…September 2024

Britain’s Labour government will remember September as the month the wheels came off the bus; for the rest of us this is just politics as usual. So far the prime minister Keir Starmer has not quite managed to make a total Liz Truss of things but she did set a very low bar, and hovering just above that bar is not a recipe for success.

It’s hard to know where to start, such is the scale of the mess that Starmer and Co have made in just three months. Perhaps the biggest issue is the faltering economy. September saw the publication of the economic figures for July, which showed that the economy flatlined for a second month. This has prompted the fear that the very modest recovery has petered out. The economy grew 0.7 percent in the first quarter of 2024, which fell to 0.6 percent in the second quarter. Worryingly, the Production sector, which includes manufacturing and of course printing and packaging, fell by 0.8 percent. This in turn means that the chancellor has less room to manoeuvre.

The Bank England has left Interest rates untouched at 5 percent, as inflation stays at 2.2 percent. The bank is still talking about a further cut to the base rates before the end of the year, but the hope of multiple interest rate cuts throughout the second half of the year has evaporated. The property market – still the best measure of stability in the UK economy – is experiencing the lowest level of actual sales in a decade. 

In contrast, the US Federal Reserve cut its interest rates this month by half a percent, the first cut in four years as the US economy is starting to pick up. The European Central Bank cut its interest rate in September to 3.5 percent, the second reduction this year. However, the ECB has warned that the Eurozone’s GDP growth is also faltering. 

Starmer and his chancellor, Rachel Reeves, have dealt with the sluggish economics by claiming that the country is broke, blaming it on the last government, which has created the impression that they have no idea how to fix the mess. At the same time, the treasury has been trying out a new line, that the UK has been trying to fund a European style social health model with American-style low taxation, which suggests that the treasury mandarins really shouldn’t be allowed out in daylight hours.

Starmer has said that those with the broadest shoulders must pick up the tab, which much to everyone’s surprise turns out to be pensioners, most of whom will lose their winter fuel allowance, and families with more than two children, who have had their child benefits capped. Reeves has been unable to explain why the government did not look at alternatives, such as increasing taxes for wealthier people. 

Instead Starmer and Reeves, who clearly like a challenge, have fallen back on the last government’s approach of calling for growth – to replace the money that was wasted – whilst ruling out the investment needed to fund that growth. Inevitably this has led many people to conclude that Labour is pursuing a misguided austerity approach to Britain’s economic problems, and this fear has decimated the last remaining shreds of confidence in the economy. 

Right on cue, the latest Lloyds Bank Business Barometer which was carried out in the first half of September, found that business optimism grew in July and August as the economy strengthened in the first half of 2024, but then fell back to 47 percent in September. This echoes a report from the Recruitment and Employment Confederation, which found that employers were less confident about taking on new staff, and another from the British Retail Consortium, which showed a drop in consumer confidence. Starmer has promised that there is light at the end of the tunnel but for many British people that feels more like the lights of a fast approaching train.

Even Starmer himself is feeling the pinch and has had to tap a passing millionaire, Lord Alli, for suits and new glasses, plus dresses for Mrs Starmer, to the tune of over £100,000. Other Labour MPs accepted clothes, travel and other gifts from their own millionaire friends. Strangely enough, nobody is offering free clothes to ordinary British workers, though the average wage is now £28,000, while backbench MPs earn £91,346 plus expenses, and Starmer as prime minister trousers £166,786 per year. 

Starmer’s defence is that he has followed the rules, but he hasn’t even managed to do that, having been forced to amend and update some of his earlier declarations. Besides, the public are quite aware that the rules were written to be flexible.

Ever helpful, Reeves, who has also grabbed lots of free handouts, has signalled that she might not after all crack down on non-doms – the tax break for rich foreigners, citing fears that such people might simply move onto another country. It’s hard to see how this would be a bad thing since millionaires are only of use to any economy if they are spending their millions in that country. 

Besides, other countries have their own problems. The conflict in the Middle East is expanding though some of the players are still missing from the battlefield. Iran is single-handedly responsible for both Hamas and Hezbollah, as well as the Houthis but its leaders have so far preferred to hide behind its proxies, no doubt mindful of Israel’s penchant for killing its enemies directly.

And Iran is weak, its economy badly damaged by years of economic sanctions and with internal tensions as its citizens dare to think of freeing themselves from the tyrannical rule of the ayatollahs. Israel has carried out several high profile attacks in Iran that have demonstrated its ability to strike deep within the heart of the country and can clearly weaken the security apparatus that protects the Iranian leaders from their own people. 

The war in Ukraine continues but is overshadowed by the US elections and the probability that a Trump win will drastically cut the US financial and military support for Ukraine. This in turn has led to nervousness in Europe as to what a Russian victory will mean for European security. It will certainly be harder for European leaders to justify having US military bases on their soil, if the Americans are unable to understand the value of helping the Ukrainians do the fighting and dying that is guaranteeing the security for the rest of Europe. 

Besides, the Ukrainian conflict will have lasting implications for other parts of the world, through the alliances that the Russians are forging elsewhere, with North Korea and with China. More importantly it holds the key to the balance of power in the Middle East because of the exchange of military technology between Russia and Iran and potentially Iran and China. 

The Chinese too are watching the US election amid a continuing slide in relations between China and the West. The most obvious issue is over electric vehicles, where the Chinese have taken a lead because they understood the strategic nature of this technology.

The European car industry appears to be buckling under the pressure of electrification. VW has floated the possibility of closing two of its factories in Germany, while Volvo has scrapped its plan to sell only electric vehicles after 2030. This is largely because the European car makers took the cheapest route to profitability and assumed that they could import electric cars and battery packs from China. But many Western governments see China as a strategic risk and have imposed tariffs on Chinese imports because they want their automotive industries to develop and build electric cars in their home markets. 

The Americans have upped the ante by floating the possibility of banning all Chinese automotive software on the basis of national security. It’s hard to see how the Chinese government can argue against this, having previously banned Tesla cars from government installations for the same reason.

The pressure to clean up power sources saw Britain’s last coal fired power station shut down at the end of September. Britain was the first country to rely on coal and it helped transform the country into an industrialised nation. But now Britain will be the first G7 country to abandon it in the transition to cleaner power. The last blast furnace at the Port Talbot steelworks, which is now owned by Tata Steel, has been shut down, bringing steel making in Wales to an end. There’s a plan to build a new electric furnace for recycling steel but that’s years away. 

Yet climate change is undeniable. Freak flooding caused by storm Boris in Eastern Europe led to a number of deaths with towns having to be evacuated and a state of natural disaster declared in Poland. Meanwhile, the UK is still clearing up the mess left by our own Boris storm…