Month: April 2008

It is good news that our prevailing wind comes from the south west, bringing us fresh air from the Atlantic and the USA. It is bad news that we are currently stuck with a biting north easterly wind, that is bringing us smells from Europe.
It remainds me of just how much grief over the centuries we have experienced by being too entangled with the affairs of that unhappy continent. Good things for the UK have come from our maritime global presence – including the fresh air brought in on stiff winds from the warmer and cleaner south-west. We should have no wish to be part of a European pong contest.

Mugabe and his cronies are moving quickly now to undermine the legitimacy and possible authority of the recently elected Zimbabwean Parliament. If they persuade the Electoral Commission to overturn just nine of the “Opposition” – now the majority – MDC seats then Mugabe’s people are back in charge. The Parliament should meet before this happens, assert their legitimacy and provide an alternative to the President who refuses to resign. They may have to do this from outside the country – it would be a good test of South Afirca, who should be willing to lend them a place near the border to do so if they have any belief in democracy.

Today is the 28th birthday of Zimbabwe. Mr Mugabe thinks that is cause for celebration, as he seeks to take people’s minds off the runaway inflation, the barbaric acts of violence, the suffering of families with little to eat or buy, and the failure to publish the results of the Presidential ballot.
The best possible present Zimbabwe could have is a change of leadership. The country is in desperate need of a government that could get to grips with the economic dislocation, and could seek help from around the world in re-establishing a system which could deliver jobs, food and prosperity.
I understand the terrible pressures on Mr Tsvangirai and the difficulty for an Opposition leader in a situation where the armed forces and police are politicised. He is trying to get South Africa to put pressure on the Mugabe regime to force publication of the election result and demand a change of President.
The regime did publish election results for Parliament which produced a Parliament where the MDC has a majority over Mugabe’s Zanu. One way forward would be for brave Parliamentarians of the majority MDC to meet and establish an alternative centre of authority, to seek to win over the public and even some of the security forces by showing them their jobs and interests would be safe with a new government if they behave sensibly. They may need to meet over the border if the security forces are instructed to stop the Parliament meeting, or to disrupt it.
Mugabe’s constant reminder of the independence struggle now looks very dated. It also gets forgotten that that struggle was not against the UK, but against an illegal state created by some Rhodesians who cut themselves loose from the UK in the 1960s when Harold Wilson was Prime Minister. It is high time Zimbabwe had a government which could live in the present and plan for the future, rather than wallowing in misrepresentations of what happened 30-40 years ago.

I am a moderniser and a traditionalist when it comes to cricket. As a traditionalist, I love the long five day Test Match, played in white kit with the red ball. It is the ultimate test of the enduring skills of great batsmen, and of the persistence and aggression of a great bowlers.
I also think the 20/20 game is the most exciting and action packed team game on the planet. It is a wonderful invention, a very different game from the long game, which can bring large new audiences to cricket.
It is foolish of the Times to bemoan the end of the baggy jumper. Many cricketers will continue to wear their jumpers in club colours with club insignia with pride, and some with a distinct lack of style. Others will rush to adopt the new fleeces, and want something that cuts a fashion dash to enhance their performances, good or bad.
This April during the English cricket season we need a new artic jacket as well, for in this age of global warming fears the North east wind does blow, and the game can be punctuated by hail and snow.
Nor is the launch of the Bollywood style 20/20 competition in India something to fear. The English cricket authorities should grasp the opportunity, and schedule our cricket in a way which allow great English players to join in the Indian competition. We have to get used to the idea that India now is an important centre for innovation, money and excitement. Cricket, like anything else, needs its fill of all three. We should take pride in the enthusiasm India is showing for a British invention, and pleasure in the way they are taking it on to new heights.
I like soccer and rugby, and enjoy watching them, but they cannot match the sheer pace and action of a 20/20 game. In a 20/20 match during three hours you can see 400 runs and 15 wickets. Every ball provides thrills, with bowler and batsman pitched against each other in a dramatic contest. It makes 1-0 after 90 minutes in a soccer game, or a rugby game determined by the kicking of half a dozen penalties seem tame in comparison. A good day at the Test might offer you 300 runs and 8-10 wickets, and that takes six hours.
So bring on the fleeces – and the global warming long johns and artic vests – and bring on more 20/20. We traditionalists can still enjoy our test matches and deal with the critics who will never understand the fascination of a series of dot balls when the contest is at its most chess like. Many more will enjoy the 20/20 game, with all the razz and glamour that goes with it. So wake up English Test Board, and let English players join in. The world is shifting to Asia. You wont beat that, so join it.

I managed a couple of one day trips to the continent during the long two week break from Parliament, to meet people in industry and commerce in Germany and Sweden. (No, they were not paid for by the taxpayer.)
It has made me want to be more European in one very important respect – to have adequate transport capacity here at home, just as they do abroad.

Wanting to get there and back as quickly as possible without wasting too much travel time, I discovered the train was impossible. Day trips were impossible by train as the distances were too great. I did not want the extra cost of hotels and the extra time away from my responsibilities here, so I had to fly. My visit to Germany took me in a couple of hours to Munich, and from there I was able to take a car to my meetings. The terminal capacity at Munich airport was large, with plenty of room and plenty of staff to deal with incoming flights. It has received huge investment as Lufthansa’s second hub airport after Frankfort. The roads to my destination were immaculate, with plenty of lanes and good junctions. The taxi driver was able to travel legally and safely at speeds of up to 160km (100 mph) with little difficulty. On my return to Heathrow there were long queues at Passport control owing to a lack of staff and positions, long queues to get out of the car park, and traffic jams, even on a motorway where the theoretical top speed is only 70 mph. There is a notable shortage of terminal and road capacity.

My trip to Sweden was even easier. I flew to Copenhagen, where I found another huge airport with plenty of terminal capacity and plenty of staff. The only thing that slows you down is the long walk from your entry gate to the exit. There is a magnificent fairly new bridge to Sweden with plenty of capacity for the limited volumes of traffic wanting to use it, financed by a toll. In Sweden the roads were capacious and relatively clear of traffic, although speeds are limited. I got to my destination half an hour early. I can’t remember when that last happened to me in the UK. On my return I faced even longer queues at Heathrow for daring to have a British (so-called EU) passport, more jams to get out of the car park, and more jams on the inadequate roads around the airport.

France and Germany have 50% more motorway style road relative to their geographical size and populations than we do; Sweden probably even more. Most continental countries have large airport facilities where they are trying to attract more business, not seeking to limit it as at Heathrow. If this government wishes to help competitiveness – and limit unnecessary emissions by allowing more efficient use of vehicles – it must get on with allowing more private investment in roads and airport capacity. The present policy is not stopping people travelling, but it is making them very grumpy when they have to, and is creating more waste of energy than is desirable. The plane that brought me back to London had to circle London for some time before landing and then had wait around 15 minutes on the ground with the engines on before a stand became available. In Munich and Copenhagen the planes landed immediately on arrival and went straight to the stand and switched off. We should stop wasting fuel by having enough capacity, and by asking airlines to move their planes on the ground using smaller vehicles to tow or tug them.

I find it interesting that greens seem to like continental countries more than the USA or the UK because they talk the talk on greenery and are keen on targets. If you examine the record you find that in recent years leading continental countires have often increased CO2 emissions more than the US and some have failed to hit their targets. They have certainly tried to expand transport facilities more than the UK, but this may not be the cause of the excess emissions, given the way they are calculated and the impact congestion and delay has on the figures.

The criticism this morning of our hapless Prime Minister is a typical media one. He is condemned for arriving in New York on the day the Pope arrives in Washington, for the Pope will take the headlines. It is all part of a world where presentation triumphs over substance, where the media can mistake the image in their distorting mirror for what is going on. What matters is how well the Prime Minister’s meetings go with Wall Street bankers over the credit crunch and with the UN over a range of international issues. Tomorrow he moves on to Washington to meet both the President and the next President, where he has an opportunity to shape the foreign policy views of all three serious candidates for the Presidency.

In the early days of the Prime Minister’s tenure the media gave him rave reviews for no good reason. As a long standing critic of his changes to the Bank of England in 1997, I was expecting financial problems. As a critic of his high spend policy, recklessly expanding the public sector without getting value for money for the spending, I anticipated economic problems ahead. The media told me when he had to handle the flooding and farming problems of 2007 that he did so well. They meant he looked serious on TV and seemed to be taking a proper interest in the difficulties. I wrote that the government had to take a lot of the blame for the crises – it was their laboratory complex which let out the disease, and their lack of preparation which left people vulnerable to floods. Worse still, there was no evidence that after the floods the government put in place the necessary measures – cleaner and bigger ditches and drains – to protect many people. None of this mattered to the BBC. The new PM was just fine, and the polls were holding up.

How different it looks nine months on. Now the fact that the Pope today meeting the President will get more US publicity than the PM arriving in New York is levelled against Gordon. The media should understand that this is a clever set of meetings by the PM. He will get plenty of publicity here in the UK for his trip, where he needs to get some messages across. The reason for the meeting with Wall Street bankers is to try to persuade us that the financial and economic problems in the UK have their origins in the US, and he is boldly trying to help sort them out. The reality is somewhat different. The UK has its own version of the western world’s credit crunch difficulties, and has so far been much less bold and positive in trying to combat them. Gordon’s stewardship as Chancellor has left the UK too heavily borrowed to cut taxes, and left UK consumers too heavily borrowed to maintain their living standards. The present squeeze in the UK owes a lot to the “substance” of Gordon, based as it has been on excessive public waste, excessive public borrowing, and a raft of unpleasant stealth taxes.It was during Mr Brown’s tenure at Number 11 that Northern Rock overstretched itself, and it is Gordon Brown who has foolishly decided to nationalise the Rock with all the adverse consequences readers of this site will know about.

I hear said that yesterday bankers in the UK think they at last got through to the PM the seriousness of the situation we are in. If they did, then maybe some of the ideas I and others have put around for tackling the banking crisis can now go onto the government and Bank of England agenda. The government this week has started talking more like the public – doubtless they have spent another fortune on polling and focus groups to find out the blindingly obvious and are now putting the language of the public back to the public. One cheer for the fact they now share our pain. They now recognise just how intense the squeeze is, and how serious the difficulties in the housing and mortgage markets are. If they had listened when Barker first reported to those of us who warned them that the UK housing market was driven mainly by mortgage finance, not by the supply of new houses, they would be in a better position today. If they had paused to try to answer the obvious question to their account of a shortage of homes, by how much do you want house prices to fall, they might have avoided the worst of the present crisis.

If they are now going to do anything more than just empathise with our pain they need to take strong action. The Conservatives official criticism of the government, that it did not mend the economic roof when the sun was shining is correct. We now need crash repairs on the roof, which include:

1. The Bank of England to make more cash available in money markets, and to accept a wider range of instruments as collateral for loans (with a suitable margin to protect the taxpayer)
2. Further cuts in the Bank lending rate
3. Reductions in stamp duty on buying homes.
4. Reduction in the rate of petrol and diesel tax, to get the forecast revenue back down to the original budget forecasts following the price increases
5. Reductions in wasteful public spending, and a general efficiency drive throughout the public sector
6. Early repayment of the Northern Rock money to the Bank and Treasury through encouraging refinancing of Rock mortgages
7. Abandoning ID cards and regional government, and imposing an administrative staff freeze throughout the public sector .

Governments are changing their position over banking regulation. When the credit crunch first struck, they were cautious and said there was no point in seeking to bolt the stable door after the horse had gone. As banks were now trying to recover from a weak position and were risk averse there was no need to strengthen controls over risk taking.

As the credit crunch has carried on its weary way there is a growing impatience as regulators feel they ought to be saying something as a prelude to doing something. We are now in to “This must never happen again” territory, allied to a view that there must be seen to be a toughening of regulation after the problems of sub prime and beyond.

There is the usual regulatory syllogism. Banking is a well regulated industry. Banking has just got into a mess. Therefore we need more regulation.

It does not flow. The truth is that the detailed regulation of banking under Basel 1 encouraged banks to put risks off balance sheet and to securitise. It was their enthusiasm for doing this that led to the well publicised problems at certain institutions. Left to their own devices to assess capital adequacy, they might not have gone so far in those directions – the regulatory sums allowed them more leeway and gave a sense of false security. No self respecting banker would be seen to have substantially more capital than the regulator thought was necessary. Northern Rock was discussing how to reduce its capital surplus under current rules before the run began.

There are currently three preferred options on offer for re-regulation of the banks. Each one has a role to play when we are coming out of the credit crunch, but each one if imposed too strictly and too soon could make getting out of the crunch more difficult.

1. More transparency. Usually more transparency, more published information about the state of a company, is a good thing. It acts as discipline on the company, and allows others to assess how much business to do with that company. However, when there are fears about bank weaknesses, a sudden rush to publish more may fuel the fears rather than reassure. Different banks will have taken a different line on how to value assets, how to assess liabilities, and how much capital cover they need. Changing the numbers or flooding out new numbers at or near the low point of the cycle could damage.

2. Mark to market. Some say the way to ensure clarity and comparability over banking numbers is to require all banks to mark the values of their assets and liabilities to market. That means that if they hold bonds, shares and bonds in securitised vehicles, packages of mortgages or the like, these should have a market value and that should be used in declaring the bank’s position. Again, this is a good idea in normal times, but in these conditions it could lead to a rush to the bottom. If bank A has to mark its holdings down a lot by marking to the new lower market prices, then it may have to start selling some of the assets to buttress its position. This could drive the market price down further, leading to more weakening in its balance sheet position. If the bank intends to hold the assets until maturity or for a reasonable length of time, making them mark them to market now could be disruptive. They need to be examined in private on a case by case basis where they wish to deviate from marking to market, if necessary in conjunction with the regulator to see fair play. There is no necessity to value a bond or mortgage at a low market price if the bank can and will hold it to maturity and get full repayment.

3. Require more regulatory capital to allow for the risks of a future credit crunch and difficulty in raising money market funds. Again this would be a prudent decision, but at the moment when banks are working hard to ensure proper balance sheet rations and liquidity for current tough conditions, an added requirement would be far from helpful and would delay recovery.

Stephen Lewis (Insinger de Beaufort)has recently written a good piece examining the IMF’s claim to be the obvious choice for a new world super regulator role over the banks. He shows how the IMF in the run up to the recent credit crunch was reporting that systemic risk was low, and was not warning people that we were about to enter the worst conditions in money markets for at least 35 years. He too is concerned, as an experienced analyst of money markets and a City expert, that overdoing the extra regulation at this point could impede recovery. This is becoming a serious and long running credit crunch. The work of the authorities around the world should concentrate on rebuilding confidence and liquidity. That should not include subsidising banks or taking on unreasonable risks from the banking sector, and it should certainly not include nationalising banks. It should include taking action to make markets more liquid and buying assets from banks at prices that mean the taxpayer does not lose.

The originate and distribute model, where banks arrange loans and mrotgages and then sell on packages of these loans to others, was a way designed to reduce the risk to the banks, and a method to allow them to extend more credit. As Mr Lewis argues, this was not such a bad idea when done sensibly. It would be a pity if such practises were made impossible in future, as it could limit credit growth more than is desiarable.

This morning it is time to look at the Olympic ideals, and the sorry progress of the torch around the world. It is a story of two cultures who seem unable to comprehend each other, of mistaken spinners for China, the Olympic movement and some torch host governments who think they can spin away the scenes on our televisions. It is a story of muddled authority and little sensible thought about what was likely to happen.

Reading the words of the Chinese Ambassador in the UK in this Sunday’s press reinforced the message that an authoritarian single party state like China looks at human rights and freedom of expression in a very different way to a democratic country. There was seeming incomprehension that protesters could be so unfair to the noble torch bearers in the cause of Tibet, as if the torch supporters from China were in some way noble and the torch carriers exempt from any unfortunate associations. There was patient explanation that if only they understood just how well Tibet was doing under China, and how many people wanted Tibet to be part of China, the protest would wither away. There was just a hint of a warning, when the Ambassador told us that it was doing grave damage to the image of the West in China.

Listening to the UK government explaining that those on the streets supporting China and the Olympic movement were different and should be treated differently from those peacefully protesting against one or both created another sense of unreality. I asked the Foreign Secretary before the torch flew into London what instructions the government was issuing to the police, as I was worried the police were going to be placed in a very difficult position between two strong groups, pro and anti China. I received a bland and tortured reply, trying to run with the fox and ride with the hounds at the same time.

What I had hoped for was a more considered answer. It should have gone something like this:

“I am grateful to the Rt Hon gentleman, who has given me this opportunity to set out the government’s view on this important matter. We have decided that the people of London who wish to should have an opportunity to see the torch being carried by leading athletes, unimpeded by violent or intrusive protest. We also believe that those who wish to protest about the matter of Tibet and human rights should be allowed to do so peacefully. We therefore have asked the Organising Committee to agree to a shortened route for the torch around Hyde Park, where the barriers used for royal processions will be used to keep back the crowd so they can view but cannot interfere with the torch and its carriers. The police will be asked to station themselves along the line of route in sufficient numbers to ensure no-one seeks to rush or leap the barrier, allowing people to view the torch. We have informed the Chinese authorities that we do not need the help of their security people to ensure the safe passage of the torch – we have a long tradition of royal processions in London without incident. People may display banners and T shirt logos along the line of route, but not in a way which stops others seeing the torch.”

It would also have helped if government Ministers had kept out of the limelight and left it to the Olympic movement and its chosen representatives in London.

I would give the same advice to any country that has not yet received the torch but is going to. If they wish to continue with it it would be best to chose a route which can be protected sensibly without intrusive security, and the authorities should allow peaceful protest.

The Olympic movement has some difficult decisions to make from here. It seems to want to continue with the progress of the torch despite the volume of criticism it has engendered. If that is so it must make better arrangements. The problems will get more formidable in Tibet, where the world’s media will want to congregate to follow – or make- a story. It will not be the kind of story the Olympic movement wants. Stopping the media or controlling the media in Tibet will reinforce the human rights protest elsewhere. Allowing the media will give greater prominence to the Tibet issue. Is that what China herself really wants?