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October 04, 2017

On why Theresa May is likely to survive

Yesterday was the big day at the Tory Party conference in Manchester - Boris Johnson gave a rebel-rousing speech, and the audience loved it. But make no mistake. There is no chance that Boris is going for, let alone winning the top job any time soon - unless Theresa May really flunks her big speech to the conference today. We have seen extracts from the speech in the British press, and while it does not appear to be nearly as emotive as Johnson’s, her appeal to unity and to focus on the future beyond Brexit are ultimately hard to disagree with. 

Daniel Finkelstein, a Tory member of the House of Lords, writes in his Times column that the internal party rules make it virtually impossible for a rebel to unseat her. The reason lies in the party’s divisions. The Remainers fear that if they stab her in the back, they will end up getting someone worse - like Johnson. And the Leavers fear that a coup might bring down the government, trigger elections, and ultimately frustrate Brexit. Finkelstein notes that the first round of a leadership contest would be a vote to withdraw confidence from the existing leader. If only one section of the party rebelled - say the Leavers - Ms May would have no trouble fending this off. This is why Johnson’s antics ahead of the conference are likely to end up strengthening her, because they cause alarm with the Remainers. That does not mean that May is safe. If there is a consensus in the party that she has to go, then that will happen. But the whole point about the Tories right now is that there is no such consensus. 

Our own assessment is that May will survive the Brexit period but we make no predictions beyond that. This does, however, not mean that all is well for the Tory party. The party has been tearing itself apart over Europe for over 30 years. And Brexit has actually made it worse. We noted a comment by Laura Kuenssberg about the party’s utter disappointment about May - described by one of her colleagues as “bent and broken”. Kuennsberg concurs that this will not translate in a leadership challenge, but the party is gripped by an existential fear.

Rachel Sylvester, the Times columnist who recently did a much remarked-on hatchet job on Johnson, also notes that May is driving the party into the ground. She quotes one older MP as noting that the fall in the party’s leadership to below 100,000, and the rise in the average age to 70, are telling us that the party current has no future.

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October 04, 2017

On how to resolve the Brexit talks

Andrew Duff gives a reasonably optimistic account of the state of the Brexit talks in Brussels, and lists the conditions now needed to break the current gridlock. He notes that Theresa May’s speech in Florence changed the tone of the discussion, and opened the way for an agreement on citizens’ rights and finances, but this has not yet been enough. There is not much progress on Northern Ireland, and May’s £20bn financial concessions do not cover the big item, the outstanding commitments knows as RAL, or reste à liquider, and contingent liabilities like pensions. 

The next round of talks will start next Monday, during which Duff suggest the UK should offer a much more detailed payment schedule for the transition period. It should also make suggestions for the joint tribunals. The European Council on Oct 19-20 will almost certainly not conclude that sufficient progress has been made, but it could give the green light to Barnier to start talks on the transition period. Duff argues that they might otherwise risk a snub that weakens May’s position at home with the risk of a Johnson premiership, as he put it.

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October 04, 2017

Social housing - not a good start for the French government

Social housing is clearly not a good subject for Emmanuel Macron or his government (nor is it for us). From what we understand is that the draft law, presented September 20 fails to address the problems in the sector while causing a polemic reaction over some of its measures. The housing market was just about to recover but the recent measures of the government on social housing have already turned tenants, landlords, investors and constructors against them. 

There was no urgency to act on housing policies right now. The two ministers in charge announced early September a cut in the housing benefits (APL) by €5 per month. They chose the worst possible political moment for this, just when capital gains tax cuts were announced. It was not surprising then that Macron was tagged the ‘president of the rich’. In reaction to this Macron then called on landlords to cut their rents. This was confirmed by the government later, so landlords of social housing are now faced with accepting a 10% cut in their revenues. Construction companies are also not happy amid the various measures to address the supply side of social housing. The latest gaffe was that the industry only learned with the publication of the budget that two important measures they rely on will be phased out. The difference compared with the consultation process over the labour law reform could not be starker. So this ill-conceived agenda achieved to make everyone angry in the end, writes l’Opinion’s lead story this morning. 

The APL benefits cost the government €18bn last year, according to Reuters. It is part of a €40bn budget on housing. This has done little to address the housing crunch in the cities. The plan was to reduce the budget spend on housing allowances, to cut the high rents, to increase the turnover in available houses and to relaunch construction of new social houses. The new measures include a tax break for those selling land for social housing in high demand areas and adjusting housing benefits according to current income. Family needs for social housing will be accessed every six years. But given the current trajectory, they could also end up with higher rents and lower supply of accommodation, writes l’Opinion. What they need is a 5-year strategy for this sector, not ad hoc measures.

The other pitfall the government tapped into is the luxury tax. A tax on to have been designed on the back of an envelope to counter the impression that the government gives more to the rich than the modest households. What they ended up with is a huge controversy full of symbolics but very low in substance. A political mine field.

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