Friday, 22 March 2013

Cyprus storm clouds..

Good morning. Forget for now the claims and counter-claims swirling around the Westminster Village following Wednesday's Budget - the crisis in Cyprus looks like becoming the political event of the year. The EU's handling of the Cypriots is making their adventures in Greece look like textbook diplomacy. Following the botched raid on deposit accounts and week long bank holiday, there is now a Plan B on the table which would protect savers with less than €100,000 on deposit. It would also refinance the two main banks, which are on the verge of collapse, but inflict a loss of 40pc on those with more, as we report. Whether they manage it in time (the ECB will withdraw emergency funding on Monday if there's no viable rescue package) remains to be seen. The country has been downgraded to CCC by Standard and Poor's, classifying it as at risk of default, and as the Mail reports, two thirds of islanders now want to leave the EU. Astonishingly, the Mail adds that Cypriot leaders were refusing to take phone calls from the ECB yesterday, and were instead focusing exclusively on negotiations with the Russian government. Those talks seem to have collapsed overnight, and the Cypriot finance minister has now left Moscow and flown home. Whether Cyprus leaves the eurozone or depositors take the hair-cut, the contagion risk is now severe. If this is the summer of Europe's discontent, a projected growth rate of 0.6pc here is going to start looking rosy. Follow all of the day's developments on our live blog here
Back in Blighty, Labour have settled on their attack line. The Chancellor's support for the housing market could be seen as a subsidy allowing the relatively well off to buy second homes, they argue. As we report, the Treasury have specifically excluded those attempting to purchase using a buy-to-let mortgage, but they have not excluded second homepurchases absolutely. The Coalition response has been confused. The Chancellor appeared to concede the ground on television yesterday. Mark Prisk, the housing minister, then denied Labour's claims, before clarifying that he was, in fact, discussing a completely different scheme. It shouldn't be beyond the wit of man to devise a legal structure which would prevent government subsidy of property barons, but until the Treasury publish the document, both sides seem to be shooting in the dark.
A better line for Labour might be the one which has led the Sun to the headline "Chancer of the Exchequer". One of the points increasingly obvious whenever the Coalition announce a cut is that much of the austerity programme is coming after the 2015 election. An IFS analysis yesterday suggested that the impact of these cuts arriving at once would be sufficient to necessitate tax rises of £9bn, or 2p on the basic rate of income tax, after the next election. As the Guardian reports, deficit reduction in this parliament has been so poor that there is now talk in the City of a further downgrade to the UK's credit rating this weekend. Damningly, the Sun's YouGov poll has "neither" as the winner on 34pc when respondents were asked whether the Coalition or Labour would deal with the deficit best. Only 14pc thought they would be better off following the Budget. Given that lack of faith, it is no wonder that we ask in our leader today "where are the political leaders Britain needs?" Philip Collins in the Times (£) believes that it is time the Chancellor concedes that he cannot wear two hats well and concentrates on what he is good at  - strategy, not budgeting. However, as Fraser Nelson argues for us, maybe it is the Bank of England, not the Treasury, which will determine whether we sink or swim:
"Osborne’s 'monetary activism' is arguably a greater gamble than anything Nigel Lawson attempted in the Eighties, since so few people can say with any confidence how quantitative easing will end – or whether Mark Carney will be so enthusiastic about all this when he finally arrives. It is certainly unfair, however, to accuse Osborne of being risk-averse, just because his Budgets are dull. The backgammon ace is simply playing two games."
Nick Clegg and Vince Cable are at one another's throats over the Deputy Prime Minister's immigration announcement this morning. Speaking at 9:50 at Gray's Inn, Nick will set out a plan to require "cash bonds" of up to £1,000 from immigrants coming to Britian for work or study from high-risk countries. These will only be repaid once the immigrant leaves the country.
Leaving aside the fact that the amount of money involved is not likely to be large enough either to deter illegal immigration nor to cover the cost of finding them if they do disappear, the scheme has provoked one of the Coalition's sternest critics to fight back. Step forward, er, Vince Cable. In an interview with The House magazine reported in the Guardian, Mr Cable claims that the target of reducing immigration was dishonest and that could cause "enormous damage" to the economy. Moreover, a reduction in net immigration into the tens of thousands "isn't government policy, it is Conservative policy." Try telling your leader that, Vince.
When being scolded by the Business Secretary, the Deputy Prime Minister makes himself available for members of the public to abuse. Yesterday's intervention on LBC's Call Clegg came from stay at home mother Laura Perrins, a former barrister who objected that the Government's prioritisation of childcare benefits for working mothers gave the impression they felt her role was "worthless". The Mail has reproduced the exchange in full. "You probably feel what I do is a worthless job," Mrs Perrins told Nick. If that's what every stay at home mother thinks of the Coalition, it is going to do nothing for Dave's women problem.
Nick Boles, the planning minister, has told developers that he is ready to campaign against countryside groups to ensure a building boom. Arecording of the meeting obtained by us includes the disclosure that the Government is poised to axe the planning permission requirement for many developments. He later told an audience of property professionals in Mayfair that "Our simple view is that the fundamental idea of the planning system is that property owners should be able to do some things if they want to without asking anyone." It may be a simple view, it will also be wildly unpopular in the Tory shires. And we know how much Dave would dislike upsetting the party base...
The Economist has become the latest magazine to reject the new media watchdog which it says "raises the spectre of state regulation". As theMail reports, the magazine also attacked the "sloppy" Leveson Report, adding that "we believe society gains more from a free press than it loses from the tabloids' occasional abuse of defenceless people."
The 18th of September 2014 will be seen as "the day Scotland took a decisive step forward" according to Alex Salmond. In 545 days time, the Scottish electorate (plus some school children) will go to the polls to answer the question "should Scotland become an independent country?" As the Guardian reports, the "no" campaign looks like the winner this far out. It may be that the 18th of September 2014 is a day when Scotland just stands still.
There's a cold snap coming with snow hitting all part of the country other than the South-West, which will get floods instead. A reassuring time to learn that Britain is just days away from gas running out. There are only two days' worth left in reserve and there is talk of limiting supply to large commercial customers, as the Times (£) reports, a disaster from a GDP perspective.
In fighting Argentina to win back the Falkland Islands, Britain should "blow up a few ships but nothing more", Ken Clarke warned Margaret Thatcher as part of a group of junior ministers whose views were summarised by the then chief whip Michael Jopling. As we report, the release of previously classified papers also includes gems like "we are making a big mistake. It will make Suez look like common sense," from Ian Gilmour, and "[my constituents] want blood" from Peter Mills. The Tories divided? Plus ça change...

Gavin Shuker with a fairly plausible excuse for a Friday night:

@gavinshuker: "Gearing up for a pub crawl with a difference tomorrow. Visiting five local pubs to discuss what we can do to halt decline in the sector." 


In the Telegraph

Fraser Nelson - Our fortunes rest on the Bank's great money-printing machine
Alex Morton - Home truths about houses
Best of the Rest

Philip Collins in The Times (£) - Osborne should stick with what he does best
Leo McKinstry in the Daily Express - The Chancellor is beginning to heal our sick economy
Today: Justice Minister Helen Grant to publish strategic priorities for female offenders.
Welsh Labour Spring Conference. The Welsh Labour party holds its annual Spring Conference - this time in Llandudno. Keynote speakers over the weekend are Peter Hain, First Minister Carwyn Jones and Ed Miliband. The Promenade, Llandudno,
09:50 am: Deputy Prime Minister Nick Clegg speech on immigration. Bingham Room, The Honourable Society of Gray's Inn, North Square.
10:00 am: Publication of Margaret Thatcher's personal and political papers from 1982. The Churchill Archives Centre at Cambridge University will be publishing Margaret Thatcher's papers from 1982 on March 22. They are dominated by correspondence about the Falklands. Churchill Archives Centre, Churchill College, Cambridge, CB3 0DS.
04:00 pm: Lord Chancellor Chris Grayling visit to youth crime project. Ealing Magistrates' Court, The Court House, Green Man Lane, Ealing.