Beyond Currency

The rise in inflation and the threat of recession has been made worse by the country’s attempt to sever links with the EU via Brexit.

Many had assumed that lessening the bureaucratic red tape that Brussels considers vital for frictionless movement of goods and labour would help make the UK economy more efficient, but it seems the opposite is true.

The Prime Minister is embroiled in a row with a broad alliance of business interests, which is set to challenge Rishi Sunak over the planned bonfire of EU-inspired rules and regulations from the UK’s statute books by the end of next year.

The Institute of Directors, the Trades Union Congress and other bodies say that doing away with regulations will make a tough situation worse,

The wholesale scrapping of the rules and replacing them with yet-to-be-prepared regulations will make dealing with companies working under EU regulations impossible.

In a report published yesterday, the OECD speculated that the UK is one of the few members that are certain to face a recession in 2023. It also confirmed that it believes that of those facing recession, the UK will be among the hardest hit.

The first tell-tale sign of a contraction in the economy is expected to be a slowdown in employment, which will turn negative in 2023 and culminate in between seven hundred and fifty thousand and a million jobs lost.

Employment continues to be one of the major litmus tests of growing weakness in the economy.

The OECD believes that one issue that marks the UK from the rest of the G20 is the effect of Brexit on both the supply of cheap labour and supply chains.

Agriculture and hospitality are the worst hit, with labour shortages pushing wages significantly higher.

Brexit has again become part of the Government's thinking as it considers ways in which to lessen the effect of the recession that is expected to grip the economy.

A Swiss-style arrangement has been discounted by the Conservatives and labelled a non-starter by Brussels. One of Boris Johnson's only achievements as Prime Minister was to engineer a Brexit deal that satisfied the right wing of his Party, even though it is now considered unworkable.

The most demanding effect of Brexit has been the shortage of cheap, dependable workers to undertake roles that traditionally have been low-paid, repetitive and physically demanding.

To persuade British nationals to fulfil these roles, the salaries have had to increase, sometimes by double. This has contributed to inflation, and even then, the shortages remain.

The Labour Party leader Sir Keir Starmer spoke yesterday of the need to wean the country off its reliance on cheap foreign labour, but in true Labour style, he omitted to say how he believed this could or should be done.

In Parliament, the Opposition Parties continue to criticize Jeremy Hunt's Autumn Statement, saying that it will worsen the economic situation and is little more than a stealth raid on working people.

It is the role of the Opposition to hold the Government to account and offer alternative policies. They seem to be succeeding in the former task but failing in the latter.

The Leader of the Labour Party, Sir Keir Starmer and his Shadow Chancellor, Rachel Reeves, have been fiercely critical of the Conservatives, whom they accuse of driving the economy into the ground during twelve years in Government. Still, neither has offered any workable alternative to the tax rises and spending cuts announced last week.

There is a row brewing between the Government and business leaders about a proposal that the UK adopt a Swiss-Style arrangement with the EU as part of Brexit.

Switzerland has access to the single market and there is free movement of people. In exchange, Switzerland pays into the EU budget.

Jeremy Hunt delivered his Autumn statement to the House of Commons yesterday. It contained the predicted mix of tax increases and spending cuts, and a fall in living standards of around 4% nationally.

Twenty-five billion pounds worth of tax increases were delivered by way of the freezing of any increase in the thresholds for income tax until 2028. This means that as wages rise over the next five years, six million people will enter higher tax brackets.

The highest rate of income tax was cut from one hundred and fifty thousand pounds to a little over one hundred and twenty-five thousand. Hunt announced that the triple lock on state pensions and means tested benefits will be maintained meaning that both will rise by September’s rate of inflation next April.

While this announcement was cheered by Conservative MPs, it was little more than a confirmation of a manifesto pledge that was agreed by Boris Johnson last Spring.

The minimum wage was also increased by close to 10%

Jeremy Hunt will make the big reveal later today as he announces the results of the government's spending review, which is sure to hold a series of tax increases and cuts to public spending.

He has already revealed that taxes will rise for all and that his plans will be fair for all, with everyone sharing the burden of higher taxation.

One measure that has already been revealed is that the amount of help with energy payments will be scaled back as the energy price cap, the subject of so much public angst earlier in the year will be scaled back.

The entire package is expected to be split 55%/45% between spending cuts and higher taxation.

The usual scramble that happens when Government spending is under review, where each Ministry is tasked with looking at where budget cuts can be made, has been taking place since Hunt took up the role.

Yesterday's October employment report showed that core wages, not including bonuses, rose at their fastest level for twenty years.

Despite the pace of the increase, real wages fell at a record rate as they still failed to keep pace with inflation.

Prime Minister, Rishi Sunak, speaking at the G20 gathering of world leaders in Bali, urged bosses to curb their pay, which, while it would not have any material effect on overall wage inflation, would show a degree of solidarity with employees.

Sunak went on to be critical of nurses' demands for a double-digit pay award which, if not met, could see nurses take strike action for the first time in history. He feels that the demand for seventeen percent is both unrealistic and unaffordable and will simply contribute to a wage spiral, evidence of which is already beginning to manifest itself in the data.

In the recent past, the demands of supermarkets have seen the price of milk to farmers tumble, which the retailers themselves have been accused of profiteering. Now it is egg producers who are under pressure due to the dual demands placed on the industry and the rise of avian flu, which is seeing entire flocks slaughtered.

Yesterday's October employment report showed that core wages, not including bonuses, rose at their fastest level for twenty years.

Despite the pace of the increase, real wages fell at a record rate as they still failed to keep pace with inflation.

Prime Minister, Rishi Sunak, speaking at the G20 gathering of world leaders in Bali, urged bosses to curb their pay, which, while it would not have any material effect on overall wage inflation, would show a degree of solidarity with employees.

Sunak went on to be critical of nurses' demands for a double-digit pay award which, if not met, could see nurses take strike action for the first time in history. He feels that the demand for seventeen percent is both unrealistic and unaffordable and will simply contribute to a wage spiral, evidence of which is already beginning to manifest itself in the data.

In the recent past, the demands of supermarkets have seen the price of milk to farmers tumble, which the retailers themselves have been accused of profiteering. Now it is egg producers who are under pressure due to the dual demands placed on the industry and the rise of avian flu, which is seeing entire flocks slaughtered.

Sunak has been building foreign policy bridges as he criss-crosses the globe before facing the arduous task of rebuilding confidence in the UK’s finances in concert with his chancellor, Jeremy Hunt.

Having renewed the country’s commitment to climate goals at the COP27 conference before jetting to Bali for G20. He strikes a far more business-like figure than Boris Johnson, whose amiable bonhomie never truly resonated with world leaders.

His primary goal in Bali will be to be part of a united front to condemn Russia and label it a rogue state.

When he arrives back in London on Thursday morning, Sunak will go straight to the House of Commons to support Hunt as he delivers the blueprint for the UK’s recovery from the recession and establishes measures to drive the economy forward in the post-Brexit period.

Various points from the plan are drip fed to friendly journalists to prepare people for the tax rises and spending cuts that are bound to be included.

Jeremy Hunt will present the Government’s financial statement to Parliament this Thursday. Appearing on current affairs programmes at the weekend.

Hunt spoke of his belief that the entire nation must share the burden of closing the hole in the country’s finances. He believes that he and the Prime Minister must make some tough decisions, and provide support for families most affected by the cost-of-living crisis.

Everyone will have to pay more in taxes, according to Hunt, but observers will want to see the detail of the package before they pass judgement on how fair it is.

It is rumoured that the 50p top rate of income tax will be reintroduced, which affects the highest earners.

The cut in the basic rate of tax will be pushed back for another year which will allow the Conservatives to introduce it as a sweetener, in the run-up to the next General Election.