The King’s Speech, Climate Change and German Inflation

Following yesterday’s State Opening of Parliament, Members of Parliament will today continue to debate the government’s plans for the year ahead as laid out in The King’s Speech. Yesterday King Charles outlined the Government’s intention to impose tougher sentencing on criminals as well as stopping leaseholds for new houses (though not flats) and a phasing out of purchasing tobacco products through incrementally increasing age restrictions. King Charles also outlined the Government’s plans to establish new licences for North Sea oil and gas projects on an annual basis. Earlier this year the government issued 100 new licences for the North Sea, in an announcement which came just weeks after Sir Keir Starmer pledged to end North Sea oil and gas exploration.

As such, Starmer said that the 21-piece legislative agenda marked “more of the same”. And as the FT argues, “even some ministers loyal to Sunak admitted that the programme was underwhelming and unlikely to transform a political landscape”.

Of course, the speech marked Sunak’s first State Opening of Parliament as PM and comes as the Conservatives continue to fall some 20pts below the Labour party, as speculation grows on whether there will be a general election as early as Autumn 2024. In accordance with the Fixed Term Parliament Act, a GE is to be held no later than 25 January 2025. All eyes remain focused on Westminster as politicians from all sides of the political spectrum continue to debate yesterday’s legislative items.

Last month the world reached its highest global average temperature since records began, surpassing the previous record by 0.4°C set in 2019. The global average temperature last month was also estimated to be 1.7°C above the average levels seen between 1850 and 1900. This follows the hottest September on record which saw temperatures rise by the largest margin from any other month of any year since this type of data was collected in 1940. The data compiled by the European Union-funded Copernicus Climate Change Service also indicates that 2023 will be the hottest year since records began. Speaking on this, the Deputy Director of the organisation Samantha Burgess said that “When we combine all the data together, the global air temperature records, the global sea surface temperature records, the global sea ice records, all of these indications together really show us that our climate is changing at a very rapid pace, and we have to adapt to the climate that we are facing right now”.

Earlier this year, US researchers at the National Centres for Environmental Prediction identified Monday 3 July as the hottest day on earth since records began at the end of the 1800s. With the global average temperature exceeding 17.1 degrees Celsius, scientists cited the impact of greenhouse gas emissions and El Niño. June also saw surface air temperatures worldwide exceeding the 1.5°C Paris Climate Conference threshold.

The latest data identifying October 2023 as the hottest October on record comes ahead of COP28 later this month. This will see delegates, business leaders and academics from all around the world meet at the Expo City, Dubai to work towards keeping global warming within the 1.5°C threshold (above pre-industrial levels). Hence, as average temperatures continue to rise at an alarming rate all eyes turn to COP28 to see whether global consensus can be reached on measures needed to reduce global warming.

This morning has seen German inflation come in line with expectations at 3.8% on an annualised basis, with the print also being unchanged from last month’s print. This marked the joint lowest inflation reading in over two years as the pace of the German economy slows and energy prices subside. Regarding energy for example, energy prices fell by 3.2% compared with October 2022 as consumers paid 28% less for heating oil and 13% less for natural gas. Electricity prices nonetheless rose 4.7% as food prices were also 6.1% higher compared against 6.1%. Service inflation also remained elevated at 3.9%.

The print will provide some confidence to policy makers in Frankfurt that the impact of monetary tightening is continuing to take some of the inflationary heat out of the Eurozone’s largest economy, reducing fears over the prospect of stagflation. German growth however remains a key concern for policy makers with Germany barely out of a technical recession, having seen two consecutive quarters of economic contraction in Q2 2022 and Q1 2023 and 0% quarterly growth over Q2.