Politics UK: Culloden

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November 1990

Economy suffers biggest drop since 1980

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The UK economy has suffered its sharpest decline in over a decade amid fears of a deep recession and rising unemployment.

GDP fell by 1% in the second quarter of the year, with further falls expected. As well as the fall in GDP, unemployment rose slightly and inflation rose to 10.4%.

Speaking to the BBC Angus Robertson, Chief Economist of the National Institute of Economic and Social Research said:

Quote:The economy is clearly entering a very rough path. Unemployment is likely to rise substantially, perhaps above three million again. The good news is that the recession and joining the ERM probably means that inflation will fall back from its current levels - but that's unlikely to offer much relief to people who lose their jobs or wages. Unfortunately it seems as if the boom of the last few years is going to have leave the economy with a rather substantial hangover.

In other news, Diana the Princess of Wales...
Electricity distribution privatised in £8 billion sale

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The long-planned sale of Britain’s regional electricity generation companies was completed today with all twelve firms fully sold and floated on the stock exchange.

Around three-quarters of the five million applicants will receive shares, including 98% of employees who now collectively own around 7% of the electricity generation companies. Around 2 billion shares were sold at £2.40 each, and the government expects the companies to repay the government around £3 billion of debt - raising a total of £8 billion for the exchequer.

Shares immediately jumped by around 50 pence in early trading, which the Department for Trade and Industry attributed to “generally improved market conditions” since the price was set in November.

The privatisation of the 12 regional electricity distribution companies completes the first half of the planned privatisation of the industry, with power generation remaining in the public sector for now. Since 1989 power generation has been split between PowerGen, National Power, and Nuclear Electric, and the Government has previously announced its intention to sell 60% of the shares in PowerGen and National Power in February 1991.
January 1991

Gulf War begins with allied bombing campaign

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The Gulf War Allies have sent hundreds of planes on bombing raids into Iraq, at the start of Operation Desert Storm. Allied aircraft launched from bases within the Gulf states, as well as from eight aircraft carriers - including one French and two British vessels - stationed in the Persian Gulf.

The American, British, French, Saudi and Kuwaiti aircraft took off at 2330 GMT last night. Their bombs were aimed at military and strategic targets, including an oil refinery and Baghdad airport. At least 500 raids took place. Latest reports say all the Allied aircraft have returned home safely.

"These raids had a crippling impact on Saddam's capabilities," said General Norman Schwarzkopf, the commander of allied forces in the Gulf. Air raids began following the expiration of the UN-mandated deadline for Saddam Hussein to withdraw all Iraqi forces from Kuwait. "The terms set forward by the United Nations Security Council were clear - force was authorised if Iraqi forces did not leave Kuwait by the new year. They have not, as such we are enforcing the will of the United Nations to protect a member state's sovereignty," said United States Secretary of State James Baker.


Two hours after the raids began, President George Bush made a televised address. He said the military objectives were clear - force Iraqi troops out of Kuwait and restore the legitimate government. First news of the bombing came from reporters in Baghdad working for the American TV network, CNN. They reported hearing air raid sirens shortly before the bombs hit. President Bush said: "Our operations are designed to best protect the lives of all the coalition forces by targeting Saddam's vast military arsenal.

In Baghdad, Saddam Hussein remained defiant. He said the "Mother of all Battles had begun". He urged the Iraqi people to "stand up to evil".

Following the commencement of bombing, the Foreign Secretary spoke to the press briefly, stating: "The International Community is sending a very clear message tonight that we will not tolerate the breaking of international law by a rogue actor. The coalition of 35+ nations we have assembled are committed to pushing Iraq back out of Kuwait, restoring their sovereignty, and destroying Iraq's ability to prosecute similar wars and further destabilise what is historically an unstable region of the World."

We will continue to provide updates on actions in Iraq.
Government in crisis as Russia standoff escalates
  • Prime Minister resigns after leaks reveal he ordered diplomat's assassination
  • Former Home Secretary, Patricia Carmichael, arrested and charged with multiple counts of espionage
  • Diplomatic spat with USSR escalates as Soviet fleet spotted off UK territorial waters


The Government has been launched into Westminster's biggest crisis in a generation after one of the most dramatic 48 hours in British politics, international relations, and criminal justice in generations.

Former Home Secretary arrested, charged

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At 8pm on January 28, the former Home Secretary Patricia Carmichael was arrested, surrendering peacefully to police custody. In an emergency statement to the House of Commons, the Prime Minister said that the arrest was due to a matter of "the highest levels of national security:



Quote:The Prime Minister:

Mr Speaker, I am happy to update the house to the extent I am able. It will come as no surprise to anyone here that the information which I am able to give is at this time incredibly limited.

What I can confirm to the house is that Patricia Carmichael was arrested by members of the Metropolitan Police today following discussions I had with the Home Secretary and senior civil servants.

The reason for the arrest is sadly, the same reason that I cannot confirm the full details of the situation to the members present. This is an issue of paramount importance regarding the highest levels of national security. The information which led to Ms Carmichael's arrest were new to me, and owing to the time sensitive nature of the matter at hand, the arrest was part of an immediate action ordered. The investigation surrounding Ms Carmichael is still underway and as such it would be even more irresponsible for me to comment too deeply on the matter but I expect to be able to brief the House properly on this matter shortly.

Since the Prime Minister's statement the Metropolitan Police has released a statement confirming that they arrested and have charged a "45 year old woman with multiple counts of espionage". Westminster is rife with rumour that Patricia Carmichael's arrest is linked to an ongoing escalation of a diplomatic spat with Russia, including the unsubstantiated suggestion that she may have had links to the KGB.

Diplomatic spat with Russia escalates

Patricia Carmichael's arrest coincided with a rapid escalation of tensions between the UK and Soviet Union. Details remain unclear, but diplomats in both countries have been arrested or expelled, a British diplomat in Moscow died in an alleged car accident, and a Soviet diplomat in Britain died of a suspected coronary - later revealed to be an officially sanctioned assassination of a suspected KGB senior agent.

Tensions peaked on Tuesday evening, when a Russian battlecruiser was spotted off of British territorial waters - prompting the RAF to scramble a squadron of Buccaneers and the Royal Navy to deploy the 1st Flotilla. The battlecruiser eventually returned to Soviet waters without incident.

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A Russian battlecruiser was spotted skirting the UK's territorial waters

Prime Minister resigns after revelation he ordered Soviet diplomat's 
assassination

Wednesday morning saw the most dramatic turn of all - with leaked revelations, later confirmed, that the Prime Minister had ordered the assassination of a Soviet ambassador, assumed to be a senior KGB agent. Refusing to address the allegations directly the Prime Minister tendered his resignation.

Quote:Prime Minister:

It is with a heavy heart that I realise that I no longer have the confidence of my party and that this nation deserves better; though I have no doubt that the majority of my MPs will wish me all the best for the future, and I am glad to have served alongside each and every one of them. Therefore it is with a heavy heart that I have submitted my resignation as leader of the Conservative Party and informed Her Majesty of my intention to resign as Prime Minister when a new leader can be elected.

...

To the British people I would like to simply apologise. I have failed you, but rest assured the Conservative Party will never do that. I take full responsibility for the actions that have happened this last week and for that I am sorry.

Where next?

Westminster has since calmed down, taking stock of the greatest political scandal to rock the UK in generations - perhaps ever. Key questions remain and are likely to be answered as the Tory leadership election completes. Those questions include the links between Patricia Carmichael's arrest and subsequent events; the extent of the backroom diplomatic challenges between the UK and Soviet Governments; and how involved senior members of the Government were in the scandal.

The political ramifications have already been dramatic, costing a Prime Minister his job and a former Home Secretary her freedom. In the short term the scandal will rock confidence in the Government. How much that carries through to the next General Election depends on the next Prime Minister - and whether he or she can detoxify the Government's scandal-ridden reputation.
Interest rates up by 1%

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The Treasury announced that interest rates would rise by 1%, to nearly 16%, their highest since the 1970s.

The pound rallied on the move and on other Bank of England action to keep Sterling within its ERM band, rising to 2.93 DM by the end of the day - much closer to the target rate of 2.85 DM.

James Shaw, Chief Economist at HSBC, told the BBC that the action was a firm statement of the Government’s intention to remain in the ERM. “This puts the currency speculators to rest for now, but we will have to see what happens in the coming months. The Budget will be a key moment as it may determine how severe the coming recession will be and therefore how credible it will seem for interest rates to remain high and to keep the pound strong.”
Big spending budget breaks from Thatcherism

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The Chancellor unveiled his first Budget today by announcing a big temporary boost to public spending and tax cuts in a Budget designed to get Britain out of recession.

Key announcements include:
  • A one year poll tax holiday while a new system is put in place
  • A new 15% starting rate of income tax up to £7,500
  • A new £8 billion fund to purchase at-risk mortgages
  • A new £5 billion fund to buy debt from at-risk companies
  • Increases in pensions and unemployment benefits

Taken together the measures will mean the Government will borrow around £78 billion this year - the highest since the Second World War, increasing debt dramatically and likely leading to substantial extra interest payments from next year onwards.

Gilt rates - the interest rate paid on government debt - rose on the announcement but most commentators suggested the government would have no trouble financing the borrowing. “It might cost more than the government would like, but investors think they’ll be good for it,” one commentator told the BBC. “Since many of the big measures are temporary, at least £20 to £30 billion of this spending is going to wind down automatically next year.”

The Budget is a significant political break from the economic approach of Margaret Thatcher’s Government, which rejected public spending and active government policy to get the economy out of a recession.

Steve Hawkins at the IFS spoke to the BBC after the Budget and had this to say

“This was probably one of the most surprising Budgets of our political lifetimes, and how the Tory party reacts to what is effectively a huge repudiation of their approach since 1979 will be interesting. From an economic point of view it looks like the Government is determined to pull the UK out of recession and has put that priority - for now - above achieving a rapid fall in inflation. All this extra spending will probably keep the recession short and return the UK to growth very quickly, but the taxpayer will be paying this debt off for many years yet.

Reading between the lines, the Government also seems determined to keep interest rates relatively high, at least for now, to keep the pound safe in the European Exchange Rate Mechanism. With interest rates having to stay high, they’ve opted instead to open the borrowing taps to fight the recession, rather than cutting interest rates.”

The pound rose above 3 DM today for the first time in a year.
Coalition forces push Iraqi forces out of Kuwait

In a rapid 48 hour campaign, coalition forces led by the United States and United Kingdom pushed Iraqi forces out of Kuwait and captured hundreds of thousands of soldiers in the Iraqi armed forces.

Following the use of chemical weapons by Saddam Hussein, a significant escalation of plans saw coalition forces led by the United States push into Kuwait by land, while a second combined American and British force entered Iraqi territory from Saudi Arabia to block an Iraqi retreat. This was augmented by landings of British and French forces south of Basra, led by the Royal Marines, in an eastern pincer movement that met with the western pincer to isolate Iraqi forces in Kuwait.

“The eastern movement was an excellent proposal developed by Dylan Macmillan and British commanders,” said Secretary of State James Baker in a visit to Kuwait City. British and French forces landing in Basra were met with the deployment of chemical weapons, but were prepared for with hazard equipment. The Republican Guard utilised sarin gas, and there are estimates that Iraq depleted its stock of VX in the attack on Haifa.

The Kuwait arm of the campaign saw limited casualties, with 97 total personnel being killed by enemy action and 302 wounded in action. Approximately 75,000 Iraqi soldiers were killed, while over 250,000 were captured. Iraqi also lost ~4,500 tanks during the course of the campaign – leaving the regime with no more than 500 remaining, according to most estimates.

Coalition forces will continue movement into Iraq as they push towards Baghdad.
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South African Intelligence smuggle former PM Marcus Drummond-Macbeath out of the UK

Disgraced former Prime Minister Marcus Drummond-Macbeath has escaped the United Kingdom and arrived in South Africa where has has been granted political asylum.

The former PM had been holed up in the South African Embassy in London since a warrant for his arrest was issued by the Metropolitan Police following allegations in the House of Commons from the Prime Minister Aubyn Myerscough around illegal wiretapping and surveillance under Mr Drummond-Macbeath's premiership.

Today, in what can only be described as a brazen move by Pretoria, agents of the country's National Intelligence Agency smuggled the former PM out of the Embassy in a diplomatic car, car and to Biggin Hill Airport south of London - from there he was placed upon a South African Airforce Dassault Falcon, the Ambassador's own aircraft, and has now landed in Pretoria.

South African President F.W. de Klerk had this to say: "Mr Drummond-Macbeath was a true friend to South Africa, he is the victim of a witch hunt perpetuated by the British establishment, who have been infiltrated by Communist Russia."

Mr Drummond-Macbeath stated to reporters: "It is very sad that I have had to depart from my country which I fought hard to defend and serve. I can only hope that I will one day again see the beautiful Perthshire countryside.  However I am very gracious to my South African hosts for protecting me and securing my asylum here, I look forward to working closely with them and I undoubtably owe this great country a debt of gratitude. They are a true bastion standing against the Marxist tyranny that has slowly infiltrated my nation and is creeping ever closer to the western nations. They have taken a very brave decision and I thank them for it."

This is a diplomatic scandal, and undoubtedly will be condemned by most of the world, the British Government is yet to respond.
Soviets name Anatoly Lukyanov as new President
  • Parliament speaker named as permanent Gorbachev replacement
  • Lukyanov replaces triumvirate rule of PM, KGB chief and Defence Minister
  • New leader pledges to “restore the Soviet Union to its glories”
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(President Lukyanov pictured waving to supporters outside the Kremlin after his appointment was announced)

In the aftermath of the removal of Mikhail Gorbachev earlier this year, the Soviet Union has named Anatoly Lukyanov as President of the Soviet Union and General Secretary of the Communist Party.

The appointment follows months of rule by a triumvirate of three senior Soviet officials following the arrest of Gorbachev in February. The three officials, Prime Minister Valentin Pavlov, KGB Chairman Vladimir Kryuchkov and Defence Minister Dmitry Yazov, worked as an interim, ruling pact to deal with internal political strife, economic strains and the diplomatic fallout from the Carmichael affair.

However, the three had promised the appointment of a sole, independent successor later in the year to senior parliamentarians and officials once unrest had settled.

Lukyanov, 61, previously served as Chairman of the Supreme Soviet, the senior position in the country’s legislative body. Lukyanov had been an early ally of Gorbachev in his efforts to reform the Soviet Union but later sided with party establishment figures after stating Gorbachev’s policies would lead to the collapse of the Soviet Union.

The new government will continue to feature Pavlov as Prime Minister, Kryuchkov as KGB Chairman and Yazov as Defence Minister. It is believed that all three men will be prominent figures and some diplomatic and media sources even speculate that Lukyanov is a figurehead so that the other three can rule behind the scenes.

Upon his appointment, President Lukyanov pledged to “restore the Soviet Union to its glories” and that he would “keep this great nation as a leading world power”.

Governments across the world are said to be monitoring the situation closely to see if the new government will make any major changes.
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