Paul Montague Smith
The shine has definitely come off Boris Johnson’s government.
The Conservative poll lead has fallen further and (according to YouGov) more people now think the Prime Minister is doing badly than doing well. Its U-turn on schools and the coronavirus tracking app fiasco have yet to be reflected in the numbers, so we can expect them to get worse.
Combined with an 80 seat majority that’s no longer looking insurmountable – with rebellious backbenchers unhappy about issues like Huawei, the travel quarantine and liberalising Sunday trading – there’s already briefing about a reshuffle in September, designed to give an impression that the PM will get a grip.
I can’t remember a reshuffle that shifted the dial with the public. Perhaps it’s partly laying the ground for what might come of the classic lobbying scandal that’s been steadily brewing. The Housing Secretary is facing very difficult questions about his approval of a development for a party donor, leading to allegations of cash for favours.
It appears politics is now leading the science on coronavirus. The ‘baby steps’ are coming thick and fast – faster than the impact they will have on the R rate can be measured. Economic realities have kicked in and the impact of lockdown on the public finances and jobs has hit home within Number 10.
But without the ‘world class’ tracking system that has been promised, the risk of further waves is significant. Many MPs think a further lockdown can’t be afforded. If another wave hits, it’s unclear whether public health will be the priority.
To help jumpstart the economy the Chancellor is shortly set to announce measures to stimulate spending and activity. Former Chancellors Sajid Javid and Alistair Darling agree that a VAT cut should be implemented. Other prime candidates are a cut to employer NICs, guaranteed apprenticeships and a programme to help people get back into work. So a stimulus now, with probably some tax rises to be announced in November.
As government loans to SMEs start to turn sour, which many inevitably will, the banking sector faces an unenviable task of having to chase down credit they themselves wouldn’t have issued. Their reputation will probably take an unfair hit as a result, unless calls for debt write-off or debt to equity schemes are heeded by the government.
The legal deadline for extending the Brexit transitional period is passing on 1 July as is the planned deadline for assessing equivalence in financial services. While some flexibility around certain issues are only now being signalled by the parties, the key arguments are still playing out, including over the UK’s adherence to the Northern Ireland protocol in the Withdrawal Agreement.
The government recently published its plans for regulating the financial services sector after Brexit, which are designed with an outcomes-based equivalence agreement in mind and which the EU has been resisting. The UK has now pushed back the date by which it said it wanted the broad outline of an agreement from June to October. The chances are probably 50/50 of a WTO outcome or, as George Osborne puts it, “a deal to keep on dealing.”
The government has also sent a signal of where its focus for financial services will be in the years ahead in choosing Nikhil Rathi as the FCA’s new chief executive. With a background in international financial services at the Treasury and as chief executive of the London Stock Exchange, it’s hoped he’s best placed to keep the UK a leading global financial centre. Chris Woolard, the interim chief executive, has a background more focused on policy, competition and communications. It is likely he will now move on.
That’s not to say domestic issues will fall off the radar. In a recent speech Charles Randell, the FCA Chair, set out a manifesto for the further changes in regulation and industry behaviour that it wants to see as we enter a recovery, including introducing more of a polluter pays principle. If you have a moment it’s worth a read (here).