Budget 2016: balancing and backlash

Well. What a day that was, and what repercussions have already unfolded. I am referring to the Budget 2016, which was announced this Wednesday. I had written about the Budget that morning, and outlined expected policy proposals. But there were surprises aplenty, most noticeably on Friday evening. So I thought to write a report of sorts about the Budget, and the subsequent political aftermath.

The Budget contained fresh austerity measures, as predicted, with the Chancellor promoting ‘stability’ in public finances against the context of a poor economic showing. In addition, it contained plans to fight tax avoidance, reform the education system and help those on lower incomes save money. It also included measures aimed at assisting small businesses, measures designed to encourage saving, a clampdown on sugary drinks and measures to tackle tax avoidance. So, it was a mix of the old and the new, the expected and the unexpected. Interestingly, it was also a Budget containing controversial comments in relation to Europe, with the Chancellor George Osborne warning against Brexit.

It was a Budget which essentially undermined the Autumn Statement of last year, with the Chancellor being forced to concede that previously promising forecasts on growth, productivity, taxes and debt (as he had proudly mentioned in the Autumn Statement) were actually no longer accurate. The consequence? The UK is now some £55 billion worse off than what was planned for. Moreover, the worsening global economic outlook will leave the British economy £62 billion smaller in 2020. Thus, the general theme from Wednesday’s announcement is that far from reducing borrowing, the Government will have to borrow £35.6 billion more than previously expected in the next three years.

However, perhaps in an attempt of softening the blow, the Chancellor was at pain to emphasis the resilience of the UK economy, stating that his aim of producing a budget surplus in 2020 — which would be the first since 2001 — is still on target. The only downside is the surplus will come at the cost of £3.5 billion in new cuts in Government spending. And whilst Mr Osborne was long on promises of austerity, it was perhaps not surprising that he was actually short on the details of where cuts would be implemented. We were informed there would be cuts in the region of £2 billion in the NHS and elsewhere to fund pension costs, and there would be further cuts of £3.5 billion by 2020, nothing more. We had already been given this figure prior to the announcement, so evidently it was a case of releasing this early so that it did not come as a nasty surprise, and would not detract from the ‘sweeteners’ also contained in the Budget. Also note the attention afforded to pensioners -they do tend to be the most consistent voters, after all…

So, what did the Budget propose, and what implications do this proposals contain? Let’s have a run-through.

Firstly, let’s consider growth and public finances. The Office for Budget Responsibility (hereafter OBR) revised down its forecast for 2016 to 2% from 2.4%. It now predicts growth in 2017 of 2.2%, and 2.1% in each of the three years after that – lower than its previous expectations. Regarding public finances, the OBR has forecast borrowing of £21.4 billion for 2018 to 2019 – almost £16 billion off target. By 2019 to 2020, the public finances are supposedly set to swing to a a £10.4 billion surplus. (Key word there being ‘supposedly’.)

Next, we have measures relating to small business taxes. The plan involved more than doubling small business rate relief on a permanent basis, from £6,000 to £15,000, with the threshold raised permanently for the higher rate. It is estimated some 600,000 small businesses are to pay no business rates at all from April next year. Also of interest for all businesses: corporation tax will fall to 17% from April 2020.

Stopping multinational companies from avoiding tax payment in the U.K. was another of Mr Osborne’s priorities. He announced a measure to cut tax relief on interest payments and prevent companies from moving assets to tax havens, a move he claimed would raise as much as £9 billion. The Chancellor also said the Government would act to stop any unfair competition U.K. businesses face from Internet suppliers, who in some cases do not pay the valued-added tax (VAT). However, I cannot have been the only one who instantly thought of the controversial deal the Chancellor struck with Google, which he declared a victory only to have it dismissed and criticised by basically everyone else.

Savers were provided for, the the ISA limit to be increased to £20,000 a year for all savers. There will also be a new Lifetime ISA for the under-40s from April 2017. They will be able to put in up to £4,000 a year, with an annual bonus of up to £1,000 paid by the government until the age of 50. Savers who have already taken out a Help to Buy ISA will be able to move their money into a Lifetime ISA. (Note that I was angelically good, and did not subject you to an ‘ISA ISA baby’ joke.)

Regarding income tax: the rate at which workers start paying top rate tax is to be raised, from £42,385 to £45,000, with the tax-free personal allowance raised to £11,500 from April 2017. An estimated 1.3 million people will be exempt from paying income tax.

Speaking of tax, it was announced that regarding capital gains tax, the headline rate will drop from 28% to 20%, with the higher 28% rate continuing to apply to disposals of second homes and buy-to-let properties. For basic rate taxpayers the rate will fall from 18% to 10%.

The infamous ‘Northern Powerhouse’ featured, or rather the HS3 project was featured. HS3, aka the proposed fast-track rail link between Manchester and Leeds  received the Chancellor’s blessing.

Mr Osborne seemingly suggested that he is not just Chancellor of the Exchequer, but he is also apparently the Health Secretary and the Education Secretary, too. In terms of health, the Chancellor dropped a surprise when he announced that a new sugar tax will be levied on drinks producers by 2018, based on the volume of sugar contained within the product. The tax is being imposed on soft drinks firms in an effort to encourage them to make their products healthier. It is estimated this could raise some £520 million. As I mentioned in my initial Budget-related blog post, education reform was featured in accordance with the Chancellor’s theme of ‘putting the next generation first’. Every primary and secondary school in England to commence the process of becoming an academy by 2020. Schools will also be able to avail of the option to lengthen the school day for additional sport instruction. In addition, there was the floated suggestion that students may be compelled to study Maths until they are 18.

Excise duties were discussed. It was announced that Fuel duty will be frozen for a sixth year, with expected annual savings of £75 each for motorists. Scotch whiskey, beer and cider taxes were also capped, but not so for wine. And from Wednesday night, cigarettes rose by 2 per cent plus inflation.

And finally, the miscellaneous section.

Employers will pay National Insurance on pay-offs above £30,000 from April 2018. Flood defence spending will be increased by £700 million, funded by a 0.5 percentage point increase in the insurance premium tax. (The Government had to be seen to respond to the flooding which has ravaged parts of the UK in recent times.) There was support for the suffering North Sea energy industry, with the supplementary oil and gas charge halved to 10%, and petroleum revenue tax effectively scrapped. Lastly, the Stamp Duty Land Tax (SDLT) on commercial properties has been reformed to remove the ‘slab system’. Henceforth, different rates of SDLT will be payable on various portions of the commercial property transaction value.

In sum: Generation Y received a boost. For those struggling to know whether to save for retirement or a flat deposit, they will now have chance to do both with the new lifetime ISA. But trouble brewed in relation to the plans to cut the welfare claims of 640,000 disabled people to save £1.3 billion . For Mr Osborne did not appear to offer any assurance to those who will be affected by cuts to ESA, Universal Credit, PIP and the collapsing social care system. But more on this issue later.

With the EU referendum in sight, and the tense Cabinet division between those supporting David Cameron’s negotiation efforts and stance to stay in the EU, and those wanting to leave, Mr Osborne used the Budget announcement to wade into the debate. One of the key and most notable points Mr Osborne made during his speech was that the U.K. would be better off in a ‘reformed Union’. Moreover, he claimed, leaving the EU would lead to ‘disruptive uncertainty’, and went on to say:

“I believe we should not put at risk all the hard work that the British people have done to make our country strong again.”

He told MPs the economic forecasts drawn up by the independent OBR were based on the UK remaining in the EU, and they did not consider alternatives.

Unsurprisingly, this political promotion in the midst of financial policy was not warmly welcomed by the Conservative MPs who support Brexit. Moreover, Mr Osborne quoted the OBR as saying a vote to leave ‘could usher in an extended period of uncertainty regarding the precise terms of the UK’s future relationship with the EU’. However, the OBR soon stated that its forecasts were made on the basis of current government policy to stay within the EU, and it had not projected what would happen if the UK voted to leave. Perhaps understandably, groups campaigning to leave the EU accused the chancellor of trying to ‘politicise’ the OBR. So rather awkwardly, and through his own making, the Chancellor ended up in the position of trying to paint the OBR as both impartial and anti-Brexit, whilst OBR Chairman Robert Chote sought to clarify on Newsnight that the OBR does not have a stance on Brexit.

Speaking of the OBR: this was Mr Osborne’s eighth Budget, and once again he placed his faith in the OBR’s forecasts for government borrowing and growth. This dedication is interesting, because it must be said that these forecasts are starting to appear contradictory and scattered all over the place. Remember when during the first couple of years of the coalition were positive with smaller than expected borrowing figures recorded, the Chancellor went so far as to declare in his first budget the Government aimed to be making a surplus by 2015, with a year’s leeway just in case there was an unforeseen economic hiccup? Those were the days. For skip ahead to the 2012/13 financial year, and suddenly the forecasts became more erratic, complete with a reluctant admission that it would not be until 2019 that we would see that promised surplus. And now it has been pushed back until 2019-2020, once again on the basis of OBR forecasts. It’s a perilous gamble.

Once the dust had settled, as per tradition the Institute for Fiscal Studies (hereafter IFS) submitted its review of the Budget 2016. And, it was not exactly a rosy review. The IFS essentially declared the Chancellor is running out of time and is lacking flexibility regarding his surplus target. Despite ‘shuffling money between years’ and drawing up ‘wholly unspecified spending cuts’, the probability the the Chancellor will actually meet this promise to eliminate the deficit by 2019/2020 is only ‘just the right side of 50:50’, according to the IFS director when delivering the IFS Budget briefing. Not exactly full of confidence in the Chancellor, then, especially when reviewing his plans in relation to public spending and finances:

Mr Osborne had three fiscal rules – the welfare cap; the rule which said debt should fall as a fraction of national income every year; and the rule to get to budget surplus by 2019-20. He broke his welfare cap in November, and it is now broken by a bigger margin. He told us yesterday he is on course to break his debt rule by the end of this month. The surplus rule is the last rule standing.

The IFS’s Budget briefing doesn’t pack its punches. My personal favourite is within the discussion on excise duties in relation to alcohol:

 …In a bizarre aside Mr Osborne linked freezing spirits duty to the importance of whisky exports. Duties are not paid on exports. This is rhetorical nonsense.

Oh, and regarding the Chancellor’s plans on personal and savings taxes, we have this gem:

The disingenuousness of the rhetoric on the personal allowance continues. The chancellor boasted yesterday that the increase in it “means another 1.3 million of the lowest paid workers taken out of tax altogether”. No it does not mean that. Taken out of income tax, yes. But not taken out of direct taxes on income.

But the greatest, and loudest criticism was saved for the most controversial aspect of the Budget: the cuts to disability benefits. A growing number of Conservative MPs signalled their alarm over reductions in personal independence payments (PIP), which the Chancellor said would save £4.4bn over the course of this parliament. And by Friday, the Chancellor’s plans appeared to be unravelling as the Treasury seemingly sounded the retreat:

“This is going to be kicked into the long grass. We need to take time and get reforms right, and that will mean looking again at these proposals…We are not wedded to specific sums… it’s not an integral part of the budget.”

This came despite Downing Street having previously insisted the cuts would go ahead, and the Prime Minister mentioning the option of ‘softening’ the cuts through facilitating discussions with disability groups when asked in Brussels to comment on the storm brewing back home. The apparent Treasury climbdown was surely prompted by Conservative rebels deriding Mr Osborne over perceived toxic politics within the Budget, which juxtaposed the PIP cuts with tax giveaways for businesses and higher earners – sending a message that businesses are to be protected over vulnerable members of society. The IFS said the planned cuts would hit 370,000 people, with an average loss of £3,500 a year.

Perhaps aware of the grumbling against him, on Friday Mr Osborne stressed that the Government would “protect the most vulnerable”. It may be a case of too little, too late in terms of protecting his reputation and leadership ambitions, however. Mr Osborne has long been considered Mr Cameron’s successor but the growing questions over the budget will remind backbenchers of the debacle that was the 2012 Budget, when he was forced to reverse a series of planned stealth taxes on everything from pasties to caravans. Not to mention of course, that he was criticised for cutting the 50p top rate of tax, again seen to be only benefiting the highest earners. The Chancellor’s leadership hopes may have been quashed with the criticism that he used a range of accounting devices to disguise a looming £56bn ‘black hole’ in the Government’s finances. It does not sound too promising when your own MPs supposedly believe your leadership chances are ‘dead in the water’.

But why the sudden cattiness? Note that these MPs are said to be those close to one Iain Duncan Smith, who caused a furore with his shock resignation from the Department of Work and Pensions on Friday evening. He too packed no punches:

“I hope as the Government goes forward you can look again, however, at the balance of the cuts you have insisted upon and wonder if enough has been done to ensure ‘we are all in this together’.”

Mr Duncan Smith cited the cuts to the personal independence payment (PIP) as being the last straw, stating he cannot accept the additional cuts to disability benefit. In addition, the DWP and the Treasury appear to have been at loggerheads. The changes to the way PIP assessments work were announced a week prior to the Budget by the DWP. Now,  the Treasury stressed that the figures included in the budget were the DWP’s work, but DWP complained they were cajoled into publishing the proposals without the time to build support, and thus were under fire for the unpopular proposal. Moreover, Mr Duncan Smith had wanted any reforms to PIP to take place slowly, over the next few months – but the Treasury was opposed this, saying the savings had to be included in the Budget. Apparently the ‘final straw’ was when the Treasury sought to blame the DWP for the additional cuts when realisation dawned of the potential for a backbench rebellion. No sooner had news of Mr Duncan Smith’s resignation sunk in, than news broke that the planned cuts to disability benefits would be scrapped. The Government was evidently fighting to reclaim control of the situation, but it must learn the lesson of Cnut: you cannot hold back the tide.

What an eventful few days, with a very real impact of the political scene. For Mr Osborne, the clock is ticking. He must ensure his Budget bears fruit, otherwise he may find himself in a vulnerable position post-EU referendum, when a Cabinet reshuffle is likely to take place. It will be interesting to note how this develops further, and whether the Cabinet’s obvious divisions over Europe, emphasised again with Mr Duncan Smith’s resignation, reach breaking point.


Investigating, or snooping: the Investigatory Powers Bill

In the run-up to yet another Super Tuesday of sorts in the US this week, and of course the national holiday of St Patrick’s Day in my corner of the world, I must confess that the law student in me lay dormant. A consequence of this was that I let an important date pass me by: that of 15th March, when the Investigatory Powers Bill was to undergo its second reading in the Commons. If you do not recognise it by that name, perhaps you will recognise it by the popular moniker of the ‘Snooper’s Charter’. (Does a rose by any other name truly smell as sweet?) Thankfully, I was able to catch up on coverage and reporting, and I thought that the news of the Bill successfully progressing to the Committee stage should merit a blog post about this controversial Bill. I will outline the summary of the Commons debate, and then move on to the bill itself.

After a lengthy debate and subsequent voting outcome, the Investigatory Powers Bill, aka the infamous ‘Snoopers’ Charter’, was passed by 266 votes in the House of Commons. This came only after Labour and the SNP backed down and abstained from voting, rather than voting against. But Home Secretary Theresa May did face criticism from her own Conservative MPs over concerns that the Bill is ill-defined, with far-reaching powers and permits too many organisations too much access to sensitive data.

During the debate, both Ken Clarke and Dominic Grieve – the ex-Attorney General – backed the proposed measures, but they each warned changes must be made at a later stage in order to ensure adequate privacy protections were in place. Speaking in support of the proposed, albeit controversial powers, Ms May seemingly sought to reassure MPs that privacy protection is enshrined within the Bill:

“[The bill] strictly limits the public authorities that can use investigatory powers, imposes high thresholds for the use of the most intrusive powers, and sets out in more detail than ever before the safeguards that apply to material obtained under those powers.”

As I mentioned previously, both Labour and the SNP abstained from the vote, which did surprise me. I had thought that the opportunity to uphold privacy, decry overzealous state policing and attempt to ensure a Government defeat would have been seized upon. Yet whilst expressing concerns that security services will be able to access sensitive internet records on the basis of vague, and ill-defined criteria, we saw abstentions in lieu of votes against. This suggests that perhaps Labour, and the SNP do not wish to be viewed as blocking Government attempts to strengthen national security at a time when global violence and terror is on the rise.

Shadow Home Secretary (and one-time Labour leader hopeful) Andy Burnham stated his belief that the UK requires new legislation in this area, and outright opposition to the Bill would only serve to leave interim laws untouched and outdated. But he seemingly confirmed my theory regarding not wanting to appear to be blocking security measures when he stated:

“To go along with [outright opposition] would be to abdicate our responsibility to the police, security services and most importantly the public.”

But he did also go on to say the Bill has ‘significant weaknesses’, and called for better protections for lawyers, journalists and trade unionists, as well as a tighter definition of which crimes would allow for data collection.

Recognising the terror threat and the work undertaken by security services did appear to be a key theme. For example, at the debate’s conclusion, Foreign Secretary Philip Hammond used this theme to reiterate his support for the Bill, saying the measures within the Bill are ‘necessary to tackle the serious threats we face’. He argued that should the Bill not pass, the UK would not be safe from the ‘myriad of threats we face’. I also have to note that this theme was present, albeit subtly, in the opening remarks of Ms May prior to the debate:

Members will be aware of the death of a prison officer who was attacked 10 days ago in east Belfast. I am sure that the whole House will wish to send its deepest sympathies to his family, friends and colleagues at this time.

The prison officer in question was Adrian Ismay, and he died following being discharged from hospital after a dissident Republican group planted a bomb under his car. In sum, a member of the security services was attacked by terrorists. The cynical side of me thinks this tragic case helped set the scene for Ms May, as she sought to argue why legislation permitting data collection to tackle terrorist threats is needed in the UK.

We can perhaps argue that through the successful outcome of the Commons vote, the Government-proposed extensive new powers to intercept and store communications data have essentially been approved by the Commons. However, perhaps realising that fears of privacy violation (and therefore Convention rights) were still present, Ms May told MPs that privacy protection is ‘hardwired’ into the new rules. Evidently, she is aware that the Bill may run the risk of being rendered incompatible with Convention rights per the Human Rights Act 1998. In addition, she has had to face criticism that the Bill has been a rush-job, the result being the ill-defined terms. Internet service providers, who will be tasked under the legislation with the collection and storage of data warned it has been brought in too quickly, with the internet Service Providers Association said:

“Even our members are not yet fully clear about what the bill will mean for them. It is vital that parliament is provided with a sufficient amount of time to scrutinise the bill.”

Such comments do not really sit well with Ms May’s comments of the Bill being, ‘clearer, with tighter technical definitions and strict codes of practice.’ But permit me to try and offer an account of the Bill, by noting the context in which it was developed, and the provisions contained within it.

The Investigatory Powers Bill was introduced to enhance the surveillance powers of the security services. It was introduced following a review by David Anderson QC in 2014 that recommended the introduction of updated powers with robust oversight. Now, it is the background of the Bill which provides assist in understanding its controversial nature. After the Edward Snowden revelations of 2013 enlightened the public regarding the sheer scale and scope of digital surveillance by both US and UK authorities, inevitably widespread concerns around privacy and freedom were sparked. At the same time however, the threat of global terror and violence is increased e.g.the rise of ISIS. As a means of combating these threats, the UK Government wants to legislate to enable greater surveillance and justify ongoing action. And so the legal quandary that is establishing equilibrium between privacy and security, and the rights of the individual v State reached Parliament.

The Bill had originally been planned for introduction during the last Parliamentary session, but faced opposition from the Conservatives’ coalition partners, the Liberal Democrats. After branding the Bill the ‘Snoopers Charter’, they blocked it from being tabled. Moreover, early plans for the Secretary of State to be granted the power to approve surveillance were hastily set aside; a judicial committee is to be appointed instead to oversee approvals. Upon the successful vote on 15h March this week, the Investigatory Powers Bill is now subject to inquiry by a Joint Committee of Peers and MPs, with cross-party membership. The aim is to ensure that the drafted Bill can engender cross-party support before it passes through Parliament. (It will not to to have claims of a pushed-through Bill via Governmental majority to empower the state with snooping powers, after all.)

The Bill is supposed to modernise current law, to ensure the UK is fit to tackle terrorism in a modern world in which cyber-security is paramount. As such, the Bill provides for key changes to the law. The biggest change is that it looks to legislate for intelligence gathering through online and phone communications. As mentioned, this includes enhanced judicial oversight and this will include interception warrants involving confidential information relating to sensitive professions such as journalists, doctors and lawyers, having to detail in full the justification for a request when the Minister approves the warrant.

From context and the basis of the Bills’ controversial nature, let’s move on to the contents. Essentially, new powers feature heavily, so it is quite understandable why many MPs voiced concern about sweeping powers and privacy violation.

In terms of powers: there are proposed powers for security services to bulk collect personal communication data, whereby data will be retained as an ‘itemised shopping list’ of websites -but not specific webpages. There is also a provision for powers which will permit security services to hack, and bug, computers and telephones. In addition, companies such as telecommunication/internet service providers will be legally obligated to assist the security services with any submitted requests. Moreover, there will be a requirement for internet and ‘phone companies to maintain a so-called ‘permanent capability’ to collect personal data.

Whilst on the topic of companies, the Bill discusses the enforcement of overseas internet and ‘phone companies. Enforcement is to be limited to interception and targeted data requests. In addition, bulk requests will not be enforceable

In terms of judicial oversight: there are provisions to ensure limitations of Ministerial power, so that they cannot authorise surveillance without the approval of a panel of seven judicial commissioners. However, there will be an exception to this. The Bill permits exemptions being made in ‘urgent cases’ needing approval within five days. Additionally, there will be oversight of surveillance activities by a single investigatory powers commissioner, who will be a senior judge.

Whilst the surveillance of the communications of members of the public can be permitted after securing the approval of a judicial commissioner panel, MPs’ communication is seemingly subject to a higher standard of protection. The Bill includes a provision to ensure communications of MPs cannot be accessed without approval from the Prime Minister. Arguably, this is for a valid reason: MPs will communication with constituents, and this information is should be kept closely guarded. Yet, there will be those who will consider the inclusion of this provision as a suggestion that the privacy of MPs is considered more important than that of the general public.

As previously noted, there have been aired concerns regarding clarity of the provisions, most recently during the Parliamentary debate this week. The criticism is with regards to definition of terms such as ‘telecommunications service’ and ‘reasonably practicable’, and on obligations placed on Communication Service Providers (CSPs). It will be interesting to see how the Government responds to these concerns going forward, and how the Committee will consider them when scrutinising the Bill.

There can be no doubt that this Bill is one to keep an eye on. Whilst the law does require an update, most especially in a time when the terrorist threat continues to rise, I cannot help but feel wary of a Bill which grants widespread powers of surveillance and monitoring.There is also the potential impact of the draft Bill with regards to legal professional and journalistic privilege to consider. As a law student with an interest in Human Rights, this Bill is a perfect example of the constant battle between the individual’s right to privacy, and the State’s responsibilities to its citizens in safeguarding national security.

The UK Government says that the Bill will update the law by essentially gathering together already existing powers. There is no doubt said powers are readily being utilised. I will leave you with this: according to the Home Office figures, there were over half a million authorisations in 2014 following requests for communications data by the police and other public bodies. Therefore to act as though this Bill is the beginning of Government surveillance is wrong. It is already here.

The Budget 2016: there’s cuts on the horizon.

In between following coverage from the US in relation to the most-recent Democratic and Republican primaries (Trump just won the Florida Republican primary, crushing Florida Senator Marco Rubio and forcing the one-time favourite to suspend his campaign), and reading chapters of my Evidence textbook, I remembered that Wednesday 16th March is quite the important day in UK politics: the day when Chancellor George Osborne will deliver the Budget for 2016. So, quite naturally, I thought to write about the Budget to explain what is is, what is its significance and to highlight the current context the Chancellor has to contend with.

What exactly is so special about this announcement, I hear you ask. Well, the Budget announcement is quite the big deal. In a nutshell, it is an annual update on the Government’s economic plans. Since Osborne became Chancellor back in 2010 and again in 2015, the Budget has become characterised by pronouncements as to how he plans to decrease the deficit. The Chancellor usually takes an hour to deliver a Budget speech.

Fun Facts: the longest Budget delivery in history was courtesy of William Gladstone (who ever else) in 1853, which lasted four hours and 45 minutes. In contrast, the shortest recorded Budget speech was by the suave Benjamin Disraeli, who took just 45 minutes in 1867. But let us return to 2016, and George Osborne.

The Chancellor delivered three different budgets last year. There was the regular Budget, and the Autumn Statement; these are delivered almost every year. However, there was also a third so-called ’emergency’ or ‘summer’ budget, which he delivered after the May General Election. It should be noted that the Autumn Statement and the Budget are not one and the same; the Autumn Statement is also a type of economic update, but it is not as detailed or in-depth as the Budget is.

Now that we know what the Budget is, it is time to look at what the Chancellor will discuss in this specific Budget. A clue: cuts appear to be on the horizon.

The Chancellor will deliver his Budget at after Prime Minister’s Questions, around half-past twelve in the afternoon and he will commence by setting out the latest economic forecasts, and the state of the public finances. Leader of the Opposition, Jeremy Corbyn will deliver Labour’s response, which should be interesting, if anything. Labour’s Shadow Chancellor John McDonnell had called for an end to ‘cruel cuts’ and ‘publicity stunts’ ahead of the Budget announcement, so expect similar rhetoric from Mr Corbyn.

What is so intriguing about this particular Budget is the timing, and background context. The Chancellor’s statement will be delivered with just two months remaining before the UK votes on the future of its membership within the EU. Now, we know that the Government is campaigning to remain in the EU – albeit with noticeable Cabinet division -and undoubtedly the Chancellor will be keen to avoid antagonising either side in the debate with his announcements. (There may just be a Conservative party leadership role on offer in the future, after all.)

It is customary for the Chancellor to speak in advance of the Budget, setting the scene so to speak. Thus we already have a rough idea of what to expect, but I must confess that I find this Budget to be scarce on information in comparison to previous years. But based on what little information is available, Mr Osborne will lay out around £4bn in extra spending cuts, and is expected to announce investment in the UK’s infrastructure. We also are aware that the Chancellor has set himself a target of achieving a surplus by 2019-20. In addition,he has set himself the target of having debt falling as a share of GDP every year.

His eighth Budget will also include a £1.5bn education package forcing all state schools to become academies and allowing some to open later in the day. Under the devised education package of reforms, every state school in England will have to become an academy, which means they will be independent of local authority control. State schools must undertake this transition by 2020, or at least have designed a plan in place by that date to do so by 2022. This  move essentially marks the conclusion of the century-old role of local authorities as providers of education.

Also on the school front: we can also expect an announcement in relation to school hours. Schools will be able to bid to be allowed to change their hours to suit the needs of their students. Evidently education is at the heart of the Budget: we can expect the Chancellor to vow to free the system ‘from the shackles of local bureaucracy’when we consider his plans to establish a new fund to permit a quarter of secondary schools in England to lengthen the school day. The consequence of this will be a vast number of students receiving at least an additional five hours a week of lessons, or extra-curricular activities such as sport and art. From a Northern Ireland perspective, this is quite interesting. Education is a devolved matter, so obviously these education reforms of the Chancellor will not come into effect here. But it will be interesting to see whether the Assembly here will consider a similar move when the new mandate convenes post-May elections.

Switching from the popular education front to another popular area, that of health. It ia understood that the Chancellor will also announce a £1.5million NHS programme to provide activity prosthetics for children so they can compete in sporting events and to fund new research. Whilst this is a great move, it cannot be denied that the NHS is under severe financial pressure.  Just recently, Parliament’s Public Accounts Committee published a report which found that the NHS in England lacks a convincing plan to plug a £22bn ‘black hole’ in funding within five years. The NHS is expected to find £22bn in efficiency savings by 2020-21, but MPs on the committee are unconvinced that such savings are actually possible.

Dr Mark Porter, chair of the British Medical Association council had responded to the report by stating his belief that the Chancellor should use Wednesday’s Budget as a means to prevent the NHS heading towards ‘financial ruin’.

“There is a complete mismatch between the government’s promise of extra funding and the reality on the ground…

“If the chancellor squanders this chance the NHS will continue to slide further into financial ruin.”

So, no pressure there, Mr Osborne.

Now, cuts and tax rises were to be expected. Simply put, there has been sluggish growth since his November 2015 Autumn Statement, when cuts to tax credits and police budgets were watered down. A consequence of this slower than expected growth is that both increased spending cuts and tax rises are needed to achieve his surplus target. The Chancellor has already warned that global uncertainty and the state of the world economy means the UK has to ‘act now rather than pay later’ in relation to making further spending reductions. Osborne has stated that the planned £4bn extra cuts would be ‘equivalent to 50p in every £100’ of public spending by 2020, which was ‘not a huge amount in the scheme of things’. (Speak for yourself, Mr Osborne).

The announcement of the extra spending cuts will mark a sharp contrast to the Autumn Statement. A mere four months ago, Mr Osborne had stated he had an extra £27billion to spend because of better-than-expected forecasts. Yet slower than expected economic growth both domestically and within European, when combined with worrying signs in China and low oil prices means the Chancellor has been forced to reverse his position. Yet it is telling that the EY Item Club warns that Osborne must not engage in ‘bad economics’ by announcing further austerity measures to eliminate the deficit.

However, it is expected that the Chancellor will raise the threshold at which people start paying the 40p tax, in a move that could see hundreds of thousands of people pulled out of the higher rate of income tax. Also in a sign of attempting to prevent alienation, Mr Osborne has already ruled out plans to scrap higher rate tax relief on pension contributions. However, he could announce further reductions in the lifetime allowance, which is the amount people can save into their pensions before incurring penal rates of tax. Moreover, Mr Osborne is also expected to announce a rise in insurance premiums that could see families pay £190 extra for motor, home contents, pet insurance and breakdown cover.

In terms of miscellaneous items, the Chancellor is expected to add 16 pence to a pack of cigarettes and may introduce a minimum price. In addition, there were suggestions in the weekend papers as to the creation of a ‘Paxman tax’, in that a tax loophole that allows television presenters and public-sector bosses to avoid tax through being paid through personal service companies – as Jeremy Paxman was – may be closed.

The above could be neatly summarised by ‘A,B,C’: ‘Austerity, Balancing, Cuts’. And Mr Osborne knew extra cuts would be required, and had you spent time following his media slots, it would have been evident that he was actually preparing the markets, commentators and indeed the public for yet more austerity in Wednesday’s annual budget. See, for example, the warning issued in The Sun on Sunday via an editorial written by Mr Osborne: the world is “facing its most uncertain period since the Great Recession” of 2008, and therefore ‘we need to act now rather than pay later.’ I have a vague suspicion this slogan will be to the Chancellor as ‘aspiration’ was to the aspiring Labour leader hopefuls last summer.

Now, the above outlined expected announcements  may very well turn out to be unpopular policies. Yet such is the commanding position of the Conservative Government, and the such are the difficulties of the (split) opposition Labour party under Corbyn, that Mr Osborne can afford to announce harsh policies. What will be interesting is seeing the development of his policies, and how any such developments coincide with the EU referendum in June.

Speaking of Europe, it is also interesting to note the difference between the UK and the majority of the other EU Member States in relation to Budgets. In mainland Europe, there generally are growing calls for more fiscal stimulus – government spending – to boost growth and relieve the European Central Bank from having to do all the work. In comparison however, the UK Government remains utterly focused on delivering a budget surplus. Whether this is achieved, notably within the restrictive time-frame the Chancellor has set himself will remain to be seen.

Of Canvassing and Campaigning.

Well. What a week that was!

Allow me to elaborate: you may have been aware that I was running for the position of Equality and Diversity Officer in the Queen’s University Belfast Student Elections as part of the REUNION ticket of fellow committed activists seeking positive change for all students. Two weeks ago marked the commencement of canvassing and carrying out the campaign within the public sphere, aka engaging with the student electorate. Two weeks agoalso marked the three days of voting, and results night. And what a week it was.

Now, before I launch fully into this blog post, sharing my campaigning experiences, I will state that unfortunately I was unsuccessful in my candidacy. I lost by 372 votes in a tight contest which I am proud to have taken part in, and even more proud to have had such an opponent in the eventual victor. I know that the post will be in safe hands next year, for all that I will no longer be at QUB to see it happen.

Truly, I know not where to start in regaling my readers with my tales of campaigning and canvassing. Honestly, the days seamlessly blurred into one, or so it feels to me. I found myself running from one area of the QUB campus to another, delivering numerous lecture shout-outs and constantly being on my feet as I spoke to one student after another. I found myself running a social media campaign, posting on behalf of the ticket on both Twitter and Facebook. I found myself surrounded by the greatest, most dedicated and passionate team of canvassers any aspiring candidate could dream of, and I cannot thank them enough for their enthusiasm and assistance.

But first, let me start from the beginning of the election season at my university.

I found myself on Wednesday 24th February making my way to the SU Marketing team to be filmed for short promotional clips, which would be disseminated online via Youtube and also through Snapchat story. The university was undertaking this filming for all candidates, and it marked the first time that such assistance was provided to candidates in the SU elections. It was a wonderful experience, albeit it initially felt quite surreal to stand before a white screen and be filmed whilst discussing my main policies. You can access the video for the Equality and Diversity candidates here.

Snapchat story time!
Thursday 25th February, exactly one week until Results Night, marked the official commencement of sorts of the 2016 elections. It is an infamous day in the university SU calender, known informally as ‘Poster Apocalypse’. This day essentially is the day when candidate posters shall hitherto paper the walls of the Student Union at my university. Certain walls and areas are more visible and as such more cherished. Thus it is not unusual to see candidates rally their troops in the early hours to camp out, guarding jealously the prime locations. The ticket I was running with had wonderful stalwarts who were sitting in the SU from eight in the morning until late afternoon; I found myself joining them in the afternoon and camped out myself. In addition, all candidates were required to attend an Equality and Diversity training session/general SU Election meeting that evening where we were informed as to election regulations and procedure in relation to campaigning and canvassing. Upon the conclusion of this meeting, we were provided our the campaign materials the SU kindly provides. Our names were randomly drawn, and one by one we were allowed to leave the room… And sprint to the nearest team canvasser and begin sticking our posters to walls, borders etc. I must confess that I never thought I would see the day when I would run down several flights of stairs, my arms filled with posters, and frantically tear and roll Blu-Tak as though my life depended on it. (It felt as though this was the case at the time.)

poster plastering
Poster Apocalypse!

The weekend of that week was packed with planning, researching and drawing up canvassing schedules for the following week. Not to mention team meetings, too. I suppose I realised at this point that it was going to be a long couple of days until Results Night, involving travelling between my home and Belfast repeatedly, many a taxi adventure and long nights of chats, and engaging online with potential voters. I did however reach another moment of realisation: that of being part of something bigger than myself, an inspiring idea. It was certainly something to see the election material around the SU, and to see my manifesto online on the SU website. It was the feeling of having achieved something; of drawing people’s attention to issues I feel passionately about and desire positive change in.

This feeling was heightened upon the commencement of election week itself. For on Monday 29th, it was Candidate Question Time! This was an event for all students to take to the stage, and to answer questions from the floor and submitted online. All candidates had a maximum of five minutes to speak; I used my allocated time to outline my motivation for running, including mentioning the parallels I feel are forming between the US higher education system and that in NI, namely increased tuition fees and reduced government assistance which is only to the detriment of students, both present and future. Then, it was on to answering questions, and here I must say that time was a flat circle; my opponent and I must surely have been on the stage for over forty minutes. The questions covered topics as diverse as how to address women’s reproductive rights, to representing disabled students to tackling ‘political influence’ in the SU, and finally to whether we would try to lobby to protect the Mandela Hall (a well-known venue within the SU which is allegedly facing destruction by the university.)

I never thought I would be taking to a stage, talking about issues affecting students, and promoting rights and respect for all students. But being able to talk about mental health awareness, consent workshops and LGBT* recognition and the importance of a self-identification for trans* and non-binary students was a remarkable feeling. I feel grateful to the SU for affording a passionate activist such as myself that opportunity to talk about all students at QUB, and to stress the need for an inclusive and respectful campus all students deserve. (It also marked the busiest my emails/social media accounts have ever been; with so many mentions and comments about myself being posted online!)

After a long afternoon of hustings, I was then to take to Queen’s Radio to be interviewed along with my opponent as part of the annual Student Leader Election coverage covered by the Queen’s Radio team. This was again such a surreal moment; I never thought I would be interviewed on radio whilst at university, being granted the chance to discuss issues I care deeply about. It was a memorable and indeed exciting experience which I enjoyed. You can access the radio interviews conducted with all candidates here. (Personally, I do rather like the comment within the summary of the interview: ‘Leah Rea was quick to quell any accusation that her place on the Reunion ticket is a form of tokenism’. That is a story for another blog post down the line.)

Tuesday, Wednesday and Thursday: a succession of days which seamlessly blended into a whirlwind of canvassing, leaflet dropping and student engagement. From lecture shout-outs on Tuesday, to canvassing around the student residential area of Elms on Wednesday and then being based all day in the SU on Thursday, I was scarcely sitting down. Nor could I avoid seeing my face staring back at me, whether on posters, leaflets or t-shirts! But it was a great feeling to be part of a movement to put students first, to campaign for change and to ensure respect and equality for all.

On the campaign trail.
Again, I have to reiterate how fantastic our team of canvassers were. They so kindly gave up their free time to come along and canvass for us, something which I am most appreciative of. Not to mention that we had a lot of chats and laugh along the way, which surely kept us all going over the three long days of campaigning. I believe I came away from that week with many new friends.

Posters became our close companions for three days.
Before we knew it, it was Thursday evening, and thus canvassing and campaigning drew to a weary close. SU election policy is that results cannot be released until all election material has been gathered and disposed of, so cue a frantic dash around all university buildings to take down posters, and bundle up leaflets. I suppose it was quite the fitting conclusion: after commencing the campaign with a frantic sprint to affix material to the walls, it seemed only right to end with a similar frantic dash to take down aforementioned material.

The clock struck five, and so all election material was duly collected.
In due course, we soon began to make our way towards the Mandela Hall (yes, the very place where I was asked whether I would oppose its alleged planned demise during Candidate Question Time; evidently my life operates in a cyclic manner) in preparation for Results Night. I had two fantastic friends at my side, and I thought that irrespective of the ultimate result, I had been able to speak about issues such as mental health awareness, and the need to reconsider consent on campus, and that was a success in my eyes.

And here we go…
And so we waited.

Results night part two

(‘RON’ stands for ‘Reopen Nominations’, an election mechanism whereby should students prefer additional candidates to enter the political fray, or do not like the current offerings, they vote RON.)

As the unsuccessful candidate, I had to make my concession speech first, and so cue me skipping to the front and taking to yet another stage. I remember feeling very calm and relaxed; I think I was just grateful that a tiring campaign was officially at an end and pleased for my opponent. I simply reiterated my gratitude to the team for placing faith in me as a candidate, my appreciation for the kindness and support of the canvassers, and I urged any listening to be involved in student politics and activism. I also stated my happiness for the victor, knowing him to be truly sincere and zealous in his belief for equality. Truly, I lost to a wonderful fella and I could not have asked for a better opponent. And with that, I exited stage left (thankfully not pursued by a Shakespearian bear) and rejoined my friends. The rest, they say, is history.

And thus concludes my retelling of my 2016 campaign! I never would have expected to have undertaken such an experience; had you said to me in the summer of 2015 that this would be the case I would have laughed. But it was an enlightening experience, informing me about student politics, and educating me in people and trust. If anything, I think it has taught me that whilst there are those who will write you off, see your in their own terms and perspectives, life is about proving these people wrong. You must show that there is more to you than meets their eyes, and be proud of who you are and what you stand for.

LSE -Deutsche Börse merger: European Market Unity?

Regular readers may recall that I once wrote a ‘walkthrough’ post in relation to commercial awareness. I stated then that as a law student, I have read many articles and listened to many a presentation over the years pertaining to commercial awareness. It has been stressed that this is a vital, and necessary skill for aspiring lawyers. But I also stated that the term and what it denotes can sound vague for many students. So in an attempt to assist my fellow students, I wrote about commercial awareness, using the London Stock Exchange and its then-current woes (arguably still continuing woes) as my means to explain just what exactly is meant by ‘commercial awareness’.

Times Coffee

The story at the heart of this blog post today is again one tailor-made for students seeking to enhance their commercial awareness and understanding. And again, it focuses on the London Stock Exchange, and it promises to be an intriguing story which, if all plans proceed accordingly, would have a big impact not just within European markets, but in the global markets, too.

This is the news that the London Stock Exchange and Deutsche Börse are continuing in their merger talks for a new exchange. Discussions centre around the leadership team, and the corporate HQ for the new exchange – which could become the third largest in the world. If this isn’t a story of current commercial awareness interest, then I do not know what is.

This story has been running since late February, when both the London Stock Exchange (hereafter LSE) and Germany’s Deutsche Börse were forced to admit they were in talks after news of their discussions were leaked. It was then revealed that the pair were in fresh talks to create a so-called ‘European powerhouse’ via a staggering £21bn merger. Unsurprisingly, given the current European economic and political climate, this apparent ‘merger of equals’ is likely to be closely monitored by European politicians. This is especially true as we edge closer to the run-up to the EU referendum in the UK.

So, what are these two economic titans seeking to achieve in their third attempt to merge? It would appear that the two exchanges are aiming to unite in order to create a European powerhouse of trading in stocks, bonds and complex financial instruments. It also is hoped the subsequent established ‘European powerhouse’ would be able to take on rivals in both the US and Asia.

The two exchanges said they were embarking on a ‘merger of equals’ in which both companies would share control of the boardroom, and retain their separate brands. However, upon closer inspection of the proposed plans, they seemingly favour the Frankfurt-based stock exchange: Deutsche Börse would actually own 54.4% of the merged holding company, compared with LSE’s 45.6%. (So, a ‘merger of almost equals’, perhaps?) However, according to the Financial Times, the holding company would be based in London – which might go some way to soothing any lingering concern that the German exchange was gaining greater control of the business.

Stock markets are susceptible to announcements, and unsurprisingly there was a noticeable reaction after the news leaked in February. LSE’s shares initially jumped 17% to £27.06, valuing it at about £9.5bn, before closing 13% higher at £26.30. Deutsche Börse raced up 7% to €81.71, giving it a value of almost £12bn, before paring gains to end 3% higher.

Is it to be a case of third time lucky for this proposed powerhouse? Well, considering how the exchanges are still in talks,this would suggest there is a very real possibility that we could see a successful merger being struck. It must be noted that even if both exchanges reach a mutually agreeable deal, a number of issues will still need to be tackled. This includes potential questions from the competition authorities – which blocked a deal between Deutsche Börse and the NYSE Euronext back in 2012. In addition, regulatory approval would have to be sought from the two major City regulators, the Financial Conduct Authority and the Bank of England, so to ensure the enlarged entity was properly managed. And not to mention, this must be conducted against the backdrop of potential Brexit as a consequence of the summer EU referendum.

So, just how do the LSE and Deutsche Börse plan to persuade regulators and politicians not to obstruct their proposed merger? It seemingly comes down to one key argument: that Europe needs an ‘exchange champion’, a powerhouse resplendent with the ability to take on the US and Asian markets.

Okay, I hear you say, but what exactly does this mean? Fret not, allow me to elaborate.

 Supporters of the deal cite three reasons for this: economics, trade and politics. (See why I constantly reiterate the argument that politics, law, and business are entwined and influence one another?)

The economic argument is perhaps the easiest to push forward. It is submitted that European companies need to be able to raise funds on the capital markets at prices comparable to those paid by U.S. rivals. And currently, this is not the case. So, by creating a bigger venue for investors, companies and banks, the new group would help European companies pay less for their funds. At least, this is the theory. Whether it would be successful in practice is another story.

Regarding the trade argument – well, this one is subtler and more complex. The problem here is that Europe’s capital markets will simply remain sub-par compared to the U.S. and Asia.
In the American corner, the US already has two huge exchange operators: Chicago’s CME Group, and Atlanta’s Intercontinental Exchange – otherwise known as the owner of the New York Stock Exchange.
From the Asian corner – it is about to become a more prominent player. It already has Hong Kong’s HKE, but the real threat is the Shanghai SE. One of two independent Stock Exchanges in China, it is likely to only get become bigger and stronger as China opens up both its economy and currency globally. So, this trade argument essentially boils down to stating that Europe must have its own big player to compete with the aforementioned Eastern and Western rivals. And, as the argument goes, such a big player can only come from the merging of the LSE, and Deutsche Börse.

Finally, the political argument. This strand argues that by having a pan-European exchange infrastructure, the EU’s ambitions in capital markets may be realised. It could provide a perfect example of the benefits of the Capital Markets Union so often touted by the Commission, and compliment the other aspects of the single market. It should be noted the single market is taking a hit, given the general continuing struggles of the Eurozone generally as well as sluggish economies within individual member states. It doesn’t help matters that deflation has raised its gloomy head: consumer prices fell 0.2% in February, the first month of negative inflation since September 2015.
On one hand, such a deal as proposed by LSE and Deutsche Börse may just be what the single market needs to stimulate growth and investment. On the other hand, such a merger may be viewed by member states as proof that the UK and Germany are the dominant political players in the single market, which may not exactly go down well.

Now, as mentioned, this is not the first time such a merger has been proposed. The exchanges had first agreed to merge in 2000, before a rival bid for the LSE from Sweden’s OM Gruppen scuppered the deal, only to be rejected anyway. Then in January 2005, the LSE rejected a formal £1.3bn offer from Deutsche Börse.

However, the timing of this current proposal is better than those in the past – from a general EU perspective. Europe’s economy is craving a true single financial market. Moreover, there is a risk that the US and Asia will become key global players to the detriment of the EU, ultimately edging the EU out. From a UK perspective, however, the timing is awkward, for as previously mentioned, there just happens to be the same issue of the UK going to the polls to determine the future of the UK’s relationship with, and within Europe.

Should an agreement be reached this time around, it would mark yet another chapter in the complex history of the LSE. It has expanded beyond trading stocks and shares in London into owning the Italian stock market, and possessing a major stake in a clearing house which operates behind-the-scenes business to guarantee billions of pounds-worth of trading. The LSE’s history of mergers is not quite as illustrious-sounding, though. Four years ago it tried, but ultimately failed, to merge with an exchange in Toronto.

We shall simply have to wait and see whether it shall be a case of third time lucky for the LSE and Deutsche Börse. Nonetheless, this is both an intriguing and important story to follow. I cannot recommend keeping on top of current affairs enough to all law students. It pays to know what is going on in the world. Remember, events in one area e.g. business will have a knock-on effect in other areas, such as law and politics.