Charlotte Street Partners

DAILY BRIEFING

DAILY BRIEFING

Accountability is taxing

Written by Adam Shaw, associate partner
Edited by Kevin Pringle, partner
11 December 2020

Good morning,

This week saw the Labour Party attempt to reassert itself on the issue of Scotland’s constitution. The problem? It feels like a rerun of 2014: Gordon Brown back to lead a UK-wide convention that will devolve power, decentralise the UK and deliver Scottish home rule. While this may be a semi-new initiative to those in the rest of the UK, Scots have heard it before.
 
Federalism, devo-max or home rule – call it what you like – will need to form part of the solution to reversing Scotland’s apparent march towards independence.
 
Poll after poll has shown a majority for independence, with young people in particular seeing it as the right path, and the prospect of a no-deal Brexit pushing former ‘no’ voters towards accepting Scotland’s exit from the UK.
 
However, to have any hope of traction, it requires a proper overhaul of the UK’s constitutional structures. It can’t simply be a case of devolving and forgetting, or tinkering at the edges.
 
One aspect I believe would be important from a unionist perspective is moving beyond the Barnett Formula and making the Scottish government responsible for raising at least the majority of what it spends on devolved matters: setting tax bands, collecting revenue directly, and granting much more substantial borrowing powers.
 
Without that accountability, the SNP, or any future Scottish government for that matter, can continue to point the finger at the UK government whenever there is a funding shortfall – perceived or otherwise.
 
These are powers that an independent Scotland would have anyway, so why not challenge the SNP to accept them as part of a federal UK in an attempt to change the narrative and keep Scotland in the United Kingdom?
 
It would be a bold move but, frankly, the unionist side needs to roll the dice.

News

Boris Johnson has stated that there is a “strong possibility” that no trade deal will be struck with the European Union. The prime minister was speaking for the first time since meeting Ursula von der Leyen, the European Commission president, on Wednesday. The two sides have failed to make a breakthrough thus far and Sunday is the new deadline for reaching an agreement.
 
An advisory panel to the US Food and Drug Administration (FDA) has recommended the emergency approval of Pfizer and BioNTech’s Covid-19 vaccine. This is a precursor to the health regulator granting approval for the first Covid-19 vaccine to be deployed in the US. The virus has killed more than 285,000 Americans to date.
 
President-elect Joe Biden and his running mate Kamala Harris have been named as Time magazine’s 2020 person of the year. The Democratic pair beat three other finalists: frontline healthcare workers and Dr Anthony Fauci, the racial justice movement, and President Trump, who lost the White House race.

Business and economy

Airbnb’s share price more than doubled on its first day of trading on the Nasdaq stock exchange yesterday. The holiday rental company saw its shares close at $144.71, up from the $68 which Airbnb sold them to investors late on Wednesday, and three times the $44 to $50 range the company gave last week. (£)
 
The Prudential Regulation Authority (PRA), part of the Bank of England, has said that UK banks that are strong enough to do so can start paying dividends again. HSBC, Lloyds, NatWest, Santander and Barclays were among those due to pay billions of pounds to pension funds and private shareholders at the beginning of the pandemic. Stopping the payments allowed them to keep the capital and absorb bigger shocks from potential loan losses.
 
Supermarkets and their shoppers face a £3.1 billion annual increase on the cost of food and drink if there is no post-Brexit trade deal with the EU. According to the British Retail Consortium (BRC), in the event of no deal, 85% of food imported from the EU is expected to face tariffs of more than five per cent.

Columns of note

Writing in The Times, James Forsyth asserts that the EU is mistaken in its belief that Boris Johnson will cave on key demands at the last minute in order to reach a deal. While there is a strong desire for a deal among the UK cabinet and the Conservative Party, there is a willingness to go for no deal. Forsyth offers some potential solutions on the key sticking points – the so-called “level playing field”, governance and fisheries – and calls on the two sides to “step back and look at the big picture”. (£)
 
In the Financial Times, John Thornhill argues that our reliance on technology has the potential to exacerbate the next global crisis. He points to the investment in cyber capabilities made by the likes of China, Russia, Iran and North Korea. Without an upgrade to our security, governance and regulatory regimes, he says, we will remain vulnerable to the crippling of critical infrastructure – either by malicious design or default. (£)

Cartoon source: The Times

Markets

What happened yesterday?

It was a mixed picture for global stocks yesterday. Brexit talks stalled and worse-than-expected jobless claims data was reported in the US. However, there was increased optimism around a wide-ranging US stimulus package and European Central Bank maintained support for the eurozone by increasing its bond-buying programme to €1.8 trillion.
 
The FTSE 100 was up 0.54% to 6,599.76, but the FTSE 250 dropped 0.64% to 19,756.1.
 
BP was the biggest riser on the main index, climbing 4.46%. The energy giant was closely followed by packaging company DS Smith, which rose 3.79% after reporting a dip in half-year profits but resumed dividend payments due to a more optimistic outlook.
 
Online grocer Ocado was the FTSE 100’s biggest faller, shedding 7.18% despite lifting its full-year earnings forecast and reporting a rise in Q4 revenue.
 
Housebuilders also saw losses, with Persimmon, Barratt and Taylor Wimpey dropping 6.37%, 5.1% and 4.22% respectively.
 
Across the Atlantic, all eyes were on Airbnb’s stock market debut. The holiday rental company saw its share price double on the first day of trading, helping the Nasdaq climb 0.54% to 12,405.81.
 
The S&P 500 fell 0.13% to 3668.1, and the Dow Jones Industrial Average fell 0.23% to 29,999.26.

What’s happening today?

Finals
Nexus Infrastructure

Interims
Polar Capital Technology Trust

AGMs
Bellway, Star Phx Grp, Up Global, Volution Group PLS, Westmount Energy

Trading announcements
Bellway, Rolls Royce Holdings

Int. economic announcements
(07:00) Consumer Price Index (GER)
(13:30) Producer Price Index (US)
(15:00) University of Michigan Confidence (Prelim) (US)

Source: Financial Times

did you know

Disney changed the title of its film ‘Moana’ to ‘Oceania’ in Italy to avoid a name clash with an Italian adult film star.

Parliamentary highlights

House of Commons

No business scheduled

House of Lords 

No business scheduled

Scottish Parliament 

No business scheduled

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