Jeremy's Blog 9th December 2022: Decisions on the Back Foot

This article by Jeremy Moody first appeared in the CAAV e-Briefing of 8th December 2022

We are now getting decisions again from the Government but they are often decisions made on the back foot, not as a fresh government with a mandate and programme but one navigating while pummelled by circumstances and firefighting successive shocks.

The November Financial Statement was driven by a need to bring order and confidence in markets with the £100 billion reversal in fiscal position, just 55 days after September’s Statement. That did remove September’s “moron premium” from UK interest rates, so that our rates rank with other countries’ as they rise across the world.

This was within the constraints of the UK as “poor rich” country. A stark chart from the Institute of Fiscal Studies shows a change in trend in real household incomes from 2008, rising on a constant curve from 1948 but then sideways from 2008, such that by 2026 those incomes would be 32 per cent, a third, below where they should have been. That loss, now tested by the shock of energy prices and for a duration perhaps not seen for two centuries, explains much of the current turbulence.

While not a programme for growth, the Statement did less damage to necessary future growth than previous tightenings. Infrastructure spending was held, not cut, but construction inflation will reduce its value. The welcome confirmation of the permanence of the previously unstable Annual Investment Allowance at £1m can give confidence to many clients’ businesses. Despite the chatter, CGT’s present structure designed for business was left unchanged, save for reducing the annual exempt amount.

But we now need that programme for growth, as flagged by the Prime Minister in his Mais Lecture this spring, to make good the lost years since 2008.

However, one measure of our will to grow lies in the crisis in housing our people. With 2 million houses less than international comparison suggests, we merely tackle the symptoms of an adverse planning system. Full reform failed with the Chesham by-election. Now over 50 backbenchers have forced still further weakening of the system’s ability to deliver. For energy and so climate change, the apparent relaxation for onshore wind seems to come without appeals. Understanding the need for consent, we have to find the ways to win consent.

This is not Westminster alone. Alongside its public service failings, the Scottish Government is criticised this week by the Climate Change Committee for how far short it is of delivering its flagship climate change aspirations while Northern Ireland now has no Executive, ministers or Assembly.

Agriculture has the same challenge after long years of low productivity growth, needing change to recover progress, not protection. In part, we seem trapped by the resistance to the pricing needed for the costs and risks of business, especially for high value production, whether eggs, onions or glasshouses. Pigs, poultry, fruit, vegetables and similar enterprises were 31 per cent of the value of our output in 2021 and all look at risk.

While Bismarck said that

“Politics is the art of the possible, the attainable — the art of the next best”

it can also, as he showed, be about leadership when needed. We are still comfortable with decline and need the case for change framing for us. The imminent consultation on achieving local consent for development might not be sufficient.