THE TRIUNE MODEL APPLIED TO ORGANISATIONS

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THE RETURN OF UK INFLATION

20 November 2024

Return of Inflation in the UK

1. Introduction

The recent UK Budget has introduced policies likely to rekindle inflationary pressures, threatening the current downward trajectory of consumer price inflation (CPI).

Bank of England Governor Andrew Bailey warns that Budget measures could delay further rate cuts and stoke inflation.

2. Key Inflationary Drivers

a. Corporate Cost Pressures

Businesses, particularly in labour-intensive sectors, face higher costs due to:

National living wage increases.

Employer National Insurance Contribution (NIC) rate hikes.

Impact:

Companies like BT, Sainsbury’s, and JD Wetherspoon are expected to raise prices to offset increased payroll costs.

Suppliers may pass on cost increases, amplifying inflationary pressures.

b. Wage Growth

Wage growth remains strong at 4.8% in the private sector, well above the target of 2–3%.

Public sector pay increases further push average earnings upward, influencing private sector pay negotiations.

c. Public Spending

Increased government spending on hospitals, schools, and public services is deemed inflationary:

The Office for Budget Responsibility (OBR) predicts a 0.5% rise in CPI due to Budget policies.

3. Changes to Rate Cut Expectations

Pre-Budget forecasts of a 4% base rate by mid-2024 have been revised upward, with rates now expected to fall more gradually:

Analysts at Pantheon Macroeconomics foresee rate cuts occurring quarterly instead of at every meeting.

Berenberg estimates the terminal rate to be 4.25% by Q2 2024.

Capital Economics increased its 2026 CPI forecast from 2% to 2.2%.

4. Additional Pressures

External risks, such as US election outcomes and potential trade wars, could exacerbate inflationary pressures.

A weaker sterling may contribute to imported inflation, further complicating the Bank of England’s policy decisions.

5. Conclusion

The Budget’s fiscal policies, while aimed at boosting public spending and wages, risk reversing recent progress in controlling inflation.

Analysts and market observers caution that the Bank of England may slow down or halt rate cuts, prioritising inflation control over economic stimulus.

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EXPECT 4.5% MORTGAGE RATES

19 November 2024

If you are thinking of buying a property, or having to re-mortgage after your 2 or 5 yr fixed rate expires, expect higher mortgage repayments.

From all I can work out, it looks like the BoE bank rate could be settling down from 4.75% today to a terminal rate of 4.25% in the second quarter of next year.

So there are hopes of Bank of England base interest rate cuts.... But this isn't the same as your mortgage rate., oh nooooo !

You'll be on a fixed-rate deal (2 or 5 yrs), and fixed rates move with swap rates, not the BoE base rate.

How are swap rates worked out?

"Fixed-for-floating swaps" is a deal where party A receives a variable interest rate linked to the BoE base rate over a period, by paying party B a fixed rate. 

Then party B adds on its costs and profit margin and that's what you, party C rhe mortgagor, will pay.

So the fixed rate reflects where market participants A and B expect BoE interest rates to average over the course of their agreement. 

As a result, swap rates tend to change when interest rate expectations change - expectations rather than actual interest rates.

The five-year swap rate has climbed from 3.75 to 4% since the Budget – despite the recent 0.25% interest rate cut to 4.75% BoE base rate.

Remarkably, more than a third of mortgagors are still paying rates of less than 3 per cent, thanks to cheap deals secured before rate hikes began. These are almost all due to expire over the next two years. 

This means that for the country as a whole, average mortgage rates are going to increase next year – even as the base rate falls further.

As the chart above shows, the Office for Budget Responsibility OBR forecasts that average rates will keep rising to 4.5 per cent by 2027, and stay elevated all the way to 2030. According to the BoE, the average household rolling off a cheap deal and having to remortgage, will see repayments increase by a quarter, or £180 a month. For an unlucky 400,000 mortgagors, payments are set to increase by 50 per cent or more.

So we need to put that in our budget spreadsheets. Locate your expected purchase or remortgage date on the graph above and then put that number in your spreadsheet, less any first-time buyer discount if applicable.

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Towards a New World Order: Rebalancing for Peace

17 November 2024

Towards a New World Order: 

Rebalancing for Peace

In the aftermath of the last World War, global institutions were established with the vision of fostering cooperation and preventing conflict. As the world faces a shifting geopolitical landscape, it is worth revisiting the fundamental principles needed to achieve lasting peace. These principles rest on three foundational pillars:

1. Trade as a tool for peace, transcending the motivations for war.

2. The safeguarding of global sea and land lanes to ensure free and fair movement.

3. The respect and enforcement of international law as a universal standard.

Achieving these ideals, however, demands a radical rethinking of global governance structures. Here are the key propositions for a more balanced and peaceful world:

Reimagining Global Governance

1. Acceptance of a Multipolar World

The unipolar dominance of a single power or bloc is increasingly untenable. A multipolar world would acknowledge the rise of new powers and distribute influence more equitably.

2. Reaffirming the Role of the United Nations

For the UN to serve as an effective arbitrator, its decisions must be universally respected and immune to unilateral challenges. This would require a renewed commitment to its authority.

3. Rebalancing the Security Council

The current structure of the UN Security Council, heavily weighted in favour of the G7 nations, must shift to reflect the interests and voices of the global majority, including nations from the Global South.

4. Reforming International Institutions

Beyond the Security Council, all major global institutions need to be rebalanced to reflect contemporary realities. If reform proves impossible, there may be no choice but to rebuild these institutions from the ground up.

5. Abandoning Alliances

Alliances often create hierarchies, with dominant powers exerting centralised control. Alliances meanblock politics. Such structures perpetuate division and conflict. 

Instead, a decentralised approach that respects the sovereignty of each nation could promote collaboration without coercion.

A Diplomatic Path Forward

The goal should not be military solutions but diplomatic ones, where rational negotiations respect national sovereignty. Centralised, top-down power structures must give way to decentralised systems that operate through delegated authority with mutual consent.

Challenges and Realities

While these ideas present a blueprint for peace, their implementation is admittedly far-fetched. The reality is that the world seems more likely to split into blocs—the West versus the rest—if no consensus emerges. China, despite its rising influence, shows no signs of pursuing the role of a global hegemon. Similarly, BRICS, a grouping of emerging economies, is unlikely to assume such a role without risking catastrophic global conflict.

The Fly in the Ointment: Israel

The most intractable obstacle to global peace remains the Israel-Palestine conflict. This singular issue continues to defy resolution and often complicates broader international relations. Without addressing this "bluebottle in the ointment," any vision of a harmonious global order will remain incomplete.

Conclusion

The dream of a balanced, multipolar world governed by diplomacy rather than alliances may seem fantastical. Yet, it remains a vision worth striving for. Whether through incremental reforms or bold reimagining, the international community must confront the structural flaws in the current system. Otherwise, the planet risks further division—or worse, devastating conflict.

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BRAINS, BUCKS AND BAGPIPES : WHO GETS TO STUDY IN SCOTLAND

16 November 2024

A recent report concludes that "26% of Edinburgh's students are from Scotland, while more than 70% are from England, the rest of the UK or overseas.

Those attending private schools make up 40% of the intake."

This is an issue to do with the need for Scotland to balance the needs of its society for a well-educated population, with the financial incentives of universities to attract high-paying international and private school students.

When considering how to respond to this report, we can ask what is best for Scotland and we can offer separate answers addressing short, medium and long term perspectives. 

SHORT TERM

In the short term, funding from wealthier students allows universities to invest in facilities, staff, and global research recognition.

But of course, this means limiting access for local students, especially from disadvantaged backgrounds, in order to sell "their" places to wealthy and overseas parents.

This risks exacerbating social inequality and could impact the availability of skilled professionals (e.g., teachers, healthcare workers).

What is to stop the Scottish Assembly from setting quotas for Scottish students to ensure local representation? Or providing financial or other carrots, or sticks, to encourage private school students to study outside Scotland, freeing places for locals?

MEDIUM TERM

To respond seriously to this challenge of "Scotland for the Scottish", we could start by creating an Equity Based Admissions Policy, EBAP let's call it.

We would like a higher proportion of qualified Scottish students, to enhance the availability of educated workers in crucial sectors like the nascent aerospace industry we intend to create in Edinburgh, and generally for supporting the local economy.

After all, letting the universities make lots of money to spend on we don't know what is rather like letting them catch lots of fish, whereas what we want is the fishing rods that could come from educating our own youth.

As well as a seedbed for greater economic growth, another goal of the equity based, the EBAP, is equality - greater diversity as an objective in admissions will boost social mobility, reducing inequality in the long run.

Of course, the university’s reputation might suffer if funding cuts and budget constraints limit research opportunities or "global outreach", or international cooperation on important future projects.

But again, how could we deal with these potential disadvantages? We could encourage philanthropic funding or partnerships with industries to offset financial losses - this was always the way in the past, where wealthy individuals and successful corporations would sponsor projects in the public sector and why don't we have PPP private public partnerships today?

Also, look at the student-level mix - focus on attracting international students into postgraduate courses, because this will mean less impact on the availability of undergraduate places.

It would definitely be a good idea for Scotland to offer a UK passport to those paying students successfully completing their course.

LONG TERM

The goals must surely be economic growth and social peace. A well-educated, locally-rooted population will strengthen Scotland’s ability to address its economic and social challenges, independently of wealthy interfering foreigners, including dare I say those from Westminster.

Furthermore, by investing in Scottish students, we will foster loyalty and retention ie they are more likely to stay and contribute to the national workforce and economy and make for a well integrated and peaceful, albeit ethnically diverse community, because local solutions give hope to local people and encourage ambition and conscientious hard work for the nation.

But to repeat, the risk is that on lower budgets, the universities will lose overseas opportunities to enhance their reputation. And at home, there could be a brain drain because once local Scottish lads and lasses get over-qualified in an economy which cannot offer them sufficient opportunity for career advancement and salary, the best will flee to higher reward economies such as Silicon Valley.

So, in terms of long term solutions, EBAP could establish SGRS, a Scottish Graduate Return Scheme, where local students commit to working in Scotland post-graduation and in return receive a first class subsidised education. And for reasons of symmetry, a scheme too, attract foreign students into postgraduate courses with the promise of a uk, passport could equally enrich the knowledge base of Scotland.

I'm sure this happens already, but it also makes sense to have the universities less dependent on tuition fees from these wealthy overseas parents by diversifying funding sources, eg create corporate partnerships.

CONCLUSION

Scotland stands at a crossroads in shaping the future of its higher education system. The challenge lies in balancing the pressing need to develop a well-educated, locally invested population with the financial realities of running a globally competitive university setup.

In the short term, the reliance on high-paying international and private school students provides essential funding but risks widening social inequality and limiting opportunities for local talent. Implementing quotas or incentives for local students could address this imbalance while maintaining financial stability.

In the medium term, an Equity-Based Admissions Policy (EBAP) could transform admissions to prioritise Scottish students, fostering economic growth and social mobility. Innovative funding models, such as public-private partnerships or postgraduate-focused international recruitment, could offset financial risks and ensure universities remain globally competitive.

In the long term, the vision must centre on a well-educated, locally rooted workforce driving Scotland's independence, prosperity, and equality. Policies like the Scottish Graduate Return Scheme (SGRS) can ensure local graduates remain invested in their homeland while diversifying funding sources to reduce dependency on tuition fees. The university system could even be used to attract high calibre graduates to Scotland on the promise of a UK passport.

Ultimately, Scotland’s universities must serve the nation’s needs without sacrificing the nation's global ambitions. Thoughtful reforms that prioritise equity and opportunity for Scottish students will secure a stronger, fairer, peaceful and more prosperous future for all.

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