How Economies And Financial Systems Can Better Gauge Climate Risks – Analysis

 

January 5, 2023  Eurasia Review 

By Tobias Adrian, Vikram Haksar and Ivo Krznar

When it comes to the devastating impact of climate change, most people think of the harm inflicted on lives and livelihoods. Yet the effects of more frequent and extreme weather are just as consequential for the health of financial systems.

The physical impacts of climate-related shocks, such as hurricane damage to power grids, affect financial institutions and how they make decisions. So do the risks of transition to a low-carbon economy. Think of the costs of new carbon taxes or new laws that require phase-outs of fossil fuels before greener replacements are available.

To make well-informed decisions about future operations, banks, insurers, and others in the financial sector need tools to manage climate risks in their operations and balance sheets. At the same time, as financial supervisors monitor the resilience of the system, they need tools to adequately assess and supervise these risks.

Financial risk analysis

With the right tools, financial sector authorities can start to assess climate risks as a crucial input to gauging how to manage them with the right policies.

This is where the IMF comes in. The Fund’s Financial Sector Assessment Program already regularly examines the resilience of banks and other institutions, including with stress tests to better gauge systemic risks. These procedures are being retooled to incorporate climate risk analysis to better gauge financial stability risks from climate change.

Risk analysis typically entails development of scenario-based stress tests for assessing bank solvency. The process incorporates adverse macroeconomic scenarios specifically designed for the tests—including elements like economic contraction, rising unemployment, exchange-rate shocks, and falling asset prices.

These scenarios are then used as inputs when looking at relationships between these macro drivers and risk factors, such as credit risk and interest income, to estimate impacts on bank income and capital. Bank resilience is then assessed based on whether capital levels fall below regulatory thresholds.

Beyond the standard approach

Unlike conventional stress testing, climate risk analysis, at this stage, doesn’t focus on quantifying possible capital needs of financial institutions relative to the regulatory thresholds. Instead, the IMF approach focuses on measuring and raising awareness of risks. This reflects new challenges, including the complexities of modeling climate risk and its economic impacts over very long horizons and major data gaps.

While the consequences of climate change will play out over decades, risks that could arise in the next three to five years are considered in typical stress testing exercises. The incidence and impact of extreme events is rising and there is sizable uncertainty over policies. All these can potentially have large effects on the value of companies, and thus banks, as markets price in the effects of longer-term risks on business prospects.

The first step in the IMF’s climate risk analysis is to assess which hazards are the most relevant for a country. Where climate risks are important, the bank solvency stress testing framework incorporates the physical and transition risk.

This often starts with temperature and emissions scenarios based on figures from the United Nations Intergovernmental Panel on Climate Change and adapted by the Network for Greening the Financial System, a coalition of central banks working on climate change.

Climate scenarios then map emissions and temperature scenarios to physical risks, like extreme weather, and transition risks, such as future carbon taxes. These scenarios point to the trade-offs between physical and transition risk—the more orderly the transition, the lesser the increase in temperatures and the occurrence of physical climate risk.

Data and projections

The overall assessment of bank stability involves measuring how physical or transition risks impact the economy and bank capital. Physical risks are localized and require new approaches to understanding where storms and floods may strike. The analysis uses new data and projections of the likelihood and impact of different hazards on physical assets like buildings or infrastructure, and economic activity, such as extreme heat that reduces working hours. This approach was applied to consider risks to banks from typhoons in the2021 Philippines FSAP.

Policies to support transition to a lower carbon world seek to shift resources from brown to green sectors, impacting the prospects for the brown sectors. For the purposes of analyzing how this impacts the financial sector, we assess the impact of carbon taxes (as a proxy for the wide set of policies to foster transition) on individual economic sectors and, where possible, directly on firms’ balance sheets and therefore to banks.

We also assess what happens if investors reassess the value of businesses because of the effect of unforeseen changes in policies on long term earnings. Such an outcome, sometimes referred to as a climate Minsky moment, could lead to increases in credit risk today, affecting bank capital. This was discussed in this year’s United Kingdom FSAPwhich gauged how firm valuations, and thus credit risk, could be suddenly affected by climate change.

Enhancing the policy framework

At this early stage, climate risk analysis can help raise awareness around the prudent management of climate risks and incentivize banks in improving their frameworks. At the same time, it will help to inform supervisors about the potential magnitude of climate-related risks in their jurisdictions and better understand transmission channels to the financial system.

Currently, several supervisors and central banks use climate stress tests to measure the exposures to related risks. This helps to understand the challenges to banks’ business models, the implications for the provision of financial services, and desired policy responses. Ultimately, climate risk analysis will help financial institutions disclose and manage related risks.—This article reflects research by Pierpaolo Grippa, Marco Gross, Sujan Lamichhane, Caterina Lepore, Fabian Lipinsky, Hiroko Oura and Apostolos Panagiotopoulos.

*About the authors:

• Tobias Adrian is the Financial Counsellor and Director of the IMF’s Monetary and Capital Markets Department. He leads the IMF’s work on financial sector surveillance and capacity building, monetary and macroprudential policies, financial regulation, debt management, and capital markets.
• Vikram Haksar is an Assistant Director in the IMF’s Monetary and Capital Markets Department. He currently leads work on the IMF’s Financial Sector Assessment Program that conducts in-depth reviews in countries around the world on policies for assessing and addressing financial stability risk. He is also leading work on the impact of climate change on financial stability and represents the Fund on climate risk scenarios at the Network for Greening the Financial System coalition of central banks.
• Ivo Krznar is a Deputy Division Chief in the IMF’s Monetary and Capital Markets Department and a Mission Chief for the Uruguay FSAP. 

Source: This article was published by IMF Blog

 

Taliban And Deteriorating Women Rights – OpEd

 January 5, 2023  Eurasia Review  0 Comments

By Jehangir Khan Mehsud

The return of the Taliban government in August 2021 did not bode well for the females in Afghanistan. During the Afghan peace deal, the Taliban promised to ensure women’s rights in Kabul to garner international recognition. However, soon after their complete take-over of the Afghan territory, they started curtailing the fundamental rights of women one by one. Initially, girls were prohibited from attending secondary schools.

Currently, university education has been altogether suspended for girls on the illogical pretext of ensuring the safety of women. It implies that women have no right to education and are not considered an integral part of Afghanistan. Hence, Afghanistan has become a forbidden place for girls. The so-called patronage of Islam- Taliban- failed to be the epitome of Islamic values which truly believes in gender equality and girls’ right to education. If women are kept deprived of their right to education, Kabul would succumb to the age of darkness where women were not treated as a human being.

The agony of Afghan women does not end here. Women who aspire to serve their nation as doctors and teachers can no longer see their future anywhere during the incumbent Taliban government. A medical student Sahira Wafa, while giving an interview to a news channel cried out louder over the nefarious act of the Taliban regime. She said, ‘’ Taliban has banned us from everything. University was our last hope. Hence, it has been also closed.’’ The crackdown of the Taliban on girls’ education broke out a massive protest where girls gathered and sought their basic human rights. The international media and all other Muslim countries have strictly condemned the inhumane treatment of women in Afghanistan. However, all such condemnations fall on deaf ears of the Taliban.  Universities are completely shut down. Girls are in a state of despair and sorrow. They are not even allowed to speak up against the atrocities being inflicted on them.

 From the very start, The Afghan Taliban has discouraged freedom of speech for all and sundry, particularly females. Women are being restricted from peaceful protest. Their voices are silenced. They are threatened and beaten. It can be manifested in the viral video on social media where Afghan Taliban could be seen using water cannons on women protesting for their right to education. The Taliban government has left no stone unturned to confine women in four walls and bar them from every walk of life. Despite the Taliban’s brutal attempts, the Afghan women showed great resistance and continued to seek their international human rights.

 Moreover, Afghanistan is no more a pro-women state. The domestic and international non-state organizations were ordered to suspend the Afghan women for not properly wearing their scarves. Hence, women are barred from pursuing their rights to employment. In these hard times, the few financially independent women will fall below the poverty line. Their miseries would compound in no time. It will not be exaggerated to say that Afghanistan is not a safe state for women. Their rights are not religiously or socially decided, rather the Taliban have to decide the fate of women

The life of women is becoming miserable day by day. A woman in Afghanistan is not allowed to go outside without a man. She has no right to entertainment or recreational activities. Her abode is defined to be only inside the four walls of the home. It is hence not far that one day, a woman will not be allowed to live in Afghanistan. The crackdown against women will revive the twenty years old rule of the Taliban in which women were confined to their homes.

After the analysis of the dire status of women rights in Afghanistan, the major stakeholders of fundamental rights must strongly condemn the brutal attempts of the Taliban government against women. Muslim states such as Pakistan, Saudi Arabia, Turkiye, etc. should stand in solidarity with Afghan women and arrange a dialogue with the Afghan Taliban regarding ensuring women rights. A dialogue will help convince the Taliban to stay true to their promise made during the Afghan peace deal. Moreover, Afghan women must be morally supported. Their right to education must not be compromised at any cost.

In a nutshell, no country can progress by ignoring half of the female population. Afghanistan cannot become stable and economically prosperous by depriving girls of their basic human rights. The right to education is Afghan girls’ universally accepted right. Therefore, the Taliban government must not fight against women’s education and other rights. Rather, the fight against the Taliban should be against terrorism, poverty, and other social evils. Afghan women are equal citizens of the Afghan territory. Therefore, the Taliban must recognize women’s rights and such an environment should be created for women where they can feel secure and protected. Let the Afghan woman breathe freely and live her life as per her religiously and universally accepted human rights.

Jehangir Khan Mehsud, the writer is a graduate of economics and political science from Forman Christian College University, Lahore.

Women in Afghanistan market. Photo by Staff Sgt. Russell Lee Klika, US Army National Guard, Wikimedia Commons.

 

THE LIBERTARIAN VIEW

Globalization, Not Globalism: Free Trade Versus Destructive Statist Ideology – OpEd

 January 5, 2023  

By MISES

By Connor O’Keeffe*

After the 2008 financial crisis, calls rang out across establishment publications and the executive offices of Wall Street that we were witnessing the death of globalization. The calls grew louder and more numerous after Brexit, the election of Donald Trump, the pandemic, and Russia’s invasion of Ukraine. Yet the data appears to dispute this narrative. Global trade hit a record $28.5 trillion last year with projections to grow in 2023. The pace, however, is expected to slow. The reason for this is less a problem with globalization itself and more the historic setbacks that globalism has faced.

Before continuing, it is important to define some terms. Globalization occurs when societies around the world begin to interact and integrate economically and politically. The intercontinental trade experienced during the Age of Sail and via the Silk Road are early examples of globalization. Globalization really took off after World War II and received a recent boost with the widespread adoption of the internet. Importantly, globalization in common discourse includes both the voluntary economic activities between peoples of different nations and the involuntary geopolitical activities of governments.

In contrast, Ian Bremmer defines globalism as an ideology that calls for top-down trade liberalization and global integration backed by a unipolar power. Statists believe that market exchange between people is literally impossible without government; only when a group claims a legal monopoly on violence and then builds infrastructure, provides security, documents property titles, and serves as the final arbiter of disputes can a market come into existence. Globalism is the application of this perspective to international trade. Globalists believe that top-down global governance enforced and secured by a unipolar superpower enables globalization.

But, like statists on a more local scale, the globalist view is logically and historically flawed. Global trade was well underway before the first major attempt at global governance, the League of Nations, in 1919. The league’s stated aim was to ensure peace and justice for all nations of the world through collective security. Falling apart at the outset of World War II, it failed miserably. But globalism as an ideology found its footing after the war. Europe was devastated. This left the US and the USSR as the only two countries with the ability to exert power globally.

So began the fastest era of globalization in history. Trade exploded as people moved on from the war. The globalist project also got off the ground with the founding of the United Nations and the World Bank. Globalism was limited only by the ideological differences between the two superpowers. The USSR wanted to support revolutions while the US aimed for top-down trade liberalization—which drove the recent allies apart and plunged the world into the Cold War.

In the United States, the neoliberals and neoconservatives dominated the political mainstream through their shared mission to bring markets and democracy to the world at gunpoint and financed by US taxpayers. Fortunately for them, the rate at which their interventions at home and abroad were wrecking US society was slower than that of the Soviets. The abolition of prices and private property eventually led to the collapse of the USSR in the early 1990s. With its main adversary defeated, the United States had achieved one of the central tenets of globalism, unipolarity.\

From the outset, the US establishment gorged itself on its new globe-spanning influence. Through new international organizations like the World Trade Organization, “free trade” agreements were introduced. Some ran for hundreds of pages, yet all free trade really requires is an absence of policy. The United States sailed its navy around the world’s oceans promising to secure shipping lanes like a global highway patrolman. Through the promise of US military security and the bankrolling of international governance organizations, US taxpayers were forced to subsidize global trade.

As Murray Rothbard highlights in Man, Economy, and State with Power and Market, there is no such thing as international trade in a truly free market. Nations would still exist, but they would be pockets of culture instead of economic units. Any state restrictions on trade between people based on location are a violation of their liberty and a cost to society. Most free-market economists understand this and advocate against state restrictions accordingly. But subsidies to international trade are also antithetical to the free market. The proper free-market position is the complete absence of policy on both sides. No restrictions and no subsidies. Let people freely choose who they do business with. There should be no hand on either end of the scale.

Economic integration was far from the only focus of the US regime during its unipolar moment. Too many people had gained wealth, power, and status during the Cold War as part of the US war-making class. Despite the USSR’s total collapse, the last thing the United States wanted to do was declare victory and give up its privileged position. Instead, the United States scrambled to find a new enemy to justify the continuation of those privileges. Their eyes settled on the Middle East where they would, in time, launch eight unessential wars that killed any notion of a “rules-based international order.” US unipolarity proved Albert Jay Nock correct; governments are only as peaceful as they are weak.

This institutional desire for war would sow the seeds of destruction for the United States’ unipolar moment. As the United States eviscerated any notion that it stood for a rules-based order through its adventurism in the Middle East, tension was brewing in Eastern Europe and East Asia. To the doubtless joy of weapons companies and foreign policy elites, the Russian and Chinese governments were transformed back into the United States’ enemies.

The Russian invasion of Ukraine in February was a huge win for the US war machine, but it also represented an enormous step backward for globalism. The Russians seceded from the global order the United States had led for three decades. The West’s reaction, grounded in strict sanctions and forced economic divestment, deepened the rift in the global system.

What the future holds is anyone’s guess, but the globalist dream of a singular system of global governance is surely wrecked for the near future as the Russo-Chinese bloc breaks away. There will be pain because so many connections between nations are controlled by governments; however, a significant degree of globalization is still valued by the world’s consumers. The data contradicts any idea that globalization is reversing. It is only slowing as governments attempt to drag consumers along on their quest to divest from the other side.

Despite the claims that globalization is dead, international trade is alive and well. But the drive toward an interconnected world is slowing down as the ideology of globalism experiences its biggest setback in decades. The statist conflation of unipolar global governance and international trade explains where these claims are coming from and why they are flawed.

*About the author: Connor O’Keeffe is a writer and video producer at the Mises Institute. He has a masters in economics and a bachelors in geology.

Source: This article was published by the MISES Institute

MISES

The Mises Institute, founded in 1982, teaches the scholarship of Austrian economics, freedom, and peace. The liberal intellectual tradition of Ludwig von Mises (1881-1973) and Murray N. Rothbard (1926-1995) guides us. Accordingly, the Mises Institute seeks a profound and radical shift in the intellectual climate: away from statism and toward a private property order. The Mises Institute encourages critical historical research, and stands against political correctness.

THE LIBERTARIAN VIEW

 

What Deeper Lessons Can We Learn From Southwest Airlines’ Meltdown? – OpEd

 January 5, 2023  Eurasia Review  

By AIER

By Craig J. Richardson*

During the last week of December 2022, amid one of our nation’s worst snowstorms, Southwest Airlines canceled thousands of flights and sowed chaos and confusion among not only travelers but the flight crews themselves. The question as to why Southwest did so much more poorly than other airlines has been the subject of dozens of articles featuring interviews with transportation experts. On December 27th alone, Southwest was responsible for 87 percent of all flight cancellations in the country, even as the other airlines quickly recovered. 

The majority of experts have centered on two reasons for the failure after the fact. First, the airline operates on a point-to-point system with some incidental connectivity through main cities, rather than a hub-and-spoke system that involves banks of airplanes all arriving and leaving a hub city within a designated time frame to enable transfers. Second, it is using antiquated software that works just fine for the vast majority of events but could not handle an extreme weather event. The combination of these two factors created a cascading failure, since a canceled flight on one leg of a flight left a crew stranded in a city, unable to complete the next series of point-to-point flights. The aging software was so overwhelmed that the airline did not even know the locations of its flight crews. 

But the experts usually forget to mention something. Prior to the enormous storm, Southwest was known for its high efficiency and customer service. Two weeks before Southwest Airlines’ disastrous meltdown, its CEO praised his team as the best, “not just in the airline industry, but on the entire planet.” Note it takes a crisis to create instant experts who point out the “obvious” problems with an organization after the fact, but not before. 

Indeed, a point-to-point system, when it is working well, is more efficient than a hub-and-spoke system in terms of getting people from point A to point B. This means that planes can fly directly to their destinations, which passengers favor, rather than having to fly to a busy hub city such as Atlanta, and then connecting on another flight. All of us who fly regularly have endured the stress of making a tight connection. 

Not only is a point-to-point system favored by consumers, but average flight times are shorter, which saves fuel. Fewer planes are needed for a given route, as well as fewer flight crews, contributing to some of the lowest per-unit costs in the industry. Southwest’s decades-old but serviceable reservation system, at least until lately, has been just good enough the overwhelming majority of the time. Both of these factors have enabled Southwest to offer discounted fares as well as garner praise as one of travel customers’ favorite airlines. 

So the question is this: why haven’t more airlines adopted Southwest’s model? After all, our economic theory teaches us that in competitive markets, firms seek out the most efficient means of production in order to increase profits. Those that do not will eventually go under. 

The answer is not discussed in economic textbooks. Preparing for unexpected events is very difficult to build into a typical model of profit and loss. This is because it involves an unknowable tradeoff that each company must make between efficiency and resiliency. One cannot have more of both. Moreover, how the company thinks about time itself is part of this preparation. A company focused on the next quarter’s profits will think very differently than one that has a 25-year business plan.

Resiliency is the idea that a firm has something in its hip pocket that enables it to weather not just predictable challenging events, but also what are known as Black Swan events. A Black Swan event is a huge surprise, seemingly out of left field, does not follow probability theory and thus falls outside the normal business model or plan. Black Swan theory was first developed by Nassim Nicholas Taleb in his eponymous book. He notes that the possibility of a Black Swan event is often ignored by industry leaders, even though if and when it does happen, it causes a huge upheaval for the organization. As former Defense Secretary Donald Rumsfeld famously put it, there are “known unknowns,” and “unknown unknowns.” A Black Swan event is an unknown unknown. 

It’s hard for a CEO to make a case for protecting against Black Swan events to shareholders and management if that event has never occurred, since spending money on protection against a potential Black Swan event means diminished profits on an ongoing basis. Leaders of these organizations only get to say, “I told you so” when the unlikely event happens. If it never does, they may only be blamed for lower profits and may never get credit for their foresightedness. This is different from purchasing an insurance policy for smaller scale losses with a known probability of occurrence. 

This brings us to the current structure of the airline industry. The vast majority of airlines use the hub-and-spoke system, which is more resilient to these types of unexpected Black Swan disruptions. When one flight was canceled out of Atlanta, a major flight hub, the other airlines had multiple options to reroute passengers, and flight crews were more likely to be available rather than stranded in a remote city. The other airlines also had invested in more modern software that allowed them to adapt to extreme weather conditions. 

As a result, Southwest’s bet on extreme efficiency on a daily basis made it ill-prepared for an unknown unknown. Perhaps the bias came from the short-term thinking of former CEO Gary Kelly, who came from the accounting world and has been described as a “number cruncher”.

In their 2014 book, Scarcity: The New Science of Having Less and How It Defines Our Lives, economist Sendhil Mullainathn and psychologist Eldar Shafir discuss ways that organizations can build resiliency by taking actions that at first glance may seem counter to profits. Their word for resiliency is “slack” and by that they mean deliberately building in inefficiency in order to handle unexpected events. 

For example, an “efficient” and highly profitable hospital network may suffer a similar meltdown in operations under a bizarre mass casualty event, if it doesn’t have extra staff or space that appears unproductive on a balance sheet. Likewise, a domestic car company that does all its business with just one foreign steel company, in order to get the best negotiated prices, may be vulnerable to an unexpected political coup. What looks like inefficient slack or resiliency may in fact be an efficient long-term choice, if and when the Black Swan event occurs. 

In an interconnected economy, we are in the dark when it comes to Black Swan events, so the best we can do is make an educated guess. If a firm had good information about these tradeoffs, it could swap units of efficiency for units of resiliency until the long-run return for each was the same at the margin, i.e. the last dollar spent for each. But in the real world, the firm can only get concrete information on efficiency. 

Not surprisingly, in a market, there tends to be a bias towards what is measurable. In the Southwest Airlines’ case, it now appears they pursued an excess of transportation efficiency, which has measurable present benefits, instead of adding more resiliency, which has unmeasurable future benefits. 

The lesson of Southwest Airlines’ debacle is not that it was “dumb” or “shortsighted.” Rather, it should make all of us think more deeply about the opportunity costs and benefits of small, or marginal changes in this efficiency-resiliency tradeoff. Southwest bet wrong, to be sure, but without the massive winter storm, many “experts” would probably still be singing praises about Southwest’s innovative and low-cost business model. 

Bob Jordan, Southwest’s CEO for the past 10 months, has inherited its aging software and promises to invest more in technology that presumably will make the airline more resilient. But there has been no word on changes to its point-to-point system, something that will doubtless take months to evaluate in the wake of the recent meltdown in operations. 

This brings us back to the response of the Federal government. Secretary of Transportation Pete Buttigieg wrote Southwest a stinging letter, saying that the US federal government will “follow up” on the airline if it does not deliver promises on reimbursing all travel costs. 

But there is something else that could make airlines more accountable, and give all airlines more incentive to think harder about the potential impact of Black Swan events. If we had increased competition from more airlines, that would lead to more choice, especially in smaller cities. A 1993 American Economic Review study found that mergers between two airlines led to more market power and higher airfares, on average. For example, American Airlines now controls 90% of capacity at its hub in Charlotte, NC after the merger with US Airways in 2013.  The  city recorded the second highest jump in airfares in 2022, a phenomenon seen with previous airline mergers in smaller cities.  

Ordinarily, free entry into the marketplace would solve the problem of higher than normal profits, with the entry of hungry competitors bidding down prices. But that is held back by the Civil Aeronautics Act of 1938, which according to a 2003 GAO report, requires that US citizens own or control at least 75 percent of the voting interests of US airlines. The primary reasons are: “(1) protection of the US airline industry, (2) regulation of international air service through bilateral agreements, (3) concern about allowing foreign aircraft access to US airspace, and (4) military reliance on civilian airlines to supplement airlift capacity.” 

These concerns seem very likely to serve as excuses to secure an oligopoly structure in many smaller cities and make our air travel system less resilient than it might otherwise be. After all, airlines like Southwest will truly learn their lesson if a competitor is available to scoop up customers after a catastrophic failure. That decision showcased a bet on efficiency which took the company in the wrong direction, away from resiliency. 

Our current laws forbidding foreign competition look a lot like the ones that held back imported cars in the 1970s, leading to some of the worst vehicles ever produced by the Big Three auto manufacturers. Regulations have their place, but will never be the leading reason for large companies to innovate, nor think more carefully, long-term about the marginal costs and benefits of increasing resiliency.

*About the author: Craig J. Richardson is the Founding Director of the Center for the Study of Economic Mobility at Winston-Salem State University. He also was an AIER Visiting Research Fellow from 2005-2012. He received his BA in economics  from Kenyon College and his Ph.D. in economics from the University of North Carolina at Chapel Hill.

Source: This article was published by AIER

UK train strike misery as Rishi Sunak tries to avert future industrial action

Key Heathrow and Gatwick services not running

Passengers stand outside the locked gates at the entrance to Southfields underground station in south London waiting for the first train of the day. PA

Simon Rushton
Jan 04, 2023

Rail strikes will cripple the UK network for the travelling public on Thursday as Prime Minister Rishi Sunak looks at new legislation to discourage industrial action in key sectors.

Two major rail unions are in disputes over pay, leaving few if any trains running on strike days.

Industrial action is also being taken by nurses, ambulance crew, airport staff and bus drivers amid a cost-of living crisis in which inflation topped 10 per cent but pay offers largely stayed well below that level.

READ MORE
London's Piccadilly Line delays add to rail strike nightmare

On Thursday, it is the train drivers from the Aslef union walking out. On Friday and Saturday, the Rail, Maritime and Transport union resumes its industrial action.

For travellers, it has cut train services by up to 80 per cent.


Mr Sunak is poised to announce as early as Thursday his plans for new legislation to curb strikes, The Times reported late on Wednesday.

He wants legislation that enforces "minimum service levels" in six sectors, including health, rail, and border security, and that cover many of the high-profile strikes taking place this winter.
















A closed Birmingham Moor Street station during a strike by train drivers from the Aslef union, in a dispute over jobs and pensions. PA

His plan would require a proportion of union members to continue working to retain a "minimum level" of service.

“This legislation will remove the legal immunity for strikes where unions fail to implement a minimum level of service,” a government source told The Times.

"The strikes will be illegal. Ultimately, people could be fired for breach of contract."


Aslef general secretary Mick Whelan warned it was "inevitable" that further strikes would be held unless there was a breakthrough to the long-running dispute.

Mr Whelan said strikes could escalate, saying train drivers wanted to go "harder and faster" after years of not receiving a pay rise.

"The situation is getting worse and my members now want to go harder and faster because of the lack of progress,” he said.

"We are in a weird world where the government will do anything to keep private companies in the industry. It is inevitable that more strikes will be held and probably escalate.

"The train companies say their hands have been tied by the government, while the government — which does not employ us — says it's up to the companies to negotiate with us.


"We are always happy to negotiate, we never refuse to sit down at the table and talk, but these companies have offered us nothing, and that is unacceptable."

Among the operators which will run no trains all day on Thursday are Avanti West Coast, CrossCountry, East Midlands Railway, Northern, Southern, Southeastern, Thameslink and TransPennine Express.

Rail links to the UK's two busiest airports will be cut, with Gatwick Express and Heathrow Express shutting down.

Areas where trains will run on Thursday include: Wales; the Central Belt, Fife and the Borders of Scotland; and parts of the South Western Railway network.

Services will also operate on London Overground and the Elizabeth line.


About 20 per cent of normal services will run, according to the Rail Delivery Group.

Companies affected by the strike are Avanti West Coast; Chiltern Railways; CrossCountry; East Midlands Railway; Great Western Railway; Greater Anglia; GTR Great Northern Thameslink; London North Eastern Railway; Northern Trains; Southeastern; Southern/Gatwick Express; South Western Railway (depot drivers only); SWR Island Line; TransPennine Express; and West Midlands Trains.
Winter strikes in Britain - in pictures