21 June 2018
Lens on the Week
UK
BREXIT: Forward and backwards, it goes. Yet again the EU Withdrawal Bill returns to the Commons with an amendment requiring that if the Government has not reached a deal satisfactory to the Commons by the end of January, the House of Commons should be able to give directions to the Government. No one knows how the voting will go. Certainly some Conservatives, led by Dominic Grieve, Ken Clarke and Anna Soubry look set to revolt but there are Labour MPs in Brexit constituencies who would not want to be associated with an amendment which could wreck the UK government’s strategy. No one knows how the numbers will work out but one thing is clear: politicians seen to undermine a national position which the public understands to be difficult could pay a very high price if things go wrong. Just how brave are they?
Stop Press – EU(Withdrawal) Bill passed with a Government majority of 16 following confirmation from Mrs May that MPs would have a meaningful say. Four Labour members voted with the Government.
CALDWELL: Doctors at the Chelsea and Westminster Hospital have been granted a twenty day license to dispense a cannabis-based drug to epileptic Billy Caldwell. Billy’s parents had obtained the drug from Canada, but it had been seized by Home Office officials, resulting in an immediate worsening in his condition. Home Secretary Sajiv Javid has promised a review of clinical use of the drug.
NHS FUNDING: Mrs May has announced annual rises of 3.5% in NHS funding with expenditure being some £20.5 billion higher by 2023. That is about £300 higher for every member of the population. In part, the money will come from increased taxation but Mrs May has indicated that some of it would be met from the “Brexit dividend”, money which will no longer be sent to Brussels. This has been ridiculed by her political opponents, and also by the Institute of Fiscal Studies, on the grounds that overall Brexit will be a cost rather than a source of income. Perhaps it can be argued that certain expenditure will be reduced but the reality is that the talk about a dividend is purely political rhetoric and we will not know the truth about how the cost is to be met until the autumn budget. The increase in expenditure does of course undermine the effectiveness of Labour’s pledge to increase funding, although Keith Starmer has been quick to say that they will do more, better, more elegantly, etc, etc.
International
MIGRANTS: Matteo Salvini, Italy’s new interior minister and leader of the hardline League party, prevented a ship carrying over 600 African migrants from docking in Italian ports. The prime minister of Spain allowed the ship, which had departed from Libya, to dock in Valencia.
Austria’s new Chancellor Sebastian Kurtz came out in support of Italy’s hard line on immigration, as did Germany’s new interior minister, Horst Seehofer, of the CSU party. Even France’s President Macron, who had initially condemned Matteo Salvini’s action, agreed that the concerns of Europe’s citizens had to be addressed, and backed Italy’s plans to prevent economic migrants crossing the Mediterranean and to deport those who do. This left Chancellor Merkel of Germany very isolated: when Mr Seehofer proposed to impose border controls on asylum seekers (in defiance of her policy and, she claims, EU law), it appeared that she would have to sack him, which would have destroyed their coalition government. A protracted stand-off has resulted, however, as both sides seek for a compromise.
Meanwhile, in the USA, children of suspected illegal immigrants are being taken from their parents and detained in cages while their parents are sent to jail pending criminal trials. This is the result of the Trump Administration changing the processing of suspected illegal immigrants from civil courts to criminal courts, in an attempt to discourage such immigration.
TURKEY: Turkey goes to the polls this Sunday with presidential and parliamentary elections. President Erdogan seeks a further term, after fifteen years leading his country; if he wins, he will continue to dismantle the country’s parliamentary system and abolish the role of prime minister, replacing it with a presidential system which will greatly increase the powers of the president. Until recently an Erdogan victory looked inevitable; this week, however, he seemed to be losing his political touch at the hustings. His approval ratings are falling as the economy is faltering and a currency crisis looms. He is facing unexpectedly fierce competition from Muharrem Ince, head of the CHP party, who began the elections as a virtual unknown but has since shown an ability to appeal to a wide cross-section of voters. Even Erdogan’s AKP could lose its majority in parliament.
SAUDI ARABIA: From this Sunday, women in Saudi Arabia will be allowed to drive. In recent weeks, however, a number of female activists have been arrested and imprisoned, presumably as a gesture by conservative elements in the regime to show that there are still brakes on the country’s speed of reform. Opposition to reforms undertaken by crown prince Mohammed bin Salman also surfaced this week when there was an online outcry by a number of Saudi men about leotard-clad female trapeze artists appearing in the performance of a Russian circus in Riyadh. The minister for fun, Ahmad al-Khatib, was sacked. His ministry was set up by the crown prince in 2016 to bring previously-forbidden western-style entertainment such as cinemas and theatrical performances and pop concerts to the kingdom.
Financial
NOT SO INNOCENT: Long rumoured, now confirmed – Virgin Money is been taken over by CYBG (Clydesdale and Yorkshire Banking Group for those who can’t work that out). CYBG was carved out of an unsuccessful foray by National Australian Bank to build a major retail banking business in the UK; in the end it rewound into the existing Yorkshire Bank and Clydesdale Bank brands – whose core markets are just as you might expect. That business has had a lot of investment – especially in the all-important technology essential for modern banking – but it has never looked big enough to become that fifth brand which might challenge the major’s, or exciting enough to be really attractive to younger customers. CYBG has about 250 branches – mainly in Yorkshire and Scotland, but the key issue it faces is getting a national presence. The takeover of Virgin helps solve that in two ways – it gives it another 80 branches, mainly in the south of England, and it gives it a stronger brand (though no doubt some grumpy Yorkshiremen won’t agree). Virgin too has struggled to build a sizable bank fast enough to compete with the majors (it is still focussed on credit cards and residential mortgages) and also, rather oddly, given its image, has weak online technology. Recently it has taken on 10x Future Technologies to build its digital offer, but that contract will presumably now be terminated. The combined business will be named Virgin Group but the platform, onto which Virgin will move its customers, will be the existing CYBG one and have about 6 million customers. There will be about 1,500 job losses, mainly in head office functions. Virgin Group, the business owned by Richard Branson, will charge an annual licence fee of around £15m to use the “Virgin” brand (that’s a mighty fee for replacing two well-known brands with a silly name). Virgin Money shareholders will own about 38% of the new bigger bank.
NOT SO FAST: Norwegian, the new kid on the runway when it comes to European short-haul and transatlantic passenger flights is an obvious target for the major airlines and national carriers, suffering as they are from cut-throat competition on all their profitable routes. Norwegian, quoted on the Oslo Stock Exchange, has expended fast over the last five years and has the advantage of a new fleet of airliners, 150 of them, with pride of the hanger being the Boeing Dreamliners which it operates across the Atlantic to the USA and Caribbean. The Dreamliners are the latest generation of planes and are faster, smoother, and cheaper to operate then anything seen so far (though the passengers are still rammed into ever small seats to make the economics work – this year it will carry well in excess of 30 million). As well as that desirable fleet it has a portfolio of landing slots at major airports, also a valuable commodity in an age when airport expansion is difficult. It has one problem – £2bn of debt. Chief executive Bjorn Kjos is aware of the danger of that if business should turn down. He has indicated he would like a partner and up popped IAG Group (British Airways and Iberia) which so far has held off a bid. Now a new stalker has appeared – Lufthansa, which operates the eponymous airline and several other mid European brands. Neither of these are what Norwegian has in mind – rabbits being not keen on talking to wolves, you might say – so they are looking for a financial partner with more speed. That may not save them; IAG already owns nearly 5% and the share price rose 12% at the beginning of the week.
