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It’s a Fight for the Right and Net Zero could be a victim

From  the London Playbook

FIGHT FOR THE RIGHT: MPs head back to Westminster this morning with the race to be the next prime minister about to hit full throttle. Foreign Secretary Liz Truss has finally announced her bid for Downing Street, Tom Tugendhat and Kemi Badenoch have clinched major endorsements and onlookers are asking themselves: Who the hell is Rehman Chishti? The temperature gauge will edge up another notch tonight when Conservative bosses announce the rules of engagement — but don’t expect bitter briefing against rivals, accusations and recriminations to be outlawed. The Tories wouldn’t be able to handle a contest without gnawing lumps out of each other.

All in a spin: The number of MPs still to decide which candidate to support is fast diminishing, which means most of the people Playbook spoke to last night were spinning like mad. Others who are still to back a horse used words like “ridiculous” and “mental” to describe the ballooning circus of hopefuls, and were finding the smorgasbord of right-wing crazies overwhelming. No one had the faintest idea who might win the thing, or if the last Conservative standing would be up to the job. “You need people with experience and humility in the final two,” one minister quipped. “But those aren’t characteristics that are common in people who think they could be prime minister.”

On that note … Chair of the committee on standards in public life Lord Jonathan Evans told the Week in Westminster last night that after the Boris Johnson era, a new PM must show that “public standards are going to be very high on their agenda.” On the Andrew Neil Show on Channel 4, former Chancellor George Osborne said the Tories must “drain the poison” of Johnson’s period in office.

One thing is for certain: The U.K. is showing little sign of shifting to the center ground anytime soon, as my POLITICO colleague Annabelle Dickson writes in her take on the pledges made so far. She brands it “a heady mix of tax-cutting, woke-bashing and Brexit-backing policies.” It’s no surprise Conservatives Zac Goldsmith and Chris Skidmore are terrified the fight for net zero will be a victim in the leadership race.

What cost of living crisis? Tory hopefuls’ fuss over tax cuts is devoid of reality

By the time the Conservative party gets around to electing a new leader, Britain will either be in recession or perilously close. The cost of living crisis will be entering a new, more painful phase with a fresh surge in energy bills. A tough autumn will be approaching, with inflation – already at a 40-year high – heading for 11%.

All they are offering is a game of tax-cut Top Trumps

Richard Partington 

These are far from ideal conditions for an incoming prime minister. Yet so far, none of the Tory candidates is offering real solutions to the cost of living challenge. Instead, the leadership contest is taking place in some parallel universe where the biggest tax cutter is king.

With the tax burden heading for the highest level since Labour’s Clement Attlee was prime minister in the late 1940s and early 1950s, this game of tax-cutting Top Trumps is perhaps understandable. The party feels it has lost its way, and needs a major reset. However, it’s a debate that is devoid of reality.

Of the leading candidates, only Rishi Sunak is arguing for restraint. The Sunday newspapers are full of pledges to cut rates for businesses, workers and consumers, with promises worth billions. Taken together, they would eradicate the tax base of a small country. In a big economy such as the UK, they would blow a serious hole in the public finances – something past Conservative leaders told us could turn Britain into Greece.

Tax cuts, big spending and budget deficits aren’t always bad news if they are backed by sound economic reasoning. However, planning fiscal policy to woo a narrow group of mainly affluent Tory party members isn’t likely to meet the needs of wider society amid the worst hit to household finances of our times.

Outside of this world of fantasy politics, economists warn that some of the tax cuts being dangled would throw petrol on the inflationary fire and turbocharge inequality.

Take VAT: cutting the rate from 20% to 17.5% would cost up to £15bn a year, but help richer households most. Inflation would be stoked by boosting the spending power of wealthier families, who were likelier to have built up savings during lockdown. Poorer households, suffering most from soaring living costs, would benefit least.

To kickstart a moribund economy, Sajid Javid and Jeremy Hunt are promising not only to scrap a planned corporation tax rise from 19% to 25% from next April – a move that was supposed to bring in about £17bn a year – but also go further, with a cut to 15% that would cost billions more.

It’s a demand that not even the big business lobby groups are making, and one that two former health secretaries ought to recognise would have serious consequences for public services.

Britain already has one of the lowest corporation tax rates among rich countries, and slashing it to 15% would fly in the face of the emerging global consensus that a race to the bottom on tax competition is a zero-sum game. Almost 140 nations – including the UK – agreed this much at the OECD last year, acknowledging that governments lose while footloose multinationals prosper.

There is growing recognition that headline tax cuts are terrible at promoting more business investment. According to a report by the Social Market Foundation, the UK spent close to £100bn with little to show for it when George Osborne slashed the corporation tax rate from 28% in 2010 to 19% today. Economic growth remained weak, while levels of business investment fell behind comparable rich nations.

When companies invest, they do so because of far more than just tax, often placing more weight on political and economic stability, as well as other key fundamentals that might benefit their returns – such as the skills of the local workforce, quality of infrastructure, and depth of their potential market.

Business investment has stalled because of Brexit and the pandemic – and now an imploding political system. It now stands almost 10% below pre-Covid levels.

Business leaders will this week warn that the wrong types of tax cut will make matters worse. The Confederation of British Industry, the country’s foremost business lobby group, will publish a report calling for a smarter tax policy rather than eye-catching measures to please the Tory faithful.

“We need tax changes that drive investment, not tax changes that fuel inflation,” it will say.

The lobby group is worried about the planned rise in corporation tax to 25% next spring, but has previously suggested it could be offset by a package of tax reliefs to support business investment. Such a move would be a far smarter way to develop a pro-growth economic stance.

Sunak, the architect of this carrot-and-stick approach to business taxation before his resignation as chancellor, has used his leadership campaign to kick back against the party telling itself “comforting fairy stories” of magical-sounding but ultimately reckless giveaways.

It’s an argument strikingly similar to Labour’s bitter infighting of recent years, reminiscent of Tony Blair warning the party against reaching for the comfort blanket of Jeremy Corbyn’s socialist policies. His argument was that this might feel right to the party faithful, but is splintered from mainstream opinion and not what the country needs.

Sunak is right to argue that cutting taxes for the sake of ideological purity is not a recipe for sound public finances and a strong economy. Where his message falls apart, however, is that tight budgetary constraints should triumph every time. This embraces a Treasury orthodoxy that ought to have been binned after a decade of austerity. For years it has been recognised that budget deficits can and should be used to soften economic shocks and support recoveries, if good tax and spending decisions are taken.

For the Conservatives it’s important to remember that where Boris Johnson cut through with the public was on the need to escape austerity and “level up” Britain’s lopsided economy. Levelling up delivered an electoral coalition spanning poorer “red wall” constituencies and the more prosperous south. Blunt tax cuts are not the tool to achieve a better balance.

In focusing on ideologically driven tax cuts alone, the Conservatives are missing the point that a more fundamental rethink of Britain’s economy is needed than an old and tired reboot of Thatcherism.

For a more detailed economic assessment, also by Richard Partington see: 

Boris Johnson has left the UK economy in a parlous state 


…In the midst of this succession of generational shocks, experts say deep structural faultlines have been exposed – all made more difficult to tackle by three problems: the legacy of austerity; Brexit; and Johnson’s lack of a coherent plan to deal with them all.

“This whole period is his legacy,” said Prof Jagjit Chadha, the director of the National Institute of Economic and Social Research, who believes without Johnson’s key role in the Vote Leave campaign six years ago, Brexit may not have happened. At least not in the same way.

“It has dominated our economic performance since 2016,” he said, referring to the year in which Britain voted to leave the EU.

What has followed is weak business investment – with the level of spending estimated to be about 20% below where it would have been without Brexit – as well as limited gains in living standards.

Without sufficient investment and productivity gains – and now with a lack of workers to fill record job vacancies – growing the economy without stoking inflation has become harder.

Prices are rising at a rate of 9.1%, and heading for 11% this October. The Bank of England is responding by hiking interest rates to the highest levels since the 2008 financial crisis, with more rises expected next month.

“We’ve had very slow growth,” said Chadha. “To be fair to Johnson, there has been a sequence of errors from successive governments. Brexit was thought to be the answer to our economic woes. In the way it has been managed, it has only exacerbated them.”…

Rishi Sunak says he has ‘no working-class friends’ in resurfaced video

Rishi Sunak’s 2001 video is very different to the glossy one that emerged “overnight” following Boris’ resignation.

Could this sink his chances (not what he says but the way he says it)? – Owl

More than 10,000 people on Twitter have ‘liked’ and shared Kathryn Franklin’s video of Sunak’s comments. Kathryn, from Huddersfield, told WalesOnline: “We first saw that Rishi Sunak clip on our local BBC Politics show back in March. We recorded it as we found it to be quite shocking and telling. I tweeted it at the time but I haven’t many followers so it didn’t get seen.

“I then saw Rishi Sunak’s slick campaign video in support of his bid to become PM and it seemed to contradict what he’d said in that video clip back in 2001. So I posted the clip again… It did take me by surprise how many people were seeing the little video that my husband Stuart and I had clipped but we felt it was a good insight into the potential PM candidate and we’re glad it’s been seen by quite a few people now. We don’t belong to any political party but we just think honesty, integrity and authenticity are important values in public life. All sadly lacking of late.”

Source Wales Online

Watch video on Twitter here

The 2022 Rishi Sunak is portrayed here

Will Boris’ “Wallpaper List” include Dame Dorries?

Harold Wilson’s controversial 1976 resignation honours list was dubbed “the Lavender List”.

Owl thinks “The Wallpaper List” would be appropriate for Boris.

“For defending the indefensible”

Boris Johnson planning to put Nadine Dorries in the House of Lords

Jack Peat 

Nigel Adams, Nadine Dorries and Allegra Stratton are among the names being tipped for a peerage before the summer recess.

With Boris Johnson clinging to power, the outgoing prime minister is expected to use the coming weeks to draw up a list of people he wishes to appoint into the House of Lords.

According to the Sunday Times, Dorries is “expected” to go to the upper chamber and depart frontline politics for novel writing after Johnson’s downfall.

Paul Dacre, the former editor of the Daily Mail, and billionaire Tory donor Michael Hintze are also said to be in line to be ennobled in the next couple of months.

The newspaper reported that a No 10 official contacted a veteran Tory to ask whether it was possible to give Stanley Johnson a knighthood on the basis he was “once an MEP”, but the senior party figure advised against it.

Allegra Stratton – who quit as Mr Johnson’s spokeswoman after she was captured joking about at Christmas gathering at the start of the Partygate scandal – is also said to be “tipped” for a peerage as part of the PM’s resignation list.