6 December 2018
Lens on the Week
UK
BREXIT: The forced disclosure of the government’s legal advice on the withdrawal agreement has dominated the first two days of the five-day Brexit debate. The advice makes it clear that once we have signed the Withdrawal Agreement it becomes impossible to escape from the back stop arrangements other than on a consensual basis. That means that the UK will not be able to enter into its own trade agreements, but will continue to operate on a tariff free basis with the EU.
It is doubtful whether that can be a surprise to anybody at this stage so the real issue is whether it matters. Brexiteers would say that by entering the Withdrawal Agreement we give up our ability to exit unilaterally under the Treaty of Lisbon. On the other hand the recent course of negotiations makes it clear that leaving without an agreement is so unpalatable as to be more or less impractical so are we really going up anything of value at all?
Another area which is causing concern is our exclusion from the Galileo project. That makes little sense in economic terms, since we will have wasted our investment and the project itself will be damaged by our withdrawal. Perhaps it is part of “project punishment”. On the other hand, the EU might say that we can hardly expect to leave and remain involved in all their projects. That would be to have our cake and eat it. No doubt there are other countries interested in security satellites with whom we could cooperate in due course.
The most important development, however, is neither of the above, but the opinion of the Advocate General of the European Court of Justice to the effect that notice given under Article 50 of the Lisbon Treaty to withdraw from the EU can be revoked. The opinion amounts to advice to the Court, which will then make its decision as the final arbiter on the EU treaties. If the Court takes the same view it would open the way to a further referendum in which reversing the decision was one of the options (see “No Deal: a Dead Duck?”).
HODGES BACK: Durham PhD student Matthew Hodges is now back in the UK after being freed by the UAE, who forced him to confess to spying for the UK. Both he and MI6 deny that this was the case. His wife Daniela Tejada was critical of the Foreign and Commonwealth Office who, inter alia, refused to share information with her. They claimed that this was on data protection grounds but it is hard to imagine that this was the real reason.
MORBID OBESITY: Health Survey for England statistics indicate that 5% of women and 1% of men are morbidly obese. These figures compare with 1% and 0 .5% respectively in 1993. You are morbidly obese if your weight in kilograms divided by the square of your height in metres is higher than 40.
GETTING STUCK IN: the Metropolitan Police Commissioner Cressida Dick has spoken in favour of members of the public getting involved when officers are attacked. Her words represent a move towards more robust policing, although an officer who knocked a moped robber off his scooter is currently being investigated by the Independent Office for Police Conduct.
International
SPAIN: Far right extremists gained seats in a Spanish assembly for the first time since Franco’s death. In regional elections, the anti-immigration party Vox won 12 seats in the 109 seat parliament in Andalucia.
National elections could come as early as the new year, as the new minority Socialist government has just been defeated over its proposed budget for 2019. Vox would be expected to win seats in that election, and also in the EU parliament elections due next May.
Vox appears to be following the same path as other hard-line extreme right parties in Europe – the League in Italy, Alternative for Germany, the Freedom Party in Austria and National Rally in France. Immigration (Spain now finds itself in the front line as routes into Greece and Italy are being closed down), economic stagnation, the collapse of mainstream parties (the centre-right Popular Party was ousted from government by a corruption scandal, and the new centre-left Socialist government doesn’t have a majority), the danger of fragmentation (Catalan independence) as national governments appear to lose relevance and status to the supra-national EU, and the seeming impotence of Brussels to deal with Europe’s problems, are all fuelling right-wing extremism in Spain as elsewhere in Europe.
G20 SUMMIT: In Argentina, the leaders of the G20 nations gathered and… I’m not sure what happened or was achieved, exactly, if anything… Was Saudi’s Prince Mohammed bin Salman sent to Coventry? Not really. President Putin gave him a cheerful high-5; even Mrs May shook his hand. Mrs Merkel arrived late because a fault on her official jet forced it to make an emergency landing at Cologne airport; a replacement aircraft was late in arriving, and even then it couldn’t take off because employment regulations demanded a rest for the aircrew. President Trump did at least meet with President Xi, and the two of them agreed some kind of temporary truce in the trade war brewing between their two countries. Did the summit’s participants agree on a joint statement to conclude the meeting? Nothing was reported, so it couldn’t have been of any substance if they did.
NIGERIA: Reports on social media claim that President Muhammadu Buhari died last year, and since then has been replaced and impersonated by a cloned imposter from Sudan called Jubril. President Buhari, 75, paid a number of extended visits to Britain last year for medical examinations, treatment and convalescence in relation to “an undisclosed but serious medical condition” (The Times). The claims have proved so persistent that President Buhari was forced to deny them this week via email. “It’s the real me, I assure you…”
Financial
MARKET MELTDOWN: US equity markets, having initially rallied 1% on news of a 90-day truce in the US-China trade war, dumped 3% in one session, as there was perceived to be little chance of the issue being settled in this period. The catalyst for the sell-off was an inversion of the US Treasury yield curve for the first time since 2007. The fact that 5-year bond traded at a lower yield than 3-year bonds was interpreted as markets pointing to a marked economic slowdown. The delay in the implementation of a tariff increase on $200bn of Chinese goods while discussions take place was ultimately undermined by the prospect of these tariff increases potentially being extended to a further $267bn of goods.
UK equity markets reacted much more modestly, partly because they have been previously supressed by trade concerns closer to home.
DOUBLE-CROSS RAIL: Sir Terry Morgan expects to be sacked as the Chairman of HS2, despite only having been in the role since August, as a result of cost and time overruns on the Crossrail project where he is also the Chair. The £56bn HS2 project has only just begun, a mere decade after it was first announced. Even now, the main building work on the project, which is supposed to provide a 250mph rail link from London to Birmingham by 2026 and to Leeds and Manchester by 2033, has been delayed until next June at the earliest, in an effort to get spending plans back into line. Sir Terry has said that it will be “very difficult” to deliver the project on time and within the price. His Crossrail experience gives him some qualification to express such opinions as this is currently running at around £1bn over its £15bn budget, and instead of opening this weekend is expected to open next autumn at the earliest. Some argue that he should not be blamed as political issues caused the late ordering of the Crossrail trains, and sacking him from one job due to issues in another is little more than shooting the bearer of bad news.
CARNEY vs. KING: Hardly Fury vs. Wilder, but in an article for Bloomberg former Bank of England Governor Lord King took the unprecedented step of criticising his successor for being drawn into a project “to scare the country” regarding Brexit. In the red corner sits the academic Lord King, and in the blue, the ex-banker and political aspirant Mark Carney.
The Bank, following interviews with 369 companies with turnover of $124bn, said that businesses expect a fall in output of up to 7% on a hard Brexit and a rise of as much as 3% on an agreed deal. They see the worst-case scenario of a disorderly Brexit pushing up interest rates to 5.5% and leaving house prices 30% lower. Lord King sees the current Brexit deal as a policy error of the magnitude of the appeasement of Nazi Germany, involving “incompetence of a high order” and assertions regarding the impact on productivity of a no deal solution as implausible.
In response Mr Carney said that Lord King presided over a “less successful” period for the UK economy, and that the Bank had been too focussed on inflation to spot the dangers of the banking crisis.
As with Fury vs. Wilder, there is likely to be a re-match.
