Rachel Reeves and Miliband in Running for a Nobel Prize!

In their dreams. My rather gloomy forecasts for 2025.

The Economy

Rachel Reeves’ policies could be viewed as a ground breaking economic experiment that will either prove or disprove the Laffer Curve for good. In the 1980s US President Regan demonstrated that cutting taxes increased the quantum of the government tax take, a smaller slice of a bigger cake. Maybe he got lucky. Whatever the case, Reeves is set on delivering economic growth by increasing taxation. If she can secure a bigger slice of a cake that is no smaller she has some hope of controlling the deficit. If she manages that she’s in with a shot of a Nobel Prize for economics.

Unfortunately the big state (as a proportion of GDP) has never worked before, in the UK or anywhere else. Neither has tax and spend. Unsurprisingly, the indications are that it isn’t this time. At best the UK is stagnating, with growth below 1%, and that’s before much of the Reeves’ budget bites. If the economy won’t grow then Reeves’ budget is a mess and she’ll either need to cut spending or raise taxes further. The latter is already being mooted.

Reeves faces other problems. Because of migration the UK’s population is growing at 1%. If the economy doesn’t grow at that rate (or more) then GDP per head will fall, meaning that we’ll all feel poorer, unless we’re a train driver or other state employee.

In the real world of money the 10 year gilt yield continues to rise so the government’s cost of borrowing is rising. If the tax take can’t keep up there will be even less money for the government. If they borrow more, as they almost certainly will since Reeves redefined the debt rules once and can do so again, then interest and debt repayments will inevitably rise too. At some point the bond markets will decide they hold enough UK debt at any price, at which point its game over.

On balance Rachel from accounts is unlikely to win a trip to Stockholm. She may well be summoned to New York to explain to the World Bank how the UK intends to pay what it owes and avoid a bond strike or (whisper it) a Sovereign default.

Energy

Ed Miliband’s might have a chance of a trip to Stockholm too. His vision of a clean grid by 2030 can only work if the wind blows almost constantly across all the UK’s onshore and offshore wind farms. If Ed can order that then his Noble Prize is surely certain.

The data at Grid Watch shows that hasn’t happened this December, when for about half the time we’ve been utterly dependent upon gas fired power stations and the aging nuclear ones. It was even worse in November. If you read the small print of his much hyped plan it says they’re going to keep pretty much all the gas fired power stations on standby.

The problem with that is twofold. Firstly a gas power station is an expensive thing and if it isn’t generating it isn’t making money to pay for its construction. Either it is paid not to generate (as wind farms are) or it will charge huge amounts for the electricity it produces when it does run.

Secondly an unused power station quickly develops engineering problems. These start with corrosion and go on to include broken seals, failed bearings and bent generator shafts. There are fixes for most of these (read more cost), but preventative maintenance measures will mean that they’re not immediately available when they’re needed.

All of which means that electricity supply will be constrained from time to time and so it will be more expensive, despite Ed the Red’s assertions. (He read economics, surely he understands this). Like Rachel from accounts, Mad Ed has cooked the books. Not only will his clean grid not be clean (5% of generation must be gas fired) but it will only be cheaper if gas prices and carbon taxes remain unrealistically high. Labour lies, again. Instead of dinner in Stockholm Red Ed should have an appointment in the Old Bailey to discuss maladministration.

If electricity costs rise, as they surely must, do does the price of everything that uses electricity, from computers to refrigeration. That will cause inflation and some businesses will fail. Both add to the Chancellor’s problems. Tackling inflation means raising interest rate – and inflation is already a problem. Rising energy costs combined with increased taxation and rising interest rates renders private sector growth impossible. Reeves and Miliband have combined to destroy the private sector – the crucial part of the economy that creates wealth for them to tax.

That’s what Marxists do. It didn’t work in the USSR, Cuba or Venezuela. Why should it work in the UK?

The United States

President Trump has a habit of doing what he says he will. That means some turbulence in the world of globalisation, withdrawing from the Paris Climate Agreement (again) , setting Elon Musk on the fetid swamp of the Federal Government machine and a lack of tolerance of failing international relationships.

President Trump’s impatience with the European bit of NATO relying on the US to do the heavy lifting is already well known. Whether he will choose a new Cold War or a period of détente with Russia is unknown, but as President of the United States he sets the policy of the world’s major military power and its allies – not the NATO Secretary General. Realpolitik is back.

It seems likely that President Trump’s main concern is China’s impact on the US economy and the security threats it poses. While he grapples with that he’s likely to seek rapid solutions to other problems such as the war in Ukraine and the Middle East.

Starmer’s government has already insulted President Trump personally, as has our new man in Washington, Lord Mandelson. The US may or may not be able to block the Diego Garcia giveaway, but the risk of real damage to US and western security makes it unlikely that the Anglophile President will accommodate the UK in matters like trade deals. David Lammy should have worked that out. Yanking the chain of the UK’s major ally and largest export market is idiotic. The whole country will suffer because of his large mouth.

If there were a Nobel Prize for proving that empty vessels make the most noise Lammy would already have won it. Twice

Ukraine

For all the noise from the jingoist newspapers, Boris Johnson and President Zelensky, the defence of Ukraine relies utterly on the USA, which has provided some $70 billion. The UK has chipped in about £12 billion, and the rest of Europe and NATO rather less. How much of that is weaponry (which is what Ukraine needs almost as much as it needs more soldiers) is opaque, but it’s much less than 100%.

If President Trump favours a negotiated settlement, that is what will happen. Ukrainians, the EU, the media and the Boris Johnson fan club may whine, but Putin and Trump will do a deal and that’s the end of the matter.

Enforcing any ceasefire and the revised border will be a huge effort. The Korean DMZ (de-militarised zone) is about 250 km long. Ukraine’s border with Russia is about 2,000 km long, with a further 1,000 km border with Belarus. The rump of Ukraine is unlikely to join NATO and its membership of the EU is likely to be vetoed too.

Rebuilding Ukraine will take a lot of money that it doesn’t have. That will no doubt lead to a further avalanche of corruption and fraud, just as it did in rebuilding Iraq. Russia of course will have to pay for rebuilding the bits of Ukraine that it has now assimilated. That might well stimulate Russian economic growth.

The impact of peace in the Ukraine for the UK will be an easing of the cash drain of funding their war cost. This is potentially likely to be defrayed entirely by the needs of building credible armed forces – particularly if, as is likely, we get involved in patrolling any DMZ. It’s more likely to go into funding the Reeves budget.

The Middle East

Netanyahu’s Israel has rewritten the book on combatting terrorism - it is possible to secure peace (or something very like it) through military means. The Israeli Defence Forces have pretty much destroyed Hamas in Gaza. In southern Lebanon Hezbollah is being evicted and their capability in Syria is being eliminated too. The Houthis in Yemen remain a pest, intermittently swatted by the IDF and the prime malevolent actor, Iran, has been humiliated.

For reasons only they can explain (ha!) much of the Labour Party clings to the Palestinian (read Hamas) cause, which of course is anathematic to Israel and a further irritation to the United States. While the doyens of Westminster may fulminate at length, our very limited military capability means that the UK will not have a major role in determining what happens next. A few RAF jets may join the occasional attack on Houthi positions and any warship in the Red Sea or eastern Mediterranean might shoot at Iranian and Houthi drones. Years of military decline mean we’re an impotent spectator, unable to protect the shipping lanes on which we depend.

If passage through the Suez Canal continues to be challenging there will continue to be a price and time premium paid on oil, gas and goods routed that way, although much of that has already happened.

EU and Brexit Revisited

Closer to home, the Starmer government seems keen to “work more closely” with the EU, which of course means taking more instructions from Brussels. That might or might not lead to more exports but will certainly lead to more bureaucracy and the results of the disastrous Windsor agreement remaining intact. Fishermen will probably get shafted too and the surge of illegal immigration will not reduce.

No doubt the Brexit arguments of the past decade (or more) will be repeated, with flaky data and opinion being confused with fact. More salt will be rubbed into the wounds that the Brexit argument dealt to national unity; the divides will be further entrenched. The price will be that the UK’s economy will continue to miss the opportunities that it should have gleaned from Brexit – which is a very stark demonstration of how utterly inept the government machine is.

UK Parliamentary Politics

The polarisation of the UK will be nowhere more apparent than in Westminster, where of course it has been exacerbated by the vagaries of the first past the post system. The government will use its massive majority to pass its progressive (i.e. Marxist) agenda and there is nothing that can be done to stop it. With a 100 seat majority it’s inconceivable that Starmer would lose a vote of no confidence and there is no other Parliamentary way of forcing an early election.

Nor is it easy to see The Toolmaker’s Son forced from office. To quote the Labour Party Rule book (Chapter 4, Clause II para D ii) “When the PLP [Parliamentary Labour Party] s in government and the leader and/ or deputy leader are prime minister and/ or in Cabinet, an election shall proceed only if requested by a majority of Party conference on a card vote.” (Card vote rules are set out in Chapter 3, Clause III Para 3 A. Enjoy!). The Unions and constituency parties have a very strong role in determining the outcome of card votes. The short version is that Angela Rayner is the not automatic the replacement for Two-Tier.. Whether that is a good or a bad thing is incalculable.

Whether the Conservative Party survives in its current form or whether it splits is, increasingly, an irrelevance. Reform has become the party of libertarian capitalism. The small part of the Tory party that still believes in that brings too much baggage with it. The Cameron, May, Johnson, Truss and Sunak governments all played a major part in delivering the mess that we’re in, not least the deficit, the national debt and net zero.

The Tories are as bereft of solutions now as they were when in power. The leftish part of the Tory have never understood Hayek and have nowhere to go. Having campaigned on a policy of Ed Davey falling over and securing the intellectually vapid vote, they now find Reform parked on their PR lawn. (Reform had 20% more votes than the Lib Dems but received 93% fewer seats.)

With Parliament reduced to an echo chamber political advances will happen outside Westminster. The most immediate event will be the local elections in England in May. While the correlation between local election votes and general election outcomes is far from direct it seems likely that the Labour vote will diminish and the Tory one stay about the same (at best). In the Lib Dem strongholds they’ll be OK. The big question is how Reform does. As the only opponents of Net Zero and the natural home for the disenchanted they’re likely to get a significant vote and a fair number of council seats.

The crucial elections for Reform are the Welsh and Scottish ones next year. Both are held under PR and the incumbent parties are dismally unpopular. On 2^nd May (the day after the council elections) you can be certain that Reform will be going gangbusters to win large votes in both parliaments. In Wales (my neck of the woods) holding the balance of power is likely and an outright win is far from impossible. The latest data from Electoral Calculus shows Reform as the 2^nd place party in almost all seats. Labour is losing votes to Reform across the board.

Law and Order

That many sections of the public are disillusioned with Labour is no secret. Some of them are furious, most obviously farmers, for whom the Reeves tax raid on Inheritance Tax Relief is causing despair. (Inevitably, there was no mention of this in the Labour Manifesto. Steve Reed, the relevant Secretary of State, assured farmers that this would not happen in the years before the election. Marxists have real problems with facts unless they can rewrite history.)

Angry farmers are now threatening to block the supermarkets’ food distribution centres for sort periods. If they manage this supermarkets would run out of stock in a day and households a little later. Blocking access to such centres is relatively simple – just park a few trucks or tractors and trailers across the entrances or approach roads and prevent them being removed. That’s what the tanker drivers did in 2000 and shook Blair to the core. Blair had the advantage that he was generally still popular and people still believed that “things can only get better”, as his campaign song went. Starmer can only dream of having the popularity and the charisma of Blair.

Rather than attempting to negotiate Two-Tier will probably use force. Ordering the police to break the picket lines is never a good look for a Labour government, but then farmers are not trade union members. As the police don’t have the heavy haulage kit necessary to move a parked tractor they’ll be reliant upon contractors, who may or may not wish to get involved as their customers include farmers and truckers.

Our petulant PM might seek to order the Army to help break the blockade; determining whether that’s a lawful order will exercise many officers and take time. The Army did step in during the 1977 fireman’s strike, but that had a clear risk to the public that short term interruptions of the food supply don’t pose.

The Army was (much) bigger then and owned lots of “Green Goddess” fire engines (procured to fight a nuclear war). Today’s army has very few HGV1 drivers and even fewer refrigerated trailers, if any. Prevention is better than a cure, particularly a humiliating one. It’s therefore quite likely that the government is already painting the famers as possible terrorists, thereby enabling MI5 to lawfully target suspected militant farmers with their full panoply of surveillance technology.

If that sounds far-fetched, remember that MI5 already spends 25% of its time on combatting the (undefined, other than Tommy Robinson) “far right terrorism”. Racism has been a terrorist offence since 2010. Remember also that the Marxist governments of the Soviet Union and Warsaw pact all relied heavily on their secret police forces, the KGB, Stasi, Securitate and the rest of them. One hopes that MI5 resists being sucked into political battles.

In a country run by Marxists who were elected on a false manifesto, have a massive majority, limited understanding of economics, thermodynamics and Britishness it’s a faint hope, but I wish you a Happy New Year.

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