Bye-Election

Friday Feeling, Labour take comfort in by-election results, potential for income tax cut plans to be dropped, president of European Commission speaks on European Union defence production.

Friday Feeling

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UK By-elections

Labour seem unaffected by the party’s issues of earlier in the week, taking both Wellingborough and Kingswood by-elections. Winning Wellingborough represents the second largest swing to Labour of all-time, with a move of 28.5%.

Labour will take comfort in the results, particularly as Reform possibly didn’t play as big a role in their win – i.e. didn’t split the Conservative vote – as much as many had feared. That said, they still got 13% of the vote in Wellingborough and just over 10% in Kingswood.

The news means that the only by-election the Conservatives haven’t lost under Rishi Sunak was the Uxbridge by-election – though that was seen as more a protest vote against Sadiq Khan’s ULEZ scheme rather than an endorsement of the Conservative candidate.

Interestingly, with the boundary changes of constituencies head of the next general election, Jacob Rees-Mogg will inherit half of the Kingswood voter base, which given they gave Labour a ten percent margin of victory could spell trouble for him.

Labour will draw comfort from the outcome and Professor sir John Curtice has said that Sir Keir is on course to become PM. But they will be concerned over their next by-election on the 29 February, where Rochdale goes to the booths – this is the seat that caused this week’s mini meltdown amongst the Labour party and George Galloway is on the campaign trail looking to be a thorn in Labour’s side.

Chancellor Poised to Abandon Plans for 2p Income Tax Cut

Following yesterday’s GDP print which signalled that the UK entered a technical recession, headlines circulated on speculation that the Chancellor Jeremy Hunt will drop his plans to cut income tax by 2p.

With Hunt gearing up for his Spring Budget on 6th March, he had been poised to cut the basic rate of income tax from 20% to 18% in a break to millions of taxpayers across the country. However, following figures suggesting that there less ‘fiscal headroom’ than previously expected – along with recessionary growth in the UK – The Telegraph is citing a source from the Treasury who said that: “The world has changed. Everything you thought was going to happen [at the Budget] may not now happen.” According to the Treasury, such a 2p cut in income tax would cost No.11 around £13bn, and thus it is widely believed that the Chancellor no longer sees the tax cutting measure as affordable.

The Telegraph’s article also cites how official figures indicate that the UK is suffering the most prolonged hit to living standards since records began with output per person also dropping significantly. Attention now turns to 6 March.

Munich Security Conference

Yesterday, the president of the European Commission Ursula von der Leyen stated that the “world has got rougher” and that the European Union should look to subsidise defence production. Speaking at the Munich Security Conference, she indicated that this would ensure the bloc would be able to increase and consolidate defence production.

Von der Leyen told the conference that the European Union has a “fragmented defence market” and that Brussels should be an enabler to the industry. According to the FT, the EU may seek to use a proportion of its budget to “supplement joint contracts for weapons signed by member states, as well as guaranteeing that production will be bought”. She signalled that such a set up could be resemble how the EU rolled out vaccine production during the pandemic.

The president of the European Commission’s comments come as NATO’s European member states are set to spend around $380bn this year on defence, marking a record high.