Tuesday, July 23, 2024
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The wheels are coming off socialism’s bandwagon


UNSURPRISINGLY, the markets and mainstream media have not much liked the Chancellor’s financial announcements on Friday. That’s to miss the point. Completely.

The UK’s centralised economy, in part courtesy of Covid and in larger part due to 12 years of weak socialism wearing a Tory badge, is failing and unsustainable. The Prime Minister and Chancellor have demonstrated that the country is changing course. Of course, that comes with some short-term turbulence and of course the initial announcements will need refinement – the most obvious being lifting the threshold for income tax. That will, I suspect, happen between now and the full Budget next March.

The financial policy changes inevitably caused the markets to reappraise their view of sterling and rebalance their holdings. Given a surfeit of sellers the spot price fell – but don’t forget that for every seller there is a buyer: if they’re buying at (say) $1.03 they believe that in their investment timeframe the price will rise above that (otherwise they would buy at $1.02, or some lower price). This will go on for a while and yes, it will cause some economic pain to those who have to buy raw materials in dollars. The important exception of course is energy, where the price caps will protect business and household cashflow (thereby keeping them solvent), albeit at the cost of greater government debt (incalculable, as the gas market is on the move).

As is inevitable, the froth of the mainstream commentariat has picked on the end of the bankers’ bonus freeze (imposed by the EU). It’s irrelevant and a matter for shareholders. I’m pretty confident that the (as some would say) obscenely overpaid bankers managed to circumvent the impact of the cap anyway. Even if they didn’t, delivering growth requires capital and that’s what bankers do.

Oddly the same commentariat hasn’t queried quite how Sir Keir Starmer will deliver Net Zero energy by 2030, which he assured the BBC’s Sunday with Laura Kuenssberg was a ‘difficult’ goal but ‘absolutely doable’. Is it heck. As I demonstrate in my book, delivering Net Zero requires 30 Sizewell Cs. We haven’t built one yet. This is simple engineering and thermodynamics, and yet no reporter challenged Starmer for promulgating drivel (largely recycling Boris Johnson’s delusion of becoming the ‘Saudi Arabia of wind’, which was (rightly) denounced as piffle at the time. Why the double standard?

I suspect it’s because they’re frit. It’s been a rotten time for the left-leaning media. The death of the Queen led to a clear demonstration that the silent majority of this country like having a monarchy. Worse, the rest of the world (apart from the New York Times) seems to respect and admire it too. I happened to be on Park Lane when President Biden’s motorcade swept by in an orgy of sirens and armoured limos. A couple of hours later our King calmly and securely walked past vast crowds with no obvious protection, those crowds being policed (superbly) by unarmed policemen. Which leadership is more secure?

We now have a Prime Minister who has grasped that the key to a successful economy is wealth creation (ask any migrant), has noticed that we have drifted off that track and is intent on talking the steps necessary to change direction. It won’t be pretty, there will be mistakes, but I suspect Ms Truss will get it done so that the electorate can pick a trajectory.

Speaking of electorates, the Italians have tired of socialism. Anything that isn’t socialist is branded ‘far-right’ nowadays, although it seems to me (and probably a fair few of the silent majority) that the most authoritarian uttering about Italy (like Hungary and Poland) came from the (unelected) European Commission President Ursula von der Leyen warning that Europe has ‘the tools’ to deal with Italy if things go in a ‘difficult direction’. That sounds more like an autocrat like Putin than someone (theoretically) leading a collection of 27 democracies.

The wheels are starting to come off the socialist bandwagon. Expect tantrums.

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Patrick Benham-Crosswell
Patrick Benham-Crosswell
Patrick Benham-Crosswell is a former Army officer who has spent the last 30 years in commerce. He is the author of Net Zero: The Challenges, Costs and Consequences of the UK's Zero Emission Ambition. He has a substack here. He is the Reform Parliamentary Candidate for Swansea West.

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