The beauty of the binary

Leave or remain?  In or out?  Left or right?  Right or wrong?  Good or bad?  Sooner or later?  Clinton or Trump?  The complexities of modern life require more consideration than a binary choice can ever do justice to. Yet so often we allow ourselves to be seduced into making a choice of ’either/or’ when presented with one.After all, there is a 50:50 chance of getting right or wrong and many yearn for a balanced approach.

July sees the Democratic and Republican national conventions where the presumed candidacies of Hilary Clinton and Donald Trump will be endorsed, respectively, by each party’s delegates. The nature of the final stage of the race for the White House is usually a binary choice.

There is nothing to stop an additional party candidate but, historically, any third party runners have acted as mere spoilers. Yet there is a considered view that 2016’s ‘spoiler candidates’ from, perhaps, the Libertarian Party and the Green Party could be influential in attracting votes away from the two main protagonists and affect the outcome of the November poll.

It is also assumed that foreign policy wise, the two likely candidates will pursue quite distinct approaches upon occupying the Oval Office.  Put lazily, one will pull up the drawbridge -  if not build a wall - to shore-up a protectionist stance and the other will be interventionist in a more obvious way than the 44th president has been.

Again, it seems like a choice between one way or another but the duties incumbent of the role of Mr or Madam President as the head of state, the head of government and commander-in-chief of the armed forces make for a more complex approach to policy making, thankfully.

What foreign policy commentators do seem to agree on is that the 45th President of the United States of America needs to decide whether or not he or she wants to see the USA continue in its role as the world’s ‘policeman’ – a role occupied after 1945.

Back then there did seem to be a binary choice between two powerful, opposing forces: communism and anti-communism.   But since the demise of the Soviet empire, things have, even on the surface, become more complex and there are certainly more than two forces in play when it comes to powerful nations with global ambitions.

The same commentators feel that if the USA is to retire from its policeman role then it needs to make it plain to the rest of the world sooner rather than later.  Some policy experts feel it is now time for the USA to become part of a new constabulary force.  Either that or it is going to have to carve out its new post-retirement identity and make plain its attitude to any new recruits who are rising up the ranks.

In terms of military, diplomatic and commercial clout the USA’s pre-eminence endures.  Whoever is inaugurated next January will have to make more than two choices about what to do with all that power, that’s for sure. It’s not a case of use it or lose it because it’s always likey going to have it.

High up on the new president’s ‘to do’ list will surely be what to do with its transatlantic cousins who live in an increasingly fractious if not fractured Europe.

Who would have thought that just having two options would make things so complicated?  A binary choice in some affairs is just too, too simplistic.

Will Mooney MRICS
Partner
Commercial, Cambridge

Regions to be cheerful

Will Mooney, Carter Jonas partner and head of commercial and professional services in the eastern region, ponders the politics of the powerhouses.

The recent Budget statement acknowledged the potential of regional powerhouses and the considerable heft that economically successful regions contribute to the national and international performance of the UK.

Not before time. On the face of it, there appeared to be positive policy initiatives which could be good for the eastern region and spending plans for the kind of things for which this region – if you consider Cambridge as the heart of the hub - is known and recognised.

There will be £11 milllion to invest in new technology incubators to be channelled through Tech City UK – the government body which funds technology clusters. A £40 million pot will assist with research in to the ‘Internet of Things’ which, in his speech, the Chancellor rightly identified as the next stage of development in ‘the information age’.

Then there was the potential of a deal whereby 100 per cent of growth in additional business rates could be brokered for and kept by local authorities in areas like Cambridge, among others. This was described in the speech and in the subsequent media coverage as a ‘roll out of the Manchester model’ and a key component in formulating a northern powerhouse which sees Manchester and Leeds at the metropolitan heart of this hub.

Naturally enough, many in business in this region gave what is couched as a ‘cautious welcome’ to this and other elements of the Budget and for understandable reasons.

It is churlish to say it, but there has been a full-on eastern powerhouse for the best part of 20 years and does the powerhouse model, in modern times, really orginate in Manchester? We’re a long way from the heyday of the wool trade in which industrial Manchester was the centre of that economic power push.

Equally, one could argue that at a county level, never mind a regional level, there are issues of disparity and identity with which we struggle here in a way that a northern powerhouse might not. Although try telling that to the Houses of York and Lancaster.

In Cambridgeshire, there is a marked distinction between the north and south of the county; try lumping Ipswich in with Norwich and you won’t be popular; locations in Hertfordshire and Essex which border London have more in common with each other than their country or coastal county compadres. And whither Lincolnshire and Northamptonshire? Arguably, the former has more in common in its southern rump with north Cambridgeshire and the latter, a compatability with the Oxford corridor.

While government and civil service assistance to provide the broad policy and economic framework and infrastructure in which any region can seek to prosper is to be welcomed, it is questionable whether direct intervention - some might say interference - in trying to impose a regional identity and common cause is the best use of their time in the modern age.

After all, the latest detailed study of the genetic sources of the UK, has identified that there are 17 dominant genetic clusters which tend to reflect the de-facto, regional identities, not bureaucratic boundaries, within our nations. The largest of these clusters covers southern, central and eastern England and dates back to the the collapse of the Roman Empire when Angles and Saxons settled here.

Will Mooney MRICS
Partner
Commercial, Cambridge

Splurge, purge and debt

Setting aside the peculiarity of making an Autumn Statement in early December, the dust has settled, for the time being, on the brouhaha which accompanied the Chancellor of the Exchequer’s latest diagnosis and prescription to remedy the financial ills of the nation.

The country is riddled with debt and it needs to be cured by short and mid-term pain for long term gain it seems.

It is politically acceptable to talk about the national debt again in a way it probably hasn’t been since the 1970s. Then, we were all about the Public Sector Borrowing Requirement and inflation, the 3-day week and the winter of discontent.

All the mainstream Westminster parties - and those aspiring to become so after the next election - are no longer embarrassed to mention the ‘D’ word again. And not only to talk about how indebted we are as a nation, but also to set out their stall as to how we can decrease this public debt.

It is okay to talk about repaying our debt, even if in repaying it what we actually mean is reducing the cost of servicing it.

In the fiscal year 2018-2019, implementation of the Government’s current programme will see us save £18 billion in interest payments. Borrowing is falling. Next year it will be £75.9 billion, falling from £91.3 billion this which, itself, has dropped from last year’s £97.5 billion.

We are aiming to be in the black to the tune of a £23 billion suplus in 2019-2020 but we are cautioned it could get messy in order for this to be achieved. Being in the black is a laudable business aim.

While it’s fine to talk about our national debt and how we can repay it, it’s still not fashionable to talk about our private debt in polite company as that’s even messier, but we have to start somewhere.

Tucked away in the detail and the in-depth coverage of the Chancellor’s statement was notice of our intention to pay back or, at least try to clear, the nation’s historical debts – some of which date back to the early 18th Century.

The refinancing of World War One debts in 1932 took the form of a bond replacing a gilt which was first issued in 1917. Now - well ,on 09 March 2015 to be precise - the British Government is set to redeem this bond which, in total with other war bonds since the penultimate year of the Great War, has cost £5.5 billion pounds in interest alone.

HM Treasury has made it known that it is the intention to repay, at the appropriate point, ‘legacy bonds’ which shored up borrowings against other expenses incurred during our nation’s history.

Some of these bonds and gilts financed the Napoleonic Wars, the setting up of the Bank of England and the clean-up when the South Sea Bubble burst and rocked the finances of the country in 1720.

Which, if any of these specific, perpetual debts are to be revisited have yet to be confirmed in detail but the fact that we, as a nation, are beginning to address our nationalised indebtedness tells the story of our times more than of those past.

Let’s hope we’ve eaten, drank and been merry in the past few weeks; for next May, we vote.

Will Mooney MRICS
Partner
Commercial, Cambridge

Our ping-pong recovery

It was exactly three years ago when I was advised that ‘being on the brink is the new normal’ for what, at the time, was the foreseeable future. In 2011, many weren’t willing to assign a specific number of years to ‘the foreseeable future’ but I think we can say that, three years on, we are back from the brink, economically.

Yet as many economic and financial commentators judge, the country is still in a strange state of being where one set of indicators suggesting positive news is offset by another giving a gloomier gloss to our recovery. Yes, the economy is growing but there will be a shortfall on the deficit above £100 billion by the end of this year.

One Eurozone economist recently characterised the UK’s growth as ‘the wrong type of growth’. Much like the seasonal ‘leaves on the line’, it’s probably the best explanation for the feed of ping-pong, back and forth, contradictory economic data this autumn and the balancing act those politicians charged with running the country are having to perform day-in and day-out as our recovery plays out.

Perhaps the bruising economic experience the UK has endured since 2008 has changed our perceptions of what amounts to recovery. Pre-crisis, debt-levels being 40 per cent of national output were considered high but now it’s 80 per cent which is the trigger point at which the credit rating agencies talk about withdrawing our triple AAA status.

The shortfall on the deficit by this year’s end would have been considered big in times past at 6-7 per cent of national output but it is not as big as it was at its 9-10 per cent peak in 2008/2009.

In October, published figures recorded that unemployment had fallen below the 2 million mark for the first time in six years. But in this current tax year of 2014/15, income tax receipts are up by just 0.1 per cent yet outlay on social benefit payments has gone down.

Wage inflation runs at just 1 per cent at this point in our recovery but the Bank of England is anticipating 3 per cent wage inflation by the end of next year and therefore tax receipts will be up.

It may feel like a heavy trudge through the recovery now but many analysts are convinced there is good news in the pipeline and, thankfully, the wisest market operators will always invest for the long term.

Before that, we have the General Election in May and all bets are off that the Chancellor of the Exchequer’s Autumn Statement – scheduled for early December – will be anything else but a necessary political and economic balancing act of ‘Austerity Lite’. There is likely to be further squeezing of public expenditure but the pinch will not be as nippingly sore as it was in the early years of this administration.

In this ping-pong recovery of ours – in which we are growing faster than Germany - whether it’s politics which is the foil to economics or vice versa, balancing is not an act: it is the reality.

Much as we did in 2011, we are going to have to accept this new reality of our recovery for the foreseeable future.

Will Mooney MRICS
Partner
Commercial, Cambridge

Goodbye holiday, hello Autumn!

As much as we all love and need our holidays it is always a relief for estate agents when the second week of September arrives and our buyers are back home, refreshed and, generally, raring to go – giving us a good two months to make it all happen before Christmas.

This year, however, we will be even more delighted when the outcome of this week’s momentous Scottish Independence Referendum is finally revealed. No market likes uncertainty and it has been interesting to see the impact of Scotland’s potential break-away from the UK on the property market.

Whatever the outcome is, the fact we will have a result will help in a way that endless speculation hasn’t.

This has been specifically noticeable amongst London buyers. With many of our London buyers working in the City, the financial markets’ trepidation has rippled out into ours. This, therefore, has contributed to a slackening in demand for larger family houses in the £1,000,000 plus price bracket.

With any luck, Scotland will decide to stay in the fold and we can all raise a whisky or two to a revival of confidence.

On the other hand, a sector of the market which has shown tartan-resistant strength is the retirement bracket. The demand for good village houses within walking distance of amenities, together with spacious reception rooms, a reasonable sized garden and off road parking/garaging is especially strong.

As 2014 took off with the wind fully in its sails, we confidently expected the year to continue as such. Mark Carney’s warning of impending interest rate rises certainly contributed to deflating the London market ‘bubble’. However, frustratingly, this took the puff out of the country bubble which had only just started to inflate and was a long, long way off bursting.

However, the consensus is that when the base rate does rise, it will be in incremental stages. Such baby-steps will not only be easier for householders to plan-for and manage but are also unlikely to spook the financial and residential property markets.

Looking at this positively, a gentle pulling-in of the reins should ensure a more contained, steady and long lasting growth.

Caroline Edwards
Partner
Residential Sales, Long Melford
T: 01787 888622
E: caroline.edwards@carterjonas.co.uk

"Events, dear boy, events."

Asked when he was Prime Minister what he most feared, Harold Macmillan responded with the now-famous quote: “Events, dear boy, events.”

The circumstances in which, about what and to whom ‘Super Mac’ was referring have never been established once and for all as the Profumo Affair (there’s one for the under 50s to google) but it’s a sentiment with which we can all sympathise.

No matter how much or to what level of detail we undertake research and prepare for or forward plan – even for an anticipated crisis scenario - events have a nasty habit of taking over.

Just ask the current Prime Minister. For all the expert advice from policy wonks and spin doctors in order to control the political messaging and the news agenda to the nth degree – it rained. And it rained. And it rained again. And it’s still raining.

Eighteen months out from David Cameron’s first General Election in-residence, the rain began. From where we are now, coming towards the end of the winter, an administration whose first term in office looked all set to be defined by austerity and, latterly, recovery, risks being overtaken and characterised – even caricatured – by a lack of both sandbags and ministers and state officials in wellington boots in the early days of the flood event.

Events are a great leveller for those in public life. Tony Blair’s premiership became characterised by wars in Afghanistan and Iraq and was defined by the terrible milestones of the 9/11 and 7/7. Not at all what New Labour had in mind on assuming power in May 1997 - no amount of political planning and message control freakery could have anticipated those terrorist events or their lasting impact.

The Bank of England policy, ‘Forward Guidance’ – whose feel-better factor I welcomed in these pages at the end of last summer – has also succumbed to events.

As the unemployment rate in January and early February looked like it was edging forward to that magic 7 per cent figure (as it turned out, it’s currently 7.2 per cent) which would mean that, under Forward Guidance, the Bank would have to take a view on increasing interest rates, Governor Carney announced that other variables were part of the interest rate policy too.

To be fair, Mark Carney was at pains to point out last August that 7 per cent was not a target at which point interest rates would definitely rise.

The direction of travel of interest rates is far easier to anticipate and prepare for a change of course than the unpredictable precipitations of Atlantic storms and the direction of the pesky Gulf Stream in winter 2013/14.

Yet not all big events are surprises. Under the Fixed-Term Parliaments Act of 2011, for the first time we’ve known exactly when the next General Election will be – 07 May 2015 – and plans will have been well underway for at least four years by the time it comes round.

This year sees another big constitutional event - some might argue the biggest since 1801 – the Scottish Independence referendum.

If, in line with a quote attributed to the US’s longest serving First Lady Eleanor Roosevelt, ‘Great minds discuss ideas; average minds discuss events; small minds discuss people’, the debate about Scotland’s independence and the accompanying political and cultural stushie has got the lot.

September 18 is bound to rain on someone’s parade.

Will Mooney MRICS
Partner
Commercial, Cambridge