Our goal: "To explain and inform Government"

GUIDE delivers political and market intelligence for corporate clients. To find out more, email Chief Executive Greig Baker on greig@theguideconsultancy.com 


POLITICS: The GUIDE to the week, 2nd December

Three things from yesterday’s by-election in Richmond may be overlooked: first, in an age of “anti-politics”, parties still matter as even nominal independents like Goldsmith struggle; second, although the Conservative “A-list” helped change the face of the party, it has had a neutral effect (at best) on party management, with some of its alumni like Goldsmith, Mensch, Soubry and Warsi giving the leadership headaches (though other A-listers still serve as loyal Ministers); and third, it shows Brexit does have electoral pull – if anything, that may be of more concern to MPs who do not hail from one of the 35% of constituencies that voted Remain.

Here’s our take on the rest of the week…

Having your panettone and eating it

UK politics will quickly feel much less parochial again if Renzi loses his Italian referendum this weekend. The result could precede a bank run in Italy, pressure on German finances, and a continental referendum on membership of the single currency. All of this would have a much bigger impact on Brexit than yesterday’s vote in London.

Taylor-made

The Taylor Review into working practices will “feed into” the Industrial Strategy over the coming months and the Government’s consultation on rules for companies will still be taking evidence well into next year. These timings are a helpful reminder that the Industrial Strategy is actually an iterative process that will adapt tactics to circumstances.

Chain reaction

Energy Minister Baroness Neville Rolfe said this week that developers involved with new nuclear projects will have to write “Supply Chain Plans” that demonstrate a commitment to UK companies and skills. The approach could mitigate the restrictions of EU state aid rules and support the Government’s semi-informal goal of “social policy by procurement”. We expect to see more of this kind of requirement across different industries.

POLITICS: Be careful what you wish for

MPs often bemoan the lack of “productivity” in the UK, but it could be a good thing while we are working out the terms of Brexit.

Productivity is the amount of work done divided between the number of workers doing it. In other words, if productivity improves but the economy as a whole doesn’t grow, that means the same output by fewer jobs.

With national economic growth low and the details of Brexit yet to be confirmed, MPs should be more comfortable with our low productivity. For MPs on the right, it avoids the risk of the long dole queues we saw in the 1980s. For MPs on the left, low productivity is the most efficient way of redistributing wealth and creating jobs going.

POLITICS: What the Industrial Strategy is and is not

There’s a common misunderstanding about the Government’s industrial strategy. It’s not a throwback to the 1970s and it’s not about picking winners. Instead, it’s closely tied to Brexit, in three ways.

First, all the time we’re still a member of the EU, the Government can’t pick winners, even if it wanted to, because of state aid rules. Second, the Industrial Strategy is about preparing the economy for Brexit through legal tax breaks and Government incentives that can also be ramped up the day we leave. And third, those benefits will be designed for areas with lots of marginal seats, to help protect the Government against the wave of electoral populism that’s crashing over traditional parties around the world.

University towns and towns close to the M1 corridor are set to gain. So are industries that can invest in tax-efficient R&D for tech innovations in line with upcoming policy changes – like driverless cars, personalised medicines, and fintech. The Government will publish its Industrial Strategy Green Paper shortly and then a White Paper in 2017.

POLITICS: BUSINESS CAN PROFIT FROM ROLLERCOASTER WESTMINSTER

The following article is based on a speech given by Greig Baker in Westminster on 16th November.

Politics might look like a wild rollercoaster at the moment, but for many businesses it can actually be predictable, practical, and even profitable.

At the broadest national level, fewer people are making more of the important decisions in Whitehall, which means political coordination is easier (and easier to predict) as long as capacity issues are addressed. Government focus is, inevitably, on Brexit – the strategy for which is closely aligned with the Industrial Strategy.

Industrial policy will be designed in part to help those who are ‘just managing’, but also to encourage foreign investment in the UK and do everything within EU state aid rules to keep existing companies here before Brexit actually happens. The criteria of geography, population and risk will help determine individual policy decisions.

So-called “mid-range” political issues like the National Living Wage, the Apprenticeship Levy and Social Value Procurement will also affect businesses directly – and to varying degrees by sector and location. The new National Cyber Security Strategy has big implications for business, too and has been discussed in more detail elsewhere on this blog.

Together with political relationships at the local level (affecting things like planning and contract decisions), these factors demonstrate how politics and business are intertwined. But if you can see what’s coming round the corner, the rollercoaster of politics can be a lot less scary.

COMMENT: In praise of Sarah Champion and Sir Alan Duncan

This week, Sarah Champion MP told the House of Commons that some African nations want to stop the UN appointing a human rights watchdog for LGBT people. Champion’s concerns were rightly echoed by Members of all parties and, on behalf of the Government, Sir Alan Duncan made clear that “the UK’s entire diplomatic network” has been put to work to defend the UN’s appointment and LGBT people around the world.

It is galling that we still have to make the case for all people to live free from the fear of violent discrimination – but we do. Sarah Champion’s speech in Parliament and the Government’s response were not some form of “virtue signalling”, but a necessary affirmation that we will do everything we can to protect people’s rights.

History reassures us that prejudice against LGBT people is more unusual than LGBT people themselves. Many great civilisations of the past have been happily led by openly LGBT people like Greece’s Alexander the Great, Rome’s Hadrian, and the Azande warriors…of African Congo.

We can be optimistic that the wheel will turn again and today’s prejudices will be recognised as a sad anomaly – but it will take people like Sarah Champion and Sir Alan to get us there.

POLITICS: Apprenticeship apprehension

The DfE told the Lords that the Apprenticeship Levy “may cause a small initial fall in demand” for apprentices among SMEs concerned about training costs. The Government has announced new measures to ameliorate things, but there is still some confusion about the system. We have been following this issue closely, so if you would like guidance please get in touch.

Will the Government win its EU appeal?

Political commentators, some of whom are still wearing the blinkers that meant they missed Brexit, dismiss the Government’s appeal to the Supreme Court to trigger Article 50. The Government’s decision to appeal rests on three things: first, there is precedent for Royal Prerogative giving laws force in the UK (not least in enacting decisions by Brussels); second, Parliament already has the means of forcing a vote on Article 50 (Gina Miller could have spent a fraction of her court costs on lobbying Labour to force an Opposition Day vote instead); and third, Brexiteers in Whitehall will argue that MPs have no more power to decide the date of Article 50 after the referendum than they do to choose Ministers to fill posts after a General Election. Success in the Supreme Court would make politics so much easier for the Government that they will push their appeal hard – and defeat is not inevitable.

Government hints at state intervention, the Industrial Strategy, and Brexit

Media coverage of the Government’s National Cyber Security Strategy focused on the Russian cyber security threat trailed by MI5 over the weekend, stoking fears of a new “Code War” if not actually a Cold War. However, the new document says a lot about issues close to home, too:

The Chancellor has staked his personal reputation on the cyber strategy. The 2011 iteration was led by the Cabinet Office but Hammond has launched this one himself. As the strategy requires cross-Government action, it will be a good measure of the Chancellor’s power in Whitehall – and, in turn, over Brexit.

The new cyber plans point to the Government’s Industrial Strategy. Key themes like using public funding to realise the commercial potential of academic research and targeted regulation to promote key sectors will run through the Autumn Statement and be a key part of the Industrial Strategy. If the Cyber Strategy is successful, it will also be a refreshing and admirable example of ‘joined-up Government’, as it will require deep cooperation between Departments that don’t normally see eye-to-eye.

The Government is willing to intervene in the private sector. The Cyber Strategy hints at vast swathes of new regulations on business, including forcing big companies to be ‘secure by default’, introducing a new cyber security rating system, and Government testing of suppliers’ cyber security measures. The Government thinks there is a competitive advantage in the UK being more cyber secure than any other market, so it explicitly says regulation here will be “as high as, or higher than, comparative advanced economies”. Public bodies, companies and even charities are all in the Government’s sights.

Private companies will be blamed when things go wrong. The new strategy paper makes clear that “businesses must understand that if they are the victim of a cyber attack, they are liable for the consequences”. The Government says it will take over a supplier’s functions if they are not cyber secure and pose a threat to national security (including risks to the delivery of public services). We think early engagement with the National Cyber Security Centre will be essential for companies looking to mitigate this risk – businesses will have to show they have at least tried to be cyber secure if they want to avoid the wrath of Whitehall.

The full National Cyber Security Strategy document is here: http://bit.ly/2fqrgca

Clients pay for the Brexit hangover

When I worked in the intelligence community, we were warned that military planners often use briefings like a drunk uses a lamppost – for support rather than illumination. Now, I am often struck by the number of organisations who are still working with political advisers who have been drowning their ideological sorrows since the referendum. Advisers who failed to see Brexit coming and who still seem to think it can be undone or pretended away might offer a shoulder to cry on, but astute political planners don’t need sympathy, they need cold hard insights and accurate predictions.

In the same way that we won business when the Conservatives took office because we understand Tory politics, we also got new work because we understand the Leave campaign – and how the Government can implement the result. The “Nissan deal”, for example, is likely to strengthen the Government’s negotiating hand by showing other EU countries it is willing to go a long way to keep businesses here. The EU now knows the UK won’t fold at the first signs of economic pressure and we are likely to get a better deal as a result.

Investment decisions are often complicated by political issues, but those companies that turn to inebriated advisers still mourning the Remain campaign are only making life harder for themselves. Clients need clear advice – and clearer heads – from their political consultants, because we all make the best choices when we are sober.

Clients paying for the Brexit hangover

When I worked in the intelligence community, we were warned that military planners often use briefings like a drunk uses a lamppost – for support rather than illumination. Now, I am often struck by the number of organisations who are still working with political advisers who have been drowning their ideological sorrows since the referendum. Advisers who failed to see Brexit coming and who still seem to think it can be undone or pretended away might offer a shoulder to cry on, but astute political planners don’t need sympathy, they need cold hard insights and accurate predictions.

In the same way that we won business when the Conservatives took office because we understand Tory politics, we also got new work because we understand the Leave campaign – and how the Government can implement the result. The “Nissan deal”, for example, is likely to strengthen the Government’s negotiating hand by showing other EU countries it is willing to go a long way to keep businesses here. The EU now knows the UK won’t fold at the first signs of economic pressure and we are likely to get a better deal as a result.

Investment decisions are often complicated by political issues, but those companies that turn to inebriated advisers still mourning the Remain campaign are only making life harder for themselves. Clients need clear advice – and clearer heads – from their political consultants, because we all make the best choices when we are sober.


Events

Please email us for details about upcoming events

Receive exclusive reports and news


GUIDE on Twitter