UK Prime Minister

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Can the Tories Retain Truss t?

No matter how much they talk about global economic forces or try to present the energy cost
intervention as a sign of how they are focused on the needs of working people, the current
government has lost credibility with both the British electorate and lenders.

Last Friday the Prime Minister and her Chancellor launched a “special economic operation”,
which was to lead a national charge to growth, securing this within sufficient time for it to
pay for the reductions in taxes that were needed to achieve it. It was not a budget, so there
was no need to have it independently reviewed by the Office for Budget Responsibility,
despite its enormous scale.

To be fair, it was not a budget. Anyone who looks at a household budget knows it has two
sides. One side is about expenditure and the other about income. And as Mr Micawber in the
Charles Dickens novel David Copperfield said: 
“Annual income twenty pounds, annual expenditure nineteen pounds nineteen and six,
result happiness. Annual income twenty pounds, annual expenditure twenty pounds
nought and six, result misery. “

We seem to have gone for the latter option, although we have added many, many noughts to
the excess of expenditure over income.

Elsewhere, I have made the point that there are fundamental differences between national
finances and household finances, the most obvious being that households do not print money,
governments do, via banks. Governments can run up significant deficits and even fund some
of these which is what Quantitative Easing is partly about.

However, governments that simply print money are destined for high, higher and eventually
hyper inflation. So some recourse to the reality of the money markets is necessary, and this
means borrowing money from investors. And, like all credit agreements, the small print, or
quickly delivered “terms and conditions apply”. This means lenders will charge a premium if
they feel your ability to repay or, more broadly, your credibility as a borrower is weak.
If your strategy for repaying the loan is based on a recoupment of investments at Aintree,
Cheltenham, Newmarket or Goodwood they may feel obliged to charge a significant
premium.

If we look back when Liz Truss was selected as Conservative Party leader she announced,
after one week, a massive support package for domestic energy consumers costing tens of
billions of pounds.

This did not spook the markets. Investors could see that urgent action was needed and that
any responsible government would have to respond to the twin problems of genuine hardship
for its citizens and economic damage to its businesses.

What spooked the markets was that this logical action was followed by radical tax cutting,
further expenditure, and an explicit statement that this would all be covered by borrowing
with no evidence-backed explanation at all as to how it would be paid for.

It seemed growth was the problem but it was also the solution. However, the magic formula
that had eluded governments around the world about how you secure the transition from
problem to solution was not forthcoming.

But worse than this, the people who may have been able to provide an assessment of the
credibility of the borrower were either sacked, as in the case of Tom Scholar the most senior
civil servant in the Treasury with direct experience of dealing with the 2008 financial crisis,
or told their help was not needed (the Office for Budgetary Responsibility, obviously the clue
is in the name) or denigrated as slow to act (the Bank of England).
It seems that they did not want to study the form, listen to the tipsters, or even count the legs
on the horses. They just wanted to go all in and bet the farm on black. Unfortunately, what
came up was red; red warning screens in the currency markets, the inflation predictions, and,
worst of all, in the cost of government borrowing.

The scale of the incompetence triggered a problem in the pensions industry as the Liability
Driven Investment strategies had the rug unceremoniously pulled out from under them. The
response of government spokespeople that this was an arcane technical issue in the structure
of the pension funds ignores the fact that it relates to some £1.5 trillion. That is a big number.
Roughly, two thirds of GDP.

The risk attached to this was so significant it could have spread problems to other parts of the
global financial markets. And we know how quickly problems can snowball once they start in
finance which is all about trust. The International Monetary Fund (IMF) was already
concerned about contagion.

Liz Truss must have had the shortest honeymoon period of any Prime Minister. In less than a
month she has lost the trust of the financial markets, lost the trust of the British people, with
polls giving Labour a 33% lead over the Conservatives, and she is fast losing the trust of her
MPs.

Boris Johnston was not Donald Trump and Liz Truss is not Vladimir Putin. The latter
individuals are in a class of their own in terms of moral degradation. In terms of
incompetence however, the PM is giving Putin a run for his money.

It has taken Putin eight months to destroy any trust the West had in him. His “special military
intervention”, which began life as a dash for Kiev, failed. He has been forced to change his
objectives but stubbornly persists in a strategy which is ruining his economy. And now he is
starting to loose the trust of the Russian people who are leaving the country in droves. Despite
being a ruthless autocrat his chances of remaining in power reduce by the day.

Constancy of purpose and determination are good things in leaders. Unless, of course, that
constancy and determination are focused on doing the wrong thing. If you dismiss those who
are experts, precisely because they are experts, or see those who challenge you as closet lefties simply trying to undermine your strategy, you may be right, but you may be wrong.

And when you are playing with a nation’s future you need to be damned sure you are right.
It looks as though Liz Truss is wrong. Worse, she does not seem to see this or is not willing
to recognise it.

There are only two credible options. One is to reverse the tax cuts in a humiliating
climbdown. The second is to implement another round of austerity which would be breaking
promises and is probably impossible to deliver politically.

Whether this would recover the PM’s credibility with the markets is a moot point. It is
unlikely to recover the trust of the citizens of the UK. This means it is unlikely to recover the
trust of the Conservative’s Parliamentary Party other than the extreme fringes of the right.

Either, Liz Truss knows something that the vast bulk of those that ought to know about these
things (the Treasury, the Bank of England, the IMF, the economics profession) do not know,
or she is wrong. Are those who think she is right willing to bet their house on it?

Rather than a triumph of determination leading to a national growth rate of 2.5% per annum,
last Friday is likely to be seen as the day the Conservative party lost the trust of the British
people in their economic competence. And it may be the day which marked the start of their
loss of Truss.

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The Intelligence Lark

The loss of Mr Grayling to the Chair of the Intelligence and Security Committee (ISC) puts me in mind of the old radio comedy “The Navy Lark” about the hapless crew of the Royal Navy Frigate HMS Troutbridge. In the show Ronnie Barker was the voice of Naval Intelligence and answered the phone with a gormless drawl, “This is intelligence speakin’.”

Mr Graylings involvement in government to date has not been an unqualified success. It is fortunate that the man who gave a contract for boats to a company with no boats was not around at the time of Dunkirk. This is a man who can make a mitigated disaster unmitigated with no appearance of noticing.

He remains a member of the Committee so the actions of Julian Lewis, working with the opposition parties, to take the Chair can only be seen as “damage limitation”. However the whole affair is fascinating as an insight into the approach to government of this administration.

They clearly adhere to the arithmetic, elective dictatorship view of democracy. A view which goes beyond seeing elections as giving the government the right to implement its’ policies within the framework of consent, which includes the rule of law and a whole series of checks and balances. Rather a view, most clearly exhibited by President Trump, that once elected, the whole panoply of state power must bend to the will of the executive.

The Justice and Security Act 2013 states, “A member of the ISC is to be the Chair of the ISC chosen by its members.” (my emphasis) Given it is statutorily given to the members of the Committee to decide who amongst them should be Chair one may assume the intention of the legislators at the time was not to place it within the gift of the Prime Minister.

To try and whip this decision is a clear attempt to undermine the intention of the statute and betrays, at the very least, a nonchalant attitude to the rule of law. To then withdraw the whip from a member of the Committee who had the temerity to get elected within the terms of reference of the Committee and the statute is a cack handed compounding of the offence.

It betrays an obsessive compulsion for control combined with a complete lack of political sensitivity. It has all the hall marks of Prime Minister Johnson’s chief advisor and it is worrying.

Mr Cummings seems to sacrifice politics to efficiency and confuses efficiency with what he wants, when he wants it. Unfortunately, politics is not a science or a game of chess, it is an art. The numbers do not always add up, even when you have a majority, and the chess pieces have minds of their own.

Steering the ship of state cannot be easy. It almost certainly requires constant attention. Attention to the big picture, taking the ship towards its destination, but also the instinctive attention to the details which matter.

This latest fiasco is a spectacular own goal, either of his own making or that of Chief Petty Officer Cummings. Why on earth would you risk political capital in providing Chris Grayling, of all people, with a sinecure which he is ill qualified to fill? He now looks as if he is losing control because he tried to control something he should not have done, what is more it is not even apparent that he needed to.

Worse the machinations look like an attempt to control the committee just at a time when it is about to deal with a report into Russian interference in the last election. A report the PM has been sitting on for months. This inevitably raises questions about whether there is something in the report which justifies the manipulations?

Sub Lieutenant Phillips was an amiable buffon, guiding HMS Troutbridge in to harbour with the technical precision of “Left hand down a bit” but almost always ended up crashing into the harbour wall with an “Ooh nasty!” Sadly it appears the Sub Lieutenant is at the helm again.

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The distance between the Prime Minister and the President

So the PM, the Health Secretary and the Chief Medical officer are confined to quarters. We do not know whether they practiced what they preached when off-screen, however,  what this does demonstrate is that if you continue working the chance of avoiding infection is low. The multiple infections are perhaps not surprising amongst a group of people who have had to work intensively and closely together for some time however it is unfortunate in terms of the governments messaging.

To date I think I would give the Prime Minister 7 out of 10 for his handling of the Covid-19 crisis. Due account has to be given to the sheer scale and multi-dimensional nature of the problem and the speed at which it has evolved. It is one thing to hear descriptions of the spread and see graphs it is another to live it. On the positive side, he has taken the issue seriously and, has deferred to the science or at the very least taken serious account of it. He has “pivoted” when necessary, albeit a touch abruptly.

Overall I think, from the distance of the North, he has done as good or bad a job as many of the other West European leaders have. The leaders of countries in the East, like South Korea and Japan have had much more recent experience of what a national epidemic can do and might have been expected to be better prepared both logistically and mentally to respond with more appropriate alacrity and concern.

There are of course questions to be asked. The timing of lockdown looked more a like a response to mounting political and external scientific pressure than the next step in a carefully crafted, strategic timeline. It would be interesting to see what mortality rates were attached to the herd immunity strategy which was disavowed as soon as the Imperial College Report was in the public domain.

Communication has been and continues to be a problem. The daily press briefing, meant to reassure the public by demonstrating a transparent approach to keeping the nation informed, was a good idea. Its very existence communicated a sense of urgency. The professional and business like way they were conducted and the presence of subject experts transmitted seriousness but also reassuring competence. Unfortunately the message was not clear enough.

This may have been that the strategy was evolving from mitigation to suppression however the social distancing message was just not strong enough. Details about what it involved keeping 2 meters apart, staying at home etc. was undermined by a failure to communicate the need for rigid adherence. The Prime Minister talking about continuing to shake hands and hoping to visit his mother on mothers day weakening and confusing the message.

As the potentially catastrophic consequences of the disease began to sink in, driven it would seem by the Imperial College Report the Prime Minister stiill appeared to be struggling with either his libertarian instincts, his concern for the economic consequences or fear that stricter controls would be ignored. He started out by “asking”,  then moved to “telling”, but then in very short order he moved to  “instructing” as emergency legislation was put in place. It may be argued that the language followed the legislation or that it was part of a strategy to take the population on a journey, however, a pandemic is not a time to be “nudging” people. It is a time for decisiveness and clear, consistent, simple messages. Days mattered.

Unfortunately as time has gone by the communication strategy has become more problematic. If you start out claiming you want to be transparent and that you are following the science you set yourself up to fail if you start to obfuscate. As the media have asked increasingly specific questions about, how many ITU bed spaces are available – now, how many ventilators the NHS have – now, and where the PEP is – now, the vagueness of the answers has become a source of concern and, for front line staff, anger.

Nadhim Zahawi, Minister for Business and Industry, was writhing like a fish on a line when being pushed to provide detailed figures on this and dates when more of all of these items would be available. It looked as if at one point he would crack and shout out, “You can’t handle the truth.” He would have been wrong. People prefer truth, however unpalatable, to obviously untrue platitudes about “ramping up”.

It is obvious to all that the requirement for rigid social distancing is absolutely critical and that anything less will mean the NHS is overwhelmed. It does not have the equipment or staff it would need to address anything other than a limited spread of the virus. False reassurance will come back to bite when reality tragically contradicts it as the infection rate accelerates and peaks.

Having said all this, I still hold to my 7 out of 10 for the Prime Minister. He may not have acted as decisively and early as he should  to implement rigid social distancing and he may not have been clear enough in the initial messaging, however, he appears to be someone doing the best he can in a fast moving crisis. He remains courteous to the media, even in the face of difficult questioning, he respects the views of the scientific advisors and at least seems to understand what it is, and he is trying to communicate that medical advice to the public.

By comparison,… a picture is worth a thousand words, and here are two.

However effectively implemented by the PM and his team there is a real attempt to communicate the social distancing message.

If you watch the two briefings the contrast could not be greater. In the US version, depicted here, three advisors stood like lemons on the stage of the press briefing  room waiting for the President. There was an awkward, nay embarrassing silence. Eventually, presumably when the time had built up enough tension for a grand entrance, the President appeared.

There was then a rambling, incoherent presentation by the President, talking mainly about what a terrific job his administration and he personally was doing. His one strength is consistency, whenever he speaks he is saying something which is either a lie or stupid or both. Firing on all four cylinders he managed the double on most of what he had to say.

His overriding concern to ensure re-election tempered his concerns for the thousands who may die from this virus. His view is that we must ensure the “cure is not worse than the disease”. He talked about the 50k people who die each year from flu and those involved in road traffic accidents to reassure the American people he had their welfare at heart.

He probably struggles with numbers (other than $ bills) but if the US do not get a grip on Covid-19 the fatalities could be in the hundreds of thousands not, the clearly more acceptable to the President, tens of thousands. From the start the President has treated Covid-19 as an annoying distraction from the main business of getting reelected for another four years of self aggrandisement and national corruption. Variously he has referred to Covid-19 as a “hoax”, the “Chinese virus”, only affecting 15 Americans, something where the “cure cannot be worse than the virus”, and which is likely to be pretty much over “by Easter”.

I had been thinking a suitable sobriquet for President Trump might be, “The President that Broke America.” Sadly, if the individual States don’t save him and their citizens I think a more appropriate one may be, “The President that Killed America.” At least the distance between him and the Prime Minister is reassuringly large.