District Matters

End of volatile year

December 2022

It is the end of yet another turbulent and volatile year. No sooner had we emerged from Covid than Putin invaded Ukraine. This immediately caused spikes in the cost of energy, food and raw materials.

This was exacerbated later in the year when he cut gas supplies to Germany and, purely coincidentally, a gas pipeline in the Baltic Sea blew up. All of this turbocharged inflation which was already rising and has led directly to what we now refer to as the ‘cost of living crisis'.

So, we have had three years of global crises in a row; 2020 and 2021 it was Covid and 2022 the fallout from Putin's invasion of Ukraine. As if these were not enough, global supply chains have been massively disrupted by China's approach to tackling the Covid pandemic. This exacerbated the fall in global economic activity and increased inflation further.

I am amazed how many people seem to believe that the Government, indeed any government, can make all these pressures go away. What the Government has done is borrow massive sums of money first; to cushion the impact of Covid on households and businesses and second; to cushion the impact of high energy prices on households and businesses.

What was cruelly exposed by Liz Truss' attempt to deliver tax cuts and spending increases on subsidising energy costs was a substantial increase in the cost of government debt. In other words, interest rates increased rapidly and substantially. This became known as the 'moron premium', for fairly obvious reasons.

However, what is very apparent now is that there are real limits to how much the Government, indeed any government, can borrow at realistic cost. This means that if anyone expects a change of government to lead to a cornucopia of spending, I suggest that they think again.

The reason I say this is that, as reported in the Financial Times on Thursday 8 December, the Debt Management Office, which handles debt sales on behalf of the Treasury, will need to sell an average of £240 billion of gilts for each of the next five financial years. There is now almost no room for manoeuvre.

You may think that this is all very remote from us. As a Council, however, much of our funding comes from the Government. If this is reduced or constrained, services will probably need to be cut. The other challenge to us is inflation. If it turns out to be 2% higher than our assumptions, over five years this will cost the Council about another £1.5 million. We all have to understand the context in which we operate.

Of course, what would make everything more manageable is economic growth. A clear strategy for growth is the one policy area that the Government has failed to address properly, except for Liz Truss' spectacular car crash. Whilst we can do little about the national picture, locally across Stratford District we are doing everything we can to encourage growth. Our latest initiative, working together with the University of Warwick and the CWLEP Growth Hub, is to bring together a nucleus of up to 50 leading and innovative businesses from across South Warwickshire to discuss the challenges and opportunities for economic growth. We have worked hard to identify potential companies and, having personally signed all the invitations, I am impressed by the sheer range and variety of innovative and high tech companies we have in the District.

These are the kind of companies that will help to generate our economic growth over the next few decades. Coupled with the development of the innovation campus of the University of Warwick in Wellesbourne, they will give our District a strong foundation for continuing prosperity so badly needed in these challenging times.

Our intention is to build on this first event. The 'Driving Innovation and Growth' summit to be held on 17 February 2023 at the Wellesbourne campus, with a series of further events addressing the main issues and challenges in initiating and sustaining growth.

For us as the Council, this is an exciting initiative. It clearly builds on the links and working relationships we have built with key partners over the past few years. It demonstrates our willingness to be proactive in the interest of everyone in the District.

Finally, as it is the season of good cheer, I have some good news to report. Following our submission of our Investment Plan to the Department for Levelling Up, we have had confirmation that, based on our vision and initiative, the Council will be awarded £456k for 2022/23, and indicative allocations of almost £900k for 2023/24 and £2.3 million for 2024/25. The news was not delivered by a stout gentleman with a white beard wearing a red suit, honest!

I wish everyone a very Merry Christmas and a Happy New Year.