POLITICAL & COMMERCIAL INTELLIGENCE

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


No longer servants, no longer civil (pt78)

Last week’s Budget has done nothing to calm the underlying (and worsening) tensions between Ministers and the Civil Service. Mandarins’ morale has been low for some time and, along with their willingness to support Ministers, is likely to fall further. #Budget16 hit Civil Servants’ pensions and put them front and centre of the EU referendum’s political bun fight, too, with the Treasury’s upcoming list of the benefits to ‘Remain’ pitched as a key part of the campaign. Given the state of the Labour party, UK politics effectively has a one-party state today – and in all one-party states, the Government is more at risk from opponents inside, not outside.

Why Budget headlines reverse by the weekend

Those of you at our post-Budget reception in Parliament last Thursday heard GUIDE’s Chief Exec, Greig Baker, citing the golden rule of Budgets: the tone of the headlines the next day is always reversed by the weekend. This year’s Budget conformed perfectly, with commentators’ complaints of an uneventful and reserved statement being blown out of the water by a series of explosive political revelations, topped off by IDS’s resignation.

The ‘golden rule’ holds because Chancellors either want to make a boring Budget exciting, or a dull one interesting. Either way, they spin it as much as they can, which only serves to alienate the colleagues and journalists made to feel hoodwinked and manipulated – and who then exact their revenge for weeks, long after the first morning’s headlines have been forgotten. The only surprise in this ritual is that otherwise politically astute Chancellors keep making the same mistake.

A very political Budget

Here’s our summary of what was a thoroughly political Budget statement yesterday…

1. There were a few gimmicks… “Investing £1.5m in child prosthetics” sounds good but is small beer. The Chancellor has a budget of £780bn, so boasting about £1.5m is a bit like a man who earns £50k telling his girlfriend he’s bought her a ring for 1/100th of a penny.

2. George Osborne thinks Jeremy Corbyn will be in post in 2020 and he is spiking Labour’s current message early and often.

3. The Treasury’s assessment of EU membership will be timed for effect, which could be risky. It could be too late to try something else and it will rely on public trust.

4. The debt and the deficit remain, with more cuts to come. These will be found in devolved funds and, for the most part, will be delivered by local politicians, not MPs.

5. Firms selling telecoms, support services and transport infrastructure to the public sector should do well, but they will have to deliver social policies to win big contracts.

6. The Government will try to build its way out of a downturn – proving that a politician is (literally) someone who, when they see there is a light at the end of the tunnel, will order more tunnel…

If you have specific questions about the Budget, please feel free to contact us.

The choice facing Labour MPs at Budget16

By GUIDE's Chief Executive, Greig Baker

Some people accuse Conservatives of wanting power at any cost. Having worked for the party during some of its darker days in Opposition, I can assure you that is not the case. However, most Tory MPs do understand you have to be in power to wield it.

When the Chancellor sits down after delivering his Budget, ambitious Labour MPs will have three choices if they want to wrestle the keys to Number 10 away from Cameron’s successor. First, they could drink the kool aid and hope against hope that Jeremy Corbyn has stumbled upon a new way of winning elections. More realistically, they will have to choose between options two and three – quietly rebelling or carefully splitting.

The rebellion option will be embodied by Rachel Reeves, Dan Jarvis, et al, who will set out their own response to the Budget, coming from a dramatically different position to Labour’s frontbench. In contrast, the splitting option has already been demonstrated by David Lammy and Andrew Adonis, who have been willing to give Corbyn a few more days’ bad headlines in return for the promise of actually getting stuff done. Given that Andrew Adonis’s recommendations from the National Infrastructure Commission will get great big lumps of real hard cash thrown behind them in the Budget, the understated rebels are going to have to do something special to persuade colleagues that they can offer a viable alternative.

Either way, the reaction to the statement will give us a clear sense of which Labour MPs know that you don’t actually have to be a Tory to want to be in Government.

The National Infrastructure Commission has real power… for now

The National Infrastructure Commission will be more powerful over the next three years than any time after that. This is for three reasons: first, the Chancellor must show that Labour politicians who join the Government’s “big tent”, like Andrew Adonis, achieve real influence by switching allegiance; second, the Treasury will use the “independence” of the NIC to justify spending decisions in a tough financial climate; and third, the NIC’s priorities were set in agreement with the current Government, so there will never be more confluence of interest in achieving those priorities than there is now.

Politics and pensions – a warning from Europe

George Osborne might not spend a lot of time following Germany’s local politics, but perhaps he should. Local authorities in Germany threatened to withhold municipal services from energy firm RWE, because the company said it would scrap its dividend this year, which was not a popular move among the public sector pension funds that rely on those dividend payments. This week’s UK Budget may include a boost for joint local government pension funds in the UK, which will be under pressure to buy shares that pay out well enough to meet the increasing demands of councils’ huge pension obligations. As those funds face growing pressure from councillors and, inevitably, MPs to prop up public pensions, firms selling shares to public sector investors will be exposed to a new and under-appreciated political and commercial risk.

Budget hints from the North

TfN’s newly published economic report calls for increased investment in rail freight capacity, with connectivity around industrial ports given special billing. Most of that investment would need to come from the private-sector, but the Chancellor’s personal and political commitment to all things Northern Powerhouse means HMT is reviewing what it can do to facilitate the cash.

New look GUIDE

Welcome to our updated site, where we are going to share commercially relevant political news throughout each day.

Thanks to the friends and colleagues who offered suggestions on design, accessibility and content – hopefully the site is now easier to use on every device.

For now, thanks for visiting us and we hope you find the site useful over the coming weeks.

Government’s Apprenticeships programme

As the Apprenticeship Levy looms large, central Government has confirmed its intention to have a controlling stake in the “employer led” Institute for Apprenticeships, with BIS Director General Rachel Sandby-Thomas taking on the role of “Shadow CEO”.

The Civil Service’s close attention comes as no surprise and is a timely reminder that this Government programme – with its significant financial implications for businesses facing the Apprenticeship Levy – is designed to meet a political, rather than corporate, objective.

Matt Hancock sets out tech investment plans

During a UKTI-sponsored visit to Israel, Cabinet Office Minister Matt Hancock has announced HMG will work with Israeli experts to enhance cyber physical security tools in areas affecting industrial control systems, the internet of things and driverless cars. Hancock also cites the Israeli model of cyber innovation centres as one that HMG intends to copy.

The announcements have implications for IT companies in the UK, including more opportunities to win sensitive public sector IT contracts for firms with close ties to UK academic institutions and a clear steer on which cyber security issues are being prioritised by HMG in light of their knock-on effects for major national infrastructure investments – especially in energy and transport.

 


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