Debt battle bites the dust
ON HEARING the detail of Theresa May’s deal with the DUP, one couldn’t but help think of the American politician Everett Dirksen. The budget disciplinarian famously declared: ‘A billion here, a billion there, pretty soon you’re talking real money.’
One must conclude that there is a price worth paying to keep Jeremy Corbyn away from the money tree of government.
But the Tories have to be careful that they don’t sacrifice the financial credibility built under Cameron-Osborne.
All of Philip Hammond’s efforts so far to continue with the process of balancing the budget and bringing down Britain’s national debt of £1.7 trillion have failed.
The Chancellor’s Budget idea of making the self-employed pay more National Insurance had to be withdrawn, leaving him and the Prime Minister with egg all over their faces. His effort to increase the tax on dividend income was lost in the final bargaining among parties before Parliament dissolved before the election.
The DUP deal is littered with fiscal pitfalls. The Barnett formula, which sets the fiscal settlement for Scotland, is unaffected by the terms of the DUP stitch-up.
But the idea that the other devolved nations will not be making demands for special treatment is cloud cuckoo land. Even though Labour may be in charge in Wales and the SNP in Scotland, it is hard not to believe that some Tories would also be thinking that a door has opened.
Similarly, Hammond is clear that postBrexit the UK’s regions need to start playing catch-up with London. One can imagine that newly installed Tory mayors, such as Andy Street in the Midlands, will be thinking they would like some cash too.
May’s attempt to deal with inter-generational issues by taking some of the goodies away from pensioners has backfired.
The ‘triple-lock’ – which means that the universal state pension rises by the best of consumer prices, earnings or 2.5pc – is being saved by the DUP alongside the winter-fuel allowance. In his March Budget, Hammond pushed out the date for balancing the books until 2025. That goal is disappearing over the horizon.
The irony is that the British public has imbibed the political language of ‘austerity’, but it hasn’t happened.
Big items of Government spending, such as the NHS and education, have continued to rise in real terms.
And although the annual deficit has shrunk by two-thirds as a percentage of total output, the country’s debt burden will still stand at 89pc of gross domestic product this year and 83.2pc in 2022, according to the IMF.
Free-wheeling spending may look more attractive than budgetary discipline but, as we learnt in the past, it is the road to ruin.
Russia’s march
EU CITIzENS may still be worrying about their future in Britain but there is no such trouble for the oligarchs from the former Soviet Union.
The latest to secure his future in UK plc is Mikhail Fridman, who has swooped on health chain Holland & Barrett in a £1.8bn deal. H&B may have 1,150 shops, a heritage dating back to 1870, a turnover of £610m and some remarkable profit margins, but the price paid looks generous for a chain of stores, often in secondary locations, which need more than a lick of paint and some fresh packaging on its own-brand products.
Fridman is not the first oligarch to join our nation of shopkeepers. Waterstones may be run by British bibliophile James Daunt but the money-man behind the bricks and mortar is Russian billionaire Alexander Mamut. Roman Abramovich bought his way into Britain with Chelsea FC.
And newly knighted Ukrainian Sir Len Blavatnik, owner of Warner Music, has proved to be one of the great philanthropists, supporting a variety of causes ranging from the school of government at Oxford University to the Tate, as well as other charities. Long may it last.
King coal
RIO Tinto looks set to recommend the offer by China-controlled Yancoal for its Hunter Valley assets in Australia, despite a better offer from London-quoted Glencore.
The grand-daddy of British miners figures it has regulatory approval for the Yancoal deal and there is no harm in keeping China, where it does 43pc of its business, onside.
Maybe, but shareholders deserve to be given the opportunity to consider the highest offer on the table.
And policymakers in Canberra might feel happier if the Sino-grip on the Australian economy was kept at arms-length.