The Bank decides — Bailey under fire — Sunak in Kent – POLITICO

Good Thursday morning. This is Eleni Courea. Dan Bloom is back on Friday to round off the week.

DRIVING THE DAY

A STICKY SITUATION: Things are about to get worse for Brits already buckling under the cost of living burden — and for the government, which doesn’t have much time improve its political fortunes.

24 hour recap: Economists spent Wednesday muttering darkly about May’s inflation stats, which measure how quickly prices are rising. The headline figure was stuck at 8.7 percent and core inflation rose to its highest level in 31 years.

As a result: Forecasters have no doubt the Bank of England will raise interest rates — increasing the cost of borrowing, including mortgages, to try to curb inflation — for the 13th time in a row to 4.75 or even 5 percent. The BoE will deliver its decision at noon today. Chancellor Jeremy Hunt and Shadow Chancellor Rachel Reeves will issue statements straight after.

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All that means: Things are looking glum if you’re a Tory prime minister hoping to get reelected on a promise to slash inflation and sort the economy out.

Things are also looking very glum … if you’re Andrew Bailey. The Bank of England governor has been under fire for a while from Tory MPs and right-wing columnists, but he’ll be reading the papers through his fingers before he heads to work this morning.

See for yourself: The Times and the Mail splash on accusations from Jeremy Hunt’s economic advisers and senior Tories that Bailey misjudged the crisis. And City traders who go into the office on Thursdays will be picking up a brutal issue of CityAM, which covers its front page with some of Bailey’s recent comments (he said in July 2021 that inflation would be “transient” and insisted as late as March 2023 that there would be a “sharp fall” this year). The Times runs an excoriating leader which says: “Mr Bailey missed his calling because he would have made an excellent defence counsel. Alibis for Britain’s outlier status on inflation (now twice the US rate) have issued regularly from the man whose primary mission is to control it … [His] excuses have worn away his credibility.”

Significantly: Transport Secretary Mark Harper went further than any Cabinet minister Playbook has seen in suggesting the BoE made mistakes. Asked about the criticism that it had been to slow to raise interest rates, Harper told Sky’s The Take with Sophy Ridge: “Some people make that criticism, yes, and there was a decision to make at the beginning about whether inflation was transitory or not.” A government aide said it was an observation on how far ahead of the curve Sunak was in realizing the threat of inflation, rather than a comment on the bank.

Harper also said: That the government had full confidence in Bailey. “They do an important job, it’s a tough job, they are independent for a reason,” he said of the bank and its governor. Ministers are loath to criticize the bank for fear of appearing to call its independence into question (especially given that was one of the things Liz Truss toyed with).

GRASPING THE NETTLE: Prime Minister Rishi Sunak will undoubtedly be asked about this as he embarks on a bit of a media and public engagement blitz today. He will speak at the Times CEO summit and be quizzed by editor Tony Gallagher at 12.35 p.m. Later in the afternoon, the PM will take questions from voters and reporters at a PM Connect event in Kent.

A preview: The Times splash trails some of Sunak’s comments — the PM will warn that the U.K. can afford neither tax cuts (memo to half the Tory MPs) nor a bailout for people facing higher mortgage costs (memo to the other half). “Any spending commitment we make will be outpaced by inflation unless we get it under control,” a No. 10 source tells the paper. In Kent, Sunak will say halving inflation is a “deep moral responsibility” and that he is “completely confident” he can meet his end of the year target.

Ideas needed: My colleague Esther Webber hears an email from No. 10 went round at least one government department asking for ideas about how to fix inflation. Reply by midday on Friday if you’ve got any (and put Playbook on BCC!).

To be fair to him: The PM is putting himself out there and resisting the temptation to hide under a duvet in an air-conditioned room. And the economy is one of the things he is most at ease talking about — though some of his team are aware he is vulnerable to opposition attacks about being out of touch with cost of living pressures.

So the question is: Will the PM do his usual thing of taking a helicopter to Kent for what would normally be a short train journey?

NO. 10’S NEXT POLITICAL HEADACHE: Facing down Tory MPs’ calls for tax cuts. The Mail leads a spread with the words: “Hope for pre-election tax cuts all but died last night,” and quotes an “insider” who says that “it may be that personal tax cuts will have to wait” until after the Autumn Statement at least. Tory MP John Redwood told the Mail in response that targeted tax cuts could help bring down inflation and that ministers should “get prices down, not tax them higher.” There’s also the pressure from MPs to introduce mortgage relief — the i has more.

Mortgage-a-geddon: The whole thing is not only a nightmare for the Conservatives, Esther Webber writes in her piece today co-authored with POLITICO’s senior finance editor Izabella Kaminska, but will be keenly felt by Sunak, who has pledged to halve inflation and steady the economy. They point out that the promise to halve inflation by the end of the year was once mocked by commentators who thought he was promising to do something that was bound to happen, and now looks all but out of reach. Despite this, insiders say, his only hope is to stick to the path he’s already set out. A government official said: “It comes down to who people think is competent and will restrain spending.”

Also worth reading: Juliet Samuel in the Times who argues that all of this is likely to herald a significant fall in property prices and painful realignment in the British economy.

Poll snippet: Forty percent of 2019 voters haven’t decided whom to vote for in the next election, according to polling by Bradshaw last month.

Now read this: My colleague Anjuli Davies writes on how Brits are still willing to splurge to treat themselves to a day out.

BY-ELECTION STATIONS

HERE’S ANOTHER TICKING TIME BOMB: Calming Tory MPs’ fears about their reelection prospects would be a less pressing concern for No. 10 were it not facing four by-elections in a few weeks’ time.

Notably: Playbook hears Sunak may be traveling to Selby and Ainsty on Saturday to campaign. That suggests the Tories are hopeful of holding onto the seat on the night of four by-elections (losing all four would really sow the seeds for panic). Selby and Ainsty has a 20,137 Tory majority, which in other circumstances would be unassailable.

Campaign preview: In her Spectator column, Katy Balls writes that Tory election strategist Isaac Levido told political Cabinet this week that the party’s by-election campaigns would be hyper-local. Playbook hears Tory MPs have been invited to 20-minute briefing sessions today with the CCHQ Insight and Voter Comms team to hear the party’s message for the four campaigns. “Clarity and discipline on messaging will be of vital importance,” the message circulated to MPs says.

Worth noting: Labour’s candidate for the seat, Keir Mather, grew up near Selby but currently works for the Confederation of British Industry (CBI) and is a former parliamentary researcher to Shadow Health Secretary Wes Streeting. The Tories might well try to depict their candidate, Yorkshire Councillor Claire Holmes, as the local choice.

IN UXBRIDGE: The Times’ Alice Thomson has an interview with Danny Beales, Labour’s candidate in Uxbridge and South Ruislip, about growing up in the area.

BIG SELECTION KLAXON: George Osborne’s long-serving former chief of staff Rupert Harrison is the Tory candidate in the newly created Bicester and Woodstock constituency in Oxfordshire (h/t Michael Crick).

LABOUR LAND

STARMER SPEAKS: Labour leader Keir Starmer is also out and about today. He will speak at the Times CEO summit at 11.25 a.m and will be interviewed by Political Editor Steve Swinford. At noon the Labour leader will go on Matt Chorley’s Times Radio show to react to the Bank of England’s interest rate decision and take part in Chorley’s regular “Can You Get to Number 10?” quiz (if only it were that easy).

On mortgages: Labour is urging ministers to impose new rules on banks forcing them to allow borrowers to switch temporarily to interest-only payments or lengthen their mortgage period if they need to. The Times’ Oli Wright has a write-up.

PEER PRESSURE: Some senior Labour figures are scratching their heads at their party’s own goal over peerages, Playbook hears. Party spin doctors tied themselves in knots to explain how and why Starmer wants to appoint a load of peers to the Lords to help implement his agenda … and also abolish the Lords in his first term. Today’s Sun and Mail give the plans — which were first mooted by the Times — a rinsing. And just when the Tories were on the ropes over Boris Johnson’s peerages.

DONOR CLANGER: Labour was a bit too hasty to tell the Telegraph it would return the money it got from Ian Rosenblatt, a senior lawyer and lifelong Labour supporter accused of having links to Russia — incorrectly as it turned out. After a review, the party has apologized to Rosenblatt. The Times’ Henry Zeffman has the story.

JOB AD: Labour plans to appoint a diversity czar to get more women, ethnic minorities and people from working-class backgrounds into elected roles at all levels in the party, the Guardian’s Aletha Adu reports. The last person to advise Labour on diversity, John Lehal, is now the party’s chief operating officer, so seems like a good gig.

UKRAINE UPDATE

ON THE UPSIDE: Things have been better for Rishi Sunak on the international stage. Despite a tricky week domestically, the government gets to showcase its leadership on Ukraine on the second and final day of the Ukraine Recovery Conference, which is being held in London.

On the agenda: Foreign Secretary James Cleverly will deliver a closing speech alongside Ukrainian Foreign Minister Dmytro Kuleba and Prime Minister Denys Shmyhal.

PUT THAT IN YOUR PIPE: One of the last arteries carrying Russian gas to Europe could be shut off by the end of next year, according to Ukrainian Energy Minister German Galushchenko. “I can tell you that we are preparing our system for a cut of supplies,” he told the FT. Ukraine’s supply contract with Russia’s state-owned Gazprom expires in 2024.

REOPEN NOMINATIONS: Defense Secretary Ben Wallace told The Economist last night that his ambition to become NATO chief was “not going to happen” and admitted that U.S. President Joe Biden wants Jens Stoltenberg to stay on in the role for longer. Wallace won’t get the gig because he was blocked by Biden, the Sun’s Harry Cole and Jerome Starkey reported. Norwegian media reported last week that Biden had asked Stoltenberg to extend his term until next spring — suggesting none of the candidates have made a good enough impression.

Brexit burn: My Brussels Playbook colleagues report that part of the issue for Wallace (or any U.K. candidate) is that several EU leaders are reluctant to hand the plum gig — which traditionally goes to a European — to a Brit after Brexit.

TODAY IN WESTMINSTER

BARGE WON’T BUDGE: The barge commissioned by the government to accommodate Channel migrants in Dorset has imposed rules meaning it won’t actually accommodate Channel migrants who arrived after March, the Times’ Matt Dathan reveals. He also says its arrival has been delayed.

COSTLY DELAY: Delaying the construction of part of HS2 from London to northern England will add £366 million to the scheme’s final bill, the FT’s Jim Pickard reveals. Successive delays, cost overruns and reductions to its scope meant its cost more than doubled from its original budget of £33 billion a decade ago.

PYLON PROBLEMS: My colleague Charlie Cooper has a fun piece on how the U.K.’s net zero target will require lots more pylons to be installed across the country — which is already drawing NIMBY-style local opposition. “In 31 years in politics, I have never known a single issue raise so much passion in my constituency,” veteran Tory MP Bernard Jenkin tells him.

JENKIN JOGS ON: The Mail’s David Churchill tailed Jenkin, who is the most senior Tory member of the Commons Privileges Committee, to quiz him over allegations he attended a lockdown-breaking party. He wouldn’t say anything.

AI UPDATE: The New Statesman’s Harry Lambert has written the mag’s cover story on artificial intelligence, speaking to the founders of the field about their contrasting visions of how good or bad its development will be for humanity. One of them, Turing Award winner Geoffrey Hinton, was recently in No. 10 for a meeting with the PM’s policy unit chief, Eleanor Shawcross, he reports.

SKILLS SUMMIT: Education Secretary Gillian Keegan is hosting a conference on the government’s skills agenda with big businesses in Westminster, with Chancellor Jeremy Hunt and Business Secretary Kemi Badenoch also billed to attend. The Sun has a preview.

COVID UPDATE: Chief Medical Officer Chris Whitty and former Chief Scientific Adviser Patrick Vallance will give evidence to the COVID inquiry, from 10 a.m.

Relatedly: Boris Johnson’s government overly relied on scientific advice during the pandemic and did not listen to economists about how lockdowns might affect the public finances, the COVID inquiry has been told. Whitty and his predecessor Sally Davies both suggested evidence from the SAGE committee should have been balanced with advice about damage to the economy from lockdowns. The i’s Jane Merrick has the story.

OLD BAILEY: Former Tory mayoral candidate Shaun Bailey, who attended that lockdown-flouting “jingle and mingle” Christmas party, is nonetheless set to become a peer on July 18. The Independent’s Kate Devlin and the Mirror’s Lizzy Buchan and Mikey Smith have the story.

NEVER MIND THE ECONOMY: A row over whether children at a particular school should be able to identify as cats has entered its fifth day. Asked about it, Keir Starmer’s spokesman said it was “clearly ridiculous” and that “children should be told to identify as children,” comments which the Telegraph describes as “the most outspoken by any party leader over the issue.” Maybe Rishi Sunak is preparing lines to outflank him today. The original story is pretty surreal if you feel like going down this particular rabbit hole.

HOUSE OF COMMONS: Sits from 9.30 a.m. with Cabinet Office questions before Commons leader Penny Mordaunt‘s business statement … and then the main business is two backbench debates on the infected blood inquiry and the BBC’s proposals for the future of local radio. Tory MP Robin Walker has the adjournment debate on government support for professional rugby in the West Midlands.

WESTMINSTER HALL: Debates from 1.30 p.m. on topics including the Marina dam disaster (led by DUP MP Jim Shannon) … and volumetric concrete mobile plants (led by Lib Dem MP Alistair Carmichael).

On committee corridor: Department of Energy Security and Net Zero Second Permanent Secretary Clive Maxwell is among those giving evidence to the Public Accounts Committee on the rollout of smart meters (10.30 a.m.) … and Ofsted Chief Inspector Amanda Spielman speaks to the Lords’ Education for 11 to 16 Year Olds Committee on that subject (11 a.m.).

HOUSE OF LORDS: Sits from 11 a.m. with the introduction of Tory peers Darren Mott and Kay Swinburne followed by oral questions on support for teachers to assist with supporting mainstream school students with a diagnosis of dyslexia or autism, working with international partners to facilitate peace talks between the Colombian government and the National Liberation Army and the decision to site the Holocaust Memorial in Victoria Tower Gardens … and the main business is the 10th day of the Online Safety Bill at committee stage and a statement by Department of Work and Pensions Minister James Younger on cost of living support.

BEYOND THE M25

WINGING IT: Fergus Ewing is set to lose the SNP whip after voting against the Scottish government in a no-confidence motion against Circular Economy Minister Lorna Slater. Ewing, an MSP since 1999 who served under both Alex Salmond and Nicola Sturgeon, was the only SNP MSP to vote against the motion. The Scotsman splashes it.

PARIS EXPLOSION: An explosion in central Paris injured 37 people, four of them seriously. The blast happened in a building containing a design school and the Catholic education system headquarters. The BBC has more.

GREEN FINANCING SUMMIT: French President Emmanuel Macron will host 50 heads of state and government at the Summit for a New Global Financing Pact, which aims to help poorer countries access funds to grow their economies sustainably. German Chancellor Olaf Scholz and European Commission President Ursula von der Leyen are among those set to attend. Rishi Sunak has been criticized by campaigners for not committing to going. POLITICO has a curtain-raiser.

GREEK BOAT SINKING: Pakistani authorities arrested seven alleged human trafficking ring key figures following the sinking of an overcrowded migrant ship off Greece which left an estimated 500 people feared dead. The arrests took place over the past two days as the government cracks down on traffickers. ITV has a write-up.

TITANIC SUB OPERATION: A robot submarine sent to where banging was detected beneath the sea could be the last chance to save the five individuals onboard the missing submersible, whose air supplies are expected to run out by noon. The BBC is live-blogging the operation.

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MEDIA ROUND

Foreign Secretary James Cleverly broadcast round: Sky News (7.15 a.m.) … LBC (7.25 a.m.) … GB News (7.35 a.m.) … Today program (7.50 a.m.) … GMB (8.10 a.m.).

Shadow Chancellor Rachel Reeves broadcast round: BBC Breakfast (7.10 a.m.) … Today program (8.10 a.m.) … BBC interview with Chris Mason (9 a.m.).

Shadow Financial Secretary to the Treasury James Murray broadcast round: GB News (7.45 a.m.) … Sky News (8.05 a.m.) … Times Radio (8.35 a.m.) … LBC News (8.50 a.m.) … TalkTV (9.20 a.m.).

Also on the Today program: Former Deputy Governor of the BoE Charlie Bean (7.10 a.m.).

Also on Sky News Breakfast: Former BoE monetary policy committee member Martin Weale (7.30 a.m.) … Former Chief of the General Staff Richard Dannatt (8.20 a.m.) … All-Party Parliamentary Group for Race Equality in Education’s L’Myah Sherae and Labour MP Dawn Butler (both 8.45 a.m.) … First Deputy Chief of the Parliament of Ukraine Oleksandr Korniyenko (9.20 a.m.).

Also on Nick Ferrari at Breakfast: Former Equality and Human Rights Commission Chair Trevor Phillips (7.40 a.m.) … National Police Chief’s Council Lead for Self Defense, Arrest and Restraint Matt Twist (8.35 a.m.).

Also on Times Radio Breakfast: England test cricketers Ollie Pope and Zac Crawley (7.50a.m.) … Chief Economic Strategist at Netwealth Gerard Lyons (8.05 a.m.) … Titanic wreck explorer and friend of the missing submersible pilot Dik Barton (8.15 a.m.) … Tesco CEO Ken Murphy (9.35 a.m.).

Also on GB News Breakfast: Tory councillor Holly Whitbread (7.20 a.m.).

Also on Good Morning Britain: Former Labour adviser Ayesha Hazarika (6.20 a.m.) … Dawn Butler (7.25 a.m.).

Also on TalkTV Breakfast: Economist Julian Jessop (8.20 a.m.) … Tory MP Bob Seely (8.30 a.m.) … Former Brexit Party MEP Ben Habib (9.40 a.m.).

Politics Live (BBC Two 12.15 p.m.): Tory MP Nick Fletcher … Labour’s Sarah Owen … PoliticsHome’s Nadine Batchelor-Hunt … Writer Tomiwa Owolade.

TODAY’S FRONT PAGES

POLITICO UK: Britain’s mortgage crisis could destroy Rishi Sunak — yet he’s powerless to act.

Daily Express: Rescue robot is last chance of survival.

Daily Mail: Tories turn on Bank over rates crisis.

Daily Mirror: Holding on to hope.

Daily Star: Their last hope.

Financial Times: Stubborn inflation piles pressure on Bank of England to take tough action.

i: Mortgage pain deepens as new rate rise sparks recession fears.

Metro: Time runs out …

The Daily Telegraph: NHS lung cancer test for every ex-smoker.

The Guardian: Guards at Del Monte pineapple farm accused of killings in Kenya.

The Independent: Frantic final search for striken sub as oxygen runs out.

The Sun: The final hours.

The Times: Triggering recession ‘could tame inflation.’

TODAY’S NEWS MAGS

POLITICO Europe: Inside Ukraine’s first day as an EU member.

The New Statesman: The AI wars — Harry Lambert on whether artificial intelligence is an existential threat or humanity’s salvation.

The Spectator: Home truths — Kate Andrews on the crushing reality of the mortgage crisis.

LONDON CALLING

WESTMINSTER WEATHER: 28C highs with a chance of light showers.

WHERE DOES THE NEW CULTURE SEC GET HER NEWS? London Playbook of course. Lucy Frazer told former Downing Street adviser Jimmy McLoughlin on the “Jimmy’s Jobs of the Future” podcast that she “gets that POLITICO email every morning” which “fully informs me.” She also loves reading Tim Shipman’s long reads on the weekend and is a member of a book club. The culture secretary — who was appointed a privy councillor by the late queen over Zoom — spoke about her path into politics and how her inspiration for becoming a lawyer came from her grandmother, the first female barrister in Leicester.

EXCITING NEWS: The National Portrait Gallery is finally reopening after three years — meaning we’ve one more leading cultural institution within a short walk of Westminster. Its opening event is the First Look Festival running until July 2, which is headlined by none other than Stanley Tucci and Paul McCartney.

SPOTTED: At the Conservative Environment Network’s 10th anniversary celebrations were … Energy Secretary Grant Shapps … Department for Environment’s Rebecca Pow … Scotland Minister John Lamont … MPs Mark Jenkinson, Selaine Saxby and Matt Hancock … Greater London Authority candidate Christine Wallace … Hacks Christian Calgie, Noa Hoffman and Dominic Penna … Financier Ben Goldsmith … and communications adviser Laura Dunn.

Also spotted: At the Solstice-meets-Westminster Centre for Social Justice summer party at the UnHerd Club were … Foreign Secretary James Cleverly … Education Secretary Gillian Keegan … Chief Secretary to the Treasury John Glen … Ministers Johnny Mercer and Will Quince … Money saving expert Martin Lewis … Shadow Ministers Jonathan Ashworth … MPs Jack Brereton, Stephen Crabb, Iain Duncan Smith and Nadhim Zahawi … SpAds Rupert Cunningham, Rebecca Macintyre, Adam Memon and Ed Winfield … Hacks Peter Cardwell, Jon Craig, Ethan Croft, Claire Ellicott, Liam Halligan, Noa Hoffman, Christopher Hope, Martin Ivens, Sam Lister, David Maddox, Henry Olsen, Andrew Pierce, Felix Pope, Ryan Sabey, Harriet Sergeant, Camilla Tominey, Olivia Utley, Jeremy Vine, Justin Webb, David Williamson and Lauren Windell … Former Downing Street Director of Communications Andy Coulson … Conservative Home founder Tim Montgomerie … Former England Rugby Captain Lawrence Dallaglio … and Former YouGov President Peter Kellner.

MEDIA CORNER: Some media outlets — including major broadcasters — have been privately granted waivers to attend the Tory party conference for free, Byline Times’ Adam Bienkov reports. For the second year in a row, news outlets are being charged a controversial £137 fee per reporter they want to send to the event.

NEW GIG: Piers Forster has been appointed interim chair of the U.K.’s Climate Change Committee.

SEVEN YEARS ON: Question Time‘s special episode to mark the seven-year anniversary of Brexit, which features an exclusively Brexit-voting audience in Clacton-on-Sea, is on tonight at 8 p.m. on iPlayer or 10.40 p.m. on BBC One.

LISTEN TO: David Aaronovitch and guests discuss Ukraine’s counteroffensive and what it can realistically achieve on the Briefing Room at 8 p.m. on Radio 4.

NOAH’S CULTURE FIX: Numerous tomes are released today to set up your weekend reading — “The Power of the Outsider: A Journey of Discovery” by Samuel Kasumu is published by Hodder & Stoughton … “Critical: Why the NHS is being betrayed and how we can fight for it” by Julia Grace Patterson is published by Mudlark … “This is Not America: Why Black Lives in Britain Matter” by Tomiwa Owolade is published by Atlantic Books … “Necessary Women: The Untold Story of Parliament’s Working Women” by Mari Takayanagi and Elizabeth Hallam Smith is published by the History Press … and “Fighting for Life: The Twelve Battles that Made Our NHS, and the Struggle for Its Future” by Isabel Hardman is published by Viking.

BIRTHDAYS: Weston-super-Mare MP John Penrose … Retired Judge and press inquiry chief Brian Leveson … Crossbench peer Sheila Hollins … Tory peer and former Energy Secretary John Wakeham … Broadcaster Alastair Stewart … Crossbench peer Richard Best … Former Treasury Director of Operations Catherine Webb.

PLAYBOOK COULDN’T HAPPEN WITHOUT: My editors Jack Lahart and Zoya Sheftalovich, reporter Noah Keate and producer Dato Parulava.

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