04 January 2018
Lens on the Week
UK
EAST COAST LINE: It is not unusual for there to be different narratives in politics, but the two lines being peddled concerning Lord Adonis’s resignation as chairman of the independent National Infrastructure Commission probably mark the beginning of the first political row of 2018. Lord Adonis believes that by allowing Stagecoach/Virgin to walk away from the East Coast franchise, Chris Grayling has let them off an unpleasant financial hook. Successive operators have failed to run the line at a profit and the total franchise payments of £3.3 billion were loaded towards the end of the eight year deal done in 2015. The government line is that the resignation is linked to Adonis’s opposition to Brexit. The latter sounds a bit thin, but the question of how far the liabilities penetrate the Stagecoach and Virgin groups depends on details of guarantees and corporate structure. Questions to be asked must include whether the release of the franchise involved the government giving up valuable claims and, if not, why this is not the case. The issues are of some importance as one of the justifications for privatised railways is that if they go wrong, it is investors rather than taxpayers who foot the bill. No doubt the truth will emerge in due course.
PHARISEES’ NEW YEAR: It has been a good holiday for those who love to make politically correct criticisms. Beyonce, a beautiful woman with an African heritage, darkens her face for a photo shoot. Princess Michael of Kent wears a brooch showing a black man with a gold crown. Neither of these things was done with any offensive intention whatsoever, yet the press and the bloggers dived straight in. The benefit for the press is obvious. The pause in the Brexit negotiation has left them short of news, so the opportunity for a bit of public sneering is just what the doctor ordered. For the bloggers, though, why do they do it? Has political correctness supplanted their identity? Would they vaporise in a cloud of acrid smoke without their weekly injection of bile? Oh, we wish, we wish. Still, as they are probably just sad people without much to be proud of, perhaps then the right thing is to wish them a happier New Year.
ENCRYPTION WAR: Home Office Minister Ben Wallace has used the holiday period to gear up his campaign to increase the cooperation given by Internet giants to law enforcement agencies. Facebook, of course, say that his picture of them as ruthless profiteers sitting on beanbags in T-shirts is wrong and denies that they put profit before safety. It is clearly going to take some time to find a balance here as democratic governments wrestle with multinational power. Still, in the end, it is governments which win these battles. Remember what happened to the Templars on that Friday the thirteenth back in 1307!
International
YOUR ASS IS COVERED, SIR/MADAM: Nobody is above the law? There must have been some huge sighs of relief in various lofty but embattled quarters around the world this week.
In Israel, after a debate lasting 43 hours and a close vote of 59 to 54, the parliament passed a law protecting politicians from police charges. The law was promoted by Prime Minister Binyamin Netanyahu’s Likud party. For the last year, Mr Netanyahu has been the subject of a police investigation into corruption.
In Argentina, a judge has ruled that the death of the prosecutor Albert Nisman in 2015 was murder, not suicide. Mr Nisman was shot dead the day before he was due to testify that President Cristina Fernández de Kirchner had covered up Iran’s alleged involvement in the bomb attack on a Jewish community centre in Buenos Aires in 1994 which killed 85 people and wounded hundreds of others, in exchange for trade deals. Ms Kirchner lost her presidential immunity from prosecution when she stepped down two years ago, but she regained immunity when she was elected to the senate last October. In December she was charged with treason and corruption, following the long-running investigation into the death of Mr Nisman and the claims that Iran was involved in the bomb attack. A judge has asked for her immunity to be removed, but is unlikely to secure the necessary parliamentary majority.
Last July, the Supreme Court in Pakistan forced Prime Minister Nawaz Sharif to resign, following investigations into allegations of corruption against him and his family. It seems that Mr Nawaz might escape prosecution, however; there are now claims that Saudi Arabia is brokering a deal with Pakistan which would give him immunity from trial in exchange for retiring from politics and living in exile.
In South Africa, judges in the highest court criticised the national assembly for failing to bring President Zuma to account for the allegedly illegal use of £13 million of public money on his private home. The governing ANC has repeatedly voted down all attempts to bring in impeachment or no confidence motions.
In Zimbabwe, there has been no question of prosecution (let alone immunity from prosecution) in the case of Robert Mugabe and his wife Grace, in spite of allegations that they amassed a fortune of billions while in power by stealing from their people and country. In fact, they are being given even more for their retirement; a mansion, an army of staff, chauffeur-driven cars, first-class air-travel, private health insurance, etc.
SLAUGHTER OF THE INNOCENTS: At least ten people were killed in an attack on Christians in Egypt. Two gunmen armed with automatic weapons opened fire on worshippers leaving a church after a service in Helwan, near Cairo. Isis has claimed responsibility.
At least 41 people were killed, and another 90 wounded, by a suicide bomber in Kabul, Afghanistan. The attacker’s target was a Shia community centre and news agency, where students were gathering to mark the anniversary of the 1979 Russian invasion of Afghanistan. Isis has claimed responsibility.
At least fourteen people were injured by a bomb in a supermarket in St Petersburg, Russia. The bomb, packed with pieces of metal, had been left in a storage locker by the entrance. Isis has claimed responsibility.
The Christian festival of the Holy Innocents, also know as Childermass or Holy Innocents’ Day, takes place between Christmas and New Year (usually on December 28), to commemorate the infanticide unleashed by Herod’s attempt to murder the newborn Jesus.
Financial
LAW OF UNEXPECTED CONSEQUENCES: (I): Pity your poor banker, and your poor stock broker, insurance intermediary, and almost anybody else you might rely on for financial expertise. The New Year brought them new rules, in the shape of Mifid II. Not a dark character from Star Wars – much more difficult than that. Mifid II is one of those changes in regulation that sound as though they can do nothing but good and make the financial world a better and safer place for investors. It may even succeed in doing that, but it is causing a great deal of angst and expense for the regulated firms who have had to introduce it. The measures enforce much fuller disclosure, mandate even stricter procedures for recording and filing decision chains, and enforce a new concept of best execution – ensuring that firms acting for clients not only do the best deal they can for their clients but also keep full justification for why they did what they did. The latter may at least save firms from those cases where in hindsight the client wishes he had not done what he did do; some banks must be regretting that they did not apply it to PPI (personal insurance on loans, the subject of many claims where the banks are finding the onus is on them to prove that they did not mis-sell, rather than on the complaining purchaser to prove they did).
Although there is a transition period, the Financial Conduct Authority has made it clear firms are not to use this as a shield for having not got themselves ready for the new rules, so they are effective immediately, except in one or two specialist sectors where further time has been granted. In the longer term the new rules may change the markets considerably – possibly reducing choice and competition as smaller firms struggle under the burden and expense, and maybe have to leave the markets altogether.
LAW OF UNEXPECTED CONSEQUENCES: (II): The markets are beginning to wonder if Britain may yet be leaving the EU without many of the trade deals and agreements in place that will deal with Britain trading outside EU rules and regulation. This is increasingly taxing UK businesses doing significant trade with Europe – but also many European businesses who do business in the UK. Latest to focus on a possible problem is the Europe’s favourite (well, cheapest) airline, Ryanair. Ryanair is of course Irish domiciled, and does a significant part of its business flying Brits to a range of European destinations (it is now Europe’s largest passenger carrying airline). Nobody is quite sure what happens if the agreements covering air traffic have not been finalised by Brexit day, but Ryanair is starting to cover a situation where nothing has – it is establishing a British subsidiary which will operate the intra-UK routes after Brexit, and will apply for the necessary air-traffic control operating licenses from the (British) Civil Aviation Authority. This follows the actions of German airline Wizz Air, who have done the same, and Easyjet, who have done it the other way, setting up a European operating business so they can continue to operate inter-European flights. Air traffic is a highly regulated industry, and one which still pays attention to national interests, requiring operators to be registered where they substantially operate (unlike for instance shipping, where many shipping lines register in low regulation, low tax, countries). What European airlines would like is to continue the current arrangements in Europe, called Open Skies, which establishes common rights across nearly all European countries (including some not in the EU). What they don’t want is to be cancelling flights in early 2019 because nobody knows what the rules are…
