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A Budget to show how it should be done – as the Greeks show how it shouldn't

Plus: Barclays, BP, Whitby potash and my troubles with Uber

11 July 2015

9:00 AM

11 July 2015

9:00 AM

George Osborne’s Budget was good politics: not so much in terms of tactical point-scoring, though there was plenty, but in terms of striving for big objectives of fiscal rectitude and wider prosperity by incentivising sensible economic behaviour and discouraging casual reliance on the state: ‘a country that backs those that work hard and do the right thing’, in David Cameron’s phrase. Some of it will provoke rage, some of it will swiftly unravel, but it was a real attempt to steer the UK in a positive direction. How sad that it had to be presented against the backdrop of the Greek crisis, which is the most howling concatenation of bad politics so far this century.

Hang on, you say: at least the Greeks tried to do the right thing by resorting to a referendum rather than violence, and voting for a temporarily chaotic outcome that may — if it forces them out of the euro — be their best hope for long-term recovery. But what carried them to this was the very worst kind of politics: in Athens, dishonest accounting, excessive borrowing and spending, minimal tax collection, outright corruption and latterly, Trotskyite fantasy; in Brussels and Frankfurt, mismanagement of a currency that was ill-designed in the first place; in Berlin, relentless pursuit of German interest at the expense of weaker partners. It’s a tragedy for Greece and an earth-tremor for Europe, including the UK: a reminder that good politics at home can be undermined at any moment by bad politics abroad.

Besieged BP

‘A realistic outcome which provides… certainty for all parties’ was how chief executive Bob Dudley described BP’s $18.7 billion final settlement with US authorities for the 2010 Deepwater Horizon rig explosion. What a sorry episode this has been, at a total cost to BP of $53 billion. The central facts are that negligence led to 11 deaths and history’s biggest oil spill; reparation was clearly called for. But the assault on BP by US courts and politicians was tainted with protectionist xenophobia, while greedy lawyers overdramatised the damage. The ‘certainty’ of the settlement now combines with the depressed share price to make BP a target for a US energy giant such as Chevron. Downing Street has said it will oppose foreign takeover of BP, but when a bid comes in we’ll see how keen ministers are to align themselves with such a pariah.

Not far enough


‘We’ve come a long way,’ Barclays chief executive Antony Jenkins declared in March, after reporting a fall in pre-tax profits and huge provisions for forex-rigging fines and other misdemeanours. ‘But,’ I commented at the time, ‘City gossip says he hasn’t moved Barclays far enough, and may feel a chill when tough new chairman John McFarlane arrives shortly.’ Sure enough, within days of McFarlane’s arrival, Jenkins is a goner. Was there ever a more predictable sacking? Jenkins took on the role in what Barclays itself called ‘incredibly difficult circumstances’, and talked the talk about culture change but was never convincing and totally failed to refurbish the bank’s tainted image. McFarlane will now be executive chairman until Jenkins’s successor is found. My bet’s on a female appointee.

Dig for value

Sirius Minerals’ shares stand 50 per cent higher since the company won permission for its potash mine near Whitby in North Yorkshire on a planning committee vote of 8 to 7 — a victory for economic common sense. Of course I care about nature, too, but as I heard one member remark at another meeting of the same committee, ‘Nature was ’ere before us, and it’ll be ’ere after we’ve gone.’ Meanwhile, I gather my advice two weeks ago that the authority would be mad to rule against the mine caused quite a stir. Among local Sirius fans, word is it’s The Spectator wot won it.

I hope Sirius now delivers long-term value and becomes less of a speculative play. For as our regular investment guru Tim Price likes to point out, there are only two ways to make money in markets. One is ‘value investing’ — buying high-quality assets at less than their inherent worth and holding them — and the other is to follow short-term price momentum. The latter is the basis of another saga of the past year: the rise of the Shanghai Composite index of Chinese stocks from 2,000 to a June peak of 5,166 followed by a slump to 3,534. The surge was driven by overexcited share gamblers, many new to the game, who now hope state interventions will save them.

It’s a classic crash pattern — but as Price says on his blog, ‘there’s no reason to presume this latest China crisis will embark on an international tour’. Greek and Chinese ripples have reached Tokyo’s Nikkei index, for example — but to value investors, that boosts the case for buying high-quality Japanese stocks while they’re cheap.

Uber trouble

I’m as irritated by Uber as the French seem to be — though I wouldn’t go as far as they did last week in arresting the ride-sharing company’s managers. Uber has hit official resistance everywhere from Johannesburg to São Paulo; but a disruptive free-market technology so readily adopted by users that its name has entered global language is bound to win the argument in the end. The only question is whether it will be overtaken by something better.

I certainly hope so. Deep in Clapham, a fellow dinner guest offered to call ‘an Uber’ to take us back north of the river. Sure enough, a scholarly-looking fellow with a clean car was there in moments. So far so good — until the driver said: ‘You go to Birmingham, yes?’ Heavens no, Mayfair please, I replied: but he was a stranger to London landmarks as well as his own satnav, and we’d have passed Heathrow if I hadn’t started shouting at him. As with many digital ventures, what’s needed is the taxi equivalent of ‘bricks and clicks’, a balance of old and new technologies: the über-trendy app, but ‘the knowledge’ as well.


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