Jack Semple, Secretary of EAMA offers a round-up of what has happened in the past few days at Westminster in a combination of news and comment.
Sunak has announced his new cabinet and those who will attend but are not full members. There is a clear-out of many Johnson and Truss backers, although Therese Coffey remains, moved from Health to Defra, where she will have to decide on UK REACH, among other issues.
Grant Shapps replaces Jacob Rees-Mogg at BEIS, with plenty of decisions to make including the future direction of the Brexit Opportunities Unit and technical regulations such as UKCA. Rees-Mogg resigned before being sacked – during the summer leadership contest, he had called Sunak treacherous and a socialist.
Michael Gove is back at Levelling Up, Housing and Communities, and in charge of relations with the devolved governments. LUHC is also responsible for UKCA challenging issues related to construction products.
Gillian Keegan is promoted to lead the Department for Education. She had a successful business career at firms including Delco, Mastercard and Travelport, having started working as an apprentice in a car factory in Kirkby aged 16. She supported the now-disaffected Rory Stewart in the 2016 leadership election and got her first ministerial job in 2020, as apprenticeships and skills minister at DfE. Sunak has spoken several times this year about the importance of skills and how UK firms under-invest in training.
Kemi Badenoch remains at the Department for International Trade, a role she was given by Liz Truss. DIT has been criticised for shrinking and narrowing its export ambition and support for exporters, partly in response to a budget squeeze from HM Treasury. There are also calls for greater clarity as to the UK’s trade policy, including our future relations with Europe. An immediate issue may be controversial trade talks with India, which appear to have gone off the boil but which the new PM may wish to see revived.
Suella Braverman, who takes a hard line on immigration, returns to the Home Office, a move that has been criticised given that she had only just been required to resign for breaking ministerial rules.
Michelle Donelan remains at Digital, Culture, Media and Sport – the department which, controversially, is responsible for semi-conductor strategy, rather than BEIS.
Non-cabinet ministerial appointments are expected in the day or so.
Full list of cabinet members and attendees: Ministerial Appointments: 25 October 2022 – GOV.UK (www.gov.uk)
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Rapidly chosen
Rishi Sunak took over from Liz Truss as Conservative Party leader and prime minister quickly, in a matter of days. The decision was taken by MPs alone.
Sunak saw off a challenge from Boris Johnson, who withdrew from the brief race saying the time was not right. This is a repeat of his unexplained withdrawal from the leadership contest in 2016, which cleared the way for Theresa May to become PM and allowing him to come back later.
Many conservative commentators wish he would now withdraw permanently. In The Times, an article from Matthew Parris likened Johnson to a corrupting vampire and said a stake needed to be driven through his heart. Johnson withdrew amid claims that he had passed the 100-MP threshold needed for a run-off vote but there was no evidence to support the claim.
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Challenges ahead
Sunak faces huge challenges, including inflation, public sector wage claims, whether to index benefits, massive over-spending by government relative to income, the need to keep the economy moving (which was one of the reasons for the Covid furlough package) and the need to maintain public sector infrastructure investment. He will be wary of critics within and outside Westminster, critical newspaper and fresh agitation form Nigel Farage and his supporters.
More positively, a slight revival in the pound and reduction in borrowing costs in recent days are encouraging. And as commentators have noted, the UK is far from the only developed economy suffering from inflation and debt.
In his first speech as PM, he said that economic stability and confidence would be at the heart of the government’s agenda. He promised “integrity, professionalism and accountability at every level”.
He pledged levelling up “and building an economy that embraces the opportunities of Brexit, where businesses invest, innovate, and create jobs”. Firms trading internationally will be keen to hear much more about what his government sees as the opportunities of Brexit and how it envisages the UK’s relationship with the EU.
Immigration policy remains controversial. Public and private sector employers, including the NHS and manufacturers, are thought to have switched their recruitment focus from the EU to Africa and the Far East. This appears to defeat what Theresa May said was one of the main reasons people voted for Brexit – to reduce the number of people coming to the UK to work. It was also reported to be the cause of a clash between PM Liz Truss and home secretary Suella Braverman earlier this month. Many leading advocates of Brexit wanted to bring people to the UK from around the world but it is far from clear that is what their supporters want. (The value of the pound also affects whether or not people want to come to work in the UK.)
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Brexit
In Sunak’s Mais Lecture in February 2022 – a landmark for his policy approach – Sunak mentioned Brexit in one sentence and that only in passing, talking about why firms may not have invested more: “I know there has been a cloud of uncertainty hanging over the British economy in recent years. But that cloud is lifting: the form of Brexit is clear, with a comprehensive free trade agreement [TCA]; we are moving on to living with Covid more quickly than elsewhere; we’ve set out plans for our most capital-intensive ambitions, like Net Zero.
However, Brexit – which Sunak has long supported – remains an issue, as a raft of serious commentators have stated in recent days. On Wednesday October 26th, Europhile and former Siemens UK chief executive Jurgen Maier, writing in The Guardian, said that while re-joining the EU was no longer on the table – “that ship has sailed” – the UK should re-join the single market and the customs union. A new video from the Financial Times has had almost three million views in two weeks.
Former Bank of England governor Mark Carney noted this month that in 2016 the UK economy was 90% the size of Germany’s and that it is now just 70% the size. In The Times this week, Clare Foges notes that “since Brexit, business investment has been growing in all other G7 countries but not in the UK. The political class, (including Sunak) knows all this. Those who backed Brexit dare not admit their misjudgement,” Foges says.
What seems most striking is the lack of discussion of UK trade policy and the UK’s trading relationship with Europe and its likely future development. We have a free trade agreement but that does not mean there is stability and certainty in the relationship – will the TCA will survive its five-year review? The Northern Ireland Protocol Bill is intended to solve the problems of the Northern Ireland border but remains controversial.
The controversial Retained EU Law (Revocation and Reform) Bill, making its way through parliament, gives new powers easily to sweep away rules from the EU but it is far from clear what changes government will make in practice. Most rules may remain unchanged.
Net zero remains a challenging issue for government. Sunak hardly mentioned it in his Mais speech. Truss set up a fast-track review “to ensure that delivering the net zero target does not place undue burdens on businesses or consumers”. It is due to report by Christmas, assuming it is not axed by the new BEIS secretary. There is both strong momentum towards net zero in large companies but also, it seems, a hesitancy at some firms about investment plans which has been increased by the Truss government’s apparent U-turn on short-medium term policy on fossil fuels.
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‘Capital, people, ideas’
Sunak’s Mais Lecture is worth re-visiting for its main theme: The key line was “Capital, people and ideas, three priorities to deliver higher productivity”. And in his spring budget, he asked for suggestions as to how to incentivise firms to invest more in training. That question is more pressing than ever.
Large firms should expect greater flexibility in how they spend their apprenticeship levy; even Labour wants reform. SMEs remain the problem. EAMA has urged tax incentives for training and re-training, notwithstanding the government’s non-interventionist philosophy and current budget constraints.
A key question for the new government is its attitude to manufacturing and related advanced engineering. The Levelling Up White Paper identified an imperative “to reverse the historic decline in manufacturing in the UK”. The PM should re-state this position and re-invigorate efforts to make it happen.
As always, we welcome comment on any of the issues raised above or on the new government. You can send these directly to Jack Semple at EAMA (email: [email protected]) but it would be helpful if you could copy us in on any comments you might send (please send this to Geoff Noon at [email protected]).
Links:
Ministerial Appointments: 25 October 2022 – GOV.UK (www.gov.uk)
Rishi Sunak’s first speech as Prime Minister: 25 October 2022 – GOV.UK (www.gov.uk)
Review of Net Zero: call for evidence – GOV.UK (www.gov.uk)
The Brexit effect: how leaving the EU hit the UK | FT Film – YouTube
Retained EU Law (Revocation and Reform) Bill 2022-23 – House of Commons Library (parliament.uk)