After 14 years of Conservative rule, British voters may just be looking for a change in leadership when they go to the polls on July 4, regardless of the issues at play.
Earlier this week, British Prime Minister Rishi Sunak called an election — hoping, perhaps, to capitalize on some positive recent economic news, considering his Conservative Party’s standing in recent polls. Yet most forecast Keir Starmer’s Labour Party as favoured to win.
Key issues of the six-week campaign will likely include the millions who continue to linger on waiting lists for service of the government’s strained health-care system, the National Health Service. Immigration, too, and the number of migrants arriving in Britain illegally, will be an important issue, especially to Conservative voters.
But the cost-of-living crisis may be the dominant issue during the the six-week campaign.
“Both sides will talk a lot about the economy,” said Anand Menon, professor of European politics and foreign affairs at King’s College London. “At least so far — and it might change with [their party platforms] — no one really is planning to do very much about it.”
Over the past couple years, British voters have suffered through a cost-of-living crisis, in which the prices of essential goods rose higher than the average worker’s wages.
Living standards took a significant hit, and will be lower when Britain elects a new parliament than at the time of the last election in 2019.
The British economy fell into recession at the end of 2023 for the first time since the onset of the COVID-19 pandemic. A year before at the end of 2022, inflation jumped to a 41-year high, hitting just over 11 per cent. Russia’s war with Ukraine also led to energy prices shooting up, impacting many voters because of Britain’s reliance on gas.
“The energy price spike was very big here, and quite long-lasting because there was a very big government support scheme, and then that ended,” said Robert Ford, political science professor at the University of Manchester.
“Although the world market prices came down, they didn’t come down in quite the same way for voters because they got kind of cushioned from the worst of the spike.
“And then when that support disappeared, basically the prices stayed high.”
Food prices spike
Food prices also spiked in the U.K. For example, 500 millilitres to one litre of olive oil, priced on average at $6.46 Cdn in April 2021, cost $14.72 Cdn, in April 2024, a 128 per cent change, according to the U.K’s Office for National Statistics.
Other food items saw significant increases, too, including lettuce (63 per cent) and beef burgers (55 per cent).
“That really hit people hard,” Ford said.
Voters were also hit with higher interest rates, in an attempt to cool the economy and bring down inflation. Like the Bank of Canada and other central banks around the world, the Bank of England raised interest rates aggressively. Rates increased 14 times, from 0.1 per cent in December 2021 to 5.25 per cent in August 2023.
“A lot of people in Britain are on relatively short-term fixed mortgages,” Ford said. “So there’s a kind of rolling impact of the interest rate rises in the last couple of years, still hitting hundreds of thousands of people every single month, as their mortgages roll on to a higher rate.”
That has also spilled over into rents, he said, which have gone through the roof.
According to a recent survey conducted by the Financial Conduct Authority, the country’s financial regulator, more than 7.4 million people in the U.K. struggled to pay a bill or a credit repayment in January. It estimated that 5.5 million people fell behind or missed a bill or credit payment in the six months to January 2024.
However, Sunak can point to some recent positive economic trends: That 7.4-million figure is down from 10.9 million in January 2023.
The Office for National Statistics reported earlier this month that the British economy grew by 0.6 per cent in the first quarter from the previous three-month period. The increase was higher than the 0.4 per cent predicted by economists and the strongest since the fourth quarter of 2021, when the economy was rebounding following the sharp contraction during the pandemic.
Inflation falls to 2.3%
As well, this week, the Office for National Statistics said the country’s inflation rate had fallen to 2.3 per cent, the lowest rate in three years.
“This morning, it was confirmed that inflation is back to normal,” Sunak said when announcing the election date. “This means the pressure on prices will ease and mortgage rates will come down.”
Also, wages have been rising at a faster pace than inflation, putting more cash in people’s pockets in real terms, while energy prices stabilize, and interest rates haven’t been raised in nearly a year.
Yet the economy, while growing, will grow the slowest among the G7 countries, according to the Organisation for Economic Co-operation and Development, which recently forecast growth in 2025 at one per cent.
And many Britons are still struggling. Inflation, for example, may be down, but prices on items are still more expensive than they were a few years ago.
“Bringing inflation down doesn’t mitigate the impact of having had the inflation in the first place,” Menon said.
“So everything still is more expensive,” Menand said. “Yes, salaries have gone up, but still people notice, don’t they, when prices are higher than they were.”
Ford noted that this is the first government ever in modern post-war British history where, over the course of the full parliamentary term, real take-home incomes have gone down. And according to some reports, people’s living standards have gotten worse.
‘Are you better off?’
Although global forces have certainly played a role in Britain’s economic struggles, it would be a challenge for any government to convince voters that this is not its fault, or that it shouldn’t be punished for this, he said.
“Because it’s the [former U.S. president] Ronald Reagan question: ‘Are you better off than you were four years ago?’ And an awful lot of people will say no.”
“That’s why the fall in the inflation rate doesn’t matter.The inflation rate is eagerly watched by everyone in the business community, in the media community. It does not accord at all with people’s lived experience.”
Published at Sun, 26 May 2024 08:00:00 +0000
What’s behind a historic, unusual U.S. military cash transfer to Canadian mines
The United States was growing desperate, months before its entry into the Second World War. It was gravely short of aluminum, and scrambling for suppliers.
Its solution: turn north to Canada.
American public money flooded into Quebec, building the aluminum industry that supplied raw materials for Allied planes and tanks.
“I would be willing to buy aluminum from anybody,” said Harry Truman, then still a U.S. senator, in 1941 hearings on the topic.
“I don’t care whether it is the Aluminum Company of America or Reynolds or Al Capone.”
Now, in an era of global tension, the Americans are looking north again.
The U.S. military has, for the first time in generations, spent public money on minerals projects inside Canada: nearly $15 million US to mine and process copper, gold, graphite and cobalt in Quebec and the Northwest Territories.
It might not be the last: Officials expect additional cross-border announcements under the more than half-billion-dollar U.S. program.
These minerals are vital ingredients in an endless array of civilian and military products — including medicine, batteries, electronics, engines, cars, planes, drones and munitions.
The context, this time, is China.
What’s driving it: U.S. fear of China
The U.S. has expressed escalating unease over its dependence on its biggest rival. China controls the global mineral supply, has cut off minerals exports in the past, and fears a potential standoff with the U.S. over Taiwan.
Washington said two years ago that it was weighing funding Canadian mining startups under the U.S. Defense Production Act (DPA). It promised funding last year, and this month, it formally revealed the first such initiatives.
The novel nature of the announcement was scarcely conveyed in the dry language of the press release, which referred to a Canada-U.S. co-investment.
What’s uncommon here isn’t Canada’s government funding Canadian mining companies. It’s the American military funding them, for what’s believed to be the first time in the 74-year history of the U.S. DPA, which created new powers for the president to fund or buy certain products as a national-security matter.
“It’s a historic move by the U.S. government,” said Ben Steinberg, who worked on energy-security issues for the U.S. government, and who now works for a coalition of battery-makers.
“The U.S. military needs these materials for combat and for national-security purposes.… It’s an important move.”
The U.S. started examining dozens of Canadian proposals in 2022. It requested product pitches, then more detailed applications, then it finally picked two winners, at which point the Canadian government contributed millions of its own.
What’s the catch?
The cash comes with no strings attached — for now. This is free money, in the form of grants, to help companies get through final feasibility studies and permitting.
But in a national-security crisis, the U.S. military could demand these supplies — say in the event of a severe trade war, or worse, a shooting war in the Asia-Pacific.
That’s made clear in a clause in Canada’s own version of the Defence Production Act, which gives the government the power to buy raw materials on behalf of a NATO ally.
In other words, the U.S. military could leap to the front of the customer line.
One recipient company said that, under its grant contract, the U.S. government would pay the going market rate if it became a customer.
That company, Ontario-based Fortune Minerals, says it’s already spent $137 million in preparatory work on a cobalt-gold-bismuth-copper mine in the Northwest Territories and a processing facility in southern Canada.
But lending markets froze two years ago, as Chinese-controlled mines ramped up production, causing global prices of critical minerals to plunge.
With prices low, feasibility studies incomplete and uncertain returns on investment, lenders shut their wallets to the sector.
“We’ve been living kind of hand-to-mouth for a fairly lengthy period of time,” said Robin Goad, president of Fortune Minerals.
“The money was not available from banks,” he said. “Because the capital markets, for junior mining, have been closed … for several years.”
A look at the two companies involved
He started asking U.S. federal departments for money several years ago, and learned most of them couldn’t fund a foreign project; but the military could, because of an old defence-industrial agreement, which the U.K. and Australia have just joined.
He underwent a preliminary screening, then an exhaustive request-for-proposals submission, and finally learned a few months ago that his project was tentatively approved. This month’s announcement made it official.
The funding will pay for the final feasibility studies, and Goad hopes to start construction on the mine within two years and start production in 2027, given that he already has key permits and an environmental assessment.
“We are a very advanced project,” Goad said.
He suspects what won the grant was his company’s plans to process, not just mine, at home, retaining control of these minerals entirely within North America. In addition, he’s working to potentially process materials for U.K. mining giant Rio Tinto.
“We have to go faster. It cannot take us 12 to 15 years to permit new mines in this country if we want to successfully advance the energy transition,” said Natural Resource Minister Jonathan Wilkinson as the federal government released its critical minerals strategy Friday.
The other winning bid belonged to a Quebec-based company, Lomiko Metals, seeking to develop what it describes as one of the world’s largest graphite deposits.
“We were very excited [by this news], as you can imagine,” said Gordana Slepcev, Lomiko’s chief operating officer.
“This is a very, very important step for us.”
She said the public funding will cover half of everything the company needs before a decision on construction, meaning its late-stage feasibility and permitting work.
With the Pentagon backing, she’s not worried about being able to raise the other half over the next few years; she estimates the final plans will take between three and five years; shovels could be in the ground between 2027 and 2029.
“The reality is we can always speed up the timeline,” she said. “If capital comes right away, we can go [faster].”
A mood shift during the 1940s
In the 1940s, that capital came quickly.
The U.S. pumped tens of millions in that era’s currency into making an aluminum plant in Quebec’s Saguenay region the largest in the world, for decades to come.
The project was considered so vital to national security its location was kept secret for two years, with The New York Times eventually breaking news of the “hush-hush” plan.
In the meantime, Canada boasted of supplying the aluminum for thousands of Allied planes, in volumes large enough to equip a new army division every six weeks.
A few years later, with the Allies on the cusp of victory, the American mood turned.
Politicians and U.S. industry complained about these arrangements, even holding congressional investigations to address a question that had seemed self-evident amid the frenzy of a few years earlier: Why had U.S. money built an industry in another country?
This modern-day iteration has been launched with no clarity over whether the world is entering a phase anywhere near as dangerous.
Published at Sun, 26 May 2024 08:00:00 +0000
