Main Edition
US
FR
'The Tory Party have lost their credibility on the economy' (Chris J Ratcliffe/Getty Images)
In selecting the date of the next election, Conservative Party strategists have a choice between catastrophe and oblivion. Following the Labour Party’s micro-landslides in Tamworth and Mid-Bedfordshire, and with Rishi Sunak’s conference reset leaving opinion polls unmoved, it seems increasingly unlikely that the Tories can win the next election. But in choosing the occasion of their demise, they should remember one crucial factor: Britain’s economic situation is deteriorating and a 2008-style crash is impending.
In fact, the economy has not looked truly healthy for years and forward-looking indicators imply that a recession is almost certainly in the pipeline in the next six to 18 months. And one of the key reasons that the Tory Party has already haemorrhaged support is due to the poor condition of the post-Covid economy, specifically with respect to the high rate of inflation. This has gradually made itself manifest in poll numbers. According to YouGov, at the beginning of 2021, still in the midst of the Covid pandemic, the most pressing issue in the country was “Health”. And at this time, and for months after, the Tories were still ahead in the general election polls (though Labour were biting at their heels).
As 2021 progressed, the initial burst of inflation caused by the lockdown’s impact on supply chains rippled through the economy. By the start of last year, with inflation running at about 6%, economic matters had overtaken health in YouGov’s polling. Then on 24 February 2022, another inflationary shock hit the world economy: the Russian invasion of Ukraine. It was not primarily the invasion itself that caused the shock, but rather the counter-sanctions undertaken in response, with the European energy supply in particular drying up. In October 2022, with inflation in Britain peaking at around 11% and a population-wide cost-of-living crisis broadly diagnosed by commentators, economic matters dwarfed any other issue. Labour stood at over 50% in some polls.
Which is another way of saying that over the last two years, the Tory Party have lost their credibility on the economy. They have ruled over an inflationary mess. But after years of shedding their veneer of competence, it actually looks as though the worst is still to come. Even though Britain has a serious cost-of-living crisis, most people who want work can find it. Until recently, the unemployment rate has been historically low — in 2022 it touched 3.5%, a record that had not been seen in over 40 years. But this is beginning to change. Unemployment has been ticking up since April of this year, with recent reports suggesting that it is set to increase even further. The media has been largely silent about this issue, but economists have been paying attention. After all, the Bank of England has been aggressively increasing interest rates since the beginning of 2022, raising them from almost 0% to 5.25%. Few economists would think that these sorts of hikes can be achieved without generating a recession.
The British economy is particularly prone to higher interest rates, most glaringly through its overinflated and economically axial housing market. At its previous peak in 2007, before housing crashed worldwide, the average house in England was worth around 7.15x the average salary. Fifteen years later, this has risen to 8.28x — a record high. And though our housing debate is dominated by questions of supply — the intractable Yimby v Nimby contestation — there is every reason to think that the current inflation in house prices is another speculative mania of the sort we saw collapse in 2008.
It is already telling that the housing market has proven completely unable to stomach higher interest rates. House prices have been falling every month since January of this year and in the third quarter of 2023 the average house price was down nearly 5% from its peak. While this may not seem like much, declines in house prices of this nature this rarely bottom out quickly and usually signal further falls. The pressure in this regard can be seen in the falling number of mortgage approvals in Britain, a contraction which dates back to 2020. Mortgage approvals went into steep decline after August 2022 as the Bank of England interest rate rose to just under 2%; it was shortly after this that house prices themselves began to decline.
Join the discussion
Join like minded readers that support our journalism by becoming a paid subscriber
To join the discussion in the comments, become a paid subscriber.
Join like minded readers that support our journalism, read unlimited articles and enjoy other subscriber-only benefits.
SubscribeThe big announcement at the Tory Party conference was a smoking ban for some grown ups but not others. This was a policy straight from Department of Health civil servants, not from the public, not from party members, not from Tory MPs and not from the Cabinet. This gives us a clue to how Rishi and his strategists see power, and when they might call a general election.
The smoking ban is emblematic of career politicians who have outsourced power, decision making, and even thinking. What is left for them to do is a mix of ceremony (PM’s questions), public relations (announcing the policies the civil service has decided), and securing their next sinecure. A future election victory is only absolutely essential for the bag carriers of MPs and the party machine.
As an MP, how you secure your next sinecure is by ingratiating yourself with the sinecure power brokers. These might be a state organisation like the BBC or Ofcom, a charity, or an international body like the WHO. That means promoting their policies, often wholly at odds with your political manifesto and supposed principles. And generally speaking, the more you do of this the better the prospects for you, which is a small motivation for early general elections if you think you can win. If there’s no prospect of winning, it means sitting in office for as long as possible no matter the cumulative future polling damage or indeed damage to the country. We can conclude that Rishi is going to sit out his term.
So what of the bag carriers and the party machine? Why aren’t they stepping in? As much as we are encouraged to think political parties are still institutions, the fact is they’re now just a brand backed by a mailing list, a small group of old stalwarts, some ambitious wet behind the ear types with no particular motivation except to become an MP, and financial supporters who are actually more like venture capital investors. Sure, there are the hardworking and dedicated constituency volunteers and the regular donors, but they are mainly just powerless dupes.
UK party political investors pay only a small sum up front, with a hedge that pays the rest only after delivery. Those lucrative speaking tours and inflated forwards for books that will be mostly pulped are testament to this. The investors are not heavily invested so their hot money can be easily switched to the winning side. Similarly, the wet behind the ear types are happy to switch sides when the opportunity comes. (A very large number of current Tory MPs and bag carriers are former Lib Dems…)
The result of all these shenanigans is what the public interprets as the emergence of the Uniparty. The sense that voting doesn’t change anything anymore. And when 30m people feel the same, there is a high probability they’re right. Yet it is not some great conspiracy, it is the net result of 60 years of career politicians (red, yellow and blue) outsourcing decision-making to groups that we don’t elect, enabled by the emergence of the national and supra-national managerial state. Two generations of MPs have traded away your democratic control of even the most basic public services in return for their own promotion. So when the next economic storm hits, it won’t actually matter which party forms the government – for them or for us.
Excellent, insightful comment.
As someone not from the UK, I really appreciate the lucid and excellent summation you have done to explain contemporary events.
Perfectly put.
Superb analysis.
Spot on. It happens in other countries too, for example Ireland where the state in a country of just 5 million people funds 33,000 NGOs €5 billion every year. This funds CEO and Head of Advocacy jobs for former politicians and political advisors, often optimally drawn from the self same media who then create content for the (state subsidised) legacy media to lobby for more money. A revolving door which suits everyone except the tax paper. Meanwhile responsibity for the things which impact people’s lives are outsourced to unelected, unaccountable quangos such as the Health Service Executive, National Transport Authority, Policing Authority, Planing Board and so on. Politicians get the salary, profile and future job opportunities, and don’t want the power.
and the two main parties have FPTP to protect them…
Sure, what explains other countries ?
German GOV finances immigrant rescue ships in the Med.
“…decision-making to groups that we don’t elect…”
Assuming you are correct that was/is the whole point. Removing long term difficult decisions from the hands of short term politicians.
Take the example of Bank of England and its independence. After the ERM crisis (and with the memory of 1970s high inflation) the policy makers that cared about the issue of monetary policy decided that the best solution was to copy the German model (Bubba and its independence). Do you want politicians to set the interest rates?!
If the case is as clear/easy as you think it should be easily rectified. One of the political parties can run by promising to make all the hard decisions and remove the unelected mandarins.
Good luck with that!
The issue of short-termism is well made, but the problem with all the quangos is that it removes democratic accountability to the electorate and gives the politicos and excuse not to be responsible. At least we can vote out bad governments even if they are short-termist! The Quangos also seem to be full of technocrats who have a biased view and look to suffer from groupthink. When did the OBR ever get a forecast right?
Politicians fundamentally control the Quangos. OBR was set up in response to G. Brown cooking the books….
LIz Truss (as PM) could have terminated OBR on day 1.
Yes, publicly elected, publicly accountable ministers should set interest rates. The Ken Clarke – Eddie George approach worked very well in the 1990s. Minutes on their discussions were published to aid transparency, but ultimately the decision was made by the Chancellor, accountable to Parliament. Post independence, the BoE maintained artificially low interest rates through QE for far too long. This had profound social, economic and political consequences, including a massive transfer of wealth from renters to asset owners. Just because you take democracy out of decision making doesn’t mean you take the politics out of it.
“…very well in the 1990s.”
ERM crisis…
The ERM crisis was tiny. We remember it as a big deal because cutting right through it was our relationship with the EU and there was a deep recession that followed with lots of home repossessions. Except it wasn’t that deep, home ownership rose over the decade, and incomes recovered very quickly, paving the way for the late 90s boom.
In contrast, since 2008 household incomes have been stagnant, property ownership has fallen, household debt has ballooned, and inequality has grown even faster.
What ERM showed was that politicians do indeed make terrible mistakes, but politicians are also under pressure to change course and correct those mistakes when they are revealed. What 2008 to today shows is that technocrats are under no such pressure to change course and so we continue to stagnate.
Unfortunately the approach you advocate requires the utmost competence of the political/BoE protagonists. Since the Clark/George tandem we’ve had Brown/King, Osborne/Carney, Hammond/Carney and Hunt/Andrew “Out to Lunch’ Bailey (not to mention the briefly disastrous Kwarteng/Bailey). None of these combinations had anything remotely near the ‘nous’ of Ken Clarke and Eddie George.
Interest rates are merely a price, the price of money, and should be set by the markets like any other price. The real power that should be taken away from both politicians and central bankers is the ability to print unlimited increases in the money supply. Like handing out crack cocaine on street corners.
As you exclaim good luck, you perhaps realise it is impossible to take these powers back. No elected government can use the civil service, and the regulators it inherits to disassemble the power they have. Added to the mix is a judiciary that has also developed vast power over elected governments.
And yes, I do want politicians to set interest rates for the simple reason what we have now has been a worse failure than what went before. Since the BoE (lender and regulator) was made independent and political oversight of central banks everywhere in the West was seriously weakened, we’ve had the largest financial crash in history, the largest monetisation of debt ever, the longest period of stagnant incomes for at least 2 centuries (Canada France, UK and others), the largest share of income going to capital (rather than labour) since modern records began, and the most negative interest rates ever (ie the difference between interest rates and price rises which shrinks the savings of low income households). A calamitous period only made bearable by a huge debt bubble that has masked the impact on incomes.
The market should set interest rates not politicians and the blob. Similarly fiscal deficits and the inexorably growing national debt steal from the future, particularly the future of our children. What I don’t understand is how the Conservative Party stopped being conservative and signed up to uncontrolled immigration, an ever expanding welfare state and its consequence- dependency, destruction of the sovereign balance sheet, why it surrendered control of all social institutions to the left, why it gave up on institutional reform, the free market, enterprise and law and order. Nobody can explain how these precious policy positions were given up so easily. 13 years water and £2 trillion added to the national debt, the Conservative Party deserves to lose and will either return to conservative policies and values or die.
Apols don’t agree. Failure to take accountability and the classic was/is someone’s else’s fault. Proper snowflake stuff in any other context.
We’ve Right Wing Govts for 13yrs drive austerity, the nonsense panacea of Brexit and other Populist twaddle and yet fail to tackle a range of economic fundamentals. The problem with the Tories and many supporters is the sense of entitlement to govern and belief the ‘market’ will solve all/most problems means they fail to grasp the reality of accountability when they make a complete hash of it and go seeking someone else to blame.
Let’s give an example – the Water industry – it’s Govt decision to allow it to end up in the hands of private equity such that the lack of investment in critical infrastructure sees us tipping more sewage into rivers and seas than we have in decades. Some media blob hasn’t done this. Govt has done this through it’s policies and decisions.
Of course Author is almost certainly correct, Labour almost certainly can’t fix much quickly and will take the hit if elected, and many Tory MPs are already into a damage limitation calculus.
What austerity? UK government spending is at record levels, UK tax is at record levels, there has been almost no interruption to real terms government spending increases since 2010.
Government doesn’t believe in the market. There are now more regulators and pages of regulatory law than ever. Private companies like Serco aren’t subject to market forces – theg and their peers have public contracts stitched up with the civil service being the architects of the stitch up.
The water industry is a great example. Your water bill is set by the government regulator who also decides what capital projects the water companies can progress and what the rate of return on the private assets should be. There’s no autonomy in these companies, their business is beholden to an all powerful regulator staffed by public sector officials. Water companies are basically public companies with private capital. It was the government regulator that created the ideal conditions for the grotesque leveraged buyouts by not agreeing capital spending plans so as to slow the growth in the regulated asset base from which profits were calculated.
As a point of fact, water pollution from sewage discharge is lower than ever. Your mention of “in decades” is silly as everyone over 40 knows the state owned industry had very severe pollution problems that were orders of magnitude worse than anything today.
And Labour won’t change a thing. Guess who put in place the regulatory structure that has made a mess of the water industry? The Labour Party. It reformed Ofwat in 2006 and made it nearly entirely unaccountable to ministers. The frenzied leveraged buyouts of the water companies of which you complain began later that year when the now infamous Macquarie Group bought Thames Water. I should know, I was a card carrying Labour member and consultant in Ofwat watching aghast as civil servants and politicians set themselves up for life by riding two horses at once.
The fact Govt expenditure may not have dropped overall despite Austerity was of course part predicted, including by the IMF. But for the poorest or for those needing heath or social care things clearly gone backwards as a result. There are many other examples too. The state of the roads for one. Austerity was poor economics, as well as fundamental unfair as it hit those hardest who had not caused the 2008 Crash. and it just may be we agree on that?
A growth in regulators the other side of the coin called Privatisation. I concur some seem to have been asleep, but the argument is like the old Communist diehard – we just never did it fully. What regulation are you saying you’d remove entirely and let the market flower?
The water pollution criticism bit more valid to be fair. Yes I agree pollution less than say pre-90s, but there’s been a 50% rise in serious pollution incidents and it’s understated because the testing has also been drastically reduced, deliberately. The bit that I don’t think valid is you blaming the problems in this Sector on Regulators. Yes they have a role, but fundamentally the economic model doesn’t work. Why are these companies still paying dividends? You can’t say they don’t have autonomy if they are doing that. It’s a racket. Govt could have changed it and haven’t.
Labour undoubtedly, if it gets elected, is going to get the proverbial ‘hospital pass’ on pretty much everything. But I think a total cop out to start blaming things last Lab govt did when Tories been in power for 13 years.
Brown brought in QE, low interest rates and deficit spending to kick the 2008 can (he saved the world apparently, according to him) the world copied him. Miliband set Net Zero into law, May compounded it. Labour & the rest wanted more lock-downs, for longer etc. This ‘Right Wing’ nonsense is just that. Tories are more Left/Nu Labour than even of the center. You want Austerity? Ask the Greeks what Austerity is.
The results of Brown’s ideas have been known for almost all those years – the moment an inflationary event appeared the whole house of cards would crumble because you could only go to -ve interest rates & that is even more insane than virtually 0 (but effectively in many case -ve rates).
So why did it not collapse earlier? Step up China. Its becoming the workshop of the world (check out how many German products are made in China!) was deflationary so kept the QE/low interest rate insanity alive.
The people I followed for the last 7 years had it right, they said that sooner of later a ‘black swan’ inflationary event would appear and it would all fall down. Ironically 2 (as the article says you could argue 3 with Russia – I say no.) appeared.
The first & the one expected to bring it down was COVID lock down, BUT then just as that inflation was starting to appear ‘boom’ ; Along came a Net Zero inflationary event that pipped it at the post.
The 2021 failure of wind/hydro to deliver power and the resultant ‘dash for gas’ of parts of South America and Europe. THAT was when gas prices went interstellar, UK companies start to collapse AND when Putin thought “Hm, I supply Europe with gas – and 5 months later he went into Ukraine.”
Europe/West stupidly sanctioned him by restricting his exports of commodities – try Doomberg on how NOT to sanction a commodity supplier! Exactly how we did it. We raised the prices by shortage & so Putin sold less for more.
We should have flooded the markets driven prices down, but no the Green Dreamers won’t allow that!
Still, Net Zero is the global catastrophe that ensures 2008 etc won’t be cured. Net Zero is impossible and insane AND Sunak is doing sweet FA to deal with it. Ironically neither does the analysis above.
I’ve listened to the doomsayers and after wondering at times during those 7 years – ‘Have they got it right?’ I now look at the steps they suggested taking to survive and I thank heaven I listened to them.
The first party to come out and scrap Net Zero will win the next election. IF Net Zero isn’t scrapped soon, then the West is going to face economic and social collapse. Watch what happens next year when Gas Boiler and Car manufacturers face fines for NOT achieving the set sales targets for Heat Pumps and EVs.
Finally why on earth should the BoE have any control over interest rates? Interest rates are the price of money, the market would do a better job than the BoE.
There is a fundamental issue here. Representative democracy is not rule by the people as many seem to think, it’s simply about being accountable to the people. If you want rule by the people you need direct democracy- more like the Ancient Greek system. But that really isn’t great, and would certainly be unworkable in a modern industrial society. So the idea that all government decisions should be ‘democratic’ in that sense is for the birds. If politicians want to consult others when making decisions it’s up to them. What you are saying in effect is that politicians have been rubbish for too long. (It’s no good trying to blame the BBC or Ofcom!!) Well perhaps you are right but the problem is ultimately the voting system. We are stuck in this awful two party tyranny. Proportional representation is the only thing that offers a glimmer of hope.
It seems to work well enough in Switzerland – the only modern State in which it has ever been tried.
true, but UK is not Switzerland.
You should check out the actual political structure of Swiss Federal Gov. See how they elect their president(s).
Despite what people say we judge things by the end result.
If public policy in UK was made by consulting the Oracle of Delphi and it delivered the right results people would be perfectly fine with it.
P.S. We have many academic studies across the West; most people simply have no idea how their government (central or local) actually works. Most Americans can not name the 3 branches of the Government. Most Brits have no idea who is their MP.
Not only that, those who do know something about MPs, often think they should be serving their constituents the whole time, rather than scrutinising legislation for the whole country. They are expected to do two quite different things. And if Ministers as well, three distinct roles. The system is not great.
Why do the public need to know who their MP is? As you say, MPs are representatives and they’ll do what they and/or their party want after they’re elected. The ballot is in reality a choice of party, not candidate, and it makes no difference to your constituency who holds your particular constituency seat. All that matters is the difference in the total number of seats held by the parties in Parliament.
The fact that fewer and fewer people know who their MP is is not proof of ignorance, but proof that most people know perfectly well when not to waste their time on useless knowledge and futile activities.
PR politicians are the same as FPTP politicians. How does PR change the dynamic of politicians being offered far more lucrative careers within state and quasi state bodies (and not at the whim of voters) if they help the state / quasi bodies? You’re still going to get the exact same legislative programme next year whoever you vote for, the vast bulk of law is statutory instruments that are sitting ready for the new government to simply sign.
Another good example of this is Great British Railways. An absolute anathema to anyone who understands the strengths and weaknesses of the old British Rail, and totally opposite the ideological position of the Tory Party. It’s a dog’s breakfast for passengers. The bill for it has been laid before Parliament by a Tory government and it will be passed by the next Labour government who will claim political credit for “nationalising the railways” or some other nonsense (the railway is already state owned). The bill has been drafted over nearly a decade by civil servants without interruption by a dozen Transport Secretaries.
One day you’ll have your PR government. And nothing will change.
PR is worse – in PR it is the politicians who decide what manifesto is followed AND IF they use the party list systems, they also decide who gets elected. At least with FPTP we can annihilate a Government and party. You think Blair would have jumped if PR was around? I doubt it. We’d probably have had John Major still around post 1997 too!
Excellent post and ad idem with my thoughts-you forgot to mention that our mighty Government ,still with a 70+ seat majority and in the midst of an economic and cultural upheaval the likes of which many people will not have experienced ,thought that rebranding A levels was a headline catching,vote winning policy!!!
The day of reckoning creeps closer-when Labour are confronted with a collapsing economy in freefall with no buffer to dip into and a society at breaking point as the cultural schism is exacerbated by the inevitable economic collapse.
Sunak can only offer what the civil servants dish up for announcement. If it is a tobacco ban and A-level reform, then that’s what he has to run with.
He could have a revolution and scrap all the legislation that enables them. He won’t though.
“And generally speaking, the more you do of this the better the prospects for you, which is a small motivation for early general elections if you think you can win. ”
What does this mean??
Superb Nell. My only quibble is the duration- the 60 years. It is surely more like 30. This dismantling and diffusion of the powers of the Nation State’s Executives & Parliament was a key objective of the Blair Modernisation Revolution from 1997. But that revolution – all the devolution, NMIs, new Supreme Court, Human Rights laws, Bank of England control of interest rates and expansion of the permanent Regulatory Quangocracy – was not driven only by the domestic progressive agenda. The dismantling of the powers of the National Executive was accelerated and encouraged by Labour being ardent supporters of the brand new shiny post Maastricht EU Empire from 1992. Brussels was the new Rome and its federalists wholly encouraged this (catastrophic) enfeeblement of the national interest in each of its 27 Statelets.
“The polling seems to suggest that most people are willing to give Labour a punt in the hope that they can improve the economic situation.”
No I think they are willing to give Labour a punt in the hope that they just aren’t the Tories. As for traditional Tory voters…many just won’t vote. I bet that turnout at the next GE will be a historic low.
Whatever you might want to believe, the country was in a better state after 13 years of labour than it is now.
LOL – but given the Tories ran with Labour’s policies we’ve effectively have 26 years of Labour, the real irony being that for much of the first 13 Labour ran with Tory economic policies, it was only when Brown sold his golden rule and did away with Prudence (remains probably under the floor in the Treasury) that it started to fall apart badly.
What this fellow I think doesn’t appreciate is that the public’s turning against the Tories was primarily motivated by morality rather than economics.
The lockdown parties, the handing of PPE contracts to your mates, the sense that the current crop of Tories are not mature and serious-minded enough to govern the country.
People partying in number 10 while you watch your gran die through a plastic screen. That’s what’s done for them.
That is certainly a big part of it.
I see Donald Trump is road-testing a new line about the next election. It runs along the lines of: there are three things wrong with Biden administration which I call ‘the three “I”s’ – Inflation, Immigration, Incompetence.
I would apply this to Britain too. Barring the recession the author predicts (guessing when the animal spirits will switch from greed to fear is a mug’s game in my opinion) these will be the issues at the next election. It doesn’t look good for the government but it is also hard to see how the public could be persuaded that they will not be worse under Labour.
BIden thinks that too, yet again Trump being proven right and Biden is building the wall!
2019
Shy tories
Academia + press+ public sector does not equal a majority of people. It does however control the means of communication whilst gate-keeping language which they booby-trap to keep the proles silent.
I don’t think polling can be trusted much since the left decided, around 2010 with the conservative victory, that it was going to set society against itself with an identitarianism that was intended to drive people apart.
Go to your local betting shop and put £1000 on a Tory victory.
Wait until a party says “Net Zero is insane, we are going to scrap it, then visit the bookies and bet on that party.”
I just might.
The problem is not that there are many shy (C)onservatives, there is simply no longer a Conservative Party with a Conservative policy platform that you can vote to have delivered in government if they win.
Take the last 3 manifestos. Lean as they were in terms of firm objective commitments, nonetheless the vast bulk of promises have been entirely ignored once in government. Sunak is personally guilty of this too: his leadership election promises have all been memory-holed.
Sunak was Chancellor for heaven’s sake, Truss got the blame for lifting the lid on (not causing) the consequences of policies he pursued.
When Sunak and Johnson broke their manifesto commitment not to raise the rates of Income Tax, National Insurance or VAT by announcing in 2021 a 1.25% increase in the rate of National Insurance , they should have called an election for a refreshed mandate then. It was the ethical thing to do, and the Tories could hardly be any worse off now. Johnson, Truss and Sunak have been in office on false pretences ever since.
Been in China fora few weeks and on return the partner noticed one thing heading to work in Hackney in the mornings – no weed smell.
It had been ubiquitous with the boys heading to school, but it looks like they can’t afford it now.
None around where we live, either.
Something has bitten in the last three weeks.
Maybe we can forget about the fat tax as well since they will have to stop buying doughnuts and snacks and concentrate on basic food (see wartime Britain).
This week’s prediction of calamity. Every week there is an article saying that either the US is about to collapse or the UK is basically bankrupt (which isn’t true since most UK debt is held in the UK).
Yep it is like the old joke: Philip Pilkington has predicted seven of the last two recessions!
“(which isn’t true since most UK debt is held in the UK).”
that doesn’t really matter.
If investors (domestic or foreign – check out the balance of trade) dump £ and gilts…well you are bankrupt.
Net liabilities is the key measure. Debt is just one kind of liability (or asset if you own it). The UK once had a strong net international investment position (NIIP) with more overseas assets than liabilities. That is no longer the case. 50 years or running a huge current account deficit (balanced by asset sales) has reversed this and the UK now has a NIIP of minus $730bn as of June 2023 or external net liabilities of about 33% of GDP. This is enormous and more typical of third world countries with economies dominated by foreign cartels. Not a comfortable comparison.
France appears to have a similar problem as the UK but its liabilities are largely in Euros and held by Germany and so they’re supported by the same central bank and therefore not really an international liability.
What a large negative NIIP represents is leverage other states and state actors have over your economy and control they have over capital formation and investment. You might recall that the UK now struggles to finance large projects without Arab or Chinese help (think Sizewell) and the NIIP helps explain why. To prevent this shortage of capital causing government debt market problems, the government regulator forces UK pension funds to buy government debt, starving the private sector of capital and so further reducing the competitiveness of the UK in the future.
There is no immediate crisis, but it is a slow long-term decline of the economy and with it the future trajectory of your living standards.
So how come Gold hit the highest £ value per Oz last week? How come Net Zero is still the Gospel according to the Morons who lead us.
Next year Car manufacturers get fined £15K for every EV car they fail to SELL, not build, SELL under Net Zero targets. 22% of Cars sold MUST be EVs, that 22% rises over time.
Net Zero is the guarantor of economic collapse in the West. Wait until the lights start going out then see whether the UK/EU/US aren’t heading for bankruptcy and worse.
As Doomberg points out,
“The path from Abundance to Starvation includes riot.”
We are on that path. The FIRES report is worth reading. In 27 years time according to that, we will have No shipping, No flying, No fossil fuels.
How are we going to feed 70M+ people? Bankruptcy and worse won’t need 27 years, we’ll get there much quicker AND the above article doesn’t even look at Net Zero!
Labour is bound to win by a large majority because the Labour voters in Scotland will all return to the fold. The days of the SNP are over.
I don’t understand the parallels drawn with 2008 – the author himself seems to be describing a totally different situation. I find this quite a confused article.