Javid’s jagged farewell
ONE of the crazy dysfunctions of the post- 1997 Labour governments was that the simmering feud between two big beasts meant then prime minister Tony Blair was locked out of budget deliberations and would be lucky to see the result of the his chancellor Gordon Brown’s work until the day before the speech.
It is going to be very different with Boris Johnson, who wants full control.
Sajid Javid was looking forward to delivering his first budget on March 11, fulfilling the manifesto commitments, with a more reforming budget in the autumn.
No 10 had been concerned that Javid and his advisers have been captured by Treasury orthodoxy, hence weekend leaks about plans for curtailing pensions tax relief and a recurring tax on high-value properties. One must now assume that the leaks served their purpose and the proposals have been killed stone dead.
First reaction of financial markets to Javid’s resignation was to mark the pound down. When his successor Rishi Sunak was revealed, along with the circumstance of Javid’s resignation, the currency bounced. As significantly, bond rates climbed to 0.65pc, an indication that there is likely to be even more fiscal ballast in the budget than had been lined up by Javid. Big infrastructure decisions have already been taken on Huawei, HS2 and buses. One suspects there is more to come. But if Johnson and Sunak are thinking of borrowing from the Donald Trump playbook, they will know that tax cuts can be very effective in bolstering output.
Sunak is fortunate. Austerity may have led large sections of the country to feel poorer, but at least they are in work. Coronavirus notwithstanding, many sectors of the economy, from housing to services, have perked up since the election.
The Treasury is swapping a former Deutsche investment banker for a veteran of Goldman Sachs with its long history of delivering public policy makers. There is sadness about Javid’s short service but disquiet still at No 10 over his biggest decision – the choice of Andrew Bailey to take over at the Bank of England.
Elsewhere, Alok Sharma displaces Andrea Leadsom as Business Secretary. It would be nice to think that Sharma will be more robust in defending firms such as Cobham from overseas marauders.
Higgins pickings
BARCLAYS has struggled to find the right chief executive. The transition from the days when descendants of the founding Quakers stealthily climbed to the top, to the appointment of talented outsiders, has not been smooth. In choosing Jes Staley, it made a good judgment for investors, although they have yet to be rewarded with a share price recovery. He brought Wall Street glitter and forcefulness with him. When a whistleblower went after one of his former JP Morgan colleagues (transferred to Barclays), Staley foolishly took on the complainant.
We have known for some time that Staley was a business and social associate of the disgraced financier Jeffrey Epstein. What wasn’t recognised was that the relationship extended beyond his years at JP Morgan. The Barclays board satisfied itself that Staley
had disclosed all they needed to know about Epstein. City regulators are less convinced and have launched their own probe.
Against the odds, Staley has demonstrated that a European investment bank can deliver in a pool dominated by the Americans. In a low interest rate environment he has managed to produce better financial outcomes than the market expected. Only the promise of a 10pc return on equity in 2020 may prove tricky.
Reality for Staley is that one regulatory misstep was excusable. But the fresh probe, even if Staley has done no wrong, is too many. New chairman Nigel Higgins will be casting for a successor without any known sign of a dynastic candidate.
Out of gas
IAIN Conn’s final hurrah as chief executive of British Gas-owner Centrica cannot be considered a roaring success, with the share price tumbling 15.3pc.
Conn cannot be personally blamed for Theresa May’s botched price cap or falling natural gas prices. Numbers of British Gas customers may still be falling, but the group’s broader retail offer is gaining traction on both sides of the Atlantic. Selling exploration and production should futureproof the balance sheet but offloading Centrica’s 20pc stake in nuclear is more tricky. But at least the die has been cast.