BUDGET EXPOSES BREXIT MADNESS

 

 

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BREXIT WOES.

In his Budget the Chancellor set aside three billion pounds more for the mounting cost of Brexit. Three billion pounds that could have been spent on the NHS (as promised by the Leavers) being put aside for more lawyers and civil servants to deal with the complexity of leaving. Being put aside to build huge car parks at Dover to cope with the hundreds of lorries held up by customs controls. And let us not forget the £40bn exit bill.

But Brexit is hitting us in a far more serious and widespread way. Look at the woeful forecasts for growth and productivity. It is true that these problems pre-date the EU Referendum, but I suggest the dramatic worsening of the forecasts are related to the uncertainties of Brexit and the perception that the UK is cutting itself adrift from the EU, many of whose members are in the Eurozone where the currency has strengthened considerably in the last year.

It is almost too late for the British people to wake up and turn against Brexit. The warnings are there for anyone who wants to see. This week the European Banking Authority and European Medicines Agency were relocated out of the UK. The latter is the most serious and will be a blow to our pharmaceutical industry quite apart from the fact that we will need to create our own expensive drug regulation body. The government should have faced far more criticism for this. They thought the future of these agencies would be part of Brexit bargaining. The arrogance! The ignorance! It was never going to be possible to keep EU bodies like these in a UK outside the EU.

Oh! but we will be playing on the global stage in the future say the Leavers. Is that the stage where the UK has just lost its place on the International Court of Justice?

PHIL SAVES THE DAY.

As I said last week, I respect the Chancellor. In a Cabinet of misfits his calm integrity stands out. After the Budget perhaps all the hysteria of him getting sacked and Theresa not surviving till Christmas will calm down.

This lot are in it for the long run. Locked into the messy Brexit process and tinkering with a weak economy, but still there. After all, where is the threat. Tory Remainer rebels probably lack the courage to torpedo Brexit and the government can always on Labour MPs like Frank Field and Kate Hoey to come to their aid. Meanwhile Shadow Chancellor John McDonnell struggles to convince us that Labour’s programme could be paid for without hugely adding to the National Debt. It pains me to say it, but the Lib Dems under Vince Cable seem to be fading away just when we need a strong party for Europe.

The Chancellor took some action on the immediate issues facing the country. Housing, Universal Benefit and the NHS but he is locked into Tory ideology by not sanctioning local councils to undertake a massive programme of house building. He is also averse to general tax increases, but why? A cross party panel of voters in Bury voted unanimously for such a move on Newsnight after the Chancellor had sat down.

Thank heavens the Chancellor has stuck with the £85,000 limit on VAT, but for how long will micro businesses be spared the bureaucracy of quarterly accounting. The moves on business rates have been generally welcomed but three-year reviews may be a mixed blessing, as will stamp duty relief for first time buyers. Will youngsters benefit or will house prices just rise. Council house building is the answer.

It now seems highly unlikely the Chancellor will be sacked now that he is “Eeyore No More” according to the Mail. So, the government is set to stagger on as the darkening days bring the reality of the consequences of Brexit ever closer.

Follow me @JimHancockUK.

 

THE COST OF BREXIT

 

THE EXIT FEE.

Extreme Brexiteers may rail against the figures, but the fact is we are going to pay a heavy price if we exit the European Union. That is the most important message from the Autumn Statement Some of us hope public opinion will change and we can yet halt this madness. But as it stands we are heading out and the Chancellor has spelt out the consequences of Brexit.

£59bn of the staggering £122bn of extra borrowing is directly attributable to Brexit according to the Office of Budget Responsibility (OBR). Because of that borrowing our debt to gross domestic product is set to peek at 90% in 2017-18. The weaker pound caused by the Brexit shock is forecast to lead to a 5% increase in food prices next year. A real problem for the Just About Managing.

AT LAST A MOVE AGAINST PENSIONERS ?

Perhaps it has been lost a little amidst the analysis of the immediate impact of the Autumn Statement but Philip Hammond this week flagged up a major area of controversy for the next parliament. The triple lock on pensions is to come under review. Rightly so, whilst some pensioners still struggle, most have never had it so good, to coin a phrase. In any case it is the young burdened by tuition fees, job uncertainty and the inability to buy a home that must be top priority for government in the third decade of this century, if not before. The problem is that up to now the elderly vote in larger numbers than the young. In the next parliament ministers will have to be courageous. I think pensioners will get the point but well done Mr Hammond for preparing the way for a change of policy.

NORTHERN POWERHOUSE.

At one point it looked as if George Osborne’s pet project was going to be quietly forgotten by his successor. However there was enough support for devolution to force the Chancellor to input significant funds into the Northern economy. £3bn for northern local enterprise partnerships in growth deals, a £400m investment fund to support smaller businesses and £60m in development funding for Northern Powerhouse Rail.

Areas about to elect city region mayors like Liverpool City Region and Greater manche4ster will get new borrowing powers. There is talk of a municipal bond to aid infrastructure investment. The continuing failure of Leeds to resolve the elected mayor issue and avail itself of these incentives is notable.

Specific road improvements include the highly congested part of the M60 near Worsley, the Waterfront Link in Warrington and dualling the A66 in the North Pennines.

MIXED PICTURE FOR BUSINESS.

The big challenge for business in the North is productivity. Nationally we are 30% less productive than the Germans and the North lags well behind London. A Productivity Investment Fund will help. There was relief that the increase in the Living Wage was modest and a welcome for the further cut in corporation tax. Some wanted a VAT cut to mitigate rising inflation but that wasn’t going to happen, nor apparently reform of business rates.

HAMMOND’S DEBUT.

There is widespread dismay that the Chancellor did not address the growing adult social care crisis but overall Philip Hammond showed himself to be a safe pair of hands on his début. He is not as close to the Prime Minister as George Osborne was to David Cameron but nor is there the ruinous rivalry of the Blair/Brown years.

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NOW MORE THAN EVER, DEMAND A NORTHERN COUNCIL

 

 

SCOTLAND AND THE NORTH.

 

Now we see more clearly what we are going to have to contend with as we try and bring power to the North.

 

We knew about Boris land in the South East and London with its power to drain the brightest talent southwards and its vastly disproportionate transport spending.

 

Now we see the full dimension of the challenge north of the border. The Scottish Government will retain all the income tax raised in Scotland, a share of VAT and power over areas of welfare. Air Passenger Duty will be a devolved power and expect it to be cut. APD is an issue that Manchester and Leeds airports have been campaigning on for years without success. Now they face a competitive disadvantage which could be significant in the border region, particularly Newcastle.

 

The city regionalists have written to The Times along the lines of what’s right for Scotland is right for the cities. Quite right but even our northern cities are not fit for purpose in the new economic landscape. We need to build on the Rail North and One North concepts, adding functions that apply across the North and make it a democratically elected body so that ordinary people have a say.

 

Meanwhile, as I write, we await the Combined Authority deals for Leeds and Sheffield promised by Nick Clegg before the Autumn Statement. On Merseyside the problems continue. Phil Davies, the leader of Wirral and the City Region has now stated that the concept of an elected mayor should be put to a referendum. That is unlikely to please Liverpool Mayor Joe Anderson.

 

JUERGEN SHOWS THE WAY.

 

Business leaders usually recoil when it is suggested they become involved in politics. But with an elected mayor for Greater Manchester on the horizon, it is interesting to see some of the non political names coming forward. For instance Scott Fletcher of ANS Group, and lively contributor to Downtown events, has not ruled himself out.

 

Another man who impressed me this week with his wider skills and vision was Juergen Maier, Chief Executive of Siemens UK. He is also Chairman of the North West Business Leadership Team, an organisation that takes a region wide view on the big issues facing business.

 

It published its business manifesto this week. It calls for action in the areas of skills, transport, world class science and emphasising our energy resources.

 

Speaking to MPs at Westminster Maier made a number of key points including the fact that there are too many skills initiatives for business to cope with. He said devolution had to operate within a national framework to preserve coherence (that is why a constitutional convention is essential). He also showed how far behind we are in only now arguing for HS3. Essen, Dortmund and Cologne were linked 25 years ago. He also hoped the autumn statement might bring economic catapults in precision medicine and energy to the North West.

 

The North needs leaders like Juergen Maier.

 

AUTUMN STATEMENT.

 

Next week’s statement by the Chancellor will be important for northern business. With the election looming we can expect further measures in connection with the “northern powerhouse” as George Osborne seeks to confirm his position as a friend of the north.

 

But we mustn’t be distracted from some hard underlying truths. There are signs that the fragile recovery is stalling, the government has missed its deficit reduction targets by a wide margin and all these city region councils that are going to get devolved powers are facing remorseless cuts in their budgets.