Financial_Times_UK 28Jan2020

2 ★ FINANCIAL TIMES Tuesday28 January 2020

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N AT I O N A L

G E O R G E PA R K E R , N I C F I L D E S A N D
H E L E N WA R R E L L —LONDON
K I R A N STAC E Y —WASHINGTON

Lawmakers in Washington and London
yesterday ratcheted up the pressure on
Boris Johnson to deny China’sHuaweia
role in supplying kit for the UK’s fifth-
generation mobile phone network.
But the prime minister’s National
Security Council istoday expected to
grant Huawei a restricted role providing
equipment for the 5G data network.
Mr Johnson is seeking to balance the

consumer and economic benefits of a

fast rollout of 5G using Huawei kit

againstsecurity concerns about the Chi-

nese telecoms equipment maker raised

by the Trump administration as well as

lawmakers in Washington and London.

The prime minister insisted the

National Security Council could deliver

“a very, very important strategic win for

the UK”, hinting that he would follow

advice from British security officials by

giving Huawei a role in supplying “non-

core” elements of the 5G network.

Mr Johnson is also expected to impose

a market share cap n Huawei in ano

attempt to reassure the Trump adminis-

tration that Britain does not want to be

reliant on Chinese technology and

would like western companies to build

up their 5G capabilities. Speaking at

King’s College London, Mr Johnson said:

“There’s no reason why we shouldn’t

have technological progress here in the

UK, allow consumers, businesses in the

UK to have access to fantastic technol-

ogy, fantastic communications, but also

protect our security interests and pro-

tect our key partnerships with other

security powers around the world.”

British security officials have said

they can manage any security risk

around Huawei kit if it is not part of the

5G network “core”, and that it will not

have a negative impact on intelligence

sharing with Washington. Core parts of

the network refer to servers and sys-

tems where mobile operators’ customer

information is processed.

The UK’s four mobile network opera-

tors —EE,O2,Three nda Vodafone—

have launched 5G services in the past six

months, all involving some Huawei kit.

The National Security Council’s decision

relates to whether Huawei should have a

continuing role as a supplier.

Huawei has consistently said it is a

private company and is not subject to

state interference, but Conservative and

Labour MPs lined up in the House of

Commonsyesterday to say it repre-

sented a risk to Britain’s security.

Tom Tugendhat, a senior Tory MP,

said Mr Johnson was about to “nest a

dragon into our critical national infra-

structure”. Former Tory leader Iain

Duncan Smith said such a decision

would be “bizarre”.

Three senior US senators today wrote

to all members of Mr Johnson’s National

Security Council urging them to exclude

Huawei from the 5G network, and argu-

ing that the company’s inclusion gave an

economic advantage to one of China’s

national champions.

Marco Rubio, Tom Cotton and John

Cornyn, all Republicans, said: “The

more countries do not allow Huawei to

participate in their 5G networks, the

more market space there is for innova-

tors and entrepreneurs to develop com-

peting products. And these incentives

are already starting to bear fruit.”

Technology

ohnson feels heat over role of HuaweiJ

Security council expected

to allow Chinese group

limited part in 5G rollout

J I M P I C K A R D— LONDON

A N DY B O U N D S— MANCHESTER

Ministers are poised to renationalise

the failedNorthern Rail franchise as

the government pledges to invest

£500m in reopening defunct lines, in

the latest bid to stem the crisis in the

privatisednetwork.

Grant Shapps, transport secretary, is

expected to confirmtomorrow that

Northern Rail will be removed from the

control ofArriva, part of German state-

owned companyDeutsche Bahn, and

placed in the hands of the government’s

“operator of last resort”, Whitehall

igures said.f

Mr Shapps has previously said that he

would choose between either national-

ising the line or allowing the current

franchisees to run it on a short-term

management contract. But one govern-

ment figure said: “You wouldn’t give the

keys back to the people who crashed the

car.”

The Conservatives have been vehe-

ment critics of Labour’s plans to take the

entire system gradually into state con-

trol, which they have criticised as 1970s-

style dirigiste interventionism.

But the nationalisation of Northern

Rail would be the second such move by

the Tory government in less than two

years, after East Coast Mainline col-

lapsed and was taken over by the opera-

tor of last resort in June 2018.

The sprawling network stretches

from Cheshire to Northumberland and

carries 101m passengers a year on 2,

daily services.

One option that has been discussed in

Whitehall is splitting Northern into two

less unwieldy entities: north-western

and north-eastern.

Meanwhile, Mr Shapps has indicated

thatSouth Western Railway ould alsoc

be nationalised within months.

At the same time, other lines are

struggling because passenger numbers

are failing to hit the heights predicted at

the time that private consortiums took

them on.

Arriva has run Northern Rail since

2016, when it replaced a consortium of

Serco nd Abellio with a promise toa

upgrade the network with a fleet of new

trains, replacing its old-fashionedPacer

rolling stock.

But the line has been dogged by delays

to infrastructure improvements —

including train track electrification —

from Network Rail, which owns the

country’s rail infrastructure, and a long-

running dispute with unions.

The announcement on reopening

some lines axed in the Beeching closures

of the 1960s is part of a wider drive by

Boris Johnson’s government to prove

that it is serious about “levelling up”

regional inequalities.

Areas set to benefit from the reopen-

ing of lines could include Blyth, a former

Labour-controlled town in Northum-

berland that turned Tory in December.

Mr Shapps this month visited Blyth to

discuss plans to reopen the line linking

Newcastle to Ashington via the town.

Other projects being considered are

thought to include the Blackpool-Fleet-

wood line in Lancashire.

The “Beeching cuts” are totemic in

railway lore, marking the moment that

more than 4,000 miles of track were

closed on the guidance of Richard

Beeching, then chairman of British Rail-

ways.

Transport

Northern Rail

set to be taken

back under

state control

SA R A H N E V I L L E

Almost half of senior NHS leaders plan

to leave the health service, or are consid-

ering doing so, because of pensions

changes that have left many facing steep

additional tax bills.

A survey by NHS Providers of execu-

tives of hospitals, ambulance, commu-

nity and mental health services sug-

gested that a 2016 shake-up of pension

rules may lead to an exodus f senior o

managers in the next two years.

The changes aw thes annual tax free

pension savings allowance educedr

from £40,000 to as little as £10,000 for

those with incomes of more than

£110,000, and have left some senior

NHS staff facing marginal tax rates of

more than 100 per cent.

Warnings by doctors’ leaders have

escalated in recent months, amid grow-

ing evidence that the number of medics

retiring or cutting back their hours

because of the so-called pensions taper

is jeopardising patient care.

In November the government

announced atemporary solution, in

which senior NHS staff delivering front-

line care were granted early access to

their pension pots in order to help cover

any extra charges in their April tax bill.

Each pot will then be topped up by NHS

England before they reach retirement.

However senior managers were not

included in the arrangements. Looking

ahead to the permanent solution prom-

ised for the March Budget, the survey

found there would be “a significant

adverse impact on morale, retention

and the effective running of services” if

non-clinicians were exempted.

Saffron Cordery, NHS Providers dep-

uty chief executive, said: “Without

urgent action, we face the possibility of

an exodus of NHS leaders, at a time

when the need for their experience,

skills and commitment has never been

greater.”

Nine in 10 survey respondents said

that they and their organisation were

concerned that differential arrange-

ments for different staff groups — for

example offering a solution to senior

doctors and nurses but not managers —

would also create divisions and harm

culture and morale.

More than a third — 37 per cent — of

board-level directors said fewer staff in

their trust were seeking or accepting

promotion, while 60 per cent said clini-

cians were now less willing to take on

leadership roles. Nearly 70 per cent of

clinical executives had turned down, or

would consider turning down promo-

tions or taking on additional leadership

responsibilities.

One unnamed NHS trust director of

operationssaid in the survey: “Poorly

led organisations have higher mortality

rates. Senior managers do on-call, and

work seven days a week. Vacancies lead

to operational decisions, especially

around emergency care, becoming ever

more difficult.”

There was a near unanimous view

that senior non-clinical staff should be

eligible for any pensionflexibilities

implemented by the government.

Almost as many felt that flexibilities

should be available to all NHS staff.

Services relied on the additional dis-

cretionary efforts of all staff, including

managers, who regularly worked

beyond their hours to keep services run-

ning, Ms Cordery said, warning that cli-

nicians could be deterred from moving

into leadership roles.

Retirement benefit

NHS survey warns of executive exodus in pensions dispute

M A D I S O N DA R BYS H I R E

Cuts to a tax break for entrepreneurs
would be a “significant blow” to busi-
ness owners, experts say, after reports
that the measure will be targeted for
reformintheMarchBudget.

The £2.4bn a year tax break allows com-
pany owners to payless capital gains tax
when selling their businesses, a policy
that has been criticised for being too
generous and for rewarding the rich.
But industry groups were quick to
defend “entrepreneurs’ relief” for its
benefits to business owners, as well as
the message it sends about the UK as a
country favourable to start-ups.
“Any reduction risks undermining
some of our most promising young
firms and entrepreneurs by stifling
investment,” said Suren Thiru, head of
economics at the British Chambers of
Commerce.
The policy allows entrepreneurs to
pay apital gains tax atc 10 per cent
instead of the usual 20 per cent on up to
£10m in gains.
Tax experts say thepolicy is unlikely
to be ended, but they expect reforms,
such ascutting the lifetime allowance to
£1m — “which will immediately remove
the biggest tax break”, said Torsten Bell,
chief executive of the Resolution Foun-
dation, a think-tank.Lowering the
allowance could protect benefits for
smaller business owners, rather than
the most successful, he said.
Business groups said there was room
for reform ut cautioned against sweep-b
ing changes. They pointed out that
many small business ownerspaid them-
selvesno salary orhad no pension, and
that targetingcapital gains tax could
hurt a demographic nearing retirement.
“Making big changes to the relief at
this juncture would hit many small
business owners who have been plan-
ning for their retirement with the relief
in mind,” said Mike Cherry, chairman of
the Federation of Small Businesses.
“Allowing entrepreneur relief on the
first £1m of a business sale... would
bring it in line with the sum that can be
accrued in a pension pot,” Mr Cherry
added.
The Budgetis also likely toreconsider
who qualifies forthe relief, as the policy
currently also provides tax relief for
large investors in companies.

‘Entrepreneurs’ relief

Businesses in

rush to defend

tax break

The Financial Conduct Authority

has fallen foul of a fellow watchdog,

with its staff pension plan coming

under fire from the Pensions

Regulator.

Trustees of the plan have been

fined the maximum £2,000 by the

TPR for not providing enough

detail in a statement for members

on how well their “money purchase”

scheme is governed.

Chair of the plan’s trustees is

Baroness Sarah Hogg, former chair

of the Financial Reporting Council

and current non-executive director

of the FCA.

The FCA’spensionplan appeared

in an online list published by TPR

of schemes it had fined in the third

quarter of 2019 for compliance

failures. The fine was levied against

the trustees of the money purchase

section but paid for by the FCA.

Watchdog bitten

FCA penalised over staff

money purchase plan

The suppliers of two key components

implicated in theGrenfell Tower fire

were accusedyesterday of knowingly

allowing the installation of dangerous

products during the refurbishment of

the west London block of flats.

The criticism of Arconic, a US metals

group, and Celotex, a UK-based

materials company, came in opening

statements on the first day of the

resumed public inquiry into the June

2017 disaster that left 72 people dead

and many more injured.

The claims were made by barristers

acting for Rydon Maintenance, the

main contractor responsible for the

tower block’s refurbishment between

2014 and 2016, and Harley Facades,

the specialist contractor overseeing the

installation of the cladding on the

building’s exterior.

The public inquiry’s first phase,

which reported in October, focused on

the night the fireswept through het

tower block in north Kensington

andsharply criticised he London Firet

Brigade’s response.

The second, longer phase of the

inquiry, led by retired Court of Appeal

judge Martin Moore-Bick, will consider

the tower’s renovation, when insulating

and rain-proofing panels that allowed

the fire to spread were installed.

Marcus Taverner, representing

Rydon, presented evidence in his

opening statement thatArconic adh

long accepted that the cladding panels

provided for the Grenfell project posed

a fire risk. Mr Taverner produced an

email sent in 2011 by Claude Wehrle,

an Arconic executive, in which he

referred to the product exhibiting “bad

behaviour” in response to fire.

He also quoted a 2015 email from

Mr Wehrle in which the executive

described the panel used at Grenfell as

“dangerous on facades”. Mr Wehrle

discussed an element of French

regulations which he said could be

interpreted as permitting the use of the

Grenfell-type material on tall buildings.

However, that rule should have been

discontinued “over 10 years ago”

because of the risks, Mr Wehrle wrote.

Mr Taverner also cited internal

emails at Celotex from 2013, in which

two executives discussed giving up on

designing a rain screen of the type that

was eventually installed at Grenfell

because it posed a serious fire risk.

Later, Jonathan Laidlaw, for Harley,

described how Celotex had made

“erroneous” claims that its RS

rain screen, fitted at Grenfell, could

safely be used on buildings as tall as

the 24-storey tower.In fact it had

only very limited safety certification

that did not cover the combination

of materials fitted at Grenfell, Mr

Laidlaw said, citing internal Celotex

correspondence. Mr Laidlaw

revealed that Harley had contacted

Jonathan Roome, Celotex’s major

projects and specification manager,

to discuss the refurbishment.

“At no stage was it suggested by

Mr Roome, or anyone else at

Celotex, that the wall build-up being

proposed at Grenfell Tower in any

way called into question the

suitability of the use of RS

above 18 metres,” Mr Laidlaw told

the inquiry.

Richard Millett, counsel to the

inquiry, had earliercriticised the

“merry-go-round of buck-passing”

between the companies involved in

the refurbishment.

Only the Royal Borough of

Kensingtonand Chelsea, the local

council, and Celotex had accepted

any responsibility, he said.

He said the submitted evidence

gave the impression no one had

done anything wrong.

Barristers for Arconic and Celotex

are due to give their opening

statementstoday.

Robert Wright

Grenfell

Cladding risks

were known,

inquiry told

Protesters outside the Grenfell

Tower public inquiry in London

yesterday. The tower block on

October 30 2019, the day the first

report from the public inquiry

was published

Kirsty O’ Connor/ Steve Parsons/PA

Counsel to the inquiry

criticised the ‘merry-go-

round of buck-passing’

between the companies

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