Issue 157: 2018 06 07: Lens on the Week

07 June 2018

Lens on the Week

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BREXIT: In a shift of policy Labour have decided to vote for “full acccess” to the single market and “shared institutions and regulations” with the EU.  It is not entirely clear how far this goes and whether they advocate “free movement”.  Perhaps this will be clarified soon.  Meanwhile neither party has an entirely clear position.

GRENFELL TOWER: The public inquiry headed by Sir Martin Moore-Bick has moved from its Commemorative stage to consideration of the issues.  The initial evidence is in the form of opening statements with reports from the Fire Brigade, the Council, the Contractors, Government bodies, etc, etc and also from a number of experts appointed by the inquiry itself.  There is early focus on the disastrous advice given by the Fire Service to “stay in place”, advice which was reversed too late, and also on the view of the experts that the cladding made the building an accident waiting to happen.  No doubt we will hear much about who was responsible for the use of unsuitable materials in due course.

It is a relief that the enquiry has now got going and that we can begin to understand what mistakes were made.  That is important if similar errors are to be avoided, but it should also have a cathartic effect and will hopefully help those involved come to grips with their trauma.  No doubt we will find lots of errors were committed but hopefully we will also gain broad insights into modern commercial contracting.  Has the use of modern techniques to avoid the wasteful over-engineering of the Victorians also stripped away secondary lines of defence?  Has the public interest in procurement meant that authorities are forced to go for the cheapest option rather than using the contractors they trust?

A NEW WIND: Is there a wind of change in Government circles?  Are the young thrusters of the Conservative party beginning to make themselves felt?  Green shoots can be seen a number of places. First there is the new Home Secretary Sajid Javid talking about revisiting immigration caps.  It seems likely that something will be done about doctors and whether students should be included in the figures, but will this move to a general loosening?  Mrs May, who set the targets, is thought to be reluctant to change them, but there is a lot of pressure from industry and the promotion of Javid may be a good opportunity to re-plot the course.

Then there is the confirmation by Business Secretary, Greg Clark, that the proposed nuclear power plant on Anglesey will be constructed in part with government finance rather than being financed privately. This would come cheaper than the funding model at Hinkley Point and would mean that the guaranteed price paid to the plant for its electricity could be lower.  Mr Clark’s decision follows a recommendation of the National Audit Office and, although he claims to be reviewing a new private funding model for other projects, the decision to use the low rate of interest on government borrowing seems pragmatic.

This week saw Jeremy Hunt break the record for longest serving Health Secretary.  More interesting, however, is his admission that he wants to move away from a number of the reforms brought in by Andrew Lansley, his predecessor, which he says have Balkanised the service into fiefdoms.  Lansley was, of course, also a Conservative but his reforms are seen as damaging and the reversal of policies is surely right.

These are all straws on the wind but this increased willingness of young ministers to challenge previous orthodoxy may be the start of a contest as to who will be Mrs May’s successor.


PEACE: The government of Ethiopia has pledged to fully implement the recommendation of the UN-backed boundary commission which defined its border with Eritrea eighteen years ago.  Armed conflict about the border broke out between the two countries following Eritrea’s independence in 1993, and has been simmering ever since.

The Pakistan army and the Indian army have agreed to stop shooting at each other across the frontier in Kashmir, and to abide by a ceasefire agreed in 2003.  Skirmishes across the disputed territory have claimed dozens of fatalities in recent months.

The peace summit between President Trump and Kim Jong-un will begin next Tuesday in Singapore. The two leaders will discuss the possibility of the denuclearisation of the Korean Peninsula and of a formal end to the Korean War.

WAR: Saudi-backed forces fighting to restore the government of Yemen are ready to attack the Red Sea port of Hodeida, a strategically vital entry point to the country, held by the Iranian-backed Houthi rebels.

A US military spokesman claimed that more than 50 Taliban leaders were killed by an artillery strike in southern Afghanistan.  Afghan security forces repelled an Isis attack on the interior ministry building in Kabul; all seven Isis gunmen were killed; one policeman was killed and several wounded.

The Turkish army is poised to attack Kurdish territory in northern Iraq.  It already occupies 11 new bases on Iraqi soil and is launching daily airstrikes on PKK positions.

The Pentagon is planning to withdraw half of its forces currently in Africa, where as many as 6000 troops are involved with the fight against Islamist militants.

ACCIDENTS: An FBI agent’s gun fell onto the dance floor while he was executing some impressive moves in a bar in Denver, USA; when he picked it up, however, he accidentally fired it and shot someone in the leg.

A German policeman accidentally shot a colleague in the leg while they were investigating an incident in Berlin Cathedral.

A policeman in the USA accidentally shot himself in the leg during an incident which disrupted the San Diego marathon.


ADJUSTING THE WISDOM (1):  Once all the experts are agreed on something, you know the time may have come to take the opposite position.  Only a couple of weeks ago the press together with retail analysts and investors agreed that high street retail was finished and that retail parks were also looking very sick.  Indeed the Shaw Sheet did a little piece on Wesfarmers, the Australian retailer, finally selling (or in fact giving away) Homebase, the British D-I-Y chain.  Then the sun shone, the public got their cars out, and went shopping.  Result: May turned out to see sales up by 4.2%, the highest rate of growth in over 4 years.  Wesfarmers may be feeling rueful that garden related sales were especially well up, but so was fashion (updating dated wardrobes or just inspired to dress better because of the royal wedding?).  More puzzling, food and booze sales were at their highest level for five years – do we eat more when the weather improves or have lettuce and strawberries have got very expensive?  Sales were said to be up in physical stores as well as on line, and to be particularly strong in larger regional centres and malls, which bears out the proposition of many property owners that shopping is becoming a leisure activity, and that malls have to offer a mix of shops, food, and true leisure offers, with good access and free parking.  The boomlet has come too late to save a number of well known chains, especially in fashion, but must offer some hope to those remaining that what has gone on over the cold and wet winter has been a deferral of spending rather than any new urge to save money.  Far from it, consumer credit figures show that credit card based spending has been growing at a slightly faster rate than good old fashioned cash.  But will June thunderstorms keep the shopping public at home whist their credit limits recover?

ADJUSTING THE WISDOM (2):  Not only has the fracking company Cuadrilla being (endlessly) criticised for the alleged environmental side-effects of its attempts to frack for the large gas reserves in deep rock under north Lancashire, it was regarded as a very speculative venture that might never turn a profit.  Indeed, it has not yet produced any commercially useable gas but it has surprisingly produced a profit for 2017.  That, to be fair to those who think it sounds a clever thing to do, is a bit of smart accounting.  In 2013 Centrica, the parent company of British gas, bought a 25% holding in Caudrilla to ensure a seat at the table when and if gas came to be available to distributers.  Part of the deal included an undertaking by Centrica to reimburse part of Caudrilla’s exploration costs when it finally began commercial drilling, which it did at Preston late last year.  Under the terms of the Centrica agreement the shareholders then released its agreed costs – which are treated as profit for Caudrilla – net US$5m, as against a loss of $16m in 2016 when the company was having to carry its own costs.  The company confirmed that it has finished drilling the first well and is waiting for the government to confirm consents for it to begin fracking, which it expects to receive very soon.  Providing it does, it forecasts that it will be producing commercial supplies of gas in 2019 – and be making trading profits.  It then thinks it should have at least six years supply of gas from that zone, and to be able to seek other areas to work in, using what will then be proven technology.

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