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

Archive for the ‘Politics’ Category

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

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

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

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

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

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

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

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

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

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

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

 

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

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

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

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

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

You can download the full report here:

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

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Boris Johnson is Safe… For Now

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

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

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

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

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

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

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

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

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

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

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Are women finally being heard?

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

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

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

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

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

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

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

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

Conservatives down across the country

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

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

Labour moving forwards, but slowly

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

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

Other opposition parties have been the main beneficiaries

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

A constitutional crisis on the horizon in Northern Ireland?

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

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

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

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

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

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

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

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Tax Rises Now, An Income Tax Cut To Come

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

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

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

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

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

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

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

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

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

 

 

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

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

 

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

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

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

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

Saving today, but more spending likely in the autumn

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

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

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

Charting a low-tax course

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

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

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

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

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Rishi’s recipe for growth: private sector investment

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

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

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

No un-funded tax cuts

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

Capital: options to drive more investment

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

People: promoting lifelong learning

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

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

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

Ideas: more R&D required

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

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

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

Where’s the green agenda?

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

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

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

There are three core points to consider from this speech:

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

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

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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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COP26 – What you need to know

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

Corporate communications haven’t quite gone to plan

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

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

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

National political tensions are playing out on an international stage

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

Expect another week of wall-to-wall news coverage

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

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

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

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

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

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

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

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

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

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

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

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Party conferences 2021: politics, power plays and positioning

Party conferences are always an annual spectacle of power plays, positioning, and of course, politics. The 2021 Labour and Conservative conferences did not disappoint – below are our key takeaways of the main themes and messages that emerged over the two weeks.

1. Both party leaders sought to put clear water between them and their predecessors

Starmer sought to lay the ghost of Corbyn-past to rest by changing Party rules and staring down hecklers during his speech, but Johnson did not pull any punches in his assessment of May and Cameron.  Comments like, “We are not going back to the same old broken model with low wages, low growth, low skills, and low productivity – all of it enabled and assisted by uncontrolled immigration” were made to foster the idea that the Johnson administration is new, not a continuation of a Conservative Government for more than a decade.  Perhaps more importantly, they were made to make the case that he will need some time to turn things around.  However, the risk of a leader taking a ‘Blue on Blue’ attack line is that he is seen to condone such behaviour by others – weakening the fabric of Party discipline and the likelihood of public rifts within Government.  In the run-up to the Budget later this month this could become a problem – the spat between Sunak and Kwarteng being a potential case in point.

2. The Shadow Cabinet used conference as an opportunity to court business

Recognising that the public’s perception of Labour’s economic competence remains a real issue 13-years after the financial crash, Starmer and Reeves led a business charm offensive in Brighton.  In a nod to the success of Brown and Blair in using public support from business in the mid-90s to rebuild trust and confidence in Labour’s economic stewardship, the Shadow Cabinet were keen to be seen as listening to concerns and promising action through measures like abolishing business rates.  Polling suggests the method is starting to work with more people thinking that the Conservatives are most likely to raise taxes and are handling tax badly.

3. The Government used conference as an opportunity to put the spotlight on business

For the traditional party of business, it was an all together different situation.  Yes, there were regular mentions of business and Government working successfully together, but ministers were at pains to reiterate that it is the job of private enterprise, not the State, to manage commercial risk.  The point that profit is associated with successfully navigating jeopardy was repeatedly made by ministers at numerous fringe discussions to some teeth gnashing from industry representatives in the audience who see inflation and supply chain issues as a political fall-out.  The tone was in line with Johnson’s belief that Government needs and can afford to be ‘tough’ with business, especially at this stage of the election cycle.  The PM is apparently not yet perturbed by organisations like the FSB, NFU and CBI, as well as companies such as Iceland, becoming increasingly critical of the Government’s approach.

4. Net Zero was the dominant topic of discussion at both conferences

Over the last decade there has been a significant increase in the number of fringe events looking at the response to climate change and the opportunity for green growth, but this was the year that Net Zero dominated the discussion.  Politicians from both parties presented decarbonisation as a way to improve security of supply in response to global shockwaves, and as a way to increase economic prosperity via new green jobs. There was significant enthusiasm from party members of both colours, but questions about cost and fairness repeatedly bubbled up from the floor.

5. The battle ground will be cost of living

If Net Zero was in the title of every other fringe event, questions about plans to address cost of living concerns were on the lips of attendees, both in Brighton and in Manchester.  Labour sees inflation as an opportunity to weaken confidence in Conservative economic stewardship, while there were concerns among the Conservative rank and file that this is an open flank that needs to be covered quickly from attack.  The next standing flashpoint will be the Budget on 27th October, ahead of which the Institute of Fiscal Studies has warned the Chancellor that there is little wriggle room for big spending pledges. It will follow hot on the heels of the next Bank of England Monetary Policy Committee meeting where eyes will be on a potential split in opinion on the base rate.  While the rate may not change in early November, a split in the vote could signal a potential uplift in the New Year which would make borrowing costlier.

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Autumn offers Johnson a window of opportunity to deliver on his domestic agenda

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

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

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

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

Spending Review 

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

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

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

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

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

Health and Social Care 

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

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

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

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

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

Planning 

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

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

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

Environment 

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

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

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

Online Safety

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

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

New faces and next steps 

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

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

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

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

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

1. Stand and deliver (the levelling up agenda)

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

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

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

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

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

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

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

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

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

3. Keir today, gone tomorrow?

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

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

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

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

4. Scotland the (un)Brave

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

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

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

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

 

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

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Is it time to level up the Cabinet?

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

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

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

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

 

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

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

 

 

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

 

 

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

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

 

 

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

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

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

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

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

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

 

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

 

 

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Three hidden messages in next week’s Budget

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

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

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

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

1. We are still in economic crisis mode

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

 

2. This is still a Conservative government  

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

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

 

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

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

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

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

 

On the road back to normality

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

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

 

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The final countdown: Brexit explained in five minutes

How did we get here?

Negotiations have been ongoing since the Brexit referendum in 2016. The UK was initially scheduled to leave the EU on 29 March 2019, two years after it triggered Article 50, but a series of extensions led to the UK’s eventual exit from the EU on 31 January 2020. The UK then entered a transition period during which EU rules continue to apply in the UK and the UK remains part of the EU’s single market and customs union. The transition period will end on 31 December 2020.

The negotiations currently taking place are seeking to agree the UK-EU trading relationship after the transition period ends. These negotiations are between the European Commission (the executive body of the EU) and the UK Government. The UK negotiating team is led by David Frost and the EU team by Michel Barnier. Interventions have also come from Boris Johnson and the President of the European Commission, Ursula von der Leyen, usually at times where political impetus is required.

Where are we now?

The UK and the EU have both said that the vast majority of the components needed for a free trade deal have been agreed. Two main issues are outstanding: fishing rights and the so-called level playing-field provisions.

Fishing rights have become a totemic issue. The UK government views fisheries as a key part of “taking back control” of British territory and regulation. The UK is thus fighting hard on the issue, despite fishing being worth only around than 0.1% of UK GDP. Indeed, in terms of Gross Value Added, the entire UK fishing industry is comparable to the single Harrods store, yet fishing rights now appear to be the single largest obstacle preventing a trade deal.

In seeking level playing-field provisions, the EU wishes to ensure that the UK either maintains equivalence with EU regulations, or faces tariffs, to prevent it from gaining what the EU sees as an unfair competitive advantage. The issue has proven intractable because both sides can argue that their position is reasonable, given the precedent of previous free trade agreements. An agreement on this point is particularly important for investors and businesses in the UK because, without one, tariffs and other regulatory barriers could impede the untaxed flow of goods between the UK and the EU, and vice-versa. In recent days, both sides have hinted that some progress has been made, but the precise nature of this progress is very far from clear.

Compounding these issues is a sense from both sides that they must not be seen to be giving too much ground, as this would set an unhelpful precedent for any future trade negotiations with other countries.

What happens next?

Face-to-face negotiations are continuing. With two weeks to go before the end of the transition period on 31 December, any agreement will require an accelerated approval. This kind of shortened timetable is not impossible, but it is highly unusual. It is likely to mean any deal agreed lacks the depth or complexity that will be necessary to cover the future UK-EU relationship in full for the long term.

In the UK, the ratification process is comparatively simple. A debate in Parliament is likely to take place (though this is not a formal requirement) and the government has set out plans to recall MPs from their Christmas holidays if necessary, to ensure a vote can be take place before time runs out. Normally, a treaty can be ratified only after 21 sitting days have passed since it was first presented to parliament, but the government has the power to push ratification through in a single day.

Given the sizeable Conservative majority of 80 in the Commons, we can assume with a high level of confidence that any deal put before Parliament at this stage would be passed.

The EU system of ratification will take longer. Once a deal has been agreed, the European Commission (which has negotiated it) will recommend that the European Council approve the deal and set out its opinion on whether the final deal is a ‘mixed agreement’ or not. The European Council is the EU’s supreme political authority made up of the heads of state or government of the EU member states, along with the President of the European Council and the President of the European Commission. A mixed agreement is a trade agreement that also deals with regulatory issues or one that covers the oversight powers of each side. The UK-EU deal will not be a mixed agreement, meaning that as long as the Council approves the deal, it can pass without any separate approval procedures in individual member states.

After the Council approves the deal, it will be sent to the European Parliament. Like the UK Parliament, it cannot change or amend the deal, but it can veto it. However, any deal approved by the Commission and the Council is almost certain to be approved by the European Parliament.

After this approval, the Council must then confirm the agreement. As soon as this has been published in the Official Journal of the European Union (OJEU), the ratification process for a non-mixed agreement is complete.

How ready is the UK for the transition period to end?

The government has faced criticism for its post-Brexit preparations. The Business, Energy and Industrial Strategy (BEIS) Committee held evidence sessions on business preparedness for Brexit in early December 2020. Following the sessions, committee Chair Darren Jones MP warned that expected border disruption would lead to issues for imports and exports, with the food and manufacturing sectors particularly likely to be affected.

The treatment of the border between the Republic of Ireland and Northern Ireland is politically and economically complex, but a future arrangement has been agreed. Checks will not take place at the Irish border. Instead a new “regulatory” border between Northern Ireland and Great Britain (England, Scotland and Wales) will be introduced. Northern Ireland will continue to follow many of the EU’s rules, meaning that lorries can continue to drive across the NI/RoI border without having to be inspected, but some checks on goods moving between Great Britain and Northern Ireland will be required.

Some sectors face disruption regardless of whether a deal is reached or not. Most issues affecting the services sector, such as market access, are unlikely to be included in a trade deal. Most large firms have already sought to offset this risk by moving headquarters or establishing operations within EU. UK financial services currently benefit from the ability to ‘passport’ into the EU’s single market, which allows them to sell funds, debt, advice or insurance to clients across the EU unimpeded, as if they were domestic, rather than foreign, businesses. This ability ends when the transition period ends. Disruption caused by the end of passporting will be limited if the EU formally states that the UK has regulatory equivalence with the EU. This would allow British firms to serve EU clients if Brussels deemed British regulations to be closely aligned with its own. This system is more limited than passporting and can be revoked by the EU with 30 days’ notice. The process for approving an equivalence agreement is separate from the trade negotiations and is unilaterally decided by the EU.

The movement of data across borders is also key to the trade in services. Whether EU-UK transfers will be allowed is subject to the EU declaring that UK data regulations are equivalent to EU regulations. This decision is separate to the agreement of a trade deal and has not yet been made.

An agreement has also not yet been reached on whether to continue mutual recognition of professional qualifications (MRPQ). An agreement could make it easier for UK service providers to continue operating in the EU (and vice versa) and remove the expense of securing new qualifications or recruiting appropriately qualified staff. If a deal is not agreed the UK and EU member states could decide to unilaterally recognise each other’s professional qualifications or provide streamlined routes to re-qualification.

Can the transition period be extended?

There is no legal basis for extending the transition period, as the deadline for doing so passed on 1 July 2020. It is technically possible that, if both sides agreed, an extension of no more than a few weeks could be arranged through international law, though this is highly impractical. It is, therefore, a very unlikely outcome.

What could a deal look like?

Both sides have sounded more confident that a deal can be struck in recent days. Ursula von der Leyen, President of the European Commission, told MEPs on Wednesday 16th December that “there is a path to an agreement now”, albeit a narrow one, with Boris Johnson echoing this sentiment in meetings with MPs. A deal primarily affects the goods and manufacturing sectors. The key part of any deal will be the tariffs and quotas system. Both sides are aiming to continue the current tariff- and quota-free trading relationship, and this is the most likely outcome if a deal is agreed. The UK and the EU are looking to negotiate an agreement that would include measures to simplify customs procedures as far as possible.

A deal would still involve some level of customs checks at borders. However, these could be much simpler than in a no-deal scenario. Full regulatory controls on medicines, chemicals and industrial goods are likely to apply, as in a no-deal scenario. A mutual recognition agreement could be included in the trade deal to partially offset this regulatory burden, but compliance costs are likely to increase regardless.

What would the impact of a no-deal Brexit be?

The UK would begin trading with the EU on World Trade Organisation (WTO) terms, meaning that ‘most favoured nation’ tariffs for all good and services will be in place, replacing the current tariff-free arrangement. This is also referred to by the government as an “Australia-style deal”.

For most goods, the tariffs charged by the EU are not significant, but some sectors are at risk of considerable disruption. Agricultural goods and food face regulatory hurdles and additional tariffs as does the automotive sector, where car imports face an EU tariff of 10%. All goods would face greatly enhanced border checks, increased compliance costs and increased time for goods to reach their destination. The absence of mutual recognition agreements would mean that businesses would potentially have to certify their goods on both sides of the UK–EU border. This would lead to significant costs in particular for the chemical and pharmaceutical industries. Amid the Covid-19 pandemic and rising unemployment, the political implications of disrupting food and medicine supplies into the UK could be severe for the government. A Cabinet Office “reasonable worst-case scenario” document published over the summer set out a strategy for coping with the event of a no-deal Brexit during the Covid-19 pandemic, which includes the possibility of significant disruption throughout the UK. This is a scenario which the government will be extremely keen to avoid. Disruptions or shortages of food, medicine or other essential supplies during the pandemic would severely harm the government’s reputation domestically and abroad, as well as compounding the economic damage which the pandemic has already done.

A no-deal situation is by no means permanent. A deal could be struck with the EU at a later date and the UK hopes that the signing of new trade deals with other major economies in the future will offset the immediate Brexit impact and provide new opportunities for British businesses. The UK has signed 29 agreements covering 58 countries or territories that will roll over the trading relationship the UK had while it was an EU member. Additionally, a new trade deal has been signed with Japan. These deals are intended to mitigate the impact on non-EU trade and the UK government will look to sign new trade deals with major economies as soon as possible.

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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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President Biden: what does it mean for businesses in the UK?

While counting continues and the threat of legal challenges remain, it is now clear that Joe Biden will almost certainly be the next President of the United States. The implications for America and the world have been discussed at length, but what will a Biden presidency mean for businesses in the UK?

The US will be more open to trade, but an element of protectionism will remain

Trump’s time in the White House has been characterised by an ‘America First’ mentality: a focus on supporting American industry and agriculture has resulted in a more protectionist approach. The introduction of new tariffs on trade with China illustrates this.

Much of this will change. Biden’s administration will almost certainly be more open to the world and have a significantly more globalist outlook. He will arguably take a less confrontational approach to global trade by engaging in multilateral trade discussions in a way that Trump refused to.

However, it would be naïve to assume that there will be a total shift: throughout the campaign Biden pushed a ‘Make American’ and ‘Buy American’ agenda, partly to appeal to swing voters in the ‘Rust Belt’ states of the Mid-West.

For UK businesses, it is likely to mean US businesses being more willing to deal with firms in the UK and could lead to greater demand for UK exports to the US. We could see a reduction in the barriers to doing transatlantic trade, but the full extent of this depends on the prospect of a trade deal.

A UK-US trade deal is unlikely in the near term

Trump’s support for Brexit and his perceived strong personal relationship with Boris Johnson created an expectation amongst many on the UK that a UK-US trade deal was inevitable. The reality was likely very different: while the rhetoric was warm, Trump was ultimately a transactional President, and a trade deal on terms acceptable to the UK public was always unlikely.

This is unlikely to change under Biden, and arguably the odds of a trade deal have got even longer. Biden’s priority from a European perspective will be the EU. He will likely see Macron and Merkel as the gatekeepers to Europe, not the UK. The UK’s historical role – while arguably having been overstated – as a transatlantic bridge between the US and the EU is now much less significant.

In addition, the same barriers to a Trump trade deal – most significantly on food standards and pharmaceuticals – will remain and politically it will be less of a priority for Biden. A divided political system in Washington, with the Republicans likely to retain control of the Senate, will mean passing any deal through Congress will likely be difficult.

So while the US may be more open to trade with the UK, a formal trade deal with the UK will be highly unlikely in the near to medium term. This will be significant for businesses who saw it as either a commercial risk – for example under cutting existing regulatory standards – or the opportunity to open up new markets, for example the Scotch Whisky industry. The latter will need to continue to lobby hard on both sides of the Atlantic to make progress.

Could a Brexit deal be more likely?

There is growing speculation, that a Biden presidency could spur the UK on to agree a post-Brexit trade deal with the EU in the coming weeks. Any hope of a UK-US trade deal would become even more distant if the UK failed to agree a deal with the EU. Biden – with Irish roots – has already made clear that the Good Friday agreement cannot ‘become a casualty of Brexit’. The White House going Democrat may refocus minds in Downing Street as talks conclude. While the UK will be keen for it not to be seen in these terms, this will be good news for UK businesses who want the certainty of a deal, however ‘thin’ it is.

There will be even greater global focus on decarbonisation

Biden is likely to commit the US to achieving Net Zero emissions by 2050, pledging to pass legislation within the first year of his presidency to drive forward the ‘Green New Deal’. While a divided Senate may make this more difficult it is clear that the US will re-join the Paris Agreement and will now enthusiastically engage in COP26 next November. As this is being hosted in Glasgow, the UK sees this as an early opportunity to build bridges with the new administration.

With decarbonisation affecting almost all aspects of the economy, the US joining global efforts to achieve Net Zero by 2050 will give certainty for UK businesses that the direction of travel being pursued here will continued with one of our strongest global allies now taking the same approach. It will also offer the opportunity of opening up a significant new market for UK firms developing clean tech solutions with Net Zero legislation offering an incentive to invest, whether that be in EVs, renewables or industrial decarbonisation.

What this all means for UK businesses and what you should do about it

While there is clearly a risk that the UK will be deprioritised for other European states and a UK-US trade deal is unlikely to be concluded any time soon, UK businesses should expect a greater degree of certainty and a US more open to global business. Clearly these are high-level geopolitical events, but there are steps that businesses in the UK can consider taking now to ensure they are prepared and can maximise the opportunities from a Biden Presidency:

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

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

Frustration bubbles up from the blue

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

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

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

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

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

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

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

Lessons from history – don’t push it

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

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

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

What this means for policy making and campaigns

It’s all to play for.

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

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

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

 

 

 

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What is the government’s plan for state aid?

Two of the Margaret Thatcher’s most steadfast beliefs were the benefits of European economic integration and the folly of governments providing financial aid to support particular businesses and industries, both of which she said contributed to the UK being labelled the ‘sick man of Europe.’ Ahead of the UK joining the European single market in 1992, Margaret Thatcher addressed businesses and encouraged them to think about the opportunities access to the single market would create. She said: “Just think for a moment what a prospect that is. A single market without barriers – visible and invisible – giving you direct and unhindered access to the purchasing power of over 300 million of the world’s wealthiest and most prosperous people.”

How times change. The current Conservative government, in its negotiations with the EU, is willing to sacrifice access to the single market so that it can offer state aid to British businesses. This about-turn raises a fundamental question: why is this government so keen to be able to financially support businesses, and what does it hope to achieve?

What are the rules on state aid?

State aid, broadly speaking, is any advantage granted by the government on a selective basis to businesses, and it can come in many forms: direct cash transfers, preferential tax treatment and financial guarantees offered by the state. Under EU rules, there is not a blanket ban on state aid. State aid can be provided if it is approved by the European Commission, it is of a small sum or if it is covered by the General Block Exemption Rule. The General Block Exemption Rule allows state aid to promote new activities that would not otherwise have taken place and promotes economic development without distorting competition. State aid that falls outside of these parameters and is viewed to distort competition by offering an advantage to a particular business or industry is illegal under EU law.

The UK and the EU are currently at loggerheads over state aid and a future free trade deal. The EU is demanding that in return for a free trade deal, the British government should commit to ‘dynamic alignment’ with the EU’s state aid rules – the so-called ‘level playing field’ commitments. The UK government, however, wants to have its own ‘separate and independent’ policy on state subsidies. The EU’s fear is that if it gives British firms free trade access to the single market without assurances on state aid, the government in the UK could subsidise green technology, for example, and undercut European made products, undermining the principles of the single market. The EU’s objections are quite reasonable – if you want to be a member of a club, you need to play by the rules. If there can be no agreement between the two sides, the UK will leave the EU on 1 January 2021 without a deal, an outcome that is looking increasingly likely (and even desirable to some within Downing St).

What’s the plan?

Should the UK leave without a deal, the government will not be able to splash the cash wherever it wants, as it will still be bound by World Trade Organisation (WTO) rules on state aid. One crucial difference though is that the WTO state aid restrictions only cover goods, while the EU’s rules cover both goods and services. This opens the door to the UK being able to financially support a range of industries in the service sector, an area where the UK already has a competitive advantage, especially in financial and professional services.

Dominic Cummings recently told civil servants in the Department for Digital, Culture, Media and Sport that he was working on a plan to help the UK build ‘$1 trillion tech companies.’ Cummings views a no-deal Brexit and the removal of EU state aid restrictions as an opportunity for the government to support British start-ups to become genuine players on the world stage, having historically lagged behind the United States and China.

Looser rules on state aid would also help the UK be more flexible in times of emergency. At the height of the Covid-19 pandemic, HM Treasury was restricted in its ability to offer CLBILS loans to private equity-backed firms due to the EU’s rules on ‘businesses in difficulty.’ Due to the leveraged financial structure of these firms, under EU rules, they were not eligible for government financial support. Outside of the EU’s legal framework on state aid, the government would be free to financially aid whichever businesses it chose to, an option that will only become more appealing as the reality of increasing unemployment kicks in.

Will it work?

The idea of a British tech giant is an appealing one for the government. Foreign technology firms are difficult to tax, and it would make the government’s life a lot easier if it had a homegrown firm it could draw revenue from. The creation of high quality, well-paying jobs would also be a bonus.

There are some problems with Cummings’ plan, though. Historically, the British government has a chequered record of success in ‘picking winners.’ When compared to the private sector, governments lack the knowledge, expertise and market discipline to sustain and grow companies. This means risk is often not weighed effectively, leading to either over or under-investment. There is also the risk that business decisions get made not for sound commercial reasons but to fulfil some other government priority.

The interaction between the state aid tech giant plan and the government’s levelling up agenda also throws up some inconsistencies between its wider priorities. Tech firms tend to thrive in big cities and those that are home to elite universities. These are precisely not the areas the government wants to ‘level up’: post-industrial towns in the north and midlands. The price of state support for the tech sector would be the government trading off the UK’s remaining manufacturing base in the north and midlands by removing tariff-free access to its biggest market.

State aid is an appealing idea, but to be implemented well it requires a government to have patience, skill and good judgement. It will also involve the government having to make an unappealing sacrifice that will undermine its levelling up agenda. The deeper message of the government’s interest in state aid is that it is no longer ideologically wedded to the ideas of the past and it is more than willing to deviate from them if it is politically expedient to do so.

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Brexit explainer – what is the Internal Market Bill and why does it matter?

For avid Brexit-watchers, the headlines from the past week may seem like the country has been transported back to October 2019. With restless backbenchers, strongly worded statements from EU Chief Brexit negotiator Michel Barnier, and journalists running to the nearest legal expert, Westminster is suffering from a collective case of déjà vu. For those just tuning back into the Brexit negotiations, here’s what you need to know.

What is the Internal Market Bill?

The Internal Market Bill is intended to create a framework for trade to operate across the four UK nations post-Brexit. The Bill attempts to ensure the whole UK operates as its own single market. It would establish two legal principles – mutual recognition and non-discrimination – to ensure there are no new barriers for businesses trading across the UK, allowing a good or service to be sold anywhere in the UK without any internal standards blocking the movement of goods.

Why is the Bill so controversial?

The principal issue is that the Bill would reverse the Northern Ireland protocol contained in the Withdrawal Agreement, which was signed by Boris Johnson and passed by the current Parliament on 24 January 2020. The protocol settled the issue of post-Brexit trade across the Irish border by applying some EU customs regulation to goods travelling between the rest of the UK and Northern Ireland to avoid checks at the Irish border. The Bill would contravene the Agreement in three ways:

  1. It gives ministers powers to not to apply EU standards on paperwork for goods leaving Northern Ireland going to the rest of the UK.
  2. It gives ministers the power to disapply or modify state aid rules in Northern Ireland, which the Withdrawal Agreement stated would continue to be governed by EU state aid rules. Those powers also allow the UK Government to ignore decisions of the European Court of Justice and EU legislation on state aid.
  3. It would prevent individuals from enforcing the provisions of the Withdrawal Agreement in UK courts by stating the measures in the Bill are ‘not to be regarded as unlawful on the grounds of any incompatibility or inconsistency with relevant international or domestic law’.

The second issue with the Bill is the decision to apply mutual recognition to the devolved nations without their consultation. Mutual recognition means goods lawfully produced in England according to English standards can be sold in Scotland, even if Scotland has higher (and thus more expensive) standards. This means the devolved nations are not allowed to exclude goods from other UK nations made to lower standards, undermining their ability to set their own regulations.

What has the reaction been?

Reaction has been strong from both sides of the Brexit debate, fuelled by Northern Ireland Secretary Brandon Lewis admitting in the Commons that the Bill ‘does break international law in a specific and limited way’. Domestic opponents of the Bill suggest that it will damage the UK’s international reputation, preventing it from being taken seriously when addressing illegal acts conducted by other nations and making trade talks harder.

Scottish First Minister Nicola Sturgeon has described the Bill as an “assault on devolution”, an accusation that is unlikely to hurt the SNP’s standing going into the Scottish Parliamentary elections next year. Sturgeon has now pledged to campaign to demand a new independence referendum as “the only way to protect the Scottish parliament from being undermined and its powers eroded”.

The European Commission has threatened the UK with legal action and trade sanctions if it does not withdraw the controversial clauses in the Internal Market Bill by the end of September. Irish Taoiseach Micheál Martin has also personally criticised the Bill, stating that he is now pessimistic about the chances of agreeing a trade deal with the UK. Despite this, the EU has no intention of immediately shutting down  its talks on the UK/EU future-relationship, saying it would amount to falling into a trap set by the UK.

Across the Atlantic, US Speaker Nancy Pelosi has warned that there is “no chance” of the US signing a trade deal under a Biden presidency if the UK goes ahead with the Internal Market Bill in its current form because it undermines the Northern Irish peace process.

Why has the government done this?

The government has stated that the Bill is merely its way of tidying up “loose ends” in the Withdrawal Agreement that it says were caused by passing the Agreement “at speed”. The policy is described as a ‘safety net’ by ministers, to protect Northern Ireland’s position if a deal on future relations with the EU cannot be reached.

The UK has also claimed Michel Barnier has threatened not to include the UK on the list of “third countries” on food standards, which would effectively make it illegal to move food from Great Britain to Northern Ireland.

This defence has been met with scepticism by political commentators, the EU and some UK politicians, who believe the UK Government is either trying to force more concessions from the EU, attempting to force the EU to walk away from negotiations or simply did not realise the implications of the Withdrawal Agreement during the negotiations.

Of course, more than one of these reasons can be true at the same time, and it is entirely possible the UK Government feels it is a necessary action to take to protect trade with Northern Ireland, while also using the Bill as a way of shaking up, or perhaps deliberately destabilising, the trade talks.

What happens now?

The government has told the EU it doesn’t intend to withdraw the Bill, meaning it will be debated in Parliament. Conservative MP Bob Neill has tabled an amendment that would give parliament a veto on any decision to breach the Withdrawal Agreement. A significant number of other amendments are also expected. The passage of any amendment would require a significant Conservative rebellion, as well as the support of Labour, the SNP and the smaller opposition parties.

The Bill must also pass in the House of Lords, where it has been widely condemned, including from Conservative peers. The Lords are highly unlikely to block the Bill but may introduce amendments to force the Bill back to the Commons. It is almost certain to back any amendments passed in the Commons designed to water down the Bill. The Bill can’t pass into law until both Houses pass the same version of the Bill in full.

What happens if the Bill passes?

The passage of the Bill in its current form is likely to cause a serious impasse between the UK and the EU. European Parliament leaders, representing a majority of MEPs, have issued a statement declaring they will block the EU-UK trade deal if there is any breach of the Withdrawal Agreement. This marks a line in the sand from which neither side is backing down and makes the possibility of leaving the transition period without a trade deal significantly higher.

While it is highly unlikely the Bill will be voted down, it may be passed with amendments that either remove or significantly waters down the current provisions. The government is considering implementing sanctions, including a ‘nuclear option’ of withdrawing the whip from rebel Conservative MPs.

The Bill also has implications for the union. The Scottish and Welsh Governments have set out strong opposition to the Bill and with Scottish Parliamentary elections on the horizon in 2021, the Bill is set to further provoke anti-Westminster sentiment among Scottish nationalists. Polls have consistently shown a majority in favour of Scottish independence since the onset of the coronavirus pandemic, and this Bill is likely to cement opposition to the current Westminster Government in Scotland.

The matter may well be settled in the courts. Although the UK Supreme Court is unlikely to have jurisdiction over the issue due to parliamentary sovereignty, the EU may choose to take the case to the European Court of Justice which has jurisdiction over the interpretation and implementation of the Withdrawal Agreement.

Whatever happens over the next week, the UK Government has chosen a provocative approach that will have significant implications for the outcome of the UK-EU trade negotiations, its relationship with its own MPs, the strength of the union and its international reputation.

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The Winter Economy Plan explained

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

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

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

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

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

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

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Webinar – From Whitehall to Town Hall

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

Watch the discussion to explore:

The panel was comprised of:

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

 

 

Watch a recording of the webinar:

 

 

 

 

 

 

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

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

What’s getting top billing

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

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

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

How much the bill will be and who will pay

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

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

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

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

The Bills that we can expect to follow

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

 

 

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The challenges ahead for Keir Starmer

Keir Starmer was elected Leader of the Labour Party on Saturday with a large majority and an overwhelming mandate for change.

His platform was clear and simple: he was the ‘unity’ candidate ready to rebuild the party and take it into power at the next election. His pitch was aimed at Labour’s ‘soft left’ and more closely resembled that of his predecessor’s than some might have imagined, with early pledges to abolish tuition fees, nationalise core industries and introduce a Prevention of Military Intervention Act.

Now that Starmer has won the election, what sort of leader will he be? And, importantly, what does it mean for the business community?

Unity and the path to power

Political parties are rarely successful and rarely win elections when they are divided. Starmer is fully aware that the disunity and infighting that plagued the party under Jeremy Corbyn had a negative contribution to its electoral success, and so he has taken on the difficult task of trying to unify different groups within the party.

His Shadow Cabinet reflects this commitment and is an early indicator that his rhetoric around ‘unity’ is serious. He offered key roles to his two leadership rivals and kept some of Corbyn’s allies in the Shadow Cabinet, including Andy McDonald and Cat Smith, in addition to Rebecca Long-Bailey.

He promoted some ‘moderate’ MPs too, such as Rachel Reeves, Jonny Reynolds and Ian Murray, and maintained some element of continuity by re-appointing Jonathan Ashworth, Luke Pollard, Nick Brown, and Baroness Smith to their roles.

However, most of his appointments were from the ‘soft left’ and were MPs that had served as junior members of Corbyn’s frontbench both quietly and effectively.

Starmer has struck a clever balance here, appointing MPs that had worked under Corbyn, but not necessarily supported him, and that the majority of Labour MPs will be happy to get behind.

The appointment of Anneliese Dodds as Shadow Chancellor is the perfect example here. Starmer could have promoted a more high-profile MP to the role, such as Reeves or Yvette Cooper, but both are more economically centrist than Starmer and could have been divisive appointments.

Instead the new leader chose the comparatively less well-known Dodds for the role, who had quietly built up a reputation for herself as a talented Shadow Financial Secretary. Indeed, John McDonnell was quick to give his successor his “full support” and praise the work she did in his team.

Other notable examples include promotions for Preet Gill, Louise Haigh and Marsha de Cordova.

Policy platform

Although we are only days into Starmer’s premiership, he has thus far tried to make good on his ‘unity’ pledge as well as his promise to work to eradicate anti-Semitism ‘from day one’. His first act as leader was to write an apology letter to the Jewish Board of Deputies, and later in the week he held a follow up call with Jewish leaders, both of which were welcomed by the Jewish community.

In fact, the only candidates for Leader or Deputy Leader not given a role in his Shadow Cabinet were those that didn’t sign the Board of Deputies’ pledge.

While Starmer will inevitably have to navigate coronavirus-related challenges over the next few months, we do expect that the policy pledges that he set out during his leadership campaign will form the basis of his early policy platform.

He has been true to his word thus far.

A Corbyn-lite approach

Starmer wants to focus on economic justice through increased taxes, social justice through the abolition of universal credit and climate justice through the support of a Green New Deal. He believes that “public services should be in public hands, not making profits for shareholders” and supports common ownership of rail, mail, energy and water, he wants to strengthen the trade union movement and workplace rights, and he wants to devolve power to the regions.

In foreign policy, in an indirect attack on Tony Blair, his firm commitment is “no more illegal wars”. He wants to introduce a Prevention of Military Intervention Act, put human rights at the heart of foreign policy, and review all UK arms sales.

These policies reflect many of his predecessor’s manifesto commitments and would not have looked out of place as Long-Bailey’s pledges.

He has also largely kept the structure of the Shadow Cabinet that Corbyn created, even maintaining the position of Shadow Employment Rights and Protections Secretary as a senior frontbench role.

Essentially, Starmer is adopting a Corbyn-lite approach; he is not a return to New Labour.

Therefore businesses looking to engage with the Labour leader and his team will need to be recognise this and tailor their approaches accordingly.

We expect he will be much more open to meeting with businesses than Corbyn was, who only engaged with a trusted select few.

To be successful in engaging with him, businesses will need to demonstrate their commitment to Starmer’s core values; by paying their full share of tax, by having clear net zero goals, and by treating their workforce fairly.

Only then are they likely to be able to influence Labour’s agenda.

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Budget 2020 Analysis

This was a Budget of two halves.

The Chancellor started on a sombre note as he gave a detailed statement on the coronavirus and the Government’s response.

To manage temporary disruption to the economy, he pledged that the Government would:

Collectively, the fiscal stimulus package amounts to an eye-watering £32 billion.

MPs behind the dispatch box were visibly surprised by the scale of the intervention, but it did not stop there as the Chancellor moved from ‘providing security today’ to ‘planning for prosperity tomorrow’.

‘Planning for Prosperity’

Added up, the Chancellor’s forward-looking ‘prosperity’ pledges come to an additional £175 billion over five years with money allocated to transport, digital and energy infrastructure; public services; research and development and the wider enterprise environment.

Despite the sombre start, the self-assured delivery and bullish outlook in the face of an unprecedented global event looked like an early pitch for higher office.

The Chancellor said that while the commitments in Budget 2020 have remained within the limits of the existing fiscal rules, the framework would be reviewed – suggesting that a relaxation on borrowing could follow in the autumn in the face of low interest rates.

The Green Book, which sets the criteria by which infrastructure projects are judged, will also be reviewed – tying in with the Government’s commitment to shift investment out of the South East and towards the regions.

More Fiscal Events this Year

The Budget also launched a consultation on the Comprehensive Spending Review (CSR), which will close in July.

The exact timing of the CSR, which will set out detailed spending plans for public services and investment, will be confirmed by the Government once it has a clearer understanding of the coronavirus’ economic impact.

Collectively the Budget amounts to some very big spending commitments but with little detail on exactly when, where and how large chunks of the money will be spent.

What happens next

Four days of debate will now follow as MPs get to grips with the detail of Budget 2020, before the Finance Bill, which enacts the proposals for taxation, is tabled in Parliament.

The Budget will also be scrutinised by the Treasury Select Committee, with expert witnesses providing evidence to committee members.

With a majority of 80, we can expect the debates and Bill to pass without too much drama, but as the ‘omnishambles’ in 2012 showed a second round of scrutiny can throw-up unexpected surprises for the Government.

Looking further ahead, the Chancellor knows that his first Budget will be like no other and further tests sit on the horizon – the CSR later this year which will see an inevitable bun fight ensue as departments square up for longer-term funding allocations, and the Autumn Budget just a few weeks before we’re due to leave the EU for good.

 

 

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

 

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

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

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

It would seem loyalty continues to be rewarded.

A question of loyalty?

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

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

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

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

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

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

Making the most of the changes – some advice for businesses

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

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

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

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

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

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

 

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Does the Flybe bailout make electoral sense for the Government?

Flybe

The Government has announced a rescue package for Flybe, the UK and Europe’s largest regional airline. It’s an early example of the government ‘levelling up’ the UK regions with London and the South East.

WA Communications takes a look at how the decision actually makes electoral sense for the Conservatives, focusing on the West Midlands.

 

Flybe administration Update March 2020:

 

Flybe has now collapsed, after a request for financial support was turned down by its investors led by Virgin Atlantic. EY have been appointed as administrators of the airline, putting up to 2,000 jobs at risk. The government had said that is was unable to provide support until after the transition period due to restrictions posed on state aid for EU members.

Unfortunately with mounting financial troubles exacerbated by coronavirus, waiting until the end of the year has proved too much for Flybe.

The government has pledged to help Flybe’s employees find new work, but there will be no relief fore the thousands of customers who had flights booked with the company or who rely on it to travel. The government has said that it wants to work with other airlines to see if some of the coverage offered by Flybe can be replaced, but with routes that most major airlines have deemed too unprofitable to operate, it is unlikely that anyone will be racing to fill the lost capacity.

 

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

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

But this need to push through the legislation to have us out, as promised, by the end of January is leaving many of those on the frontbench enjoying a lengthy interview process for their own jobs – or one higher up the ladder – while we all wait for the much-anticipated epic reshuffle in February.

Rumours in and around Westminster about who is out (Truss? Wallace? Barclay?), who could be coming up (Sunak? Dowden?) and who may have to be moved to allow them to spend more time with their constituents (Raab saw a huge drop in his majority in Esher & Walton) are making some hopeful and many nervous.

Talk of a significant reconfiguration of Whitehall departments is being played down, with a smaller-scale re-jig now looking more likely but Dominic Cummings’ determination to shake-up the Civil Service machine is anything but dimmed.

You only need to look at his blog from 2014, where he says: “If we want serious government then we need fundamental changes in the way ministers and officials are selected, trained, paid, managed and held accountable”. His recent blog post calling for “weirdos and misfits” to apply for roles should not be seen in isolation but the first step in him seeking to put his ideas into action. With the backing of the Prime Minister, this could be more than just an expensive change of the Whitehall stationery.

 

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

 

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

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

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

 

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

 

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

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

Ultimately though, change is coming to the Civil Service and it is long overdue.

Whether Cummings’ radical vision is the right one at the right time, or too much too soon is yet to be seen but civil servants, ministers and those of us in public affairs would do well to pay close attention over the coming months.

There will be implications for business and, combined with the renewal of the domestic policy agenda and the upcoming Budget in March we will soon learn where No10’s priorities lie. Being ready to make the case to ministers and departments, in the context and language of Cummings’ changes and vision will ensure closer alignment with the Government’s priorities and a much better chance of success.

 

 

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New Year, new politics: dealmaking after the election

Politics in 2020 is shaping up to be a very different beast than in 2019. But what does it mean for investors and dealmaking?

Yes, Brexit is still the talk of Westminster, but we now have a government with a clear agenda, and crucially, a mandate big enough to deliver it.

Johnson’s election campaign strategy was clear – a laser like focus on the need to Get Brexit Done, wrapped in a wider narrative of hope, optimism and aspiration. And it worked. Johnson’s government now has a majority bigger than any other Conservative administration since 1987 and the Labour Party is potentially looking at another decade in the political wilderness.

The Prime Minister’s election campaign was also underpinned by a number of retail policies designed to reach out beyond the Conservative’s traditional voter base – rollout of full fibre and gigabit-capable broadband, further rises in the National Living Wage, 20,000 more police and tougher sentencing of criminals, and targeted support for the British high street.

Johnson knows that many traditional Labour voters ‘lent’ him their votes in 2019 and he will be keen to consolidate their support ahead of 2024.

Brexit upended traditional party loyalties and the strategy of the Conservative Party election machine (led by a reassembled Vote Leave contingent) of pushing hard into former Labour strongholds in the Midlands and the North of England saw a swathe of constituencies go blue.

Johnson will be acutely aware that the only way of shoring up new lower middle-class and blue-collar workers will be by making sure there are tangible improvements in their lives – more money in their pockets, safer communities and more accessible public services.

The market response to the Conservative majority was clear – the FTSE 250 saw its biggest jump in a decade as investors piled into UK stocks and Sterling rose sharply against the Dollar and jumped to a three-and-a-half-year high against the Euro.

Shares in politically sensitive markets like water, which faced the threat of nationalisation under a Labour government, saw big gains and banks exposed to the UK economy witnessed their share prices rise sharply once the election result became clear.

So, what does the Johnson government mean for UK investors and dealmaking?

1.    Johnson is Getting. Brexit. Done. 

The UK will leave the EU on 31 January. We’ll then enter an 11-month transition period during which the UK and the EU will try to thrash out a free trade deal. If a trade deal is successfully agreed, the UK and EU will start trading on those terms immediately after the transition period ends.

If not, the UK faces the prospect of having to trade with no agreement in force, or to agree to a number of stop-gap measures with the EU.

While leaving on WTO terms now appears relatively unlikely, the next few months of trade negotiations are likely to be fraught, and it may be that the UK leaves the EU with a relatively bare-bones ‘zero-tariffs, zero-quotas’ deal on goods in place. Investors in cross-border or export-dependent businesses would do well to watch how this develops and adjust their dealmaking strategy accordingly.

2.    The policy and regulatory horizons are clearer. 

From a domestic policy perspective, we finally have what investors crave: certainty.

The Conservatives have been clear on their domestic policy agenda and on the modernised ‘One Nation’ rationale that underpins their approach to government. With Johnson gearing up for a ten-year stint in No.10, we can expect departments across Whitehall to start gearing up for a period of intense policy-making.

Whilst this may mean change in the short-term, a lengthy period of implementation will likely follow, taking some of the guesswork out of business planning.

3.    Business is no longer a dirty word. 

Contrary to Johnson’s anti business stance back in June, the Conservative Party manifesto also contains a lot that will be comforting to British business. Frequent references to a ‘dynamic free market economy’ set the scene for an unashamedly pro-business agenda and should be good for dealmaking.

Notably, the Conservative manifesto makes repeated reference to the ‘symmetry’ at the heart of the UK economy, and the importance of maintaining this balance through the support of British business: “We are the only party that understands the symmetry at the heart of the UK economy. That the only way to fund world-class public services and outstanding infrastructure is to encourage the millions of British businesses that create the wealth of the nation – especially small businesses, family firms and the self-employed.”

A revived recognition of the role of private sector business is already coming from coming from No.10 – promises to ensure regulation is ‘sensible and proportionate,’ a continuation of the ‘spectacularly successful’ Enterprise Investment Schemes, increases in R&D tax credits and a reduction in business rates all signal Johnson’s intentions.

More powers to the Competition and Markets authority to tackle rip-offs and bad practices will be the government’s nod towards making sure consumers aren’t forgotten.

4.    The age of austerity is over, at least in the North. 

Ahead of the anticipated Budget in the Spring, the Treasury is reportedly rewriting the way the government calculates value for money in order to divert additional funds away from London and the South east and towards the North and Midlands.

Traditional calculations (on a Gross Value Add basis) have disproportionately focused spending on transport, infrastructure and business development projects in areas with the highest population and business density. Under the new rules, government investment will be directed towards reducing inequality rather than predicated on promoting overall economic growth.

Given these changes, we can expect major productivity-enhancing projects outside London to be high on the government’s list for early spending commitments.

However, Johnson’s political honeymoon won’t last long, and he’ll have several critical issues that he’ll need to tackle once he’s back behind his desk in January to demonstrate his government is delivering on its promises. Creating a sustainable social care system, addressing an increasingly complex housing crisis, tackling historically low productivity rates and reversing the public’s disillusionment with the political establishment will be no mean feat, nor are there likely to be any quick fixes.

But Boris has spent most of his adult life preparing for this and will want to make sure that his government and eventual legacy is not solely Brexit-shaped – he wants to deliver lasting political change based on an optimistic, aspirational and enterprising new Britain.

2020 will be a year when we see just what Johnson is made of.

 

This article was first published in the January 2020 edition of RealDeals

 

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Boris wins – the new balance of power and how it will be used

The Conservatives are on track for a majority of a little under 80 seats. WA provides below a comprehensive overview of how power is balanced in the new government and what you can expect it to do in the next few days, weeks and months. If you would like to arrange a discussion with WA’s senior consultants to unpack the results and what it means for your organisation, please get in touch.

 

Priorities and commitments

The gamble has paid off and Boris Johnson has taken back control of Parliament with a mandate to ‘Get Brexit done and unleash Britain’s potential’.  The eyes of the country will now turn to delivery.

Achieving the first half of the election mantra is dependent on the Government clearing the Withdrawal Bill through Parliament so that attention can shift to agreeing the size and shape of the UK’s future relationship with the EU.  With a big majority of Conservative MPs who have all publicly pledged to back the Prime Minister’s deal, Johnson can be confident in clearing the House of Commons.  Moreover, while the Conservatives do not hold a majority in the Lords, it would a monumental blow for the Salisbury-Addison Convention if peers were to vote down an unequivocal manifesto pledge of this order that has been passed by MPs.

Securing agreement on what our new relationship with the EU looks like is an altogether harder problem to solve, but solved it must be to truly Get Brexit Done.  There are three scenarios for what Done looks like by the end 2020:

To achieve the first scenario, negotiators are going to have to move like lightening to agree the broad parameters of what the new relationship should be before meticulously weaving together selected threads of the 40-year-old relationship that has just been unpicked.  Along the way, the UK Government and European Commission will have to consult with the Westminster Parliament, the Scottish Parliament, the Welsh Assembly, the European Parliament, and the European Council.

Ultimately all these institutions will have to endorse, formally or informally, the final design. However, as the last three years has proven, carrying this number of interests along is not without its perils.  Particularly careful consideration will be given to how to engage with the SNP, who are currently on track to win 48 of the 59 seats up for grabs – up from 35 in 2017 – and their second best electoral result.

A foundation’ deal would be unprecedented.  Precedents are there to be broken, but any deal agreed by the UK and the EU will also need the seal of approval from the World Trade Organisation because it would be a new Regional Trade Agreement and therefore a departure from the principle of non-discrimination.  To secure approval the new deal must, in the words of the WTO, ‘cover substantially all trade’.  This means that a ‘foundation’ deal cannot be too much of a fudge and No Deal is not yet off the table.  That being said, the measure of Johnson’s victory could give him room for manoeuvre on extending the timeline he himself imposed to agree a new deal.

With the scale of the task on Brexit fully understood by Johnson and his team, it is hardly surprising that the scope of the Conservative’s wider manifesto was therefore somewhat more muted. The specific detail behind headline commitments to ‘strengthen NHS and social care, invest in schools, cut crime, fix immigration, deliver housing, invest in skills, fight climate change and protect the environment…’ is, to a significant degree, yet to be worked out alongside the Brexit negotiations.

 

Governing stability

The Prime Minister may have asked for a majority this Christmas, but what he really, really wants is a multi-year parliament.  A parliament that he can depend on to allow him to turn his attention on to his post-Brexit legacy once he ‘Gets Brexit Done’.

The media are talking about a ‘thumping Tory victory’ and although this is far from the landslides of Thatcher in 1983 (144) or Labour in 1997 (179) or 2001 (167), it must be remembered that those were in the context of a Scottish picture not too far removed from the English electoral map.  In 1983, Thatcher took 21 seats in Scotland compared to the SNP’s two; while in 1997 and 2001, Blair took 56 seats compared to the SNP’s six and five respectively.

The situation today is very different with a wave of SNP sweeping away seven of Labour’s eight seats and more than halving the Conservative’s standing to six.  With such diametrically opposed politics north and south of the border, the future of the Union is expected to come under strain.

On the plus side, all those 360 plus Conservative MPs being sworn in over the next few days are now ‘Boris’ People’.  He can expect unrelenting loyalty from them, especially in the first 100 days of his new Government when there’s still a new term feel.

But he will need to hold on to his new clutch of Conservative MPs to whatever deal he secures.  Supporting the Withdrawal Bill is one thing, but actively supporting No Deal were this scenario to emerge is quite another.  It is not beyond the realms of possibility that fissures start to emerge within the party again.

A majority of 70-plus means that by-elections are far less of a risk than they could have been. In the four years since 2015 there have been 15 by-elections, with seats changing hands in three instances.  In the five years before, there were 21 by-elections with seats changing hands four times.  We can expect by-elections to be a normal feature of this parliament and while Johnson has most certainly pushed back the tide of a hung parliament, he will want to avoid a gentle erosion of his majority in order to give himself the best chance of moving on to crafting his legacy and building up to the next election.

 

Out with the old and in with the new

More than 30 Conservative MPs retired from the House in October and decided not to stand again.  While not all serving ministers, with around 10% of the parliamentary party gone, openings have been created.  The Prime Minister will use his powers of patronage to consolidate his position, surrounding himself with those who have proven themselves to be loyal and who will support him in building momentum behind his Government.

 

Scale of opposition and character of parliament

Labour have been decimated.  A central block of the Red-Wall – Blyth Valley – was one of the first seats to fall.  Labour since its creation in 1950, the seat saw around a 10-point swing and went from red to blue in the early hours of the morning.  One of the biggest gasps of the night was when Bassetlaw was declared with an 18% swing from Labour to the Conservatives. The Lib Dems are down to 11 MPs and lost their leader in the process. The opposition has been fractured and is fragmented with only the SNP buoyant.

 

24 MPs have been returned to the House of Commons from constituencies who have not voted Tory in decades.  Nine seats taken from Labour had been held by them since the Second World War.  The make-up of the Government benches is set to change as Conservative MPs from the midlands and the north take their seats.  As they do so, they will already be thinking of the next election and the need to show their constituents that they delivered for them.  We can expect to see these backbenchers working together to ensure Government funding and attention is given to these areas.

 

What happens next?

Between now and the New Year

Reshuffle

The first order of business is the formation of the new Cabinet over the next couple of days.  This is set to be a minor reshuffle, necessitated by the decision of Culture Secretary Nicky Morgan not to stand in the election, but a more significant reshuffle is being mooted for February.  Promotion to Cabinet for a rising talent such as Rishi Sunak could be on the cards.  Meanwhile the junior ministerial ranks may see a little more movement as younger talents are allowed to advance.

Queen’s Speech

The Queen’s Speech is set to take place next week, most likely on Thursday.  The Withdrawal Agreement Bill will be top of the list but it will also include Bills enabling: greater investment in education; additional NHS funding; gigabit broadband rollout; the introduction of a new ‘points-based’ immigration system; and future schemes for trade, agriculture, fishing and the environment once the UK leaves the EU.  All these Bills are expected to be not only announced but to start their parliamentary passage within the first 100 days of the Government (by Sunday 22nd March 2020).

The Bills on immigration, trade, agriculture, fishing and the environment are all linked to the types of trading relationships that the UK seeks to establish with international partners (including the EU) and will provide an early indication of the government’s negotiating priorities when published.

Withdrawal Agreement

The top policy priority remains Brexit.  The Prime Minister is expected to get the first reading of the Withdrawal Agreement Bill (WAB) done before Christmas but to leave the remaining stages until the New Year.

January

Brexit next steps

Contrary to the Conservative campaign slogan, Brexit will still be far from ‘done’ once the WAB goes through.  The UK will leave the EU on 31 January, but the clock is already ticking towards the next big deadline; securing a new trading relationship by the end of 2020.  This is a mammoth task and the government will need to outline its approach as early as possible to stand a chance of avoiding the next no-deal cliff edge.  As such, expect a significant announcement on this by the end of January.

February – March

Easy wins

There are a series of non-legislative items slated for the first 100 days.  Some of these are ‘oven ready’ such as an agreement with mobile phone operators to improve rural connectivity.  Others are much more aspirational, such as a promise to open cross-party talks on social care, or will mark the start of longer processes, such as the launch of a strategic defence review.

Brexit Budget

A Brexit Budget is due before the end of March.  This will require the Chancellor to thread a careful path between meeting the bill for electoral promises of more funding for the NHS, education and police services with maintaining a semblance of fiscal discipline.  This is made more challenging by the manifesto pledge not to raise income tax, VAT or National Insurance and there will be pressure to find alternative revenue sources. Keep a close watch for new stealth taxes.

April onwards

Spending Review

This year will see a Spending Review, likely to be launched by the summer, setting the multi-year budgetary framework for all government departments.  This will pose another challenge for the Chancellor who needs to deliver the ‘end of austerity’.  The task: find a sustainable way of funding greater investment in public services – a shift that that is likely required if the Conservative Party is to maintain its hold on former Labour heartland seats in the north and midlands.

Climate change & Net Zero Carbon

Notable by its absence from the Conservative promises for the first 100 days, driving the UK’s transition to net zero carbon will still be a significant government priority.  An Energy White Paper is expected in the Spring or early Summer and is likely to act as a set piece opportunity for the Prime Minister to set out the government’s green ambitions in more detail.

 

Summary

Boris Johnson’s Government has been tasked to ‘Get Brexit done and unleash Britain’s potential’.  The attention of the Prime Minister and his ministers will now turn to taking the decisions dictating what this means for the future economic and social direction of this country.  Many of those decisions will come in the next 100 days and the decision taken by politicians in 2020 will define the UK’s future for decades to come.  The complexity and scale of Brexit negotiations will continue to require huge amounts of civil service resource, impacting the majority of government departments.

 

 

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Is the Conservative lead melting away or will they storm to victory?

In the last 24-hours all the talk has been of Boris Johnson’s carefully orchestrated election gamble being at risk of not paying off, with the prospect of a hung parliament seemingly growing as polling day draws near. In this article, we consider why this has happened and look forward to what it could mean for Friday.

 

Boris Johnson’s Conservative Party have remained ahead in the polls since the election was called in October. Their lead in poll of polls has been a near constant 9 to 10 per cent over the Labour Party since October 31st. Despite this, confidence in a Conservative majority is faltering and the odds of no overall control have shortened from 3/1 to 12/5.

 

Conservative success hinges on winning over voters in Wales, the Midlands and the North that have not traditionally voted for the party, while retaining its traditional southern base. Initially thought a tall order, the Conservatives have been able to tap into fatigue within the electorate and build a coalition that reaches beyond just the most committed leave voters to those that want the Brexit debate over. Polling from mid-November showed 67 per cent of voters that backed remain in 2016 and the Conservatives in 2017 intend to vote for the party again. Alongside this, the party leads among voters that back no deal (76 per cent), the Prime Minister’s deal (83 per cent) and Soft Brexit (56 per cent).

 

Where the party was once at risk of alienating voters that feared a hard or risky Brexit, the Prime Minister has pivoted from ‘Parliament versus the people’ to an election fought on enough being enough, best typified by Boris Johnson’s emotional and exacerbated remarks in his Brexit, Actually broadcast. It speaks to an electorate beyond the Westminster bubble that wants Brexit to be over. The  strategy adopted has also minimised the impact of the electorate’s growing prioritisation of healthcare as the key issue in this election, with Johnson’s Conservatives able to relegate it to a priority that will be focused on after Brexit is done.

 

With the Conservatives on course to win in places like Bassetlaw and Cheltenham – two seats never won by the same party in an election – one could see why election success for Johnson’s Conservatives seems the most likely outcome. However, the very reasons the party has this commanding lead is also the reason the party’s success is not guaranteed.

 

The hopes of radically altering the electoral map and the voter coalition of the Conservative Party is a tall order when voters have entrenched political loyalties. Whilst Brexit has tested this to its limits, with voters now more associated with their Brexit leaning than political parties, by attempting to win support from a wide range of voters the Conservatives risks alienating some of them. Dominic Raab is witnessing first-hand what it can mean when a devoted hard Brexiteer faces a concerted challenge in his traditionally safe, remain supporting constituency.

 

The Conservatives do not lack ambition though. YouGov’s MRP predicts the party will only retake 6 of the 33 seats it lost in 2017 and means its road to Number 10 Downing Street needs to be paved with constituencies that until recently have had large majorities against the Conservatives. Where traditionally parties would seek to recover old swing seats, the Conservatives have taken a different tact that requires it winning new ground in places like Wrexham, Stoke-on-Trent and Sedgefield. Yet fortune does not always favour the brave, with YouGov now predicting around 85 seats have an implied majority of just 5 per cent. Such small margins mean the result could still be anywhere between a hung Parliament and a Conservative majority of nearly 60.

 

What is worse for Boris Johnson is the seats still in play are not uniform. There are narrow margins in seats from Scottish marginals to left behind northern towns, and urban centres to the rural shires, that the party will have to win. If any one of these backfires on him, Johnson’s careful balancing act could be judged a failed strategic gamble.

 

In the first week of December, 13 per cent of voters were reported to have not made up their mind, with 19 per cent of them women. This is a risk for Johnson particular, given his poor polling with women compared to other parties. Additionally, a recent Ipsos Mori poll suggested 40 per cent of voters might still change their mind between then and polling day. It means that with so many seats still in play the party is right to fear that this election may be even closer than some polling or modelling (which excludes ‘don’t knows’) predict.

 

Where final days of election campaigns have typically focused on one group of voters in key regions, Johnson is still fighting battles across the country. Continuing to focus on voter frustration is an added risk due to renewed scrutiny of the government’s domestic agenda over the last year, typified by the recent Leeds hospital debacle. Whether voters truly believe the Conservatives will bring change after it has overseen a challenging decade in many of the communities it wants to win over remains an open question.

 

The Conservatives are walking a tightrope. If Johnson can achieve this, it will mark him out for his ability to do what other Conservatives have been unable to. All eyes will be on the exit poll but with so much scope for close local results it may not be until the morning until we really know whether the Prime Minister has achieved his latest act of political triumph.

 

Boris Johnson’s political future is finely poised. Come the morning of the 13th December he could easily emerge ready for the beginning of the next Conservative era or witness his legislative plans slipping through his fingers.

To arrange a complementary session with our senior consultants on what the new political environment could mean for you, please contact jamiecapp@wacomms.co.uk

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

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

 

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

Meeting needs

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

 

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

 

The price is right

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

 

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

 

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

 

Making a choice within a choice

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

 

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

 

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

 

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

 

A pleasant shopping experience

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

 

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

 

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

 

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

 

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

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Will fortune favour the bold? WA’s review of the Conservative Manifesto

From getting Brexit done to fixing potholes, this Conservative manifesto traverses the biggest political issue facing the country in a generation, to the gripes facing local communities day-to-day.  Launched in the ultra-marginal Conservative seat of Telford, the 59-page document is an attempted pitch to Leave-supporting Labour voters, and an affirmation to the Shire Tory heartlands.

Instead of competing with Labour or the Liberal Democrats on reimagining the British state; this streamlined manifesto seeks to cement and ultimately bolster the Conservatives’ double-digit lead in the polls by setting out the Party’s unambiguous position on Brexit alongside a comparatively modest series of electoral retail offers on the NHS, the environment and public spending. This includes pledges to:

In contrast to the Labour Party’s proposed increase in day-to-day public spending of £83 billion by 2023, whilst significantly more fiscally generous than the previous three Conservative manifestos, Johnson’s plans equate to a ‘reserved’ £3 billion increase. In addition to a modest uplift in public spending, Johnson has sought to reassure the support of business and industry by pledging not to increase income tax, VAT or National Insurance during the next Parliament.

The manifesto reiterates a series of heavily trailed pledges that have been popular with voters, including the recruitment of 20,000 new police officers, the introduction of a points-based ‘Australian style’ immigration system once the UK has left the EU, and the delivery of gigabit-capable broadband to all homes across the UK by 2025.

Its draftswomen, Rachel Wolf and Munira Mirza, have intentionally steered the Conservatives clear of policy areas where they are perceived as unable to compete with Labour or the Liberal Democrats spending commitments, such as on tuition fees, the NHS and the environment.

It is a manifesto that seeks to play it safe and heed the advice of the Prime Minister’s brother and former Universities Minister, Jo Johnson – “If anyone is talking about it more than 48 hours after it’s been released, you’re in serious trouble.”

It is also a manifesto that seeks to manage expectations, potentially allowing the Prime Minister – with one eye on 2025 – to under promise and to overdeliver, and to avoid becoming hostage to his own fortune. A manifesto with relatively little detail on how pledges will be delivered, it provides opportunities to those seeking to engage with the Party on the development of policy.

However, ‘playing it safe’ is not without its own risk, particularly when the possibility of a Conservative majority is contingent on their ability to win over traditionally Labour-voting seats and stave off challengers. The Conservatives hope that an unequivocal position on Brexit and a few headline-grabbing retail offers, contrasted with Labour’s ambitious plans for public spending, will be enough to see it over the line to a majority government. Time will tell whether the adage ‘fortune favours the bold’ or ‘the meek shall inherit the earth’ is most apt come 13th December.

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The most radical UK policy platform ever? WA view on Labour’s manifesto

Taken together, Labour’s manifesto package reimagines the British state, its purpose, how it operates and its relationship with the market. This is not a programme of incremental change but rather a total shift in the role of government and how the UK economy works. It is based on an analysis which argues that the current political and economic system works against the interest of ‘ordinary people’. At a high level it seeks to establish a greener and more equal economy which prioritises workers and consumers over businesses, and makes radical proposals in order to achieve this. It is striking the extent to which this manifesto focuses on addressing the climate crisis through a series of policies linked to a Green Industrial Revolution which combine a focus on social justice, jobs and the environment.

The question for business is the role that they can play in delivering this, albeit as a partner rather than taking on sole responsibility for activity that Labour believes should be delivered by the state not the market. It is clear from this manifesto that a Labour government will lead to significantly greater scrutiny and oversight of how business operates.

There are two key questions emerging from this manifesto launch. Firstly, is this package deliverable and over what timeframe? Many of these bold pledges will likely be highly complex to implement. Pledges such as nationalisation will be fraught with legal challenges and it is highly unlikely that these can all be introduced within one parliament. While some parts of the manifesto – such as the introduction of a four day week are earmarked as ambitions and are not expected to be introduced within the next parliament – it is likely that other policies will move into this category as they collide with reality.

Secondly, the current polling suggests that the likelihood of a Labour majority government is low. However, the chances of a Labour minority government supported by smaller parties potentially including the SNP, Liberal Democrats and Plaid Cymru are much higher. The pertinent question is therefore which policies are deliverable in this scenario, and would be prioritised by the party, and which would not receive cross-party support. There will be a number of policies within this manifesto that other parties – notably the SNP and the Liberal Democrats – can support, but a whole swathe of others which they cannot.

Polling suggests that on an individual level many of these policies are highly popular amongst the public, but it remains unclear whether taken together as a package it can lead to electoral success. The key question is whether this radical manifesto will turn this election from being about delivering Brexit – turf which is favourable to the Conservatives – to instead be about domestic policy, much more fertile ground for the Labour Party. There will be careful scrutiny of opinion polls in the coming days to see whether this policy platform will cut through with the electorate and shift public views. Regardless of the electoral consequences, this manifesto reflects a shift in the party’s policy agenda, which is unlikely to be changed by a potential change in leadership. What cannot be doubted is that with this manifesto the electorate have had a clear choice between competing visions for the country.

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What ever happened to trust?

One of the oldest anecdotes that PR professionals roll out when media training senior executives is the impact of the Kennedy-Nixon Presidential debate in 1960. It was the first televised Presidential debate and while the radio audience called it a draw, the television audience decisively called it for the younger, healthier-looking and simply more televisual senator from Boston, shifting the tide of the election and ultimately the result.

Kennedy had looked and sounded presidential – in appearance, tone and content he had demonstrated he was made of the ‘right stuff’ and the public could put their trust in him.

Fast-forward nearly sixty years from Kennedy-Nixon, and we rolled onto last night and the latest edition in the long running series of candidate television debates, the Johnson-Corbyn match-up; and how things have changed.

While the pundits are divided on which candidate edged a close debate, they almost unanimously refer to the wider issue of whether either of the candidates met that most basic of expectation of voters by telling the truth.

The reason why media trainers reference the Kennedy-Nixon debate is to emphasise the need to come across as authentic, truthful and trustworthy. Messages are to be delivered clearly, backed up with evidence and proof points. Businesses and business-leaders rely on consumer trust and when this trust is proven to be unfounded, the company can face the sort of crisis that can destroy the brand.

Imagine for one moment if the CEO of a confectioners told a series of demonstrable falsehoods about their products and their rival’s products. Further still, imagine this CEO kept on saying them despite protests, so much so that a cottage industry of consumer groups was created in repudiating and pointing out this ‘fake news’. Then imagine that business deciding to set up a fake consumer group to attack their rivals or the evidence in front of them.

We have been here with the tobacco industry, who have been labelled as the pioneers of fake news, and other industries seeking to dissemble or cover up. Modern business practices, however, embrace engagement, transparency, clear values, fiscal prudence, demonstrable action and truthfulness, as they search for the goal of strong brand trust from consumers, policy makers and opinion formers.

The striking thing about this election campaign is the extraordinary decision of both major parties to ignore these fundamental building blocks of trust. When you have a situation of record levels of public doubt in the democratic system and our leaders, you don’t double down on the very things undermining that trust, you change your approach.

It is probably about time that our political parties looked to the playbook of modern business practices and corporate communications if they are to rebuild the trust between the public and our democracy.

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General Election 2019: This time it’s personal

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

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

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

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

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Uniting to remain or a marriage of political convenience?

The decision by three remain backing parties to unite in a select 60 seats attracted headlines as the culmination of the often mentioned ‘remain alliance’. While pacts and electoral alliances have rarely arisen in British politics, such as the Liberal and Social Democratic Party in the 1970s and local alliances ever since 2017, they have often been the focus of Westminster gossip rather than serious prospects. In light of this, three parties coming together in the 2019 election, sacrificing their prospects in a constituency and endorsing another party, is both new and notable.

The Unite to Remain pact, which has brought the Liberal Democrats, Plaid Cymru and the Greens, is a shared endeavour to secure as many pro-remain MPs in the next Parliament as possible. In the 60 seats, which ranges from Bristol West, the Isle of Wight, Richmond Park and Ynys Mon, the electoral pact has endorsed one party which it thinks will best represent remain supporters and that voters should tactically back on polling day.

Political parties have always sought to encourage voters to vote tactically in elections, highlighting they are the best placed to beat the incumbent or challenger. However, with politics at its most volatile point it is hard to assess which party is truly ‘in the race’ to win a constituency and may make tactical voting messy or counterproductive. Unite to Remain has gone one step further and removed other true pro-remain candidates from the ballot paper in the 60 seats where it believes parties have chance of winning in the hopes of avoiding this happening.

At first glance, Unite to Remain is not a sea change but a drop in the ocean. The pact covers fewer than 10 per cent of constituencies and is made up of three minor parties that received less than 10 per cent of the vote in the last election. Hardly a route to a remain supporting government. Yet, with polls swinging between a small Conservative majority and a hung parliament, a pact which maximises the chance of pro-remain MPs winning and depriving either Labour of the Conservatives of a majority makes a People’s Vote more likely.

What remains to be seen is whether the pact can bring success. By defining it solely around Brexit it risks becoming less salient if the election moves beyond Brexit to domestic issues as the 2017 general election did. It is also unclear if voters, fearful of a Brexit government led by Boris Johnson, will hold their nose and decide that Labour and its reluctant support for a People’s Vote is good enough to rally remain supporters behind Corbyn. If this happens, Unite to Remain won’t be looking at winning in ambitious targets like Stroud and South Cambridgeshire, but instead securing small victories in ultra- marginals like Arfon and Richmond Park. Instead of defining the election, Unite to Remain’s candidates are likely to be at the mercy of the campaign.

While commentators focus on the pact in England and Wales, a potentially more significant electoral pact has taken shape across the Irish Sea in Northern Ireland. Sinn Fein, the Social Democratic and Labour Party and the Alliance Party have agreed to stand aside for one another, and the Democratic Unionist Party and Ulster Unionist Party has made similar moves. In total, five of the 18 constituencies now have one or more party standing aside and supporting another. Unlike in England and Wales, Northern Ireland is seeing the dominant political forces unite for this election which may radically alter the results and weaken the commanding position of the DUP in parliament. By aligning on pro-remain/nationalist versus unionist lines, the Northern Irish election formalises two clear divisions in the region and will drive voters to make a choice between the two camps. The effectiveness of which is likely to be magnified when applied to an electorate staunchly divided along sectarian lines.

The slow emergence of pacts, alongside the resistance of Labour, the Conservatives and the SNP to engage in them, is notable in this election. Pacts have a rational motivation behind them, but they also reveal an acceptance that some parties are subject to a ceiling they find hard to break through. In contrast, the hesitance of Labour and the SNP to join the pact reveals their hope to eventually convince remainers in a Brexit election that they are their only chance for a People’s Vote.

By concentrating electoral pacts in a few seats, remain parties in England, Wales and Northern Ireland have increased their chances of success, but success is by no means a certainty. If it delivers electoral success, pacts may become a defining theme of future elections. Whether these marriages of convenience become a longer-term viable strategy remains contingent on whether smaller parties can find more that unites them than divides them beyond Brexit.

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404 Error: nationalisation not found

Nationalisation is back. Labour’s plans to nationalise parts of BT and offer a free national full fibre broadband service represent the most radical policy announcement of the election.

Should Jeremy Corbyn secure a majority, he has now pledged to bring all major utilities back into public ownership – gas, electricity, water, rail, mail and now telecoms. Such a move would fundamentally change the telecoms sector overnight with grave consequences for private network builders and retailers.

There will be much commentary on the commercial implications for the sector in the coming days.

However, it is also worth considering the political process that will be required to make this radical vision a reality.

Nationalisation: Getting the numbers

Firstly, it is important to remember that this whole agenda can only be delivered under a Labour government with a stable, workable majority.

Neither the Liberal Democrats or the SNP will back it under a confidence and supply agreement. There’s a long way to go in this campaign and the polls still indicate that Jeremy Corbyn has a lot of work to do to have any hope of securing a majority in December.

This announcement itself will be a major theme in the election going forward as free, high-speed broadband for all is likely to go down well with many voters.

The key question is whether it ultimately feels too good to be true and leads voters to question the credibility of a policy that will have a long list of detractors.

Learning from the past

But what if Labour do forge a way to power? How will the Party turn such a radical nationalising agenda into reality? Previous rounds of both nationalisation and privatisation took a great deal of time and political capital to realise.

Margaret Thatcher’s converse plans to re-privatise much of the same parts of the economy took three parliamentary terms to deliver. Ticking off Labour’s long list of target nationalisations in just one five-year parliament will be a mammoth of a task.

There are several significant elements that will require primary legislation for broadband nationalisation:

The political capital, technical complexity and potential legal wrangling resulting from just one of these three areas would daunt any government regardless of its majority. Yet collectively, even if a majority Labour government could overcome these three challenges and nationalise the broadband industry, it will only deliver one of the party’s five targeted nationalisations.

Nevertheless, it’s important to note that nationalising broadband is perhaps the most ambitious and complex pledge for Labour to deliver on.

A juggling act

Let’s not forget that on top of all this, a Labour government will simultaneously be renegotiating yet another Brexit deal with the EU, scrapping universal credit, setting up a new National Education Service and making significant investments and reforms in housing, social care and other areas.

The reality of government is that some agendas will have to be prioritised over others simply due to – if no other reason – the practical limitations on time and resource in the civil service.

Especially on the topic of Brexit, there is a question mark over whether Labour’s broadband proposal would comply with EU state aid rules, though they will cite recent rulings on Ireland’s public subsidy for broadband in their defence. It could nevertheless be a potential stumbling block in agreeing a new, closer economic relationship currently envisaged as the Party’s preferred approach.

Finally, were this to ultimately go through, the government would find itself taking on responsibility for a plethora of tricky issues that were previously the problem of private players in the sector. The debate over online safety and the level of responsibility that intermediaries such as ISPs have for harmful or illegal content distributed over their networks would suddenly become an in-house issue for government. Questions over net neutrality – whether ISPs can or should prioritise bandwidth for certain sites over others – as well as the control and use of people’s data, would also be questions government would have to solve as the sole service provider.

These are headaches that no government wants to grapple with and while this announcement is a potential game changer, it’s one which is still far from being realised.

Even if it ever is, it could come with a host of difficult unintended consequences attached.

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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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Can the Conservative Party win over both Workington Man and Wokingham Woman?

When you’ve been in government for nine years, and are pursuing perhaps the most divisive policy that the country has seen for several decades, how can you win a majority? Particularly when your flagship policy – leaving the EU – is opposed by many of voters in your historic heartlands in southern England. That’s the strategic challenge that the Conservative Party faces at the start of the 2019 General Election.

Much has been made of the Conservative Party’s need to win seats across swathes of the Midlands and the North of England where there was a significant vote for Leave at the 2016 referendum. Some of these seats are long-time marginals, but many are seats which would traditionally have been way out of the grasps of the Conservative Party. It is only the Brexit vote and a perception that the Labour Party no longer culturally reflects the values of these voters that has opened up this opportunity.

Yet it is also the same strategy as Theresa May pursued in 2017. She made limited progress by winning only a handful of seats in this vein – places like Walsall, North East Derbyshire and Stoke South. Johnson needs to hope that somehow he can win over these voters more effectively.

The characterisation of these types of voters as the ‘Workington Man’ by the centre-right think tank Onward has been dismissed as a cheap stereotype, but as with all stereotypes there is a kernel of truth in it. To connect with these voters – largely white, Leave voters who increasingly feel economically and culturally left behind – the Conservative campaign needs to focus on delivering Brexit, investing in public services and infrastructure, and showing how the party will reduce the cost of living. Fundamentally the Conservative Party need to position this election as being about delivering Brexit to win these voters and seats.

Yet this is where the party’s strategic dilemma becomes clearer. The party’s traditional heartlands across southern England contain large numbers of Remain voters increasingly disappointed by the Conservative Party’s policy direction, particularly on Brexit. The Liberal Democrats are providing a potential electoral challenge in many of these seats, where they traditionally had little or no presence. Constituency polling undertaken by Survation this week suggested that the Liberal Democrats were ahead in South Cambridgeshire, only four points behind in John Redwood’s Wokingham seat and nine points behind in Dominic Raab’s Esher and Walton constituency. These are true blue seats: a wave of yellow sweeping across the suburbs and commuter belt of London could have a significant impact on Johnson’s ability to re-enter Downing Street.

The Conservative Party cannot offer these voters what they want on Brexit: instead it must hope for two things. Firstly, that these voters are so fed up of continuing uncertainty and political debate over Brexit that Johnson’s commitment to ‘Get it done’ is more important to them than a desire to re-run the referendum, and secondly that they are more fearful about the prospect of Jeremy Corbyn as Prime Minister than the prospect of Brexit happening.

To secure a stable majority the Conservative Party needs to maintain its dominance across the south of England while making substantial progress in the north. The challenge that the party faces is that as it moves to appeal more strongly to one element of its electoral coalition it risks alienating the other. The more the Tories highlight the action they will take to deliver Brexit to appeal to those in Stoke, the more Remainers in Cheltenham will question whether the party reflects their interests. The more the party defends the market economy and the ability for people to become billionaires to preserve their support in Esher, the more people in Wrexham may ask if they share their values. Can you both promise significant public spending while keeping on board those who want fiscal credibility and are worried that a larger state means higher taxes for them?

The Conservative campaign launch this week reflects these mixed messages. Johnson used the preview in the Telegraph of his campaign launch speech in Birmingham to highlight the risks of Corbyn as Prime Minister, in an appeal to middle England. But making a full throttled defence of capitalism in the Telegraph and comparing a Corbyn government with Stalin’s attacks on Russian farmers is unlikely to resonate with the voters of Bolsover, Bassetlaw and Bishop Auckland who Johnson needs to convince. Instead the passion from the Prime Minister’s Birmingham rally on Wednesday evening when he set out his vision to ‘get Brexit done’ is what needs to come across to these voters.

The party will need to walk a careful balance over the next five weeks. The strategy is clear, and while high risk – and essentially unsuccessful in 2017 – seems like the only way to achieve a stable Conservative majority. The question is whether it can work in reality and whether this fragile electoral coalition can be kept in one piece with a series of careful policy trade-offs. How the Conservative Party execute their campaign will have a big impact on this. Fundamentally, the next five weeks will define the answer to this conundrum: can the Tories win over both Workington Man and Wokingham Woman?

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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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Score draws and bloody noses: picking through the local elections

A set of local elections, which started with great expectations for Labour at the start of the year, has ended in a quiet affair. Labour will be disappointed following months of hype about the result, the Conservatives will be relieved they haven’t been routed as some feared, and Liberal Democrats will continue to feel they have a chance of #LibDemFightBack. However in these local elections, in the words of Theresa May, ‘nothing has changed’ (or at least very little).

Labour’s high hopes were to nearly sweep the board in London and seize the Conservative Party’s crown jewels of Wandsworth, Westminster, Barnet and Hillingdon. The party even wanted to mount a serious challenge in Kensington and Chelsea with well attended #unseat campaign events taking place.

However, the local elections did not work out that way. In London the Conservatives largely held their Councils, with the only disappointment in an otherwise good night being the loss of Richmond to the Liberal Democrats.

Where Labour did succeed in the capital was taking Councils it held further out of the reach of the Conservatives, Hammersmith and Fulham being a prime example. In 2010 the Conservatives were in a majority on the Council, yet now only hold 11 of the 46 seats – down nine on the 2014 result – with former Conservative stronghold wards such as Ravenscourt Park flipping to Labour.

Labour has made progress in the councils the party targeted, and this may position it well for the future as London slowly turns a deeper shade of red overall.

Wandsworth, Westminster, and Kensington and Chelsea are longstanding Conservative councils and victory would have been big, signalling a changing of the times in London. However, Labour rarely made this argument and instead allowed an optimism of a big win to sweep through the media, which eventually turned into expectation. Measured against this, the results in London are the equivalent of a defeat for Labour.

Labour’s anti-semitism row has also clearly dented the party’s chances of making gains in Councils like Barnet. Reports through the night said that in these areas with a high Jewish population, Labour’s vote was collapsing and appears to have led to councillors losing their seats. Former councillors have taken to twitter to criticise the party, and the leader of Barnet’s Labour group has acknowledged it had an effect. Barnet was the most obvious example of this impact, but this will likely have affected other results as well. More generally the row looks unseemly, and is not what voters want from a prospective government. Labour’s poll ratings have fallen slightly in recent weeks, and the row has contributed to a more hostile press environment for the party. Past the most obvious impacts in authorities such as Barnet, it is hard to quantify the exact impact of the row – but it is clear there is an issue which the party must resolve ahead of the next election.

Local elections that took place outside of London were mixed as well. Both Labour and the Conservatives had positive results, which they are trying to spin to show they are making ground. Labour won control of Plymouth Council, and became the largest party in Trafford. However, they also lost councillors to the Conservatives in Nuneaton and Bedworth, and the Liberal Democrats in Kingston upon Hull. The Conservatives meanwhile have held ultra-marginal Swindon, taken Peterborough and maintained its position as the largest party on councils such as Portsmouth and Amber Valley.

It is always hard to draw clear conclusions from local elections. The variety of seats which are in play lends itself to the ‘mixed night’ narrative, and local elections can be as influenced by national political issues as issues within a locality. There are some clear themes which emerge from this set of local elections which show what has changed, and what hasn’t, since the 2017 general election.

England is increasingly split between remain/urban areas, which Labour wins, and small towns, industrial and rural areas that favoured leave, which the Conservatives’ win. Despite the poor performance against expectations, Labour will comfortably have won the most councillors and leading psephologist Professor John Curtice expects the Conservative and Labour to be “even stevens” in the projected national vote share. This is a continuation of the political shift which took place in the 2017 election that started with the EU referendum. These groups both represent large portions of the country and from current evidence very little has changed in their mind since the general election.

This poses problems for the next general election. With such a balanced division in the country, it is hard to see a clear way for the either Labour or the Conservatives to gain a clear advantage and deliver a majority. Both of their paths to victory rely on maxing out all possible support from their respective coalitions of voters, which risks exacerbating divisions in the country and would not deliver a large majority with which to govern. Alternatively, Labour or the Conservatives must blink and offer something which reaches across the divide to attract new voters. The risk with this will be alienating some of the core vote which has got them to this position. Such a fine balance is a dilemma, and will require one of the parties to blink.

Despite these wider problems, the Conservatives will be relieved. These elections at least do not add further pressure on the Prime Minister and shows there are parts of the country which still favour the party, and potentially Theresa May. However, May remains under immense pressure and these elections will likely be swiftly forgotten as attention turns back to her apparent inability to command a Commons (or even Cabinet) majority on critical questions around Brexit and the Customs Union. While the election is not an additional headache, neither is it going to provide any sense of respite for the Prime Minister or the Party.

The biggest winner of the night was the Liberal Democrats. They have performed strongly in areas which voted remain and in which they previously have performed well. While this is big for the party, and winning Richmond and strong performances in Hull, Eastleigh and Cheltenham are welcome, this is still in a concentrated and small portion of the country. The Lib Dems have also not been able to gain wider support in remain areas, with these voters still preferring Labour as the default opposition to the Conservatives. If there were a general election soon, there would likely be modest gains for the party and some even suggesting Vince Cable and the Lib Dems could play kingmaker. What is for certain is the party will be pleased that they aren’t fading from relevance and still have an electoral future.

In comparison UKIP got massacred. The party has continued to perform poorly following the EU referendum as voters struggle to see the point of them. When these seats were last fought, the party got 18 per cent of the vote. Fast forward four years and there is nothing to be pleased with, apart from Brexit happening. UKIP’s chairman has said the party can come back, but it is unclear what it must do and if it has the will do so. In the meantime it continues to lose ground, with voters flocking to the Conservatives.

These elections don’t tell us a great deal we didn’t already know. While local elections are in no way a proxy for what may happen at a general election, this poll has not produced any evidence that either of the two main parties has moved any closer to commanding the kind of support required to secure a parliamentary majority. Attention will now quickly return to the national stage where Brexit continues to throw a huge shadow over UK politics.

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What happens next for Brexit?

Last night Parliament overwhelmingly rejected the slightly revised Withdrawal Agreement put before them by Theresa May. The government was defeated by 149 votes, a narrower margin than the first meaningful vote (230) but still one of the largest defeats by any government in parliamentary history. The Attorney General’s legal opinion that ‘the legal risk remains unchanged’ that the UK could remain trapped in the backstop torpedoed the Prime Minister’s efforts to reassure Conservative Brexiteers and the DUP.

Attention will now turn to votes to be held in Parliament today and tomorrow on the prospect of a no deal exit and on whether to request an extension to the Article 50 process. Neither vote is straightforward and will be subject to multiple amendments but they allow Parliament to take on a formal role in shaping the direction we now take.

The vote on no deal tonight is highly likely to result in Parliament seeking to take no deal off the table. While this is clearly not fully within Parliament’s power – as no deal remains the legal default if a deal or extension is not agreed – it is expected to pave the way for Parliament to instruct the government to request an extension to the Article 50 process in tomorrow’s vote.

The key questions are how long such an extension should last and what it would be designed to achieve. Should it be kept short to avoid the UK having to participate in the European Parliament elections in May or should we go long and provide time for a substantive renegotiation? Parliament has the opportunity to indicate its preferred answer to both questions but ultimately the EU will have to agree to any extension unanimously and may seek to impose unpalatable terms on it.

The EU itself has yet to coalesce around its preferred extension scenario and the indications are that they will wait for the UK to put forward a ‘reasoned’ request i.e. it must have a clear purpose. It is expected that any such request would be considered at the next European Council summit on 21st and 22nd March. If we simply ask for more time to consider the same deal or to renegotiate terms that have already been rejected by the EU then there is a clear possibility the request will be rejected and we will head towards no deal at the end of this month.

This now leaves us with significant uncertainty over the ultimate outcome of this process. But there are several scenarios that remain in play.

A shift to a softer Brexit, facilitated by an Article 50 extension

The path to this could come from a cross party shift to remaining in a customs union and significant elements of the single market as favoured by the Labour leadership. Theresa May has steadfastly resisted this and it would require a significant portion of the Conservative Party to break ranks to deliver it but there is a possibility it would have the numbers in Parliament to back it.

There is still a possibility that Theresa May’s deal could eventually be brought back before MPs for consideration a third time and passed

This would require a huge climb down from a large number of Parliamentarians and is only likely once all other options have been exhausted but remains a distinct possibility. There are several ways this could play out: if an Article 50 extension request is rejected by the EU, leaving a stark choice between this deal and no deal; if an Article 50 extension is only available for a very long period of a year or more and with extremely unpalatable terms (potentially scaring the ERG into viewing Brexit itself to be at risk); or at the end of a short extension, most likely until June, which failed to produce an alternative deal, with the choice again between this deal and no deal.

No deal remains a distinct possibility

If Parliament continued to reject May’s deal and no extension can be agreed (or is not requested) the UK will leave the European Union without a deal on the 29th The government has this morning published its short term plans for this scenario in relation to the Northern Ireland border with Ireland and tariffs. These essentially amount to deliberately not policing the border in the immediate period after Brexit and not charging import tariffs on the vast majority of goods entering the UK from the EU (though with notable exceptions such as agricultural imports and cars).

Whatever plays out in the coming days there will be significant and lasting consequences for both main political parties. The Labour Party has so far attempted to tread a careful line, refusing to back May’s deal and hoping to either force a shift to a softer Brexit (for which they can claim credit) or to allow the Conservatives to take the blame for a shambolic no deal Brexit. However, much of their membership is desperate for a second referendum and if the UK does go over the no deal cliff edge then their refusal to back a deal will have been a major contributing factor.

Most significantly, the future of the Prime Minister feels more precarious than it ever has. There is an increasing feeling that her tenure in No 10 has been drastically shortened and it is hard to see how she could oversee the implementation of a softer Brexit that she has consistently opposed. However, her remarkable durability has already seen her carry on in circumstances that would have been terminal for any other Prime Minister and there is still no obvious, viable alternative leader among the Conservative ranks.

Ultimately, the decisions taken by Parliament in the next 48 hours will go a long way to shaping the final outcome of the Brexit process and the future of this government.

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What happened in the land of Brexit last night and what happens next?

Last night, Conservative MPs united for the first time in months around a course of action, backed by the Prime Minister on the next steps in the Brexit process. That is the most optimistic take on yesterday’s events for the Prime Minster.

A more realistic, but still generous, assessment of events is that Theresa May beat a tactical retreat to avoid yet another large defeat in Parliament that would have seen MPs seize control of the Brexit process directly. A yet more pessimistic take is that she capitulated to the ERG hard-Brexiteers and the DUP, making an almost undeliverable promise to renegotiate the Withdrawal Agreement to change or remove the hated backstop.

The facts are that the Prime Minister opened yesterday’s debate by announcing that she would seek to reopen negotiations on the Withdrawal Agreement to secure legally binding changes to the backstop. She then asked MPs to back an amendment tabled by 1922 Committee Chair Graham Brady that backed the Withdrawal Agreement as long as the backstop was replaced with unspecified ‘alternative arrangements’.

May also had some warm words for the so-called ‘Malthouse compromise’ proposals that had been hastily briefed to the media. This essentially calls for the use of technology to avoid the need for a hard border (and therefore the backstop) or for a managed no deal that takes place with a longer lead in (December 2021). This is a long way from being acceptable in Brussels but has demonstrated that the rival factions within the Conservative Party are finally coming together.

This proved to be enough to swing the Conservative Party behind her. Amendments tabled by Dominic Grieve and Yvette Cooper that would have seen MPs seize control of the Parliamentary timetable and processes in order to find an alternative approach (likely a softer Brexit) were defeated. The Brady amendment was passed. The only government defeat occurred on an amendment that expressed Parliament’s desire to avoid a no deal Brexit but is not legally binding.

Attention now turns back to Brussels. The European Commission and several remaining EU Member States (including Ireland) immediately rejected May’s call to reopen negotiations on the Withdrawal Agreement. There have been briefings to the media about the possibility of using a ‘Joint Interpretive Instrument’, essentially an addendum to the Withdrawal Agreement, that could have legal force as one possible route forward. However, it is far from clear that this meets the threshold demanded by the Brady amendment last night.

Theresa May has spent the last two years trying and failing to find a way through the hard-line positions of the DUP and ERG on one side, and the EU’s red lines on the other. She now has two more weeks to try to solve this riddle before facing MPs again on 14th February. Should she fail, we will be back to square one, with a likely repeat of last night’s series of votes on various different options.

So where does this leave us?

Firstly, the chances of a second referendum are receding. There appears to be little appetite from most MPs for this approach and without a majority in the Commons it is a non-starter.

Secondly, the chances of an immediate election are also lengthening. The Conservative Party’s (likely temporary) truce strengthens the Prime Minister’s position in power in the short-term with time now almost out to hold an election before March 29th (assuming no extension of Article 50). However, questions remain over her tenure in the medium-term and the prospect of a Corbyn-led Labour Government in the foreseeable future has not gone away.

The chances of a deal getting through Parliament will depend on two things: whether the initial no from the EU really does mean no; and whether the newly forged mood for compromise within the Conservative Party extends to considering compromises from the EU that fall short of the ERG’s redlines. The ticking clock of no deal may help nudge MPs in this direction but there is deep scepticism among other EU leaders that May can actually deliver a deal even if they offer more concessions. Changing this perception will be a key task now for the Prime Minister.

If this latest attempt at renegotiation fails, the prospect of Parliament seizing control of the process will likely be revisited. If and when MPs do get another opportunity to shape the process more directly, it seems likely that a significantly softer Brexit will be the likely outcome. But the question remains, to what end? MPs last night backed away from shouldering this responsibility. Once again, the impending prospect of no deal might make them bolder if they get another chance.

Finally, no deal remains the legal default and is looming ever larger with the clock ticking. An optimist could say last night was a step in the right direction with Conservative MPs finally uniting behind something, even if it isn’t the ultimate solution. A pessimist might say we shuffled closer to the cliff edge of no deal. Nothing has yet been resolved.

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Local politics, national problem: 2018 local election

England has been awash with elections recently.

Since 2015, English voters have had to make big decisions about the shape of our government, our relationship with the EU and whether we think Theresa May is really any good. To many voters, 2018 will seem like a very welcome year off from having to make an electoral decision.

Across large swathes of England however, there will be no respite.  There are local elections afoot.

Over 4,000 council seats, in around 150 councils are up for grabs. All of London’s 32 boroughs, large metropolitan boroughs like Manchester and Birmingham, and smaller authorities like Swindon, Thurrock, Watford and Trafford are being contested. It’s a diverse spread which provides both opportunities and headaches for all the English parties.

Since the turn of the year, Conservative supporters have been talking down their chances. Given the media coverage of local elections will focus on the outcomes in London boroughs and other large cities, it is easy to see why. In the 2017 general election, Labour pressed its advantage among young, metropolitan voters, building on their historic support from the urban working class. This means the expectations on Labour to consolidate their grasp on the city is high. Jeremy Corbyn’s party will have to take not only Barnet and Wandsworth Council, but also make a good fight of traditionally Conservative boroughs like Westminster and Kensington and Chelsea for their night to be a clear success.

Expectations are so low for the Conservatives, there is even talk of the Liberal Democrats (remember them?) retaking Kingston and Richmond. A blow for the Conservatives after the party fought so hard to stamp out support for their former coalition partners in the South of the capital.

Labour will be faced by its own challenges in the capital from the plucky opposition of Liberal Democrats, Greens and Independents. In an attempt to stay relevant, these parties have focused on presenting themselves as primary scrutineers to keep Labour honest when they romp home in councils like Hackney, Islington, and Lambeth. The biggest threat to Labour will likely be in Tower Hamlets, where the party faces challenges from two left wing, ethnically diverse local parties, the People’s Alliance for Tower Hamlets (Path) and the Aspire party. These have regularly performed well in the borough, holding the mayoralty under disgraced Lutfur Rahman, and could be in with a shot of stealing the position and the council from Labour.

While attention may focus on London, it won’t be the full story of the evening. More than half the wards up for election are outside the capital and the difference in demographics may mean the Conservatives will be in for some good news elsewhere.

Councils like Swindon, Trafford and Portsmouth will provide a barometer of the political mood outside of London, which has historically been a Labour stronghold. Whether the Conservatives can hold on to their status as the largest party in these bellwether authorities may tell us more about the future outcome of a general election than the contests in London. Areas like these will be part of the battle map for a future general election, and the local election results will be the first test of who has the advantage at this point in the electoral cycle.

The Conservatives held on in the 2017 general election in part due to their ability to unite leave supporting voters, who are spread more widely across English councils than London centric remainers. The party was also successful in the local elections in 2017 through the same method, and will hope this method works once more. When these wards were last contested, UKIP was at its peak gaining over 150 councillors. Now that the party’s support has fallen in to the low single digits, the Conservatives may be able to pick off wards and voters to defend against increased support for Corbyn’s Labour.

Labour will also be worried that the cadre of young voters, which helped it claim victory in unexpected seats last year, just won’t turn out. Labour’s election chief Andrew Gwynne MP fears the local elections will be decided by the over 55s, weakening the party’s chances in London. When turnout is usually between 25 and 45 per cent it is hard to disagree. The party is diverting more resources to increase youth turnout in key London councils however this is far from ideal. We would have initially expected Labour to have some of these councils locked up considering early predictions, but the wobble puts the party’s election plans in doubt.

A lingering question over this election is the impact of national politics. Labour hopes that fatigue with eight years of a Conservative led government, combined with local dissatisfaction with Conservative council cuts, will propel it to victory. Frustration with Brexit and private sector service delivery may also help Labour to win over swing voters. The Conservatives meanwhile have been waging a pothole politics campaign, focused on cheaper councils and local representation, with the party hoping bread and butter issues distract from the national scene. It may be that both parties’ campaigning gambles pay off, reflecting the more divided times we live in now.

After May 3rd will come the real challenge for 150 new council administrations. Local government has continued to see its budgets cut year after year, with one even going bust. This will be a headache for any incoming administration, with these problems likely to persist whichever party wins control of the local town hall. Services will likely continue to be cut, with some, like social care, arguably at breaking point. It will require a deft administration to manage this situation in local authorities and still deliver on local manifesto promises.

Local government and the changes to the services it provides can have a large and direct impact on residents. Local government elections also have a clear impact on the direction of national politics and policy, as politicians will scramble to address perceived problems with policy or the people in charge.

Despite their importance, the political narratives and the implications of this election, local government rarely attracts that much interest. In a world of big developments like Brexit, Trump and Russian spies, potholes and bin collections just don’t grab people’s attention. Jeremy Corbyn could take a big leap forward with a resounding victory, or Theresa May could prove to her critics why she was worth keeping around after the 2017 election. Yet is it unlikely many people outside the Westminster village will notice, with turnout usually very low.

To most people these local elections and the results of them will be met with ambivalence… and maybe a renewed complaint about that pothole down the road.

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What are the Brexit options now?

Tonight is the night that Parliament will finally be given its say on Theresa May’s Brexit deal. After weeks of delay, the question on everyone’s lips is not whether Parliament will reject Mrs May’s deal, but by how much she will lose. With just hours left until the vote, there is no indication that enough MPs have switched their public opposition to the deal to prevent a significant defeat for the government.

It is time, therefore, to take a look ahead at the potential scenarios that might play out in the coming weeks. We have outlined below our analysis of several potential outcomes from the current chaos.

 

Defeat so big – May has to go?

There is talk of tonight’s defeat surpassing the worst defeat for a government in living memory. So is there a chance this could precipitate a move against May that could force her downfall or her voluntary resignation? In short, no. Theresa May has given no indication that she has any intent of stepping aside and even the most strident critics of her deal have not called for the Prime Minister to resign. Indeed, the DUP have stated they will continue to support her government in a confidence vote.

Likelihood: not happening

 

Parliament takes control

What of recent press reports that MPs are mobilising to seize control of the business of the House of Commons to prevent a no deal Brexit? Nick Boles is reportedly ‘plotting’ to pass a Bill that would force the government to seek an extension to Article 50 or to revoke Article 50 altogether. Even if control over the Commons order paper was wrestled away from the government, this would still be a very tall order to organise and pass before March 29th and is not realistic. Furthermore, proposals for the Liaison Committee to take control of the process from the government were quickly dismissed by the chair and vice-chair of the Liaison Committee. While Parliament is certainly flexing its muscles, it cannot ultimately seize total control of the Brexit process.

Likelihood: not happening

 

May’s deal passes at the second (or third) attempt

The government has had plenty of time to plan its next steps should Parliament reject the deal first time round. One of the most likely next steps will be simply to have another go in a second parliamentary vote, and perhaps even a third attempt too.

The success of this approach will be influenced by a number of factors. First up, the scale of the defeat in the first vote. Losing by more than 200 votes will make it much harder to simply ask MPs to try again, whereas a better than expected showing for the government will encourage them that all is not lost. The fact that 100 Conservative MPs voted against her in the no-confidence vote is likely to set the benchmark against which the scale of defeat is measured.

Secondly, can the PM secure any further concessions from the EU? So far the Commission and remaining member states have held firm to the line that there can be no change whatsoever to the legal text of the Withdrawal Agreement. Clarifications were offered round the sides of the deal on the EU’s desire to avoid using the backstop (while stopping short of placing a time limit on it) in the build up to tonight’s vote but it is difficult to see how much more can be offered.

Thirdly, will MPs be given the opportunity to test parliamentary opinion on other alternatives? A series of votes on alternatives such as no deal, Norway-plus or a second referendum might actually play into the Prime Minister’s hands if it demonstrated that none of them can actually command a Commons majority.

Finally, the way in which the world outside Westminster responds to a rejection of the deal can’t be ignored. The markets have been subdued for some time due to Brexit uncertainty and a drastic reaction to rejection of May’s deal (such as a sterling crash or a major crisis in the FTSE 100) might give MPs something else to think about. However, given the widespread expectation that the deal will fall at the first vote it is entirely possible that this outcome is already built into market assumptions.

So what needs to change between tonight’s anticipated defeat and a successful subsequent attempt? The most likely route to reversing the result will involve Theresa May providing concessions targeting Labour MPs on issues such as employment rights, the growing realisation that other alternatives are not realistic options and the simple fact that the clock continues to tick towards no deal. It may also include giving a more specific, and accelerated, timetable for the Prime Minister’s departure.

Likelihood: The most likely outcome, but one which requires the Prime Minister to limit the scale of tonight’s defeat and for Parliament to test and fail to agree on several alternatives.

Timing: It will need to happen soon and would probably require a short (‘technical’) extension to Article 50 (see below).

Implication: This may allow a return to something resembling normal service in UK politics but May will have been severely weakened and it is likely that more detail on an accelerated and specific timetable for her resignation will have formed part of the process of getting approval.

 

Article 50 extension

If the UK is to avoid a no deal Brexit, this now looks almost inevitable. Even if May’s deal is approved tonight, we are still on a very tight timetable to get the relevant legislation implementing the Withdrawal Agreement on the statute books by March 29th. Any further delay means that an extension is likely to be required for any sort of deal to be ratified without the clock ticking down to a no deal scenario that nearly everyone wants to avoid.

However, it is important to distinguish between two different Article 50 extension scenarios. The most likely outcome would be what the European Commission has described as a ‘technical’ extension. This would be for a month or two simply to allow more time for the deal to be ratified once the UK Parliament approves it in the meaningful vote. This would be very likely in the scenario considered above where the deal is approved at the second or third attempt.

The much trickier scenario would be a longer-term extension intended to facilitate the reopening of substantive negotiations. The EU has been clear that there can be no changes made to the legal text of the Withdrawal Agreement and a longer-term extension would likely only be considered if there was a material change in the UK political landscape, or a radical shift in the UK’s negotiating position. This most likely means a decision to hold a second referendum or a General Election.

Furthermore, it is important to remember that the decision to extend Article 50 must have the unanimous backing of all remaining member states. One single dissenter can block an extension and trigger no deal.

Likelihood: Very likely for a ‘technical’ extension but anything more substantial could only be the result of a significant change in the UK political landscape (such as a second referendum or a General Election).

Timing: Likely to push Brexit day back by a month or two.

Implication: Brexit is delayed but not reversed while more time is dedicated to passing Brexit-related legislation rather than focusing on domestic priorities.

 

No Deal

In one sense, a no deal Brexit is getting more likely with every day that passes without an alternative approach being agreed. No deal remains the default scenario that will happen by automatic operation of law on March 29th 2019. There are only two ways to avoid no deal; vote for May’s deal or extend (or revoke) Article 50. If the whole Brexit saga has demonstrated anything, it is that opposing no deal is much easier than finding a viable alternative.

Likelihood: Getting more likely by the day.

Timing: 29th March 2019.

Implication: A severe economic shock and a step into truly uncharted territory which could bring an end to Theresa May’s premiership, or even the Conservative government.

 

Second Referendum

Support for a second referendum has grown within Parliament in recent weeks but both the government and the Labour front bench still strongly oppose it. It is therefore difficult to see how a parliamentary majority in favour can be manufactured. The position adopted by Jeremy Corbyn is critical. If he decides to swing behind a so-called ‘people’s vote’ it could be a game changer. But that is a very big if.

The official position of the Labour Party is to first push for a General Election with all other options remaining on the table if they fail to secure this. But Jeremy Corbyn has given no indication that he is willing to swing his support behind a second referendum.

There is also genuine concern among many MPs of all persuasions around the potential impact on trust in the democratic process if a second referendum is held. Furthermore, the divisiveness of the first referendum and its consequences for the tone of political debate will still weigh heavily in the minds of many MPs. For now, this looks unlikely but it can’t yet be completely discounted.

Likelihood: Slim but not impossible.

Timing: If Parliament is to express a preference for this it will need to do so soon after tonight’s vote, although fierce debates over the precise nature of the question and passing enabling legislation could take months.

Implication: Huge. Potentially a loss of what little trust there is left in the democratic process as well as yet more (much more) valuable time spent focusing on something other than domestic policy priorities.

 

General Election

The likelihood of a General Election taking place before 2022 has significantly increased as a result of the political turbulence surrounding Brexit and the weakening of May’s already fragile minority government. However, there is very little appetite among Conservative MPs and (crucially) the DUP for an immediate (pre-March 29th) election. The spectre of a Jeremy Corbyn led Labour Government casts a very long shadow and is likely to ensure that the Conservative and DUP benches support May in the vote of confidence that Labour plans to call following defeat in tonight’s vote. Nevertheless, the medium-term reality is that governing without a Commons majority is extremely difficult. If the fallout from tonight’s vote further hastens May’s departure as Prime Minister, her successor is likely to seek their own (stronger) mandate well before 2022.

The one scenario with the potential to trigger an election before March 29th would be if the government decides to pursue a managed no deal Brexit. In this scenario, several remain supporting Conservative MPs have indicated they may go as far as resigning the whip and voting against the government in a confidence motion. Whilst extreme, this scenario is no longer unimaginable.

Likelihood: Increasingly likely in the medium term, possibly later in 2019 or Spring 2020.

Timing: Not necessarily before March 29th unless the Conservative Party splits over impending no deal Brexit.

Implication: Opens the door to a Corbyn administration.

 

Whatever the outcome of tonight’s vote, the UK is set for a period of continued political uncertainty which will be challenging to navigate. If you are interested in the support of our expert team of consultants, please do get in touch.

 

 

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While Brexit rumbles on, WA is welcomed into new home

Last night, we marked the next milestone in our development – moving in to our new offices at Artillery House in Victoria. WA is cementing itself as the consultancy of choice for organisations with complex reputational, policy and regulatory issues, and has experience sustained year-on-year growth and our new office is the latest sign of this success.

To celebrate WA’s expansion, we invited George Parker, Political Editor at the Financial Times, to give his insights on the latest Brexit developments, based on his three decades of experience at the heart of UK and EU politics.

Clients, senior business executives, policy specialists and Westminster insiders joined us for our first party in our new office to catch up over wine and canapés and to meet many of our exciting new team members.

“The crystal ball is hazy”

As Brexit draws nearer, George gave us an insight into his thinking on the big question of the day. While many aspects of the process remain uncertain, despite being only 50 days until Brexit day, many in the room agreed an extension of Article 50 is likely regardless of the deal passing or not.

While there is seeming lack of progress, George told us he believes there is life in Theresa May’s deal yet. The DUP seems to be more open to working with government than they have been recently as the prospect of no-Brexit looms. Similarly, the ERG fears a substantial delay or no Brexit at all and are also softening their position to a certain extent. Whilst they are warming to the idea of a tweaked May deal, in private discussions the threats of pulling support from government if May softens her stance on Brexit in a more Europhile direction very much remain.

On Labour, while sections of the party and its leadership are becoming less hostile to working with May and supporting her deal (as outlined in Corbyn’s letter spelling out Labour’s five Brexit asks), George was clear this would still take time. He set out how Corbyn and his top team, supported by union boss Len McCluskey, are slowly creating a permissive environment to enable the “Great British compromise” that Richard Burgeon, Shadow Justice Secretary, has teased.

Whilst the competing Brexit groups and positions seem to be dynamic and uncertain, with government policy today resembling something nobody could have envisaged three years ago, there remains the prospect of a last-minute deal. With the clock ticking, George highlighted how EU negotiations often go to the wire, so there may be space for May’s deal to scramble over the line.

There are two main set-piece events to watch going forward. The EU-League of Arab States summit in Sharm El-Sheikh later this month, which May is likely to attend, is an opportunity for further progress or concessions on both sides as all EU heads of states will be at the event. Leaders are also set to convene at the European Council on 21-22 March, if any last-minute agreements are to take place, this is likely where they will happen.

So, whilst the crystal ball is hazy and Brexit continues to surprise us all, there remain avenues for a Brexit deal with sufficient support to be cobbled together.

Thank you to all who joined us last night and to George for his excellent commentary on such a complex subject. We’re incredibly excited about the year ahead and look forward to hosting many more events throughout the year as we settle into our new home and share our ongoing success. Stay tuned!

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Defeat looms in the second meaningful vote

Late last night Theresa May and Jean Claude Juncker announced that a deal of sorts had been reached over the Withdrawal Agreement. Today the deal has been rejected by the ERG and DUP and looks set to be defeated in the second meaningful vote this evening.

The agreement announced last night consisted of three new documents:

  1. A joint interpretive instrument which has legal force clarifying that the backstop is not intended to be permanent. It points to the fact there is a so called ‘good faith’ clause in the Withdrawal Agreement to negotiate a free trade deal to avoid the backstop coming into force. It also points out that the UK can point to this clause if it wants to raise a complaint to an arbitration mechanism that this isn’t being followed.
  2. A joint statement that is essentially an addendum to the political declaration on the future relationship making further commitments (not legally binding) to explore ‘alternative arrangements’ based on new technology to negate the need for the backstop.
  3. A unilateral statement from the UK government (not agreed by the EU) that states the UK’s interpretation of all these documents taken together is that it would be able to ‘take measures’ that could ultimately disapply the backstop if the EU does not negotiate a free trade agreement or alternative arrangements in good faith.

Theresa May wasted no time in claiming these documents amount to ‘legally binding changes’ to the Withdrawal Agreement. In the joint press conference Jean Claude Juncker stuck to the form of words that this is ‘consistent with the Withdrawal Agreement’.

Theresa May’s hopes of persuading MPs to back the ‘new’ deal were dealt a significant blow this morning by Attorney General Geoffrey Cox’s legal opinion. Cox stated that ‘the legal risk remains unchanged’ that the UK would have no legal means to exit the backstop if no alternative arrangements can be agreed despite the best endeavours of both sides.

The two key groups that May was looking to win over in the Commons, the DUP and ERG, have both reportedly indicated this is not enough and are not expected to back the deal. The Labour leadership have also said they will vote against as they don’t believe anything substantive has changed, with little prospect of large numbers of Labour backbenchers defying the whip to back the Prime Minister. The deal therefore looks set to be defeated again in tonight’s vote.

Should this be the case, attention will then swiftly turn to the promised votes on whether to rule out no deal (due tomorrow) and whether to request an Article 50 extension (planned for Thursday). Parliament is very likely to take no-deal off the table. However, an instruction to request an extension, while likely, may be muddled and unclear. The key questions are: for how long and to what end? While Parliament can indicate its preference on these questions, they will ultimately be dictated by what the European Union will accept and may come with very unpalatable conditions.

A second defeat for May’s deal tonight will be a major blow. It potentially opens the door to Parliament taking control of the process with the likely outcome being a delayed and softer Brexit. It also, yet again, ratchets up the chances of a no deal outcome (either in March or at the end of a short extension). Finally, it will inevitably raise further questions about the longevity of Theresa May’s premiership and, should it be entering its final phase, what comes next.

There may be further twists and turns to come before today is over but, as things stand, the situation for Theresa May and the government looks bleak.

 

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The politics of change?

The term historic is becoming commonplace in relation to UK politics in recent times but the formation of a new Independent Group of 11 MPs, eight from Labour and three former Conservatives, does represent a very significant moment. Nothing quite like it has been seen since the formation of the Social Democratic Party in 1981. The spectacle of formally loyal MPs from the two main parties holding press conferences deploring the state of their respective political tribes has been dramatic and has rightly captured the news agenda.

This development poses many new questions that organisations seeking to engage with and influence the political sphere in the UK must quickly consider. Just how significant and long lasting is this split? How will it impact, if at all, the current political impasse over Brexit? Should you prioritise engagement with the new grouping? Does this make an earlier election more likely? How damaging is this for both Labour and the Conservatives moving forward?

Many of these questions will take time to address, but there are some factors that are immediately apparent. In some ways, this splintering is simply a formalisation of trends that have been obvious for some time: that on many big issues (particularly Brexit) there are a significant number of MPs that were no longer voting along party lines; that Corbyn’s leadership of the Labour Party has made it essentially uninhabitable for many moderate Labour MPs; and that Theresa May’s approach to Brexit has fundamentally alienated the most ardent remainers in her party.

How much influence this grouping will be able to exert on the Brexit process will depend on how organised and disciplined they are and the extent to which they are able to coordinate with the Liberal Democrats and SNP. This does not fundamentally change the parliamentary arithmetic on Brexit, but it does change the political dynamics at play. Theresa May and Jeremy Corbyn will both need to factor in the possibility of further defections when plotting their Brexit course.

The longer-term prospects for this new Independent Group are hard to predict. UK political history does not include very encouraging precedents and the first past the post electoral system will always present significant hurdles to any new political party. They are not yet technically constituted as a political party and have no electoral or administrative infrastructure. To have any chance of having an electoral impact at a general election they will need to address this, as well as build an entirely new policy platform from the ground up. They will need to define what they stand for and what they want to achieve, not just what they didn’t like about their former parties.

In seeking to start this process there are likely to be opportunities for business and investors to engage and shape their thinking. The grouping includes a former Cabinet level Business Minister, a former Shadow Business Secretary, and the Chair of the Health Select Committee and is characterised by MPs who understand the importance of supporting business and the UK economy. They will have the ability to command media attention and should definitely be a major feature in political engagement programmes from now on.

Finally, this leaves both Labour and the Conservatives wounded. There will be intense scrutiny in the coming days and weeks on other potential defectors with the reaction from both main party leaderships set to play a crucial role in what happens next. Failure to address the fundamental concerns aired about the direction of travel could see more defections. But many MPs will be making longer term calculations. The electoral prospects of a brand new political force in UK politics are very uncertain.

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2019: So, what happens next?

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A cross-party group of MPs recently warned that Brexit was “sucking the life” out of Theresa’s May government. They are right: this week David Lidington, May’s de facto deputy PM, is tasked with finding policies that can be ditched so government and the civil service can focus on no deal planning.

Escalating fears of the UK crashing out of the EU without a deal will worry businesses who are yet to receive specification from government on the type of Brexit they should prepare for. The Cabinet Office’s nationwide email and leaflet campaign on business planning will provide scant reassurance.

The government’s social care green paper, and draft Domestic Violence Bill are likely casualties of Whitehall’s divided attention. The NHS, rising knife crime, public transport, homelessness and the environment remain national imperatives. But as warning sounds of no deal get louder, government and officialdom must turn its engines toward planning an outcome few wished for or expected. Hold tight for 2019…

But what do we know for sure will be on the agenda in the new year? The Spending Review, the process through which government decides how much it’s going to spend in the next few years, will be taking place. Departments will be looking at where they should spend money as well as where they need to make efficiencies. The people and businesses affected by these spending decisions will be seeking to influence them before they are finalised.

How did we get here?

It’s impossible to look ahead to next year without first looking back and assessing where politics has left us in 2018.

Months of acrimony and countless ministerial resignations have ensued since May published her Brexit plan in July. We have reached the end of the year with the plan as good as dead, a failed leadership coup, and staring quite possibly down the barrel of a no deal Brexit in March next year.

As constitutional and parliamentary deadlock has consumed the government, Jeremy Corbyn’s supporters have hailed the Napoleonic doctrine of not interrupting an enemy when they’re making a mistake. Those looking for clearer opposition and alternatives from the Labour leadership have not found the grand historical comparison as convincing and are left disappointed.

So, where now? We could leave the EU without a deal, there could be a second referendum, Parliament could hold advisory votes on alternative courses of action, Article 50 could be extended, or a general election could be called.

Brexit: is the end really nigh?

Yes. The UK is due to leave the EU on Friday 29th March 2019. Despite her efforts, May failed to re-open negotiations at last week’s European Council meeting and it looks virtually impossible that she will be able to allay the concerns about her proposed deal that have driven so many of her ministers to resign, her own MPs to seek her removal, and every other party to state that it will oppose the deal in Parliament.

Of course, opposition hinges on the so-called ‘backstop’, the process that would effectively keep Northern Ireland in the Single Market if a longer-term trade agreement is not reached after the transition period. It has proven too bitter a pill for many to swallow and will not be resolved before the rearranged vote in January. Even the threat of no deal has not been enough for most MPs to say they’ll support it.

Going into next year Brexiteers and Remainers in parliament might have to look again at what they’re prepared to compromise on to avoid another breakdown in process. Lest we forget, while the Conservative Party is broadly Eurosceptic, parliament is not. There may not be a majority among MPs for May’s deal, but there is no majority for a no deal either. However, there is a big risk the UK could sleepwalk into a no deal scenario because government and Parliament has failed to agree an alternative way forward.

Entering election territory

The next election is not due until 2022 under the Fixed Term Parliaments Act but one happening next year is certainly not unlikely. Labour, despite its dithering this week on the much-threatened no confidence motion in the government, is enthusiastic about an election. The sheer attrition of the Tories’ mishandling of Brexit could be enough to push Labour over the line if an election is held, even if the Conservative Party is marginally ahead in current polling. Labour would then have the platform to invoke a radical policy programme to tackle the social injustices that, many in the party argue, helped cause a leave vote in the first place.

The DUP’s position is more complex. They hate the PM’s deal; the possibility of further constitutional divergence from the rest of the UK is too much for them to bear, having cheered so blithely for a ‘leave’ vote during the referendum campaign. However, they are arch political operators and know that a Labour government led by a PM with pronounced republican sympathies, would not be in their interests either. The DUP is surrounded by unpalatable options on all sides and the extent of their opposition to the Withdrawal Agreement shouldn’t be underestimated; their tacit, continued confidence-and-supply support for Theresa May is not guaranteed.

For the Conservative Party itself, there may also come a day of reckoning in 2019. MPs from the Thatcherite and wet wings, distant though they are, stick at it together, mindful that the UK Conservative Party is the oldest surviving political party in the world and they don’t want to preside over its demise. But such is the toxicity of division over Brexit, the stress of these divisions may prove too much. MPs have already come forward to declare they’ll resign the whip if no deal becomes policy.

If Theresa May goes, then what? Who takes over? Did they vote leave or remain? Do they want a hard or a soft Brexit? You can almost already hear the squabbling.

WA says

There’s so much uncertainty that it can be a worrying time for a lot of people working in business, public services, and the third sector. Often, the noise around the Brexit debate can be confusing and makes it more challenging for organisations to plan a way forward.

As an agency we specialise in helping our clients with complex political and commercial issues. This can involve keeping them up to date on what’s happening, what developments could mean for their organisation, and providing versatile and creative advice which really adds value.

As we head into 2019, if there’s a burning question or issue for your organisation that you think we could help with, don’t hesitate to get in touch and one of the team will be delighted to chat.

The WA Communications team

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Two significant shifts for Brexit

After weeks of stalemate and delay over Brexit, we now finally have two significant developments in the form of evolving positions from both main Party leaders.

Firstly, Jeremy Corbyn has bowed to pressure to support a second referendum if an amendment calling for Labour’s preferred approach to Brexit (a customs union and close alignment with the single market) is defeated. Secondly, Theresa May has confirmed that MPs will be allowed to choose between no deal and an extension to Article 50 (most likely for around three months) if she is unable to get a deal through the meaningful vote by 12 March.

Both shifts are highly significant and, taken together, appear to reduce, but by no means eliminate, the likelihood of a no deal outcome on 29th March and increase the likelihood of an Article 50 extension. However, no deal ultimately remains the default at the end of any extension period should a deal still prove elusive. In both cases, May and Corbyn appear to be moving against their own preferences under pressure to avoid further resignations, either from front bench roles or from the Party altogether. The creation of the new independent group of MPs last week has clearly been an influencing factor in both decisions.

Labour’s new position is particularly interesting. While the headlines have been focussed on their backing for a second referendum, their bottom line is that they want no deal off the table and will refuse to back May’s deal. They will therefore back whichever alternative avoids both those scenarios. Should a second referendum fail to command support in the Commons, as still seems likely, they will presumably back an extension to Article 50 and continue advocating for an alternative approach.

Theresa May’s approach, on the other hand, represents a major concession to the remainers and softer Brexiteers in her Party. This poses a big question to the ERG and Cabinet level Brexiteers who will be infuriated at this approach. They may now be faced with a straight choice on 12th March between some variant of May’s deal and the prospect of a delay to Article 50. But they have limited cards left to play and appear to be outnumbered in the Commons. Ultimately, it appears they will not be able to out-vote an amendment favouring delay over no deal.

So where does this leave us? The two most likely outcomes now are some variant on May’s deal, almost certainly accompanied by an Article 50 delay to facilitate ratification, or a delay to Article 50 to allow negotiations to continue. Either outcome would still only represent the next small step in an increasingly protracted and politically divisive process with plenty of drama and recriminations to follow. But they would at least allow business and investors to breath a sigh of relief. At least for a short while.

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Brexit delayed

In the early hours of this morning it was confirmed that the United Kingdom will not leave the European Union on Friday. The remaining EU members states have granted the UK a six month extension to Article 50 to 31 October 2019 with minimal conditions attached. The strong indication is that a further extension will be granted if there is still no deal at that point.

This allows MPs to stagger into the Easter recess to rest and recover from what has been an exhausting few weeks. Meanwhile, cross party talks continue between the government and Labour to try to break the Brexit deadlock, albeit with little hope on either side for a positive outcome. So what happens next and what does this mean for the Brexit process, the future of the government and for businesses and investors?

Firstly, there is still little prospect in the near future of securing a majority in the Commons for any specific form of Brexit and the pressure of the ticking clock has now been removed. No deal now seems extremely unlikely to ever happen. If the EU weren’t willing to contemplate this last night when the UK requested an extension without presenting any clear plan for what it would be used for, they probably never will.

Parliament now has more time to try and find a resolution and, while it is hard to see consensus emerging any time soon, the most likely long-term outcome still appears to be a softer version of Brexit, though it could take quite some time to arrive at this point.

Meanwhile, Theresa May is planning to stay put as Prime Minister until a deal is agreed. There remains a clear appetite among many Conservative MPs for her to go sooner but they lack a formal mechanism to oust her. However, her tenure does appear to be in its final days. If a Brexit deal is not in sight soon then the collective mood of the Party, expressed via the 1922 committee and/or the Cabinet, may eventually force her from office regardless of whether a Brexit deal is secured.

Indeed, the next Conservative leadership contest has essentially already started. Multiple leadership hopefuls have been brazenly setting out their stall at events with think tanks that look very much like hustings (see Matt Hancock and Penny Mordaunt speaking at an Onward event earlier this week) or via set piece interviews in the media.

Brexit will continue to dominate the political agenda for some time to come, with a Queen’s speech is now unlikely to be brought forward until the Autumn. But this extension provides breathing space in which these leadership hopefuls will continue to set out their vision for the future. It will also allow diligent ministers to return some focus to their day jobs and move forward domestic policy initiatives that have been starved of political attention in recent weeks (as long as they don’t require primary legislation).

This remains a hung parliament with no party holding a majority, while half the Cabinet are openly auditioning to be the next Prime Minister. Power and decision making is more diffuse than ever and this presents unique opportunities for businesses and investors seeking to influence policy. But capitalising on these opportunities will require detailed understanding of the political drivers in a fragmented and complex environment.

The Brexit question drags on but there is plenty of work to do for those seeking to influence the UK political environment.

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How meaningful was this week in Brexit?

Where are we?

In fourteen days the UK will leave the European Union, with or without a deal, unless an extension to Article 50 is requested by the UK and granted unanimously by all remaining 27 EU member states. Parliament has instructed the UK government to request an extension, but it has not indicated for how long this should be or what it should seek to achieve. It has also voted against a no deal outcome, against a second referendum and against giving itself an opportunity to express its view on an alternative approach in a series of indicative votes next week.

Brexit has broken the UK political system. Both major parties and almost all the various Brexit factions are deeply split and whatever path we take is likely to wreak more havoc and damage on the established political order.

What happened last night?

The instruction to request an Article 50 extension was delivered last night via approval of a government motion. This set out two possible extension scenarios; a short extension (likely until June) if Parliament finally approves May’s deal in order to pass the relevant legislation to enact it, or the prospect of a much longer extension if the deal is not passed, likely to be accompanied by unpalatable conditions from the EU.

This motion passed, unamended, by a large majority in a free vote in which MPs were not instructed which way to vote by the whips. All amendments to the motion were defeated, including a call for a second referendum (by a significant margin with Labour abstaining) and an attempt to grant the Commons the chance to hold indicative votes on alternatives to May’s deal (by just two votes). This appeared at first to be a qualified success for the Prime Minister, until it emerged that two thirds of all Conservative MPs and eight Cabinet Ministers opposed the motion.

What comes next?

The next staging post in this process is now expected to be a third meaningful vote on the Prime Minister’s deal next Tuesday. Intense efforts are now underway to find any mechanism to win round the DUP. They are seen as the key to unlocking this process. If they fall in line, many of the ERG Brexiteers and a number of Labour MPs are expected to swing in behind them. Attorney General Geoffrey Cox is again at the heart of these efforts via additional attempts to construe further legal interpretations & clarifications. It currently appears unlikely, though not impossible, that these efforts will bear fruit by Tuesday.

Should the deal be rejected a third time by MPs the only course of action left to the Prime Minister will be to seek an extension to Article 50. There is no precedent for this process. It is expected that the details of whether, and on what conditions, any extension will be granted will be hammered out between EU leaders at the European Council summit next Thursday and Friday (21st and 22nd March).

There will be an expectation that the UK will need to provide a clear rationale for the request. This could be in the form of significant changes to its negotiating stance and there is even speculation that a second referendum will be demanded as part of the price of an extension (though this would represent a very hard-line approach indeed).

Responding to an extension request will be a fiendishly tricky challenge for the EU leaders. They will be balancing the risk of pushing the UK into no deal with the need to end the current uncertainty and the desire to avoid ending up in exactly the same scenario at the end of whatever extension period is granted. This is all complicated by the requirement for unanimity, any single member state can veto an extension. The outcome of this process is highly uncertain, it is by no means a given that an extension will be granted.

How could this play out?

Should the Commons refuse to back May’s deal again next Tuesday, it is likely that MPs will be faced with a final reckoning in the last week of March with just days to go until time runs out. At this point there will be certainty over whether, and on what terms, an Article 50 extension is available and the options on the table will be crystallised.

Should Article 50 extension only be available for a very long period on condition of a softer Brexit or even a second referendum, the ERG Brexiteers and the DUP will have to choose between the lesser of two evils; extension, or May’s deal. It is entirely possible, though not certain, this would finally bring them in line behind her deal. It will be a very close call.

Should Article 50 extension be denied for anything other than a short term administrative period to pass May’s deal, then it is hard to see how Labour MPs, the SNP and other remain supporting groups could do anything other than hold their noses and vote for May’s deal. Otherwise they will facilitate the no deal scenario the Commons has voted to rule out in all circumstances.

It appears then that a significant extension of Article 50 or a last minute backing of May’s deal, under extreme duress, are now the most likely outcomes. Either scenario calls into greater question the future of Theresa May’s premiership. Either she will be faced with implementing a deal the vast majority of Parliament hates or adopting a fundamentally different approach to the Brexit negotiations that she personally disagrees with, during a delay she has consistently opposed. Neither scenario looks like a recipe for a return to predictable and stable government.

UK politics looks set to be dominated by Brexit and characterised by unpredictability for some time yet to come.

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The tough sell: getting a Brexit deal through Parliament looks harder by the day

This afternoon’s news of Jo Johnson’s resignation as Rail Minister throws into sharp relief the challenges still facing Theresa May in getting any kind of Brexit deal through Parliament. Confidence has grown over the past fortnight that a deal is likely to be struck between the UK government and the European Commission / remaining EU Member States. However, the parliamentary arithmetic that the government will need to confront back in Westminster if and when they secure an agreement remains daunting.

Johnson’s resignation follows hot on the heels of reports in The Times that May’s attempts to reassure the DUP have simply increased their suspicions that she is about to sign up to a deal that retains some Irish border backstop element that will be unacceptable to them. If the Prime Minister is unable to rely on the support of the DUP, on top of the anticipated opposition of hardcore Brexiteers, the numbers start to look very difficult indeed.

It remains to be seen whether Johnson’s resignation will be an isolated incident, or whether further resignations will follow in the coming days. If it is the former then No 10 will hope to ride this out, as they did following the other Johnson resignation earlier in the year. If it is the latter, then this could be the start of a very uncomfortable week indeed for the government.

Either way, there is no escaping the significance of the fact that Johnson was a remain supporter and his resignation is a clear indication that May’s Brexit strategy is pleasing very few people indeed. Of course, there is still a feeling in No 10 and elsewhere that the spectre of a chaotic no-deal will ultimately prove too scary an alternative for the majority of MPs, but this approach represents a high degree of gamesmanship that will leave many in the business community feeling very nervous.

What is clear, is that as the negotiations enter the final straight (at least over the withdrawal agreement) there is an enormous job facing the Prime Minister to sell whatever emerges from the negotiation to Parliament. That job is getting harder by the day.

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End game for May or end of the beginning?

With events moving fast in Westminster today, the WA team set out our take on the challenges facing the Prime Minister. Further updates will follow as the situation develops.

After two years of negotiation and speculation, Theresa May has finally delivered a draft Withdrawal Agreement text. The Prime Minister has tied the future of her premiership to the 585 page document. ‘Collective agreement’ of the Cabinet late last night has been followed this morning by two Cabinet resignations, one of them the Brexit Secretary Dominic Raab. This is a fast-developing situation, so what are the key questions that will inform what happens next?

Will there be more Cabinet resignations?

Brexit Secretary Dominic Raab was first out of the blocks this morning, followed closely by Work and Pensions Secretary Esther McVey. Penny Mordaunt (International Development) and Andrea Leadsom (Leader of the House) are on the resignation watch list and there is intense focus on Environment Secretary Michael Gove. Gove is also rumoured to have been offered and rejected the vacant Brexit Secretary role. May is clearly planning to plough on and force the deal through but every Cabinet resignation represents another valuable vote lost in the meaningful vote and makes the job of leading her Party and the country that much more difficult.

Will Graham Brady receive 48 letters?

There has been significant speculation that Graham Brady, Chair of the 1922 Committee, is close to (or may already) have received enough letters to trigger a formal vote of confidence in Theresa May’s leadership of the Party. Jacob Rees-Mogg has now openly done so and, while it remains to be seen how many other members of the ERG will follow his lead, the level of anger among Brexit supporting Conservative MPs does appear to be reaching its peak, making a leadership challenge increasingly likely. No 10 has officially confirmed that May would fight any challenge and, if she were to win, then she would be safe from another formal challenge for another twelve months.

How does a meaningful vote pass?

This is the most challenging question of all. The DUP have come out strongly against the deal and the confidence and supply agreement now appears dead in the water. It is already clear that a significant number of Brexiteer Conservative MPs will oppose the deal, with their numbers swelled by resignations from government positions (every PPS, no matter how unknown is still another vote May has lost). With the Labour front bench also lined up against the deal, the only hope for the Prime Minister appears to rest on sufficient numbers of Labour MPs crossing the House and supporting the deal in the national interest. There is currently very little evidence that enough of them are willing to do so. If the Prime Minister survives the week then this is a picture that may shift again before the vote takes place in early December but, as things stand right now, things look bleak for May.

What if May loses the meaningful vote?

This is currently unclear. It is difficult to envisage how the Prime Minister could continue if she were to lose the vote. The options available to her or her successor would be very unpalatable: to attempt to re-open negotiations with the EU; to call a General Election (no longer as straightforward as it was due to the Fixed Term Parliaments Act); or to call a second referendum. The truth is all bets would be off and the UK would be heading for a period of unprecedented political turbulence.

What are the immediate next steps?

The remaining members of the Cabinet will have a big decision to make over whether to follow Raab and McVey out of the door. Gove, Sajid Javid and Jeremy Hunt are seen as bell-weathers. They have the potential, in the next 48 hours, to decide the Prime Minister’s future.

Undecided Conservative MPs will look to the remainder of the Cabinet for a steer on what comes next and there will be many on the backbenches mulling over whether to submit their own letter.

The Prime Minister herself will have to reflect seriously on the implications of the clear challenge to securing a parliamentary majority in favour of the deal. So far, she appears determined to press on and call the bluff of her various detractors. But the situation is getting more challenging by the day.

 

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Deal or no deal? Theresa May faces rebels as withdrawal agreement talks stall at “95 per cent” complete

Negotiations with the EU have stalled after Prime Minister Theresa May offered “nothing new,” according to the President of the European Parliament, in a presentation to EU leaders at the October summit on Brexit.

EU leaders decided not to call for a further summit in November as not enough progress had been made in negotiations, though reportedly stand ready to call an ad-hoc meeting if there is a breakthrough. They reiterated their confidence in Michel Barnier as Chief Negotiator for the bloc, while German Chancellor Angela Merkel told all EU countries to prepare for a no-deal Brexit.

At home, Theresa May faces the prospect of rebellion by members of the Conservative party after her proposal for an extended transition period of 33, rather than 21, months caused outrage amongst both pro-Brexit and pro-Remain MPs. The extended period had been designed to de-toxify concerns over the Northern Irish backstop – the provisions which will come into operation if Britain and the EU are not able to negotiate a full trade agreement during the transition period. However, this proved neither acceptable to Parliament nor to Ireland. Ireland will not accept a time-limited backstop.

To placate the members of the pro-Brexit wing of her party who have threatened to depose her in retaliation for what they see as an overly soft approach to negotiations, May has committed to four ‘mini red lines’ for a backstop agreement. Any backstop must contain:

May meanwhile has said the EU withdrawal agreement is “95 per cent” complete, with the backstop for the Irish border among the final details to be settled.

Irish news site RTE has today reported that the EU will offer a UK-wide customs union as a way around the Irish backstop issue, but it will have to be negotiated beyond the withdrawal agreement as a separate treaty. Such an agreement may not meet May’s first mini red line.

WA’s analysis

May’s mini red lines promised to the Commons yesterday, reportedly taken by the EU as a snub, and her position on the Irish backstop mean that unless either side gives ground there is little prospect of a Brexit deal being reached within current timeframes.

Only a backstop without a time limit will be acceptable to the Irish government, which has a veto over whether to accept the final withdrawal agreement as all EU countries must agree for it to pass. Indeed, the Irish Prime Minister has reiterated his commitment to this position today.

It is also doubtful the withdrawal agreement as it currently stands can pass a vote in Parliament. Labour has said it will only vote for a deal which keeps closer ties to the EU, such as the UK remaining in the customs agreement and single market. In addition, 44 backbench Conservatives are now members of Stand Up for Brexit, a campaign group whose pledges are incompatible with the Chequers agreement.

While there is still the possibility Britain and the EU will be able to reach an agreement acceptable to both sides, the latest developments increase the likelihood of a no-deal scenario.

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May be she can keep it up? The great survivor survives another crisis

One of Theresa May’s surprise talents as Prime Minister has been her ability to survive almost perpetual political crisis. Time and again we have seen pundits and politicians predict that she will be out the door within weeks, and yet, two years later, she’s still there.

After the latest EU Summit in Brussels passed without much progress being made, it seemed like this might finally be it for May. Not only had she failed to progress talks beyond the deadlock on the Irish border, she had also indicated that the UK would be willing to extend the transition period. The combination of these two announcements provoked outrage across the political spectrum, making May’s position uncertain once again. Against the backdrop of the march advocating for a second referendum, which was attended by an estimated 700,000 people, Brexiteers spent the weekend briefing against the Prime Minister, seemingly preparing for an imminent vote of no confidence.

High profile Brexiteers have continued to put pressure on May, arguing that her decision to propose an extension to the transition period amounts to a betrayal of the Brexit vote. Boris Johnson, never one to shy away from making such a suggestion, described the move as “a cheat and a fraud on those who voted leave” and announced he had joined Stand Up 4 Brexit, a group of 44 MPs campaigning for a “clean break” from the EU, including David Davis, Iain Duncan Smith and Priti Patel. Steve Baker, the man credited with orchestrating the strategy of the pro hard Brexit faction of MP’s, also seemed to be launching an attack on May, tabling an amendment to the Northern Ireland Bill that would require the Northern Irish Assembly to give approval to any Brexit deal that would treat Northern Ireland differently from the UK.

And yet, the Prime Minister seems to have pulled it off yet again. While on Monday morning, momentum seemed to be building against May, with threats not only of a no-confidence vote, alongside Brexiteers, and the DUP planning to begin to vote against government Bills as a means of undermining the Prime Minister. the threat later appeared to melt away. Baker withdrew his amendment, apparently overestimating the support he could expect to have on the day. Outrage over the violent imagery used by anonymous MPs against the Prime Minister united the majority of Parliament in sympathy for the Prime Minister. All this allowed her to deliver an update on negotiations to the House of Commons relatively unscathed.

How long May can keep this up remains to be seen. The 1922 Committee meet on Wednesday, always a risk for the Prime Minister, with an estimated 40 of the required 48 letters of no confidence submitted to Committee Chair Sir Graham Brady. Fears that the Prime Minister may resort to a softer Brexit over a no-deal may push yet more MPs to submit letters of no confidence in an attempt to trigger a leadership contest. It remains highly unlikely that there are enough Conservatives willing to vote against the Prime Minister to force her out, but there are other options available to those willing to undermine her yet further. Rumours that Brexiteers are planning to deliberately derail Bills as a show of strength have yet to materialise, but clearly have the government worried. The Offensive Weapons Bill, a rumoured target of Brexiteers, has been pulled from the parliamentary agenda for two weeks running.

Theresa May is the great survivor of British politics, but with her own MPs becoming increasingly disruptive as Brexit talks grow in urgency, her future in office looks increasingly uncertain. With the Budget less than a week away, she needs to maintain at least public unity among her backbenchers, while ensuring the continuation of the confidence and supply deal with the DUP. The Prime Minister may be in a less precarious position than she was at the weekend, but it is doubtful that speculation on the future of May’s position is over.

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May survives the twelfth day of Christmas as her Brexit deal hangs by a thread

As the carol goes, the twelfth day of Christmas is usually associated with the sound of drummers drumming.

However, in this extraordinarily chaotic year, it is no surprise to learn that the drummers were replaced by relieved Conservative MPs, banging desks in relief as Theresa May faced down a vote of no confidence in her leadership. The Prime Minister remains in office, but is she in power?

A vote of confidence in Theresa May’s leadership became almost inevitable after she decided to pull Tuesday’s meaningful vote at the eleventh hour. The fact that Ministers were on the airwaves only hours earlier, confidently proclaiming the vote would go ahead, only added to the sense of betrayal felt by many Conservative MPs. In their view, the Prime Minister’s deal betrayed Brexit and now she was denying them their chance to throw it (and maybe her) out.

The quick turnaround of the vote of no confidence certainly played to the Prime Minister’s advantage. After the shambolic attempt by the European Research Group a few weeks ago to oust May, they clearly needed time to corral sufficient support. In the end, time was against them. The 200-117 victory in favour of the Prime Minister means that a vote of confidence cannot be called in her leadership for at least a year, securing her position in the party. However, 117 rebellious MPs is sizeable, and should Cabinet ministers decide to resign en masse over the coming weeks, her position could become untenable. For the Conservative Brexiteers, they end the week the way it began: with a Prime Minister and deal they cannot support.

While the Conservatives have been tearing themselves apart, Labour has surprisingly, sat by watching the drama unfold.  The scale of Conservative opposition to Theresa May’s leadership would naturally lead you to believe that it is only a matter of time before Labour tables a vote of no confidence in the government. However, Labour leader Jeremy Corbyn wants to be certain that he can defeat the government. While it is festive season, it remains to be seen whether Turkeys would actually vote for Christmas (Conservative MPs voting against the government in a vote of no confidence). It may also be the case that Corbyn is also unsure of what exactly his next move should be. Those in his party that are pleading for a vote of no confidence are mainly advocates of a second referendum (Chuka Umunna, Margaret Beckett). While the People’s Vote campaign has certainly picked up momentum in recent weeks, the only hope of ever having one is if Labour can get behind it. As Jeremy Corbyn plots his next move, it remains to be seen whether he will give the Remainers inside and outside of his party what they want.

With enemies on all sides demanding different things from Brexit, what next for Theresa May?

Overnight, her position became all the more precarious as EU leaders united to reject renegotiating the Withdrawal Agreement. May’s plan had been to secure concessions from Brussels, mainly around the Northern Irish backstop. The Prime Minister’s plan was to secure a target for a UK-EU trade deal by the end of 2021, thereby ensuring the backstop contained a time limit. Yet the backstop is fundamental to the Agreement for the EU, and the Irish Prime Minister, Leo Varadkar, while happy to offer assurances, will not budge on something that he believes is a fundamental assurance to maintaining peace in Northern Ireland. Despite this, it is still likely that May will secure some form of assurances regarding the backstop, which she will then take back to her Tory Brexiteers and the DUP ahead of a meaningful vote, pencilled in for January 14th. As Parliament stares into the abyss of a no-deal, it is impossible to predict whether political opponents on all sides of the House of Commons will support the Prime Minister’s deal.

Arguably, the most admirable quality about the Prime Minister is that she can often kick issues into the long grass, when defeat seems inevitable. However, with March fast approaching, that grass is running out and attention quickly turns to whether she can command the support of MPs from all sides to pass her deal. If she does, this is only the start of the many painful battles that lie ahead. As we look ahead to the New Year, deal or no deal, Parliament is certain to play a fundamental role in determining our future relationship with the EU.

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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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Deal or no-deal for May?

It has been another extraordinary week in Westminster. The Government started the week with two significant defeats in the Commons. In doing so, it became the first government in history to be found in contempt of parliament, was forced to publish the full legal advice provided to the Cabinet on the Withdrawal Agreement, and handed parliamentarians a greater say over what should happen if (when?) the government loses the meaningful vote.

This has been followed by speculation around how much the Government is expected to lose by in next Tuesday’s vote and even about the possibility the vote itself might be delayed. Theresa May, however, appears set to press ahead, insisting that this is the only deal available. Her message remains clear; the only alternatives to her approach are no deal or no Brexit. But is this still the case following the success of Dominic Grieve’s amendment?

To answer this, it is important to understand what this amendment does. It essentially allows Parliament the opportunity to express a view on what it wants to see happen if the meaningful vote is lost. This would be achieved by tabling and voting on non-binding motions. This allows different options, not currently backed by the government, to be tested to see if they can command the support of a majority in the Commons.

However, having the tool to this in theory is not the same as being able to organise a majority of parliamentarians in favour of a credible alternative approach with a hope of being accepted by the EU in practice. Remember, no deal will happen unless Parliament can actively agree on an alternative. So let’s examine the various outcomes that could be put forward by Parliament under this mechanism.

Another kind of Brexit – Norway-style EEA arrangement or Canada +++?

Any expression of a desire for a Norway-style EEA deal or a ‘Canada +++’ fails to account for the fact that both these options remain very much on the table by the open nature of the political declaration. Parliament expressing a view in favour of either approach does not obviate the demand from the EU for the Withdrawal Agreement and, specifically, the Northern Irish backstop. The EEA option would mean accepting free movement of people and undermining the UK’s ability to strike independent trade deals, while the Canada option would fail to prevent a hard border on the island of Ireland. There appears to be more MPs willing to back Norway than Canada but, in either scenario, there will still need to be very painful trade offs and the EU’s demand for a fall-back option for Ireland will remain.

Renegotiate the deal

The message from Brussels has been very clear on this point. They will not reopen negotiations on the Withdrawal Agreement unless there is a material change in the UK political landscape, widely interpreted as a second referendum or a General Election leading to a new government. There may be some wiggle room to make cosmetic changes to the political declaration on the future relationship or a declaration. While this might buy off some of the dissenting Conservative MPs, it won’t address the fundamental concerns held by the most hard-line Brexiteers and, importantly, the DUP over the nature of the Northern Ireland backstop. Ultimately, if Parliament does issue a command to attempt re-negotiation it won’t solve anything if the EU refuses to budge.

A second referendum

This is the one option likely to represent a significant enough shift to persuade the European Commission and remaining member states to pause the clock on Article 50. Its popularity appears to have increased as a back-up option to avoid no-deal. However, it is still far from clear that a parliamentary majority can be found for it. Were the Labour leadership to pivot its position and back a second referendum (as appears possible) that would be a significant step but there remains deep concern across the Conservative Party about the long term implications. Being seen to tell people, in effect, that they were wrong and they need to vote again risks either another leave vote (thereby solving nothing) or opening a real Pandora’s box should a remain win be seen to further undermine faith in the political process among those that thought the outcome of the first referendum would be binding.

It may not be possible to move forward until all these various options have been explored and tested against parliamentary opinion. Should none of them command a majority, or prove possible to agree with the EU, then Theresa May will have been proved right and MPs will be left with the stark choice between May’s deal and no deal. When the other options have been examined forensically, these two options still appear by far the most likely outcomes.

But will Theresa May survive long enough to be proved right? Potentially yes. She has demonstrated extraordinary resilience so far, though this will likely depend on the scale of the expected defeat in the meaningful vote. The DUP look set to support the government in a formal parliamentary vote of no confidence, thereby protecting from an early election by default. But their approach to the confidence and supply deal with the Conservative Party thereafter could have a significant bearing on the Prime Minister’s future.

May is still vulnerable to another move against her within the Conservative Party, either via the 1922 48 letters process, or by a move against her by sufficient numbers of the Cabinet. Refusal of the DUP to back a May-led government could prove fatal to her. The fact remains though that replacing Theresa May would not, in itself, unlock the Gordian knot that is Brexit.

So what does all this mean for businesses and investors? Firstly, that Brexit uncertainty still has some way to run, at least until the end of the calendar year and possibly into January. But we are now nearing the end of this particular phase of Brexit. The clock is ticking and, unless the votes for a second referendum materialise in Parliament, the UK will still be leaving the EU on 29th March next year. The nature of that departure should be settled one way or another in the coming weeks.

At that point, this exhausted government and parliament will be forced to turn its attention back to domestic matters. Next year will see a spending review and the first Queen’s Speech for over two years. In the absence of an election, these will be overseen by a weakened minority government operating in a Parliament that has reasserted itself. This will present big opportunities for influencing how the country takes itself forward regardless of what happens in the next month.

It is impossible to predict what will happen in the next two weeks, but it is both possible and necessary to prepare for the moment when attention eventually turns back to other matters.

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No-deal legislation abandoned with prorogation – what’s the impact?

As the country was watching mystified at last night’s extraordinary antics in the House of Commons, it was easy to forget that the prorogation of Parliament has a greater impact than simply making a lot of MPs furious. Buried beneath all the ceremony and speeches, is the reality that five key bills designed to prevent the UK facing regulatory black holes in the event of a no-deal Brexit have fallen and will not be carried over into the next session of Parliament. The Financial Services Bill, the Trade Bill, the Agriculture Bill, the Fisheries Bill and the Immigration Bill have now been effectively abandoned by government, raising questions about the future for key UK industries, and the UK’s workforce in a no-deal Brexit scenario.

The Financial Services Bill: what was in it?

The Financial Services Bill would have given HM Treasury the temporary power to match any changes to EU financial services law made before the UK leaves the EU for two years following a no-deal Brexit. This would effectively ensure the UK would maintain the same financial services regulatory regime as the EU in the short-term, even in the event of no-deal. The Treasury would then have been allowed to implement any changes without needing a parliamentary vote for two years, speeding up the process.

The Bill previously stalled in the House of Commons due to an anticipated rebellion on a cross-party amendment that would have forced new tax transparency rules on British Overseas Territories, including the Channel Islands. The amendment would require Crown Dependencies to set up public share ownership registers by 2020. The likelihood of the amendment passing resulted in the government cancelling a vote on the Bill on 4 March 2019, has and it never returned to the House of Commons.

Will the Financial Services Bill return to Parliament?

Like other Bills not passed by the time Parliament was prorogued, the government had the option of carrying the Bill over into the next parliamentary session but has chosen not to do so. The Bill could be reintroduced when Parliament returns on 14 October, but this is unlikely given the government’s concerns with the Crown Dependencies amendment and the loss of any hope of a majority for its legislative agenda. Given the high chance of an almost immediate vote to call a general election when Parliament returns, the most likely option is that the fate of the Bill will be left for the next government to consider.

What happens if we leave the EU without the Bill passing?

In the event of a no-deal Brexit, the UK will be recognised as a ‘third country’ by the EU. As a third country, UK-based financial services would lose automatic access to the EU. If the EU does not recognise regulatory equivalence between the UK and EU, additional restrictions are likely to apply. The Financial Services Bill was a means of ensuring the financial services sector could avoid regulatory divergence – its absence presents significant regulatory risks for the sector. The government has said the legislation is needed to keep financial services regulations up to date and that not having the power to do this “represents a risk to the reputation, global competitiveness and efficiency of the UK’s financial markets.”

Failure to pass the Bill is unlikely to cause any initial issues for the Financial Services sector in the event of a no-deal Brexit, but it creates a long-term risk of regulatory divergence that may create issues for cross border financial services. If the UK needs to introduce new legislation to match EU law every time one is introduced, we face the prospect of continually attempting to catch up with the EU, creating short term regulatory divergences that may disrupt business flows while legislation makes its way through Parliament (assuming Parliament is willing or able to pass legislation at all).

How can we help?

The loss of the government’s majority has made the future of no-deal planning legislation and all other Bills highly uncertain. WA Investor services can support investors in scenario planning for the months ahead, ensuring you are ahead of the curve when it comes to the unpredictable world of policy and regulation in the current climate.

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On the cusp of a breakthrough?

In February 2019 pro-European MPs leaving the Conservative Party and Labour Party felt that setting up a new party was the most effective way of promoting moderate, pro-European politics in the UK. Talk in the media was of how they would swallow up the Liberal Democrats who were seen as being on their political deathbed. How quickly things can change.

Whatever way you look at it, the party’s fortunes have changed dramatically in the last six months: outperforming expectations in the European and local elections, winning by-elections, and a stream of defections. There is little doubt that the upcoming General Election – expected in late November or early December – will be good for the party. The question is just how good. While activists on the ground are positive, the party faces a potentially pivotal moment: will it improve incrementally and win around thirty seats, or will we see a radical realignment in electoral support along the leave/remain axis, with the Lib Dems reaping the rewards and winning over a hundred seats after being seen as the natural home for Remain voters.

The party’s clear ‘Revoke’ policy has come under some criticism over the last week for being undemocratic. Swinson’s gamble is that by adopting a clear unashamedly anti-Brexit, pro-EU position she can solidify the support of around 20 – 30 per cent of the electorate. If she can achieve this – and build up these votes in the right areas – she’ll be on course to achieve a breakthrough and it’s largely irrelevant that the remaining 70 per cent of the electorate strongly oppose this position and Brexiteers are crying foul.

Swinson’s conference speech on Tuesday afternoon was designed to clearly set out this message, but to go further and show that she is the natural, or indeed the only choice, for those who are relatively moderate in their politics and hold liberal, open and international values.

It’s not just the party’s messaging, but also their target seat strategy which reflects this approach. The party has conducted one of the most extensive polling and modelling exercises it has ever done in preparation for the expected snap election. It’s been reported that the party’s list of target seats has jumped from 40 to 80 off the back of this.

By going for broke with the new revoke message, the party looks sets to change the type of seats it targets to win. Where once the party might focus on West Country heartlands, its new targets appear largely in London and the South East, with a higher proportions of voters who supported Remain, are university educated, have higher than average incomes, and have an ‘open’ and ‘liberal’ mindset.

As was seen when Chuka Umunna recently announced that he would be standing in Cities of London and Westminster – a seat in which the Liberal Democrats do not have a track record of success – there will be plenty of surprise and scepticism in the media that the party thinks it can win these seats. Other constituencies like Wimbledon, Kensington and Putney are Labour and Conservative marginals, not typical Liberal Democrat target seats. Swinson’s speech was preceded by an appearance on the Conference stage by the candidate for Esher and Walton, the seat of Foreign Secretary and high profile Brexit supporter Dominic Raab. Being typical commuter-belt territory and voting 60 per cent Remain it fits this model perfectly, and with a majority of over 23,000 it shows the scale of the party’s ambition.

This strategy is ambitious. It might not pay off. And it is certainly a gamble. But the Liberal Democrat bet is that this election will be transformational and will see a major realignment with the electorate voting in ways they haven’t before. Arguably, with their new policy platform and the resources they are looking to invest, they are going for broke to achieve this. If it works the Liberal Democrats will be unrecognisable from their current form and will be a major force in the next parliament. If it doesn’t it will have been a missed opportunity.

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‘Labour-pains or Labour-gains?’

The weather in Brighton this week veered from the sublime to the ridiculous, mirroring remarkable swings in the mood and political backdrop to Labour’s annual get together. A week that looked set to be dominated by stories about bitter splits and internal battles was ultimately saved by external events in the form of yesterday’s remarkable Supreme Court judgement overturning prorogation.

The Conference started with a furious row over a motion to abolish the Deputy Leader position, intended as a punishment for Tom Watson’s perceived disloyalty to Corbyn’s leadership. No sooner was this swept under the carpet (with a pledge to review the post) than another row erupted over the Party’s position on Brexit. The leadership eventually got its way, Labour will head into the next election promising to put a negotiated leave deal to the people in a referendum with remain as the alternative but they won’t decide which way to campaign until a special conference after the deal is negotiated. This leaves the Party holding the tricky middle ground between the Conservatives as the Party of leave and the Lib Dems as the clear remain option.

But as the weather turned stormy on Monday afternoon through Tuesday morning, the focus shifted to domestic policy. The most significant development was the adoption of a bold, radical approach to climate change. The Party is now officially pledged to a 2030 target for net zero carbon and a huge £250bn war chest for green investments and technologies. This is linked explicitly to the Party’s industrial strategy and will be a centre piece of its ambitions to reshape the UK’s economy. There will have been some nervousness at the fact that the motion on this topic also included a pledge to nationalise the big 6 energy suppliers and ban fracking, though that does not mean these specific points will make it into the manifesto as immediate priorities of the leadership.

This move underlines the salience of the Extinction Rebellion movement and their climate crisis messaging. This agenda is now becoming more mainstream.

Elsewhere there was plenty of red meat for the Corbyn faithful. Proposals attacking private schools are a stark demonstration of just how mainstream the ideas of what was previously the radical fringe of the party have become and it is far from clear how this could be implemented in practice. Also prominent was a pledge to deliver free social care for all over 65s to be funded from general taxation. This is a core theme, the state raising more tax from the ‘top 5 per cent’ to fund a far greater range of free universal state support; social care, university tuition, childcare, adult skills and learning – the list is extensive and the overall cost uncertain.

Then, as the rows over Tom Watson and Brexit threatened to reignite and collide during his speech yesterday afternoon, the storm lifted and the sun began to shine just as the Supreme Court judgement landed and changed the course of the Conference. It immediately became the main topic of conversation and MPs began pulling out of fringe event speaking commitments and heading back to London. Corbyn’s speech was brought forward in place of Watson and what would have been a further embarrassing spectacle was conveniently sidestepped.

Corbyn’s speech itself hit all the right notes with the audience in the hall and painted a picture that will enrapture his core supporters and concern many in the business community. He had plenty of easy Boris bashing lines from the Supreme Court judgement to deploy and plenty of policy content to delight the audience in the hall. Ultimately though, it was his condemnation of the Prime Minister that dominated the news bulletins last night with much of the policy content flying slightly below the radar.

So how does Labour emerge from all this? Firstly, they have had a slightly lucky escape. The Supreme Court ruling served to mask what remain pretty serious splits within the Party over its direction on Brexit and support for the leadership. But the Party now has a very bold, eye catching domestic policy programme with climate change at its heart to take to the electorate whenever a general election is eventually called. The big question is whether their ambiguity on Brexit detracts from their core domestic offer of drastic change. In 2017 Corbyn was effective in steering what was expected to be a Brexit election towards domestic policy issues. His ability, or otherwise, to do so again will be a key to his chances of becoming the next Prime Minister.

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In the eye of the storm at Conservative Party Conference

It is fair to say that both of the main Parties were facing significant questions on unity and leadership heading into this conference season. The Conservatives in Manchester this week were far more successful in insulating the atmosphere of their annual get together from these challenges. It simply didn’t have the feel of a Party that has just suffered a record run of Commons defeats, has ejected 21 of its own MPs and with personal scandals dogging the Prime Minister at every turn.

The mood of delegates was cautiously upbeat, helped by a focussed set of policy announcements designed to appeal to voters. Chancellor Sajid Javid and Home Secretary Priti Patel used their speeches to unveil new spending commitments on buses, broadband, the living wage and criminal sentencing with other ministers dispatched to echo these points across the fringe circuit and the broadcast studios. Given the Prime Minister also talked about tax cuts in his speech there is now a potential criticism of the Party’s commitment to fiscal discipline, but it isn’t a point likely to land effectively (fairly or unfairly) as long as Jeremy Corbyn remains Labour leader.

However, you couldn’t completely ignore the broader challenging context. David Gauke and Dominic Grieve were both in attendance and speaking at fringe events. Gauke for example noted his peculiar situation as a member of the Conservative Party and an MP, but not a Conservative MP. They present a dilemma to the leadership; their steadfast opposition to no deal has not changed, but in all other respects they remain very much Conservatives to their core and aligned with much of the Prime Minister’s domestic agenda. Many within the Party would welcome a mechanism to bring them back into the fold.

On Brexit, the line is clear, if far from detailed: ‘Get it done’. The electoral strategy is also clear – seek to unite the leave vote and take the Labour Party on in its traditional heartlands as the true party of Brexit, while offering investment in public services and infrastructure and a strong position on law and order. How far they need to advance into Labour territory will depend on how well the Conservatives can fight a rear-guard action against the Liberal Democrats and the Brexit Party.

There are clearly some sceptics of this approach with some moderate conservatives concerned about the Party’s long term challenge with younger voters and concerned that the Brexit rhetoric could undermine its ability to remain a broad church. But Johnson has a vocal support base among local associations, the youth wing of the Party and still among many MPs who frequently cite the importance of clear leadership and having a clear position on Brexit.

The Prime Minister’s speech itself was a good summation of the conference as a whole. Upbeat, energetic, and optimistic regarding the ‘one nation’ future he hopes to build but without spelling out in any further detail how he intends to navigate the enormous immediate challenge of Brexit. The commitment to delivering Brexit by 31st October remains unchanged, begging a huge unanswered question over how and if the Government will comply with the Benn Act. No explanation has yet been forthcoming as to how they can avoid requesting an extension, despite numerous hints that they have a very cunning plan up their sleeve.

In reality, the most significant story of the day was the Government finally submitting detailed Brexit proposals to the European Commission and remaining member states. Their response will eclipse anything in today’s speech or that emerged from this week’s conference. An agreement to engage further on the details will be a major boost to the Prime Minister, whereas outright rejection will lead straight back to the Benn Act dilemma.

Attention now turns back to Westminster (and Brussels and Dublin when it comes to Brexit). We are still heading towards an election and the battle lines are becoming clearer. If a Brexit deal cannot be delivered, voters will be offered a trio of choices: remain with the Liberal Democrats; leave under a one nation branded Boris Johnson government; or a people’s vote under a Jeremy Corbyn administration that is more interested in fundamentally reforming capitalism.

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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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Who will make it to No.10? The runners and riders compared

As you’ll have seen, the WA team has developed a runners and riders guide to help you understand the different approaches of the candidates, and the likelihood of their campaigns being a success. We’ll be regularly updating this as the campaigns progress, policy platforms are developed, and the field narrows.

In the meantime, for those of you that can’t get enough of the leadership contest gossip and intrigue, here are some more details about the race so far, WA’s predictions for who’s likely to come out on top, and a timetable for what’s next….. Watch this space!

The list of candidates vying to replace Theresa May has now been finalised. The contest has already seen some early casualties, with James Cleverly and Kit Malthouse bowing out due to a lack of support, and Sam Gyimah joining them shortly after nominations closed.  The rules for selecting a new leader have been changed, with the 1922 Committee now requiring candidates to secure eight MP nominations, as opposed to the original two.

What is the state of play?

A clear favourite has emerged in the form of former Mayor of London and Foreign Secretary Boris Johnson. Memorably, his 2016 leadership campaign was scuppered by the perceived betrayal of former Vote Leave colleague Michael Gove, and compounded by wide distrust of him within the Parliamentary party. It may be going too far to say that this distrust has evaporated, but in the three years since his last attempt at securing the keys to No.10 the landscape has changed in Johnson’s favour. Gains by Corbyn’s Labour in 2017 and Farage’s Brexit Party in 2019 seem to have convinced swathes of Tory MPs that whatever their personal misgivings about Johnson (be it his frequent and often offensive gaffes, his less than stellar record as Foreign Secretary or his reputation as an often shameless self publicist), they see him as the party’s best bet to hang on to the reins of government. Given his standing with the membership, amongst whom he remains the most popular candidate by some distance, it’s perhaps unsurprising that he occupies pole position.

Aside from his commitment to leave the EU on 31st October, deal or no deal, Johnson has pledged to raise the 40 per cent tax rate from £50,000 to £80,000 – a move which is likely to be hugely popular amongst middle income, metropolitan Tory voters who deserted the party in 2017.

One of Johnson’s biggest challengers, Michael Gove, has had a weekend to forget. In a campaign which has been dominated by the past recreational drug use of the candidates, Gove’s use of cocaine while a journalist in the late 90s appears to have been the most damaging, not least as it happened at the same time as he penned an attack on middle class drug users. Having legislated to introduce a lifetime ban for teachers who had used cocaine whilst Education Secretary and implemented harsh sentences for drug-related crimes as Justice Secretary, the revelations, which have been revealed in an upcoming biography by journalist Owen Bennett, could prove very damaging. Despite a campaign launch littered with policy ideas, the early questions focused on Gove’s historic drug-use.

Foreign Secretary Jeremy Hunt also faced scrutiny over the weekend, largely due to his announcement that he was in favour of reducing the legal limit for abortion to 12 weeks (although he stressed this would not be government policy). Long seen as a political chameleon given his changing stance on Brexit, there remains concern among Conservatives that he is too much of a continuity candidate, with insufficient long-term vision to fend off the challenge from Corbyn and Farage. However, the endorsement of Remainer and leading One Nation Tory Amber Rudd is a boon to his chances of making the final two, as is the endorsement of Brexiteer Penny Mordaunt.

Another candidate to gain an influential backer over the weekend was Home Secretary Sajid Javid, with widely respected Scottish Conservative leader Ruth Davidson pledging her support. This will undoubtedly strengthen Javid’s standing with that wing of the party, as will his pledge to invest more in public spending – particularly education – by slowing the pace of debt reduction. His humble background and his being the first Muslim to hold one of the great offices of state mean there are many within the party who see him as the ideal story of the Conservatives for the 21st Century. A key turning point in the leadership contest will be which two of the three members of the Gove-Hunt-Javid axis anti-Boris MPs will coalesce around. In order to prevent Johnson advancing to the final round (from where he would be in a strong position to win outright), two of these three will need to make the final two to prevent a Johnson coronation.

The other candidates, while still harbouring slim hopes of becoming Prime Minister, are more likely to be aiming for a strong showing which paves the way for a future Cabinet position. Dominic Raab, whose team are believed to be responsible for the Gove story leak, has offered an extreme Brexit position – even threatening to prorogue Parliament to ensure a 31st October exit – but with arch-Brexiteers such as Steve Baker backing Johnson, this stance appears to be increasingly redundant.

Esther McVey has also flirted with this extreme Brexit position, and is seen by some as the kind of blue-collar Conservative that could shore up the vote in target seats in the North. However, despite her hard-line stance on foreign aid and sex education playing well with the party membership, concerns abound regarding her appeal to wider Tory voters.

Andrea Leadsom was the Brexiteer’s choice during the last leadership election in 2016, but unlike Johnson her support doesn’t seem to have broadened second time around. As with Raab, the support of Brexiteers for her former Cabinet colleague is likely to prove fatal.

Health secretary Matt Hancock is occupying a very different position and has already floated major policy proposals such as an insurance scheme for social care. Seen by many to lack the political weight for the top job, he could perhaps shift his attention to securing a plum Cabinet position in the new administration.

Rory Stewart is probably in the same boat as Hancock, although his campaign of talking to ordinary people in a variety of places around the country seems to have captured the imagination, not least of political sketch writers. While many may see it as a gimmick, and the expectation is he will drop out of the race well before the final two, his optimistic message may well land him a top job in Cabinet.

Mark Harper’s USP of having not served in the Cabinet is unlikely to win him much traction among Tory MPs, and his lack of profile surely rules him out.

What happens next?

The next stage is the first round of voting by MPs, which is scheduled to take place on Thursday 13th June. Candidates will need 17 nominations to clear this stage. A further vote will be held on Tuesday 18th June, with the BBC interviewing candidates still in the race. The final two candidates will be put before party members across the UK on 22nd June, with the result announced a month later – due to be the week of 22nd July.

Boris Johnson starts the race as clear favourite. The question is whether his opponents can manufacture a scenario where tactical voting prevents him making the final two, or whether any of them can supplant his favoured status among the Conservative membership. It looks to be a tall order, but as we know, stranger things have (and continue to) happened in UK politics.

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And they’re off – Tory leadership runners and riders

The results of the final round of voting amongst the Conservative parliamentary party are in, and the head-to-head contest will be between Boris Johnson and Jeremy Hunt. Amid accusations from Michael Gove’s supporters that Johnson’s team engaged in dirty tricks to force him out of the contest, Hunt beat Gove by just two votes to make the final two – 77-75. Johnson finished with 160 votes, more than twice that of Hunt. The leadership contest will now be decided by the 160,000 Conservative Party members, with the winner to be announced on 22 July. Hustings begin in Birmingham on Saturday 22 June and will continue over the next month in 15 additional locations. Hunt will face an uphill battle if he is to take the leadership, with Johnson being the firm favourite. However, Hunt has committed to giving Johnson ‘the fight of his life’; whether Hunt can find a knock-out blow remains to be seen. Take a look at our updated runners and riders guide to see where the final two candidates stand.

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When national politics becomes a local headache: Reviewing the 2019 local elections

Local elections often don’t capture the political imagination. Expectations are managed and met, spokespeople proclaim that there are nuanced or local factors at play to explain results, and then we return to the Westminster bubble.

While some of this may be true in the 2019 local elections, the timing of the election and its scale – some 8,000 councillors – means it will have a lasting impact on our councils, political parties and Westminster.

Big problems for the bigger parties?

Commentators expected Theresa May’s Conservative Party to take a beating in these local elections. Expert predictions had ranged anywhere from losing 400 to 800 councillors, with some party spokespeople suggesting it could be close to 1,000. It looks as if these fears will be met with Conservatives continuing to suffer heavy losses in district shires across England.

While council election losses are expected for a governing party, the scale of the results will be difficult to take. The Conservative Party has been incredibly resilient in local elections since joining government in 2010 and it has given them a guaranteed activist base in seats they hold or are targeting.

Governments must eventually succumb to political gravity, but this a further blow to Theresa May and her chances of remaining in Downing Street even in the short term. Many defeated councillors and council leaders have already highlighted the government’s failure to deliver Brexit as a reason for the scale of losses, claiming it meant voters could no longer trust the party. Others simply appeared exasperated and wanted Brexit to be over. The combination of the poor results and candidates blaming the government’s handling of Brexit will embolden May’s critics as she seeks to cut a deal with the Labour Party.

Amongst this set of results there was some good news for the Conservative Party. There is a trend of the party performing well in northern and midlands authorities that were heartlands for Labour. The councils it has performed well in are made up of small towns with socially conservative and pro-Brexit voters while Labour appeals to urban and graduate voters. So far it has gained in North East Lincolnshire, Walsall, North East Derbyshire and held key authorities bell weather like Swindon. This election confirmed the trend started in the 2017 local and general elections of strong support in new territory for the party, even at the expense of more liberal voters, and gives an indication of the future route to success for the Conservative Party that leadership candidates may consider. The road to a majority may be through seats like Mansfield, Ashfield and Newcastle Under Lyme over Bath and Chelmsford.

The Labour Party’s night has been more muted. Initial predictions had Jeremy Corbyn’s party gaining around 200 councillors. So far though the party has lost 100 seats and been humbled by an independent candidate in the Middlesbrough mayoral election. The party will point to an increased majority on Plymouth Council and taking control of Trafford and Amber Valley as examples of its incremental gains, but this is the second set of local elections in which the party has flattered to deceive.

While some Labour MPs have been quick to blame the party’s Brexit stance, suggesting that by trying to please everyone the leadership are pleasing no one, but there might be other electoral challenges for Labour. Lisa Nandy MP (Labour, Wigan) has highlighted the party continues to struggle in small towns while it is piling votes up in urban centres. There are only so many votes in cities and among graduates that the party can capitalise on before it reaches a ceiling, and what may worry Labour more is that it actively sought to tackle this problem in the 2019 cycle. The party had tried to connect its radical message to the neglect that many of these towns and communities felt, with all its party-political broadcasts focused on this. It has little to show for this work, with it going backwards in areas like Bolsover, Bolton and Derby suggesting this problem has become entrenched and will actively hamper the party as it seeks to form a majority.

A yellow wave?

The big winners of the 2019 election are undoubtedly the Liberal Democrats. What started as a positive evening by gaining Bath and North East Somerset grew to a great set of results, taking councils that few predicted like the Vale of White Horse, The Cotswolds, North Devon and even Chelmsford. As it stands currently, the party has gained over 500 councillors in the best set of local election result for the party ever. The Greens too have made considerable advances, making gains on a range of councils it previously had no representation on.

Some commentators credit Vince Cable’s party’s clear stance on Brexit, in stark contrast to Labour position. While this may have helped in some authorities such as remain supporting Bath and Winchester, it less effectively explains gains in North Devon and Chelmsford or the small numbers of councillors it has gained across local authorities. Perhaps more convincingly, the Liberal Democrats have re-established themselves, at least in the short term, as a vehicle for protest at local and national politics.

Say it quietly, but the Liberal Democrats brand might no longer be tainted by coalition. Many of the local authorities it has gained or made good progress in are the types of areas the party would look to target in a general election as it seeks to reassert itself as a force in British politics. Despite the strong performance in these local elections, Liberal Democrats and commentators alike must remember that these results only return the party to roughly where it was before the 2015 general election when it faced wipeout.

There is only so much we can read from one cycle of local elections. These results may be radically different in three weeks with two new parties seeking to make their mark. Yet one thing the 2019 local elections have taught us is that both Labour and the Conservatives have significant electoral challenges they must face up to if they are to win a majority in the next general election.

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