Tag Archives: Government

Disrupted Global Supply Chains: Is a Strategic Shift on the Horizon?

GK Adviser Felix Griffin looks at the forces disrupting global supply chains and explores how industries and governments are adapting to this ‘new normal.’

Beyond shortages and delays: the existential challenges facing global supply chains

The intricate network of global supply chains currently faces a confluence of unprecedented challenges. The initial shockwaves of the COVID-19 pandemic exposed vulnerabilities in meticulously planned production and transportation systems. While there were tentative signs of recovery in 2023, geopolitical developments, like the war in Ukraine and heightening tensions in the Middle East, have exacerbated disruptions, impacting the flow of critical resources. This is compounded by the growing impacts of climate change, which manifests in extreme weather events that disrupt production and transportation, highlighting the limitations of just-in-time manufacturing models. Inflationary pressures are squeezing margins for businesses and impacting consumer spending due to rising costs of raw materials and energy. Labour shortages in many industries add another layer of complexity, creating bottlenecks and hindering smooth operations.

The consequences of these pressures are far-reaching. Consumers face significant price hikes across various goods, driven in part by supply chain disruptions. Shortages of certain products are becoming commonplace, and even when available, delivery times have significantly increased. Businesses are caught in a precarious position, struggling to meet demand while grappling with rising costs and the potential for product scarcity.

The question remains: are these disruptions a temporary blip or a sign of a new normal? Experts suggest that we are entering a new era for global supply chains, one that necessitates a paradigm shift towards increased resilience. Businesses need to adapt and become more agile to navigate this increasingly complex landscape. Diversifying their supplier base and production locations can mitigate risk by reducing reliance on any single geographic region. Nearshoring, the practice of relocating production closer to consumer markets, can lessen dependence on long-distance transportation, which is vulnerable to disruptions and rising fuel costs. Technological advancements offer a compelling solution where they can be realised. Investments in automation and data analytics can enhance efficiency, transparency, and even enable real-time adjustments to production based on fluctuating demand.

Governments themselves play a crucial role in ensuring supply chain integrity. Strengthening import/export controls and fostering domestic production of critical goods can lessen reliance on potentially volatile regions. Fostering international cooperation on supply chain diversification and transparency is proving to mitigate risks and ensure access to essential resources during periods of heightened tension. Echoing the concerns of Deputy Prime Minister Oliver Dowden, this new era necessitates a reassessment of national security risks embedded within globalised supply chains. Dowden aptly pointed out, in a recent address at Chatham House, that while globalisation has brought economic benefits, it has also exposed vulnerabilities. The recent actions announced by the UK government, including a review of Outward Direct Investment (ODI) risks and an update to the National Security and Investment (NSI) Act, serve as a model for other nations. These steps acknowledge the potential for exploitation by hostile actors, as highlighted by Russia’s manipulation of gas prices and China’s use of economic coercion. By working collaboratively with the private sector, governments can play a crucial role in building a more resilient and secure global supply chain network for the future.

Building a more resilient and adaptable supply chain network is not without its challenges. It requires a strategic shift in perspective and potentially higher upfront investment. However, the long-term benefits far outweigh the initial obstacles. By collaborating effectively, businesses and governments can foster a more robust system that ensures a smoother flow of goods, minimises disruptions, and ultimately benefits all stakeholders, from manufacturers and retailers to consumers across the globe.

Underfunded & Underprepared: Is Britain’s Defence Broken?

GK Adviser Felix Griffin dives into the challenges facing the MoD, from funding shortfalls to sluggish decision-making, and explores potential paths forward.

Incoherent strategy and a lack of funding is hampering progress

The UK’s Ministry of Defence finds itself grappling with a yawning funding gap, a rapidly evolving global landscape demanding a more responsive military, and an uncertain political landscape.

The biggest hurdle? Money – not just the lack of it but also how its spent.

Having fallen down the pecking order in the Chancellor’s recent budget, defence spending is set to receive no additional funding under the current government’s remaining tenure.

Meanwhile rising costs, particularly in nuclear deterrence and ambitious naval programmes, have created a staggering £16.9 billion hole in the MoD’s Equipment Plan – a shortfall which effectively handcuffs the MoD’s ability to modernise its equipment and carry out crucial projects necessary to maintain a robust defence posture.

There’s more to this than just money. Recent warnings highlight long-standing and systemic inventory failures in all three categories of inventory across the UK armed forces: Capital Spares, Raw Material and Consumables, and Guided Weapons, Missiles and Bombs. This raises a critical question: even with increased funding, would the UK be able to effectively equip its armed forces? The current evidence suggests not, presenting a deeper problem that needs addressing.

These issues point not only to a lack of innovation in procurement and strategic thinking, but also to sluggish decision-making processes that hinder the MoD’s ability to react swiftly to emerging threats.

Defence Secretary Grant Shapps’s stark assessment of the current situation – a transition from a “post-war world into a pre-war world” – rings all too true. The war in Ukraine serves as a stark reminder of the impact of large-scale conflict in Europe, while regional instability in the Middle East and the ever-growing tensions in the Asia-Pacific all demand a more agile and capable military from the UK. These diverse threats, which are by no means an exhaustive list, require a comprehensive and adaptable defence strategy from the MoD; something which the most recent Integrated Review (2021) failed to deliver, even after it was refreshed in 2023.

With the possibility of a new Labour government becoming increasingly likely, the party’s stance on defence policy and spending adds another layer of uncertainty.

I attended a Policy Exchange event on 28 February, which saw Labour’s Shadow Secretary of State for Defence, John Healey, articulate his party’s vision for national defence. While recognising outdated practices and the imperative to modernise, Labour’s defence plans appear largely underdeveloped, or at least under-communicated.

Despite outlining some interesting plans, including a new national armaments director and the enhancement of the Chief of Defence Staff’s role, Healey’s speech fell victim to his party’s commitment to fiscal prudence, lacking significant substance and ambition. Though highlighting the state of defence when Labour left in 2010, with comparatively higher levels of defence spending (2.5% of GDP), as well as better troop numbers and satisfaction (over 100,000 soldiers and 60% approval), Healey emphasised the need to streamline existing processes before making financial commitments, underscoring a cautious approach. Nevertheless, Labour’s emphasis on reform and strategic preparedness offers a glimpse into their aspirations for bolstering the nation’s security in an increasingly uncertain world.

Council Tax Reform

Reflections on the Future of Council Tax

GK Associate Hugo Tuckett assesses the likelihood of council tax reform amid rising concern about local authority financial resilience.

Is council tax reform on the horizon?

Amid rising bankruptcies in recent years, and growing concern about the sustainability of council finances, funding mechanisms for local authorities – and particularly council tax – are attracting growing political scrutiny.

In December 2023, the Local Government Association reported that almost one in five council leaders and chief executives it surveyed think it is very or fairly likely that they will need to issue a Section 114 notice this year or next due to a lack of funding. A Section 114 notice is issued by a council’s finance officer if they believe the council’s expenditure will exceed the resources it has available. Eleven Section 114 notices have been issued since 2018, with only five issued in the 30 years prior.

Given that council tax receipts now make up over half of local authority spending power (56.9% in 2023-24 compared to 49.1% in 2015-16), ensuring the council tax regime is operating effectively is critical to the long-term sustainability of local authority finances.

The Levelling Up Committee recently made a series of recommendations to the Government on council tax reform. In its report, the Committee reiterated its previous conclusions about the “unfairness and outdatedness of the council tax regime”.

The Government has since said it has no plans to conduct a revaluation of council tax bands (the Committee’s key recommendation) as, amongst other factors, “it would particularly risk those on a lower income, including pensioners, who have seen their homes appreciate in value”.

Here is the focal point of political discourse. A Conservative Government, aware that (according to recent YouGov polling) the Party is now the most popular only among the over-70s, will be aggrieved to conduct a revaluation of property bands which would hit the pockets of its core voter base. A Labour government on the other hand, with traditionally greater allegiances to younger, non-home owning voters and those on lower incomes could take a fresh look at this issue. One option likely to be under consideration is the introduction of new, higher bands of council tax.

Given the Shadow Chancellor, Rachel Reeves, has ruled out numerous tax rises ahead of the upcoming General Election, council tax reform represents one revenue-raising lever still available to her. While the details of any potential reform are still unknown, it is a near certainty that the council tax regime will only grow in political salience in the years ahead.

The Fallout from the Horizon Scandal

GK Point of View – The Fallout from the Horizon Scandal

GK Adviser Rebecca McMahon assesses the potential impact of the Horizon scandal on the Labour Party’s procurement plans.  

How will the Horizon Scandal influence Labour policy? 

The renewed focus on the Post Office’s procurement of Fujitsu’s Horizon software has brought to light procurement issues which are pertinent to the Labour Party. 

Labour has already committed to increasing oversight of government procurement – Shadow Chancellor, Rachel Reeves has proposed a “covid corruption commissioner” watchdog to recover taxpayer money lost due to the Government’s VIP “fast lane” for contract delivery during the pandemic. Evidently, the Party is keen on a system where both the Government and individual suppliers are held to greater account. The Horizon scandal only adds to its case. 

The Party is not just set on preventing bad outcomes from government procurement; they are also aiming to use it as an actively positive instrument, with Deputy Leader Angela Rayner placing an emphasis on “social and environmental factors”.  

She also urged the Government to ensure that “contracts do not always automatically go offshore” and instead are awarded “to businesses creating local jobs, skills and training”. Labour has also said it would “make social value mandatory in public contract design”, introducing measures to promote “decent work” and strengthen supply chains. 

Labour to lean on procurement to digitalise services? 

As well as encouraging more ethical procurement, Labour is also keen to use procurement to further digitalise public services. This is especially true of the NHS, where key figures like Wes Streeting, Shadow Health Secretary, have been vocal about the need to invest in innovative health technologies and make more effective use of health data. 

However, in the wake of the Horizon controversy, any efforts to radically digitalise the NHS will be caveated by important questions about accountability. 

Whether or not digitalisation will be a quick fix for the UK’s declining health provision, it is likely to be a key area for procurement under a Labour government. UK healthtech has expanded nine-fold since 2016, and the sector’s future could be bright under a future Starmer government. 

 

GK Point of View – Reflections on the Autumn Statement

On Wednesday 22nd November, Jeremy Hunt MP unveiled his Autumn Statement, setting out the Government’s tax and spending commitments for the next year.  The backdrop to this year’s Autumn Statement presents a number of challenges for a government with likely less than a year until the next General Election. The UK’s inflation rate stands at 4.6%, more than double the Bank of England’s target of 2%. Growth rates have stalled, and the Bank of England is predicting that the UK will see zero growth until 2025.

To better understand the true impact of the decisions in the Autumn Statement and how they will impact both the wider economy, and specific sectors, GK Strategy have developed a briefing containing sector specific insight and analysis from our Senior and Strategic Advisers.

Find GK’s briefing here: Autumn Statement 2023

Kings Speech

The King’s Speech

Conservative Party shapes political battlegrounds in bid to turn around polling deficit

The first King’s Speech by Charles III and the last before a General Election was noteworthy not for the 21 Bills announced, which will shape the upcoming legislative agenda, but what it revealed politically. Whilst in the short-term today’s ceremony is unlikely to move the dial, it did reveal the foundations upon which the Prime Minister and the Conservative Party will seek to fight the election upon.

The overarching theme was the Government’s commitment to reducing inflation and bringing down the cost of living. The language that accompanied this was ‘making decisions in the long-term interest.’ This is fundamental to the Conservative Party strategy. By next Autumn (the most likely timing for the General Election) household costs will have stabilised and the Party will say to the electorate that they are on the right track and now is not the time to change course. Expect the phrase ‘long term interest’ to feature even more prominently as we look ahead to the Autumn Statement later this month. In the most recent YouGov poll of the most important issues facing the country unsurprisingly the economy is far out in front of the public’s most pressing concerns.

Within the King’s Speech were numerous Bills related to law and order. This is an area of traditional strength for the Conservative Party, however, in recent times the Party has fallen behind Labour on the issue. The recent demonstrations in London and the potential for further action ahead of Armistice Day, the Conservative political machine may see this as an opportunity to push for a hard line approach that they believe will sit well with the majority of voters. The Economic Activities of Public Bodies Bill, which is designed to give ministers the powers to ban public bodies from imposing their own boycotts, divestment or sanctions campaigns against foreign countries is likely to be a focal point in this debate designed to further expose divisions within the Labour Party on conflicts such as Israel-Palestine.

The other major focus area, which wasn’t included as a Bill but was referenced by The King as a priority area for the Government is on the topic of immigration. The King said the Government would continue to crackdown on criminal gangs and control the boats crossing the Channel with the powers conferred to ministers in the previous Parliament. With almost 4 in 10 voters citing immigration as a top three issue the Government is determined that its efforts remain front of mind of voters.

So, with the pitfalls for Labour clear, how can the Party respond? Under the Shadow Chancellor Rachel Reeves we will continue to ensure fiscal discipline is the priority. By demonstrating a firm grip on public spending and fully costed policies, Reeves will hope to build up enough credibility that when she asks voters ‘do you feel better off after a Conservative government’ the reply will not only be ‘no’, but an electorate confident in voting for a reformed Labour Party. The Party will also feel they are on the right side of the argument when it comes to the transition to Net Zero with regards to the forthcoming Offshore Petroleum Licensing Bill, claiming the Government is failing to show leadership and is presiding over a period of ‘dither and delay’.

Labour are also likely to capitalise on the lack of health announcements in the speech despite the policy area trailing only behind the economy in voters concerns. Despite a bill promising to ban the sale of smoking to anyone born on or after 1st January 2009, there were no mentions of NHS reforms or bringing down waiting lists. Perhaps an acknowledgement that the Conservative Party have for now conceded on the issue.

The battle lines have been drawn. Today is the firing gun on the debates in Parliament and the media that are likely to play out between now and the election as the parties vie for your vote.

What can organisations looking to engage in the political process take from this? It is far less about the potential impact of these measures, which may or may not pass, but a guide to how you can align your organisation with the political agenda to ensure your voice is heard and to begin to positively influence the shape of the next Parliamentary session.

For more details on the State Opening of Parliament and the new session, speak to GK Associate Director, David Mitchell david.mitchell@gkstrategy.com