Did Rishi Sunak really make an £11 billion blunder?

Could Rishi Sunak really have saved the taxpayer £11 billion by insuring against higher interest rates last year? That was the extraordinary claim made by the National Institute of Economic and Social Research (NIESR) and in the Financial Times on Friday.

The NIESR claims that the government could have saved the money had the Chancellor taken up the institute’s own suggestion last year and forcibly converted £600 billion worth of reserves held by commercial banks at the Bank of England into two year fixed-rate bonds. By failing to foresee rising inflation and interest rates, the FT asserts, the Chancellor has blown even more money than Gordon Brown did by selling half Britain’s gold reserves at the bottom of the market in 1999.

That’s quite a charge, given that Brown’s mistimed sale of the gold reserves remains one of the most-remembered contributions to UK economy – no doubt because it conjures images of the film Goldfinger, and its massive stacks of gold the arch-villain planned to steal from Fort Knox. The concept of forcing banks to swap their deposits for two-year fixed bonds is a little more esoteric – and not everyone is convinced that it would have been remotely practical.

For one thing it would have involved the Chancellor ordering the Bank of England how to manage its deposits – not a good look given that the Bank of England is supposed to be independent (thanks to one of Gordon Brown’s better decisions) and an order from the Treasury would have undermined that, reducing confidence in Britain’s monetary policy. Similarly, forcing banks to swap deposits for bonds would have undermined confidence. Would any of us like it if our bank contacted us to say that it was converting our savings account into bonds, and that we would only get our money back in two years’ time? Such a transaction would itself have risked driving up the interest rates at which the government is able to borrow. The £11 billion sum claimed by the NIESR doesn’t appear even try to take this into account.

Mysteriously, the FT fails to address any of these concerns – which is odd for a newspaper which tried to position itself throughout Brexit as the sane voice of reason which would never cease to ask the difficult questions. Never mind the £11 billion which could theoretically have been saved in a world where governments and central banks can carry out massive transactions without any effect on markets, the real reason that taxpayers are on the hook for so much debt interest is that for two decades no UK government has succeeded in balancing the public books – with the result that debt has been piled on debt. Even when inflation and interest rates were on the floor in 2020/21 the government still spending £39.4 billion on debt interest.

One further point: the NIESR, and the FT report on it, asserts that the Chancellor should have been wise to the risk of inflation, but wasn’t. The FT is not exactly best-placed to criticise him for failing to see inflation at 9 percent. Indeed, the FT failed to see inflation coming itself, a piece in its Alphaville column criticising other publication for warning of inflation – memorably entitled ‘The Spectator joins the inflation doom-mongers’.

Sunday shows round-up: Tories ‘united’ behind Boris

Brandon Lewis: Conservatives are now ‘united behind the PM’

Mounting dissatisfaction with Boris Johnson’s leadership came to a head last Monday when he survived a vote of confidence amongst Conservative MPs by 211 to 148. The party’s rules as they stand mean that his position is now notionally safe for a year. The Northern Ireland Secretary Brandon Lewis spoke to Sophie Raworth about what this result meant for his leadership

CMA will review petrol stations’ practices

Raworth asked Lewis about how the government would ensure the cut in fuel duty would be passed on to motorists at the petrol pumps:

‘We don’t want rail strikes to happen’

Raworth also asked Lewis about the strike action planned by staff at Network Rail and the London Underground later this month, which are expected to be the largest such industrial action on the railways since 1989:

Rachel Reeves: ‘It looks like’ the government plan to break international law

Sophy Ridge spoke to the Shadow Chancellor Rachel Reeves. The government has said that it will publish details of new legislation on the Northern Ireland Protocol tomorrow, which it has said is fully compliant with international law. Reeves, however, presumed to differ:

Mark Serwotka: ‘We need a debate about morality’

Ridge also spoke to Mark Serwotka, the leader of the Public and Commercial Services Union, many of whose members work for the Home Office. She asked him about the union’s fight against the government at the High Court to halt the government’s plans to settle unsuccessful asylum seekers in Rwanda:

Tony Danker: Recessionary risks ‘happening this year’

And finally, the Director-General of the CBI, Tony Danker, told Raworth about his organisation’s concerns for the economy:

How long will Xi Jinping rule China?

For some time now it has been assumed that in November the National Congress will rubber stamp Xi Jinping’s continued role as China’s supreme leader for a third five-year term, which would make Xi the first Chinese leader for a generation to serve more than two terms.

Just a year ago his position as one of China’s three pre-eminent leaders was confirmed when the 400 members of the Central Committee passed the third ‘Historical Resolution’ in the Chinese Communist Party’s 100-year history. The previous two were organised by Mao in 1945 and Deng Xiaoping in 1981. The resolution highlighted the concept of ‘Xi Jinping Thought’ as a historical equivalent to that of his two legendary predecessors. But a number of crises, international and domestic, have put a question mark against Xi’s continued omnipotence.

When Xi met Putin before the Beijing Winter Olympics, the allies, who had moved ever closer over the last decade, declared that there were ‘no limits’ to the Russia-China relationship. What followed Putin’s invasion of Ukraine, about which Xi was forewarned, is therefore a puzzle. Although China voted against the UN resolution to denounce Russia’s invasion of Ukraine, China’s active support for Russia has been notable by its absence.

There has been no public expression of support for Putin’s ‘special military operation’. Xi himself has subsequently stated that China is ‘committed to respecting the sovereignty and territorial integrity of all countries’. Russia has asked for military aid from China but no answer, at least publicly, has been forthcoming. If, as one suspects, China is helping Russia, it is being done in secret.

Neither does it seem that China wants to risk being involved in trade wars with the West. It is notable that Union Pay, China largest credit card company, has, like Visa and Mastercard, stopped working with Russian banks. Chinese companies, particularly those established in the US, appear to be equally circumspect about breaking US sanctions.

The Russia-China allegiance may now be superglued but to what strategic benefit to China? It is difficult to see how China’s geopolitical ambitions can be burnished by its support for an ally, albeit half-hearted, whose actions are causing global inflation and, in some countries, starvation. This is not how you win friends among the ‘non-aligned’ nations – just look at the borrowing default, food riots and political crisis in China’s ally Sri Lanka over the last month.

If China’s friendship with Putin is toxic internationally, it also seems likely that this toxicity applies in some measure at home. The leadership of China is opaque when it comes to identifying opposition to Xi. However, it is highly unlikely that factions who supported the cautious internationalism of Deng Xiaoping and his successors can be happy with the consequences of Xi’s overtly aggressive foreign policy which appears to have united the West in a Russia-China containment strategy. It has to be asked whether it was Xi or other government members who decided that there should be limits to Xi’s ‘no limits’ relationship with Russia.

The domestic economic costs of Xi’s campaign against western values are also becoming apparent. Under the influence of the Wang Huning, the communist party’s chief ideological theorist, a member of the Politburo’s seven man Standing Committee, Xi has pursued increasingly authoritarian attacks on the stars of China’s new economy.

Last year technology entrepreneur Jack Ma, the charismatic founder of Alibaba, was ‘disappeared’ and his company Alibaba forcibly restructured. A swathe of new regulations has hit China’s tech sector. The US$100bn online digital education industry, deemed inegalitarian, has been devastated by new regulation. Cryptocurrency has been banned. Even China’s social media stars such as Zhao Wei, a billionaire actress, pop singer and influencer whose online presence was erased in August last year, have been reined in.

Wang, a social puritan, believes that a ‘nihilist individualism’ has undermined the moral fabric of the US. He and Xi are determined that China will not be infected by such Western-style moral corruption, which they believe is fostered by social media.

Xi’s regulatory crackdown on technology companies has crashed stock prices. According to TechNode, a Chinese technology media company, there is an ongoing bloodbath in tech sector employment. Xiaohongshu, sometimes described as China’s Instagram, has recently laid off 10 per cent of its staff. According to Reuters, even the major tech companies such as Alibaba and Tencent are planning large-scale redundancy programmes.

Investment in start-ups, already in decline before Covid, has plummeted. Many technology entrepreneurs are quitting mainland China and heading to safer regulatory locations such as Singapore or the US.

Furthermore, China’s main technology and financial hub, Shanghai, has been particularly badly affected by Xi’s doubling down on his zero-Covid stance. Shanghai’s officials and its business elite are reportedly furious. Unlike other zero-Covid zealots, such as New Zealand Prime Minister Jacinda Ardern, who have given up on draconian lockdowns, Xi appears determined to stay the course. As long as Xi remains committed to the policy of zero Covid, how is China ever going to open up its borders? It is a question that must have occurred to many within China.

As a result of Xi, a perfect storm of problems is now bearing down on the Chinese economy. His foreign policies, particularly in relation to his threats to Taiwan and his support for Russia, are scaring off foreign investors. Revelations about Xi’s brutal suppression of China’s Uighurs are a further negative for investment in China. Foreign Direct Investment has fallen to just 2 per cent of GDP compared to 6.5 per cent in the mid-1990s. Meanwhile Chinese companies are offshoring manufacturing capacity to countries such as Vietnam.

At the same time the Chinese property sector is in a cyclical downturn. Xi’s clampdown on property leverage following the collapse of residential property behemoth China Evergrande Group is crashing the property market and construction sectors. This is a disaster for China’s regional governments whose finances are highly dependent on property sales.

No wonder then that, after a first quarter of negative GDP, global investment banks are busy slashing their growth estimates for China in 2022. Real GDP growth is now forecast to halve from 8.1 per cent in 2021 to around 4 per cent in the current year. Even that may prove optimistic.

This is not the economic background that Xi would want in the run up to the Politiburo Standing Committee elections in November. Confusingly, Xi’s lockdown orders to Covid-hit cities, the Chinese Premier Li Keqiang, not a Xi acolyte, has emerged from the shadows to exhort Chinese companies to get back to work. In some quarters there is clearly alarm at the economic downturn. Does Li’s sudden appearance centre stage indicate a power struggle at the heart of government?

Xi’s government remains broadly popular. The Edelman Trust Index shows that the Chinese government enjoys a 91 per cent trust rating compared with just 39 per cent for the US government. But Xi’s future will not be decided by the Chinese people; power struggles are fought within the Communist Party behind closed doors.

Though there is no sense that things are so bad that Xi might fail in his bid to win a third term as China’s leader, there can be little doubt that his reputation is tarnished within some political factions – particularly the ‘Shanghai gang’ who dominated Chinese politics for a generation until Xi’s emergence. While we should not expect a political earthquake at the National Congress in November neither should we rule one out, particularly if the economic outlook in China continues to deteriorate.

Is there a new Covid wave – and do we need to worry?

Is Covid back on the rise? The ONS survey shows increasing prevalence in England and Northern Ireland, with ‘uncertain’ results in Wales and Scotland. Scotland’s prevalence (2.4 per cent have the virus, according to the ONS) is almost double anywhere else. Hospitalisations are rising too: up 17 per cent since last week – though two-thirds are incidental (ie in hospital for other reasons).

So is this a new Covid wave? ‘Early signs that Covid may be rising’, says the BBC. But to those following the data closely, the uptick has been expected for some time – as the natural side-effect of a new variant. It is not, in and of itself, cause for alarm. Omicron is still mutating: and now the sub-variants BA.4 and BA.5 have taken over.

Covid watchers saw this coming for some time. Because these sub-variants are able to evade some of the immunity from vaccines or infections, cases are likely to rise when they become dominant. This is known as the ‘crossover point’. It will take time to see this in the data. But early estimates suggest this crossover probably happened last weekend – hence the rise in cases.

As with Omicron, these variants first emerged in South Africa. We can look there for an idea about what’s going to happen next. And, as with Omicron, it’s reassuring news. Although each Omicron subvariant seems to have spread faster than its predecessor, hospitalisations and deaths have been lower. With each peak, the gap between cases and patients in hospitals has grown wider. Deaths are some 90 per cent lower. The outcomes of the virus are becoming less severe, allowing life in South Africa to continue relatively unrestricted.

Not even Nicola Sturgeon is considering bringing back Covid restrictions again. There is no need to return to the ‘old days of restrictions and panic’, said Scottish government advisor Professor Linda Bauld. This is especially the case in the absence of evidence that legally-enforced restrictions helped. We know from Google mobility data that people will adjust their behaviour and manage risk themselves if hospitalisations and cases do rise sharply.

But we also know – as Matt Ridley wrote in the magazine early this year – that the variants tend to get milder. Daily deaths within 28 days of a positive test peaked around the same level (300) for the original Omicron and the BA.2 wave. But deaths where Covid was mentioned on the death certificate – a more accurate measure – peaked 20 per cent lower. This suggests a higher proportion of ‘incidental’ Covid deaths. The case-fatality ratio continues to drop too: it is currently below 0.1 per cent. That’s less deadly than flu.

So there is no need to panic – and no evidence of a panic. Testing has fallen off a cliff since the government stopped providing free lateral flow tests. Just over a million tests were carried out in the last week – at Christmas we were doing 11 times that. It shows in the case detection rate: as the below graph illustrates, just 9 per cent of cases were picked up through testing – the lowest level since mass testing began.

Even if this analysis is wrong, and vaccines wane or a more virulent variant becomes dominant, we have the tools to fight it. On Wednesday Moderna announced a successful early trial of a vaccine targeting Omicron. It produces an eightfold increase in the number of antibodies compared with their original jab. T-cell vaccines are in development too. The cyclical nature of Covid and lockdowns may mean we’re half-braced for a return to the bad old days, but a look beneath the data proves very reassuring.

The ironic reincarnation of McDonald’s on Russia Day

Today is Russia Day. A muted affair compared to the pompous and bellicose displays seen on Victory Day, today is the day Russia commemorates no longer being a part of the Soviet Union and becoming the Russian Federation instead.

Unlike other patriotic holidays in the country, most ordinary Russians pay little attention to its significance. The end of the Soviet Union and the ensuing ‘Perestroika’ period was filled with economic hardship and upheaval, and is therefore a time many would prefer to forget.

Today, for most Russians, is just a nice day off, filled with wholesome family activities, the odd bit of cultural indulgence in museums and the like, and a lot of socialising with family and friends, nothing more.

However, there is one entity that is trying to encourage and capitalise on the muted patriotic feeling of the holiday, ‘Tasty – and that’s that’. McDonalds’ slightly depressing, Russified reincarnation is flinging open the doors of its first premises in exactly the same location in Moscow as McDonald’s did 32 years ago.

McDonald’s ceased to operate in Russia on March 14 in response to the invasion of Ukraine. The chain’s 850 Russian restaurants were sold to businessman Alexander Govor in May, who agreed to reopen them after a rebrand.

That rebrand has been heavily teased in the Russian press. In an exclusive scoop, the broadsheet Izvestiya claimed that as many as eight names were in the mix, including the thrilling-sounding ‘The Same One’ and drool-inducing ‘Free Checkout Till’.

On Friday, the chain’s new logo was released: a nondescript red circle next to two orange batons on a green background. According to the enthusiastic minds in the new chain’s press office, these represent a burger and two chips, while the green background represents continuity in the quality of food and service customers are used to. Sure, why not?

The decision to launch ‘Tasty – and that’s that’ on Russia Day is significant. Right down to opening their first store in the same place as McDonald’s did in 1990, it’s clear that the chain’s new owners are trying to appropriate the significance of the golden arches for the country: the new ‘McDonald’s’ will be a truly Russian one.

However, the irony of McDonald’s reincarnation as ‘Tasty – and that’s that’ on Russia Day is not lost. The entry of McDonald’s into the Russian market three decades ago epitomised Russia’s embrace of capitalism. The country had shrugged off its Soviet mantle and was keenly entering the Western fold.

That Russia’s invasion of Ukraine has symbolised its retreat from the world stage, and a self-inflicted isolation so severe it has no choice but to fall back on its own resources sits in stark contrast to the image it is trying to push on its own people.

Just as McDonald’s did before it, the arrival of ‘Tasty – and that’s that’ too marks a new chapter in Russia’s world standing. It’s just not the one they would like everyone to believe.

The NHS’s disturbing trans guidance for children

Sajid Javid spoke some sense earlier this week when he said that the word ‘woman’ should not be removed from NHS ovarian cancer guidance. The Health Secretary was responding to the revelations that the NHS website had been stripping the word ‘woman’ from its advice pages. But fine words are only a start. The Health Secretary needs to get a grip on an NHS website that seems in thrall to magical thinking on sex and gender.

The problem is wider than he might realise. Quite apart from the row over the advice to women seeking advice on cervical cancer and ovarian cancer, the NHS is currently hosting a page entitled, ‘Think your child might be trans or non-binary?’ The page contains very worrying guidance for parents concerned that their children might be ‘confused about their gender’.

The page rapidly heads off into fantasy land. Reading more like an activist blog than official NHS guidance, the website declares that:

‘We now believe that gender identity is on a spectrum that includes male, female and a diversity of gender identities such as non-binary and agender (no gender).’

If one of my pupils had written something like that, my first question would be: who is ‘we?’ It certainly doesn’t include me – I don’t believe in gender identity – and I do not understand why the NHS should be citing anyone’s beliefs. Medicine should be informed by facts, not faith.

The rest of the sentence gets no better. If the Secretary of State thinks that biological sex is ‘incredibly important’, maybe he could explain to the NHS that male and female are labels we apply to the two sex categories. They are not two seemingly random points on some ill-defined spectrum that also happens to include non-binary and agender.

But what does it mean for a child to be confused about their gender in any case? And how might parents know? The webpage discusses clothes or toys ‘that society tells us are associated with a different gender.’ Is the NHS really suggesting that pink is for girls and blue is for boys? It’s not clear to me what the NHS might think, but it seems at odds with DfE guidance to schools that states:

‘You should not reinforce harmful stereotypes, for instance by suggesting that children might be a different gender based on their personality and interests or the clothes they prefer to wear.’

Let’s be clear, the NHS webpage will be read by parents worried that because their children are ‘identifying with a different gender’, that there might be something wrong with them that needs fixing. The solutions mentioned on the page include a referral to a gender clinic and the administration of puberty blockers. What does that say to those parents? Almost as an afterthought the NHS adds, ‘This is in addition to psychological support’.

Apprehension about adolescence – probably something as old as humanity – now takes on new meaning, and it is terrifying. According to the NHS:

‘You may seek support for your child before puberty starts, which can begin as young as age 9 or 10. The physical changes that occur at puberty, such as the development of breasts or facial hair, can increase a young person’s feelings of unhappiness about their body or gender.’

The truth is that there are two sexes, we belong to one or the other, and we can like it or lump it – we can’t change it. But that does not mean that there cannot be a range of personalities and behaviours within each sex. A boy who likes wearing dresses is just that: a boy who prefers to wear clothes that are usually marketed at girls. If that makes his parents anxious, then maybe they are the one whose prejudices needs fixing?

Instead, those parents are directed to ‘charities listed on the TrazWiki page’. The organisations listed are an eclectic mix, to say the least. I would not direct the uninitiated there without more guidance. They are certainly not all charities, and some have dubious reputations.

Third in the unfiltered list of UK wide groups, for example, is ‘Action for Trans Health’. This might seem appropriate for a parent worried about the health of a child they think might be trans. But how many newcomers might realise that the Edinburgh branch of this organisation calls for nothing less than ‘the total abolition of the clinic, of psychiatry, and of the medical-industrial complex’? In another Tweet, it adds, ‘We demand an end to capitalist and colonialist “medicine”.’

After suggesting that gender non-conforming children might be ‘exploring different gender identities’, why is the NHS directing unsuspecting parents in this direction? It beggars belief. Savid Javid has spoken out about the erasure of the word woman, but this is surely far more serious. If he cares about children, he needs to take action.

Kim Kardashian is a better role model than Marilyn Monroe

When Kim Kardashian wore Marilyn Monroe’s dress to the Met Gala recently – the shimmering, crystal-studded, second-skin gown in which MM sang her infamous rendition of ‘Happy Birthday, Mr President’ to JFK in 1962 – many people had a collective fit of the vapours. You’d have thought someone had wiped their nose – or worse – on the Stars and Stripes in front of the White House, that some act of sacrilege had been committed.

Kardashian (with the good manners characteristic of her – there’s a scene in an early season of Keeping Up with the Kardashians where her monstrous sister Khloe mocks her for being courteous to a nobody who is late with her new car) anticipated this: ‘I’m extremely respectful to the dress and what it means to American history. I would never want to sit in it or eat in it or have any risk of any damage to it… it will forever be one of the greatest privileges of my life to be able to channel my inner Marilyn in this way, on such a special night.’

Kardashian recognised that the cult of Marilyn is stronger than ever. It has been announced this week that a new Marilyn Monroe biopic by Netflix, called Blonde, is due to be released this year. The director Andrew Dominik promises that it ‘will offend everyone.’ But even though Marilyn Monroe was a cultural figure dwarfing Kim Kardashian and all her sisters combined, if I was forced to choose between them as a ‘role model’ for young women (despite the fact that I loathe the idea of role models) I’d choose Kim – because I am a feminist and believe that the best way for women to be in what is still very much a man’s world is tough, not tender.

Both women were shamed for their nakedness, but the tough one toughed it out – trapped between the bullying sisters and the money-mad mother, KK’s was a Cinderella story in which not the shoe but the sex tape was the tight fit which opened the door to a whole new world. Marilyn never got over selling herself to pay the rent and putting out to get roles. There’s a bit in a book by her maid Lena Pepitone (in the New York years, when Marilyn was studying method acting) when Pepitone tells MM that she too had wanted to be an actress but her strict Italian father told her that being an actress was no better than being a hooker and Marilyn says sadly ‘He was right.’ She accepted the objectification which had such a disastrous effect on her, killing her at the age of 36.

Kim K, at this age, was just getting started on her political activism, ranging from everything from publicising the Armenian genocide by Turkey and working for the release of non-violent drug offenders; in 2019 she funded the 90 Days to Freedom campaign, an initiative to release nonviolent drug offenders from life sentences. The sneering query ‘But what does Kim Kardashian do?’ Is easily answered with ‘She raises four children, oversees a billion-dollar empire and gets under-privileged, non-violent people left rotting in jail out – what do you do?’ The Kardashians are a functioning matriarchy, where men come and go wearing the same baffled expression and the females have the final say. Marilyn was used by men until the end, the last years of her life becoming a two-Kennedy car-crash.

I’ve often wondered if it would have been different if she’d been around today in the age of MeToo. We’ll never know, but this tender and troubled woman is still being used by men, though these are now artistes rather than the casting couch Philistines – so obviously, that makes all the difference. What started with Norman Mailer (Pauline Kael called his study of Monroe ‘an offensive physical object – perhaps even a little sordid’) finds its latest expression in Blonde, which has already been rated an 18 for its sexually explicit content

Marilyn was exploited by a chain of men, and eventually it killed her – and if anything, she is more exploited in death. But Kim owned her own shaming and now thrives. Marilyn wasn’t even allowed to progress from being a sex symbol to a serious actress; Kim – whose bum was once her raison d’être – studies to become a barrister. And – unlike poor lonely Marilyn – she is likely to live to a ripe old age, dying surrounded by grandchildren, reflecting that the wages of sin can really be rather rewarding, so long as one holds one’s head high, sticks one’s bottom out and does not rely overmuch on the kindness of strangers.

How Uruguay held out against South American socialism

Of all the epithets for Latin America, the most frustrating and demoralising must be the ‘forgotten continent’. Latin America is not so much forgotten as overlooked. Part of the reason for this may lie in its cultural proximity but geographical distance to the West: what Alain Rouquié, the French political scientist, called ‘far-western’. Familiarity, even on these fringes, has bred indifference.

Last month, however, Britain remembered its historical ties to Latin America when Boris Johnson welcomed the President of Uruguay, Luis Lacalle Pou, to Downing Street. The invitation had been extended and not sought, which the President was quick to point out to the Uruguayan press. This was a meeting of equals, not the usual trope of the Global South heading north, cap in hand. For many Latin American countries, relations with the Anglosphere remain complex, all too often based on shifting ideology. None more so than with Britain, whose connection to the region is more nuanced, based as it is on an informal empire conceived through commerce in the 19th century.

Where other South American republics gained independence through its libertadores (‘liberators’), Uruguay’s route to emancipation in 1828 was idiosyncratic, even by the region’s standards. It fell to an Englishman, Lord Ponsonby, to establish a buffer state that would appease its belligerent neighbours, Argentina and Brazil, as well as to carry British interests. While the rest of the 19th century was played out in a succession of wars, it was in the opening decades of the 20th century that Uruguay transformed itself from a rural backwater into the first modern social democracy in Latin America. Secularisation, the abolition of the death penalty and the recognition of the rights of illegitimate children accelerated the country’s development. The electoral franchise, through the introduction of the secret ballot and proportional representation, reinforced the idea of Uruguay not just as un país modelo (‘a model country’) but as an outlier in the region. In 1951, a New York Times article described Uruguay as the ‘Switzerland of the Americas’ on account of a foreign trade boom and the large amounts of incoming flight capital. The moniker stuck, and so did the idea of the country’s inherent exceptionalism.

President Lacalle, an engaging and far-sighted politician in his late forties, leads the country’s centre-right coalition (which also includes a centre-left party). He is a pragmatist, an advocate of free market economics and cuts a cosmopolitan figure despite coming from a country of only 3.5 million. ‘I’m confident that the future is designed for a country like Uruguay,’ he said last year. Globalisation, he believes, is key for the country. Nevertheless, he needs willing partners. Lacalle has been critical of the US government, if only for its cavalier one-size-fits-all attitude to the region: ‘They think that from the border in Mexico to Tierra del Fuego, we have all the same problems and the same needs.’ The fact that Uruguay is not in dire need of infrastructure will mean a far more balanced trade relationship with China than other Latin American states.

Uruguay continues to be the region’s great success story. It may be one of the smallest countries in Latin America, but it is one with the highest quality of living and has the largest middle class. (Uruguayans like to adhere to the old gaucho maxim, ‘naides es más que naides’ ‘here nobody is better than anybody else’.) The country also has some of the lowest rates of extreme poverty in the region and the highest income per capita. Unsurprisingly then, it’s also one of the least corrupt. More importantly, political stability and strong institutions have protected Uruguay from the seismic political fluctuations experienced by its neighbours. During the pandemic, the government was quick to roll out vaccinations and curtail lockdowns. The coalition has been careful not to undo too many of the policies – especially in health and education – of its left-wing predecessors. In such a close-knit country, the notion of the welfare state remains central to Uruguayan political identity. Lacalle’s cabinet is also far younger than its left-wing predecessor. 

Unfortunately for the President, the country’s membership of Mercosur, the South American trade bloc established in 1991, is frustrating his plans for globalisation. Mercosur – which comprises Argentina, Brazil, Paraguay and Uruguay, (having suspended Venezuela’s membership for trade and human rights transgressions) – remains one of the most protectionist regions in the world, something not lost on Lacalle. In a recent BBC interview, he admitted, ‘Brazil and Argentina are not willing to open as fast as we want and as fast as we need.’ At the 30th anniversary of the trade bloc last March, there was a petulant exchange with Alberto Fernández, the present of Argentina, when Lacalle pushed for more flexibility for the members to negotiate free trade agreements. ‘If we are a burden, take another boat,’ was the Peronist leader’s curt response.

In mediating the different interests of the Mercosur, Lacalle likes to recall a maxim often quoted by his great-grandfather, Luis Alberto de Herrera, who led his party for more than 50 years. ‘We have no eternal allies, and we have no perpetual enemies. Our interests are eternal and perpetual, and those interests it is our duty to follow.’ Lord Palmerston’s House of Commons speech may be an unlikely source for a Latin American politician, but it is in line with Lacalle’s free-market outlook.

With Latin America currently in the grip of a new pink wave, Lacalle will have his work cut out. Left-wing parties have come to power in Argentina, Bolivia, Peru, Mexico and Chile, with Luiz Inácio Lula da Silva likely to oust Bolsonaro in Brazil later this year. Lula, who urged Chileans to vote for the new President and radical leftist Gabriel Boric, has asked the people of Colombia to vote for ‘comrade’ Gustavo Petro. If Petro wins the run-off, he will become the first left-wing president in the country’s history. With two years to Uruguay’s next general election, the leftist coalition, Frente Amplio (‘Broad Front’), is now seeking to make up lost ground by undertaking a political tour of the country to garner votes.

Unlike the first pink wave in 1999, this one is likely to be weakened by the pandemic, recession and corroded institutions. Uruguay’s strong political and economic undertow, not to mention its moral leadership, has the power to pull the region in a new direction.

Prince Charles is playing with fire

Charles is a prince on a perilous path. It’s a well-trodden one that is proving more problematic the closer he gets to having a crown placed on his head. He has opinions, who doesn’t. He wants to share them, like the rest of us. His decades long predicament is that he occupies a privileged position which should limit his ability to hold forth.

His once private – and not denied – belief that the government’s plan to deport asylum seekers to Rwanda is ‘appalling’ is not the consensus view. A man teetering on the edge of inheriting a unifying role as Head of the Nation has entered a divisive debate very firmly on the side of Boris Johnson’s opponents. One day those occupying the roles of Prime Minister and Home Secretary will be devising immigration policy as members of His Majesty’s Government.

The prince’s officials insist he remains politically neutral and matters of policy are decisions for government. Their challenge, which they’ll have been acutely aware of even as they fashioned this defence, is that in this instance the Prince of Wales hasn’t been neutral. And while the final shape of a policy might be for a government to decide, Charles has form when it comes to trying to influence what ends up on the statute book.

As a young man, back in 1970, one of the first topics to provoke him was the fate of Atlantic salmon, an issue exercising him long before declining fish stocks became an emotive topic. Countless government ministers have been recipients of ‘black spider’ memos, so called because of his distinctive handwriting style.

This weighty correspondence, a very limited selection of which was released under the Freedom of Information legislation, has in the past covered topics as varied as the lack of resources for the armed forces, the benefits of complementary medicine and the need for affordable homes. In an exchange of letters with Lord Irvine about the Human Rights Act the prince scrawled the word ‘rubbish’ on a reply he received from the then Lord Chancellor.

He’s not just expressed himself in words. During the 1999 Chinese state visit he showed his support for the Dalai Lama and his distaste for the Chinese regime by boycotting one of the state banquets and making sure the reason for his absence was briefed to a newspaper. Mark Bolland, his former senior aide, described Charles as a ‘dissident’ working against the ‘prevailing political consensus’.

Given such a lengthy track record, it’s not surprising those around him have devoted considerable energy to framing how the heir to the throne will behave when he inherits what Diana called the ‘top job’. According to the narrative of his friends and supporters, being Prince of Wales affords him considerable latitude and he knows it’ll disappear the moment he fulfils his destiny.

In the few interviews where he’s reflected on how he’ll behave as king, Charles has accepted he’ll be much more circumscribed and insisted he wasn’t ‘that stupid’ not to realise he won’t be able to speak out in the same way when sovereign. He’s painted a picture of an existence at Buckingham Palace where he will use his ‘convening power’ to bring the right people together to address weighty matters, like the environment.

It’s a future in which he could deliver a King’s Speech containing policies he doesn’t approve of and give royal assent to laws he doesn’t support. It’s one where he can consult, advise and warn the government in private, while smiling, waving and unveiling plaques in public. As monarch, most of his utterances will be delivered on the advice of ministers. This is the fate awaiting someone who’s declared ‘speaking out is in my blood’.

The monarchical straitjacket – which has never irked the Queen – delights those who believe Charles could one day provoke a constitutional crisis. Such concern is heightened by the fact his criticism of asylum policy has emerged in the wake of the successful Platinum Jubilee celebrations and while the transition from mother to eldest son is at full throttle.

The risk is of an opinionated prince morphing into a meddlesome king.

Boris’s rewilding obsession could backfire

Does Boris Johnson have the faintest idea what he and his government are trying to achieve anymore? I ask because of the Prime Minister’s ‘grow for Britain’ strategy which has been leaked to the Daily Telegraph. The strategy, due to be launched on Monday, apparently demands that farmers grow more fruit and vegetables to make us less reliant on imported food, especially in the face of the Ukraine crisis – which has created the headache of how to continue production and exports from one of Europe’s most agricultural nations.

To this end, the grow for Britain strategy will, it is said, commit to ‘changes to planning rules to make it easier to convert land into farms’. There may be a few marginal areas in national parks and sites of special scientific interest which farmers would like to plough up but are prevented from doing so by environmental, rather than planning, rules. But I wasn’t aware of any great tracts of land in Britain that farmers are trying to turn into farmland but are thwarted by planning rules. It is rather more common for land to pass in the other direction, with landowners trying to turn farmland into housing estates because of the huge profits on offer.

But leave that aside, why is the government suddenly launching an agricultural policy which pulls in exactly the opposite direction as the one it announced just five months ago? Defra’s Landscape Recovery Programme, unveiled in January, seeks to take 300,000 hectares of farmland (an area the size of Shropshire) out of production and ‘rewild’ it in the name of boosting biodiversity and trying to mop up carbon emissions.

The government has also announced that it wants 7,000 hectares of new woodland to be planted per year by the end of this parliament – although it is not clear whether this is in addition to the 300,000 hectares of land to be rewilded or included within it.

It also ought to be noted that the government’s net zero policy is also taking large tracts of farmland out of production in the name of turning them into solar farms. Current proposals for solar energy could take a further 62,000 hectares out of production. While this land could still be used for grazing, much of the farmland under threat is prime arable land.

At the time of the Landscape Recovery Programme, environmental secretary George Eustice dismissed warnings from the NFU and others that the rewilding scheme would make Britain more dependent on food imports. Britain’s self-sufficiency in food has already plunged from over 75 per cent in the early 1980s to 60 per cent now.

It is perfectly possible, of course, that the Prime Minister and his colleagues have changed their minds in reaction to the Ukraine war and the soaring price of food due to that and other reasons. Maybe they do now accept that their rewilding plans were ill-conceived. But if so, then they will have to withdraw them. What the government cannot possibly do is to sustain two contradictory policies at the same time: one encouraging farmers to rewild their land and another trying to persuade farmers to turn wild land back into farmland. So, which is it to be: rewilding and green energy – or food security?

Is Britain heading for a summer of discontent?

With workers across the economy looking set to go on strike during the next few months there is talk of a ‘summer of discontent’. The inspiration for this trope is the infamous 1978-9 ‘winter of discontent’, when despite the urgings of Labour ministers to show pay restraint, poorly paid public sector workers left rubbish piling up in the streets and, legend has it, the dead unburied. When the strikers returned to work the government’s effort to keep wages down was in tatters, along with its perceived authority to govern.

There have been many mooted summers of discontent over the years, but none has ever rivalled the original. They have all – appropriately enough given the vagaries of the British weather – ended up as damp squibs. Maybe this one will be different. Britons are now experiencing unprecedented price inflation, which comes on top of a consistent squeeze on their living standards due to the impact of the 2008 financial crisis which then got worse thanks to Covid, which has in turn left employees more alienated and discontented than ever. After a decades-long period of apparent industrial quietude it looks like many workers are finally not going to take it anymore.

The impending rail strike at the end of the June is set to kick off the summer of discontent and is likely to shut down the network for three days. It is significantly a purely defensive dispute in a sector which, like so many others, has seen pay squeezed and working conditions deteriorate: the union’s main demand is for a wage increase that meets the recent rise in inflation.

Despite this, Conservatives are sticking to the well-worn Thatcherite approach which sees in every strike the chance to tell voters that Labour is in hock to irresponsible and powerful ‘union barons’ whose interests they would always put before those of the country. At the latest PMQs the Prime Minister therefore described it as a ‘reckless and wanton strike’ and demanded Keir Starmer condemn it. The Conservative party chair Oliver Dowden reinforced that message saying Labour would always ‘back hardline unions over hard pressed travellers’.

Yet, this rhetoric has long been at variance with reality thanks to Thatcher’s own changes to industrial relations law and the demise of heavily unionised industries. In 1979 just over half of workers were members of a trade union: today it is less than one quarter. Public revulsion at the ease with which P&O sacked its employees and replaced them showed that the days when many thought union leaders had more power than the prime minister are long gone. Indeed, a plurality of Britons have for some time seen unions as playing a positive role in Britain today.

Despite Johnson’s urgings Starmer’s position is to neither support nor condemn the rail strike. His spokesperson is saying that ‘Nobody wants to see industrial action that is disruptive.’ That is the usual position for a Labour leader in Opposition – apart from Jeremy Corbyn who saw in each and every dispute a hammer blow against capitalism. Even ‘Red Ed’ Milband was afraid of alienating voters by supporting striking unions. Even so, despite Starmer’s caution, others in his shadow cabinet have expressed some qualified support for the union’s case. Most significantly, Wes Streeting, widely seen as the most right-wing member of Starmer’s front bench, said that if he was a rail worker he would have voted for a strike.

Streeting’s comments might merely suggest his has ambitions to become the next Labour leader and is giving a wink to the party’s union wing. But they could indicate a more profound shift in politics, one in which Labour is less afraid to be seen as being the workers’ friend.

As an insightful and timely new book by Phil Tinline shows, one of the fears that fuelled Thatcherism was that of unbounded trade union power, a fear seemingly exemplified by the winter of discontent. The public sector strikes of 1978-9 certainly revealed Labour’s incapacity to govern. It was widely regarded as indicating the collapse of the post-war consensus and the need for another – and it delivered the May 1979 election to Margaret Thatcher. Whether the mooted ‘summer of discontent’ plays a similar role in seeing off not just Boris Johnson’s beleaguered premiership but also the end of the Thatcher consensus which cast unions as the ‘enemy within’ only time will tell. History never quite repeats itself. But in calling for wage restraint and so for workers to take yet another real cut in pay, Boris Johnson is certainly doing a good job auditioning for the part of Labour prime Minister James Callaghan who made a similar plea as autumn turned to winter in 1978. This plea fell on profoundly and, for him fatally, deaf ears.

Britain’s ivory ban is needlessly draconian

The world’s most draconian ban on the trade in ivory came into force in the UK this month. It does not increase the legal protections already enjoyed by all living elephants, but rather extends these protections to elephants that have been dead for decades.

Trade in ivory and most ivory products from elephants killed after 1947 was already illegal; now all trade in ivory except that covered by five narrow exemptions is banned and subject to a maximum penalty of a £250,000 fine or five years’ imprisonment­­ – even if the tusks were last attached to a living elephant centuries ago. The supporters of the ban argue that it stops rogue dealers passing off more recent ivory as antique items – but such behaviour already was illegal and subject to substantial criminal sanction.

England has had a long association with ivory; it was a renowned centre for ivory carving in the Middle Ages. Some of the British Museum’s ivory pieces date to the 12th century; the houses of the Victorian and Edward British middle classes were rammed with ivory in the shape of everything from hairbrushes, combs and vanity boxes via Japanese netsuke and Oriental carvings to billiard balls, hunting trophies and pianos. Whilst pianos will certainly be exempt from the ban and mediaeval carvings – unless they are distinctly lacklustre iterations – will almost certainly be, selling what were once ubiquitous artefacts furnishing bourgeois homes is now a crime with potential penalties not dissimilar to those for trading Class B drugs. The difference is that there is plenty of support for decriminalising cannabis. The same cannot be said for countenancing an overturn of the ivory ban. The most banal and bourgeois ivory trinket is now more subversive than the herbal stimulants whose unpoliced stench has become one of central London’s most ubiquitous smells.

The new ban was legislated for in 2018 in the wake of the previous year’s general election. During that election, it became a Corbynista campaigning point and another thing to pillory Theresa May for that the Conservatives hadn’t reaffirmed a previous commitment to banning ivory. To make amends, the Tories then passed the toughest ban possible. The fact that it has taken four years to implement the legislation shows that the measure is not as straightforward as its cheerleaders like to suggest.

Objects containing ivory that can still be bought and sold are narrowly defined: pre-1975 musical instruments containing less than 20 per cent ivory (basically pianos); pre-1947 items containing less than 10 per cent ivory (for example, a silver teapot with an ivory knob or pre-1947 inlaid furniture); pre-1918 portrait miniatures, an artform where England was preeminent and which were ubiquitously painted on ivory; purchases by approved museums; and pre-1918 material of ‘outstandingly high artistic, cultural or historical value’ as assessed by an expert committee.

To lawfully sell anything under these exemptions, the item must be registered. This is fairly straightforward for the first four categories but a much more complex process for the pre-1918 objects of outstandingly high artistic, cultural or historical value. It is too early to say how the committee assessing these applications will apply the rule – but ‘outstanding’ is a high bar. Early English carvings will certainly be safe, as very likely will the most accomplished netsuke such as those eulogised by arthouse potter Edmund de Waal in his bestselling family history The Hare with Amber Eyes. It will be interesting to see how much else will pass muster – clearly the vast majority of the ivory accoutrements which our nineteenth and indeed twentieth century forebears treasured is now beyond the pale. Furthermore, any solid ivory carving – however important it may be artistically or historically – made after 1918 will be banned.

The appetite for buying these trinkets clearly does still exist. In recent months the UK’s second and third tier auction houses such as Roseberys in Norwood in south London, have been flooded with ivory items presumably from vendors preempting the ban. Most are oriental knick knacks but also Edwardian opera glasses, thermometers, auctioneers’ gavels and similar accretions. The vast majority of these objects have found willing buyers – even though these buyers must have been aware that the monetary value of their newly acquired flotsam would wholly evaporate shortly after purchase, as they could not be sold again. If the buyers were intending to take them abroad to sell them there, they will have had to have done so before the ban came into force on 6 June as it additionally outlaws the export of ivory with the intention of selling it.

Trading in objects made from the tusks of long dead animals that will never be revived is a harmless activity; no moral opprobrium should be attached to it. The new measures seem to imply that ivory only becomes untainted when it is important art, but not when it is everyday bric-a-brac. My ten-year-old son starts his weekdays by using a mid-twentieth century ivory shoe horn, now snapped in various places through his not so gentle ministrations, to put on his regulation footwear. Is there really anything wrong with me providing him with this admittedly wholly unnecessary equipment? I firmly don’t believe that elephants should be killed now to produce such items, but I can’t see how intentionally destroying these items produced by earlier generations, as some suggest we should, does any good. An elephant of an earlier generation should probably not have sacrificed its life in the service of making shoe horns and assorted trivia – but destroying these items now will not undo that sacrifice.

Anyone who has entered the ivory emporiums of Hong Kong, usually not far from the shops selling dried sharks’ fin and other sinful objects, will realise that there clearly is plenty of illicit contemporary ivory about and that it is being used to produce – at least to western tastes – truly hideous carvings of Buddhas, Chinese emperors and prancing horses of zero artistic value. But it was already illegal to sell this kind of stuff in the UK, notwithstanding the fact that few would want to own it.

In an attempt to shore up support for Boris Johnson among the Tory backbenches, the government seems thankfully to have abandoned its plans to ban the fur trade, foie gras and the importation of hunting trophies. There was no mention of these plans in this year’s Queen’s Speech. Is it too much to hope that the ivory ban will be the last virtue signalling measure in the name of animal rights by this Conservative government?

China is becoming a hermit kingdom

There is an unprecedented experiment under way in China as it reshapes its economy to accommodate its zero-Covid strategy. There are two elements to the policy. The more visible one is the harsh lockdowns, enacted most recently in Shanghai – where for the past two months 25 million people were confined to their homes or forced into quarantine holding centres. Though restrictions were officially eased last week, already 2.7 million residents are back under lockdown and confined to their homes following an outbreak in the city. Anyone who catches Covid faces quarantine or hospital.

The second element of China’s zero-Covid policy is the continued closure of its borders. This has been less noticed until now. Yet the slow but steady reopening of some of the most cautious major economies, such as Australia and Japan, along with the reopening of borders in the US, Canada, India and Europe with minimal bureaucracy, means China’s border policy is now a global outlier. It has also attracted international criticism: Tedros Adhanom Ghebreyesus, head of the World Health Organisation, said recently that China’s zero-Covid policy is ‘not sustainable’, sparking a furious backlash from Beijing.

Despite rapidly declining Covid rates, China shows few signs of changing its closed-border policy. Last month, Beijing announced that it will no longer host the 2023 Asian Cup football tournament next summer, suggesting the policy will remain in place for some time yet.

As the 20th Party Congress in October approaches, Xi Jinping will want to ensure there are no obstacles to him obtaining a third term. Zero-Covid is personally associated with him. He can’t change tack now. Fixes such as Chinese-made mRNA vaccines that would provide better protection than the current local jabs, and a rollout that would cover the millions of unvaccinated older people, are still some way off.

But even these measures would not solve the problem. After all, countries with high vaccination rates still can’t guarantee zero-Covid – and China’s leaders are sticking to the official line that the virus must be entirely eliminated. As the country’s health chief, Ma Xiaowei, recently declared: ‘We’re a long way off being able to relax.’

Much of China’s domestic economy is suffering as a result. Year-on-year retail sales dropped by more than 11 per cent in April, a major deterioration from the 3.5 per cent fall in March. A Bloomberg paper last month said that China’s economic growth might fall behind the US’s for the first time since 1976.

A recent top-level meeting demonstrates why the continued closure of China’s borders could be a long-term problem. Last month the Politburo discussed its National Talent Development Plan, which aims to attract ‘the world’s outstanding talents’ including ‘leaders in key scientific fields’.

In the past decade, some of the obstacles that might have been expected to put off such talent from coming to China, such as restraints on academic freedom, have proved less burdensome than anticipated. Well-equipped labs, huge research budgets and attractive salaries, as well as an innovative environment for research in non-political areas, have brought many western-trained scientists to China.

But the lack of mobility now threatens this aspiration because it fundamentally deters international talent in science and business. Leading academics can’t visit China for a few days to supervise a collaborative lab project in medicine or genetics without nearly a month of quarantine first. Before Covid, entrepreneurs interested in investing in Chinese technology would fly over from California for a meeting. Not anymore.

Other CCP measures suggest nervousness about outside connections. It was recently announced that party members or cadres with significant overseas assets will be blocked from promotion. This is partly a move to avoid officials being hit by sanctions, but it will also mean that the most internationalised elements of China’s leadership elite will be the most likely to suffer. Already China’s zero-Covid era is taking its toll on the middle classes.

Meanwhile, the effects of China’s lockdown will continue to batter the global economy. Tesla has halted production in Shanghai because it can’t get hold of essential parts. There’s also a concern that when shipping is finally allowed out of the city, it may cause a flood of goods that further fuels worldwide inflation. The effects of the zero-Covid policy are unpredictable, but it’s certain that they will shape not only China but the world economy for months, perhaps years, to come.

Putin is no Peter the Great

Putin has a penchant for history, but only insofar it flatters him and his views. Last year, he gifted the world a 5,000 essay that essentially pre-justified his invasion of Ukraine with amateurish fantasy history, and now he is comparing himself with Tsar Peter the Great. It is not a comparison that fits or flatters.

Peter the Great is one of the, well, greats of the Russian historical pantheon. He ruled from the late 17^th to the early 18^th century, and in that time became the first tsar to travel in Europe, built a new capital at St Petersburg, and was both founder of the Russian navy and victor, on points, of the 20-year Great Northern War against the Swedish Empire, leaving Russia a dominant Baltic power.

Speaking on Thursday on the 350^th anniversary of Peter’s birth, Putin said that Peter did not take anything from the Swedes – although he acquired territories along the Baltic coast and much of Karelia – but simply ‘returned’ to Russia what had been its own.

Smugly he added, ‘apparently, it is also our lot to return’ what is Russia’s.

Inevitably, this has caused much furore, including the usual overheated twitter claims that he was threatening to retake Estonia or the like. Rather, this is classic Putin in two ways.

First of all, this is the trollmaster-general in his pomp. Putin enjoys using his more outré rhetoric both to misdirect and to intimidate. With his armies bogged down in Ukraine, he can pose no meaningful threat in the north. However, knowing that the West has limited military resources – and, more to the point, that western politicians have limited political bandwidth – it would suit him very well to convince Nato to concentrate on this front rather than Ukraine.

Secondly, it is clear that Putin regards his rightful place as being in that pantheon of Russian state-building heroes. He has repeatedly drawn parallels between himself and not just Peter but also such figures as Peter Stolypin (the tsarist prime minister whose ruthless modernisation campaign was the regime’s last real chance for survival), tsar Nicholas I, the ‘gendarme of Europe’ and Yuri Andropov, the KGB spymaster-turned-General Secretary. In that context, this is just another of his attempts to write his own epitaph.

Digging beyond the superficialities, though, is this really the role-model Putin should be claiming?

Like Putin, Peter wanted to build Russian military power, and not only reformed his army but built his navy, just as Putin spent 20 years modernising his military. In the process, though he began the Russian state’s slide into insolvency and ensured it would be fighting wars not just to its north-west but also to the south, against the Ottomans.

Peter in effect forced the unruly Russian aristocracy into state service. However, the tsar’s control was never as complete as he might imagine, and his successors would periodically have to buy off or suppress them.

Peter’s reforms were also much less lasting than might be assumed, beyond St Petersburg. He was a fighting tsar, who reformed only what was needed to support his wars. He failed to address the fundamentals of the economy or of society, seeming to believe – wrongly – that forcing the nobility to shave off their beards and adopt European styles of dress would change how they thought.

Yet while it is tempting to make cheap shots comparing the 5’7” Putin with the 6’8” Peter, the tsar was genuinely a larger-than-life figure, who led from the front (unlike Putin), immersed himself in the detail of his plans (unlike Putin), and whose concrete legacy was the glory of St Petersburg (not the ruins of Mariupol).

Even in capricious arrogance, Peter puts Putin in the shade. Putin may have indulged himself by humiliating his foreign intelligence chief on camera, but when he was teaching himself dentistry, Peter forced his courtiers to let him practice on them.

When I was writing my Short History of Russia, Peter got the best part of a whole chapter to himself. Putin got just a half. A coda for the later edition, after his invasion of Ukraine, concluded ‘Putin really should not have trifled with History. History always wins.’

FT’s Treasury ‘scoop’ shredded by FT readers

Has the Financial Times just been sold another pup? Its economics editor Chris Giles (who predicted that the Brexit vote would lead to recession) has written what could be a Labour Party press release today. He reports as fact a claim by the NIESR, a left-leaning economics think tank, that Rishi Sunak could have saved £11 billion had he taken their advice and taken out insurance against rising interest rates.

A startling claim, interesting hypothetical and worthy of a report. It might fall down upon further scrutiny: could the Treasury really ordered the Bank of England to force commercial banks to swap reserves for gilts? Would this not have been a massive gamble that could easily have lost money? But the FT, in its excitement, decided to write up the NIESR’s what-if as an expose – as if the money has actually been lost and they were revealing this to the world. This rather weird, highly hypothetical study was made into a splash.

Failure to insure leads to theoretical, rather than actual, losses, but the FT forgot this in its excitement. Nor is there any note of scepticism. By paragraph three, Giles is in full spin mode, talking as if the lost money was real. 

‘The loss to taxpayers is greater than the amount Conservatives have accused former Labour chancellor and prime minister Gordon Brown of costing the UK between 2003 and 2010, when he sold some of the nation’s gold reserves at rock bottom prices.’

Of course Brown personally ordered the sale of the gold, a disastrous foray into asset management. And the ‘blunder’ to which the FT refers is a decision not taken. 

Furthermore, plenty of the proposals laid out by the NIESR would interfere with Bank of England’s independence, so why lay the blame on Sunak’s door? A newspaper like the FT is supposed to know where such decisions are taken: why muddy the water and take its readers for fools? As one said: “This article is very difficult to read as it mixes up the Treasury’s position and the BOE’s position.” Others asked had the insurance scheme gone ahead, who would have taken the other side of that bet?

And let’s not forget that when The Spectator devoted a cover story on the risk if inflation it was trashed by… the FT. We were accused of “stoking panic in a bid to revive an austerity doctrine that economists widely view to be far more harmful than helpful.” What would they have said had the Treasury overruled the Bank of England to insure against an inflation risk the the FT thought laughably implausible?

Yet now the FT makes out as if Sunak is guilty of an imbecilic “blunder” and “economists” have called him out. Many of those who can afford the hefty FT subscription were quick to protest against being spun in this way. Plenty of traders are painfully aware that almost no one expected the inflation rise (in fact Rishi Sunak was one of the people pointing out the inflationary risks last year). So why present this a scandal?

Here are a choice of FT readers’ comments: 

• Am highly amused by the idea that the NIESR is not partisan? When did this happen? Yesterday evening? Also amused that our Chancellor should become a hedge fund manager all at the same time.The NIESR is looked upon in Westminster as a long time ally of the Labour Party. Has the FT not noticed this?
• This article could do with a sprinkling of Martin Wolf. No analysis of whether the NIESR proposals are practically viable or what the other implications of their suggestions would be (re. central bank independence, gilt mkt constraints, impact on commercial banks, policy implications of central banks and treasuries trading in the way suggested, are there any precedents etc.).
• This is a painfully political article from a paper that pretty clearly just has it in for the Tories.
• Struggle to follow this article, the Treasury is supposed to contradict BoE’s (independent?) money printing and mess up the market by hedging against rate rises? Who would take the other side of the trade? The BoE?
• I find this a strange story. If the Treasury had taken out insurance, this would’ve resulted in a large transfer from insurance companies to the UK government. Indeed, the insurance companies would have probably become insolvent. Like AIG, they would then have required a bailout – from the Treasury?
• The BoE’s QE has very significantly reduced the effective maturity of the uk’s debt; and therefore increased its sensitivity to interest rate rises. That effect dwarfs this article’s contemplated interest rate swap. But maybe blaming the [Bank of England] governor isn’t so much fun (and anyway QE has other effects).
• This is an appallingly misleading headline and article. Plenty to criticise the government for, but this isn’t one. Article should read: interest rates go up, cost of interest payments has risen. Who was the government supposed to sell this amount of fixed coupon debt to, other than itself?!
• I’d expect better of the FT – clickbait headline and lacking any decent explanation/analysis.

What are the odds on this being reflected in the FT’s letters page? Mr S won’t be holding his breath…

UPDATE

Giles has taken to Twitter to say “I make absolutely no apology for writing a complicated story in a newsy way – that is good journalism.” FT readers seem to have expected scrutiny and scepticism applied to claims reported: the bigger the claim, surely, the greater the need for scrutiny? If you can’t turn to the FT to sort out spin from substance, where do you go?

Why Biden’s inflation plan will fail

It sounded impressive at the time. On the last day of May, a whole ten days ago, president Biden laid out a three-part plan for bringing inflation back under control. It consisted of making sure the Federal Reserve was allowed to do whatever it took to control prices, releasing oil and gas reserves to try to bring down the soaring costs of energy, and fixing supply chains to try to make industry and retailing more competitive. ‘I have made tackling inflation my top economic priority,’ he announced grandly. To listen to the rhetoric from the White House, you might think that this was an issue that could be fixed with a few tweaks to public policy, after which the President could happily go back to taxing and spending on an unprecedented scale. The problem would be solved.

Except, er, whoops, not quite. Today we learned that inflation in the United States is not falling as it was meant to be, but still climbing. It went up to 8.6 per cent, compared to 8.3 per cent a month ago. The stock market started falling heavily on the news, on expectations that the Fed will have to keep raising interest rates to choke that off, and will have to do so faster and more aggressively than anyone yet realises. Anyone who imagined that inflation would simply be transitory and would soon be back under control again will have been bitterly disappointed.

In reality, Biden, along with other political leaders around the world, not least our own Boris Johnson, has made two critical mistakes. The first is that he has failed to acknowledge the government’s own role in creating inflation in the first place. By closing down the economy for over a year, restricting production, and then printing money like crazy to pay for it all, it created the conditions for rapidly escalating prices. In particular, Biden embarked on a huge spreading spree immediately after taking office, convinced by a small coterie of ultra-Keynesian economists that deficits didn’t matter and that a bigger state was automatically better for the economy. Next, Biden, again like Johnson, refuses to acknowledge that this process will be painful. To bring supply and demand back into balance, people will have to work harder and consume a bit less. The government most of all will have to step back and stop spending money it doesn’t have. Until Biden is willing to own up to that and level with the voters, it doesn’t matter how many plans he comes up with. They will all keep failing – and prices will keep rising.

The Capitol riot hearings are farcically partisan

Let’s get the boringly obvious out of the way. What happened in Washington on 6 January, 2021 was bad. Very bad. America, the world’s most powerful democracy, looked a horrible mess. Rioting is always wrong. Rioting on Capitol Hill on the day when power is meant to be peaceably transferred is anti-democratic and anti-conservative. Even if you believe the presidential election of 2020 election was rigged, as many ardent Trump supporters do, it is never acceptable to smash up federal property. To target America’s most important building is especially egregious. It doesn’t matter how angry you are.

Obvious point two: from the election in November to January, Donald Trump behaved irresponsibly, dangerously and stupidly. Never mind if he sincerely believed a second term was stolen from him. In 1960, Richard Nixon had very good reasons to think that ballot-stuffing in Chicago meant he lost ever so narrowly to John F. Kennedy. Nixon contemplated fighting the result. But in the end he decided to do what was best for his country: sucked up the defeat and came back to win in 1968. Democracy is often unfair. The fact that Donald Trump refused to do the same, the fact that he and his lawyer Rudy Giuliani cultivated often stark raving mad conspiracy theories as to how his opponents defrauded the nation, turned an ugly election into a democratic crisis.

But crisis is opportunity, and the widespread antipathy towards what happened that day presented America’s political class with a chance to try to restore the authority of the US Constitution over elections, to re-establish that, pace Trump, not everything is about winning and losing. The integrity of the system matters and so on.

Instead, America’s politicians, in their infinite folly, have decided to do the opposite. The January 6th Committee Hearings are farcically partisan. It is part of a highly political campaign by the Democrats to pour further scorn on the Republican party. Committees are meant to investigate; to establish what has gone wrong and find a way to do what’s right. But the Republicans and the Democrats could not agree on who should run the committee. And so the Democratic Speaker Nancy Pelosi vetoed minority leader Kevin McCarthy’s proposed members in favour of her own favoured Republicans. The result is that Liz Cheney is the Committee’s vice chairwoman. On 7 January, 2021, Liz Cheney tweeted the following:

Now, you may well think Cheney is entirely right. But doesn’t such a firm opinion, publicly expressed, make Cheney a less than ideal candidate to evaluate what happened on 6th January? 

Look too at the Democratic members of the Committee. Instead of picking sensible and even-handed Democrats – there are such things – Pelosi brought in some of the most rabidly anti-Trump representatives possible. Adam Schiff, who played such a prominent part in the great waste of time that was the Trump-Russia inquiry, as well as Trump’s first impeachment. Jamie Raskin has arguably even longer form when it comes to bias. He led Trump’s second impeachment and also protested against Trump’s victory in Florida.

So what should have been a painful issue of 6 January^. – at one level, simply finding out how a rabble of protestors managed to break into such a heavily policed complex; on another, establishing exactly who and what led them to do so – the Democrats turned the 6th January Committee into yet another tedious trial of Trump. Into another clear attempt to banish him from the political stage altogether and prevent a drubbing in the mid-terms in November. As the New York Times put it: 

‘House Democrats plan to use a landmark set of investigative hearings beginning this week to try to refocus voters’ attention on 6 January, aiming to tie Republicans directly to an unprecedented plot to undermine democracy itself.’

President Joe Biden, for his part, has said that 6th January was ‘about white supremacy, in my opinion’. Is there evidence for that? Or does evidence not matter anymore?

Where will Boris get his ideas from?

Has Boris Johnson run out of ideas? It’s not an unreasonable question at the end of a week in which more than 40 per cent of his MPs said they didn’t want him leading them any more. Still less unreasonable when his big reveal policies have been getting on with something that David Cameron signed off on in 2015 but that hasn’t yet happened; and a ‘once in a generation’ transformation of the NHS which seems to amount to some middle managers going on a course.

The right to buy announcement will merely implement an old policy, while the mortgage review alongside it may help a few first time buyers. The NHS Messenger Review does cover an important issue regarding the quality of leadership in the health service, pointing to the ‘institutional inadequacy in the way that leadership and management is trained, developed and valued’. That inadequacy has clearly been a factor in some of the number of large-scale scandals in the health service over the past few years, but also in the way many whistleblowers are treated, as well as the issue of bullying in certain trusts. Messenger identified the way in which managers tend to ‘look upwards to furnish the needs of the hierarchy rather than downwards to the needs of the service user’.

Oddly, though, you will find precious little acknowledgement of one of the factors the review, led by General Sir Gordon Messenger and Dame Linda Pollard, identified which was political pressure. Either way, the review, which seems sensible enough, isn’t the radical shake up of the NHS that it was trailed as. It’s not even particularly new given there has been a series of reviews on the questions of culture and leadership in the health service in recent years.

Once again, the Conservatives seem to have been looking back to the 1980s for some kind of inspiration: it was in 1983 that the Griffiths Review recommended genuinely radical changes to the way the health service was managed. It was a necessary overhaul but not necessarily implemented in the way its author Roy Griffiths, at the time the deputy chairman and managing director of Sainsbury’s, had intended.

And of course times have changed rather since Griffiths, so there is a need to look at how the health service works. It’s just that this government isn’t prepared to do that. It is unlikely that Johnson’s Blackpool speech on housing is going to rank among one of the seminal moments of his premiership, neither are health service figures going to be talking about Messenger in 40 years’ time in the way they still refer back to Griffiths.

Why the paucity of new ideas and reliance on reheating old ones? James explains the bind Johnson finds himself in here: he doesn’t have the authority or the money to go for things that will make a real difference.

Next week, the Prime Minister will trundle to Doncaster for a conference held by the Northern Research Group of Conservative MPs. They are just one of many pressure groups in the party who have plenty of their own ideas to push the weakened Johnson into accepting. Some of those ideas are very sensible, others will annoy Tory colleagues in other parts of the country no end. But a limping and uninspired Johnson can’t dismiss them out of hand because he needs these MPs to support him. It means he will end up with a real muddle of policies in the run-up to the next election which are characterised by the ability of certain ginger groups to shout loudest, not by his own vision for Britain. And while in the short term that’s all he can hope for, in the long term it will likely make it even harder for him to persuade voters to back him again at the next election.

Soaring fuel prices could be lethal for Boris Johnson

As if Boris Johnson was not in enough political trouble already, the latest surge in oil prices is threatening to overwhelm the government. This week, petrol prices in some filling stations have crossed the symbolic threshold of £2 per litre. This would be a problem for any government, but, for a Conservative administration which owes its last election victory to the votes of relatively low-paid manual workers, it is an existential threat. 

People who rely on their cars to get to work face being priced out of the workplace. Decades of sky-high property prices – and high moving costs thanks especially to stamp duty – have changed the pattern of living and working. There are large numbers of voters who must drive long distances to reach their place of work. If you are a teacher, nurse, carer or factory worker, you have no option of working from home. Moreover, outside London, public transport is often of little use – and it is going to be deeply affected everywhere by strikes over the next few weeks. High petrol prices are a bomb which has landed right in the heart of the former Red Wall.

But there is another aspect of this crisis which is especially harmful to Boris Johnson. During the Brexit referendum he promised that one of the benefits of leaving the EU would be the ability of Britain to drop the 5p VAT on domestic heating bills. Not only has he refused to keep this promise – and at a time when keeping it would have been especially helpful to households – but he is failing to follow the example of many EU countries which have introduced emergency cuts in road fuel duties, beyond the 5p cut in the spring statement. Germany has cut duty by €0.3 per litre, France cut it by €0.18 in April and has extended that cut over the summer. Poland, too, has cut duty. 

It is very easy to look and say: we left the EU partly so that we could reduce energy bills, and yet there are EU countries slashing fuel duties while we do not. As for the 5p cut in the spring statement, that has already been more than cancelled out by the rise in the VAT receipts. Given that VAT receipts are proportional to the price of petrol, charged at 20 per cent, the government is scooping in far more extra revenue than it lost through the 5p reduction. A 50p per litre rise in the underlying price of fuel generates an extra 10p in VAT receipts. Worse, the government can be said to be clobbering motorists by levying a tax on a tax – given that VAT is levied on fuel duty.

There is an alternative case which says that road fuel duties are not especially high in Britain. When it comes to fuel prices, the UK occupies a mid-table position among European countries – and most of the countries with cheaper fuel are Eastern European ones where earnings are a lot less. Moreover, fuel duty has not risen in a decade. The government is paying the political price for failing to raise duty when oil prices were very low between 2014 and 2017. It could have raised duty then and motorists would hardly have noticed – they would still have enjoyed falling prices. That would have allowed the leeway to cut duty much more firmly now.

But trying to tell motorists they are enjoying relatively cheap fuel is not going to wash. What should frighten the government is how much further oil prices could rise. For all the havoc caused by high energy bills, the price per barrel of crude oil has yet to reach its 2008 and 2011 peaks.

A gentleman’s guide to Father’s Day drinks

Whether it’s Santa or the Sith Lord Vader, if there’s a patriarch knocking about in your family, he’s sure to appreciate some pampering this Father’s Day. But there’s no need to fuss, since most daddios are at their best if they’re left alone with a drink.

So why not earmark a quiet corner for him on the 19th and make sure he has something special to sip on? Here are some suggestions that’ll make his day.

Bourbon

This month’s removal of a punitive US-UK tariff on American whiskey trade should see a glorious return for this smashing spirit, and there are few finer than the whiskies coming from the Heaven Hill Distillery (https://heavenhilldistillery.com/#5) in Kentucky. The family-owned distillery opened its doors in 1935 and amongst its many distinctions, is that it’s the only heritage distiller to produce every style of American whiskey. From Mellow Corn to the Larceny wheated Straight Bourbon and one of our favourites, the stunning Rittenhouse Rye, a whiskey for the assertive, no-nonsense fathers out there. For the all-rounder, we often opt for the Elijah Craig, an indispensable addition to any discerning drinks cabinet, it has all the quintessential complexity and quality of Kentucky Straight Bourbon.

Beer

If Dad has forgotten to take his meds, then how about serving up a crisp German Pils. The extraordinary world of choice and craft can be a bit of a head scratcher and sometimes the old man simply wants a decent, summer sipper with character. Pils and lager style beers have had a bad rap in recent years, but only because so many brands have made cheap examples – when brewed correctly, the style is sublime. Krombacher proves this point emphatically. Family and privately owned for centuries, Krombacher is one of few locations in the world lucky enough to brew with a natural water source. Discovered 300 years ago, the Felsquellwasser – meaning rock spring water – is amazingly soft and therefore ideal for brewing lager, as are the beer’s classic German hops (Hallertau and Siegel) and it’s cultivated yeast strain.

Mezcal

But if you really want to get Dad thinking, then how about a true discovery in The Lost Explorer Mezcal. Maestro Mezcalero Don Fortino Ramos has been mastering the art of distilling mezcal from more than 40 years and his daughter, Xitlali, works closely by his side now, preparing to one day become the family’s second generation mezcalera. At the heart of The Lost Explorer Mezcal are agaves that grow on ancestral Miztec land in Valles Centrales, Oaxaca for more than seven years. After the agaves are hand harvested, they’re baked in stone lined pits, then the juices are crushed out and left to ferment with wild yeast, before being distilled. Of the over the more than 50 varieties of agave that could be cultivated, the trio of Lost Explorers utilise the Espadín, Tobalá and Salmiana, and each will bring something different to the final distillate. We’ve opted for the Tobalá, with its drier quality and touch of tobacco and wood, that converts to a sweeter chocolate with a hint of lemon citrus. Incredibly complex and flavoursome, Mezcal is one of the last, true artisan spirits.