Maitland Political Monitor – 11 August 2017

11th August 2017


Good morning,

With August headlines dominated by the war of words between the United States and North Korea, the sands are shifting over how the government is approaching Brexit.  Yesterday the Financial Times highlighted the three main camps in the Cabinet:

Team Treasury

Led by Philip Hammond, the team is pushing for the most gradual departure possible from the EU. Team Treasury tends to stress the economic risks of “cliff edge Brexit”.

Team Leave

Led by Liam Fox, emphasises the opportunities of departure and the need to honour last year’s Brexit referendum result. Team Leave favours the quickest and “cleanest” break possible.

The Inbetweeners

This group stretches across the two sides of last year’s referendum. It includes the prime minister and her de facto deputy, Damian Green, as well as Brexit campaigners, Michael Gove and David Davis. The group emphases the “complexity” of Brexit, they think we need to negotiate transitional arrangements to smooth the country’s path out of the EU.

It is still not clear whether a transitional deal with the EU is possible, however much the government favour it as an option. Whilst the EU has long been a fan of transitioning IN; something that every new country has had to do, there is no precedence for transitioning OUT. What it means to freedom of movement and the jurisdiction of the European Court of Justice, we will have to wait and see.

Also in the news today, the Government’s European Union (Withdrawal) Bill would remove individuals and companies’ right to sue the Government for breaking the law, claims the Times this morning.

The paper cites inside sources who have revealed that the legislation, formerly referred to as the Great Repeal Bill, will invalidate claims against the Government on issues such as air pollution violations.

Experts have said that there is no domestic legal basis for such actions, which were enabled under European law after a European Court ruling in 1991.  The Government has claimed that individuals will still be able to sue the Government after the Bill becomes law, but have “provided no evidence of how this system would work”.

  • Damien Green rejects Ruth Davidson’s call to rethink the 100,000 migration cap.
  • The government have been accused of a ‘chilling’ bid to block compensation claims against them after Brexit.
  • Ex- David Davis aid, James Chapman, has called for Boris Johnson to be jailed over Brexit claims.

In Focus – Interest Rates

This month the Monetary Policy Committee (MPC) voted to hold interest rates at a historic, 323-year, low of 0.25 per cent. Following the vote the governor of the Bank of England, Mark Carney, gave a press conference where he suggested rates could rise “faster than expected”, warning households should prepare. In reaction the Guardian’s economics editor argued the Bank was “talking like a hawk, but acting like a dove”. He suggested the next inflation report, due in November, would see the same story play out – no rate rise, but the promise of its imminence: “history suggests that talking up the value of a currency only works for so long. Eventually, markets will decide that the Bank is all gong and no dinner. And the pound will fall unless they are tossed some raw meat”.

Previously several members of the MPC had talked up a rates rise. In June Andy Haldane had even called it “prudent”. Given the economy fared better than expected following Brexit – the prompt for the Bank to cut interest rates from 0.5 per cent – there have been calls for the Bank to reverse its stimulus. Nevertheless, on the third of August the MPC voted to keep the rate as is six to two.

Millions of first-time buyers who, having taken out mortgages in the ‘era of cheap money’, have never experienced rates increases; this is perhaps why much of the anti-Corbyn coverage during the election focused on the idea of a ‘mortgage bombshell’ should he become Prime Minister – the implication being he would cause a huge interest rate hike. And yet, having scraped through a general election, seen their opinion polling drop and witness the cabinet split several ways, the Conservatives will be aware that a rise in interest rates could burn a hole through voters they need to attract.

This week Rachel Springall from Moneyfacts was quoted: “Just a slight rise to the Bank of England base rate could really hit consumer finances hard’. Philip Inman from The Observer has said he thinks rates rises will stay low, possibly for another decade. He argues Philip Hammond, in putting “austerity before helping the economy” needs the “life-support drip” of easy money. The spectre of Brexit – as yet unknown – also looms. Senior economist at Legal & General, Hetal Mehta, has commented that she feels the uncertainty remaining over Brexit will keep interest rates rock bottom, “how the economy fares is still greatly dependent on how the Brexit negotiations shape up and the type of deal that can be struck. A softer Brexit could be a plus for the economy in the long run.”

Top Twittery

James Melville@JamesMelville

If Trump really wants to destroy North Korea, he should buy it and turn it into a Trump resort.