25 January 2018
Lens on the Week
UK
MONEY FOR HEALTH: Rifts are beginning to open within the cabinet on health spending with Mr Johnson advocating an immediate increase of £100 million a week and the government wishing to leave the question of an increase until 2020, by which time we should know whether there is a Brexit dividend to spend. Those for increasing expenditure are worried that falling growth may eliminate any dividend (the true measure being the fraction debt:GDP) and also that it simply leaves things too late. If the government is to earn its spurs for reform it needs to begin now and take some risks, something which the ever cautious Prime Minister is reluctant to do.
That however is only part of the picture. Health spending is popular and Mr Johnson will gain points for advocating it. Maybe he is just strengthening his position for that great moment when “the ball comes loose at the back of the scrum”.
UNIVERSITY POLITICS: There are reports that Marxism is enjoying a revival in universities. Apparently undergraduates are worried about their job prospects when they leave with their degree. Perhaps as a result of the collapse of Carillion (although the survey may have taken place before then), research showed that those interviewed thought big business was more of a threat than Communism. Young people between the ages of 18-24 considered equality to be more important than freedom.
It is difficult to know whether the results of this survey are representative. There was the famous/infamous debate at the Oxford Union held just before the Second World War in which the motion was carried: “This House will in no circumstances fight for its King and Country”. In the event, the result turned out to be irrelevant. Perhaps the French are right: if you do not vote for the Communists when you are young, then you have no heart. If you vote for the Communists when you are older and wiser, then you have no head.
International
ELECTIONS: In Egypt, it looks as if even more potential challengers to President Sisi have been squeezed out of the race as presidential elections approach (see last week’s ‘Lens’). Mohamed Anwar al-Sadat, nephew of President Anwar al-Sadat who was assassinated in 1981, withdrew last week, fearing for the safety of his supporters. General Sami Anan, who launched his bid for the presidency a week ago, has been summoned to Cairo for questioning and has reportedly been detained by the military. The only candidate left standing is the head of an Egyptian football team. (Mind you, football has done Liberia proud – this week, former international footballer George Weah promised to fight corruption, improve agriculture and boost the economy when he was sworn in as president at, appropriately, a football stadium outside the capital Monrovia.)
In Germany, Angela Merkel has threatened to lead a minority government for six months and then call new elections for the autumn. She has been struggling to form a majority government since last year’s elections, but has been unable to put a coalition together. Her former partner the Social Democratic Party has been insisting on conditions which her own party is finding it hard to accept. It is thought that she is hoping that the threat of yet another election will cause the SDP to compromise on its demands.
In Venezuela, President Maduro has indicated that he would be prepared to stand in the elections due by the end of April. Perhaps he feels responsible for the mess he has made of his country – economic collapse, breakdown of law and order, record inflation, record murder rate, popular unrest, democracy undermined – and feels he should stay on for another term to put it right.
In Russia, candidates have been submitting the list of signatures required to register for the presidential election in March. The deadline for submission to the Central Election Committee, which will check them for forgeries, is January 31. 100,000 signatures are required for an established party’s nominated candidate; 300,000 signatures are required for other candidates (which includes President Putin); and no signatures are required for nominees from the nationalist Liberal Democratic Party or the Communist Party. Three potential candidates have already dropped out. Opposition candidate Ksenia Sobchak (who many view with suspicion, because of family ties with Putin) has collected sufficient signatures. Opposition leader Alexander Navalny has called for a boycott of the election. He cannot stand because of a suspended prison sentence for unauthorised rallies, a conviction which many insist was politically motivated.
In Italy, a pig has captured headlines as parties campaign for national elections on March 4. Silvio Berlusconi leads a centre-right coalition which is likely to win; however, he is banned from holding public office until 2019. His ally, the far right Brothers of Italy party, has seized on a photo of a pig rummaging among piles of uncollected rubbish in Rome to question the fitness of the Five Star Movement to govern; the Movement is Italy’s single most popular party, but its most successful politician, Virginia Raggi, has failed to improve Rome’s abysmal public services since she became mayor. Former prime minister Matteo Renzi said “Once Rome’s symbol was the wolf, now it’s the pig”.
In Zimbabwe, Emmerson Mnangagwa announced that elections will be held early. Opponents of his Zanu (PF) claim that he is hoping to capitalise on the current disarray of the opposition; Morgan Tsvangirai’s health is deteriorating and he is unlikely to be well enough to stand, and Roy Bennet (former treasurer-general of the MDC and political exile) was killed this week in a helicopter crash in the USA.
Financial
TAXI! The troubles of Uber may not yet be over in the London taxi business (nor elsewhere – latest city to withdraw Uber’s operating licence is York). In a very unexpected announcement Royal Dutch Shell – the lubricants to petroleum giant – have announced that they are considering a similar operation to that of Uber, to be trialled initially in London. Shell already has a London subsidiary, FarePilot, which has been operating for a couple of years, providing advice to taxi operators, ironically including Uber, as to where there are concentrations of customers looking for cab services. Farepilot applied for a cab operating licence from Transport for London, the licensing authority last year, and although it has not yet been granted, it is expected to come through in due course. Shell has hinted that it may then follow the Uber model to develop its own operations in London, and if this works, much more widely. It has qualified this by saying it may alternatively simply provide advanced matching (taxi’s and passengers) and management services to operators in the market. There may be quite a lot of those – the US operator Lyft and the Estonian business Taxify are both thought to be in the early stages of applying for London licences.
Shell is rapidly developing strategies to lessen its dependence on oil and gas products, and FarePilot is intended as a cornerstone of that. Whilst Shell does not expect carbon based fuel to vanish altogether, at least in the foreseeable future, it can see a world in which transport will become driven by green electric sourcing or by hydrogen – a much overlooked power source which some experts think may be the long term winner in the clean energy stakes. Shell is anxious to establish a leading position in those new markets.
CASH REMAINS KEY: More problems for embattled BT. Last year it lost operational control of its Openreach business as complaints from customers and from rival telecoms operators about Openreach’s failure to roll out broadband services finally made the regulator, Ofcom, intervene. Ofcom made BT relinquish all day to day control over Openreach and effectively to establish it as an independent business, with its own funding and management. The view of the market is that should help BT with funding both Openreach and its telecoms business, but also makes clear that if Openreach fails to speed up cabling Britain to modern systems, then its ownership will be put into other hands.
But now BT has suffered a new blow in its efforts to get more capital and cash into the operational side of its business. BT has one of the UK’s largest pension schemes – 83,000 members, current and retired, and although it closed many years ago to participants in final salary schemes, the burden of that is a serious drag on BT’s ability to generate cash internally. Current fund deficiency is around £14bn, depending on who is doing the calculation, and that means the group is saddled with a long term running deficit that it is unlikely to make up unless returns in the investment market pick up dramatically. Additionally the BT scheme has an unusual problem in that annual rises in pension payments are linked to RPI – most schemes are linked to the lower CPI index. BT applied to the courts to switch indices (opposed by the pensioner beneficiaries, unsurprisingly) but the High Court has just rejected the application, saying the terms of the scheme refer to RPI so that is what must prevail. Given the sums involved, this is likely to go to the Court of Appeal in due course.
