19 June 2018


19 June 2018

Good morning, 

Fans of The West Wing will recall the scene where Charlie Young, personal aide to the fictional President Bartlett, is filling in his tax return. It’s a minor storyline in Season Three, Episode 18 of the hit series, but I was reminded of it yesterday after Theresa May’s announcement of an extra £20 billion for the NHS.
The gist of the storyline is that Charlie is filling in his tax return with the expectation of a $700 rebate, which he has earmarked for a new DVD player (yes, it was the early noughties). To his outrage, he actually ends up owing an extra $400, with his White House colleagues explaining that this is due to the administration having funded the previous year’s rebate by increasing taxes the following year. As Charlie points out: “That’s not a rebate, that’s an advance”.
No doubt many will have had a similar feeling when hearing on Sunday that the government will be increasing funding to the NHS by £20 billion over five years from a “Brexit dividend”, only to hear yesterday that taxpayers will have to foot at least some of the bill. I’m guessing I wasn’t alone in thinking that that isn’t a dividend.


Lord Hague has added to the clamour for drug law reform by calling for a rethink of UK attitudes to cannabis. In his column for The Telegraph, the former Conservative leader suggests that the government should permit medical-grade marijuana or even go down the route of Canada in preparing for a legal, regulated market for recreational use too. He highlights the case of Billy Caldwell and points to the economic, social and political benefits of such a move, and argues that current policy is not fit for purpose, saying that asking police to defeat cannibas use is “about as up to date and relevant as asking the army to recover the Empire”.
The Trump administration is struggling to defend its policy of separating illegal immigrants from their children at its southern border. Outrage at the practice has grown following the release of a recording of sobbing children. Yesterday, Kirstjen Nielsen, the homeland security secretary, flew from New Orleans to Washington to face a barrage of questions from reporters as Democrats demanded her resignation.
The House of Commons will vote again on how much of a say Parliament will have on Brexit, following another House of Lords defeat for the government. Peers voted 354 to 235 in favour of an amendment saying that MPs should have to approve whatever the government decided to do next in the event of no final agreement with the EU. As a result, MPs will debate the issue again on Wednesday.


Business & Economy

President Trump has ordered his administration to identify a further $200 billion worth of Chinese goods to be subject to a 10% levy if Beijing does not abandon its retaliatory measures against US tariffs announced last week. Trump has also said that he is prepared to impose duties on an additional $200 billion beyond that. The latest move in the escalating dispute between the two countries, with China describing the threat as “blackmail” and warning of “strong countermeasures”.
Debenhams has become the latest high street retailer to issue a profit warning. The department store chain said this morning that profit for the year is expected to be lower than previously expected - £35 million to £40 million compared with a previous consensus of £50.3 million – due to challenges arising from competitor discounting and weakness in key markets.
KPMG’s audit work has shown an “unacceptable deterioration”, according to the Financial Reporting Council (FRC) – the accountancy regulator, which reviews the audits of the UK’s biggest companies every year to ensure standards. The watchdog said that all of the so-called ‘Big Four’ – PwC, EY, Deloitte and KPMG – needed to reverse a decline but singled out KPMG for the poor quality of its work.
Rupert Stadler, the chief executive of Audi, has been detained by German officials investigating the diesel emissions scandal at parent firm Volkswagen. Stadler, who has been remanded in custody by a judge, is the most senior executive to be held in relation to the scandal which came to light three years ago. Authorities said his detention is based on fears he may obstruct their investigation. Shares in VW fell 3.08% following the news.


What happened yesterday?
Global stocks retreated on the back of concerns surrounding escalating trade tensions between the US and China following President Trump’s decision to impose 25% tariffs on $50 billion worth of Chinese goods and the inevitable Chinese retaliatory measures. The majority of major indices were down.
The FTSE 100 dropped 0.03% to 7,631.33. RSA was the biggest gainer on the main index, rising 2.42%, after a report in The Sunday Times identified the insurer as a possible takeover target for Allianz. Aviva was also mentioned in the report and climbed 1.23% as a result.
On the FTSE 250, which fell 0.03% to 20,999.60, all the talk was of Virgin Money agreeing to the £1.7 billion all-share takeover offer from rival CYBG. The deal will create the UK’s sixth largest bank. Shares in Virgin Money fell 2.17% and CYBG dropped 0.72%.
On the other side of The Atlantic, the S&P 500 fell 0.21% to 2,773.75, the Dow Jones Industrial Average dropped 0.41% to 24,987.47 but the Nasdaq rose 0.1% to 7,747.03.
On the currency markets, the pound was up 0.03% against both the dollar and the euro at $1.3246 and €1.1395.


Ashtead Group, Accsys Technologies, Bonmarche Holdings, Braveheart Investment Group, Castleton Technology, Flybe Group, Footasylum, Gresham House Strategic, Telecom Plus
Benchmark Holdings

International Economic Announcements
(09:00) Current Account (EU)
(13:30) Building Permits (US)
(13:30) Housing Stats (US)

Caspian Sunrise, London & Associated Properties, Luceco, Motif Bio, Metals Exploration, Nautilus Marine Services, NB Distressed Debt Investment Fund Limited, Ranger Direct Lending Fund, Ranger Direct Lending ZDP Shs, Science in Sport, Slingsbury H.C., Strategic Minerals, Trinity Exploration & Production, Trufin, Water Intelligence


Columns of Note

Writing in The Times, Rachel Sylvester bemoans Theresa May’s timidity and short-term focus on survival, describing the prime minister as a “roadblock to reform”. She cites the case of the £20 billion extra funding for the NHS in England, criticising the prime minister for being unable to say where the money will come from and not offering a solution to the social care crisis. Sylvester states that a competent prime minister would challenge voters and the health service about the trade-offs required to cope with an ageing population, and urges May to be bold.
In The Financial Times, Judy Dempsey outlines the challenges posed by the opposing visions held by President Emmanuel Macron of France and German Chancellor Angela Merkel about the future of Europe. She says that, with President Trump having alienated the EU with his steel tariffs and rejection of globalisation, it is up to the French and German leaders to step up at next week’s EU summit. However, Macron wants the EU to act strategically across the board whilst Germany favours a more cautious and incremental approach. Dempsey argues that with the challenges facing Europe, a common positon will have to be agreed as “muddling through is no longer a viable option”.

Did you know?

Jules Rimet, who established the football world cup, served as a French Army officer during World War I and was awarded the Croix de Guerre for bravery.

Parliamentary Highlights

House of Commons
Oral Questions: Health and Social Care (including Topical Questions)
Ten Minute Rule Motion: Representation of the People (Gibraltar) – Craig Mackinlay
Opposition Day Debate
House of Lords
Oral Questions
Short-term holiday lets and legal requirements - Baroness Gardner of Parkes
Funding to ensure roads are maintained in a safe condition - Lord Berkeley
Improving the outcome of Personal Independence Payment assessments - Baroness Thomas of Winchester
Investigation into alleged Russian interference in the EU referendum - Lord Tyler
Legislation: Rating (Property in Common Occupation) and Council Tax (Empty Dwellings) Bill - Committee stage - Lord Bourne of Aberystwyth
Short debate: Encouraging a recovery in the population of bees and other pollinators - Baroness Bloomfield of Hinton Waldrist
Scottish Parliament
Topical Questions
Ministerial Statement: Progress in EU Exit Negotiations
Stage 1 Debate: Scottish Crown Estate Bill
Financial Resolution: Scottish Crown Estate Bill
House of Commons
Oral Questions: Northern Ireland
Prime Minister’s Question Time
Ten Minute Rule Motion: Armed Forces Representative Body – Martin Docherty-Hughes
Consideration of Lords message: European Union (Withdrawal) Bill
House of Lords
Oral Questions
Proportion of mental health treatment funded by the NHS nationally as against local funding - Lord Cotter
Risks to the creative sector as a result of Brexit. - Baroness Neville-Rolfe
Attacks on NHS staff - Lord Clark of Windermere
Continued roll out of Universal Credit - Baroness Sherlock
Courts and Tribunals (Judiciary and Functions of Staff) Bill [HL] - Second reading - Lord Keen of Elie
Scottish Parliament
Portfolio Questions: Health and Sport
Scottish Labour Party Debate: Review of Government FOI Handling and Record Keeping
Scottish Labour Party Debate: Access to Vital Medicines