priority areas.

Firstly, housing fundamentally isn’t just about stats and targets; it’s primarily about people and their key life moments. It’s about creating safe spaces that allow people to achieve their ambitions and their life plans, whether that’s moving for a new job, finding a bigger house that allows families to grow, or downsizing to give people dignity in retirement. To get cut-through in the policy debate, the industry can’t just talk about numbers and stats, it needs to relate it to people’s real lives.

Secondly, housing is highly political. Policy proposals can be well thought through but need to be able to survive contact with the political reality. In many areas of this debate, there are key political trade-offs: to take just two, reforms to planning policy risk have electoral implications in the Conservative Party’s southern heartlands, and reforming property tax leads to an immediate loss in revenue needed to fund vital public services. Understanding and reflecting the politics around this issue is critical for those wishing to shape this market.

Creating a thriving housing market is possible, but it will not be easy. It will require partnership between industry and government, and a recognition that a holistic vision is required to avoid tweaks in one area inevitably having implications elsewhere.

 

Please complete the form below to receive a link to the webinar’s recording.

 

 

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Governments can find multinational digital companies taxing, can the OECD find a solution?

On 12th October 2020 the Organisation for Economic Co-operation and Development (OECD) released the details of a revolutionary global corporate tax plan designed to prevent tax avoidance by multinational enterprises (MNEs). It is the fruit of a collaboration between 135 countries under the direction of the OECD, an organisation representing 37 developed economies. It could transform how businesses pay tax and create a more level playing field for MNEs’ competitors.

Globalisation and the internet have radically changed taxation

As nations have grown economically closer, and digital transformation and ease of trade erodes the need for physical headquarters in each territory of operation, it has become easier than ever for companies to avoid tax. They can do so by shifting profits to low tax jurisdictions where they are legally headquartered. The OECD wants to boost governments’ ability to collect taxes from MNEs by changing global tax rules so that companies are no longer simply taxed depending on where they are based.

The OECD wants a global tax regime for corporations

The proposed rules fall under two separate “pillars”, both of which would only apply to businesses with revenues over €750mn. Pillar 1 is designed to prevent companies from paying very little tax in country A, even if they make vast revenues there, by moving profits to country B where they are headquartered. This is an accusation which has been levelled at companies from Amazon to Starbucks in the UK. Under the proposals, rather than profits only being taxed in country B, a portion of MNEs’ profits would be taxed in country A based on how much of their revenue they make there. This pillar would apply to companies providing “automated digital services” and to “consumer facing businesses”, the latter being everything from food retailers to consumer electronics businesses.

Pillar 2 is designed to stop MNEs being taxed at very low rates overall by effectively applying a global minimum tax rate. If a company pays very low corporate taxes because it is registered in a tax haven, jurisdictions where its subsidiaries are based would be permitted to collect taxes up to the global minimum.

The proposed rules may struggle to achieve political agreement

The group of 135 nations collaborating on this plan described the proposals as a “solid basis” for future rules, which is international organisation jargon for “we haven’t actually agreed anything yet”. Many issues remain outstanding, including what the global minimum should be and what proportion of profits should be shared out globally based on revenue location. Perhaps even more importantly the US has proposed that the Pillar 1 requirements should be optional, something which the UK and France are against. With Joe Biden now confirmed as the president-elect, global politics could be about to see a fundamental change. However, agreeing such a comprehensive change to global tax rules is unlikely to be easy, especially as many digital companies such as Amazon and Facebook are based in the US.

If they are implemented, they will have a big effect on MNEs and their competitors

What would the implications be for business if the politicians can reach agreement? For MNEs this is likely to mean additional regulatory burdens, as well as possibly an additional tax bill. However, the lack of tax paid by digital service companies has spurred numerous European countries, including the UK, to institute or propose digital services taxes on the revenues of online businesses. Compared to these unilateral taxes, both the OECD and companies including Facebook argue that a global tax would provide certainty and stability. It would also prevent trade wars resulting from unilateral action, which could cost more than 1% of global GDP according to the OECD and which would largely affect MNEs.

For competitors to MNEs, such as department stores like John Lewis who compete with multinational online retailers on everything from electronics to clothing, a global tax minimum would be a breakthrough. It would reduce the advantage MNEs get from minimising their tax burden, creating a more level playing field and a fairer and better functioning market.

Implementing what is effectively one of the first global taxes is unlikely to be straightforward but these changes would benefit most businesses, as well as, crucially, the public purse. As we reach the stage of political negotiations and these rules get closer to reality, MNEs and their competitors should be prepared to show they are listening to the concerns driving the rules and develop strategies to work with individual governments, including in the UK, on the implementation of the rules.

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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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Far enough on Further Education?

On the back of the Prime Minister’s announcement to create a Lifetime Skills Guarantee, Cameron Wall considers what this tells us about the Government’s strategic plans for Further Education and how the sector could respond.

Words into action

A cornerstone of the Prime Minister’s ‘levelling-up’ agenda, has been one of bold commitments on further education and skills. Covid and rising unemployment is putting even more pressure on Number 10 to ensure the UK’s workforce is equipped with the skills our economy needs to recover.

In his speech on Tuesday, the Prime Minister set out more detail on the government’s plans, signalling how the Government intends to grapple with this inevitable unemployment crisis and begin to fulfil the ‘levelling up’ promises.

The PM set out how he plans to end a “bogus distinction between FE and HE”, introducing a series of changes aimed at making practical study more attractive

Front and centre was his announcement to create a new ‘Lifetime Skills Guarantee’ offering free Level 3 courses to adults without equivalent qualifications.  This will be paid for from the National Skills Fund, announced in the Conservative election manifesto. To date there has been no other real detail about how the fund will work or what it will cover. Eligible courses will be announced in due course, meaning there is still time for providers to ensure that their courses are covered while also making sure that any further action on the National Skills Fund is aligned with their offer.

Reforms to the apprenticeship system will enable businesses to use unspent levy funds to support apprentices within non-levy paying SMEs, and apprenticeships will become “portable”, so they can easily be moved between companies. This has long been called for by many in the sector, but questions still remain about whether this will be sufficient to fully fund non-levy apprenticeships.

The PM also committed to taking forward a key recommendation on further education from the Augar Review, opening up the main student finance mechanism to students undertaking higher technical qualifications. This is a positive step, but without adequate maintenance support, potential learners may question how they can support themselves to study such a course without an income.

Building on this, the Lifetime Skills Guarantee will over time progress into a system where all students can access a lifelong loan entitlement to four years of post-18 education, as part of cementing efforts to bridge the gap between Higher and Further Education. This ambition sits at the heart of the Government’s education agenda.

A signal of future system overhaul?

Reform has long been on the agenda, and a Further Education system that meets the economy’s skills needs has been a key aspiration for governments going back over decades.

The reforms announced by the Prime Minister cast some light on the potential foundations of the imminent Further Education White Paper which is expected to begin that process of better aligning Further and Higher Education and ensure the value of Further Education is recognised by learners and employers. However, a lot more needs to happen to deliver the Education Secretary’s vision to create a “world-class, German-style further education system”, which would “level up skills and opportunities” and “give FE the investment it deserves”.

Covid has, of course, posed some significant short-term challenges for the Further Education sector, but the White Paper must also settle a number of long-term questions regarding the future of Further Education. Whilst there is agreement the system needs reform, there is a lack of consensus over what this reform looks like.

Clearly Number 10 and the Department for Education are keen to show they are responding to challenges on the horizon with bursts of good news. But, as officials hash out the details of reforms behind the scenes, there is now a clear opportunity to influence what Further Education reform looks like on the ground, and government will be no doubt be looking to the sector for guidance.

Aligning business priorities with government aspirations

Foremost is the question of, in practice, how much the Education Secretary’s vision for a German-style Further Education system actually borrows from Germany. In Williamson’s speech announcing the White Paper, he only made two references to Germany. Instead his tone focused on the value that the UK attaches to Further Education, and how it falls far short of our European neighbour.

Like Germany, Williamson wants our Further Education system to put employers at its heart. He sees colleges acting as hubs within regions, linking vocational training with employers and helping meet the skills needs of the local economy. Now is the time for providers who hold strong local business links and play a role in supporting the local skills needs to make a case to government for regional control. Otherwise, the question government will be asking is, can their desired vision to bridge the gap between Higher and Further Education be achieved without national, centralised oversight?

It is also still to be seen whether the Further Education White Paper will come alongside the long-awaited review of the Apprenticeship Levy, first announced by then Chancellor Philip Hammond in 2018. This also reappeared in the Conservative’s election manifesto, which promised to improve the workings of the levy.

Whilst concerns that expensive apprenticeships are sapping up levy funds have been temporarily supressed by the pandemic, this issue will undoubtedly return in the long-term. Providers should use this opportunity to push for system changes they want to see which have been exposed by how the levy has been used to date. In any case, training providers and employers drawing on these funds will need to justify the contribution to the economy their programmes deliver.

Whilst Williamson may have a clear vision in his head, officials at the Department for Education – under the watchful eye of Number 10 – will now be in listening mode to help flesh out the details of Further Education reform as we approach the White Paper’s launch – and as they begin implementing policy reform on the ground.

To speak to Cameron about this article please email cameronwall@wacomms.co.uk

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Beyond the Future Fund: What it means for VCTs

Nearly two weeks ago, HM Treasury launched the Future Fund, the latest in a series of schemes to support businesses through the economic crisis brought on by Covid-19 and lockdown. Having been overlooked by the Coronavirus Business Interruption Loan Scheme, start-ups are now eligible for government financial assistance via the Future Fund. While this funding will help many pre-profit firms through the immediate disruption, it could also present opportunities for VCTs down the line.

The Future Fund, administered by the British Business Bank (BBB), provides an initial £250 million in funding to UK start-ups. Through the Fund, firms have access to convertible loans of between £125,000 and £5 million as long as government investment is matched by third-party investors. Funding is offered in the form of a convertible loan, with no requirement that companies make regular payments; the convertible loans will convert into equity at the next funding round. Firms must have raised at least £250,000 in third-party equity investment over the last five years to be eligible for future fund investment.

As with almost every government intervention since the start of the Covid-19 pandemic, the Future Fund has been created against a very tight timetable which led to initial criticism of the scheme on the grounds it was not compatible with the existing Enterprise Investment Scheme (EIS). The EIS is a government scheme to help early-stage firms raise money by offering tax reliefs to individual investors that buy shares in a company, but the EIS could only be made compatible with the Future Fund following new legislation. Having been keen to avoid further delays to launching the Future Fund, the government decided to exclude the EIS; this decision led one investor to claim: “If it’s not EIS-able, the scheme just doesn’t work.”

Despite this criticism, there has been significant take-up of the government’s offer of matched funding through the Future Fund, with the BBB receiving requests for £515 million of funding on the day of launch. Funding is being allocated on a first-come-first-served basis, with those firms that have all their application materials in order at the front of the queue to receive a slice of the £250 million on offer. However, the BBB has indicated it is confident the Treasury will increase the size of the Future Fund following the strong initial response from investors, and an announcement setting out additional funding is likely to be made soon.

The popularity of the Future Fund may have dispelled fears prompted by its lack of compatibility with the EIS, but Katherine Griffiths, writing in The Times, points out there are issues with the Future Fund that will only be realised once the crisis has passed. Griffiths argues that the way the Future Fund is set up means that there will inevitably be a battle for control of the business at some point because “the government and its matching investors will decide whether to convert the loan into equity at the end of the term, removing significant freedom from the founders.”

While this may be suboptimal for founders, it could be a bonus for VCTs. In the event the government does convert loans to equity, it will have little interest in holding the equity stakes for a long period of time, particularly given the coming pressures on the government’s balance sheet. When the government does choose to sell, it will provide investors with the opportunity to take equity in firms that have received a healthy dose of government funding to help them to the position they are in. While investors will have to pay government for the privilege, it is possible the Future Fund may be responsible for a wave of high-growth firms coming to market at the same time, ready for VCTs to use their knowledge and expertise to propel them to further growth.

 

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After COVID-19, what next for cancer services?

Thousands of cancer patients are missing. Many patients are having appointments delayed or cancelled, others simply aren’t seeking help. There is growing unease over the implications.

And so the direction from the centre is clear – getting cancer services back up to pre-pandemic levels is a top priority for the health service.

How this will be achieved remains to be seen, with many remaining unknowns around how, when and which services and standards will be brought back.

As the health system starts to piece together a path towards the new normal, we provide a recap of the key decisions made during the pandemic and some of the remaining questions that will be playing on the minds of those tasked with delivering the cancer recovery.

A pause on the 28-day faster diagnosis standard (FDS)

Due to be rolled out fully from April 1st, NHS England and Improvement cancer leads confirmed that implementation of the FDS would be put on hold indefinitely. While providers have been asked to continue sending data, they will not be expected to meet the 75% threshold and no data will be published until at least July.

Cancer providers will be anxious for further guidance over expectations when the NHS formally enters the “recovery” phase. With the need to maintain surge capacity alongside an anticipated backlog of pent-up demand for cancer services, there will be tough decisions to be made over how much leeway can be allowed for services that will undoubtedly continue to be stretched thin over the foreseeable future.

Maintaining impetus on early cancer diagnosis in primary care

The re-worked primary care network (PCN) contract for 2020/21 pushed back the start date for the Early Cancer Diagnosis service specification from 1 April to 1 October, while urging PCNs to “make every possible effort” to begin work earlier if possible.

This plaintive request from the centre was no doubt made against concern over the impact of the suspension of all cancer screening programmes. Together with screening, the service specification is integral for achieving the Long-Term Plan ambition to diagnose most cancers at an early stage.

It includes considerable administrative asks of PCNs, including a rigorous review of their referral practice and targeted action to improve the uptake of cancer screening services. Whether this can feasibly be done amidst the current situation remains to be seen. With no further signals on the resumption of the cancer screening programmes, much depends on PCNs’ ability to drive progress on this front.

Accelerating the roll-out of Rapid Diagnostic Centres (RDCs)

Many RDCs across the country have continued to operate during the pandemic, and NHS England has recognised their potential to support the COVID-19 response with guaranteed funding flows as required. The pandemic has accelerated the introductions of innovative approaches to manage referrals to RDCs and avoid hospital attendances, which may well continue well beyond the current crisis. At the same time however the submission of RDC management information has been paused, as has the planned national RDC evaluation exercise.

As services begin the task of bringing referral and diagnostic activity back to pre-pandemic levels, the expectations of RDCs will be high – the challenge will be to ensure that their learnings and good practice can be shared effectively across the system.

Continuing uncertainty over shielding

Little has been said officially over whether individuals who have been advised to shield during the pandemic, many of whom are cancer patients, will be asked to continue isolating in the coming weeks and months. Reports of recent communication by text message with those on the shielding list has indicated that some individuals are being removed from the list, although nothing has been announced on the rationale behind this decision or which groups will be affected.

Cancer Alliances have reported significant falls in 2WW referrals for suspected cancer, with anecdotal reports of some patients refusing to attend for fear of infection. Any continued ambiguity in the official advice will only exacerbate the concerns of vulnerable patients and will need careful management in order to ensure that cancer patients are receiving appropriate treatment and support.

Responding to the pandemic required rapid changes to cancer services and the necessary suspension of initiatives that were just gathering momentum before the crisis hit. What’s clear is that the task of piecing cancer services back up to pre-pandemic levels is just as complex, and there is a lot of remaining uncertainty as to where and how priorities should lie.

 

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Money matters

In 2017 there was a huge fiscal gulf between the two main parties.  Labour was the party of tax and spend and the Tories the party of fiscal conservatism.  It was an election of opposites.

Fast forward two-and-a-half years and the scale of spending announcements by BOTH parties is already eye watering by anybody’s measure. Notwithstanding Labour’s unexpected and radical announcement to nationalise Openreach, the Conservatives are opening their own spending floodgates.

Why have the Conservatives seemingly ditched fiscal rectitude, how could this play out over the course of the campaign, and what could it mean for businesses after the dust of the election has settled?

Two factors have compelled the Conservatives to change tac: a decade of austerity and the success of Labour in shifting the battleground on which they must fight.

Jeremy Corbyn lost in 2017, but he made up considerable ground over the course of the campaign by appealing to an electorate fed-up after almost a decade of cuts.  Theresa May had a poll lead of around 20% when the starting whistle for the election was blown. This had narrowed to 2.5% by polling day with the biggest gains made in the final half of the campaign.  Corbyn’s personal poll ratings may be worse than rock bottom at -60 percent, and the wider problems of May’s campaigns are well known, but Labour’s campaigning capability is not underestimated by the Conservatives.

This election was called because of Brexit, but the Conservatives knew that Labour would again look to move the focus back on to the domestic agenda.  Hence the mantra of the Conservative campaign has been ‘Get Brexit Done’, while a steady number of booming funding announcements has been the resounding drumbeat against which it has been sung.

Conservative Campaign Headquarters is hoping that this harmonious combination will be music to the ears of voters fed up of Brexit and austerity and rousing enough to win traditionally Labour seats necessary for a majority.

The challenge is that by taking on Labour on domestic issues, the Conservatives have opened themselves up to an attack line of ‘it’s too little too late’.  Johnson has sought to distance his four-month-old Government from those of May and Cameron, but the sheer scale of funding announcements has exposed other flanks that Labour has sought to capitalise on.

In 2017 Labour made a big deal about its manifesto being costed and the Conservatives failing to do their homework.  It was a punch that didn’t land as hard as it could have because the Conservative manifesto was so light on the draw down from the public purse compared to Labour. This time round Labour is doing the same thing and it could be much more painful as Corbyn and McDonnell will again argue that Johnson does not care about the detail and cannot be trusted to honour commitments.

We are only two weeks into a six-week campaign, and we haven’t even got to the manifestos themselves (Labour’s is expected next week).  For companies planning for the future it will be critical to understand how the details of what has already been pledged fits together into a wider picture of a mandate for government.

The dearth of funding, and arguably policy as a consequence, looks like it is coming to an end.  This will present opportunities and risks for businesses across all areas of the economy, whether they operate in energy or education, transport or telecoms, financial services or food technology.  Those businesses that have early insight into what could come their way, and when, over the course of the next five years from a government of any primary (or secondary) colour will be best placed to engage, adapt and succeed.

For comprehensive analysis on what the manifestos could mean for your business and advice on what to do next, please contact the WA Comms team at contact@wacomms.co.uk.

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A broken record? Labour’s campaign launch faces early challenges

Election 2019 is well underway with the launch of the Labour campaign.

So, here we go again. A late December election offers the Labour Party an opportunity to end the decade just how they started it – in power.

In a packed Battersea Arts Centre not far from Number 10, Corbyn launched his latest pursuit of a radical agenda which he says will “transform Britain”. The venue in some ways provided the perfect metaphor for the party – a fire in 2015 badly damaged the top of its structure, and the years since have seen attempts to rebuild.

But another metaphor can be drawn from this.

Since 2015 Labour have, by and large, been putting out fires of their own making. Antisemitism has driven a wedge in the party, defections and deselection rows have dominated headlines, their Brexit position takes time to explain (more than any candidate will have on the doorstep), and Corbyn’s personal polling is at rock bottom. Against this backdrop they entered this election tentatively.

Corbyn’s big campaign launch provided the first opportunity to claw back ground and to begin the assent in the polls which shocked us all last time around. Sure enough, the old lines came through. Labour were on the side of the people, not the “privileged few”.

Public services are to be rebuilt and funded by “taxing those at the top” (especially the billionaires – they hate those). Labour will nationalise rail, mail and water, and scrap the controversial Universal Credit. But not much new came out of the speech.

Instead, external developments seem to have put pay to some of the immediate bounce that Corbyn was hoping for. Boris Johnson’s tank (or should I say bus?) is firmly parked on Labour’s lawn, with the latest commitment to expand the government’s free childcare programme added to earlier pledges to spend on police and the NHS.

And hours after Corbyn’s fans defiantly chanted that the NHS was “not for sale” to the US in any future trade deal, the President confirmed on an LBC love-in with Nigel Farage that it in fact never was. Trump said that Johnson’s deal may actually prevent a future trade agreement with the US, but this has been somewhat drowned out by the sheer amount of material that Trump has offered headline writers.

The campaign has started with a challenge for Labour to set the narrative, in the way that they did so brilliantly in 2017. But the 2019 Labour campaign has to be different. They cannot re-run 2017. They mustn’t be a broken record.

Times have changed, even if Brexit hasn’t.

The Conservatives have declared an end to austerity and are promising spending on the level that Labour have done historically.

Ambiguity over Brexit risks their fragile coalition of northern Leavers and metropolitan Remainers, with the Lib Dems and the Brexit Party tugging at their voter base

The launch of their campaign has not addressed these challenges. But lessons have to be learned by the other parties too.

Labour has been written off before, and anyone who does so now risks an almighty shock on December 12th.

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Is the retail market in need of some retail therapy?

You would be forgiven for thinking that something isn’t quite right when the Great British tradition of shopping fails to materialise over the Christmas period.

The cautious spending habits of consumers highlights a worrying trend for the UK’s retail sector. With business rates set to rise and the country facing the cliff edge of a no-deal Brexit, can the sector rebound in 2019?

If it can, it certainly hasn’t got off to a great start.

The British Retail Consortium have released a series of alarming figures, showing that retail sales in December plummeted to their lowest rate in a decade and total retail sales showed 0 per cent year on year growth during the month. However, where there are losers, there are also winners. While big names like Mothercare (-11.4 per cent) and Debenhams (-3.4 per cent) suffered plummeting sales, two-thirds of households took the decision to shop in either Aldi or Lidl over the Christmas period. This highlights how the economic uncertainty surrounding the country is impacting individual households spending decisions (to the benefit of discounted stores).

While some retailers have had a good Christmas, the entire sector is likely to be affected by the prospect of a no-deal Brexit. Surprisingly back in November, almost a quarter of Britain’s leading retailers had done nothing to prepare for the country crashing out of the EU. Confident perhaps that the government would secure a deal that Parliament could enshrine into law. Two months on and with a parliament no closer to agreeing the Prime Minister’s Brexit deal, the sector is now taking precautionary action. Large brands like Tesco and Marks & Spencer are stockpiling food, while Lidl has taken steps to beef up its customs operation. The fear of higher tariffs and shortages of goods is real. We will just have to see if retailers have left it too late.

Away from the no-deal planning, the government is starting to plan for life outside of the EU. In December, the Home Office published its white paper on what the UK’s future immigration system could look like and this is likely to affect the way the British retailers operate. They will have welcomed proposals to remove the cap on the Tier 2 visa, a five-year scheme which currently has a cap on the amount of people that are able to use it for entry into the UK. The scheme will now be opened to anyone outside the UK, ensuring retailers can access skilled labour and offer the security of a long-term job. On the flip-side, the government are proposing to limit the amount of lower skilled labour entering the UK with proposals to introduce a time limited route for temporary short-term workers, for a maximum of 12 months. Retailers rely on access to lower skilled labour and these restrictions could leave employers unable to fill vacancies.

In search of respite, UK retailers should look ahead to the year ahead as an opportunity to turn the tide back in their favour. Ironically, whilst the government is committed to making sure that markets work for consumers, they have overlooked the needs of some sectors, like retail, that need a boost. Faced with workforce constraints, UK retailers are set to face greater financial pressures as April’s business rate increases will see retailers fork out an extra £180 million under the revaluation system. Labour have boosted their pro-business credentials and criticised the hike, highlighting the good will on all sides to generate a retail recovery. Last year the Treasury rejected calls from retailers to reform business rates. With a weakened government and supportive opposition, key fiscal events (like the Spending Review) and the Queen’s Speech should be seen as opportunities to try and secure business rate reform.

While the UK’s retailers haven’t had the start to 2019 they may have hoped for, the year offers opportunities as well as obstacles. The Prime Minister has shown she is prepared to intervene in markets where they are not working for consumers, yet it may now be time to help support the retail sector, to ensure parts of the high street are not forced to close down. They might have their backs to the wall, but the time is now for retailers to showcase what more government can do to help create a thriving sector that works better for industry, and ultimately consumers.

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An update on last night’s Brexit activity, what happens next?

After the chaotic scenes of last night’s Commons votes on whether to rule out no deal we take a look at what happened, what it means and what might happen next.

What happened last night?

What does this mean?

What happens next?

Where does this leave us?

 

 

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Corporate governance reform and risks in balancing the boardroom

Although a central factor to business’ success or failure, the issue of corporate governance has not historically tended to excite great passions amongst policymakers beyond the usual party-political posturing. However, over the past two years it has become a more contested area of reform, with a rash of policy proposals from both sides that will interest and potentially concern investors. Changes being brought by government will impact how companies report and are overseen, while more radical proposals from the Labour Party represent a further risk for investors, given they would alter the way companies are owned and managed at the top level.

Government reforms

In Theresa May’s 2016 leadership speech, she pledged to implement “changes in the way that big business is governed”. This included mandating places for workers on company boards and making shareholder votes on corporate pay binding, instead of advisory as they are currently.

Encountering the political reality of governing with no overall majority and resistance from Philip Hammond’s Treasury, which was concerned about upsetting business, May’s proposals have been watered down. Instead of the stronger proposals suggested by the Prime Minister before the election, companies reporting on financial years starting after 1 January 2019, will have to adhere to several new lesser requirements:

These measures follow a similar pattern to other new reporting requirements brought in by Theresa May, such as gender and ethnicity pay gap reporting, where public databases of performance have been created. We are likely to see similar stories in the press highlighting the worst offenders with high CEO-worker pay gaps, or the most clashes with shareholders over pay, such as those at Direct Line, and housebuilder Persimmon.

There are particular problems with the CEO-worker pay ratio which may distort who receives bad coverage by emphasising where CEOs are paid significantly more than workers. Some industries such as financial services tend to have limited numbers of well paid employees, so their ratios will be small, while retailers employ larger workforces on smaller salaries so will have considerably worse ratios. For example, McDonalds’ CEO was paid 3,101 times the average worker in 2017. In addition, because the ratio is based on CEO to average worker pay, changes in CEO pay year-on-year will have a large effect on the ratio. Because CEO pay tends to vary significantly with performance the ratio will also jump around, rather than showing clear trends.

These issues may prove a boon for private equity looking to take listed companies private, as they will not be subject to the same level of scrutiny. This has led to wider concerns the proposals will accelerate the trend for companies to go private, or not to list as they grow, meaning they are not subject to the same level of shareholder scrutiny.

Labour risks

Not to be outflanked on the left, Labour leader Jeremy Corbyn and Shadow Chancellor John McDonnell came forward with proposals of their own for corporate governance at their 2018 Party Conference. If elected, Labour said it would ensure both public and private companies with a workforce of over 250 set aside at least one third of their boardroom positions (a minimum of two) for representatives elected by the workers.

While on the surface this idea seems extreme, the model exists in other countries and we can look to Germany for an example of the actual effect such a policy is likely to have on assets. German companies operate a two-tier system, with a management board made of the senior executives and the CEO, and a non-executive supervisory board, consisting of shareholder and employee representatives.

The model has been quite extensively studied around the world. One troubling finding is that the system reduces the market-to book ratio of companies by 31 per cent on average, likely meaning a loss for shareholders as the model is implemented. There is also evidence such companies have higher staffing levels which can negatively impact profits. Shareholder and employee interests align in other areas which may provide benefit. Both are incentivised to ensure the company is a going concern by limiting risky management behaviour and executive pay.

Any potential benefit in the long term, however, is likely to be wiped out by Labour’s other eye-catching policy for company structures. For example, large companies would have to hand over ten per cent of their equity to workers. There will be a cap on the earnings received by workers and the state will take the rest, so there are questions over whether the policy is really a cooperative model. Whoever benefits, it is clear shareholders would take a ten per cent cut on the value of existing shares – no doubt the most hard-line left wing policy put forward by Corbyn’s Labour Party.

While May’s reforms will lead to public recriminations for the companies with the most egregious pay structures and a shakeup of some boardrooms, the greater risk clearly comes from Labour’s attempts to redistribute corporate power. It is this which investors must keep a watchful eye on.

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Brexit, Boris and the Budget

Expectations could hardly have been lower going into the Conservative Party Conference. The Boris Johnson show promised to derail any carefully choreographed messaging from Number 10. The Tories themselves seemed desperately short of ideas, particularly following the radical ideas from Labour in Liverpool the previous week and Ministers ranging from Sam Gimyah to Liz Truss were queueing up to criticise the direction of the party. Yet despite all this, Theresa May has emerged in a stronger position and there were a number of policy announcements that appear to signal a change of strategy. May has successfully bought herself time with which to negotiate Brexit, but big questions remain about her long term future and that of the Conservative Party.

Confounding the expectations of some in her party, Theresa May delivered one of the most accomplished speeches as Prime Minister, setting out a new, more centrist policy direction for the party. Similar in theme to her first speech as Prime Minister, where she pledged to tackle the ‘burning injustices’ within British society, May set out a vision of an inclusive Tory party that would enforce a form of responsible capitalism. This serves a dual purpose. Firstly, it establishes Mayism as clearly separate from policy visions of Boris Johnson and others in the ERG. Secondly, it attempts to formulate an answer to the popular Labour policies that have developed as a result of voters feeling that the government is ignoring issues of inequality and the funding of public services. The positive reception to the speech will likely serve to quieten critics in the short term. However, May has not offered solutions to the Brexit negotiations that will please either wing of her party, and will need to find a resolution to the issue if she is to remain as party leader in the long term.

Housing is also likely to be high on the Budget agenda, after the housing crisis dominated the speech of several high-profile speakers, including Theresa May and Boris Johnson. Both had a similar message: that as the party of opportunity, the failure of young people to get on the housing ladder was a failure of the conservative message. May described the housing crisis as her domestic priority and laid out plans to scrap the cap on the amount councils can borrow to build new houses, but more will need to be done to address regional variation in both housing prices and housing availability if the Conservatives are to prove they can maintain a successful social agenda.

While it is clear that May has some new ideas, it will be down to Chancellor Phillip Hammond to find the money for them, suggesting that the Autumn Budget, due on the 29th October, will be one to watch. Hammond has a tricky challenge ahead of him, needing to follow through on his signature promise to eliminate the fiscal deficit, while finding the money to fund the promised NHS budget increase, and freeing up money for the Conservatives to implement the social spending needed to tackle the messages of Jeremy Corbyn. There are indications that some of this money will be found in the form of new taxes, particularly for sectors accused of not paying enough. In his speech, Hammond set out plans to increase taxes for large digital companies, calling for an international approach, but saying that the UK was willing to introduce its own taxes to tackle the problem. While this will likely be a popular measure, Hammond will need to do more to find additional spending money without alienating business or voters. The Spending Review next year will be the key test of whether the Prime Minister’s suggestion that austerity is over, is anything more than warm words.

While May outperformed expectations, the problems that have made her leadership so tenuous remain and will resurface in the coming weeks. Boris Johnson’s fringe speech was widely reported and popular with his pro-Brexit base. Stepping outside his usual Brexit comments to address the housing crisis and May’s record as Home Secretary, it is clear that Johnson is now attempting to position himself as a credible leadership candidate on more issues than just Brexit. This will do little to alter his relatively poor reputation within the parliamentary party but will, in the coming weeks, add to the pressure on May to drop the Chequers agreement. While she gave no indication that she will do so, it is significant that when referring to the UK’s Brexit proposal in her speech, May avoided using the term ‘Chequers’, instead only referring to the content of the proposals. This has been taken as a sign by some that May is altering her stance on Brexit, but it could be a simple rebranding of the agreement to focus on the content of the proposal, rather than the connotations for Brexiteers.

Despite all her promises of a new, centrist party message, May will only get the opportunity to act on her proposals if she can secure a Brexit that can at least pass a parliamentary vote. Finding a deal with the EU and selling it to her party will be no small task, to say nothing of the DUP, SNP and Labour, who have all made it clear that they will vote against any deal that does not align with their interests. A strong speech and promises of better days ahead will not be enough to preserve her position without measurable success in the next few months and clear progress on Brexit at the next EU Summit on 18th October.

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Looking beyond subsidy: does the Agriculture Bill miss the opportunity to innovate?

Working in the bubble of a city, it can be easy to forget that just under 70 per cent of the country is farmland. But the sector’s economic and political significance is large. While the industry is not one of the UK’s top employers, it still provides around 475,000 jobs directly, as well as supporting a further 30,000 indirectly. Last year it contributed £10.3 billion to the national economy in Gross Value Added terms (a rise of 20 per cent from 2016). It also plays a vital supporting role, providing 61 per cent of the raw materials for the wider UK agri-food industry, which is worth around £108 billion of GVA to the national economy and provides over 3.7 million jobs.

But the sector is facing significant challenges. Changes to industry methods from disruptive and emerging technologies promise to revolutionise how food is produced in the UK. Furthermore, the sector is facing a fundamental change in how it is regulated and funded post-Brexit.

For investors, the economics of the sector have been dictated by EU policy for decades. The Common Agricultural Policy (CAP) was described last year by MEP for South West England Molly Scott Cato, who is a substitute on the European Parliament Agriculture Committee as “unfit for purpose.” Its Direct Payments System, which pays income support based on the amount of land farmed, is unpopular among many in the farming community. Small farmers see it as rewarding land ownership rather than innovation and good farming, as it pays the most money to the largest landowners. In the UK, ten recipients receive 50 per cent of the total farming subsidies.

As the first example of major agricultural legislation introduced since 1947, and one of the first practical departmental bills to map policy for a post-Brexit UK, the Agriculture Bill is an attempt to address the way farming in the UK is subsidised and to take advantage of the demise of CAP. It seeks to shift the emphasis of subsidies away from land ownership, in favour of paying farmers for sustainable land management such as better air and water quality, improved soil health, higher animal welfare standards, public access to the countryside and measures to reduce flooding.

While the Bill provides an opportunity for the government to set out its vision for the future of agriculture in the UK, it also has the potential to put in place a regime as controversial as the CAP that is being replaced. Investors and potential investors in farming, agricultural land and associated assets will have to understand the implications it will have, as well as the details of a newly forged and unexplored system where payments are linked to outcomes.

Under current proposals, cuts to Direct Payments will begin in 2021 and continue until payments cease after 2027. These cuts will be introduced progressively, with annual payments of up to £30,000 cut by five per cent in the first year of the transition, while payments of £150,000 or more will fall by 25 per cent.

Payments will be delinked from farms themselves, allowing farmers to use payments to boost their pension pots rather than having to reinvest all the income. Environment, Food, and Rural Affairs Secretary Michael Gove MP has said this is a deliberate tactic to encourage older farmers to retire. The average age of a farmer has now risen to 59, and the shortage of viable farmland coming to market is driving up prices, creating barriers for new market entrants. Commentators have predicted the uncoupling of the payments from farms will eventually lead to a reduction in the price of land, with an increase in retirees leading more land to come to market.

Publication of the Bill provoked a concerned reaction from the industry, with many disappointed about its lack of vision and the neglect of wider related topics like food production, food market price volatility, free trade and access to labour.

At a Liberal Democrat Party Conference fringe event entitled “What should the UK’s future food policy look like?”, Ian Wright, CEO of the Food and Drink Federation, Elise Wach of the Institute of Development Studies and Stuart Roberts of the NFU all agreed the bill is a “missed opportunity for the whole food supply chain.”

Wright commented that the government significantly underestimated the role of food and farming for the UK economy and that it was “really important to see food and food policy as an arm of economic policy.” More vocally, Glyn Roberts of the Farmers Union of Wales has described the phasing out of the Direct Payments System before the economic consequences of Brexit are known as having “potentially catastrophic consequences for food production.”

Meetings between Environment Secretary Michael Gove and the industry since the initial unveiling of the legislation, have reportedly allayed some fears about the bill and the perceived lack of government vision, with Richard Griffiths, CEO of the British Poultry Council commenting that the bill was a “good first step.” However, the lack of wider vision or connection to broader economic issues in the bill may still prove an issue for some in the industry and limit what it is able to accomplish.

One area not included in the bill, but part of a newly prioritised workstream by DEFRA and a new £90 million fund from BEIS, is Smart Farming. The money provided by BEIS will help farmers and agricultural supply chain businesses to utilise robotics, AI and data science, and will help to develop solutions to issues within farming, such as land availability, unpredictable weather conditions, and poor supply chain management. New “challenge platforms” will bring together businesses and academics to tackle specific issues, and “innovation accelerators” will explore the commercial viability of new technologies.

There is much to interest investors keen on innovation in the UK’s urban agriculture industry, with new farming and food projects developing in the UK’s cities, particularly in London, around the use of hydroponic systems. These systems allow the growth of food products without soil or natural light, using blocks of porous material where the plants’ roots grow, and artificial lighting such as low-energy LEDs. Such systems overcome cities’ lack of space and allow growers to simulate any set of environmental conditions for food production they need. The new market in medicinal cannabis, which could potentially open up once regulations are changed to allow forms of the drug to be prescribed by doctors, could also see these types of spaces used to develop optimised marijuana farms in the UK’s cities.  The advances in this field of technology are abundant, with many companies looking for funding to scale new products or enter new areas.

Other examples of innovation include drone use to better assess crops’ performance across large farms, and enhancements so fertiliser and pesticides can be applied precisely to each plant to reduce over-use and wastage, improving the environment and saving on costs. Better monitoring of climate conditions can inform farmers’ sowing and harvesting plans. The benefits of automated and autonomous vehicles are also a potential game-changer for the industry, with combine harvesters, tractors and other farm machinery being able to operate independently.

The potential opportunities for businesses and investors in the industry are significant and potentially far greater than might be suggested by the Agriculture Bill as it stands. While subsidy and what will replace the Direct Payments System will be of obvious interest, it will be interesting to see what, if anything, will be added to the bill as it makes its way through Parliament that presents more niche opportunities, particularly if the bill is supplemented by further government publications to make up for what is perceived as lacking.

Speaking to the Grocer Magazine, NFU Director of Brexit Nick von Wesneholz neatly summarised the key problem with the Bill: “the key issue is not what the bill does, but what the current and future government does with it.”

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Why investors should start caring about what the government thinks of national security

When WA first wrote about these changes last month, the government’s proposals for competition regulation were flying under the radar. Thanks to a devastating report by John Fingleton, former Chief Executive of the Office of Fair Trading, they are now starting to get the attention they deserve. More wide ranging than the reforms introduced in June 2018, which allowed the government to intervene more easily in mergers affecting three specific sectors, these reforms represent a significant change to the way all investment will be conducted in the UK.

Under the new proposals, the Competition and Markets Authority (CMA) will be entirely removed from the process of investigating deals related to national security. Instead, an entirely new unit will be set up to deal with these cases, with the government estimating that over 200 cases will be reviewed on national security grounds every year. This would be a significant increase when compared to the current system, which has opened eight informal investigations on national security grounds since 2003.

The huge expected increase in caseload is driven by the changing scope of the government’s powers. Although the consultation specifies sectors where intervention is most likely (civil nuclear, communications, defence, energy and transport) any Secretary of State would have would have the power to call in any deal regardless of sector. In many cases this would be the Secretary of State for Business, Energy and Industrial Strategy, although the consultation also specifies that “government proposes using “the Senior Minister” in any legislation, which would be defined as covering Secretaries of State, the Chancellor and the Prime Minister”, meaning that any Senior Minister would be able to trigger a review, regardless of the sector it affected. Additionally, the changes would not only affect mergers and acquisitions, but would also give the government powers to intervene in investments, loans, and acquisitions of intellectual property rights, including copyright and patent rights, and physical property.

This amounts to a fundamental change in the way that UK approaches mergers and competition law, particularly foreign investment. While the changes will also affect UK based firms, by citing ‘national security’ as the reason for the changes, it is clear the government has foreign firms in mind when making the reforms. This could result in a reduction of foreign investment in the UK, as firms become deterred by the increased bureaucracy which acquisitions would have to negotiate, and the uncertainty generated by new rules and a new regulator. As Fingleton sets out, if this does deter foreign investment, then the general value of UK assets is likely to decline, meaning bad news for the wider industry too, particularly as Brexit continues to be at the forefront of some investors’ minds.

The proposals won’t just affect foreign investors, as the effect of the changes will be felt across the whole sector. Investors, faced with a new system and a new regulatory body, will have to navigate additional bureaucracy and new uncertainties regardless of where they are based and what sectors they are investing in. There is no word from government yet on when the results of the consultation will be announced, but investors should use the proposals as a signal of government intention and start to prepare. Increased awareness of the political mood across parliament, and among ‘Senior Ministers’ will become increasingly necessary as investors enter this new regulatory world.

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Are Labour gambling on regulation?

On the face of it, the call from Tom Watson, deputy leader of the Labour Party, for more stringent regulation of the gambling industry is a typical Labour solution to a problem: more government intervention, more taxes and more money for the NHS. In a speech given at a Demos, the centre-left think-tank on 18 June 2019, Watson outlined his vision for a stronger regulatory system for the gambling industry. The tripartite structure he proposes involves the Gambling Commission taking responsibility for operators, a newly-created Gambling Ombudsman protecting consumers and an NHS programme coordinating research, education and treatment relating to gambling addiction. The new regulatory framework is to be funded either by a levy on gambling operators set at one percent of the industry’s gross gambling yield, or a system which draws a certain amount from the industry in response to a needs-based assessment; it is expected the measures will raise more than £100 million.

There are undoubtedly problems with the way some gambling firms operate, and an ombudsman working alongside the NHS could be the best way to protect and help vulnerable gamblers. However, there is a strategic element to Labour’s latest policy announcement. On the economy, Labour’s message is the current system is rigged in favour of a select few and does not adequately work for the ordinary man or woman in the street. Over the last 18 months, the party has chosen to focus its policy proposals on areas that reinforce their headline message on the economy: cracking down on outsourcing in the wake of the Carillion fiasco; promising to nationalise water companies after it emerged they had been loaded with debt and avoided tax while bills increased; and a commitment to better regulation of the gambling industry following revelations that some bookmakers had exploited vulnerable customers.

This is a smart play by Labour. It illustrates the party’s message with concrete examples and demonstrates the inability of what they see as the ‘neoliberal hegemony’ to work in the interest of regular people. Even better, it leaves the Conservative’s in an ideological check-mate. They can either oppose Labour’s arguments, or they can agree somewhat and present a diluted, ‘Labour-lite’ policy. If the Tories choose the former approach, they end up looking like shills for big business, playing into Labour’s hands; if they choose the latter, they run the risk of appearing as a pale imitation of Labour, allowing Corbyn to push the message that voters might as well vote for the real thing.

Many of Theresa May’s difficulties as a Prime Minister were caused by Labour’s strategic positioning on the economy. Theresa May, never a natural defender of the market, was always going to be drawn down the interventionist path. Notable examples of May’s willingness to eschew the market include the introduction of an energy price cap, and her attacks on executive pay and ‘corporate greed’. Brexit largely obscured the divisions May’s policy approach caused within the parliamentary party on these issues. However, when her position started to look untenable, ministers like Liz Truss began banging the drum for a more a more traditional Conservative policy programme: lower taxes and less regulation. This mood has been reflected throughout the Tory leadership race, with many of the candidates promising tax cuts and a more liberal approach to the economy. Rory Stewart’s elimination from the contest perhaps represented the final rejection of May’s policy approach.

While Labour’s strategy of highlighting the excesses of capitalism is a strong one, a Conservative leader better able and more willing to defend the virtues of the market will more easily avoid the trap that Theresa May fell into. Nevertheless, the debate on the economy and capitalism itself, ahead of the next general election is set to be the most polarised in a generation. Labour’s vision will have to extend beyond pointing out what is broken and offer a positive message about how they would reform the current economic model, and the Conservative’s will have to demonstrate how a freer, less regulated economy will work in the interests of the least well off.

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Lease of life: How will Labour shake-up the rental market?

While John McDonnell keeps up his ‘tea offensive’ to reassure City and business leaders the economy is safe in Labour’s hands, the party continues to offer up a series of controversial policy ideas. Following Labour endorsing the nationalisation of water companies at less than the market rate and committing to a significant decentralisation of the energy sector, Labour has now set its sights on reforming another fundamental resource: land. Land for the Many, a report commissioned by the Labour Party, makes a series of radical policy recommendations aimed at altering the way land is used, owned and governed in the UK.

The proposed reforms to the private rented sector will be of most interest to investors; especially the introduction of a cap on annual permissible rent increases within tenancies. Under the plan, rents will not be allowed to increase at more than the rate of wage inflation or consumer price inflation (whichever is lower). However, landlords will be allowed to set rents at any level when advertising the property to new tenants.

Despite criticism from economists across the political spectrum, a cap on rents will be popular amongst Labour’s core support. However, the proposed cap only restricts future rent increases, taking current rents as the base level. It is telling that the report did not recommend a more punitive rent cap, where prices are forced below the current market level. The reasoning behind this move is to avoid a destabilising fall in house prices that could create social and economic risks. This commitment demonstrates the policy tightrope that Labour has to carefully traverse: signal its commitment to fundamental economic change while maintaining the confidence of investors and asset holders.

The likely result of a cap is that rents will increase sporadically – but significantly – once tenancies finish. This is a scenario that large institutional investors will be better able to navigate than smaller buy-to-let landlords, thanks to their superior ability to withstand variable returns on their investment over time. One of the rent cap’s expressed aims is to reduce housing demand from buy-to-let investors, and, in conjunction with the report’s other proposals, some smaller landlords could be forced to leave the market. An exodus of private landlords from the market will put more pressure on rents, further increasing rents for new tenants.

While investors that stay in the market will benefit from higher rents once a tenant leaves, they face the prospect of being locked into long-term tenancies where rent only increases with inflation. As rents for new tenants diverge further from rents existing tenants pay, the greater the disincentive for existing tenants to move into a new home. Tenants in homes that suit their needs will stay for a long period of time, but those that do need to move will have to pay a premium, which may be unaffordable to some. In the long-term, larger investors will divest from the market; this could potentially help those looking to buy a home but will do little for renters as the supply of housing for rent decreases further.

The prospect of a rent cap (and a whole host of other interventions) will encourage some investors to run for the hills and leave the market. However, the authors of the report are prepared for this and suggest pre-emptively strengthening renter’s rights so landlords cannot sell their properties within the first three years of a tenancy (unless the property is either sold to a tenant or to another landlord). However, this will only delay any sell-off rather than prevent it. Perversely, it could also increase rents, as investors will mitigate the increased risk associated with the new rules by raising rents at the beginning of a new tenancy. Once again, this option will be more realisable for larger investors, who can commit to the market over a longer time period.

The report also suggests replacing council tax with a progressive property tax, payable by the property owners and not the tenants. However, the legal incidence of a tax and the economic incidence of a tax are rarely the same. Normally, some of the tax would be passed on to tenants, but under a rent cap this will only be possible when a new tenant moves in. As such, the property tax will initially be paid by the landlord, but future rent agreements will incorporate the cost of the property tax to the landlord. In other words, the tax will not be (completely) paid by the landlord.

Not every policy contained in Land for the Many will be in Labour’s next manifesto, but it is a useful indicator of the party’s direction of travel and demonstrates a Labour government would create a more challenging environment for property investors. If Labour implements the report’s recommendations, renters will enjoy more rights than ever before, but the proposed rent cap will create incentives within the rental market that could be to the detriment of renters and could change the viability of the private rented sector if not managed in a considered way. ‘Land for the Many’ could all too easily become too few landlords.

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The Battle for Westminster: Labour’s new policy engine

After nine years and countless gruesome deaths, the end looms for the most successful television series of all time. But for all those mourning the end of Game of Thrones there is some solace, for we don’t have to look far to see its parallel in our political drama.

Where the Conservative Party resembles the early sections of the series, with various kings and queens (leadership contenders) jostling for position on the Iron Throne (Number 10), over on the other side things seem rather clearer. Having risen from relative obscurity, the silver haired leader now commands almost total control, aided by an army of loyal fighters and some formidable “dragons” – perhaps stretching the metaphor to breaking point. It would seem that, like Daenerys, Corbyn is totally in control of his faction, but this is not to say that there is not still a jostling for ideas and the future direction of the Party.

Whereas the right has seen a flurry of new think tank and policy launches in the wake of the disastrous performance at the 2017 election, many used as a vehicle to propel a future leadership challenge, things have appeared rather quieter for the left. Having secured the hegemony of Corbyn as leader, and a victory for his ideas, on the surface at least policy development has appeared less about launching brand new ideas and more about fleshing out that which is already the platform. However, appearances can be deceiving.

Last week saw the launch of the newest vehicle for developing left-wing policy in the UK. Common Wealth is a think tank committed to offering radical solutions to models of ownership across the country and across sectors, looking at land, resources, capital and technology. The think tank brings together former IPPR Senior Research Fellow Mathew Lawrence as its Director – co-author of the “inclusive ownership fund” later adopted by John McDonnell – with a board featuring trans-Atlantic academic and economic development guru Joe Guinan, journalist Aditya Chakrabortty, and former Labour Party leader Ed Miliband MP (among others).

Where many might view the politics of the left over the last few years as being driven by protest, rhetoric and, at times, confusion, the launch of an already influential think tank suggests something very different. Much was made of the link between the UK Labour Party and the Democrats in the USA, in particular the activism and environmentalism of rising stars such as Alexandria Ocasio-Cortez. The sharing of ideas and campaign strategies across the Atlantic over the years to come is likely to continue as a theme over the coming years.

Another key theme, something which underpins every policy position, is the focus on environmentalism. This has come risen in the public consciousness following the two weeks of Extinction Rebellion protests, direct action welcomed by the Labour leadership, and features heavily in Common Wealth’s literature. There has been some debate in political circles as to the level of focus that should be placed on the issue – it seems the policy machine of the left has made its decision.

Having already demonstrated the strong links between the leader’s office and its directorship, Common Wealth should certainly be taken seriously by those looking at the future policy ideas of the Labour Party. What is of more interest for many though is what this focus on policy, with the backing of major unions, tells us about the Labour Party’s future direction.

Having been preparing for government since its surprise 2017 election performance, Labour is now looking to flesh out its radical policy offer by embracing various schools of leftist thinking which has taken off in the nine years out of power. While many have criticised the current leadership as representing a party looking backward at the hard-left of the 70s and 80s for inspiration, the Labour Party seems increasingly to be looking to how radical new ideas for the long-term future of the economy and democracy. The time-frame for the adoption of these ideas, and indeed the practicability of them, is open to plenty of speculation.

Where the Conservative leadership candidates battle for which ideas are likely to win the hearts of the electorate, specifically the young, Labour’s policy ambitions go further. And it is this which makes the launch of Common Wealth a key marker in the seriousness everybody should take the official Opposition.

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