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Reshuffle 2020: Opening the doors to Boris Johnson’s new Cabinet
Reshuffle 2020: Opening the doors to Boris Johnson’s new Cabinet

Archive for September, 2019

Has Boris blown it?

The declaration this afternoon from the opposition parties that they won’t back an election on Monday and are now unlikely to back one before 31st October is a significant step. It doesn’t change the fact we are heading for an election, but it could change the context in which that election takes place.

The political calculation is clearly designed to maximise the electoral damage the Brexit Party can inflict on the Conservatives in the event Boris is forced to request an extension, as he will now be required to do by law should he remain Prime Minister. This risks opening the opposition parties up to criticism of running scared from an election but they appear prepared to take this on the chin, at least for the moment.

If they stand firm on this, the government may try to find a route to an election that only requires a simple majority, such as a simple Bill or the humiliating step of calling a Vote of No Confidence in itself. However, even finding a simple majority now looks unlikely for this government following this week’s purge of the anti-no deal rebels.

This leaves the Prime Minister three options (discounting the unlikely event of him negotiating and passing a deal) all of which appear deeply unpalatable.

  1. Bite the bullet and request the extension while making it very clear his hands are being tied by Parliament. This could play to his parliament vs the people narrative but leaves him massively exposed to the Brexit Party when a poll is eventually called.
  2. Resign as Prime Minister and let Jeremy Corbyn form a minority government that requests the extension (Corbyn wouldn’t have the backing to anything else). This still exposes him to the Brexit Party as he will have essentially ceded control of the process voluntarily, but he will be able to categorically paint Labour as an anti-Brexit Party.
  3. Refuse to obey the law.

This appears to leave the Prime Minister snookered over the timings of the election. His gamble that the opposition parties would bite his hand off for an election looks to have backfired. But this doesn’t change the basic battle lines of the election. Johnson will present himself as the only option to deliver Brexit while casting his opponents as anti-Brexit remainers.

A later election presents a more difficult challenge for the Prime Minister but his message to electorate will remain unchanged: I am the only true Brexit candidate. The outcome rests on whether this message resonates with the electorate.

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WA Investor Services shortlisted for Specialist Due Diligence Provider of the Year

We are delighted to announce WA Investor Services has been shortlisted as the Specialist Adviser of the Year in Unquote’s 2019 British Private Equity Awards.

The shortlist was selected by a panel of experts from the industry, to showcase innovation and excellence within UK private equity.

The winner will be determined by a public vote, considered alongside the judging panel’s decision. Voting is now open, you can support us by casting your vote here.

Investors look to WA Investor Services for in-depth and nuanced analysis of the political risks impacting their decisions. We help our clients understand risks, forecast and scenario plan, and provide ongoing intelligence gathering to track issues.

Our insight and ability to reach the heart of the commercial implications of the current political situation have proved invaluable for our clients and their investments. Over the last 12 months we have expanded our global and technical expertise, working on projects as diverse as the Polish legal framework and UK broadband regulation.

The awards ceremony, where the winners of the awards will be announced, will take place on 1 October 2019 at The Brewery, London, EC1Y 4SD

 

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No-deal legislation abandoned with prorogation – what’s the impact?

As the country was watching mystified at last night’s extraordinary antics in the House of Commons, it was easy to forget that the prorogation of Parliament has a greater impact than simply making a lot of MPs furious. Buried beneath all the ceremony and speeches, is the reality that five key bills designed to prevent the UK facing regulatory black holes in the event of a no-deal Brexit have fallen and will not be carried over into the next session of Parliament. The Financial Services Bill, the Trade Bill, the Agriculture Bill, the Fisheries Bill and the Immigration Bill have now been effectively abandoned by government, raising questions about the future for key UK industries, and the UK’s workforce in a no-deal Brexit scenario.

The Financial Services Bill: what was in it?

The Financial Services Bill would have given HM Treasury the temporary power to match any changes to EU financial services law made before the UK leaves the EU for two years following a no-deal Brexit. This would effectively ensure the UK would maintain the same financial services regulatory regime as the EU in the short-term, even in the event of no-deal. The Treasury would then have been allowed to implement any changes without needing a parliamentary vote for two years, speeding up the process.

The Bill previously stalled in the House of Commons due to an anticipated rebellion on a cross-party amendment that would have forced new tax transparency rules on British Overseas Territories, including the Channel Islands. The amendment would require Crown Dependencies to set up public share ownership registers by 2020. The likelihood of the amendment passing resulted in the government cancelling a vote on the Bill on 4 March 2019, has and it never returned to the House of Commons.

Will the Financial Services Bill return to Parliament?

Like other Bills not passed by the time Parliament was prorogued, the government had the option of carrying the Bill over into the next parliamentary session but has chosen not to do so. The Bill could be reintroduced when Parliament returns on 14 October, but this is unlikely given the government’s concerns with the Crown Dependencies amendment and the loss of any hope of a majority for its legislative agenda. Given the high chance of an almost immediate vote to call a general election when Parliament returns, the most likely option is that the fate of the Bill will be left for the next government to consider.

What happens if we leave the EU without the Bill passing?

In the event of a no-deal Brexit, the UK will be recognised as a ‘third country’ by the EU. As a third country, UK-based financial services would lose automatic access to the EU. If the EU does not recognise regulatory equivalence between the UK and EU, additional restrictions are likely to apply. The Financial Services Bill was a means of ensuring the financial services sector could avoid regulatory divergence – its absence presents significant regulatory risks for the sector. The government has said the legislation is needed to keep financial services regulations up to date and that not having the power to do this “represents a risk to the reputation, global competitiveness and efficiency of the UK’s financial markets.”

Failure to pass the Bill is unlikely to cause any initial issues for the Financial Services sector in the event of a no-deal Brexit, but it creates a long-term risk of regulatory divergence that may create issues for cross border financial services. If the UK needs to introduce new legislation to match EU law every time one is introduced, we face the prospect of continually attempting to catch up with the EU, creating short term regulatory divergences that may disrupt business flows while legislation makes its way through Parliament (assuming Parliament is willing or able to pass legislation at all).

How can we help?

The loss of the government’s majority has made the future of no-deal planning legislation and all other Bills highly uncertain. WA Investor services can support investors in scenario planning for the months ahead, ensuring you are ahead of the curve when it comes to the unpredictable world of policy and regulation in the current climate.

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On the cusp of a breakthrough?

In February 2019 pro-European MPs leaving the Conservative Party and Labour Party felt that setting up a new party was the most effective way of promoting moderate, pro-European politics in the UK. Talk in the media was of how they would swallow up the Liberal Democrats who were seen as being on their political deathbed. How quickly things can change.

Whatever way you look at it, the party’s fortunes have changed dramatically in the last six months: outperforming expectations in the European and local elections, winning by-elections, and a stream of defections. There is little doubt that the upcoming General Election – expected in late November or early December – will be good for the party. The question is just how good. While activists on the ground are positive, the party faces a potentially pivotal moment: will it improve incrementally and win around thirty seats, or will we see a radical realignment in electoral support along the leave/remain axis, with the Lib Dems reaping the rewards and winning over a hundred seats after being seen as the natural home for Remain voters.

The party’s clear ‘Revoke’ policy has come under some criticism over the last week for being undemocratic. Swinson’s gamble is that by adopting a clear unashamedly anti-Brexit, pro-EU position she can solidify the support of around 20 – 30 per cent of the electorate. If she can achieve this – and build up these votes in the right areas – she’ll be on course to achieve a breakthrough and it’s largely irrelevant that the remaining 70 per cent of the electorate strongly oppose this position and Brexiteers are crying foul.

Swinson’s conference speech on Tuesday afternoon was designed to clearly set out this message, but to go further and show that she is the natural, or indeed the only choice, for those who are relatively moderate in their politics and hold liberal, open and international values.

It’s not just the party’s messaging, but also their target seat strategy which reflects this approach. The party has conducted one of the most extensive polling and modelling exercises it has ever done in preparation for the expected snap election. It’s been reported that the party’s list of target seats has jumped from 40 to 80 off the back of this.

By going for broke with the new revoke message, the party looks sets to change the type of seats it targets to win. Where once the party might focus on West Country heartlands, its new targets appear largely in London and the South East, with a higher proportions of voters who supported Remain, are university educated, have higher than average incomes, and have an ‘open’ and ‘liberal’ mindset.

As was seen when Chuka Umunna recently announced that he would be standing in Cities of London and Westminster – a seat in which the Liberal Democrats do not have a track record of success – there will be plenty of surprise and scepticism in the media that the party thinks it can win these seats. Other constituencies like Wimbledon, Kensington and Putney are Labour and Conservative marginals, not typical Liberal Democrat target seats. Swinson’s speech was preceded by an appearance on the Conference stage by the candidate for Esher and Walton, the seat of Foreign Secretary and high profile Brexit supporter Dominic Raab. Being typical commuter-belt territory and voting 60 per cent Remain it fits this model perfectly, and with a majority of over 23,000 it shows the scale of the party’s ambition.

This strategy is ambitious. It might not pay off. And it is certainly a gamble. But the Liberal Democrat bet is that this election will be transformational and will see a major realignment with the electorate voting in ways they haven’t before. Arguably, with their new policy platform and the resources they are looking to invest, they are going for broke to achieve this. If it works the Liberal Democrats will be unrecognisable from their current form and will be a major force in the next parliament. If it doesn’t it will have been a missed opportunity.

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‘Labour-pains or Labour-gains?’

The weather in Brighton this week veered from the sublime to the ridiculous, mirroring remarkable swings in the mood and political backdrop to Labour’s annual get together. A week that looked set to be dominated by stories about bitter splits and internal battles was ultimately saved by external events in the form of yesterday’s remarkable Supreme Court judgement overturning prorogation.

The Conference started with a furious row over a motion to abolish the Deputy Leader position, intended as a punishment for Tom Watson’s perceived disloyalty to Corbyn’s leadership. No sooner was this swept under the carpet (with a pledge to review the post) than another row erupted over the Party’s position on Brexit. The leadership eventually got its way, Labour will head into the next election promising to put a negotiated leave deal to the people in a referendum with remain as the alternative but they won’t decide which way to campaign until a special conference after the deal is negotiated. This leaves the Party holding the tricky middle ground between the Conservatives as the Party of leave and the Lib Dems as the clear remain option.

But as the weather turned stormy on Monday afternoon through Tuesday morning, the focus shifted to domestic policy. The most significant development was the adoption of a bold, radical approach to climate change. The Party is now officially pledged to a 2030 target for net zero carbon and a huge £250bn war chest for green investments and technologies. This is linked explicitly to the Party’s industrial strategy and will be a centre piece of its ambitions to reshape the UK’s economy. There will have been some nervousness at the fact that the motion on this topic also included a pledge to nationalise the big 6 energy suppliers and ban fracking, though that does not mean these specific points will make it into the manifesto as immediate priorities of the leadership.

This move underlines the salience of the Extinction Rebellion movement and their climate crisis messaging. This agenda is now becoming more mainstream.

Elsewhere there was plenty of red meat for the Corbyn faithful. Proposals attacking private schools are a stark demonstration of just how mainstream the ideas of what was previously the radical fringe of the party have become and it is far from clear how this could be implemented in practice. Also prominent was a pledge to deliver free social care for all over 65s to be funded from general taxation. This is a core theme, the state raising more tax from the ‘top 5 per cent’ to fund a far greater range of free universal state support; social care, university tuition, childcare, adult skills and learning – the list is extensive and the overall cost uncertain.

Then, as the rows over Tom Watson and Brexit threatened to reignite and collide during his speech yesterday afternoon, the storm lifted and the sun began to shine just as the Supreme Court judgement landed and changed the course of the Conference. It immediately became the main topic of conversation and MPs began pulling out of fringe event speaking commitments and heading back to London. Corbyn’s speech was brought forward in place of Watson and what would have been a further embarrassing spectacle was conveniently sidestepped.

Corbyn’s speech itself hit all the right notes with the audience in the hall and painted a picture that will enrapture his core supporters and concern many in the business community. He had plenty of easy Boris bashing lines from the Supreme Court judgement to deploy and plenty of policy content to delight the audience in the hall. Ultimately though, it was his condemnation of the Prime Minister that dominated the news bulletins last night with much of the policy content flying slightly below the radar.

So how does Labour emerge from all this? Firstly, they have had a slightly lucky escape. The Supreme Court ruling served to mask what remain pretty serious splits within the Party over its direction on Brexit and support for the leadership. But the Party now has a very bold, eye catching domestic policy programme with climate change at its heart to take to the electorate whenever a general election is eventually called. The big question is whether their ambiguity on Brexit detracts from their core domestic offer of drastic change. In 2017 Corbyn was effective in steering what was expected to be a Brexit election towards domestic policy issues. His ability, or otherwise, to do so again will be a key to his chances of becoming the next Prime Minister.

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