A rise in interest rates could be disastrous for homeowners

A rise in interest rates could be disastrous for homeowners

With interest rates set to rise once unemployment reaches 7% homeowners will be looking at their bank balances and finding ways to economise there lifestyles.  It has been mentioned in the news for years now that a rise in our record low 0.5% interest rates could be devastating for some families who are already struggling to pay their mortgage.  Your average household on a tracker mortgage currently pays £805 a month for their house, even a small 2% rise in interest rates could increase their monthly payments by £182.  The rise in interest rates is expected to lead to one in five home owners to increase work hours or make substantial cut backs on their household spending and in some cases people will lose their home.  These statistics relate to a 2% rise in interest rates, a greater rise could have an even more devastating impact on the homeowners.

A rise in interest rates will only add to an already high cost of living in the UK.  The Bank of England argues that by time the rise in interest rates comes the UK economy will be in a period of recovery and stronger economic growth.  This means people jobs will be more stable, and above inflation pay rises will once again be the norm.  However none of this is certain, and many in the public sector will not receive above inflation pay rises , and because the interest rate rise will be triggered by unemployment figures those on zero hour contracts and in part time work will be counted as employed.  So although a rise may not hurt as many as one in five homeowners, even if the economy will be well into its recovery a large group of working and lower middle class people will find themselves in a very tough financial situation when interest rates rise.

Since the Bank of England was given independence under Gordon Brown, interest rates are now out of the government’s control.  Although the Chancellor may advise the governor of the Bank of England, he cannot force him to alter interest rates.  However, the Chancellor needs to say something, although a proposed rise in minimum wage and tax cuts will cushion the blow of interest rate rises it won’t be enough to stop households suffering from a rise in their mortgage payments.  It is inevitable that interest rates will rise eventually, but a better test than unemployment rates is needed to stop them having an adverse effect on the aspirational classes.  The people who will be worst hit by a rise in interest rates are the hard working people who David Cameron constantly says his government supports.  Currently this issue is not one that is being seriously debated, mainly because a rise in interest rates is unlikely to happen before the next election.  However, the Chancellor and Prime Minister need a plan to either delay interest rate rises until people are in a better position to deal with them, or at least come up with a set of policies designed to reduce the rises impact on home owners.  It is worth noting that many people will also benefit from a rise in interest rates, it will encourage the banks to lend more to businesses, which may well lead to more jobs being created.  Also savers will enjoy a rise in interest rates, however if David Cameron is serious when he says he supports hard working people and he is trying to do something about the cost of living, he needs to ensure that a rise in interest rates does not happen before the economy is ready for it. 

  

Boris cannot lead the Conservatives

Boris cannot lead the Conservatives

As a Conservative the issue of who should be the next leader of the Conservative party means a lot to me, I want the Conservatives to win a majority in 2015 or at least be the largest party in a hung parliament.  If they are not then David Cameron will step aside a new man will get the job and even if David Cameron does return to No 10 there is no guarantee he will be PM by 2020.  Anybody who has read a newspaper in the past year knows that one of the front-runners for the Conservative leadership is Boris Johnson.  Boris Johnson cannot be allowed to lead the Conservative party and if he does we may as well hand the keys to No 10 to whoever happens to be leading Labour.

Boris Johnson looked like a strong contender for the leadership only last year but now I believe he is now dropping behind, with candidates such as Michael Gove look like a much stronger prospect.  Several things have happened in the last year that have weakened Boris as a candidate and made him look like a potentially disastrous leader.  Firstly a documentary about Boris Johnson was released which highlighted all the bad things about Boris, followed up by the disastrous Eddie Mair interview about the same documentary (in case you missed the interview here is a link http://www.youtube.com/watch?v=fj686CmGGSA).  Party leaders need to be squeaky clean, yes occasionally they can make a mistake at some point in their career, but Boris Johnson’s list of political crimes is very long.  You have his affairs which are a no no, for a politician, then you have his misquote in the Times which got him fired this makes him look untrustworthy, there is the incident where he provided information to allow someone to be beaten up, and he comes across as a bit of an oaf.

Now I understand that Boris is not an oaf and is a very intelligent man and becoming the Mayor of London was a huge achievement for any Conservative only topped by being re-elected.  Nevertheless, his mannerisms that make him so popular as London Mayor are the sort of behaviours that a PM would never get away with, also the list of Political crimes he has committed will be used by Labour to make a big stick which they will repeatedly hit Boris with.  As much as I used to support Boris Johnson I believe his past is to toxic for him to be a viable leader he would be a liability come election time and the Conservative Party has better options.  We have Education Secretary Michael Gove, he has shown himself to be a shrewd tactician and a reformer, trying to change our education system without using the classic Tory argument of Grammar schools.  There is William Hague he was a disaster as leader the first time around but he is older now and is a modern day big beast, not only that there are few better debaters in the commons than William Hague, however he has already said he will be retiring from politics soon so maybe he won’t run.  Adam Afriyie has been mentioned in recent months as a potential leader, I have written about him before and I don’t believe it is his time yet.  Although I have changed my mind on one thing he would be better for the party than Boris Johnson, I still think he would lose to the likes of Michael Gove but is a really strong candidate for the leader after next.  He is a self-made man, he is a good speaker, he gives a good interview, and he is great at articulating his views.  These are just a few alternatives to Boris Johnson the Parliamentary Conservative party is full of talent I have not even touched upon David Davis, Jessie Norman, Philip Hammond or Theresa May.  The Conservative party does not need Boris as its next leader and hopefully the party choses one of the many alternatives or we should prepare for a period in opposition. 

Scottish Nationalists need to start living in the real world if they want independence

Scottish Nationalists need to start living in the real world if they want independence

The Scottish independence campaign is this year and currently it looks like the Union will remain intact long after 2014.  There are several reasons why the ‘Yes’ campaign has been lagging behind in the polls ever since the referendum has been announced, firstly there is no real appetite in Scotland for independence.  Although the SNP currently have a majority in the Scottish they did not win that majority due to people wanting independence, they won for other reasons such as Labour’s roll in the financial crash and their relative success as a minority government.  However just because there was no strong call for independence initially does not mean that the SNP can’t win independence for Scotland if they start campaigning based on rational arguments, rather than ignoring facts and playing to peoples sense of nationalism.

One of the key issues in the independence debate is economics, will Scotland have a stronger or weaker economy if it goes independent.  Alex Salmond argues that Scotland will have a stronger economy if it goes independent, its economy will be based around the energy sector with funds coming from North Sea oil and green energy.  There are problems with Alex Salmond’s utopian vision of an independent Scotland’s economy, firstly it is now cheaper to get oil from the USA than from the North Sea this will reduce the lifespan of drilling in the North Sea.  Simple economics says that when oil companies can no longer make a profit from an oil well they move on.  Secondly, Green energy may be the future, but it may not.  It has challengers from nuclear, conventional energy sources such as coal, oil and gas, and looking further into the future nuclear fusion is already being tested in France this technology although far from complete has the potential to kill of all other forms of green energy.  The final problem with Green energy is that it is expensive and requires lots of government subsidies and tax incentives to make companies want to invest in green technology, this is money Scotland may not have if it is independent.  Currently Scotland spends 45% more on its people than it generates in tax, as it is part of the UK this spending is sustainable, if they leave they will have to borrow more money or make spending cuts.

Another huge economic debate surrounding independence is which currency will Scotland use?  Salmond has his heart set on the pound, and entering into a euro style currency sharing agreement with the rest of the UK.  However both the Chancellor and the Shadow Chancellor have both said no such agreement between Scotland and the rest of the UK will occur if Scotland gains independence.  This does not mean Scotland can’t use the pound, although if it does use the pound it will not have control over monetary policy which would undermine the whole point of being an independent country.  To illustrate the fact that the SNP currently don’t live in the real world, Nicola Sturgeon still insists the rest of the UK would sign a currency sharing agreement, she also said that an independent Scotland would have stronger growth than if it remained in the UK.  Although finance experts continue to ridicule the SNP’s economic policy, Ruth Porter head of economics at Policy exchange said “the raft of economically incoherent policies being proposed by Alex Salmond would be disastrous for Scotland.”  An independent Scotland would most likely have to adopt a new currency and this could severely damage the standard of living in Scotland and also as a new nation Scotland will struggle to borrow money at low interest rates.   One final point relates to Scotland joining the EU, recent reports suggest that Spain may oppose Scotland’s membership to the EU fearing that Catalonia may seek independence, this means that Scotland would not be able to adopt the Euro as an alternative to the pound (not that they would currently want to) and they would not have the easy access to European markets that they currently do and this would be hard on Scottish businesses.

To conclude the ‘Yes’ campaign need to start drawing up a serious economic plan for independence because currently if the facts differ from their argument they lie about the facts or ignore them altogether.  Their campaign is currently geared too much towards stirring up Scottish nationalism and without a solid economic plan this campaign will not be successful.  I doubt if Scotland votes no to independence, that the SNP would cease to be a political force in Scotland but it may spell the end of Alex Salmond and show him up for the demagogue he is.

David Cameron needs to talk to the Mondeo man

David Cameron needs to talk to the Mondeo man

It has been a tough year for the Conservative party, Labour has had a comfortable lead throughout 2013 and UKIP have had a breakthrough year.  There has been talk of leadership coups and there has been general backbench worry about the upcoming 2015 election.  However, it has not all been negative for the Prime Minister, the economy is growing, Labour’s lead is down to 6% from a high of close to 11%, and UKIP’s popularity surge has subsided and stabilised.  Although the year has been tough for the Conservatives the points mentioned above will give them some optimism of being able to win a majority in 2015.  Nevertheless, if they intend to win the first Conservative majority since 1992, 2014 will be a big year and the Conservatives are going to have to start talking to the Mondeo man.

The Mondeo man is the name given to those voters who opted to vote Conservative in 92 but turned to Labour in 97.  Even in 2010 David Cameron was not successful in winning this group back, and it is crucial in 2015 this key electoral group returns to the Conservative party.  This group of aspirational middle class voters kept Thatcher in power for a generation and then Blair, the Mondeo man decides elections.  So far the Mondeo man has been neglected by the government, as this year Cameron has fought UKIP in a successful attempt to stop the Conservative party leaking its core voters.  As he is aware without his party’s core vote he will never win a majority.  In his fight with UKIP Cameron has promised a referendum on the UK’s membership in the EU and has took a tough stance on immigration.  Although these sorts of policies have not won back all the former Conservative voters now considering voting for UKIP, they have won back some and stopped UKIP’s popularity surge.  UKIP had a spike in their popularity in May in which they stood at 15% in the polls since then the Conservatives have successfully shrunk the UKIP’s rating to around 11% were it has remained for the last four months. 

The Conservative party’s offensive against UKIP alongside an economic revival has helped them recover in the polls.  However, they have failed to steal many Labour voters at all and if they are to win in 2015 they need to start damaging Labour’s share of the vote.  To do this they need to target the aspirational middle class (Mondeo man), this is the group they lost in 97 and they need to win it back.  This is the group so often referred to as the “squeezed middle” in the media and is being badly hit by the cost of living.  As keen political observers will have noticed the battle for the Economy is pretty much over, now all Labour want to talk about is the cost of living and this sort of rhetoric could potentially win them the next election.  The Government have done things to tackle the cost of living and come election time these policies will be highlighted, such as the raising of the tax threshold and not raising fuel duty.  However, in the recent debate over the price of energy the government has received a bloody nose by having no real alternative to Labour’s energy price freeze.  In 2014 the Conservative party are going to have to show they are tackling the issues surrounding the cost of living and this includes getting to grips with the cost of energy bills and hitting their 2% inflation target.

Although the economy is growing again many people are yet to feel the effects of this growth, and will be looking to the government to lower the ever-increasing cost of living.  Currently the dreams of the aspirational middle class such as owning a house or owning a new car seem very distant, and the party who can make these dreams realistic will be the party of government come 2015.  David Cameron has already started to try to talk to this key electoral group, but more than just talk of cutting green taxes must be done for the Conservatives to show they are taking the cost of living crisis seriously.  

Autumn Statement 2013

Autumn Statement 2013 

The Chancellors golden streak continues, his successful budget has been followed up by a successful Autumn Statement.  The growth predictions in the budget have been revised upwards, growth figures from even further back have also been revised, to show that the UK never went into a double dip recession.  In fact, all the figures from the Office of Budget Responsibility would have made pleasant reading for the Chancellor, the only thing that would have pleased him more was Ed Ball’s stumbling rebuttal.  The economic tide is clearly changing we have moved out of recession and into growth however we still have a problem with the cost of living and many working people are not reaping the rewards of a growing Economy.  George Osborne has actively tried to address some of these problems in this Autumn Statement however, more must be done if the Conservatives intend to govern on their own after 2015.

As mentioned above one of the sweetest aspects of the Autumn Statement for Conservatives were the OBR’s figures about growth.  Firstly there was no double dip recession this announcement will do the governments reputation regarding economic competence a world of good.  The 2013 growth figure was also revised upwards from 0.6% to 1.4%, which strengthens the Chancellor’s claims that the economy is moving in the right direction and disproves Labour's claims that the government’s economic policy is not working.  The Deficit has also been reduced by a greater amount than predicted in the March budget, it is now expected to be 6.8% rather than the 7.5% predicted on budget day, borrowing has also been revised down by £9 billion.  All these figures give Conservatives a reason to smile and at least on a macroeconomic scale, the policy of austerity seems to be working.

As addressed in the introduction despite a growing economy the effects of this growth are not being felt by everyone, particularly the hard working people who the Conservatives need to win round by 2015 if they intend to earn a majority in the House of Commons.  George Osborne has shown he is aware of how hard it can be for working people by setting out plans for a set of policies to try to stop a rise in the cost of living.  These policies include scraping next years planned fuel duty rise and a deal with the energy companies to prevent further price rises next year which is expected to save the average family £50 a year.  Also a tax break for some married couples combined with an increase in the personal allowance also shows the Chancellor is trying to do something about the cost of living.  Although the tax allowance for married couples is only expected to help 1 in 6 couples, which takes some of the shine of the policy.  The Autumn statement went on to address the problem of youth unemployment in the UK, employer national insurance will be scrapped for under 21’s to encourage businesses to take a chance on hiring young people.  In addition, 20,000 new apprenticeships will be created, the effect of this policy is going to be down to the quality of the apprenticeships and more apprenticeships will still need to be created but this is still a move in the right direction. 

In conclusion the Conservative party should be pleased with the latest Autumn statement it has tried to address many of the current problems for working people and has shown an improvement in the economy as a whole.  It does not make pleasant reading for those people who will not be retiring till 69 and will end up paying more for their pensions, however the UK has a pension crisis brewing so in practice it is a sensible policy.  But as I have mentioned a few times already it is essential for the Conservatives to deal with the issues facing real people and not only that they also need to appear more in touch with everyday problems or run the risk of losing their grip on power in 2015.   

UKIP Can be the Ross Perot of the 2015 election

UKIP Can be the Ross Perot of the 2015 election

UKIP has seen a huge rise in its popularity since the 2010 general election when the party won 3.1% of the vote, now in the latest YouGov opinion poll they would win 12% if there was an election tomorrow.  They are currently more popular than the Lib Dems, and are expected to win the upcoming European elections.  Despite this the Conservatives are not mounting a sustained attack on UKIP instead there are talks of pacts like they are some sort of distant cousin rather than a party that could ruin any chance of a Conservative majority come 2015.  To illustrate my point I am going to compare UKIP with Ross Perot the independent candidate who derailed two Republican campaigns in the 90’s.

There are several similarities between Perot and UKIP, firstly they are rebels against the established main parties, they both offer policies that people want to see (financial restraint in the case of Perot and lower immigration in the case of UKIP).  They both reach sections of the public who feel ignored and most importantly they both never really stood a chance of winning an election.  However this does not make them unimportant and UKIP have the potential to decide who gets into Number 10.  I am going to show UKIP’s significance by looking at Ross Perot’s impact on the 1996 election, in 96 Ross Perot won 8.4% of the vote significantly less than in 92 when he gave Clinton the election.  In 96 if Ross Perot was not present Bob Dole probably would have won Arizona, Florida, Kentucky, Missouri,  Nevada, Ohio, and  Tennessee,   now this would still not  have won Dole the election however it would have been significantly closer and the effect of Perot on keeping Republicans at home in the belief their candidate had already lost is not measurable.  Despite what I just said it is important to note a few differences between Perot supporters and UKIP supporters, Perot drew significant support from both Democrats and Republicans.  While UKIP draws most of its support mainly from Conservatives, although there is support from Labours lost working class vote as well.  Ross Perot was involved in the Presidential TV debates, UKIP so far will not be involved in any leadership debates in 2015 which will cut their media exposure significantly.  Also UKIP is has engaged many voters who have lost interest in politics under New Labour and are significantly more populist than Ross Perot and draws a large amount of working class support while Perot’s support was mainly middle class.  So although there are some similarities and I believe the election impact could be similar it is important to stress that I am not saying that Perot and UKIP are the same.  The link with Perot is largely to illustrate how reasonable support for UKIP candidates in swing seats will lose the Conservatives the election and could give Labour a significant majority.

If the Conservatives intend to damage UKIP they need to attack them just as they would attack Labour, the European referendum is not enough.  As I have wrote before UKIP are more than just an anti-Europe party they are anti-establishment and anti-politics  they are a base for people who are disgruntled with the main parties.  This does not however make them any harder than Labour to attack, UKIP have some fundamental weaknesses.  One is they lack details on their economic policy Conservatives need to find little holes and then ask can we afford UKIP?  They also lack a plan for what to do when they leave the EU they are making it seem simple, this needs to be attacked  showing UKIP up as amateur inexperienced and unsuitable for government.  The Conservatives can also try to entice UKIP supports by showing the rise in the tax

threshold and the fall in immigration as well as trumpeting the return to economic growth.  American style targeting of potential UKIP voters is also needed, show them all the populist right wing policies the current government has enacted.  Lynton Crosby has slowed the advance of UKIP by making Cameron focus on more right wing policies that attract UKIP voters, but at election time these policies need to be trumpeted to show potential UKIP voters they can get what they want with the Conservatives.  Finally scare tactics need to be implemented, many of these UKIP voters will not want to see Labour in government after all they are the party of Europe and mass immigration, the link between voting UKIP and getting Labour needs to be established.  It may already be too late to kill off  UKIP as the Conservatives were arrogant in their attitude towards UKIP for too long, and although it is almost certain UKIP will not win in 2015 they can lose the election for the Conservatives.

The Conservatives have won the argument but not the election

The Conservatives have won the argument but not the election

It seems like an age ago that George Osborne was under assault from all fronts for his economic policy, the IMF singled him out for criticism, the ratings agencies downgraded the UK’s credit rating, and he was seen as a hapless Chancellor.  His fortunes have had a revival and there are whispers of him becoming the next leader of the Conservative party.  Just like the Chancellor, the Conservative party has started to win the big arguments, with Labour now promising to be tough on welfare and to allow parents to open free schools, as well as the popular sale of Royal mail.  So by this logic the Conservatives should be set to coast to a majority in 2015, however it seems unlikely that it will be so easy.

Ed Miliband has highlighted a key issue, which has the potential to decide the next election in his conference speech, the cost of living.  Although you can easily argue that Labours policy to tackle the rising cost of energy is counterproductive.  Sadly for the Conservatives that is not their only idea, and as Labour slowly start to fill their policy void the cost of living will become a greater issue for Cameron and Osborne.  Labour’s other idea has received endorsements for rightward leaning think tanks and it is a logical idea that worked well for Alistair Darling and Conservative back benchers have also called for it.  It’s a cut to VAT , unless it is a substantial cut it will still be a token gesture but Darling’s own small cut in VAT did lead to economic growth.  But the Chancellor in his position of increased confidence says any savings made from cuts will be used to pay off government debts and there will be no VAT cut. 

The Chancellor may just be waiting until it is closer to the election before he starts to dish out goodies such as tax cuts or he might be plotting a different way to tackle the cost of living.  One such way cut be a cut to Green taxes which are damaging industry by increasing the cost of production which is being passed on to consumers, and it is severely damaging energy intensive industries such as the chemical and steel industries.  Moreover, for all the damage green taxes do to the economy and the cost of living they have a minimal effect on climate change.  Although Vince Cable has ruled out a cut to green taxes under the coalition this does not mean that a Conservative manifesto will not include such a policy and it would be a move of political genius that Osborne is known for.  It would some red meat for the right of the party and it would tackle the issue of the cost of living as well as showing that the Conservatives are on the side of UK industry.  Whatever Cameron and Osborne decide to do they will need a policy to tackle the cost of living problem in the UK or risk helping Ed Miliband into Number 10 after all very few people feel better off now than they did in 2010.