UK News

Insights from the UK and beyond

from Hugo Dixon:

Cameron, UK hurt by Syria vote fiasco

Rarely has a UK prime minister done so much damage to himself in a single week as David Cameron has with his mishandling of a vote authorising military action against Syria. Cameron may cling onto power after his stunning parliamentary defeat on Thursday night, but he will cut a diminished figure on the domestic and international stage. In the process, he has also damaged Britain’s influence.

Cameron’s litany of errors began with his decision to recall parliament from its summer holidays in order to give the green light to British participation in a military strike designed to punish Bashar al-Assad’s murderous regime for its alleged use of chemical weapons against its people last week. The decision to get parliament’s approval was right, even if not constitutionally necessary. The mistake was to rush things before all the evidence of Assad’s culpability had been gathered and published. In France, which is also contemplating military action, the parliamentary debate is scheduled for next week.

To be fair, Cameron tried to achieve political consensus. He initially persuaded Ed Miliband, the Labour leader, to back military action. He also got Nick Clegg, the deputy prime minister and leader of the Liberal Democrats, to sign up. Both of these are also partly to blame for the fiasco. They should have attached many more conditions to their support.

Miliband quickly saw the error of his ways, especially after Ban Ki-moon, the United Nations’ secretary general, pleaded for his inspectors to be given more time to complete their on-the-scene investigation of the chemical attack. The Labour leader insisted not only on more time, but also that there should be compelling evidence of Assad’s culpability and that the government should aim to secure approval by the U.N. Security Council before launching any strike.

from Breakingviews:

UK’s big build dreams still dogged by past binge

By Ian Campbell

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

The UK government wants austerity to pave the way for bold modernisation of Britain. In reality its cuts don’t reverse the previous explosion in government spending and there isn’t much money for its big infrastructure dreams.

from Breakingviews:

Carney in doesn’t mean pound down as QE heads out

By Ian Campbell

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Is Mark Carney really Mr. Easy Money, about to devalue the pound in a bid for growth? The incoming head of the Bank of England has spoken of the need to attain “escape velocity”. But the logical deduction - that he will open the monetary floodgates and send the pound down to $1.40 - ignores the latest economic news and the new international mood on monetary policy.

from Hugo Dixon:

UK should get on front foot with City

It is perhaps too much to expect Britain’s Conservative-led government to lead any initiatives on Europe, such is the orgy of self-destruction in the party over whether the UK should stay in the European Union. But, insofar as David Cameron manages to get some respite from the madness, he should launch a strategy to enhance the City of London as Europe’s financial centre.

Britain has in recent years been playing a defensive game in response to the barrage of misguided financial rules from Brussels. It now needs to get on the front foot and sell the City as part of the solution to Europe’s problems. The opportunity is huge both for Britain and the rest of Europe.

from The Great Debate:

Margaret Thatcher, an enlarger of British freedom

My immediate and lasting  memory of Mrs. Thatcher -- Maggie as we called her -- is sitting next to her in the late sixties at a dinner table as she scorched a bunch of City of London financial types. I was astonished. She wasn't yet the Iron Lady. She wasn't  in government. Labour was in power. She was  an obscure back bench Conservative MP, elected only in 1959, noticed in those sexist days (has much changed?) as much for her hats and aggressive hair style as for  her passionate defence of grammar schools under threat of closure from Labour.

What she did with the City of London men  was later characterised as a  "hand-bagging." A black Asprey bag she always carried was metaphorically wielded against people she saw as standing in the way of the greatness of Britain as Boudica, the leader of a British tribe, wielded a lance against the Roman occupiers. I suppose that as a new national editor (of The Sunday Times), and with normal male presumption , I had expected to lead the questioning of the ten or so big names and the table. I didn't stand a chance. Maggie pounded and pummeled them all by herself for an hour. I can't pretend this is verbatim but it went something like this: "All you people are interested in is moving paper around, making money not things. What are you doing for British industry? When are you going to help business stand up to  the unions?"  They murmured, they shuffled, they were outclassed. British elections -- six weeks to  a vote and no paid television ads -- have never been as corrupted by money as much as American, so she was not turning off a potential source of funding as an American candidate would fear to do. Still these were  men -- all men of course  -- who were influential and articulate and used to reverence not rebuke.

from Anatole Kaletsky:

Even Britain has now abandoned austerity

The Age of Austerity is over. This is not a prediction, but a simple statement of fact. No serious policymaker anywhere in the world is trying to reduce deficits or debt any longer, and all major central banks are happy to finance more government borrowing with printed money. After Japan’s election of Prime Minister Shinzo Abe and the undeclared budgetary ceasefire in Washington that followed President Obama’s victory last year, there were just two significant hold-outs against this trend: Britain and the euro-zone. Now, the fiscal “Austerians” and “sado-monetarists” in both these economies have surrendered, albeit for very different reasons.

Much attention has been focused this week on the chaos in Cyprus. Coming after the Italian election and subsequent easing of Italy’s fiscal conditions, the overriding necessity to keep Cyprus within the euro -- and its military bases and gas supplies outside Russian control -- will almost surely mean another retreat by Germany and the European Central Bank from their excessive austerity demands. But an even more remarkable shift has occurred in Britain. The Cameron government, which embraced fiscal austerity as its main raison d’etre, was suddenly converted to the joys of debt and borrowing in this week’s budget.

from Breakingviews:

Boris Johnson intervention reduces Brexit chances

By Hugo Dixon

The author is a Reuters Breakingviews columnist. The opinions expressed are his own

Boris Johnson's intervention in the European debate reduces the chance of a British exit from the European Union - or Brexit. The Mayor of London, a popular Conservative politician, says he will campaign to keep Britain in the EU provided it can negotiate a pared-down relationship based on the single market.

from Hugo Dixon:

Brexit could come before Grexit

Investors have been obsessed with the notion of “Grexit” - Greece’s exit from the euro. But “Brexit” - Britain’s exit from the European Union - is as likely if not more so. The country has never been at ease with its EU membership. It refused to join its predecessor, the European Economic Community, in 1957; it was then blocked twice from becoming a member by France’s Charles De Gaulle in 1960s; and shortly after it finally entered in 1973, it had a referendum on whether to stay.

The euro crisis has put further pressure on this difficult relationship. David Cameron’s Conservative Party, the governing coalition’s dominant group, delights in pointing out the flaws in the single currency. The party’s eurosceptics feel vindicated because they have long believed that monetary union was only possible with political union.

from Lawrence Summers:

Why the UK must reverse its economic course

It is the mark of science and perhaps rational thought more generally to operate with a falsifiable understanding of how the world operates. And so it is fair to ask of the economists a fundamental question: What could happen going forward that would cause you to substantially revise your views of how the economy operates and to acknowledge that the model you had been using was substantially flawed? As a vigorous advocate of fiscal expansion as an appropriate response to a major economic slump in an economy with zero or near-zero interest rates, I have for the last several years suggested that if the British economy – with its major attempts at fiscal consolidation – were to enjoy a rapid recovery, it would force me to substantially revise my views about fiscal policy and the workings of the macroeconomy more generally.

Unfortunately for the British economy, nothing in the record of the last several years compels me to revise my views. British economic growth post-crisis has lagged substantially behind U.S. growth, and the gap is growing. British GDP has not yet returned to its pre-crisis level and is more than 10 percent below what would have been predicted on the basis of the pre-crisis trend. The cumulative output loss from this British downturn in its first five years exceeds even that experienced during the Depression of the 1930s. And forecasts continue to be revised downward, with a decade or more of Japan-style stagnation now emerging as a real possibility on the current course.

from Breakingviews:

Memo to UK’s new air strategists: let numbers talk

By Robert Cole

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

After years of make-do-and-mend, the UK is once again arguing about the London’s airport capacity, and the possibility of a third runway at Heathrow. Most people seem keen only to rubbish plans they dislike. The right approach is to give airtime to all ideas - and then make a firm decision.

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