The Economist (2022-01-08)

48 Britain The Economist January 8th 2022

1956,  a  third  of  Britons  thoughtthequeen

had been chosen by God. 

But as her reign wore on,thatprinciple

faded.  Britain’s  monarchy became what

Vernon Bogdanor, a constitutionalhistori­

an, calls “utilitarian”, withlegitimacythat

rests on the good it does.Itbecameneces­

sary  for  royals  to  be  hardworkinganddo­

gooding. It embraced therhetoricofmeri­

tocracy: never mind howthequeengother

job, what mattered was thatsheperformed

it  well.  Intimacy  succeeded reverence:

nowadays, commoners lovetheroyalfam­

ily in part because they thinktheyknowit.

Ms Giuffre’s allegationshavethrownall

this into doubt. Britain’s mainanti­monar­

chist movement, Republic,planstostepup

its  campaigning  during the jubilee. It

hopes  the  succession  willopenupdebate

on the constitution. The queenistheroyal

family’s  “heat  shield”,  saysitsleader,Gra­

ham Smith. “When she isgonethey’rego­

ing to be very vulnerable.”

A  utilitarian  monarchyisundermined

by a prince who has beenforcedbyscandal

to abandon his duties, andnowpassesthe

time horse­riding in the groundsofWind­

sor Castle. A meritocraticmonarchyisun­

dermined by a prince unsuitedtodiploma­

cy, whose alibis have beenwidelyridiculed

and  who,  even  after  Epstein’sdeath,de­

clared  he  had  no  regretsabouttheir“very

useful”  friendship.  His  troublesareare­

minder  that  heredity  isalottery,some­

times  throwing  up  starslikeQueenEliza­

beth  II,  and  sometimes  duds.Asforinti­

macy, the royal family’s affairsanddivorc­

es in the 1990s bound themonarchycloser

to  ordinary  people,  withtheirownmessy

marriages.  The  allegations made about

Prince Andrew are not exactlyrelatable.

The bare fact of Ms Giuffre’scaseleaves

the  royal  family  with  nogoodoptionsfor

dealing  with  Prince  Andrew.Thereistalk

of sending him into internalexile:ofask­

ing him not to use his titlesandstripping

him of his military ranks.Thatwouldstill

leave him in the line of succession.Butthe

alternative—him  renouncinghisclaimto

the throne—would probablybeevenmore

damaging  to  the  monarchy.It isfunda­

mental  to  a  hereditary  orderthatsucces­

sion is automatic and beyonddebate.Start

tinkering with the line becauseonesonis

better  qualified,  more  popular or more

moral, and the logic falls apart.

As Edward Bulwer­Lytton,a Whigpoli­

tician  in  the  19th  century, once put it:

“What suicide is to a man,abdicationistoa

king.” That is why EdwardVIII’sabdication

in  1936  was  so  traumatic,andwhyPrince

Harry, despite having “steppedback”from

royal  duties  for  a  more  glamorouslifein

Hollywood,  remains  sixth in line. The

monarchy  cannot  toleratePrinceAndrew

on  the  inside,  but  it  cannotejecthimei­

ther. The best it can do is closeitseyes,and

pretend he was never there.n

Investmentscreening

Balancing act

O

n january 4th a new investment­

screeninglawcameintoeffect,herald­

ed by the government as “the biggest

shake­upoftheuk’snational­securityre­

gimefor 20 years”.Thatisnoexaggeration.

It marksa shiftawayfromeconomicopen­

nesstowardssuspicionandintervention.

Kwasi Kwarteng, the businesssecretary,

saiditwouldshowmembersofthepublic

that“theirsecurityremainsournumber

onepriority”.Whatcouldgowrong?

Thegovernmentisseekingtostopas­

setsvitaltonationalsecurityfallinginto

hostilehands.A reportin 2017 warnedthat

“ownershiporcontrolofcriticalbusiness­

esorinfrastructurecouldprovideopportu­

nitiestoundertakeespionage,sabotageor

exertinappropriateleverage”.Thecontext

isconcernaboutChineseinvestment,and

pressuretofallintolinewithalliedcoun­

triessuchasAmerica,AustraliaandGer­

manythathavealreadytightenedup.

Investorsin 17 sectors,includingartifi­

cialintelligenceandcommunications,will

havetonotifythegovernmentiftheyare

acquiringmorethan25%ofacompany.

The government will review, and may

block,thetransaction.Itdoesnotmatterif

thecompanyissmallortheinvestorBrit­

ish.Ifa dealshouldhavebeenbroughtto

thegovernment’sattentionbutwasnot,it

maybevoided.Companiestryingtosell

overseasassetsused“inconnectionwith

activities”inBritaincouldalsofacereview. 

Thisnew regime isvery broad. It is

backdated,  covering  deals  that  went

through  since  November  2020.  “National

security”  is  undefined,  and  the  govern­

ment can intervene in deals outside the 17

named  sectors,  if  it  so  chooses.  Other

countries generally limit such screening to

fewer  sectors,  to  acquisitions  of  domestic

entities and to foreign investors. The broad

scope of Britain’s rules reflects how hard it

is  to  protect  against  evolving,  ill­defined

threats.  But  it  may  also  complicate  en­

forcement,  especially  when  it  comes  to

overseas assets.

Another risk is of deterring welcome in­

vestments.  Though  the  forms  are  quite

straightforward, and the upfront costs rel­

atively reasonable—as little as a few thou­

sand  pounds  for  small  firms—the  extra

steps  may  cause  delay.  Extra  information

may be demanded before an application is

processed, for example. Moreover, the gov­

ernment estimates that in complex cases a

full  national­security  assessment  could

cost  more  than  £120,000  ($160,000).  Ven­

ture­capital  and  private­equity  investors

taking minority stakes in early­stage com­

panies  are  especially  likely  to  be  put  off,

says Becket McGrath of Euclid Law, a legal

firm, since they are unused to government

departments nosing round deals. 

Yet  another  worry  is  that  uncertainty

over  the  new  system  will  clog  it  up.  The

government has tried to be clear in its defi­

nition of the 17 sectors where notifications

are mandatory, but there will inevitably be

borderline cases. Investors who fail to not­

ify  deals  that  should  have  been  notified

risk  fines  and  prison  time.  They  might

therefore  decide  to  err  on  the  side  of  cau­

tion,  slowing  everything  down.  “I’m  very

concerned  that  from  January  4th  there’s

going  to  be  a  flood  of  notifications,”  says

John  Adebiyi  of  Skadden,  Arps,  Slate,

Meagher & Flom, a law firm. 

A final risk is that the government is too

enthusiastic with its red pen. Unlike some

European  regimes,  Britain’s  is  not  sup­

posed to be used for industrial policy: na­

tional  security  is  supposed  to  be  the  only

criterion when deciding whether to allow a

deal to go ahead. But there is sufficient dis­

cretion that political pressure to reject for­

eign takeovers may be hard to resist.

There is no doubt that the government

is planning to become more meddlesome.

Since  2002,  when  the  previous  regime

came into effect, there were just 12 nation­

al­security  interventions.  An  official  im­

pact  assessment  published  in  November

2020 estimated that the annual number of

notifications under the new arrangements

might  be  as  high  as  1,000­1,800,  with

around  ten  subjected  to  formal  remedies.

The government claims that the new rules

should  encourage  investment  by  enhanc­

ing perceptionsofBritain as a stable busi­

ness  environment. That  reputation  will

have to be earned.n

Protecting national security without

deterring investors

Cheques and the City