Queen Elizabeth II: astute in the world of politics - Financial Times

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On any other morning, the £150bn package to support UK households and businesses through the energy crisis would be the theme of today’s note. Instead, the biggest story in UK politics and one of the biggest in the world is the death of Queen Elizabeth II.

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Inside Politics is edited by Georgina Quach. Follow Stephen on Twitter @stephenkb and please send gossip, thoughts and feedback to insidepolitics@ft.com.

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Queen Elizabeth II, 1926-2022

“Her reign spanned Britain’s journey from the wireless to the smartphone, from social deference to egalitarianism, from empire to the EU — and out again,” reads the Financial Times’s obituary. In an ever-changing world, the Queen was the only constant.

As Philip Stephens writes in a thoughtful piece on her life and reign:

The 96-year-old monarch’s failing health was no secret. She had been obliged to miss many of the events in this year’s national celebrations of her platinum jubilee. The shock of her death will be no less profound for that. No other public figure was held in greater affection.

In a nation beset by economic troubles, scarred by the polarisation of its politics and uncertain of its place in the world, the Queen was a vital anchor.

That was in part about the length of her reign. But it was also about her abilities as a canny political operator, and her adroit handling of the job. As the FT editorial board says:

She fulfilled a sometimes ill-defined constitutional role with delicacy. She was the weekly confidante of 14 prime ministers from Winston Churchill onwards, and just days before her passing swore in her 15th, Liz Truss. She remained above politics with only rare, discreet exceptions — such as her professed hope, days before Scotland’s 2014 independence referendum, that the Scottish people would “think very carefully about the future”.

As I wrote at the time of the platinum jubilee:

The paradox of the Queen’s political success is that we mostly don’t think of the monarch as political. But, of course, the question of whether to have a constitutional monarchy, a republic or something else entirely is a political question. And a big part of the Queen’s success is that UK politics is a colder home to republicanism now than it was in the 19th century.

She has also managed to pitch the monarchy as “above politics” when it is in fact anything but. The biggest tribute to the Queen’s political project wasn’t anything that happened over the jubilee weekend. Actually, it was during the 2019 general election: when the then Labour leader Jeremy Corbyn got asked about whether he watches the Queen’s Speech on Christmas Day, he felt obliged to claim “usually we have it on”.

The next best tribute came in a poll this weekend by Sunday Independent/Ireland Thinks which showed that the Queen is more popular in the Republic of Ireland than any of the country’s own politicians. Glance across the rest of Europe, where so many monarchs have been diminished, displaced or actively decapitated, and you can see that the Queen’s popularity isn’t inevitable.

It means we have a new monarch and for almost everyone in the UK that will be an entirely alien experience. It will, of course, have political ramifications: but what they will be, I’m not going to pretend to know.

Liz Truss’s £150bn energy price guarantee

The UK government will spend around £150bn to cap energy bills. Here’s George Parker, Jim Pickard and Chris Giles on how it will work:

An “energy price guarantee” will limit average annual household bills to £2,500 over the next two years. The price guarantee will apply to the unit cost of energy so the amount any household pays will vary depending on how much gas and electricity they use.

The maximum amount for typical household energy use had previously been due to rise to more than £3,500 in October with some projections showing that bills would have topped £6,000 next year. A previously announced £400 energy bill discount will be retained and green levies costing £150 will be temporarily removed, meaning that average household bills will remain at roughly their current level of £1,971.

Businesses will receive “equivalent support” for six months, but the exact nature of that remains unclear, as does the Treasury’s own estimates as to how much the package will cost. After that six-month period has elapsed, the government plans to switch to a more targeted scheme for “vulnerable” businesses.

The government is trying to do quite a lot of things here: it’s trying to prevent households from experiencing destitution and businesses from going bankrupt this winter, and encourage households and businesses to reduce their energy usage.

As our European economics commentator Martin Sandbu says in his excellent Free Lunch email (requires premium subscription access), resolving the energy crisis means both avoiding destitution and bankruptcy this winter and bringing an end to Vladimir Putin’s ability to use the global energy market as a weapon of war. Here’s the key paragraph (emphasis mine):

It is imperative, therefore, to beat Putin at his own game, which means to make our own demand more elastic and overall smaller. This depends on our physical ability to economise on energy and substitute between power sources and uses. We are finding out what this ability is, as Chris Giles’s excellent comment on Europe’s handling of the gas crisis shows. It also depends on policy. That is why it is so important to support energy users with grants and support schemes rather than trying to subsidise or cap prices below market-clearing levels.

Now, it’s true to say that the scale of the crisis means that “the needy” is a category that now includes nearly eight in 10 UK households. But even so, there is a benefit to a cash transfer, which would mean at least some households deciding to cut down usage or invest in insulating their homes in order to pocket some of their subvention for other things, rather than only spending it on their energy costs. Others would be more likely to install solar panels both to cut their own bills and to earn money by selling their excess energy back to the grid.

The Truss plan is superior to the Labour and Liberal Democrat proposals in that its price ceiling is at a higher level than either of the opposition party proposals. It may therefore still see more of the beneficial behaviour changes and domestic investments that the opposition proposals would not.

But it comes with risks attached. The first is that the combination of that £400 support package and the energy price guarantee may not provide adequate support to the poorest households.

The second is that it provides insufficient incentive for households and businesses to cut back on their energy usage and to invest in insulation and other measures — and ministers end up having to introduce a formal programme of rationing. A lot is resting on the effectiveness of the government’s campaign to encourage energy saving.

The third is that the scheme reduces the height of the peak in UK inflation at the cost of making high UK inflation last longer, as Chris Giles explains in an excellent piece on the challenge the policy poses for the Bank of England:

There are some offsets to this new fiscal stimulus. Economists agreed the plan was likely to lower the peak of inflation by about 5 percentage points so that instead of peaking around 15 per cent in January, it will stay at roughly the July level of 10.1 per cent before falling gradually in 2023. In the short term, this will cut the cost of inflation-linked government debt by about £25bn, only to push it higher in the medium term because the decline in inflation will not be so steep.

Now, of course, Liz Truss insists that her policy is not inflationary, and chancellor Kwasi Kwarteng writes in defence of the measures in our pages today. These disagreements are also part of why Kwarteng has sacked Tom Scholar, the Treasury’s permanent secretary. Scholar’s exit means that the two top civil service posts at the Treasury are currently vacant, giving Kwarteng huge scope to remake the Treasury as an institution.

But the longevity of those changes will depend on if the unorthodox approach favoured by Truss and Kwarteng works.

Now try this

Simon Schama has penned a captivating, and profoundly human tribute to the “monarch [who] was so much more than a head of state — she was quintessential Britain”, in one of our series of reflections on the second Elizabethan age, featuring some wonderful anecdotes and pictures.

Have a lovely and restorative weekend, however you spend it.

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