20 Aug 2018

Stuart Taylor

20 Aug 2018

Good morning, 

“Judge me in a year and if I haven’t succeeded I’ll resign.”
 
Not me. Please don’t judge me. Rory Stewart MP is the quoted judgement seeker, the mild-mannered minister responsible for reforming prisons in England and Wales proposing that ultimatum on Friday. He only has to lift a newspaper this morning to gain a sense – if he didn’t already know it – of the vertiginous nature of the uphill challenge he faces over the next 12 months.
 
Stewart’s department, the Ministry of Justice, has been forced into an extraordinary intervention, taking over immediate control of one of Britain’s biggest prison’s following a damning report that highlighted the “appalling violence and squalor” endured by staff and inmates at HMP Birmingham.
 
Violent attacks, prison officers asleep on duty, inmates openly using and dealing drugs, cockroaches, blood and vomit in the corridors, and a crumbling building where some wings had virtually every window damaged or missing were all found, leading to the conclusion that G4S, its operator, had let the prison fall into a state of disrepair. David Gauke, the justice secretary, sanctioned an emergency takeover until conditions improve.
 
It’s only the second time in history that the state has seized control of a privately run prison and the move will see a number of unprecedented measures introduced, including a new governor and management team, extra staff, and the transferral of inmates to reduce the prison’s capacity, the cost of which will continue to be footed by G4S.
 
Today’s intervention will reignite the debate over whether private prisons should exist in the UK. The market – the value of which is estimated to be around £4bn – has existed since the Criminal Justice Act 1991 was enacted, allowing the management of any prison to be contracted out. Today they account for around 15% of the country’s prisons.
 
Critics of the model argue that increasing prisoner populations, combined with tightening financial pressures, have created an unendurable strain, encouraging companies with a primary focus on profit to deliver only the most basic level of service.
 
That debate will rage on. For now, HMP Birmingham and its newly deposed operators have joined Rory Stewart in a very public annual appraisal process.

News 

The UK government plans to give EU migrants the unilateral right to remain in the country in the event of a no-deal Brexit, leaked Cabinet papers reveal. The papers show that Britain will take a "moral high ground" by allowing EU migrants to live in the UK and continue to access the NHS and claim benefits as concerns grow that failing to do so will lead to labour shortages. (£)
 
Pakistan’s new prime minister has used his first national address to kick off a personal austerity programme aimed at averting a foreign exchange crisis. Imran Khan vowed to slash his entourage of official servants and auction a fleet of government cars in a bid to improve the country’s ailing public finances. (£)
 
Australian prime minister Malcolm Turnbull has bowed to pressure by conservative MPs within his government and abandoned plans to set an emissions reduction target in legislation. Turnbull had faced a possible leadership challenge had he not U-turned on a key pillar of his energy policy to set in legislation Australia's pledge for a 26% cut in emissions, based on 2005 levels, by 2030.

Business & Economy 

J Sainsbury and Asda may be forced to sell up to 300 stores if their proposed merger is to be approved by regulators. It follows an analysis by The Times that shows there are at least 300 catchment areas where the merger could create local competition concerns. (£)
 
A recovery in North Sea oil production is fuelling fears that the UK Treasury could miss out on billions in tax revenues from higher oil prices this fiscal year. UK tax revenues from the North Sea will not reach even a quarter of the amount raised in 2010, despite oil prices rising above $70 a barrel, as a result of tax changes introduced by George Osborne in 2016. Those changes were intended to stimulate investment in the UK continental shelf at a period when plummeting oil prices raised questions for the sector’s future. (£)
 
Research by the Child Poverty Action Group has found that low-earning parents working full-time are still unable to make enough money to provide their family with a basic, no-frills lifestyle. The charity found that a single parent on the National Living Wage is £74 short of the minimum income needed each week, while a couple with two children would be £49 per week in deficit.

Markets 

The week ahead
It has taken eight years but Greece will today return to the international capital markets upon leaving its international financial bailout agreement. The country has relied on bailouts from EU governments and the International Monetary Fund for the best part of the last decade as it sought to recover from its economic woes. The move comes a month after the IMF warned eurozone governments that they need to offer Greece more long-term debt relief to prevent the country from being locked out of financial markets.
 
Venezuela, another country familiar with financial troubles, will today resume issuing its own currency, the bolívar, after removing five zeroes from its currency amid hyperinflation. Our researcher, Juan Palenzuela, has written previously about the economic situation in his homeland, as inflation is set to reach 1,000,000% this year.
 
Norway’s $1tn oil fund will report second-quarter results on Tuesday, with investors keen to see what effect the fund’s increased exposure to volatile equity markets has on its performance after it posted its first negative return in two years for the first quarter.
 
Wednesday will see the release of the minutes of the Federal Reserve’s August monetary policy meeting, where it voted to keep rates unchanged and predicted a further increase in short-term interest rates as soon as next month. Investors will pore over the minutes for any evidence that the Fed has altered its view of the economy and inflation.
 
Finally, on Thursday, Alibaba reports first-quarter results, with the Chinese tech giant expected to continue its strong revenue growth in all areas of its business following recent acquisitions.

Interims
Georgia Capital
NMC Health
Polymetal International
TBC Bank Group

AGMs
Acorn Income Fund Ld
Northern Bear
 
International Economic Announcements
(07:00) Producer Price Index (GER)

Columns of Note 

Kevin Pringle writes of his support for an Edinburgh tourist tax in The Sunday Times. Citing Jesse Norman’s new book on Adam Smith, Pringle says that the economist would have backed the introduction of a small levy on hotel stays and short-stay lets to improve the capital’s infrastructure and public spaces for the benefit of everyone in the city. (£)
 
Writing in The Times, the editor of the Jewish Chronicle warns that Jeremy Corbyn would be a threat to the UK’s national security as prime minister. Stephen Pollard says that while the focus is normally on the Labour leader’s long-held attitude to the Israel/Palestine conflict, his views on Iran are equally troubling and should be a primary concern for voters at the next general election. (£)

Did you know? 

During the Korean War, Air Force pilot James Risner successfully ‘pushed’ his wingman’s damaged aircraft into friendly territory using the nose of his own jet. It was a manoeuvre that had never been attempted in history.

Parliamentary highlights 

House of Commons
In recess until 4 September 2018
 
House of Lords
In recess until 4 September 2018
 
Scottish Parliament
In recess until 4 September 2018