Boris Johnson’s Power Grab Risks Upsetting Balance That Saw U.K. Thrive

(Bloomberg) — There are few relationships in the U.K. government more important — or potentially more toxic — than the partnership between the prime minister and the chancellor of the exchequer.

On Thursday that crucial double-act spectacularly broke apart when Boris Johnsonmoved to take full control over the finance ministry and his chancellor, Sajid Javid, resigned in protest.

Johnson’s power grab was the latest and most dramatic example of his drive to impose his authority on every aspect of government and political debate in Britain. He quickly replaced Javid with the inexperienced Rishi Sunak, who has never run a government department and has only been a member of parliament for five years.

Boris Johnson Ambushed His Chancellor in a Quest for Control

The premier’s aides say his goal is simple: to take total control over economic policy, bringing the troublesome Treasury into line, and ensuring there are no more clashes or feuds between the two most powerful ministers in the government. The question now is, will it work?

Creative Tension

The relationship between between the prime minister’s office at Number 10 Downing Street and the chancellor’s next door has been central to the success of British governments for decades, and Johnson’s move risks taking the U.K. into territory uncharted in modern times.

It is a partnership frequently defined by tension. But even on the rare occasions when the two post-holders have got on, the dynamic between them has ensured policy makers’ flights of fancy, and urge to spend money, are tethered to earth by reminders of their fiscal responsibilities.

“The role of the Treasury is to challenge, and you need that bit of grit,” said Jill Rutter a former senior Treasury official who now works for the Institute for Government, a think-tank. “If one of the purposes is to remove any sense of that challenge, then that’s not a good idea. Taxpayers and policy suffer if you make the Treasury a fully subordinated unit of Number 10.”

U.K. Political Shock Opens the Door to Trump-Style Stimulus

Johnson was 25 in 1989, when Nigel Lawson quit as chancellor after falling-out with Margaret Thatcher because she was paying more heed to her own economic aide than to him. There have been running battles between the Treasury and the prime minister’s office for most of Johnson’s adult life.

Watching Blair

He was a backbench MP watching from the sidelines as Tony Blair and Gordon Brown fought their way through the first decade of the 21st century and it’s not hard to see how the prime minister, freshly elected with a commanding majority, would want to stop the same thing happening to him.

“It didn’t work well having the Treasury going in a very different direction from the center of government,” Jonathan Powell, Blair’s chief of staff, told BBC Radio on Friday. But “to do what they’ve done now I think is a mistake,” he said. Sunak is “clearly completely subservient to the prime minister and to his special advisers” and won’t provide enough challenge, said Powell.

Johnson’s aides say he wants his relationship with the Treasury to replicate that of David Cameron and George Osborne, who worked closely together from 2010 to 2016. But even their relationship was marked by disagreements, some of which were precipitated by five years sharing power and having to find common cause with the Liberal Democrats in coalition.

The other key difference is that Osborne and Cameron were close friends and political equals. Johnson, who has been at the forefront of British politics for two decades, dwarfs his new chancellor in terms of stature and power.

Johnson’s Stooge?

The test will come when Sunak needs to assert his independence as the new chancellor. He may have an advantage compared to Javid, not least because Johnson will not want to lose a second chancellor, according to David Gauke, who was a Treasury minister in Theresa May’s government.

“If Rishi simply ends up being seen as a stooge of the prime minister then that won’t help,” Gauke said in an interview. “I wouldn’t be surprised if at some point he wants to demonstrate his independence.”

After his shock resignation on Thursday, Javid fired a warning shot to Johnson. The power grab could backfire on the premier and undermine the credibility of the British government, he said in his resignation letter. The chancellor must be able to take candid and independent advice from his aides, Javid warned.

“If the Treasury ends up being to a degree neutered and having its function as custodian of public finances curtailed, then that would be deeply problematic.” said Mel Stride, a former minister who now chairs parliament’s Treasury committee. He added that “a joined-up approach between the two offices could be a very good thing.”

Too Strong

At stake in all this is the future of Britain’s economy as the country searches for a new role in the world after leaving the European Union. A fiscally incontinent government could hurt the taxpayer, the government’s ability for policy making and striking trade deals with other countries. If the gamble doesn’t pay off, it could cost Johnson his premiership at the next election.

For now, Number 10 officials insist the new unit, bringing together Treasury and Downing Street economic advisers into a single team, will ensure the chancellor and prime minister are aligned on key policies. It will include existing officials from Number 10 including Liam Booth-Smith and Douglas McNeill, according to one official.

But history has shown that even the most powerful prime ministers sometimes need a skeptical chancellor who can stand up for himself. If Johnson’s gamble goes wrong, too much power could be his — and the economy’s — undoing.

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The U.K. finally leaves the EU — nearly 4 years after Brexit vote

London — Almost four years after the British public voted in a referendum to “Brexit,” the U.K. finally left the European Union on Friday.  At 11 p.m. in London (6 p.m. Eastern), the United Kingdom ceased to be a member of the union it joined more than 47 years ago.

The British public has been bitterly divided over the divorce with the EU, and the historic day has been greeted with both cheers and tears in London. While many will herald it as a day on which the United Kingdom reclaims some lost independence, others will mourn it as a grave loss.  

Opposing groups, pro- and anti-Brexit, gathered around Parliament in central London on Friday afternoon. They occasionally shouted insults at each other. While there is still a year of “transition period” to complete the actual task of Brexit, it may take a lot longer than that to heal the divided kingdom.

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U.K. Brexit Bill Clears House of Commons After Year of Gridlock

© Reuters.  U.K. Brexit Bill Clears House of Commons After Year of Gridlock © Reuters. U.K. Brexit Bill Clears House of Commons After Year of Gridlock

(Bloomberg) — Prime Minister Boris Johnson’s Brexit legislation cleared its final hurdle in the House of Commons, putting an end to the parliamentary gridlock that cost his predecessor Theresa May her job.

Members of Parliament voted 330 to 231 in favor of the Withdrawal Agreement Bill, which now passes to the upper House of Lords. Johnson wants the measures passed into law before the end of the month so the U.K. can leave the European Union on Jan. 31 and he can deliver on his election campaign promise to “get Brexit done.”

“It is my sincere hope that their lordships will now give due regard to the clear majorities we have seen during the committee stage and establish their endorsement of this bill in a similar, timely, fashion,” Brexit Secretary Steve Barclay told lawmakers. “This bill will secure our departure from the European union with a deal that gives certainty to businesses, protects the rights of our citizens and ensures that we regain control of our money, our borders, our laws and our trade policy.”

The smooth passage of the bill illustrates the dramatic shift in the political landscape since May first tried to get her Brexit deal through Parliament a year ago. The U.K.’s split from the bloc this month is now virtually a formality, and attention is already turning toward negotiations on the future relationship. Johnson wants to broker a Canada-style trade deal by the end of 2020, something the EU Commission says is impossible.

After Johnson stormed to an 80-seat majority in the Dec. 12 election, he stripped out a series of concessions May had made to opposition lawmakers, including guarantees on workers’ rights and the environment, measures to protect child refugees, and giving Parliament a say over the next stage of negotiations.

Opposition Members of Parliament tried — and failed — to reinsert some of those measures during debates in the House of Commons. Opposition amendments are more likely to pass in the House of Lords, the unelected chamber where the government doesn’t have a majority, but the Commons can strip them out again. In such circumstances, the Lords traditionally bows to the will of the elected chamber.

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Boris Johnson Asks Troops to Fight Floods as Weather Hits U.K. Ballot

(Bloomberg) — Boris Johnson deployed extra troops to help flood-hit parts of Northern England as he tried to ensure that a natural disaster didn’t damage his election chances.

The prime minister convened a meeting of the government’s “Cobra” emergency committee on Tuesday evening, after opposition Labour Party Leader Jeremy Corbyn accused Johnson of failing to take the problem seriously. It agreed to request military support, and offered cash grants to affected areas.

Around 1,000 properties have been vacated in Yorkshire after two rivers burst their banks. The flooding shows the danger of Johnson’s decision to hold an election in winter, when cold, wet weather adds to the list of things that can go wrong for a government during an election campaign. Although only an extra 100 troops will be involved, their presence will deliver pictures that show the government taking action.

“In the next few weeks and months the rainfall could cause flooding in many parts of the country, and we simply have to be prepared,” Johnson said after the Cobra meeting. “I know there will be people who feel that that isn’t good enough. I know there will be people who are worrying about the damage to their homes, who will be worried about the insurance situation, worried about the losses they face. All I want to say to those people is that there are schemes to cover those losses.”

While the main Conservative attack line of the week has been that a Labour government would let public spending run out of control, the floods work well for the Labour argument that the Conservative focus on cutting spending over the last decade has hurt essential services, including the agencies that protect against flooding, and deal with its consequences.

One of the electoral districts most affected by the floods, Don Valley, is an example of the kind of seat Johnson aims to capture for his Conservative Party in the election: Labour-held, but strongly in favor of Brexit. Corbyn is using the floods to make the argument to voters there that the Tories don’t have their interests at heart. In a speech Tuesday morning, the Labour leader said that had the floods hit traditionally Conservative areas in the South of England, the response “would have been a very different story.”

That’s a narrative that Johnson can’t allow to run. in 2017, his predecessor, Theresa May, tried to win the same pro-Brexit seats that he’s aiming for. She was undone by plans to use the value of people’s houses to pay for their elderly care, something that repelled the voters she was trying to reach. Those around Johnson have said they won’t repeat her mistake, but if the government appears uncaring while people are flooded out of their homes, it could have the same effect.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.

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Election Road to More U.K. Borrowing Puts Focus on Bond Spread

(Bloomberg) — There are so many scenarios in U.K. politics now it’s hard for investors to know where to turn. With both main parties aiming to ramp up spending after next month’s election, a bond market spread is likely to widen no matter which side wins.

Whoever forms the next government, there is an increased risk of a swelling budget deficit that would be funded by extra borrowing in the bond market. That is likely to hurt gilts and widen their spread against interest-rate swaps.

If Boris Johnson’s ruling Conservatives win as polls suggest, they will look to end a decade of austerity. Victory for Jeremy Corbyn’s Labour party would open up the spending taps further and also risk capital flight that would widen this swap spread even more. Either way, investors would need to hedge against the possibility of a hung Parliament, where no side has a majority.

  • Interest-rate swaps, which exchange fixed-rate payments for floating rates, have many drivers pushing and pulling their spread against bonds. For example, a turn in global sentiment away from risky assets means a preference to own government bonds rather than a credit instrument such as a swap. Other factors could include Bank of England asset purchases, funding levels that determine the carry between the two products, and flows from pension funds and insurers.
  • Higher demand and a lack of supply has seen 30-year gilts outperform swaps in recent weeks, but the increase in issuance from government budget requirements could see gilts falling versus swaps, taking the spread back toward the 2019 summer lows of around minus 60 basis points.
  • Thursday’s vote split on interest rates at the BOE signaled a short-term easing bias that saw the 2s10s gilt curve steepen, as front-end yields fell on the BOE while long-end yields moved higher with global bonds as well as the expected incoming fiscal wave.
  • A majority government should create the potential for a BOE rate hike given the fiscal spending outlook and potentially less Brexit uncertainty. A hung Parliament that prolongs uncertainty and could rein in spending ambitions via a coalition government would instead see the swap spread narrow, which could be hedged with receiver options that would pay off on a rally in gilts.
  • NOTE: Tanvir Sandhu is a global fixed income and derivatives strategist who writes for Bloomberg. The observations he makes are his own and are not as investment advice

To contact the strategist on this story: Tanvir Sandhu in London at tsandhu17@bloomberg.net

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.

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White House and U.S. official’s wife over teen’s death in U.K.

Nearly three months after Harry Dunn was killed in a head on collision in England, lawyers for his family are suing the White House in the 19-year-old’s death. The family told CBS News they’re pursuing a civil suit against the Trump administration, as well as Anne Sacoolas, the wife of an American official who admitted to causing the car crash.

Harry’s stepsister, Larna Harber, explained why the family is taking it to court, a step they hoped they would never have to take, CBS News correspondent Imtiaz Tyab reports.

“In simple words: get her back on the plane to the UK. Donald Trump has the authorities to do that and I can’t understand why they’re not,” she said. “She’s a mom of three children — what example is this setting to her three children? … It just seems wrong. I don’t understand why when something seems so simple to us.”

Sacoolas’ immunity is, of course, a complex issue — one that reached the highest levels of government in the U.K. and led Harry’s parents all the way to the White House, where they say they were “shocked” when President Trump asked them to meet with Sacoolas who was in an adjoining room.

They declined that meeting, saying they would only meet with her in the U.K. and only in the presence of grief counselors. That of course still hasn’t happened.

The family said it will accuse the administration of “lawless misconduct” and will also be seeking damages. CBS News reached out to Sacoolas’ lawyers and is waiting for a reply.

This legal battle is the latest chapter in what can only be described as an extraordinary campaign led by Harry Dunn’s parents. A campaign for justice that isn’t over.

© 2019 CBS Interactive Inc. All Rights Reserved.

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Parents of U.K. teen felt “ambushed” by White House visit

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Forex – Pound Gives Up Some Gains; U.K., EU Inch Closer to Brexit Deal

© Reuters.  © Reuters.

Investing.com – The British pound gave back some gains on Wednesday in Asia after gaining overnight. A Bloomberg reported that the U.K. and European Union are close to agreeing on a legal draft of a Brexit deal.

The pair was down 0.2% to 1.2755 by 12:18 AM ET (04:18 GMT).

The pound spiked yesterday after European Michel Barnier said a draft legal text was being drawn up, and that an agreement “is still possible this week.”

“Our team(s) are working hard, and work has just started now today, this work has been intense over the weekend and yesterday, because even if the agreement will be difficult, more and more difficult, to be frank, it is still possible this week,” Barnier told reporters in Luxembourg on Tuesday morning.

He added that “any agreement must work for everyone,” saying it is “high time to turn good intentions into a legal text.”

The deal however is dependent on Prime Minister Boris Johnson getting support from the Northern Irish Democratic Unionist Party, which is uncertain. The two sides are racing to reach a deal before the Oct. 31 deadline, but remain optimistic that an agreement will be made by the end of Tuesday.

Meanwhile, the last was little changed at 98.042.

Tensions between the U.S. and China flared up again after the U.S. House passed four measures, including the “Hong Kong Human Rights and Democracy Act”, on Tuesday in unanimous voice votes.

A similar bill is in front of the Senate.Beijing has threatened to retaliate if Congress passes a bill.

The pair gained 0.2% to 7.0964.

On the data front, the U.S. retail sales data are set to be released later in the day and are forecast to increase for a seventh straight month.

China will release third-quarter GDP, September industrial production and retail sales data on Friday.

The pair lost 0.3% to 0.6731. The pair dropped 0.2% to 108.63.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.

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NewsBreak – Scottish High Court Rules U.K. Prorogation Unlawful

© Reuters.  © Reuters.

Investing.com – Three judges on the Scottish High Court ruled that U.K. Prime Minister’s Boris Johnson’s decision to suspend parliament is unlawful. An appeal is expected to be heard in the Supreme Court on Tuesday.

• rose 0.1% to 1.2356 as of 5:23 AM ET (9:23 GMT).

• fell 0.2% to 0.8921.

• The yield rose 5.5% to 0.674.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.

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Forex – Pound Little Changed; Boris Johnson Chosen as New U.K. Leader

© Reuters.  © Reuters.

Investing.com – The British pound was little changed against the U.S. dollar on Wednesday in Asia following news that Boris Johnson was chosen as the new U.K. leader.

The pair last traded at 1.2429 by 11:30 PM ET (03:30 GMT), down 0.04%.

Johnson, known for his hardline stance on Brexit, was named Prime Minister and leader of the Conservative Party. Johnson defeated Jeremy Hunt by a margin of 2 to 1.

Johnson said after the announcement on Tuesday that he would unite Britain.

“Like some slumbering giant we are going to rise and ping off the guy-ropes of self-doubt and negativity with better education, better infrastructure, more police, fantastic full-fiber broadband sprouting in every household. We are going to unite this amazing country and we are going to take it forward,” he told the audience.

“I know that there will be people around the place who will question the wisdom of your decision and there may be some people here who still wonder what they have done, and I will just point out to you that no one party, no party has a monopoly of wisdom.”

Johnson has recently insisted that the U.K. must leave the EU on Oct. 31 “do or die, come what may” despite widespread concern over a “no-deal” Brexit.

Meanwhile, the U.S. dollar surged towards four-week highs on Tuesday after U.S. President Donald Trump and Congress struck a deal to raise the debt ceiling, easing fears of the government defaulting.

The dollar was also supported by news that the officials from the U.S. and China will begin in-person trade talks sometime next week, although reports suggested that it could take months at the minimum to agree on a trade deal.

In other news, the International Monetary Fund reduced its global growth outlook for the second time this year.

The world economy will expand 3.2% this year and 3.5% next year, the fund said in its latest quarterly World Economic Outlook released Tuesday. Both rates were down 0.1% from the funds’ April projections.

“The projected growth pickup in 2020 is precarious, presuming stabilization in currently stressed emerging market and developing economies and progress toward resolving trade policy differences,” the IMF said.

“The principal risk factor to the global economy is that adverse developments – including further U.S.-China tariffs, U.S. auto tariffs, or a no-deal Brexit – sap confidence, weaken investment, dislocate global supply chains, and severely slow global growth below the baseline,” the IMF said.

The pair was near flat at 108.18.

The pair and the pair were down 0.3% and 0.1% respectively.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.

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