4 July 2019
Lens on the Week
UK
BORDER TALK: The two Conservative leadership candidates seem to be taking similar positions on Brexit. The backstop arrangements under which the UK could be trapped in the Customs Union indefinitely pending agreement on how to deal with the Irish border has to go and be replaced by something else. The difficult question is, what? There are two issues, one is product safety and checking that diseased animals cannot cross the border into the EU. That might be dealt with by aligning product standards in the UK with those in the EU. The second is the enforcement of tariffs. Whoever becomes Prime Minister, there will be immediate and intense negotiations on these points. If a solution is found we will leave with something close to Mrs May’s Withdrawal Agreement. If not, unless there is a successful intervention by the House of Commons, we leave without an agreement. One thing is sure. The dynamics of negotiation dictate that any agreement will be right up against the deadline.
PLEDGES GALORE: In the ‘let’s spend someone else’s money in pursuit of our political careers’ competition, some of the more eye-catching pledges are:
From Johnson: an increase in income tax thresholds with the higher rate beginning at £80,000 a year rather than £50,000 a year, increases in the national living wage and in the wages of the public sector, 20,000 more police, and the maintenance of foreign aid at 0.7% of GDP. Mr Johnson will review HS2 and put a broadband in every home (presumably the modern equivalent of the chicken in every pot promised by Henry of Navarre);
From Hunt: a drop in corporation tax to 12 ½% with national insurance contributions beginning at £12,000 a year, relief from business rates in the high street and investment allowances (ie 100% capital allowances) up from £1 million to £5 million. He would also spend £15 billion extra on defence over five years, maintain the free television licence, build 1.5 million houses (with associated ownership schemes) and keep HS2 and the new runway at Heathrow.
Philip Hammond, the Chancellor of the Exchequer, has thrown his hands up in horror at this profligacy. Less has been said by Labour, however. That may be because they think that austerity was a mistake in the first place. Alternatively Mr Corbyn may be too concerned about tracking down the person who said he was not fit for the job of prime minister.
BBC SALARIES: The silly season is clearly upon us with the papers getting excited about top pay at the BBC. Gary Lineker leads the field at £1.75 million with Jeremy Vine at number 20 scoring £290,000. Presumably the BBC values its stars by reference to the circulation they bring. Does Lineker really bring that much value or would the public find other, cheaper, stars equally attractive? Hopefully someone has done the maths.
International
NORTH KOREA: President Trump became the first US president to set foot in North Korea. At the G20 summit in Osaka, he made a public request by Twitter to Kim Jong-un to meet him at the DMZ border; the meeting took place, apparently at short notice, when Trump stopped at South Korea on his way back from Osaka. The two leaders shook hands across the line; Trump stepped into North Korea at Kim Jong-un’s invitation, then they both crossed back into the South to join President Moon.
US secretary of state Mike Pompeo said that talks between the US and North Korea would start within three weeks. President Trump said that he would welcome Kim Jong-un to Washington if talks proceeded. China is urging the US to ease sanctions as a means of gaining concessions from North Korea; previous talks broke down because North Korea couldn’t accept the US insistence on total de-commissioning of nuclear weapons before any sanctions could be dropped. There were hints this week that Washington might be considering relaxing this uncompromising line (thought to be engineered by hard-line national security adviser John Bolton) and calling for a freeze of North Korea’s weapons program rather than a total ban.
IRAN: Iran announced that it now possesses more than 300kg of low-enriched uranium, following last week’s resumption of uranium enrichment. It is thus openly in breach of the terms of the 2015 nuclear deal. Its announcement was confirmed by the UN’s watchdog the International Atomic Energy Agency. Tehran has also declared that it will start enriching uranium to a grade of 20%.
It seems that Tehran has decided that the European signatories of the deal have not managed to find a way round US sanctions to trade with Iran, but it remains unclear what compensatory gains it can hope to gather by blatantly abandoning the agreement.
LIBYA: Despite a UN ban on the selling of arms to Libya, both sides in the latest phase of the civil war are claiming that their opponents are being armed by outside powers. The GNA in Tripoli claims that General Haftar’s forces are being armed by the UAE; General Haftar’s Libyan National Army claims that the GNA is being armed by Turkey. The GNA exhibited captured US Javelin short-range missiles which they say had been purchased by the UAE. The Libyan National Army released six captured Turkish sailors.
Financial
WET APPROACH: Thames Water has long being the target of many left and leftish politicians, as well as its customers, for its leaky habits (water from its pipes, not tales from its boardroom), and large profits. Ofwat, the water industry regulator, has been on Thames’s case to at least get the leaks fixed and over the last few years Thames has gradually been stepping-up works to do just that. The strain is starting to tell – last year, profits were down over 60% to £52m, customer complaints continued to rise, and investment spending – mostly on new pipes – was well over £1billion. The customers are not happy; the regulator is not happy; the shareholders are not happy. So Steve Robertson, the CEO has taken an early bath (presumably a shallow one) and left. The board commented that “last year was mixed” and blamed “extreme weather events” for the delay in fixing leaks. Do they mean that long hot summer?
SAY THAT AGAIN? In a week which saw the conclusion of the UBS insider trading trial at Southwark Crown Court, Fabiana Abdel-Malek, a senior compliance officer and Walid Anis Choucair, a trader each got three years in jail, Andrew Hauser, director of markets at the Bank of England made some slightly perplexing remarks. Speaking at an event to promote female participation in foreign exchange markets and finance (presumably he also encourages those of other sexualities and none) he certainly did not seem keen on male traders. He blamed a bro-culture and old fashioned male networks for encouraging crime in markets and subverting behavioural cultures, citing private groups including WhatsApp communications which enabled secret messaging between staff intent on bad behaviour. Mr Hauser, at the Bank since 1992 (he does not detail his social or educational background in his profile), seems to have overlooked the conviction of Ms Abdel-Malek, or indeed that the Bank of England itself has one of the lowest proportions of female to male staff in the City.
GETTING THE BOOT: Boots, the chemist (no longer Boots The Chemist), has confirmed its long rumoured closure programme among its UK retail outlets. Boots, now owned by the Walgreen Boots Alliance, an international conglomerate, says it will close 200 stores over the next year or so, mainly in locations where it has duplicate branches. It does not expect many compulsory redundancies, moving most staff to other outlets, if they are willing to transfer. Currently the group has almost 2,500 shops, and in some areas it is very thick on the ground – there is one on almost every street in the City of London; perhaps those traders need frequent medication for stress. Commentators think this is likely to be only the first stage in the shrinking of the retail empire – Boots is facing increasing competition from NHS doctors’ own in-house pharmacy services – a useful extra source of income for GP practices and handy of course for patients. But the other threat to its high street operations comes from itself – it is rapidly expanding its on-line delivery to the door service, not least to see off expanding competition from other retailers there.
DRIVERLESS MOTORS: A couple of weeks ago we mentioned the in-negotiation merger between Fiat/Chrysler and Renault. Now it appears to be off – the French Government, Renault’s largest shareholder, wants to discuss it more with Nissan, Renault’s current partner. This is thought to be code for “fears loss of jobs and French control” in the tricky politics of Macron’s France. The two companies say the party is not over, but without government support, it probably is over for now.
