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World Markets
STOCK MARKETS
Mar 19 prev %chgS&P 500 2089.27 2099.50 -0.49Nasdaq
Composite 4992.38 4982.83 0.19Dow Jones Ind 17959.03 18076.19
-0.65FTSEurofirst 300 1597.56 1590.25 0.46Euro Stoxx 50 3670.73
3668.52 0.06FTSE 100 6962.32 6945.20 0.25FTSE All-Share 3758.09
3747.38 0.29CAC 40 5037.18 5033.42 0.07Xetra Dax 11899.40 11922.77
-0.20Nikkei 19476.56 19544.48 -0.35Hang Seng 24468.89 24120.08
1.45FTSE All World $ 281.23 281.42 -0.07
CURRENCIES
Mar 19 prev$ per 1.062 1.064$ per 1.473 1.469 per 0.721 0.725
per $ 120.935 120.905 per 178.108 177.556 index 84.544 84.216SFr
per 1.054 1.059
Mar 19 prev per $ 0.941 0.940 per $ 0.679 0.681 per 1.386 1.380
per 128.475 128.685 index 89.748 90.319$ index 104.813 104.989SFr
per 1.461 1.461
COMMODITIES
Mar 19 prev %chgOil WTI $ 45.61 46.65 -2.23Oil Brent $ 54.41
55.91 -2.68Gold $ 1166.00 1147.25 1.63
INTEREST RATES
price yield chgUS Gov 10 yr 100.20 1.98 0.06UK Gov 10 yr 102.90
1.70 0.00Ger Gov 10 yr 103.08 0.19 -0.01Jpn Gov 10 yr 100.72 0.33
-0.01US Gov 30 yr 99.08 2.55 0.04Ger Gov 2 yr 100.59 -0.22 0.00
price prev chgFed Funds Eff 0.12 0.11 0.01US 3m Bills 0.05 0.05
0.00Euro Libor 3m 0.02 0.02 0.00UK 3m 0.56 0.56 0.00Prices are
latest for edition Data provided by Morningstar
ELIZABETH RIGBY, JIM PICKARDAND KIRAN STACEY
Labourhas accusedGeorgeOsborneofdipping into the pork barrel
after itemerged that the chancellors Budgetcontained a series of
initiatives aimedatmarginal seats including a projectto tackle
themenace of kebab-stealingurbanseagulls.
With 50 days to go to the election, MrOsborne used his sixth
Budget to handout sweeteners to a range of
Conserva-tiveandLiberalDemocratMPs.Tory MP Andrew Stephenson,
defending a 3,500 majority in Pendle,was awarded 56,000 to
upgrade hislocal theatre while 250,000 will bespent researching
aggressive urbanseagulls in Bath at the behest of
LibDemMPDonFoster.Asked to explain the Bath plan, the
Treasurysaidtherehadbeenreportsofseagulls stealing peoples
kebabs andthat themenaceofurbanseagullattackswaswidespread.The
chancellor gave 97m to support
the regeneration of Brent Cross inHen-don, where Conservative MP
MatthewOfford is defending a majority of just106: a further 7m was
earmarked fortheCroydonGrowthZone, to thedelightof
localConservativeGavinBarwell.The Financial Times has found 16
examples of where MPs in marginalseatshavebeenofferedassistance
in theform of direct funding, housing orenterprisezones.This is
pork barrel politics at its
worst, said Jon Ashworth, Laboursshadowcabinetofficeminister.One
Treasury insider said that while
all projects have to pass Treasury rules,constituencies with a
small majority
hadbeenofparticular focus. Therehasbeen a push to fund things
that will behelpful incertainplaces.Under the rules, any public
spending
has to be signed off as being value formoney by the relevant
accountingofficer inWhitehall.ATreasury spokes-man insisted money
had not been dis-proportionately funnelled to marginalseats, noting
the coalition governmenthadcommitted to invest13bn in trans-port
infrastructure across Labour-heldterritory
inthenorthofEngland.Danny Alexander, Lib DemTreasury
chief secretary, meanwhile announcedfunding to help residents
across thenortheast of Scotland, including hisInverness
constituency, save
anaverageof30fromhouseholdelectricitybills.Budget aftermath page 2
and 3MartinWolf page 15StanChart shift urged page 19
Osborne accusedof porkbarrel politicsover funds to fight
kebab-stealing seagulls
THE FINANCIAL TIMES LTD 2015No: 38,807
Printed in London, Liverpool, Dublin, Frankfurt,Brussels, Milan,
Madrid, New York, Chicago, SanFrancisco, Washington DC, Tokyo, Hong
Kong,Singapore, Seoul, Dubai
9 7 7 0 3 0 7 1 7 6 5 5 5
1 2
Some of George Osbornes jibesagainst France during his
Budgetspeech can be justified, on somemeasures. But labour
productivity the amount of output per worker orhour worked is
substantially higheracross the Channel and, since thefinancial
crisis, has grown faster. Overthe past two decades French
workershave, on average, been 20 per centmore productive than UK
employees.Analysis i PAGE 3
French leave Brits behindon productivity measures
FRIDAY 20 MARCH 2015
Briefing
iUS reconsiders its UNbacking for IsraelTheWhiteHouse has said
it is rethinking itssupport for Israel at theUN, even as
BenjaminNetanyahu appeared to row back his electioncomments
rejecting a Palestinian state which theUS labelled cynical and
divisive. PAGE 6
i Inside trader helps to hookUSbig fishConvicted insider trader
Julian Rifat, described asthe face ofMoore Capital in London,
hasco-operatedwith aUS probe that will see animportant individual
charged in days. PAGE 19
iDeutsche Bankpressed to sell PostbankInvestors in Deutsche Bank
are pushingfor a sale of the groups Postbankretail unit as the
German lenderssupervisory board looks for ways tobolster returns in
the face of toughconditions. PAGE 21
iHolcimand Lafarge salvagemergerHolcim and Lafarge have reached
an agreement tosalvage their 40bnmerger to form theworldsbiggest
cement company, and are set to outline newterms as early as today.
WWW.FT.COM/INDUSTRIALS
i FormerAustralian premier Fraser diesMalcolmFraser, the
ex-Australian primeministerhas died aged 84.His conservative
Liberal Partycame to power in a constitutional crisis in 1975 andhe
stayed in office until 1983. WWW.FT.COM/WORLD
......................................................................................
iUber chief scoops Boldness prizeTravis Kalanick, head of
ride-hailing companyUber, haswon the 2015 Boldness in Business
Personof the Year award, sponsored by the FinancialTimes and
steelmaker ArcelorMittal. MAGAZINE
iDesign award for Financial TimesThe Financial Times 2014
newspaper redesign haswon anAward of Excellence from
theUS-basedSociety for NewsDesign in its annual awards.
Global hunger andfood prices
Sources: FAO; Haver Analytics
101214161820
80100120140160180200
1992 95 2000 05 10 14
Share of globalpopulationundernourished(%)
Global foodand beverage
price index
Datawatch
WORLDBUSINESSNEWSPAPER UK 2.50 Channel Islands 2.80; Republic of
Ireland 3.00
Subscribe In print and onlinewww.ft.com/subscribenowTel: 0800
298 4708
MICHAEL MACKENZIE LONDONSAM FLEMING WASHINGTONSTEPHEN FOLEY NEW
YORK
Bond investors are betting thatUS rateswill stay near historic
lows followingmixedsignals
fromtheFederalReserve,highlightingapersistentgulf inexpecta-tions
between the central bank andmarkets.Adayafter theFeddropped
itspledge
tobepatientover lifting rates, traderswere betting that its key
interest ratewouldbe just 1.80per centby theendof2017. Market rates
rose slightly yester-daybut investors forecasts are
stillwellbelowtheFedsownprojections.Tad Rivelle, chief investment
officer
for fixed income at TCW, said that theFed was giving the markets
conflictingmessages on rates, describing its signal-
ling as similar to a Michael Jacksonmoonwalk.It looks like you
are going one way
but in fact you aremoving in the
otherdirection,hesaid.Themarkets expectations of low US
rates for longercameastheBankofEng-lands chief economist said he
wouldconsider a further cut in UK interestrates if
lowinflationpersisted.ButAndyHaldane stressed that he did not see
animmediate case for a move in eitherdirection, pointing out that
his viewstood in contrast with the majority
oftheMonetaryPolicyCommittee.Janet Yellen, the Fed chairwoman,
said onWednesday that themajority ofmembers of the Federal Open
MarketCommittee were expecting rates to
risethisyearamidconsiderableunderlying
strength in theeconomy.Buta seriesofreductions in theFeds
interest-ratepro-jections alongside forecasts of weakergrowth and
inflation prompted tradersto conclude that the central bank
wastakingamorecautiousviewof theecon-omy even as it opened up its
optionson rates. That suggested amove in Junewas now less likely,
and traders werebetting that by the end of the year thefunds
ratewouldbe about0.50per centupfromthe0-0.25percent target.The
interplaybetweencurrenciesand
central bank policy has anchored USbond yields at low levels,
bolsteringmarketexpectations that thepaceof thenext
tighteningcyclewillbemodest.Investors yesterday seized on the
Feds decision to lower its estimate ofthe longer-term rate of
unemployment
to 5-5.2 per cent, suggesting that theUSjobsmarketmay havemore
slack thanpreviously believed and allowing theFOMCtokeeprates
lowerfor longer.MsYellen also highlighted the impact
of the soaringdollar on theFeds assess-ment of export growth and
inflation.While the dollar reflected the US econ-omys strength, it
would also act as anotable drag on net exports this year,shesaid,
adding that itwaspullingdownimport prices, pointing to low
inflationfor longer.Thedollarhad retracedmostof its losses in the
wake of the FOMCmeeting,andwasup0.8percentagainstabasketofrivals
lateyesterday.BoE opens door to rate cut page 4Editorial Comment
page 14Short View page 19Markets pages 32-34
Fedsmixed signals expose gulfwithmarkets over rate forecasts3
Moonwalk message said to be conflicting3BoE economist says UK cut a
possibility
The number ofpeople withoutenough to eathit an all-timelow last
year of805m, or 11 percent of theglobalpopulation.This is
despitefood priceshitting anall-time highin 2011
NothappyPharrellWilliams speaks outover copyright ruling
Is it possible to copyright a feeling?PharrellWilliams says no,
acknowledg-ing that his track Blurred Lines wasinspired byMarvin
Gayes Got to Give ItUpbutdenyinghe
infringedcopyright.LastweekheandsingerRobinThicke
were ordered to pay $7.3m damages totheGayeestatebyaUScourt.
Inhis firstinterview since the verdict, theGrammy winner told the
FT that thedecision could be ruinous for creativework from movies
to fashion anddesign.There are songs that utilise other
material, he said. But until now therehasnt been copyright
infringement,which iswhythis is soscary.
Marvin Gayepictured in LosAngeles in 1973
Full interviewpage 8
If we lose ourfreedom tobeinspired, theentertainmentindustrywill
befrozen in litigation
EXCLUSIVE INTERVIEW
Nasdaq rulesFormidable tech stock indexcomes of age MARKETS,
PAGE 34
Cameron adriftPremiers holiday from globalaffairs PHILIP
STEPHENS, PAGE 15
Lawless LibyaRapid rise of Isis fuels fears overanarchic state
BIG READ, PAGE 13
5%-5.2%Fed's estimateof longer-termrate ofunemployment
0.8%Dollar's increaseagainst a basketof major
rivalsyesterday
MARCH 20 2015 Section:FrontBack Time: 20/3/2015 - 00:18 User:
jacklinj Page Name: 1FRONT-LON-03, Part,Page,Edition: LON, 1, 3
-
2 FINANCIAL TIMES Friday 20 March 2015
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BUDGET 2015. THE AFTERMATH
EMMA DUNKLEY
The government has pledged to force British banks to open up
access to cus-tomer data in an attempt to inject com-petition into
the industry and help con-sumersshoparoundforthebestdeals.
Banks sit on a wealth of informationfrom their customers current
accountsand in his Budget on Wednesday GeorgeOsborne, the
chancellor, unveiled plansto let technology groups use these datato
make it easier for customers to searchthemarket
forbankingproducts.
The government is also launching anew tool next week that allows
people tocompare current accounts and selectthe most appropriate
according to theirfinancialhistory.
In standardising access to data thegovernment said it aimed to
increasecompetitive intensity by supporting thegrowth of technology
that can beadoptedbybanksandnon-bankprovid-ers
tocompetetooffernewproducts.
Luke Scanlon, a technology expert atlaw firm Pinsent Masons,
said the initia-
tive would provide consumers withmore secure access to tools
such asaccount aggregation applications,where users gain a single
view of theirfinancesonline.
New digital platforms that offer cus-tomers access to all their
accounts onone screen, for example, currentlyrequire people to hand
over their logindetails and passwords, potentially
com-promisingsecurity.
Peer-to-peer platforms, which con-nect individuals as lenders to
borrow-ers, also stand to benefit from accessingmore data to help
inform lending deci-sions and mitigate default risk. If thereis an
agreed standard for what data[are] transmitted and how often,
thenyou get a level playing field and lessasymmetry of information
the bankshave got it all, said Louise
Beaumont,headofpublicaffairsatGLIFinance.
In the Budget the government con-firmed plans to make big banks
refersmall businesses that they reject forfinance to third-party
platforms, whocanfindalternativesourcesof finance.
Competition
Coalitionpromises tomakebanks share customerdata
KIRAN STACEY POLITICAL CORRESPONDENT
The Liberal Democrats would cut gov-ernment spending back to its
lowest innearly 20 years, Danny Alexander saidyesterday in an
unprecedented alter-nativeBudgetstatement.
The Treasury chief secretary wasgranted time in the Commons the
dayafter the Budget to set out how thesmaller coalition party would
cut thedeficit inthenextparliament.
The plans involve eliminating the def-icit by 2018, as outlined
by the Conserv-atives.ButMrAlexandersaidthiswouldbe with 6bn of tax
increases, allowinghis party to cut welfare spending moregradually
thanitscoalitionpartners.
The Lib Dems would cut departmen-tal spending by 12bn, meaning
that by2020 government spending wouldreturntothe levelof
theearly2000s.
Mr Alexander was critical of GeorgeOsborne, his boss in the
Treasury,accusing him of taking government con-sumption the amount
the govern-
ment spends on goods and services backtothesamelevelas1964.
Referring to the Ken Loach film abouthomelessness in the 1960s,
Mr Alexan-der told MPs: The era of Cathy ComeHome is not my vision
for the future ofBritain.
TheplansarekeytotheLibDemspre-senting themselves as equidistant
fromthetwomainparties in therun-uptotheelection. They commit the
party toreducing the deficit as quickly as theTories have promised,
but then allowborrowingtocontinueforcapital spend-ing
itemsonly.
But they are unlikely to be enacted intheir current form in any
future govern-ment. Lib Dem advisers admitted noneof what Mr
Alexander announced con-stituted a red line in any
coalitionnegotiations, leaving his plan simply astartingpoint
forpost-electiontalks.
Labour and Conservative MPs haveprotested that Mr Alexander was
givenCommons time to speak from the des-patch box about something
that wasessentiallyLibDempartypolicy.
Lib Dems
More gradual cut inwelfareset out in alternativeBudget
GEORGE PARKER POLITICAL EDITOR
George Osbornes Budget was intendedto soften his austerity
chancellorimage, but his decision to reverse cuts atthe end of the
next parliament onlyrefocused attention on what he wouldaxe
inthemeantime.
Ed Miliband, Labours leader, claimedMr Osborne would bring
public serv-ices to their knees, while the Institutefor Fiscal
Studies said it was frus-trated with the chancellors failure
tosaywherethebladewouldfall.
This was not the script the chancellorhad in mind. Mr Osborne
used his sixthBudget to announce that austeritywould end a year
early and that 20bnof extra cash would be pumped intopublicservices
in2019/20.
Mr Osborne hoped that by doing so hewould fix a political
problem: fending
off Labours claim that public spendingas a share of national
income would fallto 1930s levels by the end of the
nextparliament.
Instead he created a new problem: byplanning to boost spending
in 2019/20he has created what his own Office forBudget
Responsibility called a roller-coaster profile for public spending:
abigdropfollowedbyabigrise.
Alistair Darling, former Labour chan-cellor, said: This is what
happens whenyou try to be too clever by half. You nowhave a
situation where a police forcemight have to lay off an officer,
only tore-engagethemayear later.
Political and media attention quicklymoved on to the downhill
element of MrOsbornes big-dipper plan a fiscal con-solidation of
30bn by 2017/18 andhowheintendedtofundit.
The chancellor told BBC Radio 4sToday programme yesterdaythat
the planned cuts over the next two years to dep-artmental spending
wouldbe at the same pace asthe cuts in this parliament.He said the
OBR hadassumed the axewould fall solelyon public serv-ices and
hadnot taken into
account his plans to close the deficit,partly by 12bn of welfare
cuts and byclosingtaxloopholesthatwouldbring in5bn.
Mr Osborne insists that voters shouldjudge him on his record and
that he hadshown he was capable of finding welfaresavings; but by
excluding pensionersfrom future cuts, the working-age poorwillbear
thebrunt.
The IFS said it was frustrated thatMr Osborne could not give
more detailsand concluded that planned spendingcuts for 2016/17 and
2017/18 would betwice the size of any years cuts overthis
parliament if Mr Osbornesplanned welfare cuts and tax
avoidancemeasures failedtomaterialise.
Mr Miliband said: Public servicesand the damage this government
will doareontheballotpaperat thiselection.
Labour claims that Mr Osborne willeither raise VAT or cut the
NHS to makehissumsaddup.
The renewed focus on Mr Osbornesausterity plans for the first
half of thenext parliament will be frustrating forthe chancellor,
whose Budget did notaffect by a single penny his plan to
cut30bnby2017/18.
Indeed, the general conclusion atWestminster of Tory and Labour
MPswas that Mr Osbornes Budget was
sur-prisinglycautious,giventhatanelectionisonly50daysawaybutcontainedsomewelcomemeasures.
Ed Balls, the shadow
chancellor,claimeditwasaprettyemptypackagebut admitted that Labour
would sup-port all of its key measures, including acut to the
personal tax allowance andnewtaxbreaks forsavers.
Labour had feared that Mr OsbornesBudget would include a move to
trans-form the terms of the economic debate.It hasnt changed the
fundamentals atall, said one Labour official. Werehaving exactly
the same discussion wecouldhavehadlastweek.
Although some Tory MPs had hopedfor more ambitious tax cuts in
theBudget, most said it reinforced thepartys key message of stable
economicstewardship.
David Ruffley, a Tory member of theCommons treasury committee,
said itwas masterly, adding: It was eco-nomically grown up and in
the nationalinterest but it was also excellent poli-tics.
Meanwhile, in an uncomfortable echoof Mr Osbornes
omnishamblesBudget of 2012, the chancellor was
accused by Labour of making a U-turnover a tax break originally
aimedat fullorchestras.
After Labour claimed themove discriminated againstbrass bands,
Mr Osborne inter-vened to tackle the trumpettax allegation and
changedguidance to include musicalgroups that did not encom-pass
all four main musicalgroups: string,
woodwind,brassandpercussion.
Public spending
Osbornes vowto reverse cutsputs focus onwhere axe
fallsChancellors rollercoasterprofile for public servicesspending
causes confusion
VANESSA HOULDER AND KIRAN STACEY
A new offence that will see companiescharged if they fail to
prevent taxevasion was announced yesterday, asthe Treasury steps up
efforts to priseopensecretoffshoreaccounts.
The government also unveiled plans tocreate a criminal offence
that would tar-get individuals who had failed to pay taxon offshore
income, regardless of theirintentions.
Themeasureswereunveiledasminis-ters attempted to show they
hadcracked down on abuses, in the wake ofapolitical stormovera
taxevasionscan-dalatHSBCsSwissbankingoperation.
Danny Alexander, the chief secretaryto the Treasury, presented
an alterna-tive Liberal Democrat Budget to MPsyesterday. He also
gave more detailsabout tax measures the coalition gov-ernment
intends to implement in its
final few weeks. As well as removingignoranceof the
lawasadefenceforeva-sion, and levying fines on companiesand
individuals who facilitate or fail toprevent evasion, the
governmentintends to increase penalties for off-shore evaders and
allow officials tonamethosewhohelpothersevadetax.
The proposal to create a strict liabil-ity offence of offshore
tax evasion meaning an individual can be prose-cuted regardless of
whether there wasevidence of an intention to break
thelawwasfirstput forwardlastyear.
But it was heavily criticised by theLaw Society, which said it
was likely tobreach the right to a fair trial. Althoughmany tax
professionals expected thegovernment to drop the measure, it
hasbeen pushed forward in the wake of theHSBCSwissbankingrow.
The government said there would beconsultation on appropriate
defences
and thresholds before the measure wasintroduced.Thepublicwillnot
toleratebeing stolen from any more, Mr Alex-andersaid.
Jason Collins, a partner at PinsentMasons, a law firm, said the
creation of anew offence for companies that facili-tate or fail to
prevent evasion was likely
to result in changes in corporate cultureand better controls,
similar to thoseintroducedafter the2010BriberyAct.
At present, banks and professionalssuch as lawyers and
accountants mustreport clients who may be committingmoney
laundering, but under the newrules theywillneedtogomuchfurther.
Simon Wilks, tax partner at PwC con-sultancy, said the new
corporate offencewould be a big change for companies,which will not
only have to ensure theyare not helping people to evade tax
butalsostopevasionhappening.
In a consultation paper last summer,the Treasury said it did not
expect toapply the strict liability measure incases where the
account was held incountries that were automaticallyexchanging
information. But Mr Collinssaid this exemption was likely to
havebeen dropped because more than 90countries far more than
expected hadagreedtoexchange information.
The government also announced atoughening of penalties that HM
Reve-nue & Customs could apply, including apower to take a
portion of the asset thathad been hidden. HMRC will also havemore
resources to pay rewards for infor-mationonevasion.
Tax crackdown
Failure to curb evasionwill result in charges
KATE ALLEN PROPERTY CORRESPONDENT
George Osbornes latest home owner-ship subsidy has been attacked
byeconomists and housing experts whohave called for a huge increase
inhousebuilding instead.
The Help To Buy individual savingsaccount, announced in the
Budget onWednesday, will give first-time buyers a25 per cent
deposit subsidy an extra50forevery200theysave.
The maximum initial deposit in theaccount will be 1,000, with
maximummonthly deposits of 200 meaning itwould take savers
four-and-a-half yearsto build up 15,000, or a 10 per
centdepositontheaverageUKhome.
StuartAdam,aseniorresearchecono-mist at the Institute for Fiscal
Studies,said the Isas risked pushing up houseprices by fuelling
demand without trig-
gering more housebuilding. If there isno extra supply, overall
affordabilitycannot increase, he said. Althoughfirst-time buyers
can still gain, otherslooking to buy a more expensive home[will]
find itharder.
Researchers at Capital Economicsestimate that the scheme would
givepotential buyers an extra 60,000 tospend, once their additional
borrowingscope is takenintoaccount.
Withgreaterpurchasingpower, first-time buyers will simply bid
the prices ofhomes up, said Matthew Pointon, Capi-tal Economics
property economist.Once again, a scheme designed to helpone
generation of homebuyers will endup reducing the chance of home
owner-shipfor thenextgeneration.
The chancellors announcementrisked lowering housing market
activityin the short term, as potential buyerswait for the Isa to
launch this autumn,
he added; the IFS said this effect couldlast until 2020 when the
first buyers tousetheschemewouldenter themarket.
Gavin Smart, interim chief executiveof the Chartered Institute
of Housing,said the Isa failed to address the funda-mental problem
that we are simply notbuildingenoughhomes.
Mr Osborne tiptoed around the ele-phant in the room, Adrian
Gill, directorof estate agencies Your Move and ReedsRains,
said:Itsallwellandgoodgettingfirst-time buyer finances in shape but
itwill amount to hollow words if there arenopropertiesavailable for
themtobuy.
The 2.2bn estimated cost of the pol-icy during the next five
years would payfor nearly 65,000 affordable homes tobebuilt,
saidhousingcharityShelter.
Campbell Robb, Shelter chief execu-tive, said the Isa was yet
another exam-ple of government attempting to put
astickingplasteroveragapingwound.
We need to double the number ofhomes built a year, he said.
Onlymeasures that actually build
morehomeswillmakeamaterialdifference.
Affordable housing campaign PricedOut called the new Isas total
madness.They directly push taxpayers moneyinto the housing market,
which can onlypushupprices, thecampaigntweeted.
Jeremy Duncombe, director of mort-gage broker the Legal &
General Mort-gage Club, said the policy was broadlywelcome but not
the same as helpingtocreatehomestobuy.
Other estate agents and researcherspraised the scheme. Fionnuala
Earley,director of research at Hamptons Inter-national,
said:Weseethisasgreatnewsfor thosewhoaresavingforaproperty.
Lucian Cook, UK director of residen-tial research at Savills,
said that limitingthe subsidy to 3,000 per saver
shouldpreventasurge inhouseprices.
Help to Buy Isa
First-timers subsidywill drive upprices, say experts
The economistIf there is no extra supply,overall
affordabilitycannot increase
The estate agentIt will amount to hollowwords if there are
noproperties availablefor [first-time buyers]
The campaign groupThey [Isas] directly pushtaxpayersmoney
intothe housingmarket, whichcan only push up prices
Themortgage lenderIts not the same ashelping to create homesto
buy
A police forcemighthave to lay off an officer,only to re-engage
thema year later
Big dipper:Osborneplans to cut,then pumpin extra cash
Avoidance codeTreasury rejects MPs argumentsthat the tax
industry cannot betrusted to regulate itself
ft.com/uknews
Struggle for supply New homes more important, says industry
Chris Ratcliffe/Bloomberg
30 global locations www.efginternational.com
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A private bank unlike any other.
MARCH 20 2015 Section:World Time: 19/3/2015 - 20:29 User:
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Friday 20 March 2015 FINANCIAL TIMES 3
BUDGET 2015. THE AFTERMATH
CHRIS GILES, SARAH OCONNORAND EMILY CADMAN
With a general election seven weeksaway, the chancellors slogans
domi-nated Budget day, many of themstrongly disputed. The Financial
Timesexamines fourofGeorgeOsbornesmostcontentiousclaims.
Britonsarebetteroff thantheywere in2010Mr Osborne quoted data on
real house-hold disposable income per capita,which he called the
most comprehen-sivemeasureof livingstandards.
The measure does have some advan-tages: it is fairly up-to-date
and coverswages, self-employment, pensions,taxes and benefits. But
it also has someodd features. It includes the incomes ofnon-profit
institutions such as chari-ties and universities. It also includes
ameasure of imputed rents the rentthat homeowners might receive if
theydidnot live intheirownhome.
The other problem is that Mr Osborneis relying on forecasts for
2015 for hisclaim. The Institute for Fiscal Studiessaid living
standards were close to 2010
levels, but the most important feature,according to its
director, Paul Johnsonwas that we are for sure much worse
offthanwecouldreasonablyhaveexpectedtobebackin2007or in2010.
Inequality is lower
Mr Osborne was bold in saying ine-quality is lower since the
public hasbeenbombardedwiththeoppositemes-sageoverthepastyear.
On almost every measure possible,Mr Osborne is right, the IFS
confirmedyesterday. Across the huge majority ofthe population,
inequality has fallen alittle, Mr Johnson said, although headded
that the changes had been small.Tax and benefit changes since the
startof deficit reduction in early 2010(before the last election)
have hit therich and the poor hardest with the mid-dle of the
income distribution largelyspared.
Overthepastyear, thenorthgrewfaster thanthesouthWhen Mr Osborne
talks about growth ina national context, he is talking aboutthe
increase in gross domestic product
after adjusting for inflation, since this isthe best available
measure of the rise inthe volume of goods and services
theeconomyproduces.
Whilenationaldata for2014exist, themost recent regional national
accountsdata refer to 2013 and do not adjust forinflation.
Experimental data adjustedfor inflationexistonly for2012.
In 2013, the rise in nominal GDP inLondon and the southeast was
3.5 percent while the combined growth of thenortheast, the
northwest and Yorkshirewas 3.26 per cent. The advantage of thesouth
is even larger if the whole period2010to2013 isused.
Ashwin Kumar of Liverpool Econom-ics said the chancellor was
using datarather selectively. To generate hisclaim, he used the
growth in per capitaGDP in 2013 only. Between 2010 and2013, London
is still the fastest growingregion,withthenorth inmid-table.
Mr Osborne was speaking about thegrowth of a region but was in
fact meas-uring growth per person in one specificyear. That year
was the last year forwhich such data were available but itwasnot
lastyear.
Nogimmicks
If a gimmick is something small anddesigned to attract
attention, MrOsbornes Budget was stuffed full ofthem. The
chancellor rattled out awhole range of measures from help tothose
saving for a deposit for a house tomoney to fund the commemoration
ofthe Battle of Agincourt but most ofthesewill cost theTreasuryvery
little.
By far the biggest additional spendingcommitment was the
decision to makefurther increases to the personal taxallowance,
which the Treasury esti-mates will cost 960m in 2016-17, risingto
1.7bn by 2019-20, which was a rela-tively small part of Mr
Osbornesspeech. In comparison, the headline-grabbing pledge to
partially match first-time buyers savings for a deposit, isexpected
to cost 230m in 2016-17, ris-ingto835min2019-20.Lombard page 24
Chancellors contentious claims: true or false?Osbornes
assertions on living standards, inequality, regional growth and
giveaways are hotly disputed. How do they stand up to scrutiny?
2008-09=100Living standards
Sources: ONS; OBR; IFS
95
100
105
110
2008-09
2010-11
2012-13
2014-15
2016-17
2019-20
Regional growth in GVA per head
Source: ONS
* North = North West, North East and Yorks &the Humber.
South = London and the South East
% change in nominal gross value addedper head
0 1 2 3
WalesNorth West
North*West Midlands
North EastScotlandLondon
UKSouth West
South*East of England
Yorks &The Humber
South EastEast Midlands
Northern Ireland
2012 to 20132010 to 2013 (annual average)
Real householddisposable incomeper capita(OBR forecastsfrom
2015-16)
Median net householdincome, adjusted by
CPI inflation
FERDINANDO GIUGLIANOAND SARAH OCONNOR
The chancellors Budget speech onWednesday was peppered with
refer-ences to Britains fine economic healthcomparedwithFrance.
The UK grew faster than any othermajor advanced economy in the
worldlast year [ . . .] and seven times faster thanFrance,
saidGeorgeOsborne,add-ing that between 2010 and 2013 morejobs were
created in Yorkshire than ontheothersideof theChannel.
Mr Osbornes jibes can be justified onsome measures. Unemployment
inFrance was 10.2 per cent last year,almost twice the UK rate.
Gross domes-tic product in the UK grew by 2.6 percent in 2014. In
France it was a meagre0.4percent.
However, on a measure that is crucialfor both competitiveness
and livingstandards, Mr Osborne should be envi-ous of what is
happening in France.Labour productivity the amount ofoutput per
worker or hour worked issubstantially higher there and, since
thefinancial crisis, has grown faster than intheUK.
Data show that in 2013, output perworker in France was 13 per
cent higherthan in the UK. But because Britonswork longer hours
than the French, on acomparison of GDP per hour, the
differ-encejumpstoawhopping27percent.
Over the past two decades, Frenchworkers have, on average, been
20 percent more productive than their UK col-leagues. But the gap
in output per hourworked has grown wider since the crisis.While
labour productivity in UK in 2013was exactly where it was in 2008,
inFrance it rosebyabout3percent.
The trouble for the chancellor is thatthe gap between the
countries is not theresult of French exceptionalism. Outputper hour
worked in France was roughlyon a par with Germany and just
below
the US. In the league of the worlds sevenmost advanced nations,
Britain isbehindeveryoneexcept Japan.
The Office for Budget Responsibility,the fiscal watchdog, is
confident that,having halted in 2008, productivitygrowth will
return to its pre-crisis trend.But in their twice-yearly economic
andfiscal outlook, the OBRs economistswarn this recovery will be
slow and maynotoccuratall.
We continue to assume that produc-tivity growth will pick up
slowly to morenormal rates, but that remains the mostimportant and
uncertain judgment inourforecast, theOBRsaid.
The worries over productivity growthin the UK have led
economists to urgethe government to take action to
boostthesupplysideof theeconomy.
The fundamental fact of the Britisheconomy over the past seven
years hasbeen unprecedentedly poor productiv-ity performance,
leading to an unprece-dented squeeze on living standards,said
Jonathan Portes, director of theNational Institute of Economic
andSocialResearch.
The question is, what should the gov-ernment do? It should go
hell for leatheron doing whatever it can to boost pro-ductivity,
like infrastructure invest-ment and housing. We should be
throw-ingthekitchensinkat it.
The UK Treasury insists it is tacklingthe problem. We are
implementing afar-reaching programme of structuralreforms, it said,
including a pipeline ofover 460bn of infrastructure invest-ment; a
plan to rebalance growth acrossthe country . . . and a wide-ranging
pro-grammeofschoolreform.
But there was some disappointmentwith the Budget. I was dismayed
thatthe productivity issue just didnt fea-ture, said Prof Geraint
Johnes, directorof the Work Foundation, a think-tank.There was
nothing to encourage invest-ment, innovation,patentprotection.
Yet Michael Saunders, an economistat Citi, said low unemployment
and lowproductivity was much better than theFrench alternative of
high productivityandhighunemployment.MartinWolf page 15
Advanced economies. National comparison
Boasts debunkedasFrance gets last laughonproductivityBritain has
higher growth and
more jobs but Gallic workers
are outperforming theUKs
Labour productivity, UK v France
Sources: ONS; FT calculations
GDP per hour worked, 2013 GDP per worker, 2013
UK France
Real GDP per hour workedIndices, 2007=100
100 127 100 113
UK productivity and trendNon-oil gross value added per
worker(rebased, Q1 1997=100)
1997 2000 05 10 14
100
110
120
130
140
150
Productivity
Trend 1997-2008
UK France
Source: ONS
96
98
100
102
104
106
2007 08 09 10 11 12 13
UK
France
G7 excluding UK
CHRIS GILES ECONOMICS EDITOR
Politicalpartieswereaccusedofacan-dour deficit on public
spending aseconomists scrutinised the
fineprintoftheBudgetyesterday.
George Osbornes gambit to raise publicspending in the last year
of this decadeto prevent it falling to 1930s levels as ashare of
national income promptedmany economists to say his plans
nowlookveryodd.
Robert Chote, chairman of the Officefor Budget Responsibility,
annoyed theTreasury on Budget day by talking of arollercoaster
profile for public spend-ing. He described deeper real-termscuts to
public services in 2016-17 and2017-18thanoverthepast fiveyears,
fol-lowedbyasplurge in2019-20.
His rollercoaster description com-pared public spending over the
next fewyears with its level in the financial
yearabouttostart,2015-16.
An alternative method is to comparethe plans for public spending
in the
Budget with those set out in DecembersAutumn Statement. On this
compari-son, austerity has been loosened inevery year because Mr
Osborne usedsome windfall gains forecast fromcheaper debt servicing
to boost spend-ing on health, education, justice
andotherpublicservices.
Compared with its December plans,the Treasury estimated that it
hadincreased the money available for pub-lic services by 3bn in
2016-17 rising to6bn in 2018-19 and then leaping
to30bnin2019-20.
On this comparison, there is signifi-cantly more money available
for thenext government. This could giveLabour a new No Cuts
election slogan,given its willingness to borrow 30bn ayear more
than the Tories by the end ofthedecade.
AdamCorlett,of theResolutionFoun-dation, said: Labour could
feasiblyreach its target of a current balancebudget by the end of
the parliamentwithoutanyreal-termscuts.
However, Paul Johnson, director ofthe Institute for Fiscal
Studies, said thatall of these calculations were highlyuncertain
because no political partieswere outlining exactly what they
wouldcut, how much they would borrow andwhethertheywouldraise
taxes.
The Conservatives have pledged nottoacceleratecuts topublic
servicesafter2015-16, saying they would instead find12bn a year of
cuts to working-agesocial security, around 10 per cent of
thetotalbudget.
But they have not outlined what thesewould be, frustrating
economists suchasMrJohnson.
The IFS said it was likely that theBudget plans would not last
long andany new government would revise thepath of welfare
spending, public servicespending and taxation later this
year.Whitehall departments are going tohave to plan for some
dramatically dif-fering scenarios, one of which they willhave to
implement in just 12 monthstime,MrJohnsonsaid.
Treasury planning
Candourdeficit identified inpublic spending
Budget 2015Analysis, comment and videos
www.ft.com/budget
France never tires French workers aremore productive
MARTIN ARNOLD BANKING EDITOR
George Osborne has justified his one-thirdrise in theUKbank
levybysayingbanks could afford a higher contribu-tion to public
finances because theywerebecomingmoreprofitable.
But figures published yesterday byStandard & Poors, the
rating agencyraised questions about the
chancellorsBudgetdayassertion.
Pre-provision operating profits fell atthree of the four biggest
banks last year Barclays, HSBC and Royal Bank ofScotland. Only
Lloyds Banking Groupincreased its pre-provision operatingprofits.
Overall, the four made 38.5bnof pre-provision profits last year,
downfrom42.5bninthepreviousyear.
The banks benefited from underly-ing progress in improving
operatingperformance for most core businessesbut this was offset by
the drag of excep-tional expenses and restructuringcosts, S&P
said. It said the big fourbanks put aside almost 28bn to cover
the cost of misconduct, litigation andrestructuring over the
past two years,which meant they fell below theirtargets
forreturnonequity.
S&P forecast one-off costs, which fellonly slightly to
13.8bn last year, wouldcontinue to drag on banks perform-ance,
especially when added to the costof regulation. In total, one-off
costs forthe big four UK banks amounted to
morethanthe26.3bnofpre-taxprofitstheymadeoverthepast
twoyears.
These exceptional expenses, alongwith ringfencing and other
regulatorychanges, could make achieving
theirreturnonequitytargetschallenging.
Pre-tax profits, including exceptionalitems, fell at Barclays
and HSBC, butrose at Lloyds. RBS made a loss, albeit afractionof
theone itmadeayearearlier.
Yet despite these headwinds, bankscontinued to strengthen their
regula-tory capital positions, with progress ondeleveraging and
risk reduction com-pensatingforthe limitedcontributionofretained
earnings to capital building,S&Psaid. It said
thebankshadbenefitedfrom a strengthening economy, whichproduced
modest net loan growth andboosted net interest margins the
dif-ference between what banks pay ondepositsandearnonloans.
Loan impairment charges droppedwell below the 25-year average of
71basis points to below 20 basis points their lowest
inmorethantwodecades.
Standard & Poors
Fallingbankprofits cast doubt on rise in levy
38.5bnPre-provisionoperating profitsof the big fourfor 2014
13.8bnTotal one-offcosts for the bigfour UK bankslast year
But Britons burn out Employees work longer hours in the UK
Photos: Guillaume Souvant/AFP; Jason Alden/Bloomberg
MARCH 20 2015 Section:World Time: 19/3/2015 - 20:47 User:
summersj Page Name: UKNEWS2, Part,Page,Edition: LON, 3, 1
-
4 FINANCIAL TIMES Friday 20 March 2015
NATIONAL
EMILY CADMAN
The Bank of Englands chief economisthas opened the door to a
further cut ininterest rates if low inflation persists,expressing a
dovish view that stands incontrast with the majority of the
Mone-taryPolicyCommittee.
In a speech on Wednesday, AndyHaldane said while he did not see
animmediate case for a move in eitherdirection, I think the chances
of a raterise or cut are broadly evenly balanced.In other words, my
view would be that
policy may need to move off either footin the immediate period
ahead, depend-ingonwhichwayrisksbreak.
Mr Haldane stressed this was a per-sonal view and should not be
taken torepresent a change in the overall view ofthe MPC. But his
remarks will reopen the debate on whether the UK
couldexperienceevenlower interestrates.
It is also a markedly different viewfrom that expressed by Mark
Carney,thebanksgovernor,whotoldaHouseofLords committee recently
that it wouldbe extremely foolish to cut rates orexpand
quantitative easing in responseto fallingoilpricesunless lower
inflationwas hurting wage growth, consumerspendingandbusiness
investment.
In February, the BoE changed its guid-
ance on what it considered to be thefloor for interest rates,
saying it believedthey could be cut to below 0.5 per cent
iftheeconomyrequiredfurtherstimulus.
Whilemarketshavegraduallypushedback the expected timing of the
first riseto some point early next year, theassumption has been the
US and the UKare set to embark on a period of mone-tary tightening
while much of the rest ofthe world, including the eurozone, isstill
looseningpolicy.
That assumption has driven sterlingto a seven-year high against
the euro butdown to a five-year low against the dol-lar as
investors bet that the FederalReservewillmovebeforetheBoEdoes.
Sterling dipped further yesterday onMr Haldanes remarks, to an
intraday
low of $1.4760. City economists said thatdespite the mixed
message from theBoE, the speech would not change
theirraterisecalls.
Richard Barwell, senior Europeaneconomist at RBS, said he was
uncon-vincedbythecase forcuttingrates.
You should not be putting your footdown now, boosting inflation
two yearsout, when the impact from oil prices
willhavedriedup,hesaid.
Mr Barwell also added that any ratecut would increase the chance
that theeventual lift-off from the lower boundwill be neither
limited nor gradual theBoEskeyaspiration.
Howard Archer, chief UK economistat IHS Global Insight, said Mr
Haldanelooks to be pretty isolated in his views
on the MPC and the next move in rateswashighlyprobable
tobeupwards.
At the last meeting, all MPC membersvoted to keep rates on hold
but recentlytwo members, Ian McCafferty and Mar-tin Weale, were
voting to raise rates andare known to believe the decision is
stillfinelybalanced.
Mr Haldane said while the risks toinflation were two-sided, my
personalview is that these risks are skewed to thedownside. He
pointed out that if policywere set not by the MPC but byalgorithm,
the BoEs forecasting modelwould currently suggest that with
thelower bound set at zero, the optimalpath for interest rates
would involvethem being cut in the short run
towardszeroforaroundayear.
Monetary stance
BoEchief economist opensdoor on rate cutHaldane suggests
policymay need tomove offeither foot in near future
GILL PLIMMER AND ANDREW BOUNDS
High Speed 2 could reach the northaheadof its 2033 schedule
under plansfor the50bnrailway line tobeput
for-wardbythegovernmenttoday.
The Department for Transport is pre-paring legislation for the
next parlia-ment that would bring HS2 to Crewe,probably by 2027,
and to Leeds andSheffield soon after. It will also considerallowing
the route across the north to beusedbyfastregional
trainservices.
The plans are part of GeorgeOsbornes plans to build a
northernpowerhouse a loose collection of cit-ies including
Manchester, Liverpool andLeedsasaneweconomichub.
Launching the first Northern Trans-port Strategy report in
Liverpool today,the chancellor is expected to say: Frombacking
high-speed rail to introducingsimpler fares across the north,
ourambitious plans for transport mean wewill deliver a truly
national recoverywhere every part of the country willshare
inBritainsprosperity.
The first phase of HS2 is expected toreach Birmingham in 2026,
with a sec-ond Y-shaped section to
ManchesterandLeedsduetobefinishedin2032-33.
As well as weighing legislation tospeed the HS2 link to Crewe,
plans setout in the report include developingnew east-west road
connections such asa road tunnel through the Pennines;
andintroducing Oyster-style smart travelcards and simpler fares
across thenorth.
It also includes proposals either toupgrade existing lines or
build five newrail lines that would halve journey timesacross the
north. A new line from Leeds
to Newcastle would cut the journeyfrom 87 minutes to 50 and
would costbetween 8.5bn and 14bn, for exam-ple. The alternative is
to improve theexisting line,whichwouldcut it
toabout75minutesandcost1bn-4bn.
But critics said the proposalsremained unfunded. Ed Cox, of
left-leaning think-tank IPPR North, saidmoney should have been
earmarkedalready: The Budget presented anopportunity [for Mr
Osborne] to put hismoney where his mouth is, and onceagain there
was nothing by way of cashpromises.
Mick Cash, leader of the RMT trans-port union, said: This is yet
more pie-in-the-sky nonsense from the govern-ment on the so-called
northern power-house when in reality transport servicesacross the
region in the real world arelumped with clapped-out,
overcrowdedtrains with any replacement pro-grammelightyearsoff.
The report also outlines plans to helpcreate a zonal ticketing
system and Oys-ter-style smart cart to simplify faresbetween
northern cities. Commutingbetween the cities is hampered by thefare
structure, according to a recentstudy, which found ticket-sellers
them-selvesareoftenconfusedaboutprices. Italso wants to increase
capacity forfreight traffic. Half the freight in the UKtravels
fromorthroughthenorth.
The report came a day after the chan-cellor gave Greater
Manchester thepower to keep all the additional busi-ness rates
generated by economicgrowth, rather than the 50 per centnorm.
Despite government rhetoric, infra-structure output has fallen
8.5 per centsince the coalition came to power,according to the
office for National Sta-tistics. The National Audit Office
onTuesday also said that capital spending which includes new
projects as well asmaintenance shrank by a
thirdbetween2010and2014.
Rail plans
High-speedtrain arrivingatCreweduesix years early
PILITA CLARK ENVIRONMENT CORRESPONDENT
Electricity grid operators, expectantscientists and excited
school childrenare gearing up for the UKs first majorsolareclipse
in16yearstoday.
As the moon passes between the sunand the earth, the eclipse
should start tobecome visible just before 8.30am,depending on how
cloudy the skies are,reaching a peak at about 9.30am
andwindingdownataround10.40am.
The best views will be seen by peoplein the north, where the sun
will bealmost completely obscured. But even in London around 85 per
cent of the sunwill be covered at the peak of the eclipseand there
will not be another chance toseeoneof thismagnitudeuntil2026.
The event will be closely monitoredby grid managers. When the
last majoreclipse happened in 1999, a solar
panelwasararesightonaBritishroofor field.
Today there is more than 5,000 mega-watts of solar generating
capacity, morethan Yorkshires huge Drax plant,
thecountrysbiggestpowerstation.
Other nations such as Germany havenearly eight times as much
solar powerand Europes electricity system opera-tors have warned
about the prospect ofdisruptedsuppliesduringtheeclipse.
As much as 35 gigawatts of solarpower, the equivalent of about
80 con-ventional power plants, is expected tofall off the European
grid during theeclipse, according to analysts at
theFrost&Sullivanresearchfirm.
The UKs National Grid will be work-ing with its counterparts on
the conti-nent to make sure supplies are main-tained,butsays it
iswellprepared.
We are in a slightly different positionto some of our
counterparts in Europeowingtoourparticulargenerationmix,the grid
said, explaining it was expect-ing a loss of 850MW of solar power
fromthesystem.
This should be largely offset by
an1,100MWdropindemandforelectricityas people go outside to watch
theeclipse, with the net effect being a200MW drop in demand,
similar to thetypicaldemandforGlasgow.
This lossofsolar isentirelymanagea-ble, said Jeremy Caplin,
forecastingmanager at National Grid. We startedplanningfor this
inMaylastyear.
If there is bad weather, even
fewerpeoplewillbewatchingandtherewillbelesssolargeneration
lost.
The prospect of cloudy skies is aworry for scientists and
thousands ofchildren who will be monitoring theevent.
The weather is the villain of the piecein eclipses, said
Professor Giles Harri-son, head of the University of
Readingsmeteorologydepartment.
He is leading a national experimentinvolving nearly 200 schools
and spe-cially deployed weather balloonsaround the country that
will try todetect phenomena such as the eclipsewind, or changes in
the breeze anecdo-tallyreportedduringaneclipse.
Scientists hope the information gath-ered will help them
understand how theweather works so forecasts and even
cli-matechangemodelscanbe improved.
Experts warn it is dangerous to lookstraight at the sun during
an eclipse,evenwithsunglasses.
The Royal Astronomical Society hasproduced a booklet on the best
way towatch it safely and says the simplestmethod is to use a
kitchen colander andapieceofpaper.
By standing with your back to the sun,you can hold the colander
in one handand the paper in the other and safely seeimagesof
theeclipseas itpasses.
Electricity generation
Solar powersupply set tofall during firstbig eclipsefor 16
years
JIM PICKARD CHIEF POLITICAL CORRESPONDENT
If David Cameron and Ed Miliband areweighing up possible
coalition dealsafter the general election in May theymay want to
carry out some elementarycost-benefitanalysis.
Plaid Cymru, the Welsh nationalistparty, has told the Financial
Times thatit will lend its support in the event of ahung parliament
for 1.2bn a year. Onits current parliamentary presence ofthree MPs
that amounts to about400mayearperseat.
That compares with a price of about250m for each of the eight
seats heldby the Democratic Unionists in North-ern Ireland,
according to one seniorparty figure. The DUP, founded by thelate
Ian Paisley, wants a 2bn boost
totheprovinces11bn-a-yearblockgrant.
The Scottish National party, mean-while, has already extracted a
rich pricefrom the main political parties in Lon-don.
In the final days of the referendumcampaign last autumn the
Westminsterparties promised to preserve the Bar-
nett formula, which gives a generousallocationof
fundingtoScotland.
Jonathan Edwards, Plaid CymrusTreasury spokesman, said his
partywanted to be treated the same as Scot-land under Barnett: That
would workoutas1.2bnperannum,hesaid.
What is good enough for the peopleof Scotland is good enough for
the peo-ple of Wales. Were not asking for anyspecial treatment,
just the same asthem.
Westminster is rife with talk of deals
after the most closely contested
generalelectionforageneration.
WithneitherLabournortheToriesontrack to win a majority, if the
opinionpolls are correct, there is more focus onthestancesof
thesmallerparties.
The DUP, which is prepared to workwith either party, has already
set out itsnegotiating position, demanding theringfencing of the
defence budget aswell as the extra 2bn. We want to useour leverage
to secure national, UK-wide priorities, a DUP source recently
said. The SNP has ruled out a coalitionwith the Tories, while
Labour has ruledout a coalition with the SNP, but theScottish
nationalists could still create aninformal alliance with Mr
Milibandsparty.
Plaid Cymru would demand an end tothe austerity programme of the
currentparliament and further devolutionalongthe
linesofScotland.
It has already ruled out a formal coali-tion with the Tories but
is keeping itsoptions open in respect of other deals.We will work
to ensure the best deal forWales,MrEdwardssaid.
With only three MPs, and a total of sixtargets inMay,
thepartysdemandsmayseempresumptuous.
But Plaid Cymru is aware that even ahandful of votes could prove
critical inthe event of a hung parliament. If it is abalanced
parliament there are hugeopportunities for us, Mr Edwards said.It
isanumbersgame.
In the 1970s a trio of Plaid Cymru MPspropped up a Labour
government inreturn for compensation, whichreached 250m, for quarry
workersafflictedbypneumoconiosis.
In the 1990s the party lent its supportto the beleaguered John
Major oversome of his Maastricht treaty votes, inreturn for
improved transport linksbetweenWalesandIreland.
Hung parliament. Minority parties
Welshnationalists putprice on coalitionpact
KADHIM SHUBBER
Almost 600,000 cycle journeys takeplace in London everyday as
Spandex-cladenthusiastsmixwith thousandsofcityworkers pedalling in
leather shoesandblazers.
Now a coalition of UK businesses,including Sky and
GlaxoSmithKline,has called for increased national
spend-ingoncycling infrastructureas themainpolitical parties
prepare to announcetheirelectionmanifestos.
The intervention from the companies,along with Santander,
National Grid and
the AA, is a sign of how far the activityhas grown from a hobby
for the youngintoalegitimatemodeoftransport.
In a letter to David Cameron, Ed Mili-band and five other party
leaders, thecompanies called for 5 per cent of theUKs annual
transport spending to beringfencedforcycling infrastructure.
They also demanded national designstandards for cycle-friendly
road infra-structure by 2016 and a target that 10per cent of all
trips be made on bicycleswithinthenext10years.
Cycling in the UK has boomed
inrecentyears,withmanypeoplepointing
toBritains success intheTourdeFranceand the Olympics as the
impetus behindthewaveof interest.
But critics say that policy and fundinghas failed to keep up
with the increasednumbers of people leaving cars at homeand turning
to pedal power. About 2 percent of all journeys are now made
bybicyclebutinfuriatinglyslowprogressin improving roads has held
backcycling, according to Chris Boardman,policy adviser at British
Cycling. Weremoving millimetre by millimetre in
therightdirection,hesaid.
London has led the way in improving
cycling infrastructure after mountingoutrage at the deaths of
cyclists on thecapital citys roads. In 2014, 14 cyclistsdied in
London, of a total of 109 in thecountryasawhole.
Boris Johnson, the mayor, announcedlast year a cycle
superhighway run-ning across the city that would accom-modate 3,000
cyclists an hour on theeast-west track alone. But Matt Wilson,GSKs
head of sustainability, said thatwithout a national policy on
cycling,local efforts to improve road designwould result in a
hotchpotch of trans-port infrastructure.
Pedal power
Businesses oil thewheels for increase in spending on cycling
infrastructure
Plaid CymruwantsWales to
be funded along Scottish lines,
equivalent to 1.2bn a year
Right direction: about 2 per cent ofall journeys are nowmade by
bicycle
Pick of the bunchRoyal collection of garden art goes on show
Aworker at the Queens Gallery in Buckingham Palace inspects The
Sunflower Clock, created by the Vincennes porcelain factory in
1752. The piece will go onshow alongside works by Leonardo da Vinci
and Carl Faberg as part of Painting Paradise: The Art of the
Garden, which opens today Rob Stothard/Getty Images
Labour/left minority parties* 1.3%
Conservative/Lib Dem
Labour/Lib Dem
Labour/Lib Dem/left minority*
Conservative/DUP 0.9%
Conservative/Lib Dem/DUP
Conservative majority 0.5%
Labour/SNP
Labour/Lib Dem/SNP
Labour/Lib Dem/SNP/left minority
0.1%
Labour/ SNP/left minority*
Labour majority 1.4%
Conservative/DUP/Ukip 1.4%
Projected outcomes
Source: Populus/Hanover* Green, Plaid Cymru, SDLP
Likelihood of each coalition scenario
26.9%
15.1%
11.6%10.8%
5.1%
16%
8.9%
2026Date whenfirst phase of linkis set to reachBirmingham
50bnEstimatedfull cost ofthe fast-linkrail project
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6 FINANCIAL TIMES Friday 20 March 2015
INTERNATIONAL
I sraels bitterly contested election appears to confirmthat the
politics of fear works well enough for anunpopular prime minister
to secure a third successiveterm. But Benjamin Netanyahus victory
comes at aheavy price. This is already visibly a scorched earth
victory, in which Mr Netanyahu has been burning
Israelsinternational bridges, outflanking his far-right allies
andlayingwaste toanyresidualhopes that Israelmightnegoti-ate a
solution with the Palestinians whose territory it occu-pies, and
tarring the countrys already alienated Arabminorityassomething less
thanIsraeli citizens.
Mr Netanyahu, who according to the last pre-electionopinion
polls was trailing the Labor-led coalition headedby Isaac Herzog,
launched into an incendiary final furlongthat galvanised the base
of his rightwing Likud party andsiphoned off votes from his rivals
on the ultranationalistandreligiousright.
Itwasanextraordinaryperformance.
Mr Netanyahu chose as a centrepiece for his campaignhis
provocative address to the Republican-controlled USCongress on
March 3. Infuriating President Barack Obamaand triggering a boycott
by some 60 Democratic lawmak-ersgenerallysupportiveof Israel,
theIsraelipremiercalledon his Republican admirers to derail
delicate negotiationswith Iran intended to ensure its nuclear
programme willnot result in nuclear arms. Republican senators duly
wroteto Ayatollah Ali Khamenei, Irans supreme leader, claim-ing
that any deal he does with Mr Obama could be
undonewiththestrokeofapen.
While this caused a firestorm in Washington, scandal inEuropean
capitals, and scorn in Tehran, it furnishedMr Netanyahu with onlya
mild uptick in the polls.So he raised the stakes inwhat became, for
him, ano-limitsgame.
Sounding rather likePresident Recep TayyipErdogan of Turkey at
hismost pugnacious, hedenounced an
interna-tionalconspiracytodrivehimfrompower.Herejectedanypossibility
of a Palestinian state alongside Israel theinternational policy to
which he has paid lip-service since2009 and pledged to accelerate
even more Jewish settle-ment on occupied Palestinian land. To
dramatise this, hestaged a photo opportunity at Har Homa, a
particularlycontentious settlement he started during his first term
in1996-99, which, he reminded Israelis, had closed thesouthern
gateway to Jerusalem the occupied Arab eastof which Mr Netanyahu
has always vowed never to surren-der. Then, on election day itself,
he used social media tosound the alarm that Arabs were voting in
droves,bussedtotheballotboxesbythetreacherous left.
Yet this fourth Netanyahu government, presumablybuilt around the
countrys irredentist right, risks acceler-atingatrendtowardsIsraels
international isolation.
Mr Netanyahu has done nothing to contradict veterangenerals and
securocrats who denounced him before theelection as divisive and
destructive of Israels securityinterests. His Iran campaign has
poisoned further analready confrontational relationship with Mr
Obama. Byditching a never credible commitment to a
Palestinianstatehehasmadeconfrontation
inevitablewithanEUthatalready skirmishes with Israel over its
occupation of Pales-tinian land. As the Palestinians press on with
their multi-lateral quest for international recognition, can it be
arguedany longer they would be better served negotiating withMr
Netanyahu? If the EU, nine of whose member statesalready recognise
Palestine, arrange for a resolution
onstatehoodintheUNSecurityCouncil,will theUSveto it?
The Palestinian diplomatic offensive, which may nowinclude
accusing Israel of war crimes at the InternationalCriminalCourt,
couldalso leadfinally to thecollapseof thePalestinian Authority. Mr
Netanyahus government isalready withholding tax revenue the PA
needs to survive,whilePresidentMahmoudAbbas, thePalestinian leader,
isthreatening to withdraw security co-operation with
IsraelintheWestBank.Scorchedearth indeed.
[email protected]
GLOBAL INSIGHT
ISRAEL
DavidGardner
Likuds scorched earthvictory risks spurringtrend to global
isolation
Netanyahuraised the stakesinwhat became,for him, ano-limits
game
JOHN REED JERUSALEMGEOFF DYER NEW YORK
The White House said yesterday that itwas reconsidering the
support it hasgiven Israel at the UN, even as BenjaminNetanyahu
appeared to row back on hiselection comments rejecting a
Palestin-ianstate.
Describing the Israeli prime minis-ters tactics in the final
campaign pushas cynical and divisive, White Housespokesman Josh
Earnest said that theUS had defended Israel at the UN in thepast
because its government had beencommittedtoatwo-statesolution.
The steps that the United States has
taken at the United Nations had beenpredicated on this idea that
the two-state solution is the best outcome, hesaid. Now our ally in
these talks hassaid that they are no longer committedto that
solution. That means we need tore-evaluateourposition
inthismatter.
Mr Earnest said the leaders warningto rightwing voters that
Arab-Israeliswere turning up at the polls in droveshad been a
cynical election-day tacticthat was a pretty transparent effort
tomarginaliseArab-Israeli citizens.
The alert from the White House cameas Mr Netanyahu tried
yesterday tobacktrack from his vow on Monday thathe would not allow
for the creation of aPalestinianstate ifhewerere-elected.
The comments were the most inflam-matory moment in a heated and
attimes ugly last few days of the electioncampaign that resulted in
victory on
Tuesday for his rightwing Likud party.I dont want a one-state
solution,
Mr Netanyahu said in an interview withNBC television. I want a
sustainable,peaceful two-statesolution.But for
that,circumstanceshavetochange.
When asked by NBC whether Presi-dent Barack Obama had called to
con-gratulate him on his poll win, Mr Netan-yahu said: Secretary
[of state John]Kerry called me yesterday, and Im sureIll be
speaking to President Obamasoon.Wellworktogetherwehaveto.
Late yesterday the White House saidthat
thetwoleadershadspoken.
The US has consistently used its vetoon the UN Security Council
to protectIsrael from resolutions that have criti-cised its
treatmentof thePalestinians.
Before the election, many Europeangovernments were frustrated at
whatthey see as Israels unwillingness to talk
over a two-state solution. With the pros-pects for new talks so
poor, US officialshave suggested they might considerallowing a UN
resolution that sets outparameters foraPalestinianstate.
The Palestinians yesterday criticisedMr Netanyahus conduct in
the daysbefore his electoral victory, which isexpected to result in
a coalition govern-ment that will be further to the rightthanhis
lastone.
Mahmoud Abbas, the Palestinianleader, was quoted on AFP as
saying:Netanyahus statements against a two-state solution and
against a Palestinianstate . . . are proof, if correct, that
thereis no seriousness in the [future]
Israeligovernmentaboutapolitical solution.
On Monday Mr Netanyahu said estab-lishing a Palestinian state
would giveterritory away to radical Islamistattacksagainst
Israel.
Middle East
USreconsiders backing for Israel atUNCynical Netanyahu seemsto
change tack on rejectionof Palestinian nationhood
HEBA SALEH CAIRO
Tunisia will remain standing said thesign carried by a young
Tunisian dem-onstrator just hours after 23 people,mostly foreign
tourists, were gunneddown by suspected Islamist militantsoutside a
museum in the capital onWednesday.
The bloody rampage at the Bardomuseum has left the fledgling
democ-racy the only success story to emergefrom the Arab uprising
of 2011 reel-ing, with its vulnerabilities exposedand its hopes for
a speedy economicrecoveryfading.
Despite the success of their demo-cratic transition, many young
Tunisiansopenly express support for the IslamicState in Iraq and
the Levant, or Isis, andthousands are fighting alongside
theextremists in Syria, Iraq and morerecently
inneighbouringLibya.
Isis has claimed responsibility for theattack in an audio
recording distributedonline that praised the two attackers,calling
them knights of the IslamicState. It was impossible to verify
theauthenticityof themessage.
The authorities said yesterday theyhad arrested ninepeople for
their role inthe attack but did not confirm any
linktoIsis.Barbedwireappearedaroundthemuseum and the government
pledgedto deploy the army to protect key sitesagainst attack. Beji
Caid al-Sebsi, thepresident, met police and army leadersand
parliament vowed to press on withanantiterrorismlaw.
But the carnage presents Tunisiasyoung democracy with several
chal-lenges. Chief among these is reviving analready ailing economy
dependent onEuropeantourismandinvestment.
Ina first signof the impactontourism,whichaccounts
for7percentofGDP, theItalian cruise line Costa Crociereannounced it
had cancelled all stops inTunisianportsforsecurityreasons.
Tourism will be affected, but unfor-tunately this will also have
an impact onother sectors, said Fadhel Abdel Kefi,head of Tunisie
Valeurs, an investment
firm. What happened could postponeinvestment in Tunisia. We were
hopingthat 2015 would be the year the [tour-ism] sector takes off.
It is the mainsource of foreign currency and, if youlook at
banking, you will see that manynon-performing loans come from
thetourismsector.
That only adds to the pressures on agovernment struggling with a
nationalrate of unemployment of 15 per cent,which isevenhigher for
theyoung.
There are also fears the attack coulddestabilise the political
system. Tuni-sian politicians managed to surmountthe deep
polarisation between Islamistsand liberals to forge a historic
compro-mise last year, enabling agreement on
aconstitutionthatwasfollowedbyparlia-mentaryandpresidentialelections.
Mr Sebsi, who founded the secularNida Tunis party, and Rachid
Ghan-
nouchi, head of the Islamist Nahdaparty, have found ways to work
togetherdespite an initial deep mistrust. Theassassination of two
secular politiciansby Islamist extremists in 2013 sparked abacklash
against Nahda, with protestscalling for the unravelling of the
politi-cal process that had led to the election ofthe Islamists as
the biggest group in anassembly that was writing the
newnationalcharter.
On Wednesday, Mr Ghannouchi une-quivocally condemned the attack
andcalled for national unity against terror-ism. Mr Sebsi promised
the countrywould continue on the route of
democ-racyandelections.
They used similar words, said SayedFerjani, a senior Nahda
official. I amreasonably confident that not onlyfor Sebsi, but for
most of Nida Tunis,we are no longer in the same [hostile]
mood where we used to be before.But Karim Mezran, Tunisia
expert
and senior fellow at the Atlantic Coun-cil, recalls that
extremist violence in thelate 1980s was used by the oustedregime of
dictator Zein al-Abidine BenAli to close the political space and
perse-cutemoderate Islamists.
The fear now is that something simi-lar could happen, he said.
But so farthe first signs are positive. Sebsi is muchtoo smart to
do that, but he is not theproblem, it is those behind him who
are.He is elderly, so what if he gets pushedaside? The fear is the
dynamics withinNidaTunis.
But for now the biggest headache forTunisias politicians is
their destabilisingproximity toLibya
andtheirporousbor-derwiththechaoticcountry.Libya: a divided land
page 13Editorial Comment page 14
Museum assault. Tunisia defiant
Fledglingdemocracy grappleswith its futureKillingof tourists
exposes the
countrys fragility andweakens
hopesof economic recovery
Under guard:a police officeroutside TunissBardomuseumyesterday,
sceneofWednesdayscarnage. Thereare fears theattacks willdamage
tourismand postponeinvestmentChristophe Ena/AP
Video:NetanyahuconsolidatesJohn Reed onhow Israelsprime minister
isworking to shoreup support for anew
rightwinggovernmentwww.ft.com/videos
SIMON MUNDY SEOULJAMIL ANDERLINI BEIJINGROBIN HARDING TOKYO
The foreign ministers of China, Japanand South Korea will meet
in Seoul thisweekendforthefirst timeinthreeyears,in an effort to
calm tensions in theregion.
Thetriohavestrongeconomictiesbutfrosty relations. International
angstabout this state of affairs among theregional superpowers has
been furtherpiqued by the Asian InfrastructureInvestment Bank, a
Chinese-led initia-tive sparking alarm in Washington
andprovingdivisiveelsewhere.
Seoul is in talks about joining theAIIB; Japan, which has more
sway overthe Manila-based Asian DevelopmentBank,has indicated it
isunlikelyto join.
The latest spat follows a slew of terri-torial and other
diplomatic rows. BothBeijing and Seoul have kept Tokyo at
arms lengthinrecentyears, inprotestatwhat they consider its
refusal to acceptresponsibility for war crimes duringJapans early
20th-century imperialexpansion.
But Seoul wants to return to the prac-tice of annual trilateral
foreign minis-ters meetings, and some observershope this weekends
gathering will pavethe way for a summit between the threeheads of
government an event thatlast tookplace inMay2012.
Since then all three countries haveinstalled new leaders. Shinzo
Abe,Japans prime minister, has outraged hisChinese and South Korean
counterpartswith remarks interpreted as rollingback Japanese
admissions of historicalguilt. There is a growing consensus inthe
region that things will have toimprove to better deal with this
para-doxical situation, said Kim Jae-chun,
aprofessoratSeoulsSogangUniversity.
For Beijing the trilateral meeting haslong been seen as a useful
venue toadvance its long-term goal of reducingUS influence in the
region. Some Chi-nese officials have suggested that closerties
between the three countries could
lead to a northeast Asian economic blocthatexcludestheUS.
Beijing eased friction with Tokyo lastNovember with an awkward
meetingbetween President Xi Jinping and MrAbe on the sidelines of
an Asia-PacificEconomic Cooperation meeting, wherethey agreed to
work on measures toavoid clashes over a disputed islandgroup.
But China and South Korea are likelyto wait for Mr Abe to show a
morerepentant attitude before they committo a leaders summit. South
Korean offi-cials say he has a good chance to do so inthe coming
months, first with a visit tothe US next month and then with a
speech in August to mark the end of thesecondworldwar.
On Tuesday, Fumio Yoshida, Japansforeign minister, played down
the pros-pect of historical disputes beingaddressed at this
weekends meeting,saying he expected it to be future-oriented.
International policy makers will alsobe watching. The United
Nations hasbeen engaging in a number of regionalco-operative
mechanisms but northeastAsia still remains a missing link,
BanKi-moon, the UN secretary-general,saidonMondayduringavisit
toTokyo.
This month Wendy Sherman, the USundersecretary of state for
politicalaffairs, spoke of Washingtons frustra-tion at the bad
relations between coun-tries in northeast Asia. A
particularheadache for the US is the tensionbetween Seoul and
Tokyo, its two key allies intheregion.
It is not hard for a political leaderanywhere to earn cheap
applause by vil-ifying a former enemy, Ms Shermantold a conference,
outraging SouthKorean politicians who accused her
offailingtounderstandregionalhistory.
Northeast Asia. Regional spats
China, JapanandSouthKorea seek to ease tensions
Frosty relationsmust thaw if
talks in Seoul this weekend are
to paveway to a full summit
Government leaders last held asummit in Beijing inMay 2012
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8 FINANCIAL TIMES Friday 20 March 2015
MATTHEW GARRAHAN NEW YORK
Musician PharrellWilliams haswarnedthat the creative industries
are at riskofawaveofcopycat litigation followinghiscourtdefeat
lastweek,whenajuryruledthat his Blurred Lines song infringedthe
copyright of Marvin Gayes Got toGiveItUp.A federal court in Los
Angeles
ordered the songwriter and
producerandthesingerRobinThicketopaydam-ages of $7.3m to the Gaye
estate afterstudying the two songs. The verdictappears to set a
legal precedent becausealthough the tracks have a similarsound and
feel they have different noteandchordsequences.The verdict
handicaps any creator
out therewho ismaking something thatmight be inspired by
something else,MrWilliams told theFinancialTimes inhis first
interviewsincetheruling.This applies to fashion, music,
design . . . anything. If we lose our free-dom to be inspired,
were going to lookup one day and the entertainmentindustry as we
know it will be frozen inlitigation. This is about protecting
theintellectual rights of people who
haveideas,MrWilliamssaid.Lawyers acting for the Gaye estate
argued in court that Blurred Linescopiedelementsof Got toGive
ItUp.Amusic expert called as a witness for theprosecution testified
that there was aconstellation of similar elements inthesong.TheGaye
familyyesterday filedanew
injunction in court to prevent the copy-
ing, distributing and performing ofBlurred Lines. With the
digital ageupon us, the threat of greater infringe-ment looms for
every artist, the familysaid inastatement.TheGayeestateowns
thecopyright to
the Got to Give It Up song but not
therecording.MrWilliamsdeniedBlurredLines had broken any copyright
rules.Therewasnoinfringement,hesaid.You cant own feelings and you
cant
own emotions . . . [in music] there areonly thenotations and
theprogression,headded, referring tomusical
composi-tion.Thoseweredifferent.Blurred Lines, released in the
sum-
mer of 2013,was among thebiggest hitsof that year, generating
nearly $17m inprofits, according to court documents.The release of
the track came amid astring of hits for Mr Williams
thatincludedHappy,hissolonumberone.The Grammy winner has
received
broad support from themusic
industry.Itsaverypeculiardecisionbecausetherulingdidnot refer to
theusual infringe-ments thatartists canbesuedover, suchas
thewriting of the song or thewritingof the track, said
PaulMcGuinness, theformer manager of U2. The awardseems to have
beenmade on themoodof thesong,which isextraordinary.The jurys
verdict has prompted con-
cernsbeyondmusic.TheOscar-winningmovie producer HarveyWeinstein
saidHollywood could alsobe affectedby
theBlurredLinesprecedent.Imvery concernedabout thenotion
that feeling or having a piece of art thatfeels
likesomethingelsecanbe
infringe-ment,saidMrWeinstein,whoseepony-mous companyhas released
films rang-ing from The Kings Speech to The Imita-tionGame.Everyone
quotes things, even sub-
consciously, but this canbe a disruptivedecision, he added. What
film-makercouldnt sue another film-maker formaking a movie that
feels like anotherone? Itsdeeplytroubling.Another movie studio
chairman
pointed to the potential ramificationsfor the art world. Think
about RoyLichtenstein and Andy Warhol, whoborrowed heavily from
other sources,hesaid.Noneof thatstuffwouldexist.MrWilliamsdeclined
to comment on
whetherheandMrThickewouldappealagainst the verdict. Were working
outournextstepsrightnow,hesaid.Buthewasadamant that taking
inspi-
ration fromother sourceswasakeypartof thecreativeprocess.
You cantown feelingsand youcant ownemotions
Familymatter: Gayes daughterNona leaves court in Los Angeles
This appliesto fashion,music, design. . . anything.The
industryaswe know itwill be frozenin litigation
SHAWN DONNAN WASHINGTON
A stronger dollar saw the US currentaccount deficit widen in the
final threemonths of last year due to fallingexports anda
reducedvalueof repatri-ated profits from overseas invest-ments.
The Commerce department said thedeficit, a broad measure of
trade andinvestment flows, grewbyalmost 15percent to $113.5bn in
the fourthquarter of2014 versus the previous quarter as theUS
dollar surged against the currenciesofmostof
itsmaintradingpartners.The figures come after months of
growinganxietyover the strengthof thedollar and its impact on
the US eco-nomic recovery. For the full year, thecurrent account
deficit stood at$410.6bn, or 2.4 per cent of
grossdomesticproduct.PaulAshworth, chiefUSeconomist at
Capital Economics, said there was agood chance the deficit would
narrowagain inthefirstquarterof2015.However, he said that the
widening
trend was likely to continue over thelongerterm.As the full
impact of the drop in the
price of imported energy feeds throughin the first quarter,
there is a goodchance that the deficit will shrink
againtemporarily,hesaid.Beyond that, however, the stronger
dollar and the relative weakness ofeconomic growth outside the
US sug-gests that the deficit will graduallywiden.Mr Ashworth added
that there
was also concern that slowing exportscould eventually become a
sizeable
drag on real economic growth.Wednesdays move by the Federal
Reserve to downgrade its estimates forgrowth, in part because of
the impact ofthe dollar, caused a brief slump in thedollar on the
expectation that the UScentral bank would not raise rates
asaggressivelyasexpected.It also led somedollar bulls to call
the
end of a recent rally in the greenbacksvalue.Currency concerns
have become
more political. Dollar hawks inCongress have raised questions
aboutwhether trade rivals inAsia andEuropehavebeenactively seeking
todepreciate
their own currencies to gain a competi-tiveadvantage.The timing
is awkward for theObama
administrationwhich is trying to closeahuge trade deal with 11
other PacificRimeconomies includingAustralia andJapan.Some in
Congress have been calling
for the deal, knownas theTrans-PacificPartnership, to include
new provisionsoncurrencymanipulation.Members of Congress have
pushed
bills in recent weeks that would allowthe US to impose punitive
countervail-ingdutiesonanytradingpartners
foundtobemanipulatingtheircurrency.Editorial Comment page 14
Trade and investment
Current account deficit growswider as dollar strengthens
The relativeweakness ofeconomic growth outsidetheUS suggests the
deficitwill graduallywiden
Pharrell Williams
BlurredLinessingerwarns oflegal threat toartistic
creativityEntertainment industryfaces litigation nightmare,says
huge-selling star
Hit: PharrellWilliams andRobin Thickeperform inArkansas lastyear
Getty Images
Williamsspeaks
INTERNATIONAL
-
Friday 20 March 2015 FINANCIAL TIMES 9
DEMETRI SEVASTOPULO OTTAWA
One political leader accuses his nemesisof
stokinganti-Muslimfearsandreturn-ing the nation to the dark days of
the1940s when Jews were confronted withan immigration policy of
none is toomany. Opponents attack the outra-geous warning as
bizarre and con-temptible.
This was not a fight involving MarineLe Pen, leader of the
National Front inFrance. It was Justin Trudeau, the Cana-dian
Liberal party leader, trying toskewer Prime Minister Stephen
Harper,the Conservative party leader, who isseekingafourthmandate
inOctober.
Fear is a dangerous thing. Oncestoked, whether by a judge . . .
or aprime minister with a dog whistle, thereis no way to predict
where it will end,Mr Trudeau warned last week in aspeech on liberty
as the governmentheld hearings on a controversial
anti-terrorbill.
Hisattackwaspartlyaresponseto theHarper governments decision to
appealagainst a court ruling allowing femaleMuslim immigrants to
wear the niqab the face veil during citizenship cere-monies. But
more broadly, it signalled agrowing discussion about values
asCanadians engage in the same kind ofdebate on freedom versus
security thatAmericans held after the September 11terroristattacks
in2001.
While Canada passed an anti-terrorlaw after 9/11, Wesley Wark, a
terrorismexpert at Ottawa university, says thenation did not feel
it was in the bullseye. But he says there has been a fun-damental
change and now there is asensethatCanadaisadeclaredtarget.
In September, Abu Mohamed al-Ad-nani, spokesman for the Islamic
State inIraq and the Levant, or Isis, called forattacks on
countries, including Canada,that were helping the US target
theextremist group in Iraq. That came afterthe government
identified 80 Canadi-ans who returned home after
engaginginterrorism-relatedactivitiesoverseas.
In October, Michael Zehaf-Bibeaukilled a Canadian soldier during
anattack on the parliament in Ottawa thathe claimed was justice for
Canadas rolein Afghanistan and its opposition to Isisin Iraq. That
same week, a convert to Islam whom Mr Harper said had
beenradicalised killed one solder andinjuredanotherwithhiscar
inQuebec.
NotonlyhavetheOctoberattacksand
the Isis threat made Canadians morenervous, they also appear to
have givenMr Harper a boost with voters. NikNanos, a Canadian
pollster, says MrHarper pulled ahead of Mr Trudeau inthe polls
following the attacks havingpreviously trailed by about eight
points.
With two out of three Canadiansexpecting another attack,
according toMr Nanos, Mr Harper has tried to por-tray Mr Trudeau,
the charismatic butinexperiencedsonof formerprimemin-ister Pierre
Trudeau, as ill-equipped toprotect Canada. This partly
explainsJustin Trudeaus recent attacks and hissupport despite
substantial reserva-tions about a lack of oversight for
theC-51anti-terrorbill.
Paul Wells, a political reporter atMacleans magazine, says Mr
Trudeaussupport for C-51 is an effort to buy backsome toughness
after the Liberalsrefused to back Canadian involvementagainst Isis
in Iraq. He adds that theToronto speech was Mr Trudeau
call-ingLiberalsbackhome.
In the past decade, the Conservatives
have successfully courted the NewCanadians recent immigrants
whohave boosted the proportion of resi-dents born overseas to
one-fifth of thepopulation. That has helped propel MrHarper to
three victories, each timewithastrongermandatethanthe last.
Observers say Mr Trudeaus libertyspeech in Toronto a key
electoral bat-tleground was a calculated attempt towin back that
group, which has
tradi-tionallyvotedfortheLiberalsandwhichisexpectedtobepivotal
intheelection.
Roland Paris, a University of Ottawaprofessor, points to signs
of rising anti-Muslim sentiment in Canada. But hesays Mr Harper
could over-reach bypresenting a narrative of fear and dan-ger that
exaggerates and blurs differentrisks, adding that such issues as
theNiqabareextremelysensitive.
Mr Paris adds: They have sought toweave the beheadings in Iraq
and attackon parliament as a pastiche of danger. . . every time
Jihadi John chops some-
ones head off, it reinforces the narrativeathome.
John Manley, the Liberal
deputyprimeministerbetween2002and2003,says the Conservatives will
essentiallyurge voters to ask of Mr Trudeau: Doesthe kid even have
a driving licencebefore Igivehimthekeys?
Religious tension. Election countdown
Canadas fear of attackstokesdebate on
libertyversus security
Aftermath: police in Ottawa after a soldier was killed in
OctoberCole Burston/EPA
Every time Jihadi Johnchops someoneshead off, it reinforcesthe
narrative at home
DEMETRI SEVASTOPULO ANDMEGAN MURPHY WASHINGTON
President Barack Obama joked in Cleve-land on Wednesday that he
did notexpect the American people to read hisbudget or the two
fiscal plans justrevealedbycongressionalRepublicans.
Common wisdom in Washington saysthat budgets have become more
abouttheatrics and scoring points than seri-ous efforts to fund
government. Butwhen Senate and House Republicansrevealed their 2016
budget proposalsthis week, pundits and fiscal
expertspaidmoreattentionthanusual.
Observers said the plans were the firstpart of a multi-stage
litmus test forwhether Republicans can fulfil the vowthey made to
govern responsibly beforewinning both houses of Congress
inNovember.
The political stakes are high, saidMaya MacGuineas, president of
theCommittee for a Responsible FederalBudget. This is a test of
whether the
Republicans can govern. While thereare differences between the
Republicanplans, especially on defence and health-care, they sent
the same broad message:they aim to balance the budget over
10yearsandrepealObamacare.
The law, which provides health insur-ance subsidies for
low-income groups, isdislike by Republicans in part becaus