We help companies affected by political change. To access our political and commercial intelligence service, email GUIDE’s Chief Executive on greig@theguideconsultancy.com


Predicting politics is a bit like going ten-pin bowling with your children – if you put the barriers up, the ball ricochets around a lot and looks chaotic, but it’s possible to work out where things will end up when you know what the constraints are.

We accurately predicted how the Brexit talks would end more than 18 months ago. From autumn 2019, we consistently said to clients that the negotiations had a 60% chance of a Free Trade Agreement being struck in 2020 and ratified in 2021, with additional talks carrying on in other areas (for transparency, we also had a 20% chance of a comprehensive FTA being struck and a 20% chance of the talks ending without any FTA).

Our predictions didn’t change despite the ups and downs of the talks, and we gave clients foresight of what would happen – just like we do with domestic politics, too.

It looks like we were alone in getting Brexit spot on but we are happy to share our analysis of any issue. Please get in touch if you want to know more.


Senior jobs in politics are a mixture of pure grind and moments of exaltation or defeat. The people serving in this administration have faced a lot of the former, with 18hr days, crisis conditions and appalling policy options persisting for most of this year. At the same time, a lot of the latter, which are often the fun part of top-flight politics, frankly (the trips to Camp David, rallies with adoring supporters, high drama international summits, and so on) are all on hold. It would be striking if this was not affecting the way decisions are being made.


The ice edges of Norwegian glaciers that have held their secrets for millennia are being slowly forced back by searing temperatures. As the white stuff disappears, archaeologists are being presented with Viking walking sticks, weapons, and even human remains that haven’t seen daylight in generations. While the summer sunshine is also beating down on our own villages and towns, it is the COVID-inspired lockdown, rather than the unseasonal weather, that is lifting the veil on some of our Local Authorities’ age-old secrets. Unfortunately, the discoveries are often just as grisly as anything you might find in a Norseman’s fjord.

Worse, our Councils’ artefacts have little to do with some ancient Danegeld and everything to do with the pound in your pocket right now. Because the national lockdown has revealed the flaws in ludicrously ambitious gambles taken by many Councils that decided to become speculative property investors, placing bets on your behalf with debt doled out by the ‘Public Works Loan Board’, or PWLB.

The PWLB is different to most lenders. For a start, it has, until recently, been formally led by twelve Commissioners on behalf of the Crown, using powers dating back to 1875. More importantly, it also takes a rather unusual approach to approving loans to Councils asking to take out debt on your behalf: there is no assessment of a Council’s ability to repay; no investigation into how the money will be used; and no paper trail, because all applications have to be made by phone with funds normally issued within two days. To further sweeten the deal, the PWLB lets Councils take out large loans at cheaper-than-market rates – normally around 1.91 per cent for a 5 year loan and around 2.45 per cent for a 45 year loan.

Unsurprisingly, Councils have been rushing headlong into these new debt deals. It is not uncommon for the PWLB to issue more than 1,000 loans a year, taking the outstanding principal owed by Councils to more than £85.7 billion at the last count. Now, the cost of COVID might have taken some of the shock out of such figures, but when you get up around the £90 billion figure, then pretty soon you’re talking real money (actually, about £1,400 of new debt for every individual woman, man and child in the country).

That debt is not evenly spread between Councils, either, since a few have chosen to make their own mountains out of it. A handful of Local Authorities with existing extensive PWLB debt are the most likely to apply for additional loans – partly because of their familiarity with the system and partly because of their growing reliance upon it. The National Audit Office reports that 80 per cent of the cumulative PWLB spending used to buy commercial property is done by only 14 per cent of Local Authorities.

And that’s where the real rub lies. The PWLB was originally established to fund essential capital projects specific to local areas. But some of our more ‘inventive’ Councils have been using these loans to gamble on commercial property purchases (incredibly, often outside their local patch), hoping that the rent from private tenants would cover overspending elsewhere. The most active of these Councils have really been getting stuck in, with a handful ramping up their median gross external borrowing levels from three per cent of their spending power in 2015-16 to 756 per cent of their spending power in 2018-19. To put that in practical terms, one Council with gross annual income of about £70 million took on £380 million of debt to fund just one deal – effectively making them major property speculators that only dabble in public services.

There are three big problems with all of this.

First, most voters don’t know it is happening – and they probably wouldn’t appreciate their Council taking on risky debts to drive up local property prices if they did. The NAO warns there is “insufficient transparency and reporting to elected members or the public; limited internal challenge to decision making; [and] reduced governance to enable faster decision-making”. That can’t be good.

Second, the Council Officers designing these debt-funded speculations, and the Councillors signing them off, rarely have any particular idea what they’re getting into. Using vast amounts of debt to buy commercial property on the high street – when online shopping was already changing the business case for it, even before visitors were locked down and locked out – must rank up there with Gordon selling the gold as an astute investment decision. They have been betting on red when the roulette ball has been comfortably settled on black for some time.

And third, like a racetrack loser hoping for one last chance to get back level, as things go belly up, profligate Councils will claim Whitehall did not give them enough money in the first place and, worse, turn to taxpayers across the country to bail them out.

Thankfully, the new Government is starting to get a handle on things and introduce some accountability to what has been a worryingly opaque system. As of this year, the Treasury has assumed effective control of the PWLB and HMG is trying to ensure investments focus on housing, infrastructure, and front-line services. It has also warned Councils that they should stop making “speculative commercial investments” before they come a cropper.

To be fair, some Councils are also looking at alternative sources of cash, such as issuing debt themselves through a new Municipal Bonds Agency – though this obviously still carries significant risk for the taxpaying public.

In addition, I’d like to see a cultural change. If Councils feel they really have to borrow to boost their area, they could use that money to attract and retain private investment – for example, by continuing the suspension of Business Rates or resisting the temptation to charge for the parking that the public has already paid for (twice). Local Authorities could even remove their own incentive to fund speculation with debt by simply spending less.

In my day job, I run a political intelligence agency and we try to help clients see what’s coming around the corner. For four years, we have been writing briefings about what would happen when the next downturn revealed Councils’ use of PWLB debt and the knock-on effect on Local Authorities’ ability to fund local amenities, spend (and spend effectively) on infrastructure projects, and create a positive environment for local businesses to flourish and genuinely create wealth for local communities. Sadly, that downturn has now come on the heels of a virus.

COVID-19, like some contagious version of melting Scandinavian ice, is going to reveal a lot about local public finances that people would have preferred stayed hidden. It’s worth remembering that state employees, as admirable as some are, rarely have special investment insights. In fact, they are just ordinary people, perhaps even your neighbours and, newly denuded by lockdown, some of their choices about what to do with your money are looking pretty silly.

As archaeologists root around in the Norwegian sludge, I’m reminded of the legend that the Viking god Odin gave an eye in return for knowledge. Now we know how some Councils spend our money, I fear it will cost us an arm and a leg.

09JUN20: Lies, damn lies, and economic statistics

You would be hard-pressed to find two institutions more important to the EU economy than the Commission and the European Central Bank. However, their views on what COVID-19 will do to Member States’ financial standing could hardly be more different. While the ECB predicts a -15% shrinkage of the eurozone economy as a result of the virus, the Commission makes a much rosier (though still unprecedented) prediction of -7.7%

It’s said that if you lay every economists in the world end-to-end, they still wouldn’t reach a conclusion – but this is not just an example of academics splitting hairs. The Commission’s forecasts consistently boost the economic prospects of EU Member States (and especially the eurozone) more than reality warrants. This could cause some real headaches. For example, in the Brexit talks, politicians increasingly believe the Commission is basing negotiating priorities on what it wished the EU economy looks like, rather than what it actually does. 

If the Commission becomes the linchpin for mutualised EU debt this problem will only get worse – and the markets will be a lot less forgiving than officials and journalists have been to date.



EU27 leaders have three incentives to extend the Brexit talks: first and most obviously, to free up capacity as political efforts focus on the COVID-19 crisis; second, delaying the break-off would allow greater access to UK funds when the EU27 want to pay for rebuilding the bloc's economy in 2021; and third, ongoing regulatory alignment would give the EU27 some control over how HMG positions the UK economy to compete with the bloc in what could be a pretty barren post-corona setting.

While the media consensus is that an extension to talks is inevitable, there are arguments for keeping to the current schedule. For example, a delay is just that - it puts off the reckoning rather than removes the need for it, pushing any Brexit-related disruption closer to the next UK General Election. More immediately, as any mechanic will tell you, it's easier to fix a car when it's standing still - so while the economy is in aspic for corona there could be a unique opportunity to reset the terms of trade.  


HMG is making one enormous bet that public debt can be used to generate a financial return, partly by sparking private investment and partly by turning the UK into the world’s science lab. With the Tories at 50% in the polls, they might well be in office long enough to cash in on that gamble. But there’s an irony, too: at the same time as it goes to the debt markets, HMG is reining in Local Authorities’ ability to fund commercial investments with borrowing, for fear of losses exceeding returns.


The next set of Holyrood elections will be a referendum on a referendum – if the SNP has a very strong showing, it’s going to be tricky for HMG to resist calls to test Scotland’s appetite for independence again. This means that we are firmly in the pre-match build-up now… and without COVID-19, the Salmond trial would likely be front page news across the UK.


HMG has little choice but to take its new approach to EU talks if it wants trade agreements with other partners. To strike new trade deals beyond the EU, HMG must manage its own affairs – if the EU had ongoing legal control over HMG, any prospective UK deals with third countries would be impossible because an external body could alter the UK’s ability to comply at any stage.


HMG is due to make fully independent representations at the WTO from 1st January 2021. Ahead of that, it has asked every country in the WTO to approve its General Agreement on Trade in Services (GATS) schedule – and every country duly has, bar one. A Freedom of Information request confirms that Russia has refused to sign off the UK’s schedule, saying it “looks forward to entering into consultations with the UK in order to reach a satisfactory resolution to this matter”. Given that Russia may be equally content with causing disruption or gaining concessions, there are strong incentives to quickly remove this spanner from the works.


For a while, we've been telling clients about a storm coming for Local Authority funding, as Councillors sign off increasingly ambitious and speculative commercial property deals to boost their spending power. The NAO has just published a report that says some Councils have seen “median gross external borrowing levels grow from 3% to 756% of their spending power from 2015-16 to 2018-19”. This is likely to become a big story soon.


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