Amid the general disarray of the mini-budget, the government’s concessionary signals on Northern Ireland risk going unnoticed. Hitherto-stalwart Conservative MP Steven Baker caused alarm among Unionists in Northern Ireland when he apologised to the EU at the Conservative Party Conference (among other comments) for taking a “ferocious” stance in negotiations over the Protocol. Coupled with the current Northern Ireland Secretary expressing the hope that the Northern Ireland Bill will be “redundant”, the signals are not good.
Still a Giant’s Problem
This messaging reflects the government’s decision to engage in further negotiations with the EU over the Protocol. These negotiations are billed to cover technical issues of implementation – which, in other words, will fall greatly short of the sweeping changes needed to the province’s status. As we cover below, the Protocol is already causing damage to the region’s economy, and is straining Loyalists’ commitment to the Good Friday accords.
In other, non-economic news, readers may have seen the recent arrest of transgender-critical journalist and campaigner Caroline Farrow. The Catholic mother of five was arrested by police in front of her children, pursuant to an investigation for alleged malicious communications. Whatever one’s stance on the transgender debate, harassment and arrests clearly breach the right to free expression. This is only more likely if the government’s Online Safety Bill passes the Commons.
The prospect of UK energy rationing was also debated this week, albeit in rather senationalist terms. The EU is also debating the prospect of introducing a bloc-wide energy price cap, though many members are angry at Germany for unilaterally introducing a €200 billion package for its own consumers. Critics say this removes incentives to reduce demand, and subsidises German industry at others’ expense.
Elsewhere, Ukraine scored another victory – this time advancing in the south of the country, amid reports of newly-mobilised Russian soldiers walking (or driving their tanks) to the frontlines in order to surrender. The bridge between Russian-controlled Crimea and mainland Russia across the straight of Azov was also damaged by saboteurs, putting pressure on the Kremlin’s supply lines.
Nine NATO members backed Ukraine’s accession to the alliance, although Finland and Sweden’s full membership has yet to be confirmed. Finally, Iranian protests continue to rock the country, although there is no sign as yet that the ruling regime will relax its hardline approach to moral policing.
Co-Editor Graham Gudgin wrote a piece on the mini-budget for the website – see below.
The Northern Ireland economy is NOT outperforming the rest of the UK, by Harry Western
EU, Irish nationalist and UK remainer observers continue to claim that the Northern Ireland economy is outperforming that of the rest of the UK and that the Northern Ireland protocol is therefore ‘working’. This claim is simply not supported by the available evidence, which points in the opposite direction. Moreover, the long-term costs of the protocol for Northern Ireland could be much higher than those seen so far. The UK government must not agree a deal with the EU that keeps the protocol substantially in place – as they appear minded to do.
“The evidence therefore suggests NI has underperformed GB in terms of exports to the EU, despite the protocol – a particularly striking finding given that this is the main channel by which NI supposedly would have been ‘shielded’ from Brexit downsides.”
The Chancellor’s Budget fiasco. What now?, by Graham Gudgin
The revolution in economic policy attempted by Kwasi Kwarteng has got off to a bad start and may not survive. It will be a pity if the new focus on faster economic growth were to founder, but an over-reliance on low taxes to accelerate economic growth was in any case a mistake which convinced no-one, and more effective supply side policies are needed.
“The best we can expect from the measures that have been announced is a small addition to annual growth. A short-term boost to growth in 2024 is quite likely and will help Tory electoral prospects, but beyond that continued slow growth beckons.”
There has been much in the news about the Bank of England’s statement that it will spend up to £65 billion to prop up pension funds exposed as a result of the falling value of government bonds (see last week’s Key Points). This has been portrayed in certain quarters as if the Bank has actually had to spend this money – but a guarantee of spending, and actual spending, are quite clearly different things.
In reality, the Bank has had to spend little of this sum – only £3.7 billion as of Friday – and expects to be able to end scheme on its scheduled date on October 14th. The episode shows that maintaining market confidence is, if anything, more important than actually. 10-year gilt yields remain worryingly high, however, at 4.2% – not far short of their post-crisis high of 4.5% – which suggests that markets remain wary of government plans. (Bond yields in comparator nations have also increased over the last month as recession fears mount, albeit not to the same extent).
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A Cambridge PhD Student
Economist, Centre for Business Research, Judge Business School University of Cambridge
Emeritus Professor of French History, University of Cambridge