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| | Hi Friend,
It was Liam Byrne Chief Secretary for the outgoing Labour government in 2019, who penned the note for his successor to say "I'm afraid there is no money". Byrne came to regret the comment, which he described as stupid and offensive. Offensive to the millions of people who had made sacrifices to achieve the budget cuts. Stupid because it became easy for Labour opponents to bash the economic mess inherited.
Perhaps the comment was not quite as offensive as that made by the Tory Chancellor Reggie Maudling, who bounced down the steps of the Treasury in 1964 to tell Jim Callaghan, "Sorry to leave it in such a mess, old cock."
Jeremy Hunt has wasted no time in advising there is no money for tax cuts in the forthcoming Autumn statement. Perhaps little chance of tax cuts in the Spring either, which will be the last budget before the 2024 election.
The IFS have made it quite clear, the economy is in a bit of a mess "Old Cock". "We are in a horrible fiscal bind as low growth and high debt interest payments mean there is no room for manoeuvre."
"The UK economy remains stuck between weak growth on the one hand and the risk of persistently high inflation on the other. An ill-timed fiscal loosening, such as an unfunded package of pre-election tax cuts might give a short-term economic sugar rush, but could prove unsustainable. This could lead to a protracted recession as interest rates rise even further to bring inflation back under control.
The state of the public finances also undermines the case for net tax cuts any time soon. The Chancellor is in a terrible bind, as will be whoever is Chancellor after the general election. Poor growth and very high spending on debt interest over the next few years mean that the national debt is stuck at close to 100% of national income.
In the first six months of the year, Public Sector Borrowing was £81.7 billion. That's £15.3 billion up on prior year, an increase of 23%. In the full year, 2022/23, borrowing was £128.3 billion. Pro rata the government is set to borrow over £150 billion this year [in line with OBR forecasts]. Total debt has risen to £2.6 trillion, 97.8% of GDP.
Political pressure are rising, especially following the bye election results this month. Jeremy Hunt may well caution, "I'm afraid there is no money." The response may well be, "Well just print some more then anyway. We can sort the mess out later ...
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| | I've Got Legacy Issues ...
The Tories received a bit of a shock this week. Bye election results in Tamworth and Mid Bedforshire delivered wins for Labour with significant reversals of Conservative majorities.
Tamworth Labour tweeted that it was an “absolutely sensational
result”. The Tories starting the night with a majority of almost
20,000 but Labour won with a majority of 1,316. Election expert Sir Jon Curtice said that “no government has hitherto
lost to the principal opposition party in a by-election a seat as safe
as Tamworth.”
Tory Party Chairman Greg Hands said he will not resign despite the losses. "The swing to Labour was clearly disappointing but bye elections are not a good indicator of how the general election will turn out."
"People think Rishi is doing a good job, He is the best leader to take the country forward. We are committed to halving inflation, restoring growth, cutting debt, reducing hospital waiting list and stopping the boats. We are making the right decisions on transport infrastructure, smoking and mathematics." OK don't mention prison overcrowding and popup cells in courtyards.
Greg Hands sought to deflect blame away from Rishi Sunak, saying the defeats, which came on the back of two by-election losses in July, were the result of "legacy issues" that pre-dated Mr Sunak's time in office.
The party's defeats have been criticised by its own MPs, with Dame Andrea Jenkyns saying the Tories needed to make "far-reaching major changes now".
David Frost, the UK's former chief Brexit negotiator, said the results were "extremely bad for my party". I don't think it helps to suggest otherwise, as some party figures have done this morning. The current national polls are dreadful for us but these results are even worse. These results show that the national polls are broadly correct and that a strategy of denial is unlikely to work."
George Osborne said Sunak and chancellor, Jeremy Hunt, have restored a rational, serious approach to politics but he and other Cameroons were offended when Sunak tried to present himself as the radical-change candidate after 13 years of a failed Tory government.
I don't think he's really going to be able to pull that off, Osborne said. You can't say, "All that went before me was pointless or useless, because people will say: Well you were part of that party, you are pointless and useless."
It''s a fair point. The bye elections occurred when Chris Pincher resigned for groping, Nadine Dorries resigned for sulking. There was no swing to Labour. Labour picked up 800 votes in Tamworth but lost 150 votes in Mid Bedfordshire.
The Tories lost 16,000 votes in Bedforshire and 20,000 votes in Tamworth. Tory voters stayed at home. Legacy issues, thirteen years in office, pointless and useless. That's a lot of electoral baggage ... and a clear message to Number Ten ...
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| That's all for last week! Have a great week ahead ...
John
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| To understand the markets, you have to understand the economics ...
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© 2023 John Ashcroft, Economics, Strategy and Financial Markets, experience worth sharing.
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