When it finally came, UK Prime Minister Theresa May’s announcement that she would introduce a cap on energy prices if re-elected was made more in anger than in sorrow. Declaring in the Sun newspaper that she is “fed up with rip-off energy prices” May promised to cap the ‘standard variable tariffs’ (SVT), through which most UK households buy their energy. The cap will be put in place by the regulator Ofgem, and although not all details are yet clear, May’s expectation that it would “save families on poor value tariffs as much as £100” strongly suggests the imposition of a cash limit.
Today, the BEIS Select Committee released its report on the UK government’s Brexit negotiating priorities on energy and climate change. The report highlights important issues, including the need for a delay in the UK’s exit from nuclear cooperation agreement Euratom, potential “special arrangements” to maintain a single Irish energy market, and the view that the UK should not leave the EU-ETS before 2020, but should consider alternatives if the EU-ETS cannot be reformed. But largely it is a plea for the status quo, reflecting both the economic benefits of membership of the internal energy market and the views of a sector which mostly believes that Brexit’s energy challenges can be separated from its turbulent politics.
The NASDAQ reached an all-time high yesterday as Donald Trump announced he wants to more than halve the US corporation tax rate, from 35% to 15%. But he knows that doing so comes with a big price tag – one that, in the context of a fraught debate about the US national debt and deficit, is an almost impossible sell to Congress. The solution? Dynamic modelling: counting the economic growth gains that the cut might create when calculating its cost, to show that in fact there is a net benefit to the Treasury’s coffers.
When the finance ministers of the world’s largest economies gathered in Washington over the weekend they had in front of them IMF analysis of the global economy that for once was quite up-beat. The growth forecast is higher, financial markets are buoyant, and a long-awaited cyclical recovery is underway in many economies.
With the UK now set for a general election on 8 June, attention has turned to the party manifestos. Given the general expectation that the Conservatives will win a large new majority, their platform is of particular interest. With very little constraining political opposition, UK Prime Minister Theresa May has the freedom to be as innovative as her admittedly cautious nature allows. The election is a chance to formalise her own, post-David Cameron agenda: a manifesto version of what she has already done with her cabinet. What she says on Europe and Brexit will be picked through minutely. So, what should we look for from a May manifesto?
Theresa May’s decision to call a general election on 8 June is timed to minimise disruption to the negotiations with the EU. The early stages were always going to be about modalities - about who will participate, what they will discuss and when - and that can still happen in the run up to the election. The serious discussions, requiring high-level political backing, will need to wait until the new German government is in office after elections there in the autumn.
With the UK Parliament likely to dissolve on the 2-3 May, ahead of the 8 June election, there will now be a frantic scramble for the UK government to complete the passage of legislation currently in train. This process, known as the wash-up, was thought to be relatively obsolete with the introduction of fixed-term parliaments. Revived now it will be controversial, as the normal process of parliamentary scrutiny is substantially truncated.
Central bankers have never operated in a political vacuum, even though many of the most important are at least operationally independent. For some, that independence is now being eroded - or even directly challenged. The result is a creeping politicisation of policy, at a critical decision point for monetary policy, which may have long-lasting economic implications.
When you mention EU states competing to win a prestigious and powerful European regulatory agency from Britain after Brexit, most people would probably think of the European Banking Authority. But the European Medicines Agency (EMA) is also up for grabs, and the most intriguing bidder is Bucharest.