14 November 2019
Lens on the Week
UK
SECURITY: A report by the Intelligence and Security Committee into Russian attempts to influence the last election and the EU referendum will not be published until after the General Election has taken place. The report is understood to have been given security clearance but was not released by Downing Street before the election was called and cannot now be released during the purdah period.
CLINTON INTERVENES: Hillary Clinton has described the failure to publish the Intelligence and Security Committee report as “Inexplicable and shameful”. She has also accused mainstream coverage of the Duchess of Sussex of being in part racist. She has described Boris Johnson as a “Blowhard”. Signs of a book coming on? Sure enough her opus “The Book of Gutsy Women” written jointly with her daughter is currently on sale.
CYBER ATTACKS: The Labour party website has twice come under intense cyber attack since the beginning of the election campaign. It is hard to see that that will in any way effect their electoral prospects but it is to be hoped that the malefactor will be identified and prosecuted.
BURTON AND UTTOXETER: As the parliamentary hopefuls continue to play musical chairs, Mr Gauke now saying he will stand as a conservative independent opposed to a hard Brexit, one of the oddest changes is in the seat of Burton and Uttoxeter where the Tory MP, Andrew Griffiths, has stood down following a sexting scandal to be replaced by his wife Kate Griffiths as the conservative candidate. Mr Griffiths has said that he will back his wife but she is divorcing him and has made it clear that she does not want and has not sought his support.
BREXIT PARTY: Having agreed that the Brexit party will not contest seats previously held by the Conservatives, Mr Farage is under pressure from pro Brexit sponsor and activist Aaron Banks to go further and not contest seats which the Tories have a good prospect of winning. His suggestion of a pact that in return for his party’s withdrawals the Conservatives should stand aside in seats they cannot win has been ignored by Mr Johnson.
TRUTH ABOUT NHS: As the funding of the NHS becomes an election shuttlecock it is timely that the OECD have produced a short summary of the real position. As you would expect it is something of a curate’s egg. At present we spend around 10% of GDP on health, about 1% above the OECD mean and a figure expected to rise to 11.4% by 2030. On the other hand the number of doctors and nurses per person is below the mean, although closing. Unmet needs due to affordability are the third lowest in the OECD, which is good, but access to long term care is poor with one in five persons over 50 acting as informal carers. Obesity and opioid abuse are high.
FLOODS: Rising waters, 1000 abandoned homes, a meeting of COBRA, help from the armed services, much of England remains flooded and the government is criticised for its inadequate response. Some steps are being taken: up to £500 a household and £2500 a business to cover uninsured losses, and a proposal that the government provide Flood Relief with up to £10,000 per home to reduce vulnerability to flooding – moving electric fixtures up walls, waterproofing plasterwork etc. The Government has yet to decide whether to adopt it.
International
SPAIN: The weekend’s general election (the second this year and the fourth in four years) appears to have done nothing to resolve the country’s political paralysis. Prime minister Pedro Sánchez called the election in the hope that it would give his Socialist party a clear majority (he has struggled to govern with a minority ever since the centre-right People’s Party’s government collapsed last year, mired in corruption), but in the event he lost a further three seats (an ominous lesson, perhaps, for another prime minister with a minority government who has just called an election?).
His prospects of forming a majority coalition government have slipped even further away; his most likely partner, the far-left Podemos party, lost seven seats; the Socialist’s 120 seats plus Podemos’s 35 seats would fall well short of the 176 required for a majority. The failure of the two parties to reach an agreement earlier this year precipitated the election, and although both have been making more positive noises this week, the question of “will they, won’t they?” seems increasingly irrelevant.
The centre-right People’s Party gained 22 seats, suggesting that they have begun to rehabilitate themselves after their recent corruption scandals and that the mainstream is still alive (the anti-mainstream populist parties Citizens and Podemos both lost votes and seats). More ominously, the extreme right Vox party gained 28 seats, more than doubling the 24 seats they won in their debut earlier this year; it’s thought that a nationalist reaction against the Catalonian independence movement, and against the removal of General Franco’s remains from the Valley of the Fallen, boosted their support.
BOLIVIA: President Evo Morales has stepped down and has been given political asylum in Mexico. Last month’s presidential elections were followed by widespread protests and demonstrations when the publication of results, which suggested that Morales would not win outright but would have to face a second round run-off, was abruptly shut down; it resumed a day later with the news that he had won outright after all. The Organisation of American States condemned the “clear manipulations” and “serious irregularities” in the results. Morales was seeking an unconstitutional fourth term; three years ago he had tried to change the constitution to allow this but a referendum ruled against it (although a court subsequently ruled against the referendum result). He admitted that he had lost his grip on power when the police and the army joined with the protests against the dubious referendum results and told him to go. The leftist Morales was the first indigenous American leader; he was praised for reducing poverty in his country but criticised for following an increasingly authoritarian path away from democracy.
SYRIA: The Pentagon has persuaded President Trump to keep some US troops in Syria, after all. Hundreds rather than thousands of soldiers will remain in eastern Syria, where most of the country’s oil fields are under the control of the Kurdish-led Syrian Democratic Forces who liberated them from Isis.
Financial
CUTTING REMARKS: The latest meeting of the Bank of England’s Monetary Policy Committee decided on leaving the UK Bank Rate unchanged at 0.75%, but 2 of the 9 committee members dissented by calling for a 0.25% cut. While governor Mark Carney said that a Brexit deal had helped “the prospects for a pick-up in UK growth”, with the global environment also stabilising, the Bank still forecast UK growth 1% lower over the next 3 years compared with its forecast in August. MPC members Michael Saunders and Jonathan Haskel, who both voted for a cut, said that the current inflation rate suggested that there was little risk of the economy overheating in the medium term if rates were cut. The market thinks that they will win the day before long and, not only has a rate cut been priced in, the market expects that rates will stay at the lower level until 2022 at least.
INFLATION SUPPORT: This week’s inflation numbers gave some additional support to the view of Saunders and Haskel. Inflation, as measured by the Consumer Price Index (CPI) rose by just 1.5% in the year to October, which compares with 1.7% in the previous month, representing its lowest level in almost 3 years – well below the MPC target of 2%. One helpful factor was the lowering of price caps by the energy regulator Ofgem (gas prices fell by 8.7%) with some offset coming from a rise in the price of clothing and footwear. The future path for inflation will be highly dependent on how sterling performs through the election and any subsequent Brexit agreement, but the recent boost to the currency would point to a still lower inflation number for the next few months.
BLUE STEEL: It would appear that British Steel has finally found a buyer in the form of a state-backed Chinese company, Jingye, whose £50mn offer was favoured ahead of the Rotherham-based Liberty Steel due to differing plans for the giant steelworks in Scunthorpe. There is some irony in the deal, given that arguably one of the factors behind the demise of UK steel production has been the dumping of cheap Chinese steel (generated by cheap labour and questionable environmental safeguards) on the European market. Jingye has pledged to invest £1.2bn into the business, which will be needed to save 4,000 jobs in an area that the Tories will be hoping to win from Labour.
