British politics is in a state of flux right now.
No content with making a real mess of Brexit, our parliamentarians are furiously at loggerheads with each other over a whole range of issues.
Huge in-fighting within both main political parties has spawned the rise of the Independent Group. MPs who’ve joined this new outfit say that they stand for ‘the centre ground of politics’. And they forecast that more Conservative and Labour members will join their new party.
So, with the Brexit 29 March deadline looming, is there even more chaos ahead?
In fact, though it’s rather lost out in the headline stakes to all the political brouhaha, there is some better news out there. And it could provide us with a good money-making opportunity…
Brexit has clearly proved to be the tipping point for this change in UK politics.
With B-Day nearing, here at Agora we’re planning to say plenty about Britain’s pending divorce from the EU and how it will affect you. So I’m not going to go down that road today. But watch this space.
As for the prospects for the Independent Group, recent history hasn’t always been kind to centrist breakaway elements.
Remember the Gang of Four?
(No, I’m neither talking about the UK post-punk band nor the Chinese Communist Party officials who came to prominence during the Cultural Revolution).
Labour moderates Roy Jenkins, David Owen, Bill Rodgers and Shirley Williams left the party after the January 1981 Wembley conference which committed Labour to unilateral nuclear disarmament and withdrawal from the European Economic Community, the forerunner of the EU.
Believing Labour had become too left wing as a result of being infiltrated by the Trotskyist Militant tendency, they set up the SDP (Social Democratic Party) which ultimately teamed up with the Liberals to form the Social and Liberal Democrats.
30 years later: of the SDP there is now no sign. And the Liberal Democrats have little influence on the British political scene.
So the Independent Group “needs to incite a much wider rebellion to achieve its goal of triggering a rethink over the country’s exit from the European Union and smashing a two-party structure that they say is no longer fit for purpose”, says William James at Reuters.
“They need numbers. You’re going to need some cabinet resignations… that would really set things moving”, says Tony Wright, Emeritus Professor of Government and Public Policy at UCL: “Where will it lead? It could lead to nowhere, it could become a footnote in the history of Brexit, or it could become the beginnings of the break-up of the party system which has been going for the last 100 years.”
In other words, the real story to emerge from the Brexit mess could be starting here.
Moving forwards from memory lane as well as those current parliamentary pitched battles and back to my main theme for today…
More government money
Let’s look at our government’s coffers. They’re actually looking in very good shape.
In fact, I’ll repeat that, because at first glance it probably looks like I’ve got it wrong.
It’s become our expectation, not just here in Britain but around the world, that governments are constantly borrowing far too much money. And that they’re always struggling to keep their deficits down, let alone to balance the books.
Yet last month Britain revealed its biggest budget surplus on record.
In January the country managed to bring in almost £15bn more than it spent. This was the highest surplus since monthly records began in 1993. Britain is making money again!
Granted, this state revenue bonanza wasn’t due to a rip-roaring economy.
Last year saw the weakest economic growth since 2012.
Compared with the previous January, the huge surplus was mainly driven by a £1.9bn surge in lagging self-assessment tax receipts and a £1.2bn rise in capital gains tax takings. So it doesn’t fully reflect the condition of the economy at the moment.
It seems that more people than usual have paid their tax bills before the 31 January, meaning that February’s receipts are likely to look worse by comparison. Further, government precautions for a possible ‘no-deal’ Brexit could push February and March spending higher than last year.
Yet PAYE and VAT receipts climbed by 7.5% and 5.6% respectively, above the 5.3% and 5.2% average growth rates recorded in the first nine months of the fiscal year, indicating a stronger economy than official data imply.
Indeed, for the current financial year the national budget deficit looks set to drop to its lowest since 2001/02 at just above 1% of GDP. That’s down from 10% just after the great financial crisis a decade ago.
To repeat, that’s just a 1% annual overspend.
OK, if economic growth slows further, that borrowing percentage is likely to rise.
But it’d be from an extremely low level. In other words, Chancellor Hammond has scope to spend some serious money and still keep 2020/21 cyclically-adjusted borrowing (debt relative to economic growth) below his stated target of 2% of GDP.
We’ll know more in next month’s Spring Statement – the main Budget has now moved to October – assuming you can drag yourself away from the Cheltenham Festival to watch it!
What’s the bottom line? The country now has the cash to absorb post-Brexit shocks. And any increases in government spending to offset these are likely to boost UK domestic businesses.
As we can’t be sure exactly how Brexit will play out, we don’t know yet which companies will benefit. But this could be a good money-making opportunity. When we’ve worked out where the money will be made, you’ll be the first to know…