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The Chancellor wants U.K. Pension funds to invest more in U.K. companies and infrastructure. Pension funds would need to be persuaded such investments would make them better returns at acceptable levels of risk.

She needs to study just how U.K. pension funds came to be dominated by bond investment, and to review the LDI pension fund bond collapse of autumn 2022. Regulators and the advisory industry directed Trustees of funds to more U.K. bonds based on the doctrine that U.K. government bonds were assets that matched their liabilities. They also regarded them as low risk, as no one thinks a future U.K. government will fail to pay the interest or fail to repay the capital on the maturity date.

You can argue that far from being a matched asset a conventional long government bond means a fund  does not match the inflation in liabilities all the time the member of the fund is still working. The pension liability for such a member  will be rising in line with their wages. On retirement the pensioner would like pension increases to keep in line with prices. Often  Trustees can only afford  lower or no increases. Conventional gilts can only  match a defined need for cash that does not increase with inflation.

You can go onto argue that an investment in a spread of properties or shares can match liabilities better. Over the longer term these assets will provide increasing rent or dividends that should keep pace with inflation. This will be reflected in  rising asset values. You could however experience sharp falls in bear markets and need to keep sufficient cash or safer assets to pay a couple of years bills without needing to sell depressed real assets.

In 2022 many pension funds owned more bond than they could afford to pay for to give them  greater future cash flows to match estimated liabilities. When The Bank changed policy from cutting interest rates and buying bonds to the opposite the bond market fell sharply. As prices of bonds fell so pension funds had to put up more cash to the geared bond funds they had bought into to protect the funds from the growing losses, as the bonds were bought on margin. The pension funds often had to sell bonds they owned outright to pay the extra  bills on the bond funds which needed money to pay their debts.A fund might buy  six times the amount  of Bond  it could afford, only paying say 10% of the full price. When the price fell it had to pay more.

The Regulators should ask themselves how this all happened. It should have reminded them that far from being safe you can lose very large sums if you own long dated bonds when interest rates go up and bond prices fall.

Brexit is a huge opportunity for farming in the U.K. We are out of the Common Agricultural Policy which directed too much subsidy to the largest and more profitable farms. It damaged our dairy  industry by not allocating us enough milk quota, and our beef industry by too prolonged a response to BSE. It led to a big decline in the proportion of home produced food during our membership. They paid grants to remove our orchards.

On exit government promised farmers the same level of subsidy out of the EU as in it, with a planned redistribution away from the large corn estates. Unfortunately the government decided to allocate much of the money via the ELMs scheme, rewarding not growing food rather than growing it. Large estates could turn over more land for wilding and take the cash. Many family working farms wanting to maximise food output  did not qualify or did not bother to apply for grants.

I and a few other MPs lobbied strenuously for grants ,subsidies and affordable finance to promote more and more productive food production instead of ELMs. Some  schemes were introduced but the sums remained small compared  to the environmental grants.

The latest government attack on family farms with their ill thought through IHT proposals has understandably raised the opposition of the farmers. Family farms may well have to be broken up or sold to richer larger landowners and companies to pay the death taxes.

We need policies to promote the retention of family farms and to  encourage more investment in food growing. Why do government want us to import much of our food as well as much of our energy and manufactured goods? When will they support growers and makers so we can earn a living as a nation and increase our national resilience?

The Governor of the Bank should have apologised for the high inflation of recent years when he spoke at the Mansion House.

The Bank has one overriding duty,to keep inflation to around 2% per annum. It allowed inflation to hit 11%. It consistently told us inflation would not rise anything like that amount. Being unable to forecast inflation meant the Bank could not follow a good policy on interest rate levels or size of its bond portfolio.

The Bank spent 2021 creating more Central Bank money and keeping interest rates very low. It then was surprised when this produced the predictable inflation. It lurched in 2022 to hiking interest rates and selling many of the bonds it had bought at ridiculously high prices at the much lower prices it was creating.

The Bank claimed the inflation was caused by the Ukraine war which it could not predict,seeking to sidestep all responsibility for the bad forecasts and bad inflation outcome. This excuse does not work. U.K. inflation hit 6% or three times target before Russia invaded. The Swiss, Japanese and Chinese Central Banks which did not create so much extra money and buy more bonds presided over inflation which stayed around 2% despite the oil price surge that did follow war time decisions. The Fed and ECB made similar mistakes to the Bank of England and also ended up with higher inflation and wrong forecasts.

The Bank needs urgently to review its past errors. It should stop selling bonds at huge losses,a policy no other Central Bank is following. It is burdening taxpayers and intruding on fiscal policy.

The Governor implied in his remarks at the Mansion House that trade and the economy had been damaged by Brexit. He failed to look up the figures which show our exports up by more than 50% since 2016, well ahead of price inflation over the period. He failed to mention the huge success of our services exports, catapulting us from fourth place in the world to second place in the table of service exporters. He failed to read the excellent pieces by Fact4EU that set out the successes by country  or to consult the ONS detailed numbers.

Let me remind him from the ONS. 11 of the top thirty export destinations are EU and 19 are rest of the world. We export three times as much to the USA as we export to Germany, our largest EU trade partner.  Our trade with the rest of the world has been growing faster than our trade with the EU now we are out, as it did when we were in the EU. The main reason is we excel at services and the EU does not buy enough of those. They sell better into English speaking countries with UK styles of law and business process. In 2023 our exports to the EU amounted to £356bn and to the rest of the world £505bn, 41% EU and 59% rest of the world.

More importantly our trade with the rest of the world delivered a £75 bn trade surplus in the year to August 2024, compared with a continuing massive deficit of £100bn with the EU. Brexit has not prevented the EU continuing to export large quantities of energy and goods to us, as they remain tariff free under the Free Trade Agreement we have with them. Services now account for 55% of our global  total trade.

It would be good to export more goods and energy. The main reasons growth in goods has been slower is not Brexit but the UK’s industrial and net zero policies. Two of our top six goods exports are oil and refined oil products. The UK government is pursuing a rapid run down policy for our North Sea and onshore oil and gas prospects and refining  so that acts as a headwind to growth in goods trade. A third leading area has been cars. Accelerated switching to electric vehicles by government policy before the UK has the ability to design and make enough good affordable  EVs is again hitting export volumes. We do not produce enough electricity as policy is to close coal, older nuclear and some gas planets before there are sufficient replacements. Instead of exporting electricity we become a net importer when the wind does not blow and the sun does not shine.

The Governor when analysing reasons for slow growth since the 2008-9 crash of the economy should look at the erratic and error strewn Bank of England policies that allowed and created a big inflation to be followed by a credit crunch.

COP 29 tells us global warming is happening. They tell us too much global warming will happen if the world does not drastically reduce its manmade CO 2 output urgently.

Successive COP meetings have been telling us this all century. Most world governments say they agree. So COP 29 needs to ask

Why has world manmade CO 2 just hit a new high after all these years of COP policies?

Why does COP ignore China, accounting for around one third of world CO 2 which has been increasing its output all this century, and now says it is peaking? Surely China needs to cut quickly.

What is COP 29 ‘s message to India and Russia, large CO 2 producers who have been increasing their output?

What is COP 29’s view of US voters who have just given a big mandate to the Republicans running on a ticket of Drill baby, drill?

Why does COP 29 go forward on national accounting which means you can cut your manmade CO 2 nationally by closing fossil fuel activities and importing instead? This often increases world CO 2 so how does that help?

Why should a smaller CO 2 emitter nation make sacrifices to cut its CO 2 when the large emitters are not bothering?

When will COP and governments tackle the big issue of lack of consumer enthusiasm for net zero products?

What is the latest COP 29 estimate of the total world cost of decarbonisation?

 

 

Much of the U.K. media has been Remain and many are keen to back Labour views that we need to cosy up to the EU more. So why do they tell us so little about the politics and economics of the main EU countries? Why do some Remainers think now we are out we should not even talk about EU matters, whilst talking themselves a lot about the US?  Why did they show little willingness to discuss other EU country policies and economies when we were in the EU and were governed by a Council of EU countries?

Where are the headlines about Euro 60 bn of budget cuts and tax rises in France? Where the story of the French left voting through massive tax rises, with the government saying they will simply ignore those amendments to the budget.? Why no interest in the possible use of a constitutional power for the government to ignore votes in Parliament?

Where are the daily stories about when the broken German government will have to hold an early election, and no attacks on the AFD who are polling well but do not get the Trump treatment? Where are the criticisms of Von Der Leyen, Scholz and Macron refusing to go to COP 29 or to offer more green transition cash to emerging market countries, a cause the mainstream media pursues incessantly? Why little discussion of the border fences around the EU and recent closing of internal borders whilst endless focus on President Trump’s Mexican fence and wall?

The main countries for Western Europe are stuck with little or no growth, way below the GDP per head and real personal incomes of the US. So we have had daily blasts against Trump and about US politics for the last two months, but are kept in the dark about the political dramas and economic  failures of our near neighbours.

 

Remain wrongly forecast a hit to U.K. exports of goods and services when we left the EU. They said the hit would be up to a 15% decline, which would mean a 4% loss of GDP.  They still use this in their commentaries on Brexit and it was baked into OBR forecasts. Whilst saying this could take 15 years to complete, they thought the bulk of the loss would happen quite soon after Brexit.

So what happened? U.K. goods trade continued to grow with the EU after we left, and grew faster with the rest of the world as it had been doing when we were a member. Services trade boomed in the years after we left. Time for apologies and red faces?

Apparently not so. Most keep reporting a bad forecast as a fact. Maybe they haven’t checked the data. One study earlier this year sought to dig Remainers out of their gloomy hole by arguing that whilst trade had gone up and not down it should have gone up more so we should still not a theoretical loss against these recently inflated expectations!

All this becomes relevant as President Trump threatens the rest of the world with tariffs designed to cut exports into the USA. The USA is the UK’s biggest trade partner by far, and we have a good growing trade with a U.K. surplus. It is good news we are out of the EU and can do our own trade deal with the US. The government should be proposing a trade deal to Mt Trump and should be using its Brexit freedoms to avoid the likely tariff war the EU seems to be planning. We should start by announcing we will not copy the EU carbon based tariffs they are bringing in against the US and others.

Facts4eu have published some excellent tables and graphs setting out the U.K. trade success post Brexit.

COP 29 meets against the background of a new US President about to take office who sees net zero as a scam. China generating 33% of world CO 2 is still expanding her output by burning more coal and gas as well as cornering the market in renewables and batteries. Now the US accounting for 13% of world CO 2 says Drill baby drill there is no way the world can meet its 2030 targets en route for net zero by 2050.

The Republicans by a majority reject not just the damaging policies of trying to force people into battery cars and heat pumps but also some of the theory and forecasts behind the policies. Some Republicans point out that there was substantial climate change before man arrived on the scene, with periods both colder and warmer than today. This argues that natural causes can boost and reduce temperatures substantially with no man made CO 2. Some argue climate models are dominated by man made CO 2 and need to include  many natural changes to get their predictions right. Some think there has always been extreme weather events and are not convinced there are now more or worse. Some think if China, Russia, India and others are not reining in their use of fossil fuels, why should America?

COP 29 is going to find it difficult to get advanced countries to pledge the huge sums needed by the emerging world to pay  for their huge transition. With the US under Trump likely to resist such payments it throws matters back on the Europeans. It is telling that the President of the EU and the President of France are giving this COP a miss and the German government has just collapsed. None  of these countries have the large sums the emerging world wants.They are asking for $1trillion a year for net zero transition!

President Trump will change this debate and force a re think to policies trying to cut CO 2 which are very costly. So far these policies have not succeeded in reducing world CO 2. With China and the US not trying this transition is much delayed.

The Western powers want to broker a peace in the Middle East. They want to prolong the war in Ukraine. Why this difference?

The policy towards Ukraine is based on condemning Putin for his aggression. It does  not offer Ukraine enough military support to allow them to win the war, preferring to drag it out through withholding important weapons and understandably refusing to commit NATO forces.

President elect Trump has indicated a wish to bring about a negotiated peace. European governments are against this, claiming it means helping Russia. They do not complain about a negotiated peace in the Middle  East which  on the same logic would be helping Hamas, Hezbollah and Iran.Meanwhile France provides very little financial or military help to Ukraine and Germany always offers les than Ukraine wants with delays in providing more effective weapons.

I remain against the idea of a NATO/Russia war so do think the U.K. should work with President Trump on what a peace agreement would look like. Central to it should be to give to all Ukrainians who want to live beyond Russian control a place to do so with better security guarantees. It seems unlikely that Crimea can be brought back into Ukraine.Of course the West should do all it can at any talks to support the Ukrainians seeking to restore peaceful authority over their lands and  who wish to live in a country independent of Russia. The EU needs to rethink its position to be more helpful to peace. Whilst the West sees this as a war against Russian invasion, Russia sees it as a war against EU expansion. .

The Bank of England has cut their base rate twice now. They have put their inflation forecast up after the budget and said this means fewer rate cuts and slower rate cutting from here. The budget was especially inflationary, pushing up public sector pay a lot with no productivity agreements and confirming higher managed energy prices. The whole disastrous energy policy means dearer energy going forwards.
The budget also pushed up longer term interest rates with knock on to mortgage rates. The ten year government bond borrowing rate surged to over 4,5%, a higher level than after the short lived Kwarteng budget when the Bank was hiking rates and announcing huge  bond sales. These market moves reflected justified concern about all the extra borrowing the government proposes after its rule change.

The bad budget according to Bank forecasts as well OBR forecasts will raise inflation and slow growth. Whilst both bodies are often wrong, on this occasion I agree with them that the budget measures are likely to slow growth from 2026 and push up prices sooner. These forecasters had to up 2024 growth forecasts because earlier this year they clearly under estimated and had to revise up recently because we enjoyed good growth in the first half.
The U.K. has a very bad public sector productivity problem and is wasting far too much money in the  public sector. The government should urgently cancel £19 bn of carbon capture spend, abandon ideas of an expensive HS  2 extension, control Bank of England losses and set out a productivity plan for public services.