As the election reaches fever pitch it’s said that we have two choices to make:
- You can choose the person to lead the country; or
- You can choose the policies that seem right to you.
Politicians repeatedly come at or near the bottom of polls on trustworthiness. Either they fail to answer simple questions, or they make promises that we know they are unlikely to keep, or which fail to deliver the promised benefits.
This election is proving no different, with evasions and seductions reminiscent of the Brexit campaign, in which the choice was reduced, by some, to whether we wanted £280m a week back to use in the NHS, or not. At the moment we don’t know whether we will get that back, after paying for our liabilities, or not, (although I’m not placing any bets on it). But what we DO know is that this seemingly large sum (well actually a large sum for an individual but shared among 65m people it’s just over four quid) is not the main economic effect of the decision to govern ourselves independently of the EU.
The main effects of Brexit have been, and will largely continue to be, as follows:
- Our exchange rate has reduced, boosting exports and inflation;
- Our capital markets went up, due largely to the fact that a lot of their value is derived from overseas and a cheaper pound means that, arithmetically, they are more valuable in £ terms;
- Uncertainty of how our trading relationships will change has caused a lot of expansion to be delayed, thereby reducing growth.
Now I may have been asleep during the campaigns (although my blogs weren’t ghost written) but I don’t recall any of this (except the last one) being mentioned at the time. So it’s no surprise that there is no mention in this campaign of interest rates, which I think will change dramatically if the financial markets lack confidence in the Prime Minister. As with any organisation, the role of competent financial management can overshadow all its plans. A CEO who doesn’t have a grasp of his key figures, and plans which aren’t fully costed, is a riskier proposition than one who does. He may still be backable if his plan shows the prospect of good returns but (so long as a threshold is passed) the additional risk requires a premium which doesn’t just affect the interest that Government pays but also affects the rate that everyone else pays on mortgages etc. This is because the rate that the Government pays is the Base rate and other rates are calculated as a premium on it.
So, come polling day don’t just look at the claimed benefits of each manifesto. If you want strong and stable leadership for the many not the few, without unintended consequences, consider the financial credibility of your choice.