September 4th, 2022.
The UK has been “enjoying” the summer recess of Parliament. Usually, there is a welcome break from political stories, but this time we have had to endure the Conservative leadership campaign as it trundled through the shires and towns of Britain. The two candidates remaining, Liz Truss and Rishi Sunak, have looked as bored with the whole process as the rest of us.
Whoever wins the contest and takes over from Boris Johnson will be faced with major problems that need addressing from day one. The winner looks like being Liz Truss, as Rishi Sunak has had the unfortunate trait of appearing insufferably smug, and Liz Truss just bumbles along. The contestants were throwing the dirt at each other, with Sunak’s supporters suggesting that Truss is economically illiterate and lacking in numeracy skills and the ability to understand complicated issues.
Sunak has been portrayed as an unfeeling patrician, cut off from the realities of the hardships that will be endured by the average citizen during the forthcoming economic slump. He worked for Goldman Sachs and then was a partner in a hedge fund from which he is alleged to have made millions during the financial crash of 2008.
Truss, it may surprise people, as well as having a degree in PPE from Meron College, Oxford, is married to a chartered accountant and is a qualified management accountant. So whilst Sunik may seem to be a high-flying, successful investment banker, used to matters of high finance, Truss has actually had real-life exposure to working in the world of small companies, with staff and normal business pressures. As such she would appear to be in a better position to understand the micro impact of economic policies introduced to ease the coming financial crisis and to give the staff some protection. She will also understand the problems that small firms will face as their very survival in the near future is threatened.
It is anticipated that the increased power prices if left to the free market would make 70% of pubs and restaurants unviable.
It is these contrasts between the two candidates that will probably see Truss elected with a huge majority.
Whoever wins will be faced with severe economic issues. Inflation is forecast to reach 18% by January 2023 and left alone reach 22% shortly after. Sterling is coming under pressure and the pound looks as though it will take a hammering on the forex markets (I wonder what Sunak’s mates in the investment banking and hedge fund industries will do when this happens; they have probably already taken their positions).
The huge rise in forecast industrial power rates is because they don’t have the domestic, regulated, price cap applying to them. Where domestic power price increases are restricted to +50%ish per stage, they will probably achieve 200% increases by next year, taking some pensioners’ power bills up to as much as 50% of their income. It is no exaggeration to say that deaths will result from their inability to heat their homes. The UK’s debt is already 95% of GDP and the government is going to have to face some extremely costly decisions.
If, as expected, Truss wins tomorrow, she has already got a cabinet reshuffle planned and will bring in an emergency budget.
With the likely cost of servicing government debt increasing dramatically because of forex, interest rate and credit rating issues the government’s options are becoming limited and expensive.
Matters aren’t helped by the continuing strikes: railway workers, rubbish collectors in Scotland, barristers (yes barristers are on strike, clogging up the legal system). Health workers are getting restless; the government is in for a torrid time.
There are increasing actions by environmental protestors, and when Truss announces, as expected, that she will discard green taxes and allow the resurrection of fracking exploration in the UK she will come under pressure from the green lobby. Added to this, the police can’t cope with burglaries. They have a 75% conviction rate, increasing violence on the streets and general lawlessness.
The immigration influx gets worse with 45% of immigrants now being Albanian, coming from/via criminal gangs in Albania; many of them are working in clubs and rackets.
Rumours are abounding that the Queen is in ill health with the new Prime Minister having to fly up to Balmoral on Tuesday to be appointed. Johnson will fly up first with the new PM following shortly.
The new PM will have their hands full from the start and it will be interesting to watch as events unfold in the next few days.