IoD Week in Policy 18 – 22 September 2023
Well, well. It might have cooled down outside, but things are just beginning to heat up in the policy world. The Westminster ether is full of whispers about general elections and showcasing and party conferences and budgets. And it seems the party contenders are pulling out all the stops…
Climate changing – The hot topic of the week is Sunak’s readjustment of the UK’s net zero strategy. For example, he has pushed back the ban of petrol and diesel cars from 2030 to 2035 and relaxed the 2035 target for phasing out the installation of new gas boilers. These changes have sparked backlash, especially with car manufacturers, the Labour Party and even some of Sunak’s own party. Our view is that it is vital the government creates certainty for business so they can make proper long-term plans for investment. You can read our sustainability policy asks here.
Small change – The ONS released a series of data sets that tell us how our economy is getting along. Well, inflation is down from 6.8% to 6.7%, and while this can only be described as a marginal improvement, it’s better than economists were expecting, with a bigger drop due in October when the Ofgem price cap comes down. GDP also fell – by 0.5% in July. We can blame weaker retail consumer activity on the wet weather, but separately there was a decline of ICT, admin services and manufacturing. Finally, the labour market saw a 0.5% rise in unemployment in the three months to July.
The Goldilocks zone – All that taken together led us to the decision that it was just the right time for the Bank of England to stop increasing interest rates, which they did do, holding rates at 5.25%. The Bank’s programme of tackling inflation with interest rates seems to be working – they tamed the beast, with inflation likely to fall to within sights of the 2% target in 2024.
Têtes-à-têtes – Meanwhile, on the other side of the House, Sir Keir Starmer has been getting friendly with nos amis across the Channel at a lunch with President Macron on Tuesday. The Labour leader wants to significantly improve the UK-EU Trade and Cooperation Agreement (TCA), which Starmer described as “far too thin”. If he wins the next general election, he wants to beef the TCA up with a veterinary agreement, closer ties on security, innovation and research, and a deal on professional qualifications.
Subject to change – Speaking of qualifications, the Prime Minister has been doing a lot of thinking about the UK’s school system. He is exploring the idea of reshaping A-levels with a new British baccalaureate. This would mean all 16-year-olds would study core subjects like maths and English beyond GCSE. From a business perspective, it is good that potential new recruits are given the opportunity of the broadest possible education, but another big change to post-16 education needs to be implemented carefully so employers can trust what the qualification really means.
An exchequ-list – So, Sunak’s net zero policy is somewhat contentious, the economy is at a pivotal moment and the UK-EU trading relationship is up for debate. We wrote to the Chancellor to give him some ideas about what to put in his Autumn Statement on 22 November. These include tax credits to address skills shortages, a stronger incentive for SME net zero transition, permanent 100% capital expensing, a volume based exports target and greater reputational pressure on slow invoice payers. Either way, Mr Hunt, it can’t be as bad as last year, can it? Read our full letter here.
Next week, parliament is in recess, as parties get ready for their Autumn Conferences. The Liberal Democrats will be hosting theirs in Bournemouth next week. Then the Conservatives will be in Manchester the following week, and Labour will be taking us to Birmingham the week after that.