This time last week we were in Moscow planning a pleasant lunch on the river cruise boat. It's a great way to see Moscow, with a few shots of vodka to ease the burden. The day before we had visited the Kremlin, Red Square, the Bolshoi Theatre, St. Basil's Cathedral, the Gum Store and so much more. Yep we even traveled on the Moscow metro.
It was an amazing trip and a great opportunity to speak at the Gazprom conference on managing the challenge of digital disruption. Also speaking at the event was Boris Zarkov, founder and CEO of the White Rabbit Family of restaurants. Two of his restaurants are in the top 100 best restaurants in the world. We made it to the eponymous White Rabbit restaurant in Moscow on Thursday night. A starter not to be missed - "Cabbage and Caviar" ... followed by "Flounder" always a favorite.
It was a great week away to avoid the trauma of the election process. Back in the UK the runners are riders are in position. The first debate between Johnson and Corbyn, left voters equally divided or confused. Boris appeared to squeeze the decision with a narrow win. The four way "Question Time" exchange last night left much to be desired from either side. The decision may yet lead to a hung parliament all over again.
The Tory party are keeping their manifesto a close secret, not so the Labour Party. The release last week of the socialist agenda ran to over 100 pages with an average cost of over £4 billion per page. The tax and spending plan has already been denounced by the IFS and big business. The process of state sequestration, a breathtaking look back, to a time we all thought was long passed.
So far the voters are unimpressed by the promises of the socialists. The Tories has a twelve point lead in the polls. Martin Baxter's Electoral Calculus has Boris Johnson returning to Number Ten with a seventy seat majority and a clear mandate for Brexit. The Conservative manifesto will be released next week. Foxhunting has disappeared from the headlines, along with Jacob Rees-Mogg ... focus is on spending, borrowing is set to rise ...
Borrowing hits monthly high ...
Phillip Hammond was affectionately known as "Spreadsheet Phil". His love of detail ensured the numbers added up, both down and across, always a bonus with Treasury. Sajid Javid on the other hand, is becoming known as the Chino Chancellor, Chancellor In Name Only.
Boris Johnson has a knack of stealing the best lines, this week was no different. The Prime Minister announced prematurely the increase in National Insurance hurdle rates to £12,000. The announcement made on the campaign trail in Teeside sent campaign staff into a panic. The giveaway was supposed to be revealed in the manifesto. Johnson had been put on the spot when asked "are the tax cuts planned for [posh] people like you or people [workers] like us".
The National Insurance announcement ensured the Prime Minister avoided a difficult moment. Other giveaways will be revealed in the manifesto. More money for the NHS, more doctors, nurses, police on the beat, forty new hospitals, the manifesto will ensure the calculators are churning in the IFS and the OBR. The impact on growth and borrowing readily and rapidly assessed.
The spending challenge was not made easier by the release of the latest borrowing figures for October. Borrowing in the month was £11.2 billion, the highest October level for five years. The year to date figure was £46.3 billion roughly 10% higher than the prior year. For the year to date we expect spending to rise to £47 billion, well ahead of the 2% target.
There would appear to be little or no scope for a big giveaway spending plan for an incoming Tory majority. The Prime Minister has already revoked the planned cuts in corporation tax, announced in passing at the CBI conference this week.
Once back in office, with a clear majority, the Tories may well find other spending plans could be put to better use ...
Must spend more ...
Must spend more was the message from the incoming President of the European Central Bank. Christine Lagarde, taking over from Mario Draghi, has urged European leaders to increase spending and boost growth.
“Investment is a particularly important part of the response to today’s challenges. It is both today’s demand and tomorrow’s supply,” Ms Lagarde, 63, explained.
Germany and the Netherlands are under particular pressure to do more to boost domestic demand. The central bank, which recently cut rates and restarted quantitative easing, would continue to do its part to support the economy, the incoming President explained.
More QE, the drift to negative rates continues. Modern Monetary Theory, would provide the intellectual justification for an increase in government spending and borrowing hurdles. The Magic Money Tree is now surrounded by a forest of "Group Think". The outcome of the UK election becomes even more pertinent to the debate ...
That's all for this week, have a great weekend. We will be back with more news and updates next week ...
The Saturday Economist
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