Weekly Political Round-up – 21st July 2014

This edition comes deliberately late following speculation that the prime minister was overdue for a cabinet reshuffle early this week, with growing rumours that it was going to be “big” and “surprising”. It was worth the wait. For more information, look for an article later today. This looks at everything else that has happened over the week.

Last week when Ed Miliband promised to devolve £30bn from Whitehall to council regions if in power, David Cameron delivered £12bn for the same cause whilst in power, all in the name of decentralisation from Westminster. Using Manchester as a blueprint, the £2bn-a-year deal starting from 2015 is expected to be spent on more than 150 roads, 150 housing developments and 20 railway stations across the country.

The Labour leader announced that the next Labour Government will introduce new Technical Degrees to cater for the “forgotten 50 per cent who do not currently go to university.” In another week to try and charm firms, the Labour Leader said how his party would give employers more control over funding to encourage them to help design and sponsor the scheme so that young people can earn for part of the week whilst they study for the rest, putting vocational subjects on an equal footing with traditional academic degrees. Miliband said that he will not sacrifice current university places, although it is not yet clear exactly how it will incentivise universities to offer the new courses.

Another battle has commenced over social enterprises. The conservatives have offered a 30% tax reduction to investors in a new social investment tax relief. Individuals will be eligible to claim up to £290,000 over 3 years if they help boost organisations which strive to help the social community. In retaliation, Labour has pledged to break the stranglehold of big corporate businesses on public procurement by allowing only social enterprises with a “public service mission” to bid for some government contracts. In a speech last Wednesday, Chi Onwurah MP argued that due to new EU procurement rules, Labour will use Government departments and local authorities to reserve the award of some three-year contracts exclusively to organisations “who feel locked out”, with more than £10bn of taxpayers’ money a year being paid to just 20 private companies.

The Modern Slavery Bill, regarded as one of the positive highlights of the Queen’s Speech and first introduced to the House of Commons on 10 June 2014, got its second reading in Parliament. The bill is one of the first of its kind in trying to address slavery in the 21st century in tackling slavery, human trafficking, forced labour and domestic servitude. The bill was headed by Home Secretary Theresa May and focused on three types of exploitation widespread in the UK: sexual, labour and domestic slavery.

“To anyone involved in slavery let me be clear – we will track you down, prosecute you and lock you up.”

Much of the debate focused on trafficking in the UK, with at least ten children a week brought here for forced labour and/or sexual exploitation and a further 21 million people in slavery today across the world according to the International Labour Organisation (ILO). There has been tension between the Home Secretary Theresa May and Number 10 in her plan to include supply chains in the Modern Day Slavery Bill. The Labour Party and the Association of Labour Providers (ALP) scrutinised the bill for not including the same provisions for the food industry and high street supply chains.  Commentators have pointed out that the ‘residence test’ a day later in Parliament which permits free legal representation only to one-year UK residents, will effectively annul the push for legal counselling and representation for many victims who, in a fear of deportation, may not report their perpetrator to the authorities.

Whilst perhaps unfamiliar to the general public, banks have been of hot topic recently. Select Committees may not be the most interesting of meetings that take place in the House, but recently, MPs have pressed the financial watchdog – Financial Conduct Authority (FCA) – to investigate into allegations that the stock exchange – in particular the gold market – may be rigged through the manipulation of benchmarks. Ever since the LIBOR interest rate fixing scandal, financial authorities are continuously detecting the £3 trillion-a-day plus currency market. The current scrutiny renews from the £26m FCA fine impeded upon Barclays in May for price rigging by an options trader through changes in indices. The bank, along with HSBC, Scotiabank and Société Générale (also previously Deutsche Bank) jointly dictate the 95-year-old London gold fix in a twice-daily auction system, thereby setting a benchmark to be expended by everyone from large dealers to miners and local traders. Some lawmakers have expressed concerns that the calls which occur twice-a-day and every day of the year could last up to an hour, with customers and clients of the banks also able to dial in. One of the witnesses at the Treasury Select Committee attested that the gold fix might have been manipulated between 10 percent and 30 percent of days between 2010 and the end of 2013. Mark Garnier MP, who for 27 years was an investment banker and hedge fund manager, told the committee that it was a “well-known secret” among traders that prices were routinely manipulated in London and around the world. Upon evidence of the 2,100 tonnes going through the Shanghai Gold Express in 2013, Thomson Reuters have declared that London as center of the market was heading towards the East.

Whilst on the issue, with recommendations of the FCA, the Bank of England has been hot-on-the-trail of the so-called UK ‘Big Four’ (Barclays, HSBC, Lloyds and RBS), making it easier for smaller banks to challenge their dominance with capital requirements being reduced from £5m to £1m. The Competition and Markets Authority is also expected to propose an investigation into a major shake-up of Britain’s strongest banks by hoping to regulate current accounts and small business loans. This is pretty big news – large banks may no longer run the show as they currently do.