Issue 93: 2017 02 23: Week in Brief: UK

23 February 2017

Week in Brief:UK

Union Jack flapping in wind from the right

Government

NORTHERN IRELAND: The Democratic Unionist Party (“the DUP”) is the largest political party in Northern Ireland.  It has been revealed that it paid thousands of pounds in secret donations to help fund the Leave campaign in the EU referendum.  Northern Ireland is exempt from the rules which apply in the rest of the UK which require parties to declare the source of funds and the DUP has refused to say where the money came from.

AIR QUALITY: The UK has received a final warning from the EU Commission about air pollution.  Other EU countries which received similar warnings are: Germany, France, Italy and Spain.  If no improvements are made within 2 months, the Commission may take legal action through the European Court of Justice on the grounds that the countries have breached the 2008 Air Quality Directive.

UNEMPLOYMENT: Official statistics just released show that employment in the UK reached the figure of 31.8 million at the end of 2016, while the number of people unemployed fell to 1.6 million.  Many of those employed were born outside the UK, either in EU countries or in countries outside the EU.

RATES: Reports in the press that business rates will increase for some firms/companies by 47% have been challenged by Sajid Javid, the communities secretary and David Gauke, a Treasury Minister.  However, the figures set out in a letter by Javid to Conservative MPs have themselves been criticised as being inaccurate. Officials in the Department for Communities and Local Government, who were responsible for the estimates, defended them and said that they were correct.

EMISSIONS: The head of Volkswagen in the UK, Paul Willis, has been accused by the Transport Select Committee of telling blatant lies.  He told the Committee that VW had not misled customers in any way over diesel emissions and denied that special devices had been fitted to European cars so that they could cheat emission tests.

Education

MUSLIM “PLOT”: “The Sunday Times” has uncovered what it says is another example of a so-called “Trojan Horse” plot by Muslim extremists to take over a state school in Oldham.  A confidential report drawn up by the local council listed complaints made by the head teacher; she said that she had been the target of a campaign to have her removed.  She said that she had received death threats, threats to blow up her car and aggressive verbal abuse.

CHEATING: Ministers have insisted that universities expel students who are caught cheating by buying essays online.  The demand comes after “The Times” revealed that 50,000 students had been cheating over the last 3 years.

Church

SAME SEX MARRIAGE: The Church of England’s General Synod has voted not to accept a report produced by bishops which confirmed the traditional Christian teaching that marriage should be between a man and a woman.  The report ruled out a change to doctrine or ecclesiastical law which would allow same sex marriages to take place or to be blessed in church.

Transport

SOUTHERN REGION: The dispute between ASLEF and Southern Trains was thought to have been settled after agreement was reached between the two sides, but the deal has been rejected by the members of the union. It is not clear what will happen now.  The union RMT had attacked ASLEF for agreeing the deal.

NEW SERVICE: The first scheduled train service pulled by a steam engine started on the Settle/Carlisle line.  The locomotive was the “Tornado”, a Peppercorn Class A1 engine.  However, the scheduled service will only last 3 days.

Health

SUPERBUGS: Concern has been raised at the ease with which antibiotics can be bought online without prescription.  The websites which are based overseas are beyond the control of UK authorities.  The increase in the number of “superbugs” which are immune to antibiotics, has been linked to the promiscuous use of the drugs.

 

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Issue 93: 2017 02 23: The future of civil partnerships (Lynda Goetz)

23 February 2017

The Future of Civil Partnerships

To be extended or abolished?

By Lynda Goetz

Now that procreation has been removed from the concept of marriage, and same-sex marriage (although still not formally recognised by the Church) has been put on the statute book, is it time to say goodbye to the civil partnership?

On Tuesday the Court of Appeal ruled against Rebecca Steinfeld and Charles Keidan’s attempt to obtain recognition of heterosexual civil partnerships.  Under current legislation only same-sex couples have the right to register a civil partnership, which, once registered, gives the same rights and responsibilities as a marriage.  The inequality of the law as it stands seems at first sight to be very odd, and the judges’ decision to go against modern ‘values’ somewhat extraordinary.  That is until you look carefully both at recent history and all the implications around the legislation.

It is only fifty years ago in this country that the Sexual Offences Act 1967 exempted from prosecution homosexual acts between two men, both of whom had to have obtained the age of 21.  This did not extend to Scotland or Northern Ireland, however.  Note also that there was no mention of women, whose same-sex relationships appear to have gone largely unremarked for most of the previous century.  The age of consent for homosexual males was reduced to 18 by the Police and Criminal Justice Act 1994, and then brought into line with the heterosexual age of consent (i.e. 16) in 2000.  It was not until May 2004, when the Sexual Offences Act 2003 came into force, that sexual acts were viewed by the law without regard to the sex of the participants and all of the previous sex-specific legislation, including the 1967 Act, was replaced.  Even then, same-sex relationships were not recognised in law, and the growing call for reform, both here and elsewhere in Europe, led to the PACS (pacte civile de solidarité) in France in 1999 and The Civil Partnership Act here in 2004.  The big difference between the two, however, is that in France any couple can become pacsé.

Twenty-one European countries currently recognise some form of civil union, although rather fewer (13) have recognised same-sex marriage.  The European Court of Human Rights has made a number of rulings on the issues, including a case in 2013, Vallianatos and Others v Greece where the Court ruled that the Convention was violated by the Greek legislation, which provided for the registration of civil unions for heterosexual couples, but not for same-sex couples.  In 2015 Greece extended the right to same-sex couples.  The European countries which currently do not allow same-sex marriage appear, on the face of it, to be mainly middle European countries where the influence of the Church may hold more sway.

Same-sex marriage passed into law in England and Wales just over 3 years ago in 2013, and the first same-sex marriages were celebrated on 29th March 2014.  Scotland has its own legislation but Northern Ireland has so far not passed any legislation on the subject, although a legal challenge is pending.  So, now that same-sex couples can get married (if not yet in Church) do they also need the rights granted by civil partnerships?  If they do, then surely it must be right to recognise the distinction between marriage and civil partnership and also allow opposite-sex couples to choose one or the other?  That, by any definition, is equality.

The three judges in Tuesday’s Court of Appeal decision decided in a two-to-one verdict to give the Government more time to review the current law, which Justine Greening (the Education Secretary and minister responsible for equalities) has, after consultation and Parliamentary debate, announced they are doing.  Steinfeld and Keidan, who reject marriage on the grounds that it is ‘sexist’ and ‘patriarchal’, have said they will take their appeal to the Supreme Court in any event.

How is it then that in other European countries, as we have seen, civil unions are available to all?  In Greece the civil union was actually created for heterosexual couples in 2008 and needed to be challenged to be opened up to same-sex couples; and in France, where PACS was introduced to offer some legal status to same-sex couples, as of 2012 94% of PACS were between heterosexual couples.  The rights, responsibilities and benefits of civil unions, which have essentially only been around since the 1990s, vary from country to country and in the US from state to state.  PACS, for example, is effectively a ‘marriage light’ and carries fewer rights and responsibilities than a marriage.  It is a contract stamped and registered by the clerk of the court and can in some areas of the country be followed up with a ceremony at the mairie identical to that of civil marriage.  So, what are the differences in this country between marriage and civil partnership apart from subject of the current challenge?

Fundamentally there are no major differences, although one difference, which may perhaps explain Keidan and Steidenfeld’s ideological opposition to marriage on the grounds of the ‘patriarchal baggage’ they claim it carries, is the fact that civil partnership certificates contain the names of both parents of the parties, whereas marriage certificates bear the names of only the fathers of the parties.  This is, however, surely something of a trivial point in the overall scheme of things?  Another important distinction is that adultery is not recognised in same-sex partners and therefore cannot be used as a ground for dissolving a civil partnership, whereas it is of course grounds for divorce.  Civil partners cannot describe themselves as ‘married’.  A civil partnership is not the same as a civil marriage.  In a civil marriage the ceremony is conducted by a local official, a registrar, and the ceremony cannot have any religious content.  Inheritance rights are the same whether you are married or in a civil partnership.

If marriage is now available to all, as a religious or non-religious ceremony, what exactly is the argument for civil partnerships?  The Government is apparently waiting to see how extending marriage to same-sex couples impacts on civil partnerships before making a final decision.  If civil partnerships are to continue to exist, should they simply be extended to all regardless of gender?  Conservative MP Tim Loughton, who recently introduced a Private Members Bill to that effect which has received cross-party support, clearly believes that should be the case.  As, I would suggest, do many of us; but it does beg the question as to the point of civil partnerships.  They were introduced as a way of allowing same-sex couples the same rights and creating the same responsibilities as marriage.  Should they perhaps in future become a way of opting for a lesser commitment than marriage?  In order to create a proper distinction between the two, perhaps civil partnerships could fulfil a different role; perhaps as seven or ten-year renewable contracts?  If adultery is not a reason for dissolving a civil partnership, those who do not consider being faithful as a prerequisite to their relationship could choose civil partnership over marriage.  There are almost certainly a number of other ways in which a clear distinction could be made with both options available to those of all genders.

The other issue the Government will almost certainly have to face is the question of the unfairness of Inheritance Tax.  Those questions about aged siblings who may have shared a property for years who will be unable to take advantage of laws that offer concessions to couples, leaving them open to unaffordable taxes on the death of one of them, have not really gone away.  A civil union may not be an appropriate vehicle for solving such cases, but if people are waking up to the fact that there is no such thing as Common Law marriage and that in order to safeguard their rights in the event of death or a parting of the ways they need to have some form of legally recognised union in place, what is to stop the demand for some sort of ‘family union’ (and families are of course so ill-defined these days)?  Since procreation has been removed from the concept of marriage, the cornerstones of the old edifices have already been loosened…  Perhaps it is these wider implications and cascading consequences that have caused the Government to apply a ‘wait and see’ policy to what appears to be a relatively straightforward issue.

 

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Issue 93: 2017 02 23: Walking on the seabed (John Watson)

23 February 2017

Walking On The Seabed

The withdrawal of the Kraft bid is a stroke of luck for the Government.

By John Watson

I wonder if Mrs May has ever walked across the Red Sea.  It has been done before of course to considerable effect, and all that is needed is for the waters to part before you so that you can saunter along the seabed in comfort.  Whether it requires divine intervention or just a lucky combination of winds is a moot point but you would not chance it unless you were the sort of person before whom difficulties fall away.  Mrs May has now worked the trick twice.  The first time she took the Tory leadership across a sea of political corpses who had knifed themselves or each other in a bloodbath worthy of Shakespeare.  There was no blood on Mrs May’s knife.  She just stood still and the path to greatness opened in front of her.  Now it has happened again with the withdrawal of Kraft’s bid for Unilever.

For those who have not followed the saga, the American food giant Kraft Heinz announced a £115billion offer to acquire Unilever.  It would have been the biggest takeover ever and the fees to banks and professionals would have been mouthwatering.  It would also have posed a challenge to the Government which has yet to spell out its merger policy.  Would it, as nice open economies are supposed to do, leave the matter to the shareholders?  Or would it block an acquisition which would leave such an important jewel of the economy in foreign ownership?  There were complicating factors too.  Unilever is a byword for corporate responsibility and the good treatment of its staff.  Kraft Heinz on the other hand is part owned by Brazil-based private equity house 3G who would have increased the gearing and looked at new ways of sweating the assets, as private equity houses do.  In particular they would have reviewed the workforce, and a workforce which is well treated may also be a work force vulnerable to cuts designed to maximise short term returns.  There is nothing improper about that, but Kraft Heinz has a little form in this area having reneged on promises to keep jobs open made during the takeover battle for Cadbury in 2010.  That made people worry about how far the process would go.

It all looked rather tricky for a Prime Minister who in her bid for office had indicated a more interventionalist approach and has yet to produce concrete proposals.  Would she have to find a tortuous path between Scylla, represented by the standard bearers of the open economy, and Charybdis in the shape of those further to the left?  It hardly promised to be a walk in the park, and then… guess what?  Everyone fell over and, following a robust rejection from the Unilever Board, Kraft Heinz withdrew their offer, everyone became friends and Mrs May was left to stroll through the Red Sea in peace and to develop her industrial strategy at leisure.  Wow!  I don’t know where she says her prayers but I think I’ll pop along there too.  If she can keep repeating this sort of trick, Brexit should be a doddle.

Still, that doesn’t answer the question of how we should deal with foreign bids for prime British assets, particularly if the prospect of Brexit makes them cheaper than was previously the case.  To see how difficult this is you need to contrast reactions to two different pieces of news.  The first is that Unilever will not be taken over by Kraft Heinz.  Well, I expect most of us are pleased about that.  Unilever is a well managed company and an example of British business at its finest.  No one likes to see leveraged buyouts of that sort of thing.  Leaving aside any damage to the tax base (most of the interest on the acquisition debt arranged by 3G would no doubt have been tax deductible), it was bound to be followed by aggressive cost cutting, loss of jobs, closure of factories, damage to industrial stability.  Yes, I’ll drink a glass to the defeat of all that.

Then there is a comment made about Rolls Royce in Shaw Sheet’s ‘Week in Brief’ last week: “….each division is showing promise of growth this year and next, with cost cuts in many key areas, but especially in engine servicing, seen as a major success in improving productivity without reducing quality.”

Whew!  I am glad they got the costs down.  We need our industries to be fully competitive.  Rolls Royce has had a difficult time.  No room for complacency.  I’ll drink to that one, too.

How then are we to decide when cost cutting is a good thing and when it is bad?  Is British ownership the test or would that show a disturbing lack of internationalism?  Does it matter that the owners include a private equity fund?  They need relatively short term returns to satisfy their investors, of course, but are their demands really different from those of the stock market?  Or does the distinction lie in the target itself, with some businesses having a role in protecting high employment which dilutes their purpose of profit generation?  The truth is no doubt a complex mix of all these things and others too, and that is why governments have been reluctant to interfere in this area.  If Mrs May decides to take a proactive approach she will need to keep the rules wide and decisions will have to be made on a case by case basis.  The uncertainty of the ground surely militates against interfering too much.  Wide rules sparely applied must be the order of the day.  Formulating policy in this area will not be easy and a certain amount of ad hocery is inevitable.  For the moment Mrs May will be glad that the issue has been postponed.

 

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Issue 93:2017 02 23:Good Cop,Bad Cop(Neil Tidmarsh)

23 February 2017

Good Cop, Bad Cop

Populism and the police.

by Neil Tidmarsh

Much has been written and said about populism recently, but one of its most interesting and important aspects has provoked little comment so far – the fact that, under a populist leader, a country’s police force often ends up going to the dogs.

Why should this happen?  Well, if I was a populist leader, I wouldn’t hesitate to play the “will of the people” card to trump my opponents whenever they played the “rule of law” card to keep me in line (and I’d accompany it with howls of outrage similar to those recently heard issuing from the White House and from this country’s populist press).  But with the judiciary out to frustrate me, what then?  Logically, I’d have to take law and order into my own hands – and I’d do that by cultivating the police force as the instrument and executor of my will (sorry, I mean, of course, the people’s will).  The only problem then is that the police will inevitably come to feel themselves above the law, and sooner or later they’ll be capable of anything.

It’s a theory.

Of course, nothing has happened in the USA to support it (but it will be interesting to test it against further developments there).  More significant was the news from South Africa this week that a fraud investigator conducting an inquiry with the Independent Police Investigative Directorate (the country’s independent watchdog) into accusations against corruption among senior police officers has himself been arrested.  Former policeman Paul O’Sullivan, who has lived in South Africa for 30 years, was pursuing police chief Khomotso Phahlane when he found himself arrested and dragged into court to face charges of fraud, extortion and impersonation.  Lieutenant-General Phahlane accuses him of pursuing a vendetta against him, but Mr O’Sullivan is already well-known in South Africa for bringing down the big beasts – ten years ago, his work resulted in police commissioner and president of Interpol Jackie Selebi being found guilty of accepting bribes from a drug lord, and being given a fifteen year jail sentence.

Interestingly, Mr O’Sullivan thinks that time is running out for corrupt elements in the country’s populist ANC government; he claims that the corruption which began with President Thabo Mbeki has peaked under President Zuma and will be bought to justice and eradicated once Zuma, and perhaps even the ANC itself, begin to lose their populist appeal, something which their defeats in recent local elections suggest is already happening.

Even more significant, however, is this week’s news from the Philippines. (President Duterte has been mysteriously absent from the media’s recent discussion of populism and populist leaders, but surely Duterte Harry is the Big Daddy of them all?)

A second witness has claimed that President Duterte personally authorised and organised extra-judicial killings while mayor of Davao.  The witness, Arthur Lascañas, is a former police officer who confessed that he played a leading part in the death squad, which killed as many as 1400 people, according to human rights groups.  At a press conference in the Senate in Manila, he gave details about the killings of suspected kidnappers, drug dealers and journalists, and accused the President of ordering them.

This testimony must be a problem for Duterte; 7000 people have been killed (2000 of them during official police operations) since he became President and declared a war on drugs.  But, believe it or not, it isn’t his biggest problem; that is the fact that he can’t even rely on the police any more to do his will in that war.  Having been placed above the law, it seems that they are now only too willing to take the law into their own hands for their own gains.  Earlier this month Duterte announced that the police were “corrupt to the core” and out of control, and that he would have to suspend the war on drugs until the force had been purged of the rogue self-seeking elements who have apparently been indulging in bribery, blackmail, coercion and kidnapping for personal profit.  The discovery of the body of a South Korean businessman in the grounds of police headquarters at Camp Crame – he had been kidnapped and murdered by rogue police officers – was the last straw.

But hang on a moment, you say.  President Duterte might be the world’s most blatant populist, but he isn’t the world’s most powerful populist.  That honour must go to President Putin, surely.  So, if your theory is to hold water, where are the reports that elements in the Russian police are indulging in some really extreme behaviour?

Which brings me to my final story from the news this week.

The trial of Arsen Bairambekov, who was a policeman in Dagestan, southern Russia, began this week.  He is accused of the illegal circulation of firearms and of the contract killings of two businessmen.  Oh, and of the creation of zombie slaves through occult ritual murder.

Eight years ago, the interior ministry announced that Satanism was a greater threat to Russia than Islamist extremism; six years ago, police in the central Russian city of Saransk claimed that a cult of devil-worshippers was infiltrating the police force.  Mr Bairambekov is facing allegations of luring homeless people into a forest in Verkhnyaya Pyshma, almost one thousand miles east of Moscow, at night, with the promise of alcohol, and then murdering them on a stone altar, by firelight.  He allegedly buried the bodies but dug them up later, to perform further rituals which he believed would endow him with supernatural powers.  The prosecution says that he tried to bring them back to life as zombie slaves.

Now, whatever could be the connection between zombies and populism?

 

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Issue 92: 2017 02 16: Contents

16 February 2017: Issue 92

Week in Brief

UK

International

Financial

Comment

Twitter In Adolescence by John Watson

Is Trump releasing its political potential?

Sans Lui, Le Deluge? by Richard Pooley

Who will stop le Pen?

Get Real, Ladies! by Lynda Goetz

Divorce nearly always for poorer.

Legally Binding by J R Thomas

Mr Trump and the law.

Universities Challenged by Frank O’Nomics

Degree applications have hit a tipping point.

Poisonous Headlines by Neil Tidmarsh

“We have a lot of killers.”

Features

Excusing The Soliloquy by Chin Chin

How to explain talking to yourself.

Dropping The Pilot by J R Thomas

Farewell to Richard Chartres.

Puzzles and Cartoons

Crossword, by Boffles: “Playful”.

Solution to the last crossword “Plain Vanilla 17”.

Cartoons by Aggro.

Earlier EditionsLarge 600x271 stamp prompting the reader to join the subscription list

Issue 87: 12 January 2017

Issue 88: 19 January 2017

Issue 89: 26 January 2017

 Issue 90: 02 February 2017

Issue 91: 09 February 2017

Issue93:2017 02 23:Dangerous Leanings (J.R.Thomas)

23 February 2017

Dangerous Leanings

38 Degrees and Trump: too similar for comfort?

by J.R.Thomas

Avalanches are best avoided, as anyone who has witnessed one, or worse still been caught in one, will aver.  They are suffocating, all powerful, and destroy almost everything in their path.  Not, you might think, a great idea, to name your organisation after them – unless you are running a demolition company.  The on-line campaigning organisation 38 Degrees, though, proudly proclaims that it is the idea of the avalanche that inspired its name – “38 Degrees is the angle at which snowflakes come together to form an avalanche – together we’re unstoppable” it trumpets on its web page.  It’s a nice image, forming an unstoppable force for change, though maybe not such a great idea to characterise your supporters as snowflakes.  Let alone the underlying message that you are into unstoppable destruction.

38 Degrees was founded in 2009 to harness the power of the internet as a form of mass communication in support of  campaigns to bring issues to the attention of the media, the public, and ultimately government.  It was initially funded by a number of charities, including the Esme Fairburn, the Barrow Cadbury, and the Joseph Rowntree Trusts, all well known for a leaning towards social action, who supported a small group of individuals of, shall we say, generally left leaning tendencies, to set up 38.  They were led by Gordon Roddick of Bodyshop, the cosmetics chain, who wanted to commemorate Anita Roddick, a very committed social activist herself,  by a form of living campaigning memorial.  38 Degrees has grown rapidly and refers to itself as having over three million members, a claim which, if  true, would be remarkable from a standing start over seven years and put it on the tails of the National Trust and RSPB.  But to be a member of 38 Degrees, a snowflake, it is merely enough to sign one of their on-line petitions; no subscription, no form filling, no background checks.  The organisation’s operating costs and campaign funding comes from small private donations, nearly all from individuals, giving an income of around £3.5 million in 2015/16.

The modus operandi is to run campaigns which well up from those who are members, to try to bounce government, sometimes big business, into doing something, by displaying the vast weight of snowflakes metaphorically cascading unstoppably down the mountainside towards it.  The causes can be almost anything (though one suspects that attempts to lower tax rates for higher income groups or to allow City banks to become less regulated, for example, would not find favour).  There is a daily cause promoted by excitable, often shrill, emails sent out to their vast email contact list.  Yesterday’s was headed “Unfair: Amazon.  The government wants to give Amazon a break – a tax break”… which turned out not to be a government initiative to improve the quality of life along the Amazon River, but a more prosaic protest against the recently concluded business rates review.

Snow: white, but not drifting

Now, using the 38 Degrees approach, Amazon has a sight more members than 38 Degrees, if we count each purchaser from the Amazon web site as a “member”; indeed the Amazon ones are prepared to pass actual money across.  38 Degrees wants us to protest about the effect of the change in business rates on small businesses, who it says will pay more, and big business, especially the enormous and hated Amazon, who it says will pay less.  Very unfair that would be.  Only that is not what the review is doing – it is generally imposing smaller increases on buildings in economically weaker areas and greater on those in prosperous areas.  It is not, directly or indirectly, an attempt to favour Amazon, though Amazon shoppers might favour a reduction in their cost base so they can get even cheaper prices – actually that might be worthy of a campaign (sponsored by Amazon, we don’t want potential conflicts of interest).

Not keen on that?  Plenty more causes to put your electronic signature to.  “No more corridor deaths in Worcestershire Royal Hospital” is a good one, though perhaps it is not campaigning so much about alternative locations to meet one’s maker as the need for more wards; “Tell Theresa May to stand up to Trump”;  “Protect Sherwood Forest”; “Switch to paper cotton buds”.  These may or may not be good causes; you may or may not know something about them so that you can make an informed decision about the costs, the threats, the benefits.  But you won’t get that on the 38 Degrees website which is a straightforward appeal to emotion, based on some currently hip beliefs – Trump bad, Big Business bad, NHS envy of world, trees good.  (What paper cotton buds are, apart from an apparent contradiction in terms, is not clear, but would seem to involve more tree felling and less employment for working people in the poverty stricken parts of the globe which tend to produce cotton.)

The rise in sites such as 38 Degrees (it is far from the only UK site to encourage crowd pressure for change or action, but is probably the market leader) stems from the introduction of the on-line petitioning of parliament, a facility introduced under the Blair government, which became so popular that it was suspended in April 2010, but brought back in late 2011, and rebased again in July 2015, with increased capacity and a promise by government to consider debating petitions which reach more than 100,000 signatures.  Such debates have actually been rare, not surprisingly considering that in the first year 36,000 petitions were submitted to the portal.  But there is no doubt that mass petitioning can be effective in some areas, especially where government is nervous or uncertain as to elector’s views – or where there are some easy giveaways.   Most petitions call for things to be done, almost always involving the spending of public money.  A popular perennial is of course the National Health Service with nearly a thousand current submissions, but other recent campaigns deal with planning – more homes, though not on the green belt, and a new contender, asking government to keep town parks open and free and well maintained (no word as to how this might be funded, or whether this might conflict with getting some more wards open in the Royal Worcestershire Hospital).  There is a lot of what is called in American politics “praising motherhood and apple pie” which makes it very easy to get large numbers of signatures – 338,000 and rising on the town park one.

It is easy to make fun of these campaigns as over emotive, failing to balance the complex choices that are required in reality (how many would have signed the park one if they had to enclose £10 to kick start a local park fund with their vote?).  The overuse of the system has degraded it in the eyes of the politicians and civil servants and raised false expectations among the voters as to what might result.  But they do tell our governing class what it is we are worried about, bring causes to public attention that might otherwise languish, and put power in the direct hands of the people rather than the traditional media.  All this mass opinion manipulating and expressing is of course part of the populist phenomenon which has brought President Trump to the Oval Office, led to the Brexit vote, and may well create a new chapter in French politics.  The board of 38 Degrees and its young energetic staff would be astonished to be equated with Mr Trump, but they are undoubtedly riding the same wave, or, rather, surfing the same avalanche.  What permanent changes to the political landscape the fast moving snow might create is yet to be fully seen; maybe, like snow in spring, it will just melt away.

 

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Issue 93: 2017 02 23: Beards (Chin Chin)

23 February 2017

Beards

Shaping the whiskers.

By Chin Chin

It is said that great sculptors will spend days looking at a piece of marble before they make the first cut.  An inch to the right and Venus will be missing a nose.  An inch to the left and the curve of her body will be marred forever.  It is mistakes of this sort which account for classical statuary missing so many limbs, but anyway the first chink of the hammer must always be a nervous moment.  There are similar tensions too when a great diamond is cut, and I have heard it said that when the Koh-i-Noor was remodelled in 1852 the craftsman fainted with relief on seeing that his initial stroke was perfect.  Well, you can see his point.  With both Prince Albert and the Duke of Wellington in charge of operations it would have been a tad embarrassing to have had to tell them that Queen Victoria now owned a large number of gravel-like stones.

But the problem is not restricted to great artists dealing with pieces of public importance.  In fact I am suffering from a similar uncertainty myself.  How exactly should I trim my beard?

It all started when I went to Russia in the very early years of this century.  I was to spend some couple of weeks in the country and I really didn’t know very much about the language.  Actually I had tried studying it at school but gave it up well short of any academic qualification with only one usable expression to my credit.  That was “eto vitrazh” meaning  “this is a stained glass window”.  That is undoubtedly a useful phrase but, although I spent many hours standing about in cathedrals, monasteries and the like waiting for new groups of tourists in front of whom I could exhibit my linguistic accomplishment, I never felt that I had achieved the true object of the tourist, to pass myself off as a local.  Something else was needed and it was clear from the failure of my earlier efforts that it would be fruitless to try to master more of the language.  So what did that leave?  Something essentially Russian.  Obviously a beard.

I have no idea whether the luxuriant growth which I then developed was convincing to Russian eyes but it went down very well with my family, so much so that they wanted me to try again.  I was against it myself.  Beards may look very impressive on other people but I have never liked the view from the inside.  Nevertheless I said that I would grow anothr beard when I was next abroad for long enough to do the project justice.  That turns out to be for a period of almost 3 months.

The first stage of beard-growing is an easy if essentially negative process.  You simply stop shaving, and the beard (rather like those cress seeds which you put on pottery hedgehogs) grows all by itself.  So far so good.  For the first few days people assume that you have been partying all week and have not been home.  Just after that they assume that you are becoming a hipster.  Then you go through a number of stages.  There is the “maybe a sensitive skin makes it difficult for him to shave” stage, the “playing a rat in the local pantomime” stage, and then the “growing a beard but too mean to pay a barber to shape it” stage.  It is then, when you could pass for WG Grace without the cricket, that your mind turns to sculpting your facial hair into something a little more edifying and you put the word “beards” into Google.

It is extraordinary what you find.  Apart from discovering that the world is full of people sporting beards of the most elegant appearance, you learned that a “bag of beards” was among the detritus cleared up after the Glastonbury music festival.  A bag of beards?  Presumably they are all false ones.  Are there people who change their beard every day as they run from their creditors or perhaps the agents of North Korea?  Is it something more sinister than that?  Also amongst the rubbish were sex toys and a statue of a naked man.  Just where had those beards been?  You might catch the nastiest disease if you picked one up and put it on.

Even more confusing, however, is the choice of beard style revealed by your search and here you need to fit your facial hair to your own self image.  Do you see yourself as Coeur de Lion, the great Plantagenet warrior who combined military skill with the sense to avoid capturing Jerusalem with an army which had vowed to stay together until that was done?  If so, a full but clipped beard is for you.  Still, you will need a horse and a sword as well if you are to stand comparison with the magnificent statue in Parliament Square.  Are you, on the other hand, more a man of the pen?  Perhaps then a René Descartes beard with a small tuft under the bottom lip in counterpoise to the thin black moustache above.  Then again, something more religious might suit.  We do not know what sort of beard Christ wore but lots of people have had a guess, and if that is going too far, what about a lesser religious figure such as Rowan Williams?  A fine old testament beard there although to do it justice in modern times you probably need a mitre.

But then you might prefer something more conceptual rather than historical, a full Sir Jasper, for example, sharply pointed and supporting a moustache with curling ends.  Just the thing for a little seduction and card-sharping.  There are lots of others to choose from and I was thinking of the possibilities as I crossed the road on the way to the barbers.  That may be why I didn’t see the cyclist who had to slam on his brakes and nearly fell into the gutter.  I had expected some abuse but when he saw my beard his expression softened:

“Never mind, old timer,” he said, “just keep more of an eye out next time.”

“Old timer!” That did it.  I walked into the barber’s shop and told him to shave the damned thing off.

 

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Issue 93:2017 02 23:House prices can also go down (Frank O’Nomics)

23 February 2017

House prices can also go down

There are forces at work to correct the value of your house

by Frank O’Nomics

Those living north of the Watford Gap may quite reasonably indulge in some schadenfreude on hearing that prime London property prices fell by 6.9% last year, and closer to 12.5% over the last two years.  Given that the rise in stamp duty for properties valued at over £1 million was the real driver of this correction, most will assume that the trend will not permeate north or to cheaper properties in general.  However, it seems that there are other forces at work that could drive a more pervasive correction in house prices.  The OECD has described UK house prices as “dangerously high” and liable to crash.  This is an important factor when looking at the UK economic outlook, given that housing transactions drive so much consumer spending, on both goods and services.  The wealth created by rising house prices has long buoyed spending, and price falls could prompt widespread retrenchment.

Why might house prices be in for a broader correction? Well, first of all, they may not really have been as high as many estate agents made out.  Some newly built properties on Highgate, North London were reduced in price from £9 million, to £7 million.  That looks dramatic, but as none had traded at the higher level is this really a fall in prices?  In a desperate effort to get properties onto their books estate agents have been overvaluing.  This has the combined effect of causing a slowdown in transactions, and ultimately a significant fall in offering prices if people are keen to move.  In some areas of the country homeowners are waiting for up to 10 months to sell, and transaction levels have been falling significantly in areas where prices have done well – notably Aberdeen, London and Bristol.  In the last 3 months of last year, a price cut was needed to sell nearly half of the properties sold in London, usually of around 10%.  Areas that have relied on buy-to-let or second home purchases have also seen price cuts following the increases in stamp duty.

A fall in the level of transactions might be regarded as a symptom rather than a cause of a property price correction.  Prices are, after all, a function of the level of demand.  In looking at what is undermining demand, the first and most obvious factor is economic uncertainty.  The consequences of Brexit, in terms of jobs and interest rates, are still huge unknowns, and it is quite reasonable for homebuyers not to want to take on greater debt at such a time, given that it could take some years for matters to be resolved.  This is particularly important when one adds in an affordability element; buyers are already stretching themselves to their limits.  First time buyers’ house prices are over 5 times the level of average earnings, which is almost double the ratio of 30 years ago.  Studies of house prices shows that they tend to match the growth in nominal incomes over the long-term, but they currently sit way above that trend line.  There seems little prospect of significant earnings growth for some time (if there was, the Bank would have increased interest rates already) and in real terms the value of earnings is likely to fall short-term as inflation picks up.

Another good gauge of house prices is the rental yield which they offer.  After the financial crisis, yields rose to a peak in 2011, but the rise in house prices means that they are now at their lowest level in 6 years, and exceptionally low in London.  Prices have been rising faster than rents.  For the prospective first time buyer this suggests that they are better off waiting, and for the buy-to-let investor the returns do not justify the risk.  In addition to falling returns, the buy-to-let investor has been discouraged by the additional 3% stamp duty and the gradual reduction in mortgage tax relief that starts from this April.

All potential buyers (first timers, buy-to-let and those moving) are further constrained by changes in regulation.  The authorities, concerned by increasing levels of indebtedness, are starting (via the Prudential Regulation Authority) to impose stricter criteria on lenders.  It is estimated that these restrictions could remove some 50% of lenders from the market – in short, we are being saved from ourselves.  The other factor that will impact potential mortgagees would be an increase in interest rates.  For many such a move is way overdue – unemployment is at historic lows and inflation is forecast to exceed the Bank’s 2% target for a reasonable period of time.  It seems very likely that the MPC will sanction an increase later this year.

The regular counter to all of the arguments that focus on the demand side is that supply constraints will always be greater.  There are just not enough houses being built.  However, this to some extent presupposes that everyone will want to own a house and it seems that the millennial generation is content to rent.  Buy-to-let landlords selling, as 1 in 4 indicate that they will, will address some of the supply issues.  Longer-term, government initiatives to allow building in green belt sites, together with tax breaks for pre-fab housing, could provide supply solutions.

The slowdown in transactions has not been uniform across the country, with those areas benefiting from government infrastructure projects, such as Manchester and Birmingham still seeing high turnover, but overall the impact on prices extends beyond just prime central London, so that the Land Registry has reported the first decline in outer London property prices for four years.  The ripple effect should not be ignored and there is a danger that OECD fears could be realised.  If that were to be the case, consumer spending could slow rapidly and post-Brexit complacency about the economic outlook for the UK could be short-lived.

 

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Issue93:2017 02 23:catch me if you can (J.R.Thomas)

23 February 2017

Catch Me If You Can      

So where are all the fish?

by J.R.Thomas

Dr Johnson did not think much of fishermen.   “A fishing rod,” he said, “is a stick with a hook at one end and a fool at the other.”  There are many fishermen who would agree with him, but they still sit by waters in their millions, hoping that something may attach itself and be taken home proudly for supper.  The crème de la crème of these fools are salmon fishermen, to be found in greater numbers the further one travels north; with the best salmon fishing, at the greatest expense, being found on the great Scottish rivers.

River waters are generally owned by the landowners who own the adjacent banks, as far as the centre of the river.  This has been a great source of income to the great Scottish estates, and to some northern English ones, who rent or lease the fishing rights by the day or week or season to the fishermen.  But the riparian owner does not own the fish in the water.  The fish is a free agent and swims hither and thither and even, in the salmon’s case, spends quite a lot of time out at sea in the mid-Atlantic.  He – or she – returns annually to the same river in one of those extraordinary feats of nature which we so little understand, to spawn and feed and amuse the fisherpersons on the banks.  But therein lies a problem.

Less and less salmon are returning to the rivers they regard as their summer homes, and the numbers of fish caught has been in decline for many years, especially in Scotland.  To start with, this was blamed on the net fisheries – who operated in waters at the river mouths, catching the sleek shiny monsters in nets, on a vast scale.  Very unsporting.  The salmon industry is not without resources (there are said to be five ducal riparian owners on the Tweed alone) and most of the net fisheries were bought out in the 1980’s and 1990’s and the netting stopped.  That reversed the decline but not for long, so many owners imposed severe restrictions on the catch that could be kept by anglers – with most fish and all those under a certain size having to be returned to the waters from which they had just been seduced.  What the salmon thought of playing a game of tag involving a hook, and then being chucked back, is not recorded.  That did not do much to stop the decline, and detailed studies revealed that the decline was much worse on the Scottish west coast discharging rivers than on the east.  Then the penny dropped.

Fish farming.  The west coast lochs are now scarred, or enhanced, depending on your perspective, with great rafts of floating cages, complete with little huts, yellow and orange mysterious devices, and RIBS whizzing back and forth with supplies and men and chemicals – and fish.

Uig on Skye – a supply station for Scottish west coast fish farms

You may not have seen the cages but if you enjoy salmon for lunch or dinner or sushi or smoked with scrambled egg for brekkers you have benefitted from their productivity.  Salmon is cheap, not quite so cheap as bacon but as readily available.  We are back to the days of the eighteenth century when the City of London apprentice boys petitioned against and marched in protest at been fed so much salmon; not more than twice a week was their cry.  Yet by the 1960’s salmon was so special and so expensive that a fisherman friend of the author’s grandmother would wrap up a whole freshly caught salmon and dispatch it by overnight train from Aberdeen to York, where it would be joyfully met and driven to a cool larder in the North Riding for the delight of local friends and relations, a very special treat.

Now we are back to eating salmon every day as a cheap form of protein – not fished out of the Thames or Tyne (two major salmon rivers in the eighteenth century), but scooped up in a form of semi-industrial processing in a Scottish sea-loch.  It is best maybe not to think about what those noisy apprentice boys were eating filtered through their fish, but what we are eating via farmed fish is not that great either.  Salmon are creatures used to immense activity, swimming into the mid-Atlantic and back, thrashing those powerful silvery tails up rivers, jumping clean out of the water to get over obstacles in the water.  (For an eye opening demonstration of the power in a tail fish, visit the fish ladders at Pitlochry where the salmon leap their way up a power station concrete fish ladder to reach their spawning grounds further up the Tay.)   But in a fish farm they are confined to cages, like aquatic battery hens.  Aggressive behaviour is common, the fish grow fat and their muscle tone wastes, and disease spreads rapidly.  Flu on a tube train has nothing on disease in a fish farm.

And from the perspective of those river owners, and the people who stand in the rivers with very expensive rods and reels, the fish farms are very bad news indeed.  The wild fish swim up the sea lochs past the fish cages and the farmed fish occasionally escape.  This leads to interbreeding with the wild salmon which may well be mucking up their radars as to which ducal river they are supposed to be heading to, and of course spreads the farmed cousin’s diseases into the wild fish.  It is not surprising that the numbers of wild fish are in steep decline.  And many salmon experts (every fisher in possession of a rod and a landing net is an expert) think that interbreeding means already that there is no such thing as a truly wild salmon.  Whether that matters is another thing.

Readers with queasy stomachs, consider reading no further.  There is a new problem in those floating cages.  And it is a problem at the moment to which there seems no clear solution, though the fish farms of Norway, who are the leaders in most things to do with salmon farming and indeed own or operate a lot of the Scottish farms, are researching hard.  The fish are being attacked by sea lice, a cousin of those who create such panics in schools, but bigger – the size of a 5 pence piece.  The sea lice attach themselves to the bodies of the salmon and live on it as a slowly diminishing host, eventually either killing it or rending it liable to some other infection which finishes it off.  Chemicals do not seem to have much effect, other than on bird life and other seawater dwellers, though the industry is certainly trying its best.  The amount used of the most popular (with fish farmers) chemical, azamethiphos, has gone up ten times in the last ten years; and still the lice spread.  There are arguments as to whether azamethiphos lingers long term in water (the industry says it doesn’t), but it is not nice stuff and it is not working.  The newest technique is to abandon chemical treatments and introduce natural parasites – of the lice, not the fish, or the fishermen.  Trials with fish that eat the lice and will live with the salmon are so far going well, though conservationists worry about this rebalancing of nature and the river fisher folk would just like to see the farms gone so that the wild salmon might, hopefully, return.  The SNP Scottish government would also like the problem sorted – salmon revenues have gone the way of oil revenues, not good news for aspirations to independence.

In the meantime the price of farmed salmon has gone up considerably to reflect diminishing supply and is likely to stay that way as costs of lice management go up.  And if you prefer the superior taste of wild salmon?   Soon, the only way could be back to that 1960’s technique – ask a fishing friend to stick one on an overnight express to collect at the diner’s station.  Cool weather preferable.

 

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Issue 93:2017 02 23:Week in Brief Financial

23 February 2017

Week in Brief:BUSINESS AND THE CITY

NEWS, the word in pink on a grey background

NOT YET FULLY FUELLED:  Anything to do with aerospace seems to be bad financial news at the moment.  British Aerospace itself continues to struggle through, hoping that times are getting better; Rolls Royce last week announced a whopping loss – though said that underlying trading is improving.  This week’s bearer of bad tidings is Cobham plc, the company formerly known as Flight Refuelling Ltd, which neatly encapsulates what it principally does, a business which is the root of its current problems.  Like Rolls Royce, Cobham has a new chief executive, David Lockwood, but he denied that this was the new man having a clear out;  it is, he pointed out, the fifth profits warning in 15 months – profit forecast reduced by a further £20m, but this one came with £750m or so of right downs and adjustments – a veiled warning that the company might soon need a rights issue to rebase the balance sheet.   Mr Lockwood blamed two main factors for the company’s problems:  firstly, well known issues on a contract with Boeing to supply flight refuelling systems to 179 fuel transporter aircraft for the US Air Force, a US$40bn contract in total.   Cobham is a subcontractor but is liable for key problems and penalties, which led to the £150m write down on the contract due to delays and “technical complexities”.  The second cause of trouble was the acquisition of Aeroflex, an American specialist maker of aerials and antennae, which has caused further strain and write downs, though the underlying business is said to be good with strong potential.  But current weakness on this contributed to a further £500m plus of write-offs.  On the other hand the future of  Cobham is closely linked to flight systems, especially to military applications, and this is giving Mr Lockwood some comfort.   Military spending is likely to go up over the next five years after many years of cuts to budgets. The combination of Mr Putin and the worn out nature of much kit – and the new American president wanting to kick start manufacturing to deal with employment levels – should create rising demand for Cobham’s products, in which it is undoubtedly the market leader.

MAKE MINE A HALF:  Given the trouble of the public house trade, which has suffered a long slow decline for over twenty years, with, it is said, a pub closing every week, it is wonder that anybody wants to invest in it.  Indeed Punch Taverns, one of the largest chains of pubs in the UK with 3,350 outlets, has decided to halve the size of its business, and bundled up 1,900 pubs for sale to a partnership of Heineken, the Dutch based brewer, and Patron Capital, a specialist investment fund which manages the endowment funds of Harvard University, amongst other clients, and which likes to look at the potential of specialised property assets to create extra returns .  The price agreed was £403m and all looked set far for an early closing and no doubt a couple of drinks to celebrate.  Until the Competition and Markets Authority turned up to spoil the party.  It has now started a formal investigation into the acquisition – pointing out that Heineken already owns 1,100 pubs in its Star division.  The investigation could take up to six months although the new Heineken based group will be smaller than the old Punch based group.  It is believed to have been prompted by objections from landlords of pubs in the portfolio that Heineken is much more rigorous in wanting to sell its own products through its chain than the present owner. The Star chain is believed to have 85% of its beer and cider products sourced from Heineken.  Landlords like to have flexibility as to where they source their stocks, so as to give an attractive choice to customers and to buy competitively. The management of Star has already said that they intend to allow the acquired pubs greater flexibility in buying, especially in their ability to buy from specialist and niche breweries and cider houses.  If the Competition regulator will not accept this there may be additional conditions put in place, though the deal is unlikely to be stopped altogether.

POWER CORNER:  The troubles of the electricity generating sector continue to hit the headlines.   Latest one to worry its investors is Drax group, whose keynote power station is the huge Drax plant in East Yorkshire, but which has and continues to diversify away from its old coal powered dependence.  Drax is one of the largest producers of power from bio-mass – renewable grown sources and wood chips, including at Drax itself, now 50% from green energy sources. But it is still one of the largest coal burners in the UK , with all its coal being imported from Europe, as indeed is much of its woodchip supply (some also comes from the USA and from the UK).  The company has struggled with political turmoil in the funding arrangements for biomass, losing a High Court action against the government early last year relating to subsidies.  On the output side, the company has also suffered from price volatility, and has now decided that it must adopt a more conservative dividend policy to protect its capital base; this was announced by chief executive Dorothy Thompson, who pointed out that underlying net earnings had more than halved from 2015 to 2016 and that in the current economic climate it was wise to be prudent.  The problem is that power generators have long been regarded by investors as stable utilities – like water companies – which can be held in an investment portfolio as low risk, if also low return, income.  If they cease to be seen as stable and low risk, that means required yields will rise and the share price will fall – as it did after Ms Thompson’s announcement.

OFF THE MARKET:  The sorry tale of the attempts by Royal Bank of Scotland Group to sell its Williams and Glyn division – a number of outlets principally in the north-west, W&G’s historic base, bundled up to sell as a condition of more banking diversification following the state rescue of RBS, seems to have finally concluded – without a sale.  RBS has had several bidders, the latest being the Clydesdale and Yorkshire Bank, but nobody could reach the price RBS wanted – which was itself allegedly below the costs (£1.8bn) incurred by RBS in trying to separate the W&G part from the rest of its operation; nor could bidders see how to give the group modern management and recording systems without huge further expense.

But now the UK Treasury is said to have reached an agreement with the European Commission that the de-bundling need not take place.  Instead the Treasury will provide around £750m to various bodies, including challenger banks and funds, to compete with RBS in personal and small business banking, and RBS will be required to provide clearing and cash systems to these competitors to increase competition.  Just a pity nobody thought of this before spending £1.8bn on trying to sell the unit…

KEY MARKET INDICES:

(as at 21st February 2017; comments refer to changes on last 7 days; $ is US$)

Interest Rates:

UK£ Base rate: 0.25%, unchanged: 3 month 0.36% (steady); 5 year 0.74% (falling).

Euro€: 1 mth -0.37% (steady); 3 mth -0.33% (steady); 5 year 0.01% (falling)

US$: 1 mth 0.77% (steady); 3 mth 1.05% (slight rise); 5 year 2.00% (steady)

Currency Exchanges:

£/Euro: 1.18, £ slight rise

£/$: 1.24, £ steady

Euro/$: 1.06, € steady

Gold, oz: $1,229, steady

Aluminium, tonne: $1,877, slight fall

Copper, tonne:  $6,002, slight fall

Oil, Brent Crude barrel: $57.03, slight rise

Wheat, tonne: £147, steady

London Stock Exchange: FTSE 100: 7,290 (falling).  FTSE Allshare: 3,997 (rise)

Briefly:   UK interest rates show some decline, unlike the dollar and euro, but elsewhere the picture shows little excitement; all eyes are still on copper with more industrial action taking place, but the price moved down a little – profit taking say the analysts. The FTSE 100 and FTSE Allshare moved marginally in opposite directions – a comparatively unusual event.

 

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