Issue 185: 2019 01 17: Lens on the Week

17 January 2019

Lens on the Week

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UK

BREXIT:  Mrs May’s deal has been rejected by a majority of 230 votes in the House of Commons.  That leaves her with three days to come up with a proposal.  See comment article.  Meanwhile the Government has survived a no confidence motion with a majority of 19.

TOUGHER TURDS?  No it seems not, although the discovery that fatbergs tend to be a problem in more prosperous towns like Sidmouth might make one think so.  Those amateur scientists who believe that the focus of fatbergs away from poorer areas is down to the way in which acidic cheap wines break down excremental matter, or to burgers made from ground-up meat being more susceptible to fragmentation than fillet steak, are in for a disappointment.  It’s up market quilted loo paper combined with cooking oil what done it, at least if you believe South West Water.  That makes you wonder if there are things going on behind porticoed front doors which are beyond the imagination of the rest of us.  Still, Exeter University is looking into it and, since none of us wants to encounter a fatberg when out swimming, it had better not be a bum report.

OBSERVED:  It was the German quantum theorist physicist Werner Heisenberg who discovered that by measuring the velocity of a particle you automatically affect its behaviour.  British local authorities have sought to apply the same principle to the criminal classes by increasing their expenditure on CCTVs.  The 17% increase on expenditure on cameras since 2010 contrasts starkly with savings in almost every other area.  The Local Government Association says that the cameras help prevent and detect crime, but civil liberties group Big Brother Watch denies this, believing that the focus is on the enforcement of minor rules (turning right in the wrong place for example) and that the real purpose of the cameras is to maximise income from fines.  Well, maybe that is sometimes the case, but it is hard to deny that CCTV surveillance helped identify the Novichok poisoners in Salisbury.  Still, the rigorous camera-supported enforcement of minor offence at a time when cuts in policing prevent more serious crimes from being properly investigated, must inevitably erode respect for the criminal justice system.

INFANT EXCLUSIONS:  The revelation that 8845 children under the age of seven were excluded in 2016/7 for attacking teachers sounds like a problem, especially when compared to the 4210 excluded for the same reasons for 2012/3.  The trouble is that it could mean so many different things.  No doubt cuts in educational funding for special needs children have contributed but, beyond that, it is hard to say whether behaviour has got worse or schools exclude more easily.  What temperamental seven year old has not lashed out at its parents at some point?  That doesn’t make it a criminal or mean that it won’t go on to lead a blameless and useful life.  Part of the art of parenting is to know what to ignore.  It is part of the art of teaching too.  The question is whether our schools are good at it.

International

ITALY v FRANCE:  It began last year with President Macron of France criticising Roberto Salvini of Italy for closing Italian ports to migrants; Salvini promptly responded by accusing Macron of hypocrisy for closing the French/Italian border to migrants and covertly returning refugees (who did cross the border into France) back to Italy.

It continued this year with Salvini forming a populist, right-wing alliance with Macron’s opponent, France’s Marine Le Pen and her National Rally (the re-launched Front National).  Salvini’s fellow deputy prime minister, Luigi di Maio of Italy’s Five Star Movement, offered support and fellowship to Macron’s enemies, the Gilets Jaunes.

This week the feud really hotted up with Italian institutions refusing to lend works by Leonardo da Vinci to the Louvre for its planned block-busting expedition to mark the five hundredth anniversary of the Italian genius’s death.  It became red hot with the extradition of a terrorist to Italy from South America, a terrorist who has been found guilty of murder but who was sheltered – even feted – for decades in Paris by the French establishment.  There are, apparently, many more like him still being sheltered in and by France – extreme left-wing terrorists wanted for murder since the 1970’s – and Italy would like them all back to face justice.

At least Macron has the satisfaction of knowing that Brussels is in his corner.  The EU threatened Salvini and Italy with massive sanctions for proposing a budget which would result in a deficit of 2.4% of GDP – too close to the EU’s limit of 3%.  But France’s budget will now actually break that 3% limit this year, following Macron’s concessions to the Gilets Jaunes – and is the EU threatening similar massive sanctions?  Non, pas de chance.  Why not?  Is it because the liberal and pro-EU Macron is “le premier de la classe et le chouchou de la maîtresse” (in the words of Le Petit Nicolas) while the right-wing anti-EU populist Salvini is the school’s delinquent, as far as Brussels is concerned?

N’importe pas, Macron might say – with the new economic and military rapprochement between France and Germany announced this week, France is now in with the school’s big, strong, golden Head Boy.

Financial

NOT IN FASHION:  Another major fashion retailer has announced that it is in financial difficulties, but also that it believes that it has restructured to overcome its problems, at least for the foreseeable future. This time it is New Look, a major high street retailer at the value end of the spectrum.  New Look’s main market has been the teenage fashion end of the trade, a fickle market at best, but it has recently tried to broaden its appeal to an older audience.  It has long been overburdened with debt as part of an ambitious expansion programme (and also as part of a tax efficient ownership structure) and entered into a CVA last year under which it closed 10% of its UK stores – it had 600 – and all 120 of its outlets in China. Although like-on-like sales then recovered slightly, Christmas trading was very poor and the firm has now agreed a deal with its debt providers whereby they will gain control of the business as shareholders. As a result debt will fall from £1.35bn to £350m and the creditors will own 72% of the shares.  The current owners, Brait, a South African investment business, will end up with only 18%, but presumably takes the view that that is better than the alternative – which would be insolvency.

OILING THE FINANCIAL WHEELS:  Premier Oil, which is thought to be the front-runner for the purchase of the oil and gas fields being sold by Chevron, the USA energy giant, has released further details of how it intends to pay for its new assets if it succeeds in the acquisition.  The purchase will be a step up for Premier, and not one for which it has the cash in its back pocket.  The market thought it was likely to announce that it was forming a partnership with a financial partner who would bring the money whilst Premier provides the oil and gas management expertise.  However Premier has now said it will probably offer the opportunity of expansion to its shareholders by way of an up to £1.5bn rights issue.  It says it does not want to take on more debt (current external debt is thought to be around £2.3bn).  The acquisition of the Chevron assets, which are all North Sea based, will offer significant tax advantages to any UK tax payer because of Britain’s relatively friendly North Sea energy tax regime, and it makes sense that Premier – and its shareholders – should seek to maximise that.  All that now remains is to win the bid – there are thought to be at least three other contenders.

DANGEROUS LIAISONS:  This column always admires a buccaneer and Mike Ashley rarely fails to please.  But as his struggle for control of the Debenhams department store chain continues we cannot help but wonder if this time he may be walking his own gangplank.  Mr Ashley’s attempts to acquire Debenhams were given fresh impetus by his successful purchase last year of its rival House of Fraser.  That business is now being trimmed and refocused with some stores closing and the rest to be taken upmarket.  Bolting on Debenhams, with the possible cost savings and disposal of duplicate outlets, would seem to be a clever move.  That is, if the department store sector has a viable future at all.  In the meantime Debenhams is struggling both to survive and to escape Mr Ashley, who now owns 30% of its shares and has support from other shareholders, suffient for him to force last week the removal of the chairman Ian Cheshire and CEO Sergio Bucher (Mr Bucher continues for now as chief executive, but without a board seat).  Debenhams has produced its own survival plan, closing up to 90 of its 165 stores, with a massive reduction in staff, but it seems likely that it will be Mr Ashley who will implement whatever it takes to save the business as his grip tightens.

 

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