Maitland Political Insight What to expect in 2016

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Contents

Contents Page

Introduction

Reform | Andrew Haldenby

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Business

Transport and Infrastructure

Health

Defence

Elections

Progress | Richard Angell

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Introduction

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For the Conservative Government, still fresh from their victory last May, 2016 is shaping up to be a make or break year. A raft of major policy changes are in the process of being rolled-out, key decisions are waiting to be taken and the prospect of a mid-term slump in popularity looms. This will be a significant time for organisations of all shapes and sizes.

Yours faithfully,

Pete Bowyer

2016 will see the Chancellor’s economy begin to take shape but not without pains and difficult decisions. Central to Mr Osborne’s plans is the transfer of responsibilities and costs from the state on to businesses. It is policies like this which present business with challenges and opportunities over the next five years of Tory rule.

One rather large distraction from the day-to-day business of government and, policy development is the forthcoming elections in London, Scotland, Wales and Northern Ireland, and the small matter of the EU referendum.

The commentariat are hesitant to make sweeping statements about winners and losers in these elections considering the totally unexpected Tory majority at the last. But here we provide some of the key determinants of the elections to come including key parties and people. The EU referendum is the biggest decision the British people will have to make for a generation. Our EU membership may be over by this time next year but the voice of the business community is being heard louder and louder as they spell out the dangers of a Brexit.

To help us on our way, Andrew Haldenby from the think tank Reform introduces us to the 2016 insight and the Director of Progress, Richard Angell, offers his reflections as one of the foremost Labour party moderates.

If any of the issues catch your eye and you’d like to find out more, please get in touch via our website or email us direct at politicalbriefing@maitland.co.uk.

Reform

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Andrew Haldenby

The Prime Minister’s New Year Message received a D minus from the Financial Times. The pink ‘un bemoaned the Government’s “restlessness abroad and inertia at home”. It warned that there are “no public service reforms as dramatic as those visited on education in his first term”. It described the permanent procrastination on a new runway at Heathrow or Gatwick as “politics at its narrow and nimbyish worst”. Happy New Year, Mr Cameron.

One of the FT’s themes was that Number 10 amassed a “mountain of political capital in 2015”, which it should enthusiastically spend. I suspect that isn’t quite what it feels like in Government. The Conservative majority in Parliament is a scant 16, compared to (say) Tony Blair’s equivalent figures of 179 in 1997 and 167 in 2001. The Opposition may be consumed in introspection but there are plenty of other interest groups willing to hold up the Government’s programme. Step forward, the BMA.

The Government could rightly say that it has a suite of reforms that are changing public services profoundly (even if these policies aren’t the ones that Ministers talk about most often). The biggest spending areas are pensions, the NHS and working-age welfare. Later retirement ages and auto-enrolment offer the hope of more sustainable pensions in future. The Five Year Forward View is a comprehensive plan for the future of English healthcare. Iain Duncan Smith and Priti Patel are moving on to reforms to sickness benefits, where a great deal of change is needed. We can add acade-mies and free schools, reforms to prisons, changes to the Ministry of Defence, and interesting Whitehall reforms such as the Government Digital Service.

Put all this together and it does look something like the “great reforming decade” to use Mr Cameron’s phrase. Much of the 2016 political debate will be taken up with these various

programmes of reform, with the Opposition likely to act as a barrier to change.

The problem for the Government is that there are a raft of policies that point in the other direction. The pensions triple-lock drives up costs in the medium term. On 1 January David Cameron himself wrote about spending more on the NHS rather than changing it (trumpeting “record levels of funding for the NHS”). Whitehall reform has disappeared since Francis Maude departed the Cabinet Office. The Treasury emphasised higher spending in the Spending Review. This is not so much a great reforming decade as a series of decisions ducked, all of which store up trouble for the future. The danger for the Government in 2016 is that its unwillingness to be consistent will seriously undermine its positive reform initiatives.

Looking at the business agenda more broadly, the question of EU membership will of course be central. It will also be interesting to see whether businesses’ patience snaps at the rising tide of regulation. As the Government has had less money to spend, it has increased regulation in particular on employment (see the National Living Wage and the apprenticeship levy). So far business opposition has been muted but that may not last forever.

Andrew Haldenby is director of the independent think tank Reform (www.reform.uk) which works in partnership with around 70 leading companies each year.

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Business

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• Reduce Corporation Tax from 20% to 18%• Introduce a National Living Wage• Create 3m new apprentice starts by 2020• Roll-out an Apprenticeship Levy in 2017• Devolve power over spending, business rates and planning to cities and regions• Digital tax accounts for business by 2020

The Government received a welcome boost over the festive season with news that Britain will race ahead of Germany and Japan to become the fourth largest economy within the next two decades. The Centre for Economic and Business Research (CEBR) report’s findings offer further vindication of the long-term economic plan and will encourage the Conservative Government as it doubles-down on plans to reduce spending.

The New Year will see the Chancellor rolling out his vision for a low tax, high pay economy. At the heart of this is the transfer of responsibilities to businesses. The 2015 Autumn Statement saw the Government putting forward a grand bargain with the business community: in return for lower corporation tax and easing the burden of regulation, companies must play their part through higher wages and improving productivity.

Symbolic of this approach is the introduction of the new National Living Wage in April. This highly political move by the Chancellor risks disrupting the Low Pay Commission’s delicate balancing act with the minimum wage. Many expect businesses to tighten their belts, potentially scaling back on

investment or cutting staff. Still, Osborne will be hoping that it can secure the remarkable success of the labour market by aiding retention in low-skilled areas and incentivise people to move from welfare into work.

Of great concern to business has been the Apprenticeship Levy, which is intended to achieve 3 million apprenticeship starts by 2020. The 0.5% levy on employers with a wage bill of more than £3m has been condemned by the CBI, who said it is “inevitable there will be significant job losses”. The Government insists that growing the number of high-quality apprenticeships is crucial to achieving much needed productivity gains.

The devolution agenda will have a further impact on business. Local authorities will be allowed to set and keep the money they collect from business rates. Moreover, the “metro mayors” established as part of the new City Deals will have the power to levy a business rate premium for local infrastructure projects.

Taken together, these measures demonstrate the Government’s desire to break from the old top-down approach to policy implementation and transfer responsibility from Whitehall.

Key Priorities

Transport and Infrastructure

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2016 will be a big year for the development of our infrastructure, particularly in transport. First and foremost will be a decision on Heathrow expansion expected in the first half of the year, perhaps soon after the London Mayoral elections. This is likely to set the tone for the year in terms of infrastructure developments.

Aside from Heathrow, the Chancellor will be expected to put meat on the bones of his repeated refrain last year: “we are the builders”. Investment in infrastructure enjoys cross-party support and public backing as well as being demand by business. Nevertheless, every Government finds that delivering on its plans is a challenge, particularly when the detailed plans are put out to consultation.

Nevertheless, the Chancellor’s National Infrastructure Commission (NIC), an idea borrowed from Labour, and the appointment of former Labour Transport Secretary Lord Adonis as its chair does hint at both ambition and action. The Government has committed £100bn for investment in infrastructure until 2020, further underlining this. In many cases the need is identified and the broad plans are ready but with every infrastructure plan come detractors, both inside the Conservative party and outside, that can delay things. Seeing diggers breaking ground in the coming years will be crucial to assess the Government’s success in this area.

The National Infrastructure Commission itself is focusing on three key areas: Northern Connectivity, London’s Transport System and Energy and it will report back before the Budget in March. The Government’s response to the Commission’s first report will be a crucial test for the credibility of the new body.

Away from transport, the Government have vowed to build a million homes by 2020 and minor ground preparation is underway at the new Hinckley Point C nuclear plant. The NIC’s report in March will give a further idea of how the UK can meet the energy challenges that lie ahead, particularly focusing on ensuring sufficient capacity is available as coal-fired power stations are shut down. In a related area, the Government is determined to move ahead and establish a viable shale gas industry. With 159 licences for onshore oil and gas exploration recently awarded, 2016 may mark the beginnings of a growing industry. Expect major opposition whenever and wherever exploration activity begins.

Key Priorities

• The Government will make a decision on airport expansion, either a new runway or a runway extension at Heathrow or a new runway at Gatwick

• The National Infrastructure Committee (NIC) headed by Labour’s Lord Adonis gets under way, focusing on three main areas: Northern Connectivity, London’s Transport System and Energy

• Northern connectivity to be provided by a roadbuilding programme – “the largest since the 1970s” – and HS2, which should complete its Parliamentary journey this year

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Jeremy Hunt’s task as Health Secretary to neutralise the NHS as a political issue seems more difficult than ever.

One of the big debates ahead of the election was NHS England funding, with NHS Chief Executive Simon Stevens asking for £8bn additional funding by 2020. The Conservatives pledged to fund this and confirmed this in the recent Comprehensive Spending Review. The focus will now move to how and where the NHS budget is spent – as this extra money is not a silver bullet.

Mr Hunt’s immediate challenge will be to help NHS trusts regain control of their finances to protect the long-term security of the service. With more than eight out of ten trusts in deficit, this is a big task. Remedies are likely to focus on finding further efficiency savings.

Ministers will want to ensure that time and re-sources are focused on the delivery of new ways of working, and not just on using the extra money for reducing deficits or business as usual. To that end, the Government will look to press ahead with implementing the Five Year Forward View – expect to see further pilots like the new ‘accountable care organisation’ that integrates primary and secondary care.

Beyond that, the Government will want to make good on their other election promise: a ‘truly 7 day NHS’. Some say this already exists, while others argue it requires impossible levels of funding. A crucial part of this will be the new junior doctors’ contract. Strikes were avoided last year but negotiations continue. If the new terms are rejected, 45,000 junior doctors could take industrial action over the coming months.

Efforts to integrate health and social care systems will continue, which will offer long-term efficiency savings it is hoped. More immediately, the cause for concern will be social care funding across local authorities. The Spending Review offered few crumbs for social care, though councils are being permitted to increase Council Tax by 2 percent for additional social care funding. Funding shortfalls could see elderly people in hospital beds rather than discharged, piling pressure on NHS services.

The Government’s Childhood Obesity strategy is expected to be published early in 2016 and will set out measures designed to reduce childhood obesity. Changes are likely to build on Public Health Eng-land’s report on sugars, such controls on in-store price promotions; potential restrictions on marketing and advertising to children; and local authorities taking greater consideration of ‘unhealthy food outlets’ when making planning decisions.

Health

Key Priorities

• Increase NHS spending and progress with implementation of the Five Year Forward View• Agree the terms of the new junior doctors’ contract and move towards a 7 day NHS• Attempt to integrate the health and social care systems• Take action to reduce child obesity

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Before the 2015 General Election the Conservatives pledged to “protect our nation” by ensuring a “strong armed forces” and to meet NATO targets on spending and funding of equipment. The Strategic Defence and Security Review (SDSR) in November 2015 delivered on these commitments and pledged to spend 2% of GDP on defence and more than £178bn on purchasing and maintaining equipment.

Since the election of Jeremy Corbyn as leader of the Labour party the dividing lines between the two main parties on defence policies are stark, with the Labour leader opposed to trident renewal and a NATO-focused foreign policy.

There is also considerable opposition to the Labour leader from within the Labour party on these issues making it easier for the Government to implement its programme for national security. This was best exemplified by the Shadow Foreign Secretary Hilary Benn defying his leader and giving an impassioned speech in favour of the government extending air strikes to Syria. This speech helped sway a majority in the House of Commons. Furthermore the SNP are opposed to Trident renewal, behind airstrikes placing further pressure on the Labour party to clarify their position.

Looking ahead, the Government has highlighted the threat of cyber and terrorism and the erosion of rules-based international order as critical when shaping UK defence and security policy.

Defence

Key Priorities

• Meet the NATO target by spending 2% of GDP on defence• Establish a new Join Security Fund• Spend £178 billion over the next decade on equipment • Invest 1.2% of the defence budget on science and technology• Vote in Parliament on Trident renewal• Double spending on aviation security around the world • Invest £1.9 billion in protecting the UK from Cyber-attack and publish the second five-year National

Cyber Security and launch a further five-year National Cyber Security Programme

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Elections

The London Elections

In May, London will elect the new Mayor as well as the London Assembly, who scrutinise the Mayor. The Mayoral election looks to be a close fight between Labour’s Sadiq Khan and the Conservative candidate Zac Goldsmith, both current London MPs. The Assembly elections are likely to see Labour capitalise on their local strengths, though thanks to the Additional Member System, the smaller parties like the Lib Dems and the Green party will continue to have a presence.

The Mayoral Contest

With Labour controlling 20 of London’s 32 councils, having won nearly half the seats on the London Assembly in 2012 and bucking the national trend in the 2015 general election by gaining 7 seats in London, many would assume that the Mayoral election is a foregone conclusion. Yet the 2008 and 2012 elections show that with the right candidate and a well-run campaign, the Conservatives are a force to be reckoned with in London.

With the popular Richmond MP Zac Goldsmith, the Conservatives hope they have just that candidate, with a broad appeal across society and an environmental record that appeals to many on the centre-left. They will seek to contrast his independent-minded record against Labour’s candidate Sadiq Khan’s links with the unpopular Labour leader, Jeremy Corbyn, who endorsed Khan during the nomination contest.

Labour believe that in Sadiq Khan, whose father was a London bus driver originally from Pakistan, they have a candidate who truly represents London’s diversity and its many hard-working people. Khan is expected to focus on the bread-and-butter issues that those people face, such as high transport costs and a lack of affordable housing for buying or renting.

The other parties’ candidates will only play a minor role, though their second preference votes normally determine which of the two main candidates will win the election. As a result, appealing to Green and Lib Dem voters will be an important strategic aim of both main candidates.

With Labour expected to do well in the London Assembly elections, the question is more about the level of their success rather than success per se. With the bar high to clear, any improvement in seats will be portrayed as evidence Corbyn’s leadership is an asset to the party, particularly if the Scottish results for Labour will be as bad as they are predicted to be. The Conservatives will hope that with an improving economy and continued investment in London’s infrastructure, as well as schemes to help Londoners get on the property ladder, they will be able to make some gains in the capital.

The London Assembly Elections

Elections

The Scottish Parliament Elections

The election in Scotland is likely to be a landslide victory for the SNP, in fact anything but a return to power for Nicola Sturgeon is almost unforeseeable. The opposition parties are likely to avoid a 2015 UK General Election style wipe-out due to the Additional Members System, which means that along with the 73 constituency MSPs each of the 8 regions picks 7 additional MSPs using a proportional system.

SNP Leader | Nicola Sturgeon

The SNP are likely to continue the rhetoric used at the General Election last year, “better for Scotland” and “governing for those in favour of independence and those not” “the only party protecting Scotland from Tory cuts” are all likely to be heard in TV studios and on billboards.

Labour Leader | Kezia Dugdale

Labour will hope that since this election is about Holyrood rather than constitutional issues or Westminster, they can focus on the SNP records. The Forth Road Bridge closure will be used as sign that the SNP are not fit to govern and they will also question management of education and health try and make it feel like a “normal” election, focusing on bread and butter issues.

Smaller Parties

The Tories will portray themselves as the only unionist party, trying to tap in to the “quiet no” vote from the referendum. The party feels like it is in the assent, with a popular leader in Ruth Davidson. It is widely expected that the Liberal Democrats, who at one point returned 17 MSPs are now down to five, will not improve on their 2011 performance. The Green party, who were given good airtime in the General Election are hoping to overtake them as the fourth biggest party in the chamber.

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Expert View

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Wales has long been dominated by Labour. However, a recent poll suggests that although the largest party is unlikely to change the smaller parties could demonstrate considerable political clout.

A poll by ITV Wales predicted UKIP – which currently has no Assembly Members – could make big gains, snatching nine seats. This would rocket it ahead of the Liberal Democrats and place it just one seat behind Plaid as the fourth group in the Assembly.

The Conservatives are also predicted to drop two seats to hold 12 while the poll suggests Plaid Cymru will lose one seat, leaving the party with 10 AMs. Meanwhile the Liberal Democrats are set to lose three of their five seats.

Welsh Assembly Elections

If the poll is correct Labour will form minority Government, but with less influence over the assembly, and Welsh politics than they have had in many years. This would make governing difficult and will see smaller parties able to exercise influence as the Welsh Government seeks a majority to pass its legislation and budgets.

Progress

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In 2016 the real world and the political world will feel more distant from each other than ever. At the furthest point from the next general election both major parties will attend to party matters, ahead of the country’s big challenges.

For my own party, its new leadership will look to shrug off more of its election-winning ways and disassociate itself with any of the “toxic” days in power. The Christmas campaign of the leader’s office has been to pre-brief a ‘revenge reshuffle’ rather than focus on the constant mistake-making of the government. This is a sign of things to come. Expect important issues of national defence and the renewal of Trident to be put to party members in plebiscites and the summer to be focused around divisive constitutional rule changes at the party conference. Labour will get to voters’ concerns on the deficit, immigration and welfare only once we have purified ourselves of the views closest to those who did not vote for us in May 2015. This is all regrettable.

Worse still, the Conservative party will peak in its pursuit of putting party before country and take the much-discussed European referendum to the voters.

Richard Angell

This time it is not just the leadership that is hell-bent on party pursuit – the whole Tory party will be jockeying for position, knowing that, whatever the result, the referendum will mark the end of David Cameron’s prime-ministership. He may choose to ignore this fact, but the battle to be the next occupant of No 10 will be well under way and Cameron will find himself unable to pull many of the levers normally at the disposal of the leader. Everyone knows the Boris Johnson v George Osborne v Theresa May line-up. But expect an outsider to enter the race – the real focus will be on who it might be. Education secretary Nicky Morgan and business secretary Sajid Javid are likely challengers.

Regrettably, but unavoidably, the parliament as a whole will join in this navel-gazing. The government, not content with the Lobbying Act of the last parliament and the (anti) trade union bill of last year as attempts to silence its critics, has cut the state funding to opposition parties and will reorganise the parliamentary boundaries to cause maximum chaos for their political opponents. This is an active strategy of this government and will go a long way in distracting journalists and backbenchers from the pitfalls in its policyproposals. Thankfully, some of Labour’s best people are now on select committees studiously holding the government to account and finding the needles in the haystacks.

Progress

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Over the next 12 months look out for Rachel Reeves and Wes Streeting on Treasury select and Iain Wright and Peter Kyle on business; former leadership candidates all occupy select committee places and will attempt to champion individual causes and come up with a critique of the Tories’ more compelling than ‘austerity bad’. However, the two Labour people to watch are not new to anyone. Andrew Adonis as head of the infrastructure commission and Alan Johnson leading the ‘Labour In’ campaign will make important weather for the country, with or without the support of their leadership.

Big elections in Scotland, Wales, London and English metropolitan areas will be a high point for the political class, but will be greeted by the voters with low turnout and predictable results – a Scottish National party hold in Scotland, Labour in Wales, with a Labour win in London and the Tories gaining local government seats.

The event of the century will be the substantive of the European referendum. But please do not expect it to be exciting or exhilarating. The ‘Remain’ camp will need to keep it dull, pragmatic and emotionless – learning from the more shrill Better Together example north of the border – while the ‘Leave’ camp, unable to control Nigel Farage’s lot, will overclaim and be found wanting. The result, however, no one should take for granted.

I for one will throw everything at winning this epic battle, not just for our place in Europe, but more fundamentally for what kind of country we want to be. With the political parties looking inwards, 2016 will be the year the voters decide if Britain continues to look outwards.

Richard Angell is director of Progress, the Labour modernisers group

Social Market Foundation

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