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Navigating Intergenerational Dynamics: A Conversation with Dr. Eliza Filby, Expert in Generational Intelligence

Dr Eliza Filby, is an academic, lecturer, renowned author, podcaster, and speaker who specialises in ‘generational intelligence’ helping companies, governments, and services understand generational shifts within politics, society, and the workplace. Eliza has spoken at the EU’s Human Rights Forum on Teenagers and Technology; the Financial Time CEO Forum on the Future of Work, and to the UK’s House of Lord’s Select Committee on Intergenerational Unfairness.

I had the great pleasure of spending some time with Eliza discussing the increasing gap between generations, the multi-generational workplace, and the practical things companies can do to support a multi-generational workforce. Here’s some of the highlights from our discussion.

You can read more about Eliza’s work and her insights at www.elizafilby.com

Q: Eliza, you describe yourself as someone who specialises in ‘generational intelligence’, can you tell us a bit more about what it is you do?

I study society through the prism of age and generations – from Baby Boomers to Generation Alpha – examining how the traditional lifecycle is being reordered and remade in the 21st Century. I think this itself is quite a restrictive analysis and way of viewing society, but it’s a starting point that I use to analyse the different ways in which society is changing in terms of its consumers, its citizens, and its workers.

I’m interested in looking at the way in which the different generations are evolving because we’re not static as human beings. So, what their narratives are, what events, trends, and values have shaped them, and then really how that’s playing out in the workplace, education, politics, the economy, and society as a whole.

Q: It feels like the division between generations has got greater in a way I haven’t felt before. Is this true? If it is, how we begin to the bridge that gap?

It certainly does feel like the gap between generations is greater than it’s ever been and at times that can feel very divisive. However, we are predisposed as human beings to be ageist and if you could create a thread throughout history, the one constant would be that the old have always criticised the young as being lazy, privileged, and entitled.

You bridge the gap by building understanding and empathy across the generations. One of the things that I spend a lot of my time doing is helping companies understand that we are all a product of our time. Different values, technologies, and experiences have really shaped generations and explain why they are the way they are, for example what it’s like for a Gen Z to have grown up with a smartphone in their pocket since they were 13, or for a Gen X woman to have entered the workplace as the only woman in the office, or what it’s like for a Millennial to be the first generation to go to university and then graduate extensive debt and a declining level of opportunity.

Being able to acknowledge that we are all a product of our time and understanding the impact of that is a great place to start.

Q: We are now in a world where we have four, and in some cases, five generations in the workplace, so how should companies be thinking about their workforce?

Research has found that within the workplace you are more likely to make friends with people of a different gender, sexuality, or race than you are of a different generation or age. This statistic is key to recognising not only the importance of age diversity within an organisation, but also the challenge it brings.

Ageism can be a really corrosive force, so it’s important to think about the practical things you can do to bring the generations together, particularly in a hybrid working environment where we are seeing less of each other. The absence of this can fuel greater levels of misunderstanding and prejudice because we’re just not colliding as much.

We really need to think about ways in which the different generations are heard in the workplace and by this, I mean all generations. I’m not a massive advocate for Gen Z boards because you’re giving a voice to yes, the generation that expects it the most, but you’re actually alienating others – particularly older workers who already feel a sense of dislocation and displacement.

You need to consider and encourage not just cross-generational dialogue, but dialogue that gives everyone a voice and enables everyone to listen including multi-generational boards, reverse mentoring, skills swaps, and effective communication.

Q. You mention that hybrid working means we are seeing each other less, what impact is that having on a multi-generational workforce?

One of the challenges with hybrid working is that all the learning through osmosis that used to happen naturally when people are in the same place is just not happening through Zoom/Teams calls anymore.

So much of the older generations’ experience is not being transported down the generations. Therefore, it’s really important not only for companies to bridge the generational gap, but also help up-skill the young by forcing different generations to be in the same room together, so that informal learning to take place.

Whether it’s talking to a client, dealing with a problem, or having an uncomfortable conversation – those things need to be observed if you’re young because that’s how you learn.

But equally, it’s really important that we recognise that you have a generation coming in who for the first time in history, have higher technological skills than the people that are managing them. That knowledge also needs to be passed upwards through the generational chain in the workplace.

So, companies need to be consider how they can develop an educational policy and culture that really encourages cross-generational learning.

Q: We are increasingly living and working longer. What role do organisations have to play in ageing societies?

One of the key areas that organisations need to focus is on how they care for their employees. I have a very holistic and open understanding of what I mean by care. A lot of companies have thought about care firstly in terms of parental leave, maternity leave, and helping parents, but actually if we’re talking about equipping and supporting our workers for the demands of the 21st century, our care responsibilities as individuals are changing. Women are having fewer babies, they are having them later, closer together, and fathers and grandparents are more involved than ever, so do company policies reflect this.

But then also a major responsibility for Gen X and very soon Millennials will be looking after their parents. Do companies have a policy that really is inclusive and helps people look after older people as much as young people and enable them to fulfil those duties? This is crucial, because elder care will be much longer and arguably more disruptive and intrusive to people’s work than looking after children.

Care also includes self-care, which covers everything from mental and physical to financial well-being. So, when companies are talking about care, they need to understand that they are talking about something that is multi-generational and much more expansive than just support for parents or mental health awareness days. This is what employers need to demonstrate.

Q: What causes the significant disparity between generations in the workplace, considering that family is highly valued outside of work? Why is it challenging to reconcile these differences within a professional setting compared to outside of it?

We know that the baby boomer generation are the exceptional generation. They accumulated an awful lot of wealth to the extent that one in five baby boomers in the UK is a millionaire – mostly on paper in property. They own 70% of the nation’s wealth and that money is already trickling down the generations. The bank of Mum and Dad is the sixth largest mortgage lender in the UK and that money is going to their millennial kid and grandparents are supporting their grandchildren. But also, there’s a sense that because we’re living longer, we’ve disrupted what expectations come with a certain age, particularly middle-age and old-age. We therefore feel more in touch with our children, and you’re seeing this with Gen X who are friends with their Gen Z children.

On the family side, the reasons are economic, whilst on the work side they are cultural. There’s a bigger generational gap because of technology, Gen Z are questioning the cultural corporate norms that have existed for Boomers and Gen X. Additionally, Gen Z are looking at Millennials going, you’ve worked really hard…but what have you got to show for it? They’re the generation that will not live by one salary alone and are aware that there are endless possibilities for multiple streams of revenue.

Q: What single piece of advice would you give to any company in how to navigate multi-generational workplaces?

The multi-generational workforce is not going anywhere – it’s the future. Companies need to recognise the new reality, which is we are working longer, we are disrupting the age and stage model of work where before long, if you haven’t already, you will have managers who are 25-years old, managing people over 55. You’ve got a hybrid working model which means generations are colliding less and probably misunderstanding each other more, and a working culture, which I think because of the pandemic, means there are now greater expectations on companies as to what they provide for their employees.

You have to recognise that what worked in the 20th century will not work in the 21st for two very simple reasons. Firstly, technology is changing rapidly and it is changing everything about our lives at an unprecedented pace. Secondly, our ageing society means that the life-cycle is changing and with this comes a whole range of differences, to the 20th century, including different educational needs, and care responsibilities.

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So, the 21st century life cycle really has to be at the forefront of your mind when creating policies for your employees. It’s not about how much can I offer that person or how much flexibility can I give them, but can I give them the support structure they need in order to produce the best work? Can I give them a reason to come into the office. Fundamentally, this means companies need to think about all the things we’ve discussed – understanding, empathy, effective communication, learning and education, and care.

Interviewed by Sarah-Jane Wakefield, Director and Head of Employee Communication and Engagement

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Yes, you’re #Instafamous, but are you “AI famous”?

With AI chat platforms and AI art generators such as HotPot at our fingertips, the vocabulary of Artificial Intelligence is fast-making its way into our collective lexicon. It feels like an important moment in time, similar to when Snapchat AR filters first appeared on our smartphones revolutionising the way we capture and share moments by integrating digital animations, 3D objects, and special effects into our real-world photos and videos. That happened 7 years ago in case you were wondering.

It took just a few months for digital filters to become mundane, making their way off Snapchat and everywhere else. But what we didn’t know at the time, was that dog ears were the playful gateway drug of filters, that led us down a sinister, addictive path. The tech evolved from cartoonish filters that were easy to identify, to the more insidious beauty filters designed to be disguised. What followed were face-tuning, contouring, and lip filling AR filters, which are both a cause and effect of image-first social media channels. It’s hard to decide which came first, the filler or the Kardashian?

Either, augmentation influenced reality, i.e., repeated exposure to filters influenced people into doing their make-up a certain way, leading to younger and younger people undertaking plastic surgery to change the way they look – there’s even a word for this phenomenon; ‘Snapchat Dysmorphia’. Or, reality influenced augmentation, i.e., influencers doing their make-up a certain way and getting cosmetic treatments normalised a way of looking and being, which was then mimicked by the AR filters.

This cycle where cause and effect sort of chase each other around in an ever-dangerous whirlpool continues to this day. We’re aware of the dangers of course, and some of us are trying to row against the current, putting rules and regulations in place to preserve the fun, and reduce the fillers.

With time, we’re likely to see the same happen with AI. AI is a complex thing to understand, but in a nutshell, AIs are machines or software which learn how to mimic or “think” like human beings. They are doing this by combining large data sets and interpreting or organising this data. Most of the easily accessible AI tools get this data from the internet.

For now, AIs are operating with limited data sets, for instance, some tools have access to Google Images but not Instagram. But, we’re moving towards a world where more of our digital realities are connected. Which means the AIs of the future will learn about us from interpreting the things we post, share, publish, Tweet, Google, gram and more.

In the early days of the internet, search engines began organising information for us; people and brands are now only as “valuable” as how high they ranked in Google search results. So began the publishing of websites, blogs, and Wikipedia entries. With Web 2.0 and social media, if you didn’t post it, it didn’t happen. So, we began populating feeds with real-time updates about what we were eating, with who and where. What we didn’t know at the time, is that AIs would come along, and have all this data to feed on.

For brands and businesses playing the attention-grabbing game, perhaps going forward influence won’t be measured in how many people follow you on social media, or how high up you feature in Google. Instead, we’ll be typing, speaking, or thinking (yes, it will happen) questions into AIs, so they can teach us about the world. Remember how our parents grumbled about us moving from physical encyclopedias and libraries to Google? Soon we’ll be grumbling about our children refusing to Google things, but instead just taking the lazy route and asking AIs for the answer.

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It’s only a matter of time before brands come to comms agencies asking not to appear on TV or the FT but asking to reach the AIs. Because really, in the long run AIs might control social, cultural, and political discourse. In the not-so-distant future, you may not matter, unless the AIs know who you are.

I, for one, can’t wait.

By Salonee Gadgil, Digital Associate Director

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January’s negative reputation: 3 ways to fix it

The glasses are dry, the wallets are bare, and the decorations are a long distant memory. You’ve said ‘Happy New Year’ on Teams every day for the last four weeks, and you’re sure that if you say it one more time, your colleagues will have you committed. Thankfully, the month of January is almost behind us…

The internet tells us it is the most depressing month of the year, with Blue Monday, the post-holiday season and the short days and long evenings. If January were a client, it would be high risk, one that requires a strategic approach and proactive management.

Clearly, January has a reputation problem. But does the reputation match the reality? I have taken the toxicity of brand-January as gospel for years: ‘Hold off any big launches, too much real news around’, ‘‘Don’t organize events, everyone’s doing dry-Jan’. Then, last week I learnt that ‘Blue Monday’ itself was in-fact the machination of the PR machine at the now defunct Sky Travel. My foundations shaken; I sought to find a solution to fix January’s reputational crisis.

Like any good strategist, first, we dived into the data. Combing reams of articles about seasonal blues and piles of data on consumer peaks and trough. Finally, we arrived at our critical insight: January has fewer days of celebration than any other month of the year. Eureka! A strategy to fix this? We needed to find plenty of reasons to celebrate January.

Next came the tactics: what were the good days to shout about (strengths) and the bad days to steer well clear of? There were many more of the latter unfortunately: world hypnotism day (4th) – HR minefield; national squirrel appreciation day (21st) – risk of rabies; national peanut butter day (24th) – serious allergy problems; national croissant day (30th) – likely Brexit issues.

Then, we arrived at the golden nugget: three celebratory days to fix the reputation of January:

  1. Lunar New Year (22 Jan)

The Lunar New Year, like January itself, is misunderstood. Its remains clouded in controversy, having undergone its own internal re-brand of late. But once people start to learn about it, they embrace it.

Here at Hawthorn we marked the occasion with drinks and cheese (moon shaped), while many of our clients took the opportunity to mark the occasion on social. It was progress, but not nearly enough….

In 2024, let’s push the boundaries and make Lunar New Year the ‘Christmas? What Christmas’ celebration that it truly deserves to be. After all, it’s the Year of the Dragon next year. What better way to start the year?

  1. Burns Night (25 Jan)

A stalwart of the calendar year that goes criminally under-leveraged, as far as January’s profile goes. Burns Night celebrates the life of the poet Robert Burns. Our Scottish colleagues get sick of explaining what this means and why we should care.

This year we had the pleasure of taking to the Tower of London with our client who deals in scotch whisky, for a spectacular celebration, just down the corridor from the crown jewels themselves! Anyone on the fence about the strength of the occasion after that was well and truly converted by the end.

In 2024, our goal is to make Burns Night a staple of social (and client) calendar.

  1. Dry January

Dry January rallies and polarizes in equal measure. At no other time of the year does the nation rally behind a coordinated mission to not go to the pub. That sense of camaraderie and minor achievement is rarely seen outside of a major football tournament. And while some may be losing their drinking buddies, others will be gaining a temporary gym buddy. This is to be commended.

At Hawthorn, we’ve stood in solidarity by moving our January social to next month.

In 2024, Dry Jan needs to be celebrated for the achievement that it is. Perhaps a badge for all those doing it? Or a wristband?

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January may bring challenges and uncertainty, but we are excited to have had a successful and productive start to 2023. We have gained new clients, planned exciting events, and have been presented with many opportunities for growth. Let’s embrace January as an opportunity to think creatively and set a positive tone for the rest of 2023.

By Gordan Carver, Senior Director

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Sarah Sands on submitting the GEAC report to the German Chancellor Olaf Scholaz

We talk at Hawthorn about being a values driven company and sometimes we get the chance to take a stand. Last year, I chaired the G7 gender equality advisory council under UK presidency and this year I was invited back by Germany to sit on the council. I had two particular interests. First, how we measure progress and so I was delighted that Germany took up the UK proposal last year for a dashboard to provide data on how G7 countries are performing on topics ranging from the number of female led businesses to feminist diplomacy and the care economy.

Second, the searing subject of war rape, made more vivid this week by the testimony of the Ukranian first lady, Olena Zelenski. I have followed this subject since William Hague and Angelina Jolie held a summit in 2014 when I was editing the Evening Standard and I accompanied them to the DRC.

This week, the Foreign Secretary James Cleverly convened a summit on the subject of conflict related sexual violence; I was invited to compere some of the sessions and chaired one on media ethics, with a panel including journalist Christina Lamb, film maker Leslie Thomas and a survivor of Isis kidnap, called Hala.

It was harrowing to listen to the experiences of the Yazidi women, who were kept as slaves by Isis. But amidst all the economic trials and political quarrels at the moment, it was also inspiring to see the UK showing moral leadership on this subject.

Report 2022

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It coincided with the presentation of the GEAC report to the German Chancellor Olaf Scholz in Berlin on Thursday. My small contribution was towards this same issue of war rape and, while wrapped in diplomatic language and stopping short of a new commission, which we would have liked, it has the best chance of strengthening response to this most barbaric weapon of war.

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Supporting your people during a recession

As the Bank of England warns that we could be facing our longest recession since records began, with the economic downturn expected to extend well into 2024, many businesses are facing rising costs, shrinking profits, and tough decisions. Similarly, employees are worried about soaring prices, a string of redundancies they’ve seen at high-profile companies, and uncertainty over what comes next.

Leading executives across high-growth businesses are telling us how concerned their employees are about the cost of living. In a study conducted for Hawthorn earlier this year, they told us that employees were worrying about the recession, a lack of job security, risk of redundancy, recruitment freeze, lack of pay increase, and employee retention.

The companies that will best weather this storm and come out the other side in the strongest position, are those that protect their greatest asset: their people. But what can a company do to support their employees during a recession?

  1. Talk to your people

At a time like this, it is critical to communicate regularly, consistently, and transparently with your employees. Talking openly and honestly about the company’s current situation, performance, market conditions, and plans for the future, on a regular basis, will keep employees engaged and make sure they’re in the right headspace to weather the current storm.

  1. Listen to your people

At all times, particularly during times of uncertainty and stress, employees need to feel heard. Company forums can be used to capture employee sentiment and employees should be involved in the decision-making process and co-creating solutions to the company’s problems. This is a great way in which a business could find some of the most innovative responses to the problems they are facing. co-create the solutions with them. When people feel trusted and needed and an integral part of the team, they become more committed to the organisation and its success.

  1. Avoid redundancies where possible

Don’t panic and rush to make redundancies. Some will say they are inevitable, but sometimes they can be a false economy. A string of lay-offs can have a wide and lasting impact on an organisation – not just those who are laid off. If not managed carefully and thoughtfully, redundancies negatively affect employees who are left behind. There are alternative options to be considered before landing on redundancies. You can read more in our article Definitely not the separation we would have wanted.

  1. ‘Working harder, with less’ is not the answer

If a company does have to make redundancies, introduce hiring freezes, or slim down resources, it’s important to adjust an employee’s expectations. Companies will need to communicate what the organisation is doing to ensure everyone can still do their job, at the same time as trying to save money by streamlining processes, systems, and driving a bigger programme of efficiencies. People will need to understand what these changes mean for their workload, priorities and how the organisation is going to adjust; a company can’t expect employees to continue working as hard as before on fewer resources.

  1. “Working harder, for less” isn’t the answer either

During an economic downturn, companies will inevitably need to make savings somewhere, however the best companies will ensure that their people are adequately rewarded for their work. Companies should take time to review their employee value proposition to ensure the benefits of working for their organisation are relevant for employees and are in line with their needs during this time. Even though money is tight, and businesses may not be able to offer employees a pay rise, companies must explore other routes to show financial support – such as benefits. Doing so will go a long way in boosting team spirit and showing people they are appreciated.

  1. Upskill your employees

Upskilling and reskilling your people will not only help to fill any experience or skills gaps as a result of turnover, redundancies, or hiring freezes, but it will also help support employee engagement and retention. This is because the company is showing their employees that even though the economy may have stalled, their careers have not. Ensure your employees know what opportunities are available for them to take on new roles or leadership positions, step-up, take on stretch assignments, and receive/provide mentorship.

  1. Empathetic leadership

Leaders – at all levels – are one of any company’s greatest assets when it comes to shaping the culture people and the organisation need to thrive. It is essential they are equipped to support, lead by example, and effectively communicate. People will be looking to their leaders for support and reassurance. Thoughtful leadership during challenging times builds the kind of loyalty that retains employees.

  1. Wellbeing

Employees may already be feeling stressed, burnt-out, and over-worked. In fact, according to the World Health Organisation, in the first year of the pandemic the global prevalence of anxiety and depression increased by 25%. This is only likely to be further exacerbated by entering the longest recession since records began.

Companies need to ensure they are clear about what support is available for their employees, who they can speak to, and what wellbeing initiatives are available to them. There are also small things that can be done like ensuring people take their holiday and creating time to take a break and connect as a team.

It will be critical for companies to really focus down on these areas to retain a strong workplace culture and avoid low morale, poor engagement, and to retain their people. Employees need reassurance, a supportive environment, and to know that you are all in it together.

By Sarah-Jane Wakefield, Head of Employee Communication and Engagement, and Arabella Kofi, Employee Communication and Engagement Executive

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Definitely not the separation we would have wanted

Those were the words of Stripe’s CEO Patrick Collison as he announced a 14% reduction in the size of his team. Redundancies are becoming a daily feature in our news, particularly amongst the tech industry and fast-growth businesses. With the likes of Twitter, Meta, Lyft, Netflix, Microsoft, Tesla, Amazon, and Salesforce, (the list goes on…) all making a string of layoffs in the face of uncertain economic conditions, some will say that redundancies are inevitable, but are they wise?

It’s not uncommon for fast-growth businesses like these to fall into the trap of hiring too many people, too quickly in periods of boom only to find themselves overstaffed in periods of stagnation or decline. But with a looming recession all companies are going to need to make difficult decisions. According to new research from ACAS, one in five employers are considering making employee redundancies in the next year.

However, even though redundancies have always been a reality of the economy, the effects are far-reaching – so they should only be the last resort!

Are redundancies a false economy?

According to the CIPD and KPMG, making a person redundant costs on average £10,000 and for some businesses even more than that. It’s not a short-term cost saving.

More importantly though, when the economy rebounds, businesses find they have a huge problem: a reduced workforce lacks the manpower and skills to effectively take advantage of the improving economy and can hamper a business’s ability to recover. It’s also not uncommon for businesses to hire back many of the people they fired – Twitter found this out earlier than most – and it can be quite an expensive endeavour!

Furthermore, the UK’s current skills shortage means it’s taking longer to fill critical positions, and this will only be made more difficult by the damage a large redundancy exercise can have on a businesses’ reputation and employer brand. Current and future employees will be watching closely, and many will think twice before working for an organisation they perceive doesn’t seem to care about its people and will make sweeping layoffs at the first sign of trouble.

…and what about those left behind?

Whilst redundancies negatively impact those who have been laid off, if not managed carefully and thoughtfully they also affect employees who are left behind. This has the potential to damage their trust in the organisation, lead to low morale, poor employee wellbeing, and a lack of engagement.

If handled badly, a wave of redundancies can also result in a leadership vacuum, inappropriate behaviour, a lack of transparency or sense of empowerment and no clear purpose. After a while, this can create fertile ground for a toxic culture to develop, stunting creativity, collaboration, and connectedness. Altogether, this reduces productivity and profitability at the worst time for the company.

What are the alternatives to redundancies?

Where possible, companies should exhaust all alternative options before landing on redundancies. It’s important to safeguard practices to ensure minimal damage and disruption for employees and the business.

One of the more common alternatives is the introduction of a hiring freeze and in recent months we’ve seen companies including Apple and Google announcing hiring slowdowns or freezes and those in turbulent industries such as cryptocurrency drawing back after a collective hiring binge.

Other options include:

  • Looking early for efficiencies and evaluating core processes and roles needed.
  • Identifying activities that are less essential or can be done more efficiently and effectively another way.
  • Reallocating people to new roles or tasks.
  • Introducing budget constraints.
  • Reducing hours of overtime.
  • Asking colleagues to take unpaid leave – for some this would be a more welcome option than losing their jobs.
  • Flexible working requests – reduced hours / days worked
  • Voluntary career breaks
  • Early retirement
  • Communication is key!

Regardless of whether a company decides to pursue redundancies or alternative cost-saving measures, dynamic leadership and communicating effectively is always important, especially amid uncertainty over the future. Being transparent about the challenges the company is facing and how it intends to overcome them will ensure workers are in the right headspace to weather the storm.

Make time to engage with people, explain the context and the vision, allow them time to process what is happening, and ensure there are processes in place to safeguard the emotional wellbeing of employees.

While such conversations are never easy, offering transparency lets employees know where they stand and what they need to do to maintain their roles and help the company through this period. These are challenging times for employers and employees alike.

But remember the decisions a business makes now will be remembered when the good times return.

By Sarah-Jane Wakefield, Head of Employee Communication and Engagement, and Arabella Kofi, Employee Communication and Engagement Executive

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Future of leadership

By Sarah Sands, Partner

The Platinum Jubilee celebrations were about 70 years of history but they also turned into a discussion of the character of leadership. The Queen is an outstanding example of servant leadership. As Charles Moore wrote in the Daily Telegraph, the Queen’s role is that of sacrificial service. She does not seek power, her motivation is vocational.

Commentators have contrasted this selflessness with political leadership which is about grasping and retaining power. George Osborne is quoted as saying about the potential coup against the Prime Minister: “Power is not given, it is taken.”

With handy timing, Hawthorn Advisors and Spencer Stuart, both of whom work with corporate leaders and search for them (we’d prefer “find and advise them”) held a dinner on the theme of the future of leadership.

The premise of the discussion was that we are undergoing a generational change in expectations of leadership. Power cannot be assumed, it has to be earned and new qualities of collaboration and empathy are required.

We are witnessing a passing of conventional leaders and followers and in its place a new form of social contract. While we see old style authoritarian leadership across the globe – most tragically in Russia – it is on the wane in corporations. Prepare for challenge – if not quite as dramatically as seen at Westminster.

Hawthorn Advisors and Spencer Stuart assembled for their round table discussion leaders of the future and the present. There were two One Young World ambassadors, Zubair Junjunia and Dara Latinwo. Zubair is an educational activist who founded ZNotes an online learning platform which reaches 3.5 million global students. Dara creates digital disruption at Deloitte.

Also at the table, representing experience and optimism, was John Flint, the former group chief executive of HSBC and now the chief executive of the UK Infrastructure Bank. Next to him, was Freshta Karim, founder of the charity Charmaghz, which runs a mobile library in Afghanistan. Freshta represents the beacon of citizen leadership. When the Taliban outlawed girls’ education, Freshta devised a way of allowing them to read.

Dr Eliza Filby provided academic credentials for our theories, drawing on her work on Generational Intelligence, from baby boomers through to post 2010 generation alpha. Poppy Mills represents transformational change, as the director of Ubitricity, formerly working on Shell’s renewables business. Sasha Dabliz, head of marketing at Waverton Investment Management knows how to direct the flow of money responsibly and profitably.

Kristina Ribas, senior strategy manager at Shell, who began her career at Goldman Sachs, was also questioning of traditional routes and warned of the conflict of using past leadership models to predict the future. Stephanie Edwards, Head of Sectors Strategy at Cop26 was at the heart of transformation, while Charlotte Appleyard, Deputy Director of Development at the Royal Academy of Arts showed the pluck of a young woman leading distinguished elders down new paths. This, said Katy Jarratt, from Spencer Stuart, was the way of the future. Spencer Stuart are busy appointing under 35s to boards and watching the response of the 60 year olds who must answer to them. Generational Intelligence in action.

John Evans, CEO of Hawthorn Advisors, described the entrepreneurial opportunities and challenges of rapid growth with a diverse work force. Zubair began the discussion by talking of motivating volunteers; this requires passion, purpose and mission rather than didactic instruction. John Flint called this catalyst leadership. He also defined the boundaries of leadership; you can set a strategy but you cannot “ lead” on process, such as technology. You are leading people. He added, with the wryness of experience: “ You have to know yourself, and knowledge comes with scars.” You can avoid vulnerability by staying behind your desk but only by risking vulnerability can you achieve a modern kind of leadership. There are two ways of leading, by fear and money, or positively. Inspiration has the longest tail.

Eliza agreed that change has come.

“There has been 30 years of turning humans into robots and robots into humans.”

What does it mean to talk of human leadership? Sasha asked about the evolution of leadership. Are leaders born or made? Learning is now a more communal process and the new work force is drawn to the creative and the unconventional. John Evans called for the alchemy of new ideas combined with experience. Theories have to work in practice.

Dara pointed out that we look for omnipotent leaders in our entertainment, the Marvel superhero. How does that square with vulnerability? Dara posited that leadership needn’t be visible and voluble. It could be invisible and valuable. Mobile libraries in Afghanistan could be an example of leadership as doing good. If leadership becomes communal there are consequences to that. Katy asked which leaders are prepared to take on all the baggage of others. Narcissism is a familiar characteristic of leadership, even among the good leaders. The dangers of leadership were underlined by Eliza – it can’t just be about an ability to have followers. This allows for populists and maniacs.

Freshta talked of the hard choices affecting leadership, including engaging with the oppressor. She said that the leadership open to all of us, is to do what we can, and to encourage open debate even if means sacrificing popularity, or worse. Freshta’s aim is to work for a “ better truth,” through grass roots platforms. Leadership is a facilitation of this. Leadership also demands example.

Several round the table warned about corporate spin without substance. Beware those who got to the top merely by having the sharpest elbows and the determination to shape their own mythology. The different framing of leadership for women and for men was also raised. Eliza picked up that Poppy used the word “ accessible “ leadership rather than “vulnerable. ” Poppy agreed she chose the word carefully. Women are wary of being described as vulnerable.

Charlotte pointed out that leadership under scrutiny changes expectations. Decisions made in jobs in which the public have an awareness or a stake are much more glaring. Stephanie spoke up for the outliers, the radicals, for example on climate, who push the boundaries so that the middle ground shifts slightly for the realists and the pragmatists. She also laid down one essential for leadership, evidence that you care for those who work for you. James Nicoll at Spencer Stuart added the virtues of resilience and empathy.

Who got the table’s votes as role model leaders? John chose Alison Rose, Chief Executive of NatWest Group as an example of modern leadership, Eliza went for Margaret Thatcher as a leader who led rather than followed, Sasha chose Peter Harrison, CEO of Schroders, for his moral compass and for wearing leadership lightly. John Flint said those who speak truth to power and named Alexei Navalny and in happily different circumstances, his predecessor at HSBC Stuart Gulliver.

Freshta wanted a leader who could end wars, Stephanie called for Dame Barbara Woodward, UK ambassador to the UN, Charlotte for former US ambassador to the UK Matthew Barzun and for the artist Ai Weiwei, Dara for Sasha Romanovitch, former CEO of Grant Thornton, for sticking to principles, Katy for Bernard Looney, CEO of BP who leads with vulnerability and transparency. Turning to the world of sport, James Nicoll of Spencer Stuart suggested Toto Wolff, the CEO of the Mercedes-AMG F1 team, who leads through a management style of empathy and empowerment. Zubair thought for a bit, then came back with Muhammad Yanus, the Bangladeshi social entrepreneur who pioneered microcredit. All leaders who make a difference rather than serving time.

The collaborative nature of the evening was achieved partly by swerving political leadership. Hard power is not the same as soft power. Hawthorn Advisors and Spencer Stuart will continue discussions of the nature of leadership through different forums and events during the next years.

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Best of British

By Sarah Sands, Partner

As Platinum Jubilee flags appeared on the streets and the Chelsea Flower Show put native nature on show, Hawthorn Advisors CEO John Evans and Hawthorn partner Sarah Sands welcomed a group of extraordinary talents to our Best of British dinner. They were there to answer a pressing question: what makes Britain great?

Our guests were an eclectic mix. Ten years after delighting the world with the cauldron that provided the climax to the London Olympics, the designer Thomas Heatherwick arrived having created a new talking point, the Tree of Trees sculpture, in celebration of the Jubilee. A royal theme was taken up by Anthony Geffen, whose Atlantic Productions have just made the visually stunning documentary on the crown jewels.

From the world of science and technology we had the leader of the Whittle Laboratory, Rob Miller; Frank Strang, CEO of the SaxaVord Spaceport UK and Daniel Golding, global head of corporate communications at McLaren. Anabel Kindersley, co-owner of Neal’s Yard Remedies and nature campaigner brought insight into sustainability. The entrepreneurial dynamism that Britain is looking was embodied by Trinny Woodall, who has created a multi-million-pound company built on women’s beauty products, Andrew Roberts, senior vice president of corporate relations and engagement at Burberry and Meredith O’Shaughnessy, the brand strategist.

It was terrific to welcome Emma Bridgewater, who has not only created a brilliant brand but also revived the art of pottery in Stoke on Trent, and Mark Cropper, whose commercial paper mill has a global reach, and who is now exploring handmade paper craft in the Lake District.

Antonia Romeo, who used to run the GREAT campaign to promote British exports and investment was there to keep us on our mettle, Elizabeth Adekunle, chaplain to the Queen, to ensure we did not lose sight of our humanity.

To kick us off, Antonia reminded us of the original concept of the GREAT campaign. Soft power. It is business, culture and people that create and innovate, with government playing a facilitative role.

And with that in mind we were away, the conversation flowing between big philosophical questions about the British character and big practical questions about the role of government, such as can the government facilitate business during a period of massive financial constraints?

A consensus emerged, led by Rob Miller and Frank Strang: we need more of a liberating vision, less of a strangling bureaucracy. It was not so much a matter of public funding, but of belief in the innovators.

Rob reminded us that leadership in innovation demands conviction and speed. At Cambridge, the vision of a UK “Bell Lab” nurturing critical early stage technology is ready to break ground. £34 million has been raised and there is £20 million to go. Will leadership come from private companies such as Rolls Royce and James Dyson or government funded bodies?

The hard thing for governments, we agreed, is risk taking. “If only the UK Government could find better ways of funding the gut feelings of its leading innovators then the UK economy would be turbo charged and at a fraction of the current research spend,” said Rob. Frank noted the distinction between governmental and private spend. In the space race it is individuals, such as Elon Musk, supported by government to take big risks, who are leading. And it is Americans who are more likely to visit Shetland at the moment. Where we have a combined advantage of innovative technology and geography – Shetland could not be better placed – we must not falter.

We explored tech, including Anthony Geffen’s belief that immersive virtual reality will soon displace the iPhone and that the metaverse is the next revolution. Trinny Woodall was bewildered that we continue to turn out graduates who can read Milton but do not understand the tech economy. And, talking of economics, puzzled that men seemed so poor to judging businesses run by women.

But before we lost ourselves in the metaverse, Emma Bridgewater and Mark Cropper, united in a Quaker philosophy, reminded us of the dignity of making things and providing jobs in places that needed them. Liz Adekunle reminded us that we have a responsibility towards others and should remember the lesson of the pandemic: those key workers who kept the country running, rather than those who ran the country. Anabel Kindersley also spoke for social purpose, and for doing the right thing. She was dismayed that the government’s decision to lift the ban on use of neonicotinoid pesticides for use on sugar beet is killing bees again and has harnessed a coalition of businesses to find some solutions at a forthcoming Bee Symposium.

Little by little, a consensus emerged. The Best of British is scientific ambition, creative possibilities, a business-friendly environment and…something intangible. Thomas Heatherwick summed it up. When artificial intelligence takes over most tasks, what will be left is imagination. Slogans are not enough. You can’t just say Glorious Great Britain, like Incredible India or Amazing Asia. We have to show what we can do.

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Sarah-Jane Wakefield an internal communications specialist joins Hawthorn as a Director

We are delighted to announce the appointment of Sarah-Jane Wakefield who has joined Hawthorn as a Director. Sarah-Jane specialises in internal communications with over 20 years of experience in global corporate communications, employee engagement, leadership communications, and organisational and cultural transformation.

Sarah-Jane has joined Hawthorn from Standard Chartered Bank where she was Head of Group Internal Communications overseeing all global internal communications and employee engagement across 96k people in over 70 markets and responsible for the CEO’s leadership communications. More recently she was Global Head of Communications for People and Culture driving strategic communications to support the Bank’s culture, organisation, and people transformation.

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Felix Meston a technology, media and financial services specialist joins Hawthorn as a Director

We are delighted to announce the appointment of Felix Meston who has joined Hawthorn as a Director. For over 10 years Felix has been a trusted advisor to corporates, startups and executives on communications strategy, narrative development, global media relations, thought leadership and ESG-related issues. He specialises in the technology, media, and financial services sectors. He has previously held senior communications roles at mytaxi (formerly Hailo), Europe’s largest taxi app, and Global, the media and entertainment company.

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Time to activate your influencers…

It’s a tough time to be a journalist in the traditional media. According to the Reuters Digital News Report, only 15% of the UK population had used print news in the last week, down 7% on 2020. Alongside this, the numbers watching TV in the UK have dropped by 20% in the last seven years.

The future for the media will be very different, and this demands a dramatic rethink of corporate communications tactics. Already, corporates and leaders are losing the influence and trust they once held – outside of their business – due to a digital strategy of silence and an out-of-date approach to the way they speak to their stakeholders.

Shifting sands
The change we are seeing is fundamental. It isn’t just about how people get their news, it’s about whether they want news at all. In the latest Reuters Institute for Journalism Report, Nic Newman describes an ongoing “decline in interest in the news overall” as well as the channels delivering them. Many people are more likely to turn to the feeds of campaigners than the words of journalists to learn about the world.

That change has inverted the relationship that stakeholders have with corporates, executives, and their employees. Previously, tradtional media organisations, multinational brands and high-powered CEOs could be considered trusted authorities. Now, due to the almost limitless amount of information presented online, the power has switched from the company to the individuals within it.

Digital channels should be in the hands of your storytellers
Adapting the communications tactics doesn’t mean abandoning everything that has gone before. Your digital strategy is best placed alongside your traditional communications strategy.

Delivering a consistent message across platforms increases your authority amongst your stakeholders. But that doesn’t mean saying exactly the same thing across every channel; you can share your message in different forms on different channels.

For a long time, the job of digital communications was given to sales and marketing teams, overlooking the natural story-telling capabilities of the communications teams and agencies to run their digital newsrooms and channels. However, some leaders embraced the potential of a new digital approach early. Richard Branson’s use of digital set the tone for the likes of BP’s Bernard Looney. Looney uses his LinkedIn to promote company initiatives, praise staff and provide news on speaking engagements. This approach allows him to make an authentic connection and helps humanise the BP brand.

This approach is not an accident. Both individuals not only write posts themselves, but tie up with their company communications teams to ensure consistent, company-relevant content is uploaded at timely intervals, keeping the channel active and interesting. This allows for a consistent delivery of company key messages alongside personal updates that demonstrate their credentials as leaders.

Use you digital channels to create human connections
As consumers are more likely to “trust someone like us”, activating employees and leaders as influencers across your own (and their own) channels is critical to creating advocates.

Building influencers out of employees has delivered success for the likes of Walmart, which transformed 500 employees into influencers under their Spotlight initiative. This has seen the brand become a force on TikTok through its “Walmart Cheers” and “Walmart dance parties.” By giving a voice to its front-line associates, Walmart is humanizing its brand and offering customers authentic, relatable content that they actually want to see and engage with.

Brands and business leaders that build a rapport with their audiences stand a better chance of creating advocates. Building these advocates out of audiences, through a two-way conversation, will also increase crisis resilience, when an issue arises.

Digital natives are less likely to visit a news website, or be committed to impartial news… [they are] … more likely to say they use social media as their main source of news. Deeply networked, they have embraced new mobile networks like Instagram and TikTok for entertainment and distraction, to express their political rage – but also to tell their own stories in their own way.

Finally…
Few modern businesses ignore digital communications. Equally, relatively few make the very most of their true potential online. As traditional media suffers, and the way consumers learn about the world changes, communications strategies will have to change more radically than ever before.

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Jamie Plotnek a sustainability, climate and ESG specialist joins Hawthorn as a Director

We are delighted to welcome Jamie Plotnek who joins Hawthorn as a Director. Jamie is a sustainability, climate and ESG specialist, with more than 15 years of experience advising companies and charities on confronting environmental challenges. He joined Hawthorn from the international non-profit Climate Group, where he developed and led a global campaign on zero emission vehicles. Jamie’s previous roles included leading communications on climate and energy at Unilever and heading up business and public sector engagement for one of Britain’s biggest climate change campaigns.

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What should a spokesperson do if they are about to go on air?

Hawthorn’s Board Director, Guto Harri, spent 18 years at the BBC before taking on some of the most demanding roles in communications. He presented a number of flagship programmes, was posted to Rome and New York and became the corporation’s Chief Political Correspondent before joining Boris Johnson as his Spokesman and Director of External Affairs at City Hall. In recent weeks he has featured as a commentator on the BBC, Newsnight, CNN, Sky News and many more. We asked him: what advice would you give a spokesperson about to go on air?

Answering the phone to a studio producer who puts you straight on air isn’t generally a good idea; I love it and the day starts with a glorious surge of adrenalin. But I had 18 years to practice. I often speak to Nick Ferrari on LBC before I’ve greeted my wife. But picking the right time, place and outlet to put yourself out there is otherwise a good starting point for any live, on-air commitment. Some of us are bad at breakfast. Others are jaded by teatime, and Newsnight is well beyond bedtime. Play to your strengths.

Think hard about location
Most media – these days – give you the option of joining from home or going into the studio. Choose the latter if possible. You will look better. The sound will be richer. The Wi-Fi won’t go down. More importantly, you’ll form a bond with the presenter, and stepping onto a properly-lit set will get you appropriately psyched for the occasion. Home is clearly in your comfort zone, but addressing a bigger audience with limited time and a trained interrogator takes more energy, focus and projection than most of us can engineer over a laptop.

Work out why you’re there? Do their requirements coincide with yours? Are you commissioned to attack or defend? Both involve taking some pain. Think of how you can add context, perspective, or nuance and your insights will land better with a broader audience.

Make it memorable
Go light on facts and numbers. Pick one or two that speak volumes and drop the rest. No one’s interested in how hard you work or how much you know. A tasty bone that the audience can chew on is better than a carcass that overwhelms. Tell them something they haven’t heard, and flag it. Make them feel you’re sharing a secret, breaking a confidence, or telling a tale others would keep quiet. Think anecdote, parallel and metaphor whilst gently reminding them of your authority or credibility on the subject.

Surprise the interviewer
I challenge myself to surprise the interviewer, making them gasp or even laugh. Pick playful words, create some frisson, or pass on a killer phrase. A former aide to Boris Johnson told me some months ago he’d happily help him again – if he moved swiftly. He was – however – not interested in going back to “walk him to the gallows”. Five words, lobbed into an otherwise pedestrian answer, clearly tickled Laura Kuensberg and Adam Fleming when I joined them for their Newscast recently.

The masochist in me couldn’t resist an on air confession in another recent hit. When most of the world wanted to disown and condemn any association with drink-fuelled “work meetings” with Boris Johnson, I fessed up to launching “wine o clock” in his Mayoral days at city hall. Mad? Maybe. But not against the rules. And the reason why – I remembered very clearly how hard it was to get him to attend. He really isn’t a party animal. Saying that falls on a lot of deaf ears in the current climate. Painting the picture may just have opened some eyes.

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Name Role

Which brings me to my final point…
No one gets invited back to trot out the same old lines. Say something worth saying – from memory, experience or deep reflection. If an answer can be clipped and posted onto social media you will definitely have ticked their box.

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Singapore’s sling, good COP bad COP and Russia and Ukraine’s battle of Britain

Policy preview: Singapore’s sling
The Organisation for Economic Co-operation and Development (OECD) and G20 agreement to implement a global minimum 15% corporate tax faces a long road to implementation, particularly as governance standards for policing adherence remain undefined. Singapore is likely to prove a key test case. It has a 17% corporate tax, but offers an array of incentives that can reduce this significantly for many corporate residents, including those tech giants who operate regional headquarters from the city-state or the investment managers based there.

Prime Minister Lee Hsien Loong acknowledged as much earlier this month, noting that the city state will have to see how its current tax incentives “will have to be modified”. Singapore is not a member of the OECD, unlike many other alleged ‘tax havens,’ or the G20, but has signalled support for the effort for years now, and members of its government have called out the “artificial shifting of profits” to minimise their tax bills in the past, even as others have accused Singapore of profiteering off such practices.

Singapore remains well-positioned as a corporate hub outside tax competition, but it is nonetheless still likely to ensure that its business environment is as attractive as possible for the multinationals and other businesses that make their home there. It is set to benefit from concerns about the political environment in Hong Kong as well as its membership in the Regional Comprehensive Economic Partnership (RCEP), due to come into effect next year.

Singaporean authorities have indicated that they will seek to take action aimed at making Singapore an even friendlier business environment, including by offering incentives to hire locals and lowering requirements for leasing government-owned office space, a considerable portion of Singapore’s commercial property stock.

However, the temptation for tax adjustments may prove too great – particularly as its strident COVID-19 regulations and increased requirements for permanent residency visas have raised concerns about the quality-of-life and employment advantages it has long held.

Singaporean authorities may state they do not intend to continue to compete on a tax basis, but such declarations have been made in the past with little follow-through. The extent to which it is possible to enforce and regulate the OECD-G20 agreements is likely to be evidenced by Singapore’s corporate tax adjustments.

Power play: good COP bad COP
COP26 has set the stage for a new series of measures to stimulate private markets for climate financing.

British Prime Minister Boris Johnson used the conference to renew a longstanding goal, first agreed at the 2009 iteration of the COP conference, to provide US$100bn of climate finance – intended to enable developing countries’ attempts to mitigate and adapt in the face of climate change – annually by 2020.

One year beyond the deadline this target has not been met. Latest OECD estimates show climate finance amounted to some US$80bn in 2019, three-quarters of it provided on a state-to-state basis. Announcements made during COP26 suggest the target will not be met until 2023. Diplomats and negotiators are hard at work trying to pull together enough public and private finance to make the target. Building on Germany and Japan’s positions as the largest providers of climate finance in 2019, we have seen new commitments in recent weeks from the UK, Italy, and Denmark, while US climate envoy John Kerry is confident that the total will be met in 2022. So far, so good?

It is not so simple – what is meant by ‘climate finance’ is itself contested. There are a range of definitions, accounting for the financial instruments used (such as loans or grants), whether contributions are from the private or public sector, and the favourability of interest rates or notice periods. The OECD’s definition of climate finance is broad, encompassing grants, loans and export finance credits from both public and private sectors.

Many developing countries find this definition overly generous, arguing that it obscures how useful and beneficial climate finance might be. For instance, many contributions focus on development projects with only a partial focus on climate goals, and very often governments do not meet their fair share of climate finance contributions.

This contributes to the anger and mistrust felt by developing nations. The founder of a Nairobi-based climate charity, said that the missed US$100bn in 2020 had “hugely damaged” trust in the UN climate summit process, while the Gambia’s energy minister has said that the consequences for developing nations would be grave: “It would be catastrophic because we need those resources”.

This widespread feeling that developed countries cannot be trusted to pull their weight is a challenge to negotiations at COP26, where talks are being held to determine target levels of climate finance beyond 2025. Geopolitical pressure on wealthy countries to deliver is growing. The bulk of climate finance at present is public, but given the political headwinds we can expect to see OECD countries lean on the private sector to find the environmentally and politically necessary levels of finance.

“We [the world’s least-developed countries] bear the biggest brunt of the impact of climate change and we would like to see the commitment that was taken by the developed countries be fulfilled” Lamin B Dibba, The Gambia’s Environment Minister

Dollars and sense: Russia and Ukraine’s battle of Britain

Moscow and Kyiv have been locked in war in eastern Ukraine for some seven years now. Casualties remain a weekly occurrence on the frontlines, even as life goes on largely unaffected in both capitals. The bitter falling out between the erstwhile close allies has had ramifications for international gas markets, NATO, and much more. One front of the conflict has even struck into the heart of Britain, which while not a violent threat, could have major ramifications outside the scope of the conflict.

On 11 November, the UK Supreme Court is due to hold its final hearing in a lawsuit between the two sovereign states, as Kyiv claims that Moscow foisted a US$3bn bond loan on the former, disgraced, government of President Viktor Yanukovych (whose ouster in large part sparked the war) in 2013. Subsequent Ukrainian governments have refused to repay, arguing duress. Russia for its part argues that though the loan was structured under UK laws, that these arguments are not justiciable in the UK.

Ultimately, Kyiv’s bar for a ‘victory’ is lower than Russia’s – if the Supreme Court merely orders a full trial on the merits of any of the various legal arguments Ukraine has made (legal scholars have labelled its approach a ‘kitchen sink strategy) then a series of further appeals by Russia can be expected and the bond will remain outstanding.

The British government has in the past indicated it does not approve of Russia’s approach to the bond, though suggestions that it legislate in support of Kyiv have been dismissed as unworkable – and caused concern this could undermine London’s position as a key market for selling emerging market debt. London and New York have long been the preferred markets for doing so, with their respective legal regimes providing comfort to investors.

Anything other than a ruling in favour of Russia, however, risks affecting London’s attractiveness as a market for such debt – if there is an argument of coercion, this will likely be picked up by activists from groups like the Jubilee Debt Campaign. As is so often the case, much will be determined by the messaging around the ruling and whether Russia seeks to engage in a public relations effort over the judgement. This should be expected; British banks and investors should be prepared for Moscow engaging in its own effort to disparage the standards of English law for such contracts in the event of an adverse ruling.

“Is it really incomprehensible that such an unprecedented policy of double standards could open a Pandora’s box, cause enormous damage to global finances and generally undermine confidence in international financial institutions”

former President of Russia, Dmitry Medvedev
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Sarah Sands moderates a roundtable discussion with Greta Thunberg, Vanessa Nakate and UK newspaper editors and broadcasters ahead of COP26

The last time I was in a room full of newspaper editors it was to discuss press regulation, so naturally all ended in mutiny. On Friday, before Greta Thunberg and Vanessa Nakate headed off to protest against investment in fossil fuel projects, and then onto Glasgow, I introduced them to media decision makers in a private, round table discussion hosted by the Natural History Museum.

This time there was a wholly different spirit and purpose. Greta has remarkable convening power, but as moderator I had wondered whether the journalists would feel they were being lectured. They didn’t. Here was huge media influence coming together in one room, abandoning cynicism, ready to listen and to take responsibility for informing the public and holding government to account.

Greta was also ready to listen, facts at her fingertips but never hectoring. Her faith is in the people rather than the politicians and thus she turns to the media. This slight figure, remarkably composed, speaking perfect English, can hold a room of media leaders who reach millions. Alongside her was a figure of comparable charisma, the Ugandan activist Vanessa Nakate, talking of the moral responsibility towards the global south, which is responsible for a tiny percentage of the world’s carbon emissions, yet pays the highest price in loss and damage.

The media leaders talked, under Chatham House Rule, of their commitments and challenges. How to keep readers interested in a story both existential and urgent without overwhelming and alienating them? How to balance short-term gains – energy security – with medium term destruction?

The climate scientist Professor Simon Lewis, who joined Greta and Vanessa at the meeting, does not mince his words about the scale of the threat to “human civilisation”. Lewis claims in his book The Human Planet, that human kind is a geological force, changing everything, forever.

Greta and Vanessa wanted to meet the media decision makers because galvanising public opinion and keeping pressure on governments are crucial if we are going to get to net zero. The media are good at that. Indeed, Greta has said of the media: “You are our last hope.” There was honest self-examination during the session. One editor raised the rule of journalism that you cannot keep doing the same story and keep reader attention, but then observed that coverage of Covid had shattered that rule.

We discussed the lessons from the pandemic, during which media played an important role in informing the public and persuading them to get vaccinated.

There were further insights: television was thought to have an advantage over print in covering climate because of the power of images. Our senior journalists agreed that humanising and personalising the issue helped with engagement. They also emphasised that hope was important.

Audiences, particularly for financial media, like reading about technological solutions. Can journalists discriminate between aspiration and realistic achievement? Can even scientists be sure of what is going to work?

The editors talked about representing climate stories through entertainment or graphics or on the weather pages, in order to keep audiences engaged. It can be a tough sell: according to George Marshall’s book Don’t Even Think About It, our brains are tragically hard wired to avoid thinking about climate change.

Friday was a thought provoking session from a group of media leaders who have power and recognise responsibility. The final words came from Vanessa Nakate, who had found herself erased from media photographs when she spoke at the youth forum in Milan, an editing decision that seemed symbolic of the lack of attention paid to the global south in discussions about climate change. “Whose story are you telling?” she asked.

Then Greta headed off for her next protests, a small, self-contained figure, immediately mobbed by her supporters. An 18-year-old activist who has become a world figure.

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Uranium’s return? Dier’s Day and Emirati geo-economics

Policy preview: Uranium’s return?
In September, uranium spot prices returned to levels last witnessed in 2012, spurred by hopes that Japan would be restarting its investment in the sector a decade after shutting it down following the March 2011 Fukushima Daiichi nuclear power plant disaster. Nuclear power has been on the lips of politicians elsewhere as well, with many proposing renewed nuclear investment as a key component to the climate crisis. The UK’s Boris Johnson has been a keen proponent, and since assuming office in 2019 has repeatedly floated a plan for a dozen or more ‘miniature’ nuclear reactors.

The past decade has been brutal for the sector. Westinghouse, once America’s flagship nuclear firm, filed for bankruptcy in March 2017 and was later purchased by investor Brookfield Business Partners, though it has been accused of failing to reinvest in the business and dithering on whether to seek an exit. The UK’s pre-Boris nuclear strategy is broadly seen as a failure, with Hinkley Point C beset by repeated delays, knock-on effects for its French state-owned parent EDF’s other projects as well. Russia’s Rosatom has had more success, but its flagship project – near the Lithuanian border in Belarus – has caused the Baltics to limit electricity trading with Russia and Belarus over security concerns. China is the sole outlier, having invested heavily in building new reactors over the last decade, though its efforts to export its building technology have not met success.

Japan restarting its nuclear reactors would provide a new breath of life to the sector but would hardly prove sufficient. The crash in uranium prices that began in 2012 was also driven by Germany’s abandonment of nuclear power, one of outgoing Chancellor Angela Merkel’s most controversial legacies. There have been some hopes that a coalition without her Christian Democrats (CDU) could revisit the decision, but this should be dismissed – the result of the September election means that the Greens are all but assured a role in any government. The party traces its origins to the anti-nuclear movement that inspired much of mainstream student and youth politics in the 1970s. They are more likely to agitate for an EU ban on nuclear power – something the party’s representatives in the European Parliament have previously called for – than allow the resumption of nuclear power plants in Germany.

Uranium is not dead yet, and nuclear power investments may ultimately form a key part of the climate crisis response. But headwinds remain – just look to Japan where the opposition has campaigned on the nuclear power plant restart ahead of the 31 October election, seeking to cast the government as irresponsible.

“Following Fukushima we had to acknowledge that even in a highly technologically-developed country like Japan the risks of nuclear power cannot be safely mastered”. Chancellor Angela Merkel

Power play: Dier’s Day
Eric Zemmour has seeped through French politics this autumn like water from a burst dam, dominating conversation even, and often especially, amongst those most opposed to his right-wing nationalist vision for France. Perhaps the only major political force in the country to successfully ignore him thus far is his right-wing rival, Marine Le Pen and her National Rally (formerly the Front National) party, though this has not proven effective in terms of maintaining Le Pen’s spot in the polls. All this before Zemmour has even formally declared his candidacy. A mix of quasi-literary invectives, national pride, culture war invectives and the effectively-timed leaking of an affair with his assistant have proven irresistible to French media. Zemmour is certainly his own man, but at the genesis of this media frenzy stands one of his closest political advisors: Antoine Diers.

Diers is, like Zemmour, not an elected politician. He also formally does not work for the non-candidate, at least not yet, and serves as chief of staff to the mayor of the upscale Paris suburb Le Plessis-Robinson. He has served as a counsellor himself, in Dunkirk, for the various iterations of France’s traditional main right-wing party, now known as the Republicans, amid the heydays of Nicolas Sarkozy’s presidency. Diers combined this work with a simultaneous stint in student politics (which in France still includes a fair number of right-leaning associations, and neo-Gaullist movements, contrary to popular perception).

Diers, however, quickly moved to the right, becoming a follower of Philippe de Villiers, a former Republican who had broken with the party over what he saw as its insufficient criticism of the influence of Islam in France and Euroscepticism. He was also associated with the right-wing activist Pierre Meurin go on to be director of the academy set up by Marion Marechal after she broke with her aunt Marine Le Pen amid Le Pen’s attempts to detoxify the Front National. Bluntly, he studied with many of France’s most polemic and assertive figures, with experience in new form media and more accustomed to raucous debate than the formal-yet-acerbic debates of the old French intellectual right-wing from which Zemmour hails.

Diers has forced Zemmour into the centre of the national conversation, appearing more often on critical television and radio stations that more established right-wing figures have long considered unworthy of their time. Diers is widely tipped to become Zemmour’s spokesperson once his candidacy is formalised. Even if Zemmour’s candidacy ultimately does fail to win the presidency, Diers has set an example for how the right can seize the French national conversation – experience that will keep him in high demand.

“I have come to the conclusion that politics are too serious a matter to be left to the politicians.”

Charles de Gaulle

Dollars and sense: Emirati geo-economics
The United Arab Emirates (UAE) has recalibrated its foreign policy in recent years to ensure a greater focus on economic diplomacy, all the while assisting its endeavour to diversify its economy away from dependence on oil.

We have already seen the effects begin to play out with the recently-announced partnership and investment relationship between the UAE and the UK. This is to include Emirati investment in the UK’s green energy and life sciences sectors, but also a tie-up to invest in and expand ports in Senegal, Egypt and Somaliland. The UAE has long had a strategy of investing in African ports, but the partnership with the UK’s Commonwealth Development Corporation helps put it at the centre of Britain’s own ability to project power in the region.

There is precedent for the UAE to use economic ties as a bridgehead for deepening its political links. Last October, it was the flagship Gulf signatory of the Abraham Accords – an agreement between Israel and a number of Arab states to normalise diplomatic relations. This had been preceded by substantial Emirati investment into Israeli business and in particular its services sector. Once unthinkable, UAE and Israeli embassies have opened up alongside formal channels of communication and cooperation.

This diplomatic cooperation paves the way for further partnership in strategically-important sectors. The two countries have proposed cooperation on security matters, and though progress will likely fall short of a full defence pact, Israel’s decision not to intervene to oppose the US’ recent sale of weapons to the UAE points toward further cooperation.

The Abraham Accords also gives further political space for the UAE to promote business ventures with Israel and other international partners. Just last week Israel, India, the US and UAE formed a quadrilateral forum for economic integration, helping them work together on sectors including infrastructure, digital infrastructure and transportation.

Indeed, a joint article by Abdullah bin Zayed Al Nahyan and Yair Lapid, the UAE’s minister of foreign affairs and international co-operation and the foreign minister of Israel, respectively, highlighted the extent of these bilateral partnerships. The pair noted they ranged from an association between the Israeli D’Vaish health food company and the UAE-based Al Barakah Dates Factory, as well as a $1bn investment by Emirati sovereign wealth fund Mubadala into Israel’s Tamar gas field.

UK-UAE economic partnership is following a similar course, with the Emirati state pledging to invest £10bn in the UK’s strategically important clean energy, tech and infrastructure. The UAE has already invested £1.1bn in British companies and funds, including £500m in telecoms infrastructure firm CityFibre. Meanwhile, Mohamed bin Zayed, the UAE’s de facto leader, plans to sign an agreement with the Prime Minister to strengthen trade and collaboration across a wider range of sectors including climate change and regional stability (read: defence and security).

The UAE’s increasing appetite for collaboration and strategic partnerships between the UK and the UAE is only set to increase, providing opportunities for British firms in key sectors both in the UK and internationally.

“As two of the world’s most dynamic and advanced countries, the UAE and Israel together can help turbocharge economic opportunity by pushing for deeper regional integration.” UAE and Israeli Foreign Ministers Abdulla bin Zayed and Yair Lapid

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Stephen Atkinson joins Hawthorn as a Managing Director

Hawthorn Advisors is delighted to announce the appointment of Stephen Atkinson to lead our financial services business. He brings three decades of experience at the highest levels of banking after a long and successful career at Standard Chartered Bank. There, Stephen led the Investor Relations and Communications functions, was Corporate Affairs Head for the bank, operated as Chief of Staff to Standard Chartered’s Group CEO and latterly was Head of the Private Bank for Africa, Middle East and Europe. He joins Hawthorn Advisors as a Managing Director.

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We are delighted to announce the appointments of Director Josh Leigh and Associate Director Rebecca Durnin

We are delighted to announce the appointments of Director Josh Leigh and Associate Director Rebecca Durnin. Josh is a digital corporate affairs specialist who will be advising Hawthorn’s clients on search, and protecting and enhancing their reputations online. He helps craft digital campaigns that make sure clients’ messages get noticed.

Rebecca brings years of experience providing senior counsel and strategic direction to household name brands, including one of the world’s largest social media platforms, and a series of high profile companies in the luxury sector.

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Double Irish surprise, small-town hero? Corporate income tax a la française

Policy preview: double Irish surprise
Ireland’s political economy is set to undergo a rather momentous shift. As a result of the 8 October agreement brokered by the Organisation for Economic Co-operation and Development (OECD), states are to set out a global corporate tax regime that will see a minimum 15% tax on corporate earnings instituted for multi-national enterprises. Ireland had been a hold out to the pact when it was first teased earlier this year but was reportedly brought on board by a commitment that this rate would not be later increased. Nevertheless, for an economy that has attracted numerous multinationals over the last two decades precisely due to its 12.5% corporate tax rate, though often even a fraction of that because of Irish rules around ‘patriating’ foreign earnings, this marks a potential significant departure.

The Irish government has acknowledged as much in its budget, presented by Finance Minister Paschal Donohoe on 12 October. Corporate taxes will indeed rise from 15% for large corporations, albeit only from 2023. Given Ireland has so long been a jurisdiction of choice for multinationals, rather than necessity, the Finance Ministry warned that move that Ireland has warned will cost at least £800m in tax revenues – imply what you will about what this says about the ministry’s confidence in the 15% minimum tax actually being globally enforceable.

Although the government has not directly tied the two tax shifts to another, Donohoe’s budget announcement did include a new tax that should be able to fill this gap in the budget; a zoned land tax, also due to come into effect in 2023. It is nominally instead meant to replace a vacant sites levy and similarly designed to address a national shortage of homes, but in reality sets a platform for local authorities to radically revisit Ireland’s zoning practices. The rate will be 3% but the power for local authorities to reclassify major swathes of the country as having the potential for development will see the land tax base expand significantly.

The move may well ultimately be successful in raising tax revenues and spurring new development in Ireland. But it is not the first time that Ireland has relied on a mix of land development and tax incentives to expand government spending. A similar mix fuelled the Irish real estate bubble that so dramatically burst in the global financial crisis – one would hope this serves as enough of a warning to ensure the same mistakes are not repeated. Irish debt to national income soared to 108% in 2020, but Donohoe has pledged the new budget will see it fall to 99% in 2022. Whether this bears out may well prove a significant bellwether, or early warning sign.

“Tax competitiveness has brought our country the only prosperity we’ve known”. Bono

Power Play: Small-town hero?
Central Europe is experiencing a wave of political change -the last week has seen the erstwhile wunderkind of Austrian politics Sebastian Kurz resign his premiership amid a corruption probe and in the neighbouring Czech Republic, populist billionaire Andrej Babis’ premiership has also apparently come to an end with an opposition coalition forming after the 10 October elections in the country. Both departures stand in contrast to the relatively orderly ongoing departure of Germany’s Angela Merkel. All three moves, however, hang heavy over the future of Europe’s second-longest serving leader after Merkel, Hungary’s Viktor Orban.

Orban has faced repeated corruption scandals, much like Kurz, though so far has been impervious. He has reshaped Hungarian politics to solidify his Fidesz party’s grip on power, shifting the parliamentary system and engaging in gerrymandering that has outraged liberal opponents – something Babis tried, but failed, to do. However, Hungary’s opposition has finally begun to unify after over a decade of repeated splits. Much as the Social Democrats, Greens, and liberal Free Democrats in Germany are now holding coalition talks that have the potential to put Merkel’s Christian Democratic Union in opposition for the first time in 15 years, Orban’s political opponents have shown a willingness to cross traditional ideological divides in an effort to ‘reset’ Hungarian politics.

Hungary’s opposition has even organised a primary contest to choose a united nominee for prime ministership in the election due to be held next spring. But in a shock turn of events, the contest’s most prominent figure – Budapest Mayor Gergely Karacsony – withdrew from the race on 8 October. Karacsony has built a name for himself at home and abroad as the driving force behind the ‘Pact of Free Cities’ an alliance between mayors across central and eastern Europe that has often challenged their more nativist governments in recent years. Yet in withdrawing, he endorsed the conservative Peter Marki-Zay, mayor of the small town of Hodmezovasarhely.

Marki-Zay had finished behind Karacsony in the first-round of the opposition primary, but the pair are united by a belief that Klara Dobrev, a left-leaning MEP who edged out Karacsony, will be unable to defeat Orban in the national election. The second round is already underway, with votes due by 16 October but Marki-Zay is seen as the favourite. There is precedent in the region for a small-town mayor to upset a political stalwart, in neighbouring Romania Klaus Iohannis did just that in 2014, defeating Prime Minister Victor Ponta in a race for the presidency in 2014. Marki-Zay will be hoping he can likewise make his mark on the region’s politics.

“To tell the truth, I have always seen the 20 years between 2010 and 2030 as a unified era” Hungarian Prime Minister Viktor Orban

Dollars and sense: corporate income tax a la française
Emmanuel Macron is not often hailed for his successes. He has been pilloried from the left and the right domestically, while he has had little success in winning over France new allies internationally – and has arguably further strained relations with both the UK and fellow EU members. His self-perception and actions have earned him the sniggering sobriquet Jupiter. Yet four years into his presidency he has one unalloyed success on which he should be proud to rest his laurels: France’s effective top-end corporate income tax rate has fallen from 44.4 per cent to 28.4 per cent.

The tax is set to fall even further to an effective top rate of 25.8 per cent in 2022. Although the COVID-19 pandemic has strained France’s finances just as it has for so many other economies, Macron has steadfastly insisted that he will maintain the cut plan. This is in contrast to many of his would-be rivals, with Paris Mayor Anne Hidalgo coming out in favour of renewed higher taxes (in particular the ‘wealth tax’ on the highest earners that Macron also abolished). The far-right’s perennial candidate of the last decade, Marine Le Pe, is also in favour of a higher tax rate, though it is unlikely to be a major area of her campaign. Those vying for the nomination of the Republican party, the latest iteration of France’s traditional centre-right party, have been critical of Macron’s debt binge, but hesitant to call for further tax rises out right.

Yet despite the headline success, Macron is not expected to make the tax cuts a key feature of his 2022 presidential campaign. Macron is reportedly wary of being seen as too business friendly, least this shift votes to a more left-leaning candidate such as Hidalgo in the first round of the election, or cause the left to stay home in a potential run-off against Le Pen.

But rumours have been circulating that a second Macron presidency would seek to plug the gap in the French budget through a one-off corporate tax, enabling Macron to avoid an embarrassing permanent reversal of his signature success. Macron has already shown himself willing to engage in such taxation accounting fudges – in 2017 the very year he began his cut agenda, a one-off tax of 10.7 per cent on firms with revenues over €250 million. Plus ça change, plus c’est la même chose.

“Can a people tax themselves into prosperity? Can a man stand in a bucket and lift himself up by the handle?”

Winston Churchill
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Referanda to the rescue?, Waiting for Whately and actioning ESG

Policy preview: referanda to the rescue?
Planning reform has long been seen as a bugbear for the Conservative Party. Even the current government, with its 80-seat majority, has faced calls to water-down its proposals in the aftermath of June’s Chesham & Amersham by-election attenuated concerns that housing reform could erode support from the traditional Conservative base, homeowners.

The Labour Party has attempted to seize on this, arguing that Prime Minister Boris Johnson’s tax increase puts the burden to fund social care on workers rather than on homeowners. Nonetheless, we noted in our 23 June Horizons newsletter that we expected Johnson to push ahead with the core of these reforms despite that shock result with the Liberal Democrats overturning a 16,000 majority.

Johnson and Housing Secretary Robert Jenrick, however, have faced grumbling from the backbenches, including from former prime minister Theresa May over the planning reforms. Yet some of these same backbenchers may have picked up on a solution that allows Johnson to avoid risking a major rebellion. MPs are expected to introduce a private members bill that would give local communities a vote on housing in their area, including approving density plans and style guides.

The policy, known as ‘Street Votes,’ is the brainchild of the Policy Exchange and Create Streets think tanks and aims to challenge the perception that new developments are aesthetically, and economically, unpleasing to suburban residents while also enabling those rural residents to protect green spaces even when their local authorities aim to increase the housing stock.

Whether such a policy could be successful remains to be seen. Advocates such as Sam Bowman of the US’ International Center for Law and Economics argue that it provides the optionality necessary to have a ‘bottom-up’ approach while allowing the political hurdles, at both a parliamentary and local level, to be overcome by residents keen on raising the value of their neighbourhood. They point to similar proposals in Seoul and Tel Aviv that saw new housing approvals jump by as much as 50%.

Incorporating the Street Votes proposals into the government’s own legislation may well bring it sufficient votes to avoid a substantial rebellion. It may also bring in some Labour votes for Johnson’s housing plans and planning reforms, a situation Johnson has thus far been keen to avoid least he be seen to be dependent on Labour votes to pass them.

The Smart Votes system remains untested, and it will seem unnatural to many UK political observers that referenda, even of the hyper-localised variety, could be the panacea to some of its mot lasting political disputes. Politically, however, it offers the Johnson government the potential to declare victory on passing its reforms while deflecting responsibility for any eventual housing -target shortfall.

“Maybe this referendum will be the beginning of a trend” Former UKIP and Brexit Party leader Nigel Farage

Power play: waiting for Whately

The UK government is staking a great deal of political capital on its recently announced reforms for adult social care. Prime Minister Boris Johnson has gripped the ‘third rail of British politics’ by trying to tackle the issue, but the government could be damaged if the controversial policy is a damp squib.

Helen Whately, Minister for Social Care, will be responsible for driving and delivering the reforms. Funded by a rise in national insurance contributions and dividend taxes raising £12bn annually, the government will initially attempt to clear the pandemic-induced NHS backlog.

After three years of increased funding for the NHS, the extra cash will supposedly be diverted from the NHS and re-allocated to the social care system. If, of course, reducing funds to the NHS doesn’t prove too politically challenging.

With a political bid to prevent care users needing to sell their homes or other financial assets to fund their social care, the government has proposed a (means-tested) cap on the lifetime costs of social care of £86,000 from October 2023.

However, it is not yet clear exactly how or why the reforms will make the social care system. The political difficulty that has surrounded the issue for decades has largely been a matter of funding, and it is this area that was covered in most detail by last week’s announcement

There is still more to come in the way of solutions for how the government plans to tackle some of the underlying problems that the social care sector faces. Identified in Department for Health & Social Care’s white paper this February, these issues include insufficient integration with the NHS, too much bureaucracy and a need for more accountability in the system.

The government’s new plan includes provisions for more training and support for care workers, but detail on how it will address these issues is thin on the ground, with another white paper setting out further detail promised in due course. Social care providers such as Four Seasons Health Care have already criticised the plan as being too little too late, calling on the government to make the necessary reforms to help support staff as soon as possible.

Though the reforms have not been universally popular, they have not torpedoed the Conservative’s polling in the manner that Theresa May’s social care proposals did in 2017. Once the impact of NIC increase starts to bite, pressure will be on for the government and for Whately to show that their reforms are having a real effect.

“We have a social care crisis right now, and it can’t wait to for people to draft [a promised white paper], and then delay any funding and any staffing changes for another two years.”

Jeremy Richardson, Four Seasons Health Care CEO

Dollars and sense: actioning ESG
It is not too often that international bond markets have to think about NGO’s. That is not to say it is unprecedented for them to do so – 25 years ago the International Monetary Fund and World Bank launched the Highly Indebted Poor Countries (HIPC) initiative following sustained pressure from the Jubilee Debt campaign and associated activist groups. HIPC today remains a key structure of emerging market debt markets, enabling many more countries, including debuts well into the bottom rungs of the credit rating spectrum, to issue international debt.

The sale of so much debt by low-income countries and companies in poorly regulated markets has often raised concerns about how they should be treated for investors seeking to put climate change concerns and environmental, social and governance (ESG) principles at the heart of their investing strategy. The credit investment industry is being slowly transformed by ESG investing, with so-called ‘green bonds’ now often trading at a premium. This makes green debt in theory cheaper, and therefore a market structure to promote the very ESG principles they encompass.

However, concerns about ‘greenwashing’ remain. If the recent trend for ESG investing does translate to a sustained premium, this risks major losses for creditors holding debts that are later revealed not to be as rooted in ESG as initially premised.

Given that similar concerns about morality in investing and the potential for economic growth to be more equitable globally prompted the HIPC initiative – which enables countries below a certain income level to receive special assistance from the IMF and World Bank – it is not too surprising that once again the voices of NGO’s are being heard on ESG investing.

Already there is evidence that they may be having an impact. In March of this year, the Nature Conservancy announced it was launching a programme to work with coastal nations to protect their waters, ‘Blue Bonds for Ocean Conservation’. The effort attempts to combine the twin realities that it is difficult for maritime nations to resist exploiting their waters’ wealth with the reality that debt countenancing ESG principles is cheaper for issuers.

The Nature Conservancy said that it was inspired to launch the programme by work it had done with the Seychelles government to restructure $22 million in its debts in 2016, but it is now set to face its first major market test. The government of Belize has announced its intent to restructure its debt – following two defaults in recent years – in a deal backed by the Nature Conservancy and its key creditors. Under the Blue Bonds programme, Belize will repurchase $530 million in dollar bonds for just over US$290 million. Investors see a gain to the 60% discount the debts had been trading at, while Belize reduces its debt burden substantially. In exchange it agreed to fund a $23.4 marine preservation endowment and the new debt provided by Credit Suisse to finance the repurchase will be subject to Belize continuing to honour certain ESG commitments. The deal has until 19 November to be approved by 75% of bondholders.

Bringing together international institutions, NGOs and bond markets proved an effective way to fund emerging markets growth with the HIPC initiative. The Nature Conservancy programme may just have established a template for ensuring that ESG principles remain a sustained, not fleeting, feature of funding this growth.

“A debt is just the preservation of a promise” David Graeber, Author of Debt: The First 5,000 Years

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Defence’s defence, Sinn Féin and aiding ailing airlines

Policy preview: defence’s defence
UK Defence Secretary Ben Wallace has made plenty of headlines in recent weeks amid the emotional withdrawal from Afghanistan. Foreign Secretary Dominic Raab has as well, albeit suffering from more critical coverage amid reports regarding his holiday during the frantic fall of Kabul in early August. However, it is business secretary Kwasi Kwarteng whose actions this month most clearly illuminate the government’s defence agenda.

On 18 August, Kwarteng issued an “intervention notice on the grounds of national security” regarding US private equity firm Advent International take over UK defence manufacturer Ultra Electronics. Just last year, Advent acquired another British defence firm, Cobham, with UK government approval granted in November 2019 under following reviews by former business secretaries Greg Clark and Andrea Leadsom,despite public opposition from Cobham’s founder.

Cobham is more than double the size of Ultra Electronics by revenue and differentiating between their contribution to national security is not so easy. Both provide crucial services such as Cobham’s aerial refuelling and Ultra’s positioning, location and communications technologies, used in many of the UK military’s most advanced components.

The government had telegraphed for weeks that it was likely to make such a move regarding Ultra. Blocking US private equity firms from investing in the UK, even in the defence sector, risks upsetting the UK’s reputation among an investor class that could be key to the UK’s post-Brexit prospects. The review Kwarteng’s notice ushers in will be reported in January, the same time as the UK’s new National Security and Investment Act comes into force.

The action has two motivations – first a desire to ensure that UK manufacturing and engineering of such high-value technology continues. There have been complaints regarding Cobham’s offshoring and Advent’s apparent prioritising of US development sites in the 18 months since its takeover. The second comes amid a push to ensure the UK’s defence sector, and defence strategy, is not wholly dependent on the US, something various Conservative MPs have harked on amid the Afghanistan withdrawal.

This is not a position limited to the Tory backbenches; even the -Blairite New Statesman has warned against the UK becoming dependent on US foreign policy decision making, while politicians such as Rory Stewart have sought to resurrect their careers by calling for a limited UK force to remain in Afghanistan, knowing they won’t be held to account for a policy that will never come to pass.

Boris Johnson and Biden’s lacklustre relationship, and the UK’s search for a new post-Brexit foreign policy mean that such rumblings will continue. However, upon a review of costs, it is likely to become quite clear to Johnson that it will be far too expensive to keep US investment out, let alone invest sufficiently to give the UK independent defence capabilities again.

Where there is smoke, there is not always fire.

“Tony Blair made decisions on what he thought was best for the people of Great Britain, and I made decisions on what I thought was best for Americans” Former president George W. Bush

Power play: a big dail
Sinn Féin won the most votes in Ireland’s February 2020 elections for the first time, with 25% of votes. As the coalition between Fine Gael and Fianna Fáil, traditionally the two main political competitors, faces low public approval and continued strong polling for Sinn Féin, what chance does the leftist radical Republican party have of entering a future government?

Sinn Féin candidates won comprehensively across the country in 2020, with many of the party’s incumbent members, Teachtai Dala (TDs), re-elected on the first count, a rarity in Ireland’s ranked-preference system of constituency proportional representation.

However, Sinn Féin won fewer seats than Fianna Fáil – 37 to 38 – as the party did not run multiple candidates in every constituency. The party has spent the last 16 months preparing for the potential for another election, and to ensure it does not leave ‘seats on the table’ once again – had they more candidates in the last election, it is estimated the party would have received 41 seats. 80 are needed to form a government.

Despite Fine Gael and Fianna Fáil’s opposition – they hold a combined 73 seats – as a result, Sinn Féin is very likely to become a party of government in the medium term.

In recent years the party has sought to broaden its appeal beyond radical Republicanism by embracing left-liberal progressivism in the mould of Greece’s SYRIZA or Spain’s Podemos. This has proved popular amongst Ireland’s younger voters, who form the backbone of Sinn Féin’s electoral success and are driving historic success in the polls, which it has been leading since before Christmas.

Based on the latest polls, Sinn Fein might win as many as 50 seats in the next general election. The Dáil has a sizeable proportion of around 20 independents, predominantly local and leftist candidates, and TDs belonging to smaller left parties such as the Labour Party or Social Democrats. Should Sinn Féin prove successful at the next election, a broad left coalition with Sinn Féin as the largest party could be its route to power.

Aside from strengthening calls for Irish reunification, with Sinn Féin also leading polls in Northern Ireland, a Sinn Féin victory in the Republic of Ireland would prove significant on a number of fronts.

Though its policies may be altered should the party form a coalition, Sinn Féin have pledged to deliver ‘the largest public housing program in the history of the state’ as well as to implement a 3-year rent freeze.

Though it seeks to maintain Ireland’s famously low 12.5% rate of corporation tax, multinational companies should note Sinn Féin’s intentions to tighten the tax environment by closing tax loopholes, as well as their demands on firms to be more transparent about their tax affairs.

Sinn Féin entering government would be a significant landmark in Irish politics, and is a real possibility in the medium term. A radical progressive program would include ramped up social spending on housing and a more sceptical approach to Ireland’s position as low-tax business environment.

“To go for a drink is one thing. To be driven to it is another.”

Michael Collins

Dollars and sense: aiding ailing airlines
It is no surprise that aviation has been among the sectors most battered by the pandemic, and which continues to face significant uncertainty about its prospects given the ongoing threat of further viral mutations. The UK government has come under considerable public pressure to do more to respond, with calls from airliners, airports, and the communities that house them for the government furlough scheme to be extended for the sector past the end of September.

So far, however, there has been little reaction to such pleas. Chancellor Rishi Sunak appears to have ruled out furlough extensions in response to a letter signed by 67 MPs from across Parliament calling for such action.

The future of the UK’s aviation sector is not merely a matter for the Treasury, however. Extending furlough would be expensive, but failure to support aviation amid the ongoing uncertainty risks Britain losing out to European competitors, and for London’s status as an international transit hub diminished. One individual unlikely to countenance such a loss is Business Secretary Kwasi Kwarteng, who represents the constituency of Spelthorne, a hub for employees of Heathrow Airport and related industries.

A number of leading lights in the aviation industry have appealed to Kwarteng, and the government more broadly, for support. Aside from extensions to the furlough scheme, their primary ask has been to seek a reduction in airline passenger duty (APD), the variable tax (depending on class of travel and distance) that passengers pay when booking a ticket.

Numerous APD increases were pushed through Parliament under the Conservative-Liberal Democrat coalition from 2010 to 2015, to help pay for government spending as mandated by the era’s dedication to austerity. Shockingly, APD for long-haul flights was again increased in the March 2021 budget. Yet with so many flights still grounded as travels has yet to recover to 2019 levels, receipts have fallen off a cliff. Properly communicated, a campaign for the temporary reduction or suspension of certain APD charges may prove the most effective way to guarantee government support for the sector.

Exemptions to APD already exist – passengers on long-haul flights departing Northern Ireland do not pay the fee. Regional and smaller airports can argue for such an exemption to ensure they survive the pandemic, and help with the government’s ‘levelling up’ agenda. Heathrow and other large airports similarly should position the potential for exemptions as one of the benefits of Brexit to the sector, not normally seen as a winner of the recast EU-UK relationship.

The same March 2021 budget that raised the long-haul APD merely froze it for short-haul flights but Prime Minister Boris Johnson opened the door to a cut for domestic flights only. A consultation is ongoing, but pressure for the government to act should come now – especially as it will become hesitant to do so as the COP26 climate change conference’s 1 November launch approaches.

“Heathrow expansion is supported by businesses, unions, trade bodies, airlines and airports across the country, as well as many local communities whose economic livelihood depends on the airport’s continuing success” Secretary of State for Business, Energy and Industrial Strategy Kwasi Kwarteng

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Internal activism, Afghanistan’s last bastion and hydrogen hopes

Dollars and sense: internal activism
‘Green’ investment funds and public pressure are forcing big oil firms to change their behaviours, but immediate material change will be limited, while we await and expect further regulatory changes.

This year’s AGM season provide tumultuous for the world’s largest publicly-listed energy firms. Activist ‘green’ hedge funds have used their positions to compel major players to progress on their decarbonisation credentials. Such firms have always been vulnerable to criticisms from climate activists and environmental NGOs.

But the rising salience as climate change as a political issue, coupled with the trend toward a greater focus on companies’ social and environmental credentials, has lent credibility to climate activists operating in the financial world.

Hedge funds such as Engine No. 1 have led the charge by forcing board appointments and environmentally-conscious resolutions at some of the biggest oil firms, including Chevron and Exxon Mobil. These efforts are positioned as moves to maximise shareholder returns and to ensure that energy firms are well-equipped to weather global transitions to renewables. This is a trend we will doubtless see continue as climate change’s impacts are further felt across the world and activists emulate the like of Engine No. 1.

We are also seeing developments of the regulatory environment around listed firms’ environmental reporting requirements in both the UK and the US. For example, the next few years will see the progress along the FCA’s roadmap concerning firms’ obligations around climate and ESG reporting. The roadmap includes reporting requirements for listed entities aimed at preventing greenwashing. From this accounting year, it is already the case that large publicly-listed firms should report their approach to measuring and managing climate-related impacts and risks, and the FCA looks committed to expanding the set of firms affected.

Across the Atlantic, the SEC appears similarly committed to mandating that public companies report climate risks around their behaviours. Although it is already the case the case that oil and gas firms must report on their carbon emissions in the US, this regulatory shift is symptomatic of greater desire by regulators and governments to force companies to disclose the climate impact of their activity. As a sector long negatively associated with carbon emissions, we expect more stringent regulatory mandates to be placed on oil and gas firms in the coming years.

Major economies’ efforts to reach net zero carbon emissions are proving politically contentious across the world. Mandating more open climate reporting will help provide governments with greater political cover to make necessary policy changes. The tightening of ESG reporting requirements, however, can shift the onus for action to a fight between business and government to one within the boardroom.

Though oil majors have been exploring how they can convert their existing facilities to expand their renewable energy production capacity, ‘green’ policies by firms will only go so far. Increased regulation, both in the form of reporting requirements and of minimum climate standards necessary for listing, will likely be a permanent fixture. Governments and activists will both look to listing requirements to bring the battle to the boardroom.

“We welcome the new directors to the board and look forward to working with them—constructively and collectively on behalf of all shareholders.”

Exxon Mobil spokesperson, in response to election of Engine No. 1’s nominees Gregory Goff and Kaisa Hietala.

Power play: Afghanistan’s last bastion
The stunning fall of the Afghan government over the last week has sent shockwaves rippling across Western governments, with 20 years of military, human, and financial capital appearing to have been for nought in the fight for control of the country.

US President Joe Biden has made clear that he sees no more direct role for US forces in the country despite acknowledging the surprising speed and scale of the Afghan government’s defeat. And while UK Defence Secretary Ben Wallace too has bemoaned the state of affairs in the country, the reality is that there is no political will in Britain. However, one pocket of resistance to the Taliban remains – Afghanistan’s Panjshir Valley.

Panjshir’s most famous son, Ahmad Massoud, announced on 16 August that he planned to lead a new anti-Taliban movement from the region, the sole territory that has not fallen to Taliban control over the last week. The Panjshir has welcomed fleeing minorities from other parts of the country, special forces units abandoned by their military leaders, and vice president Amrullah Salleh, one of the only senior leaders from the Western-backed government not to flee the country. Protected by significant peaks and a loyal population, it is not the first time that resistance to the Taliban has been left to the Panjshir Valley.

The region famously never fell to the Taliban in the pre-US invasion civil war. It became the core of the ‘Northern Alliance’ against the Taliban that was led by Ahmad Massoud’s father, Ahmad Shah Massoud, better known as ‘the Lion of Panjshir’.

Ahmad Shah Massoud was assassinated two days before the 9/11 attacks, by al-Qaeda operatives posing as Western journalists. The killing was ordered by Osama bin Laden as assistance for his Taliban hosts and to shore up the al-Qaeda-Taliban alliance before the terrorist attacks that did so much to change Afghan and world history. That his son is now left to fight the Taliban without direct Western assistance – effectively the same situation which Ahmad Shah Massoud found himself in, having pleaded for support at the European Parliament just months before his assassination – demonstrates how little impact Western intervention has had on Afghanistan’s underlying divisions.

The younger Massoud notably finds himself without the same broad alliance among Tajiks and Uzbeks that his father was able to rely on. Even before the government’s collapse, the Taliban made inroads in northern Afghanistan far beyond what it ever achieved before the US-led invasion. Meanwhile the Taliban has made clear it seeks international recognition, and even made noise about adjusting its medieval practices ever so slightly to such support. However, it ultimately remains the reprehensible terror group that it has always been.

If there is to be any international support for an anti-Taliban effort now or in the future, Ahmad Massoud and the Panjshir Valley may prove the sole conduit for hope that Afghanistan can avoid another decade of darkness under Taliban rule.

“This situation over the short and long-run, even in case of total control by the Taliban, will not be to anyone’s interest. It will not result in stability, peace and prosperity in the region. The people of Afghanistan will not accept such a repressive regime. Regional countries will never feel secure and safe.”

Ahmad Shah Massoud, ‘Letter to the American People’ (1998)

Policy review: hydrogen hopes
The UK government launched its first its plans for a ‘world-leading hydrogen economy’ on 17 August, declaring its intent to secure more than 9,000 jobs in the sector and unlock £4 billion in investment by 2030. Hydrogen has long been linked with the green agenda, as the gas produces no carbon emissions when burned.

However, hydrogen comes in various varieties – and the debate over how to support the sector’s development largely breaks down into two camps over these: advocates of ‘green hydrogen’ derived from electrolysis and ‘blue hydrogen’ derived from natural gas but in which the carbon dioxide in this process is captured and securely stored or disposed.

The government’s hydrogen plan declares its preparation to offer subsidies in support of hydrogen production but crucially demurs on whether it will subsidise green or blue hydrogen, or both, only “committing to providing further detail in 2022 on the government’s production strategy”. A public consultation on “a preferred hydrogen business model” is now underway.

Advocates of both forms of hydrogen production will be lobbying the government in line with their preference, with ‘blue’ advocates keen to demonstrate its lower cost and ‘green’ supporters advocating for its potential as a carbon-free energy source, with no long term storage costs even if presently it is significantly more expensive.

The cost difference to the UK could be significant, as the government’s strategy lays out that it plans to offer effective ‘feed in tariffs’ in which hydrogen producers receive a payment to bridge the difference between the cost of production and the price at which they sell it on the market. It does caveat that this market price cannot be lower than the price of natural gas, but the price differential between gas and ‘green’ hydrogen is significantly wider at present than between gas and ‘blue’ hydrogen.

Blue hydrogen’s advocates, however, have an additional tool at their disposal in addition to the cost basis, which will be subject to advancing economies of scale in electrolysis technology (though some have already voiced concerns about reliance on Chinese technology in this space). Namely that blue hydrogen offers a route to extending the lifeline of the North Sea’s hydrocarbons industry – something already endorsed by the UK’s oil and gas industry.

With the public purse under post-pandemic pressure and the Conservative’s levelling up agenda, subsidies for blue hydrogen may well prove a potential panacea for a number of areas of concern, but selling their potential will require a sustained and joined up effort from both legacy industry and new hydrogen players.

“I believe that water will one day be employed as fuel, that hydrogen and oxygen will constitute, used singly or together, will furnish an inexhaustible source of heat and light” Jules Verne

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London listings, Rayner’s Labour and VAT’s back

Policy Preview: London Listings
“The world clings to its old mental picture of the stock market because it’s comforting; because it’s so hard to draw a picture of what has replaced it; and because the few people able to draw it for you have no interest in doing so.” Michael Lewis

The London Stock Exchange (LSE) has had a turbulent past few years. European regulators blocked its merger with Deutsche Börse in 2017 for the third time, and though it pivoted to a data provider model with the purchase of Refinitiv in January, the LSE’s own share price has struggled.

While the business model of competing with other data providers will likely prove significant to the LSE’s long-term prospects, some of the poor performance the exchange has seen in recent years is due to a slowdown in new listings, partially due to Brexit uncertainty and partially due to the LSE lagging other major exchanges in innovation. 2021, however, has shown the signs of a turnaround are already in place – with more 50% listings in the first six months of 2021 than in all of 2020.

Arguably the most significant LSE listing this year – in terms of its own business model – was the July trading debut of the fintech firm Wise, which specialises in international monetary transfers. Notably, the listing was not an IPO but rather a direct listing in which existing shares are entered into the market rather than new issuance as typically occurs in the former. Such listings, which typically enable existing investors to cash out more quickly, have grown in popularity in the US tech sector in recent years but the LSE had heretofore largely been reticent.

Wise’s debut was seen as a success and the firm is now the largest in the UK tech space by market capitalisation. London has prided itself on developing a wider fintech scene in recent years and there are a number of other expected listings, such as those of challenger bank Revolut or payments firm Klarna, that the LSE will be keen to secure.

To that end, last November the UK government launched a review of its listing regime, with a split emerging between advocates of continued high regulatory standards and those in favour of loosening listing rules, in particular to attract fintech listings. The LSE seems to have firmly come down on the side of the latter, most emphatically the requirement that a minimum of 25% of a firm’s shares be sold in an initial listing. It also gave softer backing to calls to allow firms with dual class shares to be treated as ‘premium listings’ and thus eligible for the FTSE 100 index. For example, Wise’s CEO Kristo Käärmann has enhanced voting rights shares, meaning Wise will not enter the FTSE 100.

These rules are overseen by the Financial Conduct Authority (FCA), which is conducting its own review, off of which it has proposed reducing the free float requirement to as little as 10%, and to allow certain forms of dual class share structures to be included as ‘premium listings’. An overhaul of listing rules along these lines is likely to be signed off by year’s end.

Power Play: Rayner’s Labour
“Finding the right alchemy that will woo the older and socially conservative voters of the Red Wall whilst keeping on board the younger, more educated, and socially liberal voters elsewhere has become Labour’s quest for the Holy Grail.” Professor Eunice Goes

Angela Rayner’s position of prominence is secure within the Labour Party. Following its disappointing results in the early May elections, Keir Starmer and his allies attempted to side-line her, failing when Rayner refused to accept what she regarded as a significant demotion. Instead, with backing from party allies, she negotiated retaining her position as Deputy Leader and exchanging her roles as party chair and national campaign coordinator for positions as Shadow Chancellor of the Duchy of Lancaster and a newly-created post of Shadow Secretary of State for the Future of Work.

This is symptomatic of two things – firstly, Keir Starmer’s weakness at the head of the party, unable to reshape his frontbench to his liking. Secondly, it demonstrates that the left-of-centre, though less radical than the left under Jeremy Corbyn, still has some residual strength within Labour. For the time being, Rayner is able to stay in position as Deputy Leader, consolidating her own power base.

What does this mean for Labour? The party’s attention will soon be turning to the next general election, which could come as soon as May 2023. Labour will be keen to stem the flow of so-called ‘red wall’ voters deserting Labour. Some within the party may feel that as a Stockport-born former trade unionist, Angela Rayner may be better able to connect with voters across the North of England and the Midlands than Sir Keir Starmer QC.

There may not be much time for Labour to effectively set out their message, if the election is just two years away. A non-trivial proportion of that time will still be politically dominated by the pandemic, and Labour will need to offer a positive vision of the future, rather than criticise the government’s perceived failings during the pandemic.

The party will continue to position itself as tough on crime and social issues, playing to Starmer’s prosecutorial experience. The Conservatives will always be more credible on law-and-order issues, however, and Labour will need to seek to shift the economic debate onto terms in which it is most comfortable.

Rather than being painted as the party of fiscally irresponsible tax-and-spend, in her newly appointed brief handling the Future of Work Rayner will seek to frame the nature of the post-pandemic recovery as being an opportunity for more socially-just economy rebalanced towards workers. We have already seen the beginnings of this with pledges for a ‘new deal for workers’, with Rayner calling for an enshrined right for workers to work from home.

Although the Opposition’s policy influence is necessarily limited, we can expect Labour to continue to influence policy debates by positioning itself as more socially conservative yet with an economic policy characterised by more targeted interventions in the interests of workers.

Dollars and Sense: VAT’s Back

“Happiness is not in money but in shopping”

Marilyn Monroe

Since the start of 2021, the United Kingdom no longer offers tourists and visitors refunds to the value added tax (VAT) that they pay on UK bought goods. Formerly known as the Retail Export Scheme, similar VAT refunds are available across the European Union and they have proved a boon to growth for big retailers.

Such refunds not only bring in tourist spending – helping drive the development of commercial shopping centres such as the UK’s Bicester Village – but also have provided a fresh income stream to retailers and logistics businesses, who typically take a small portion of the refund in exchange for handling the relevant paperwork. The end of the Retail Export Scheme will not totally end this business, as UK exports shipped directly abroad will still be VAT-free.

Yet certain retailers are likely to be particularly impacted, from famous London outlets that have long been magnets for tourism to the smaller luxury stores and shopping centres in Manchester that have seen high-end spending driven by VAT-free purchases from tourists largely from India, the Middle East and China, in recent years.

The COVID-19 pandemic, resulting lockdowns, and travel limitations have far overridden the impact of the VAT refund’s abolition on retail. However, as the post-pandemic recovery continues and travel slowly opens up with the rollout of global vaccinations efforts, the VAT refund scheme’s abolition risks seeing the UK retail recovery lag behind that of other sectors and even retail in Europe.

Yet the government has so far shown no signs that it plans to reinstate the Retail Export Scheme, or some variety thereof. Simply put, foreign tourists are not a particularly politically salient constituency and the government is wary of being seen as handing valuable tax receipts to retailers in a post-pandemic environment.

Nonetheless, a potential middle ground with benefits to all exists – the digitisation of tax receipts raises the possibility of reinstating at least certain refunds for goods whose export status can thereby more easily be verified. The government has put tech at the forefront of other customs arguments – recently raising the idea again in relation to policing the Irish border – similar arguments about the future of UK retail recovery follow naturally.

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Equity for private equity? Gulf going green and no longer contained

Dollars and sense: Equity for private equity?
“The art of taxation consists in so plucking the goose as to obtain the largest possible amount of feathers with the smallest possible amount of hissing” Jean Baptiste Colbert

One policy choice may soon demonstrate whether post-Brexit Britain is set to hew closer to the US’ agenda or it will pursue the so-called ‘Singapore-upon-Thames’ model

It is a foregone conclusion that US President Joe Biden and the Democratic-held Congress will look to eliminate the carried-interest tax structure favoured by so many private equity firms. The position was endorsed by almost all major Democratic presidential candidates in 2019-2020 and it has repeatedly been suggested as a tool to help pay for recent infrastructure spending programmes. What may be more surprising is the amount of Republican support for such a move. While support is not as universal as on Congress’ left benches, ex-president Donald Trump campaigned on higher private equity taxes in 2016 and raised the bar for qualifying for such a tax in his 2017 tax reform., and again called for its elimination as recently as 2019.

The US, however, is not alone in allowing the general partners of investment funds to share in the gains of that fund, and pay tax on it as capital gains rather than as income. Britain has similar regulations, and with capital gains taxes for higher-rate tax payers set at 20% (28% for property investments) rather than the 40% income tax level for high-earners.

There have been occasional rumours that the Conservative government is considering raising the tax as well. The 2019 Conservative manifesto only pledged not to raise income tax, national insurance and VAT – and Chancellor Rishi Sunak’s March announcement that corporation tax will rise – undoing a decade of Conservative cuts – in response to the pandemic raising the spectre of private equity likewise being targeted.

The private equity industry has long sought to avoid taking its policy battles to the public, and to instead make its arguments persuasively directly to policy makers. Lobbying was crucial to getting higher carrier interest taxes removed from Trump’s 2017 tax reform, as acknowledged by Larry Kudlow, who would go on to head Trump’s National Economic Council. Yet Biden – and Trump’s continued rhetoric – shows it only slowed, rather than stemmed, the tide.

Private equity has proven a key investor in the UK, and its activity increased during the turbulent years after the 2016 Brexit referendum. The UK’s exit from the EU has made competition for the future of the services and financial sectors as sharp as ever, though many have seen New York as the real winner. The Biden Administration’s tax plans and continued US political tumult may put this in doubt, however. Meanwhile in the UK, Prime Minister Boris Johnson is in search of ways to demonstrate his support for traditional Conservative principles while shaking the party up with his so-far-successful ‘Northern Strategy’.

Private equity can fill these gaps by demonstrating its value to London, investment across the British economy, and to UK competitiveness. But it is a message that it must not just take to politicians, but through a pro-active communications agenda targeting both the public and the media, or otherwise risk repeating the scenario we see playing out today in Washington.

Power play: Gulf going green
“It was charged against me that the British petrol royalties in Mesopotamia were become dubious” T.E. Lawrence

The Gulf States are undoubtably concerned by the world’s major economies transitioning away from hydrocarbons, but the shift is already reshaping the region’s dynamics – and avenues for partnership, both commercial and political.

Some analysts suggest that we have already seen the peak of global oil demand, while even conservative estimates predict that demand will have peaked by 2030. Economies like Saudi Arabia and the UAE, which have historically relied on oil exports for revenue, are seeing this important revenue stream dry up – the Middle East is likely to see a 70% reduction of net oil and gas income by 2030. However, regional energy demand is set to double by 2040 – Gulf states are investing in renewables to ensure energy supply can keep up with demand.

These dynamics mean oil’s geopolitical role is changing. Oil’s historic role as a driver of allyship between the West and friendly Gulf states will diminish as Western states stop relying on them. Saudi Arabia and the UAE may decide that the likes of Russia and China – already a major supplier of solar panels to the region – make more worthwhile allies. This lack of interest in the West is already stoking greater competition between Gulf states. The recent OPEC spat is symptomatic of this. Rather than driving unity between the UAE and Saudi Arabia, oil is a rapidly shrinking pot. Oil-producing nations are seeking to maximise their own share at the expense of other members of the organisation.

Competition rather than cooperation will be the norm when it comes to resource politics in the Middle East. Qatar has already sought to establish itself as the region’s main player for natural gas, producing 178.1 billion cubic meters in 2019 compared to 23.7 in 2000. MENA states are making efforts to develop their renewable energy capacity, though currently only 11 per cent of the region’s electricity generation currently comes from low-carbon sources.

Huge expansion is planned as Saudi Arabia and the UAE recognise the need to competitively investing in domestic hydro and solar power projects. With a planned $100bn investment, Saudi Arabia has credible plans to increase its installed green capacity fivefold in the coming years. Many of these large-scale projects will be driven by state-owned firms and investment bodies, with companies owned by the likes of the PIF and Mubadala competing for tenders.

The interest in low-carbon energy projects in the Middle East will only increase as states’ efforts to ramp up energy production leads to aggressive investment and greater opportunities in renewable energy across the region.

Policy preview: No longer contained

“It is not the going out of port, but the coming in, that determines the success of a voyage.”

Henry Ward Beecher

This January, we wrote on the state of the global shipping industry and noting that the then-incoming Biden Administration was likely to take a negative view of the concentration of power among a small set of container shipping alliances that have been built up over the last decade. Container prices had already been steadily rising, but by June many benchmark prices had doubled, some even tripled. Though they have since retreated, container pricing has contributed significantly to higher-than-expected inflation indicators in Europe and the US.

This has escalated the urgency of the matter for the White House, as indicated by President Joe Biden’s 9 July Executive Order aimed at promoting competition in the US economy. The White House specifically noted the concentration of power among large container shipping firms and warned this risked “leaving domestic (US) manufacturers who need to export goods at these large foreign companies’ mercy.

The order only directly addresses this, however, by encouraging the Federal Maritime Commission “to ensure vigorous enforcement against shippers charging American exporters exorbitant charges”. The scope for US executive branch reproach is limited by the non-US domicile of major international shipping companies.

Nonetheless, we expect the US Department of Justice (DOJ) to announce a new investigation into the shipping industry – picking up the probe that it first launched in 2017 but dropped in 2019. However, the key US approach is likely to come via legislation, with Congressmen John Garamendi (D-CA) and Dusty Johnson (R-SD) leading bipartisan efforts to draft legislation on behalf of the House Transportation and Infrastructure Committee.

The key provision of the legislation is expected to seek to bar shippers from declining cargo bookings for exports – the rates for which are far-below those for US imports, which has led to many shippers even leaving American ports empty so as to faster reload for export to the US. Importers, however, will be weary that this will not lower their prices – and may even increase them.

Container prices will be a particular important feature of the economy not only for their impact on inflation, but will be further prioritised by policy makers as the diversification of supply chains to protect resiliency grows in the aftermath of the COVID-19 pandemic and amid ongoing global trade tensions. One area where a DOJ probe is likely to look – and legislators are expected to examine – is the relationship between container port terminal operators and shipping companies. Action to prompt diversification, and potentially even divestment, on this front should be expected.

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Charging growth, a red herring between the Pacific and Atlantic and a one-tax world

Dollars and sense: charging growth
“Lithium is common. (The) hard part is turning Lithium salt or clay into extremely pure LiOH”. Elon Musk

Far from the headline news around Brexit and its aftermath – so centred on the Northern Ireland protocol, governance and rules for the financial services industry, customs declaration (or the lack thereof) and British-EU travel as the COVID-19 pandemic appears to be waning – Brussels and Westminster have been competing fiercely on an issue less headline-grabbing but likely at least as important to their economic futures: the development of a European battery industry.

This importance of this competition can be best summed up in Nissan Motor’s 1 July announcement that it would spend some £1 billion pounds developing a new battery plant at its hub in Sunderland alongside Chinese partner Envision AESC. It will also produce a new all-electric crossover vehicle, the details of which have yet to be announced, at the plant, where its legacy Qashqai crossover and its all-electric LEAF are already produced.

The announcement marks a stark reversal from electric car industry stalwart Tesla’s 2019 announcement that it would invest US$4.4 billion in a battery production plant outside Berlin, a cost that has since risen to closer to US$7 billion. It also marks a stark turnaround from 2016, when Tesla first announced it was exploring such an investment, and when Nissan warned it could pull out from the UK entirely if voters backed Brexit.

Nissan’s investment is being generously supported by subsidies; at least €100 million from the government, plus further support from Sunderland City Council. However, the ultimate difference between producing new electric car batteries in the UK versus on the Continent comes down to refining lithium, a matter that may prove familiar to long-term readers of Hawthorn Horizons as in November we covered the challenge facing the Portuguese government in the first-half of 2021, namely whether and how to push ahead with a Lithium mining and refining project in its far north that had attracted considerable local opposition.

Lisbon proved unwilling to do so, and in April scrapped plans to develop the site. In contrast, the UK’s British Lithium has made strides towards launching a lithium mine in Cornwall, as has Cornish Lithium, by securing UK government backing. In a sign of growing confidence, start-up Green Lithium announced last week that it had secured seed funding for a lithium refinery (on the back of a government-backed investment in April).

As things stand, lithium appears set to charge British growth – while a lack thereof could seriously damage Europe’s auto industry.

Policy preview: a red herring between the Pacific and Atlantic
“I’m a big fan of bitcoin…regulation of money supply needs to be depoliticised” Al Gore, former US vice president

El Salvador recently became the first country that set to accept Bitcoin, with President Nayib Bukele approving legislation in early June that mandated that businesses and individuals accept Bitcoin as payment effective 7 September. Just days earlier, he had announced the move at a conference in Miami that more closely resembled the ongoing of a nearby nightclub than the IMF summits in Washington D.C. or central bank summits in Jackson Hole, Wyoming, where monetary policy announcements are more frequently made.

Bukele’s new law unsurprisingly contains a major loophole, namely that all El Salvadorean firms and individuals who lack the technology to process Bitcoin transactions – well over 99% of each – will be automatically exempt from the regulation requiring they accept it. Nonetheless, the move has been hailed by many crypto-advocates as the first example of Bitcoin supplanting the US dollar – El Salvador does not have its own currency, and has been dollarised for quite some time. Bitcoin’s most ardent believers also argue that the move therefore helps restore some of El Salvador’s sovereignty, though the reality is that were Bitcoin ever to become the country’s de facto currency, El Salvador would still lack the ability to set an independent interest rate.

El Salvador’s central bank nonetheless has a significant role to play in the new crypto-friendly country, namely Bukele has tasked it with overseeing a fund that is responsible for ensuring convertibility between the dollar and Bitcoin. This effectively forces it to take on price risk, and as bitcoin’s significant volatility this year has shown, that may well prove to be quite the daunting task. It is made all the more concerning by the fact that El Salvador is currently in negotiations with the International Monetary Fund (IMF) for US$1 billion in desperately-needed hard currency funding.

The IMF has suspended negotiations as a result of El Salvador’s decision, concerned that El Salvador’s bitcoin regulations could see it effectively become a hub for those seeking to convert Bitcoin to dollars, and it is unwilling to see disbursed funds go to this market. For all the fanfare that El Salvador has received, the move is likely to be dashed, at least in practice by the IMF’s demands and US opposition.

It would not be the first time such an experiment has failed – then-Ohio Treasurer Josh Mandel announced in 2018 that the state would accept bitcoin to pay state taxes. His successor, Robert Sprague, shut the programme down in October 2019 citing procurement irregularities. It processed fewer than 10 transactions during its 11-month lifespan.

Cryptocurrency may be here to stay, but it will not be displacing the dollar anytime soon, even in El Salvador.

Power play: a one-tax world


“With deregulation, one sector of the economy after another is liberated to capital’s unominotred authority”

Economist Herbert Schiller

The G7’s June embrace of a global minimum tax proposal advocated by US Treasury Secretary Janet Yellen brought the campaign out of the shadows and into global headlines. We first discussed the issue in Horizons in March and noted that Washington was likely to use the Federal Reserve’s currency swap lines instituted at the onset of the COVID-19 pandemic as a sweetener to bring +EU nations on board. It has indeed done so, announcing just after the Carbis Bay meeting that it would extend the lines until the end of the year.

The Federal Reserve also concurrently extended swap lines to other central banks – including Brazil, Mexico and Australia’s. At the start of July, the Organisation for Economic Cooperation and Development (OECD) announced that its members too had backed the proposal, a far more significant move than the G7’s endorsement as the OECD has the ability to shape policy not just among the G7 but far beyond, even if it has long been reticent to use its legally-enforceable decisions to pressure member states.

So far only nine states have opted out – most notably Ireland but also Barbados, Estonia, Hungary, Kenya, Nigeria, Peru, Saint Vincent & The Grenadines, and Sri Lanka. Dublin’s reticence will remain a major sticking point, but the OECD, unlike the G7, has notably already agreed to exempt most financial services from the tax, which may ultimately be extended in a manner that allows Ireland to remain an attractive base for multinationals.

The global minimum tax is still a far way, likely at least a couple of years, away from becoming a reality. But as it appears on the horizon, it is important to consider how states will look to compete, and who may be poised to gain. One potential beneficiary is Canada, and its model may soon be adopted by others.

Canada has long made itself an attractive destination for corporates, particularly in the commodities sector. While its regulatory environment was shaped by its own mining sector, miners from Kyrgyzstan to Brazil to Indonesia have long seen Toronto and its stock exchange as their preferred destination.

The Canadian model leaves securities regulation and oversight to its Provincial governments, meaning it does not have a federal equivalent of the US’ Security and Exchange commission or the UK’s Financial Conduct Authority. They do have an umbrella organisation, the Canadian Securities Administrators (CSA), which aims to harmonise regulation.

In late May, the CSA announced a series of proposed amendments on continuous disclosure obligations, effectively reducing them by combining a set of three disclosure and filing requirements into one annual disclosure statement.

The institution of a global minimum tax will spur further such moves, as regulatory competition will supplant tax-rate competition for attracting multinationals.

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Poll tax, redux? Much ado about Chesham and Amersham and a Swiss family affair

Dollars and sense: Much ado about Chesham and Amersham
“Like one that draws the model of a house, beyond his power to build it; who, half through,, gives o’er and leaves his part-created cost, a naked subject to the weeping clouds, and waste for churlish winter’s tyranny” William Shakespeare

The Chesham and Amersham by-election raises serious questions for the future of the Conservative Party’s planning and homebuilding policy. The Liberal Democrats’ overturning of a 16,233-vote majority on a campaign built off of local opposition to new house construction and the HS2 high-speed rail line (despite the party backing both on a national level) highlights just how salient such issues are in the Conservatives’ ‘Blue Wall’. British by-elections are renowned for producing shock results, but they often belie the state of national politics.

The Chesham and Amersham vote is one such result. While suburban London and much of the home counties are undoubtedly fertile ground for Liberal Democrats, tactical voting – which saw the main opposition Labour Party win just 600 votes – is far less common during general elections. A so-called ‘Lib-Lab’ coalition has never seriously manifested itself, least of all at election time, despite repeated efforts.

As a result, papers are aflutter with talk of whether Prime Minister Boris Johnson will reverse his proposed planning bill and other manifesto commitments aimed at increasing the number of new homes built by 300,000 a year. Many Conservative party stalwarts have proposed just that, and some MPs such as Theresa May, Johnson’s predecessor as prime minister have been pushing for such a reversal since well before the by-election was called.

The crux of the matter is the fact that Britain’s strict planning permission requirements – while ostensibly aimed at sustaining greenbelts, protecting architectural heritage, and providing local communities with democratic input over their own development – are also a key driver of house price appreciation. The Conservatives traditionally do far better in areas with high home ownership, with Labour’s strength historically in urban areas with high rent share.

However, the fate of the ‘Red Wall’ should cast doubt upon these assumptions. Home ownership rates are fairly high in the north-east seats where the Conservatives saw such success in 2019. House prices are crucially far lower than in the area around London, but the price differential was far smaller during Labour’s heyday under Tony Blair even as home ownership rates were broadly similar to their present levels. House price decreases in northeast can in part be attributed to low population growth compared to the rest of the country, driven by employment decreases.

New home construction in areas where population has increased may decrease the rate of house price appreciation, but the north-east demonstrates this does not spell doom for Conservative hopes. As the population grows elsewhere, new homes will have to be constructed to eventually bring more voters onto the property rolls. Expect Johnson to continue with his planning reforms – it would not be the first time he has discarded the advice of May and her ilk.

Policy Preview: Poll tax, redux?
“The increase in the value of land, arising as it does from the efforts of an entire community, should belong to the community and not to the individual who might hold title” John Stuart Mill

Planning policy is not the only significant change to the UK’s housing and property market that has been in the public debate in recent months. Property tax change proposals have been bandied about at a rate not witnessed since 1991, when the ‘poll tax’ was withdrawn in the face of significant public opposition just a year after its introduction, helping to end Margaret Thatcher’s prime ministership along the way.

The 2019 Conservative manifesto raised the spectre of such a change in its call to “redesign the tax system so that it boosts growth, wages and investment and limits arbitrary tax advantages for the wealthiest in society”. Council tax are among the most tangible example of such policy to many voters: the four lowest council tax rates are all found in central London while the highest rates are found in far less wealthy, and even relatively impoverished, areas. For example, Hartlepool, which the Conservatives won in a by-election in May for the first time, has the fourth highest council tax rate despite being the 11th most deprived area in England.

Given the Conservative shift to the north, and the aim to solidify the former Red Wall as a new Tory heartland, it is therefore no surprise that Bright Blue, an independent think tank advocating an agenda of liberal conservatism, in late May published a report declaring an ‘annual proportional property tax (is) the best system for levelling up the country,” employing Downing Street’s favoured phrase for its Northern-friendly policies.

Bright Blue is by no means alone in calling for such a system, which will be familiar to American readers, in which property taxes are directly tied to the value of a home. The present council tax system was also meant to partially take home value into consideration, hence its ‘bands’ but the valuations were set in 1991, where they remain frozen (except in Wales), and rates for bands are directly tied to one another.

Numerous Labour MPs have called for a proportional property tax, and even making the tax payable by the home owner (council tax is paid by residents, including renters, rather than home owners) as has former Liberal Democrat leader Sir Vince Cable.

While the government sets thresholds for council tax increases, policy is otherwise left largely to the councils themselves. Recent Conservative governments have increased local tax authorities’ powers by also expanding the ability of local councils to retain tax on local businesses for local spending, part of its devolution agenda.

It is this policy that one should expect to be reversed. Johnson may well look to have the government redirect funds raised from business rates tax to fund his levelling up agenda. A tax on commercial land tied to its value is also a serious possibility. But the backlash that would result from a proportional residential property tax in the ‘Blue Wall’ would provoke a backlash that would risk escalating the post-Chesham and Amersham Conservative squabbles into a potential re-run of the party’s poll tax crisis. It shall not pass.

Power play: a Swiss family affair


“The best inheritance a father can leave his children is a good example”

John Walter Bratton

The Swiss Federal Council’s decision in late May to abandon negotiations with the European Union over a new framework agreement to replace the dozens of treaties that currently facilitate Swiss access to the single market, and EU citizens’ right to seek employment in Switzerland among other matters, was the result of years of strained negotiations. Yet it marks the crowning achievement of one man, long the eminence grise of Swiss politics, Christoph Blocher.

Blocher is a unique political figure, in a unique political system. While UK audiences may see commonality between his Euroscepticism and his right-wing Swiss People’s Party’s rhetoric and the role that Nigel Farage has played in UK politics over the last 20 years, Blocher’s role in reshaping Swiss politics goes far beyond. Although he only ever sat on Switzerland’s seven-member Federal Council, the executive government body in the country, for one four-year term from 2003 to 2007, in Europe only Germany’s Angela Merkel and Hungary’s Viktor Orban have spent a comparable amount of time at the pinnacle of national politics.

Blocher is arguably even more controversial than Farage. His narrow 2003 election to the Federal Council over incumbent Ruth Metzler marked the first time an incumbent member was not re-elected since the 19th century, breaking Switzerland’s tradition of amicable cross-party politics. The second, and final time, a councillor has failed to secure election came when Blocher himself was ousted four years later when other parties placed a cordon sanitaire over his candidacy although his Swiss People’s Party (SVP) won a record number of seats in the National Council, the lower house of the Swiss parliament.

Notably, Blocher has never formally headed the SVP. Though it split in 2007 when another party member accepted a seat on the council in Blocher’s stead, and again a few years later, the SVP has remained the largest party in Swiss politics by some margin ever since.

At 80, with the idea Switzerland would inevitably be drawn closer to the EU now firmly in the rear-view mirror, Blocher has indicated he may be ready to give over the reigns of the party he has never officially led. The party’s current president, Marco Chiesa, is another figurehead and not the likely heir.

Instead, his daughter Magdalena Martullo-Blocher, a SVP representative in Parliament, is his heir apparent. There is already precedent for such a succession, she took ownership of chemicals firm Ems-Chemie decades ago as her father entered politics, and formally succeeded him in 2008. She has clearly had success, with Bloomberg estimating her to be worth $8.6 billion, a gargantuan fortune even by Swiss standards. Despite unconvincing denials of any such interest by father and daughter, Martullo-Blocher will seek an even more commanding role atop Swiss politics than her father ever held.

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Sarah Sands on chairing the G7 Gender Equality Advisory Council and addressing the G7 leaders

While the match between England and Croatia was at its most exciting, I was poring over the final communiqué of G7. I had a stake in this, as chair of the gender equality advisory council for G7. On Friday, I presented 14 recommendations to G7 leaders on behalf of the council. They were warmly received, especially by President Biden, Prime Minister Trudeau, President Macron and the President of the European Commission Ursual von de Leyen. Boris Johnson said that he personally endorsed them.

But I have learned a trick or two about summits in the three months that I have been working with GEAC and the first thing is to check what is in print. In the past, rhetoric has not translated into action. During the French G7, in 2019, there were more than 70 recommendations and little to show for it. The following year, President Trump scrapped the GEAC.

So this year, as chair, I was determined to make something happen, or what is the point of us? We had a far shorter period for preparation than is customary, so the overwhelming mission was evidence-based focus. Work out what G7 can actually deliver and make sure that women are central to discussion.

The pandemic was an example of what happens when women become an afterthought. Women were on the front line as health workers, teachers and carers yet also expected to hold the home together. Maternity services were not thought through – there is still contradictory advice on whether pregnant women should have the vaccine. And there was not enough attention paid to the shadow pandemic of domestic violence. There is a huge data gap for women.

The composition of GEAC this year was the making of us. It was packed with scientists and economists who were used to problem solving. I looked at the list and wondered how any of them would have the time. The names included Dame Sarah Gilbert, of the Oxford vaccine team, Dr Fabiola Gionotti, Director General of Cern, the Harvard professor Iris Bohnet, Ursula Burns, leader of the White House Stem programme, Dr Ritu Karidhal, from the Indian Mars mission, Dr Dambisa Moyo, the global economist.

The civil service secretariat also set up meetings with leaders in their field to inform our recommendations and report. For instance we spoke to Alison Rose, chief executive of NatWest and author of the Rose Review about access to capital and scaling business. Every female leader we spoke to asked simply: How can I help?

We divided our subjects into education, empowerment and eradicating violence and found of course that the three are inextricably linked. I presented our recommendations to the G7 leaders alongside the Congolese gynaecologist Dr Denis Mukwege, a Nobel laureate who tends the horrifying injuries caused by sexual violence in conflict. He asked first for war rape to become a red line, triggering international condemnation. And second that we keep girls in school to make sure that they are safe.

The communiqué was as satisfying to me as the England Croatia result. It acknowledged, as we asked, that women and girls had been set back by the pandemic and needed to be central to the economic recovery. It pledged to increase the number of girls studying STEM, which will unlock for them the jobs of the future. This is not a good time to ask world leaders for funding, but the Global Partnership for Education, which we backed with our council member Alice Albright, got the lion’s share. We have been asked to produce a report by September that will both work out the international structure for dealing with sexual violence in conflict and the mechanism of a progress index, by which we can track with data what is improving for women and girls, and what is not. This will include targets and representation. When the prime minister used the odd phrase about the world becoming more feminine, I reckon he was referring to our recommendation about getting more women in decision making roles. Even at G7.

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Boris’ social test, raise the roof and potash play

Policy preview: Boris’ social test
“Providing better social care for older people who need it is a cause worth fighting for” Ex-prime minister Gordon Brown

Prime Minister Boris Johnson marks two years in office come 24 July – regardless of potentially partisan views on how he performed on them, there is little disputing that he has faced a series of serious tests to his leadership: Brexit and the COVID-19 pandemic foremost among them. However, seems to have yet another test. As laid out in the Queen’s Speech this May, the government plans to lay out proposals on social care reform in this Parliament.

It will be the first time the Conservatives have seriously put forward such proposals since then-prime minister Theresa May included in the party manifesto a policy that would see the government claw back some spending on elderly care from the value of the home. It was stingingly, and lastingly, labelled a ‘dementia tax’. The policy – or at least the attention it received, its justification by critics to label May as ‘cold,’ and, perhaps most importantly, the unease it caused with homeowners, arguably the key Conservative constituency – was seen as critical in the loss of the Conservative majority in the June 2017 general election.

One can be certain that Johnson will not be reviving May’s policy, from which she was forced to backtrack during the campaign. There has been little attention to just how high a pedestal Johnson has placed on such reform even as he made its priority quite clear by declaring that “We will fix the crisis in social care once and for all” outside Downing Street on his first day as prime minister.

Spending on social care remains well below its 2011 levels, and while the Conservative Party is expected to return to its budget-conscious roots more broadly, this is one area where even libertarian-inclined Conservatives such as Jacob Rees-Mogg have endorsed further investment. Having turned on the spending spigot to fight COVID-19, which has raised the political weight of public health and wellbeing issues significantly, Johnson may well feel justified to do so with regards to elder care. The political push for such action may grow as claims by Johnson’s former advisor, Dominic Cummings, that Health Secretary Matt Hancock saw COVID-19 patients returned to care homes without negative tests are investigated.

Johnson has been cool on a mandatory-contribution scheme to fund such care in the past, and is likely to again hold off now. A blank cheque pledge from the state to meet all social care costs is also unlikely, but Johnson is clearly not afraid of being seen as a statist. Expect his proposals to include substantial investment in state-run social care, and an entitlement to certain levels of in-home support, with the state overseeing a regulated system of insurance-style schemes available to those over a certain age limit. To make them more attractive, tax advantages are likely to be offered to buyers.

Dollars and sense: potash play
“Our country has become a conduit for security and stability in the centre of Europe” Belarusian President Alexander Lukashenko

The European Union is going to impose its most serious sanctions yet on Belarus, following a meeting of the bloc’s foreign ministers at the end of May. Outraged by Minsk’s tactics in arresting an opposition journalist – apparently calling in a fake bomb threat to a Ryanair flight from Greece to Lithuania, both EU members, to forced the plane to divert to Minsk – the ministers agreed to punish strongman ruler Alexander Lukashenko by sanctioning key industries in the country, where most businesses are still state run. According to Luxembourg’s foreign minister, this is to include potential sanctions on its exports of potash, a mined fertilizer that is the sole natural resource Minsk produces in abundance.

Washington has been more circumspect, although it typically imports fairly little potash from Belarus, with sizable North American producers such as Canada’s Nutrien and US-based Mosaic rivalling Belarus’ state-run Belaruskali among the world’s largest producers. Washington is concerned such a move could push Minsk into an even more reliance on Russia, its key benefactor, and also increase Europe’s resource dependency on Russia given its largest alternative potash sources are all Russian. Nevertheless, US Secretary of State Tony Blinken has made coordination of sanctions policy with Europe a key policy priority and will not oppose any such move.

There is precedent for sanctions on key commodity producers to rile markets, with the most recent such example the 2018 sanctioning of Russia’s Oleg Deripaska, which risked affecting his metals firm Rusal, causing major tumult on aluminium and bauxite markets as prices spiked overnight. A similar situation is less likely to result if the EU blacklists Belaruskali or otherwise seeks to restrict its ability to sale in the EU market because potash spot markets are not nearly as important to the trade, and pricing outlook, of potash.

Belaruskali, however, itself is very significant in setting potash prices because for much of the last decade it has traditionally agreed annual supply contracts with China and India before any other competitors that are seen as setting the ‘price floor’ for the market. Western sanctions on Belarus could see Minsk accept a bottom barrel price next year. Responding to Minsk in this manner may inadvertently pull out the proverbial rug underpinning the profitability of other potash producers as well.

Power play: raise the roof?

“I always think a debt ceiling is a good tool to carry something”

Senator Mith McConnell, Republican Minority Leader

Fights over the US debt ceiling – a legal limit on how much the federal government can borrow – were a key feature of domestic American politics for much of the Obama presidency. The downgrade of the US’ credit rating in August 2011 set off a round of political fighting that repeated itself every year, with fiscally Conservative Republicans seeking to constrain president Barack Obama’s budgets, and spending on his flagship health care agenda, throughout his term in office. As deficits continued to grow under the Trump Administration – with federal revenues falling due to his flagship legislation, tax cuts – debt fights slowly faded from the agenda. In 2019, Congress passed a mechanism tying the debt ceiling increase to the budget, aiming to settle the matter once and for all.

2020 quickly put paid to that plan, with the massive deficit and in turn debt increase caused by the trillions of dollars in stimulus both the Trump and Biden administrations have put at the core of their response to the pandemic. Congress did agree to suspend the debt ceiling last year, but that suspension expires on 1 August. With the Republicans in opposition in Congress, a renewed debt fight is to be expected. Lawmakers such as Senators Ted Cruz (R-TX) and Lindsay Graham, (R-SC) have already floated potentially policy concessions from the Biden Administration in exchange for their support.

However, the lawmaker most set to benefit from the debt battle is not a Republican, but rather Arizona’s Krysten Sinema, arguably the sole budget-wary Democrat remaining in the Senate. Because debt ceilings can be tied to the budget, the Senate’s ‘Byrd Rule’ applies, which allows a simple majority to pass legislation. With the Democrats holding 50 Senate seats, and Vice President Kamala Harris the tie-breaker, Democrats could adjust the debt ceiling without any Republican votes.

However, centrist Joe Manchin (D-WV) has demonstrated the political rewards on offer by threatening to be the sole holdout. Less than five months into the Biden presidency, he has arguably become the most powerful figure in the Senate. This not only helps him not only secure benefits for West Virginia but also to maintain his political position in the state, which voted overwhelmingly for Trump, given his perceived independence from the Democratic agenda.

Sinema’s home state of Arizona is, in contrast, a key swing state. She will threaten to hold out to seek political benefits there as well, hoping it solidifies her support among centrists ahead of her re-election campaign in 2024 when Arizona is again expected to be among the most contested states. Ultimately, however, she will support such an increase, likely extracting some directed spending towards Arizona in the process.

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Der Kingmaker, the debt ceiling and Lithium in coalition

Policy preview: ending the debt ceiling?
The US’ debt ceiling is among the most despised institutions of US politics, from the perspective of the Democratic Party. The ceiling formally institutes a limit on how much the US government can borrow – but in practice it has never done so, having been consistently raised since its introduction just over 100 years ag, even in the 1990’s when then-president Bill Clinton managed to run a rare surplus.

The ceiling is once again in the news after the Republican Party refused to support raising it in a procedural vote on 27 September. The ceiling was of course consistently raised under former president Trump, when Republicans controlled the Senate, and it was formally suspended for two years in August 2019. While this may well have avoided its politicisation during the COVID-19 pandemic, the vast government spending rapidly required by the initial response to the virus highlighted the potential risks in retaining such a limit.

Democrats argue that the Republican Party politicises the limit every time that it is out of power, pointing to the government shutdowns that resulted from refusals to raise the limit when Barack Obama was president and former Republican House Speaker Newt Gingrich’s 1995 move to separate the increase from the annual budgetary process. But at the same time the Democrats have been wary of publicly calling for its elimination, which could be perceived by voters as embracing fiscal irresponsibility.

Treasury Secretary Janet Yellen has warned that failure to raise the ceiling could lead to a formal default, declaring this would push the US back into recession. Federal Reserve Chair Jerome Powell – who former president Donald Trump nominated to replace Yellen in that post – has made the same point.

Republican Senate Majority leader Mitch McConnell has used the latest standoff to say that the buck stops with the Democratic Party this time, given the party’s control of both houses of Congress and the presidency. He is correct in that the Democrats can use the budget reconciliation process – which would override the Republican ability to filibuster such a vote – to eliminate the debt ceiling. Yet the Democrats are seemingly unwilling to open the 2022 budget resolution to do so, which could galvanise opposition to increased spending from centrist Democratic Senators Joe Manchin and Kirsten Cinema, already engaged in a standoff with their own party over a US$3.5 trillion social policy and US$1 trillion infrastructure bill.

The Democratic Party may therefore have an interest in allowing a brief crisis over the debt ceiling even as they control all branches of government. Previous shutdowns have failed to significantly affect domestic political trends. McConnell’s relationship with Trump and the less fiscally cautious wing of the party that has been so ascendant since his 2016 election victory is strained, with Trump reportedly seeking to stoke a leadership challenge among Republican Senators. Despite McConnell’s declarations, the intricacies of Senate parliamentary process are not of interest to most American voters.

Strange as it may seem, if Democrats are hoping to lay the blame for any fallout at McConnell’s feat, in hopes it will engender an environment in which they can finally push through the debt ceiling’s abolition in 2022.

“Democrats have every tool they need to raise the debt limit. It is their sole responsibility”. Senate Minority Leader Mitch McConnell

Power play: Der Kingmaker
Germans went to the polls on Sunday, and the election appears to already have a likely winner. The leader of the Social Democratic Party (SDP), Olaf Scholz, is look set to be the next Chancellor. However, the two smaller parties he will need to support his governing coalition will have to find a lot of compromise.

The SDP won the most seats in the election in a disappointing night for the Angela Merkel’s governing Christian Democratic Union (CDU).

The party sitting closest politically to the two largest parties, the SDP and the CDU, and thus natural coalition partners in the next government is the FDP, whose leader Lindner has been described as a ‘kingmaker’ who must choose the next leader of the Republic.

However, a coalition made up of the CDU, FDP and Greens, is politically implausible. The CDU suffered a heavy defeat on Sunday, losing a quarter of its support compared to the last election in 2017. Their leader is already facing calls to resign from within his own party, and is no longer a serious contender for the Chancellery.

The most likely outcome is a ‘traffic-light’ coalition between the Greens, the SDP, and the FDP. The SDP will need to form a coalition with these parties in order to form a government. But while the Greens favour statist intervention, the FDP is more aligned to a laissez-fair economic doctrine, preaching faith in markets to solve the climate crisis.

So while Lindner may no longer the ‘kingmaker’ – with little tangible choice over who will be the next Chancellor – more significant may be areas where the Greens and the FDP can find common ground. Whereas the Greens and SDP largely align on economic policy, the FDP support significant tax cuts and adherence to the debt brake. Division over climate issues such as the future of the car sector, Nord Stream 2 gas pipeline, and how to best protect households from the impact of climate policies, may prove to be sticking points.

However, early signs suggest compromise is possible – the Greens and FDP already have entered negotiations between themselves to better enable them to present a united front. To give just one example, Lindner has called for a state investment fund, separate from the federal budget, borrowing and invest with higher returns. The Greens may well see this as the route to climate infrastructure investment without having to increase national debt to unacceptable levels.

Perhaps Lindner will not be kingmaker, with Scholz apparently already Chancellor-in-waiting. But the success of Germany’s next government will depend on how much compromise can be reached by the FDP and the Greens – and early signs are promising.

“For me, it is always important that I go through all the possible options for a decision”.

Chancellor Angela Merkel

Dollars and sense: Lithium in coalition
Germany’s Green Party is all but certain to enter its next government after the 26 October elections – having come in third, both the first-place Social Democrats (SPD) and the runner-up Christian Democratic Union (CDU) have they want to discuss forming a coalition with the party. Any realistic coalition other than a renewed CDU-SPD grand coalition, which both have said they wish to avoid, would require the Green’s participation. The Green’s environmental agenda has been embraced by both as well, but one major question facing any new coalition will be how they balance environmentalism and NIMBYism.

Pollsters reported that more Germans identified climate change as their primary concern going into the elections, rapidly overtaking COVID-19 as the summer progressed. The German auto industry has also undergone a rapid shift to supporting the electric transition for the sector as well, spurred on by Tesla’s development of a ‘gigafactory’ outside Berlin – something the outgoing grand coalition pushed for. The CDU’s chancellor candidate, Armin Laschet, even met with Elon Musk in mid-August, seeking to brandish his parties green credentials.

Incidentally, Laschet posed a question to Musk that said gets to the heart of Germany’s green agenda: “hydrogen, or electric?”. Musk laughed it off, endorsing the later (on which he has staked his company) wholeheartedly but that such a question could still be posed in German politics highlights the quiet discomfort many at its peak express with regards to a core aspect of the transition: the supply of lithium batteries.

Demand for lithium has grown exponentially over the past decade, but Europe has repeatedly failed to develop its own sources. Plans for lithium mining in Portugal collapsed in April, and while the UK has made some very early tentative progress towards exploiting its own lithium, post-Brexit competition and EU rule-of-origin and tariffs mean that integrating European auto manufacturing with UK battery production is unrealistic at present.

Despite the enthusiasm for the green agenda, the Green Party has been at the forefront of opposition to lithium mining. At the European level, the party has fiercely opposed the US$2.4 billion Rio Tinto led Jadar mine project in Serbia over concerns it will degrade the local biodiversity and agricultural fertility and in solidarity with local protests.

Whatever coalition is formed in Germany, it will have to deal with the reality that Berlin risks being left behind if Europe remains without a significant local lithium supply. Otherwise, its auto industry risks being left behind.

“We have to think of where the raw materials come from… but we want to further develop and expand electro-mobility here in Germany, particularly with the production of batteries”. Annalena Baerbock, co-leader of the Green Party

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Jess Phillips, Labour Party MP on support of alienated voters and the role all businesses can play in supporting their employees who may be suffering from domestic violence

Following the poor performance of the Labour Party’s recent election results and the subsequent botched reshuffle, the direction of the Party remains very uncertain. Jess Phillips, Labour Party MP and Shadow Minister for Domestic Violence and Safeguarding, spoke to Hawthorn’s Sarah Sands on Tuesday 18th May.

Author of three books, including the Sunday Times Bestseller, ‘Truth to Power’ and the forthcoming ‘Everything you need to know about being an MP’, Jess is known as being one of Westminster’s most outspoken MPs. She spoke about how the party can win back the support of alienated voters as well as discussing the role all businesses can play in protecting and supporting their employees who may be suffering from domestic violence.

Listen to the replay of Sarah Sands in conversation with Jess Phillips, MP.

Speakers
Jess Phillips is a Labour Party politician who became the MP for the constituency of Birmingham Yardley at the 2015 general election. Jess has committed her life to improving the lives of others, especially the most vulnerable. Before becoming an MP, Jess worked for Women’s Aid in the West Midlands developing services for victims of domestic abuse, sexual violence, human trafficking and exploitation. She became a councillor in 2012, in this role she worked tirelessly to support residents, with her work being recognised when she became Birmingham’s first ever Victims Champion. Since becoming an MP, Jess has continued her fight to support those who need it the most and has earned a reputation for plain speaking since being elected, unfazed by threats and calling out sexist attitudes as she promotes women’s rights. Jess has written two bestselling books ‘Everywoman: One Woman’s Truth About Speaking The Truth’ and ‘Truth to Power: 7 Ways to Call Time on BS’.

Sarah Sands, Board Director at Hawthorn. Sarah joined Hawthorn from the BBC, where she was editor of the Today programme, Radio 4’s flagship news and current affairs programme. She was previously editor of the London Evening Standard, the first woman to edit The Sunday Telegraph and deputy editor of The Daily Telegraph. Sarah is Chair of the Gender Equality Advisory Council for G7 for 2021 and of the political think tank Bright Blue. She is also a Board Member of London First and Index on Censorship and is a Patron of the National Citizen Service.

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