One week you’re fighting to survive the dance-off amid vicious backstage rivalries, the next you’re scoring a perfect ten from Bruno Tonioli for your shimmering tango. As it was on Strictly for Debbie McGee, so it was — well, almost — for Philip Hammond at the despatch box. Unlike many of the Budgets of his predecessors Osborne and Brown, this one did not unravel immediately or prove full of black holes and political tricks. Clear in its analysis, frank in its forecasts, limited in its objectives, it took modest steps to ease the housing crisis and encourage entrepreneurs — and not much else.
But it was enough to be hailed as a turning point in Tory fortunes and it was followed by Business Secretary Greg Clark’s ‘industrial strategy’, which again met more praise than scorn, though it clearly represents no more than ‘a decent first step’, as the CBI put it, towards addressing endemic problems of low productivity and skills.
Clark’s pledges to pump an extra £2.3 billion into research and development, but not until 2021-22, and to bring the UK up to the OECD average R&D spend, but not until 2027, come nowhere near justifying his own claim of ‘an unashamedly ambitious vision’. But he got away with it in a week when the public mood was receptive and Labour’s responses made no impact at all.
Plus, there was reassuring news from the Bank of England, which declared that the major UK banks are sufficiently well capitalised to withstand an imaginary crisis in which house prices would fall by a third, unemployment would double, GDP would plunge and the banks would collectively lose £50 billion — enough to have wiped them out a decade ago. That’s a worse scenario than even the gloomiest Brexit expectation, so according to Governor Carney, the long-term reinforcement of the banking sector’s foundations can be judged a success.
Putting these items together — Budget, industrial strategy, bank stress tests — we seem, for the time being, to be standing squarely on two feet with a sensible view ahead, tempered by the limits of how far the state can or should intervene in markets, and how much taxpayers’ money it can spend. What can possibly go wrong next?
What’s the brother up to?
The devil is in the detail, you might reply, and one example is what’s currently going on in the university sector, which holds so many of the keys to our future economic success. Vice-chancellors are currently grappling with a 600-page consultation which promises ‘a bold, student-focused, risk-based’ new approach to regulation and funding. One wise owl of that world told me it’s ‘the worst consultation I’ve ever seen’, hostile in tone to much that the best of our academic institutions hold dear. The minister responsible is Jo Johnson, who may be quietly doing even more damage to the nation’s prospects than his brother Boris.
It’s all gone quiet on the subject of the European Medicines Agency’s unexpired lease. Based in London since it was established in 1995, the drug-licensing quango is due to relocate its 900 staff to Amsterdam before Brexit day — while the European Banking Authority moves its more modest workforce to Paris. The Dutch city (chosen by Brussels from among 19 bidders) offers ‘excellent connectivity and a building that can be shaped according to our needs’, which is presumably just what the EMA thought about the nine floors in Canary Wharf on which it took a 25-year lease in 2011, before Brexit loomed.
That deal included three years’ rent-free up-front but — contrary to standard form for long-lease London office space and the advice that might have been offered by any property professional — no break clause. Evidently, the eurocrats responsible wanted to avoid the extra cost of get-out wording, even though MEPs queried the terms at the time. The outstanding €350 million of rent for the entire lease period is therefore still due, even though the EMA is departing, and total relocation costs have been put at more than half a billion, which Michel Barnier says is for the UK’s account since it’s all our fault. Our side argues that Brussels should pick up the tab if it insists on moving the EMA, which would be welcome to stay in London — where the ‘connectivity’ includes delegating a chunk of its assessment work to our own Medicines and Healthcare Products Regulatory Agency.
When the relocation was announced last week, nothing was said about future co-operation between the EMA and interested UK parties, including pharma companies as well as regulators — leaving yet another sectoral loose end we must hope will be addressed during the ‘transition period’ after March 2019. As for the lease money, we really ought to know who’s going to cough up and who was responsible for the cock-up in the first place. I hope we’re not being asked to pay for their pensions as well.
And so to lunch
In the end, of course, nothing in the Budget or the industrial strategy really counted for much beside the three great economic issues of the day: whether Brexit can be negotiated without catastrophic drops in investment, confidence and external trade; whether debt and equity markets are limbering up to deliver another global shock; and whether Corbyn and McDonnell can be kept out of power. The Bank of England’s stress-test report gave some comfort in relation to the first two of those threats and Philip Hammond, against expectations, did a little to make the third less imminent. But as he rose to deliver his speech last Wednesday, I confess I was sitting down to lunch — at the stylish Ivy Tower Bridge, since you ask — with a companion whose opening gambit put all these matters in perspective: ‘Thank goodness my father was born abroad. When it all goes pear-shaped here, at least I qualify for a new nationality.’