Au Revoir Boris – Reasons To Be Cheerful

Mark Posniak is managing director of mortgage lender Octane Capital

As I write this, our indefatigable Prime Minister is still Prime Minister as, whilst his hands have been prized from the door frame of 10 Downing Street, he has insisted on keeping hold of the keys for a while. And even when he relinquishes occupation entirely once a new Tory party leader and PM is ordained, I suspect that Boris will remain a prominent figure within UK politics for a while yet. If I were the Conservative membership I’d make him party chairman, a role much more fitting to his character and brilliant campaigning ability. He’s an electioneer not a leader, in my opinion.

So what now? Well, Sunak, Mourdant, Truss Hunt, Tughendhat et al were all vying for the favour of, first, the parliamentary Conservative party who select two short-list candidates then for the 100,000 strong Conservative membership to appoint a boss come September or so. It’s now down to two.

My money is on whoever this is being a strong fiscal conservative. And Nadim Zahawi should catch our eye as first out of the blocks with a raft of tax cutting pledges. The current Chancellor (I think although it’s hard to keep up) has declared that if he were PM he would cut taxes including corporation tax, VAT and stamp duty – the latter being my pet hate. He’ll suspend fuel duty too temporarily if he has any sense thus reversing a consumer spending decline and reversing the current inflation trend all at the same time. But this was all to no avail and he’s out, the battle being between a tax hiker in Sunak and the supposed tax cuts of the other one.

Rishi? I like him and I think he’ll make a great Prime Minister and whilst I certainly don’t buy him being obsolete because his wife is a billionaire or because she pays tax in her native India, he may still be tainted by the Number 10 briefing campaign against him from earlier this year and his refusal to cut taxes. Chancellor again? Yes, maybe that works.

Whatever happens in the embittered battle that is about to ensue, a fresh pair of hands with a clean slate is just what we need and, accordingly, confidence and positive sentiment has a decent chance of being restored now. Perhaps we’ll also see integrity and honesty returned to the corridors of Whitehall – one can hope.

The new team must send a strong message to the Bank of England too, independent as it may be. And that is one of being less obsessed with inflation figures. Yes, it hurts us and means that wages are lower in real terms but to place inflation as THE key metric by which we run economic policy seems nuts to me. Inflation is temporary and right now caused by a combination of the uptick in recovery spending post-pandemic and scarcity of resources as a consequence of the war in Ukraine. Neither of these will last forever and nor will inflation.

The wrong thing for Downing Street 2.0 to do here is to acquiesce to Andrew Bailey, the Bank’s Governor. Instead the new incumbency must change his terms of reference and let inflation run a little. Surely a slightly higher cost of living for a short while is better than an economic ice-age caused by a recession brought about by interest rates being hiked and hiked unnecessarily?

As we all swelter in the heat, the latest temperature check of the UK property market via the Halifax House Price Index shows that values have risen by the highest annualised rate since 2004 at 13%. So far, Brexit, the pandemic and Bo Jo’s crash to earth have left the housing market completely unfazed.

So, in amongst the doom-laden commentary that you will see elsewhere, are there reasons to be cheerful? Yes, I rather think there are.

Mark Posniak

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