Archive for May 7th, 2010

The British election and NAMA

As our neighbours up North and across the water survey the many surprises unfolding in the general election, I look at what the changes will mean for NAMA. Firstly it was estimated that 26.9% (or €22bn) of the €82.5bn NAMA-bound loans considered by the EU in February 2010 relate to assets held in the UK (€5bn in Northern Ireland and €17bn in Great Britain).

Will there be changes at HM Treasury where the Labour MP, Alastair Darling is the incumbent?  I don’t think we’ll know for a couple of days but I think it is fair to say that the Liberal Democrat Finance spokesman, the widely respected Vince Cable, will have some input to policy regardless of whether the principal incumbent is Tory or Labour. Neither Vince Cable or Tory Finance shadow, George Osborne, have expressed any strong feelings towards NAMA. NAMA must observe the laws in other jurisdictions. No major policy specifically relating to property is in the offing – yes there may be a mansion tax from the Lib Dems, there may be some curtailment of tax avoidance by property funds, but all in all, it is likely to be business as usual. UPDATE: present details on Wednesday 12th May, 2010 with respect to the Conservative-Lib Dem coalition suggest the mansion tax idea is binned and there is no news on the tax avoidance measures proposed by the Lib Dems. George Osborne is installed as Chancellor and Vince Cable the Banking and Business Secretary. Sterling seems to be strengthening and is presently at GBP 1 = Euro 1.18 – given the turmoil in Europe generally at present it is impossible to tell what vector is having the most influence.

It is difficult to tell what is happening to sterling:euro exchange rates with Greece’s woes, the possibility of contagion in the Euro area, the emerging sovereign debt bubble (and the UK’s debt is far greater than ours) and of course the hung British parliament all vying to influence exchange rates. Since opinion polls have been predicting a hung parliament for some time and arguably the uncertainty is built into existing rates, the fact that there is a hung parliament should not influence rates now as long as some form of government is worked out in the next few days. Whatever party or coalition comes to power they will need introduce a budget to contain the spiralling deficit, and the betting is there will be sweeping cuts to the public service and an increase in taxes (national insurance, VAT, mansion taxes have all been mooted). Meanwhile UK inflation is at the 3% level, so an increase in historically low interest rates is probable. Quantitative Easing, QE – printing more sterling in one form or other has largely come to an end. There will be the possibility of severe risk to sterling’s value if there is a long-drawn-out agreement on who governs.

In the North, the composition of the Assembly remains as before as it wasn’t affected by yesterday’s vote. Although Peter Robinson, the DUP leader, has lost his Westminster seat, he remains the First Minister for now and Sammy Wilson (who also retained his East Antrim Westminster seat comfortably)  remains Finance Minister, a role he in which he is probably quite safe – the DUP still has most Westminster MPs though Sinn Fein have the largest number of votes (that will be formalised when Fermanagh South Tyrone is resolved). There appears to be a decent working relationship between Brian Lenihan and Mr Wilson, so no change in procedures there. There’s a NAMA roadshow in Belfast next week. The Northern Ireland Construction Employers Federation seem to be keenly engaging its members in getting the most from NAMA, particularly the €5bn development pot. UPDATE: Whilst the DUP Westminster Election manifesto indicated that dual mandates would disappear after the election, the betting had been that this would not be the case, something apparently confirmed by DUP MP Gregory Campbell to the BBC on 10th May, 2010. My betting is that Sammy Wilson will remain in his Finance Assembly post.


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