Charlotte Street Partners

DAILY BRIEFING

DAILY BRIEFING

Love thy neighbour

Good morning,

Written by Charlie Clegg, senior associate 
Edited by David Gaffney, partner
9 August 2021

News

As a rule of British politics, the fates of chancellors of the Exchequer are tied up with their prime ministers’. Of post-war prime ministers, only Margaret Thatcher and Harold MacMillan have reshuffled chancellors. Otherwise, only the usually unfortunate junctures of death or resignation have seen chancellors leave office before their next-door neighbours.

The press this weekend has been ablaze with reports that Boris Johnson suggested to aides last week that he move Rishi Sunak from Number 11 Downing Street to the Department for Health and Social Care. The cause of this proposal was Johnson’s apparent anger at a leaked letter from Sunak encouraging the easing of travel restrictions.

The prime minister, fond of big-spending projects, is understood to be chafing against his chancellor’s desire to balance the books post-Covid. A reshuffle is widely expected and Johnson could seek a more pliable alternative, perhaps Liz Truss. Johnson’s threat may prove as empty as it is rash, but it exposes a disastrous division at the heart of his premiership.

Consider what Sunak has in his favour. Among the public, his popularity stands at 42% against the prime minister’s 34%. Among Conservative members, the division is starker: Sunak’s net satisfaction is 74% against Johnson’s three per cent. As chancellor, Sunak soon established “Brand Rishi”, which still appears attractive. The wiser but more difficult option for Johnson is to contain and use that brand to bolster his government.

Sunak’s response to any attempt to move him may be to leave government entirely. A strong personality on the backbenches can be a sometimes fatal problem for a prime minister. Boris Johnson, of all people, should know that.

Here’s where MPs’ views matter too. Covid has brought a massive change in how the UK’s Conservative government has used public finances. We are yet to see how long-lasting those changes are. Nevertheless, Sunak’s instincts to rein in public spending are far closer to those of most Conservative MPs.

At present, one frontbench source claims the parliamentary party is split “50:50” between the two men. The realities of the UK’s post-Covid finances could soon tip that balance in Sunak’s favour.

Of course, Johnson’s threat to sack his chancellor could be just another of the not-entirely-thought-through statements that have characterised his tenure as prime minister. Yet this recent outburst evinces a fissure at the core of government.

Sound economic management should guide any government. For a prime minister, reshuffling one’s chancellors is like dropping the pilot before you’ve entered harbour. Johnson’s ship has too often seemed directionless. If he drops Sunak, he could be steering it onto rocks of his own making.

News

Scotland has exited Level 0 of Covid restrictions with only limited measures remaining. Health secretary Humza Yousaf has encouraged Scots to “enjoy yourself but be sensible”, adding that “the virus is still with us”.

The United Nations’ Intergovernmental Panel on Climate Change will today publish its report summarising the scientific evidence on climate change. The report, the first such document in eight years, comes ahead of the COP26 summit, which takes place in Glasgow from 31 October to 12 November this year.

The Taliban have taken three more Afghan cities. The northern cities of Kunduz, Sar-e Pol and Taloqan fell as a wave of assassinations killed eight Afghan Air Force pilots. The developments come in the wake of President Biden’s removal of US troops from the country. (£)

Business and economy

UK health secretary Sajid Javid has called for the Competition and Markets Authority to review the costs of PCR tests for returning travellers. The tests should cost around £75 each but some travellers have complained of charges of hundreds of pounds.

Consumers may be hit by a steep rise in the price of raw materials. The latest update to the Royal Bank of Scotland’s Purchasing Managers’ Index has found costs have risen at the fastest rate for over a decade. (£)

Columns of note

When recent Olympic Games have averaged cost overruns of 250%, is there ever an economic case for countries to host them? In The Times, Mark Littlewood concludes there is not. Benefits during and long after the games have never been enough to offset their massive costs, he argues. (£)

How is the UK’s government tackling the challenges that face Britain? How is its opposition doing so, for that matter? In The Guardian, Isabel Hardman reviews both Boris Johnson and Sir Keir Starmer’s policy offers. She concludes that, although the government may be offering little, they have had an easy time of it from a policy-light opposition.

Cartoon source: New Yorker

Markets

What’s happening this week?

As mentioned, the week begins with the long-awaited publication of the UN Intergovernmental Panel on Climate Change’s extensive report on climate change.

Throughout the week, schoolchildren will receive exam results across Britain. English, Welsh, and Northern Irish pupils will receive GCSE and A-level results while Scottish pupils will receive National 4s and 5s and Highers.

Businesses reporting results this week include leisure and entertainment giants Walt Disney, Tui Travel, and InterContinental Hotels. Lockdown winners Deliveroo and Flutter, an online gambling service, will also report.

US and Chinese inflation figures will dominate this week’s publication schedule with second quarter GDP statistics for the UK also expected.

In company news:

Tobacco giant Philip Morris has raised its bid to buy respiratory drug maker Vectura to more than £1bn. The company faces competition for the acquisition from US private equity group Carlyle.

Saudi Arabian energy giant Aramco has seen its profits jump 300%, boosted by a rise in oil prices as demand recovers.

What’s happening today?

Finals
Hargreaves Lansdown

Interims
Clarkson
H&T Group Plc
PageGroup

AGMs
Hansa Inv.
NextEnergy Solar

EGMs
Romgaz S

Int. economic announcements
(07:00) Balance of Trade (GER)

did you know

                                                 Until 1830, there was a pub on Downing Street called the Rose and Crown.

Parliamentary highlights

House of Commons

The House of Commons is in recess. The House will next sit on 6 September.

House of Lords 

The House of Lords is in recess. The House will next sit on 6 September.

Scottish parliament 

The Scottish parliament is in recess until 30 August.

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