14 March 2019
Lens on the Week
UK
MAYDAY: Mrs May’s revised Brexit agreement was defeated by 391 to 242 with 12 abstentions. That clearly marks the end of her attempts to make it sufficiently palatable to MPs to pass the Commons. Three green bottles were left on the wall; No Brexit, Hard Brexit and a Faux Brexit which leaves us in the EU market and subject to its rule. The next step was a resolution by the House that the government should avoid a Hard Brexit. It passed in the teeth of government opposition. That leaves two green bottles. The first is to withdraw the article 50 notice. To go against the referendum result is hardly practical politics. The second is to remain in the single market, following market rules and having no say in them. That would suit the EU quite nicely and, if it was the likely result, would probably be a sufficiently good prospect to induce them to give us the further time required to agree it. With Labour broadly in favour, it is hard to see how we will not end up here. Bye, bye the image of Britain as a modern independent trading nation. We will end up tied to a large protectionist block, building walls to repel the rest of the world as the seas warm and the waters rise, instead of looking outwards to help find a solution.
It must surely be bye bye for Mrs May as well. Her strategy of becoming a free trading nation without suffering the short term damage has failed. Perhaps that was inevitable. Yes, she certainly made some mistakes but who could have trodden that narrow and difficult path without doing so? Still, her greatest shortcoming was her failure to make good use of the channels of power. That is always a problem and we have seen it many times before. For example Edward II, one of England’s most spectacularly unsuccessful kings, did not fail because of his homosexuality but because he tried to govern through his favourites rather than the nobles. The parallel with Mrs May’s reliance on her civil servants is irresistible. Fortunately red hot pokers have dropped out of fashion as a political weapon but time is up none the less. We need a new leader who can bind the country together in the pursuit of a new modern reformed Britain. Mrs May may be a good woman who has given of her best but it isn’t her.
A&E TIME LIMITS: Werner Heisenberg showed that at the level of quantum physics an attempt to measure the behaviour of a particle will inevitably change it. The same is true of the NHS, where the target of 95% of A&E patients being seen within four hours has resulted in hospitals gaming the system by treating those patients whose four hours are nearly up in priority to those whose four hours have already expired. The trouble is that the target is no longer being hit and the NHS believes it should be replaced. A new target would depend on the average wait which sounds more sensible. The question is, of course, whether it will be tough enough to make the NHS maximise performance.
International
BOEING 737 MAX: Over forty countries (including the USA, the UK and the other EU countries) have banned the Boeing 737 Max 8 and Max 9 passenger jets from their airspace. An Ethiopian Airlines’ Boeing 737 Max 8 crashed just after take-off from Addis Abba on Sunday; all 157 people on board (including 9 Britons) were killed. A Lion Air Boeing 737 Max 8 crashed in Indonesia five months ago; 189 people were killed. It’s suspected that there’s a fault in the aircraft’s stabiliser system; the plane’s tendency to lift its nose under high pressure seems to trigger the stabiliser system which automatically pushes the nose down to prevent loss of lift. The pilot has to work out which automatic response is at fault before correcting it. Clearly AI is not yet better than a human being at flying an aircraft.
VENEZUELA: Venezuela has been without electricity for most of the last week. A bushfire near the Guri hydroelectric power station burnt through the two cables carrying power to the single substation on which the whole country’s system depends; power loads were incorrectly allocated so could not be passed to other generators. The infrastructure is obsolete, neglected and under-funded (even though the Maduro regime claims to have spent billions of dollars on the power grid – where did that money go?). Very few capable electrical engineers remain in the country to maintain the system or repair it; most have already emigrated. Hospitals have reported at least 17 deaths resulting from the power failures. Maduro has blamed the blackouts on cyber attacks by the USA; in fact the power system is so old and low-tech that it would be impervious to hackers.
See comment Caracas’s El Helicoide.
CANADA: President Justin Trudeau is facing calls to resign, following allegations by his former justice minister that he put pressure on her to save a Canadian construction and engineering company from a corruption trial. Quebec-based SNC-Lavalin has been accused of bribing Libyan officials for contracts, but a deferred prosecution agreement could save it from prosecution. Justice minister and attorney general Jody Wilson-Raybould regarded this as inappropriate, was demoted and then resigned. Trade minister Jane Philpott resigned in protest at the government’s handling of the scandal. Even if Trudeau doesn’t resign, the scandal may well damage his chances in the elections which are due in October.
Financial
FULL OF ENERGY: Mr Trump may have good reason to be cynical about global warming, or at least about the USA’s adherence to carbon reduction targets. The latest report from the International Energy Authority has been looking at oil production trends in the next five years. Not good news for any reader considering stagging the oil price, the amount of exploitable oil accessible to send to the market is continuing to grow – and 70% of that increased production is likely to come from American homeland resources. That’s from a domestic industry which has seen spectacular growth over the last ten years; the USA is already the largest oil producer in the world, ahead of Saudi Arabia and Russia, and by 2024 the USA will be producing more oil than has ever come from a single country – ahead even of Saudi at its peak. The United States used to worry about the extent of its reliance on oil imports – as recently as 2008 seeing it as a major eco-political issue, but now is rapidly becoming the largest exporter in the world. Most of this comes from shale oil and fracking, whose known reserves are enormous. Even better for the US, the production costs are cheaper than those of many rivals – as are distribution costs. The trade advantage that this gives to the USA is enormous – as is the economic growth that could underpin an incumbent President’s run in 2020.
RUN THAT PAST ME AGAIN: Red faces in the accounting department at Kier, the international building contractor who has finished most of its Crossrail contract and is gearing up to build HS2. It turns out that Keir thought it had £130m of debt but actually, when the abacus was recalibrated, has £181m. Some of that is from our old friend “accounting for derivatives”, always tricky to get right, but more was from debt in projects that Keir is trying to sell. The accountants forgot that until the projects are sold Keir is still on the hook. The company had a £264m rights issue last autumn though two thirds of shareholders did not take it up. Perhaps they knew something the accountants didn’t?
ASHLEY CORNER: This is in danger of becoming a regular feature… Having not succeeded in acquiring his various recent targets, the Ashley spotlight has swung back to Debenhams, where he owns 29%. Mr Ashley has called for an EGM with the aim of persuading his fellow shareholders to appoint him chief executive. The existing board don’t like that idea at all, so are now trying to raise £150m in loans from its bankers to try and “stabilise” the company finances – and deter Mr Ashley. Part of the deal will be the banks taking shares in exchange for cancelling some existing short-term debt, and also the closure of a number of under-performing stores. The share price has crashed from around 37p a year ago to about 3.5p now. Piling on more debt seems an odd way of avoiding the rocks, but not for long, one suspects.
NOT SURE WHAT YOUR HOUSE IS WORTH? Neither are the experts. According to the Halifax, which for years has run an index of house prices based on the volume of deals which it sees across the UK from its mortgage business, houses prices from December to February were up nearly 3% (and February was up 6% year on year). Nationwide, the building society, runs the same type of survey based on what it sees – and says February was up only 0.3%, and marginally down on the quarter. You pays your money…
