Month: April 2008

This weekend will see the Olympic torch arrive in Britain amidst wrangling over Chinese human rights and the role of Prime Minister in the ceremony. Tomorrow, April 6th, is also the 112th anniversary of the opening of the first modern Olympic games in the Panathenaic Stadium in Greece. Most people ignore the Much Wenlock (Shropshire) Olympian Games of 1850 as a precursor.

The first modern Olympics in Greece had many of the features of the more recent encounters. The organising Committee saw costs multiply to three times budget, before they resigned en masse in 1894 saying the games could not be staged in Athens as they could not afford it. Others stepped in to raise more money and sort the problems out. The games were organised with representatives from 14 different nations, who joined in the Opening ceremony in national groups. Silver medals and laurel wreaths were awarded to winners and copper medals to runners up. Attempts to construct a modern gold/silver/bronze medal table for Greece shows the host nation winning, with the US second and the UK fifth. There were 43 separate events covering nine sports, with the highlight for the home crowd being a Greek victory in the marathon. There was a protest by a female athlete, running her own marathon to highlight the organiser’s ban on women participating in the games at all. There was no special accommodation for athletes. It was left to who happened to be able to afford to be in Athens at the time as to who could join in. Several of the British competitors were attached to the British Embassy. The rowing had to be cancelled owing to high winds, and sailing was abandoned owing to a shortage of boats. The closing ceremony took place a day late owing to bad weather.

In many ways the modern Olympics are much better. Women and the disabled can join in the games. Provision is made for the athletes. Many more countries are represented and more sports featured. More preparation and more money allows the best in the world access to good equipment and high standards of organised competition. They have, however, wandered further and further from the ideal of dedicated amateurs competing for the fun of it. The advent of ever bigger money has produced all the trappings of professional sport – expensive coaches, expensive equipment, detailed regimentation of the athletes life by others, and so much training that an Olympic athlete can no longer hold a normal job as well. It brings with it lawyers and ever more complicated rules. As the prizes become so much more valuable to win, so the ingenuity of coaches and athletes pushes at the limits of the rules. An athlete who wins an Olympic gold may still be an amateur in the sense that they are not paid for the winning race, but they will on the back of it be able to enter all sorts of lucrative contracts and deals to exploit their skill and celebrity status. The rules have been changed and relaxed over the years to reflect the reality that financial support helps produce better performances.

We are learning to live with the rough side of the Olympics. Any host nation is opening itself up for scrutiny, and potential abuse if the world does not like the way it behaves. The Olympic movement does little to stop the advance of ever more money in the games themselves, and even encourages it by backing very expensive staging and lucrative media involvement. It has become a media fest and a celebration of large corporations as sponsors, as well as a showcase for the fastest, strongest and most skilled competitors. We should expect more political controversy over the games, as the games are big news and those campaigning see an opportunity to gain air time and coverage. Attempts to stop peaceful protest will simply increase the coverage of the protesters, as it will make the story bigger. The arrival of the UK Lib Dems on the scene trying to find the moral high ground tells you they realise it is a great media circus, where even a squeezed third party can find some oxygen of publicity.

It is difficult to believe the UK government is serious about climate change.

Anyone in power who believes that global warming is happening, that it is dangerous, and that it is caused by human emissions of CO2 would conclude that unilateral action in a country the size of the UK, however effective, could make practically no difference to the likely growth of carbon dioxide output, as China and India industrialise rapidly. They would go on to decide that what the UK had to do to deal with the problem is invest in tackling the likely adverse consequences of it. They would also be unlikely to commission new coal fired power stations without carbon capture and storage, given the only progress in cutting CO2 the UK has made in the last 20 years was the dash for gas initiated by the Conservative privatisation policy.

I have been urging the government for a long time now to take action to prevent flooding and to increase the piped water supply, as more flooding and shortage of piped water are the two most likely adverse consequences of a warmer Britain. I have identified a number of anti flood projects that need to be undertaken in my own constituency. Many of them require relatively modest expenditure – enlarging a ditch with a digger here, cleaning out a culvert there on a regular basis. Indeed, they could probably be accommodated by spending less on reports, reviews and letters denying legal liability by public authorities and hiring a man with a digger for a few days. A couple require larger schemes, that need to be fitted into the Environment Agency’s overall budget, and some require action by the local Water monopolist. I have had another conversation with Hilary Benn, and have followed it up with another letter, as I suspect what I find in Wokingham is common in all the areas subject to flooding around the country.

I have also been urging action to tap into borehole water where water levels are rising, to build an additional reservoir for the South-east and to press ahead with a stand-by desalination plant in London for water provision.

We are going to need better flood defences and an increase in water supply, regardless of climate change. So come on government, wake up.

I am also grateful to a correspondent for sending me the following quotes, which shows how professional opinion changes, as it should do in the light of new facts and theories

“The world’s climatologists are agreed” that we “prepare for the next ice age” (Science Digest Feb 1973)
“..the approach of a full-blown 10,000 year ice age” (Science, March 1 1975)
” The North Atlantic is colling about as fast as an ocean can cool…growing seasons in England and Scandinavia are getting shorter” (Christian Science Monitor 27 August 1974)
Lowe Ponte, “The Cooling” 1976 forecast the problems of global cooling

Just as we have seen a rush by mortgage companies to put their rates up, so they are not left as the cheapest on offer facing a deluge of applicants, so we are now seeing a rush to withdraw mortgage products altogether as mortgage companies struggle with the volume of demand.

Individual companies are right to stress they are withdrawing products and increasing prices because they are inundated in the wake of Northern Rock’s withdrawal from the market, not because they have run out of money. The system as a whole, however, is cutting back on its volumes because it is rightly being more cautious about how much money it can raise from different sources. The Credit Crunch is having a real impact at last – it means less money for banks and Building Societies as a whole to lend, which means fewer mortgages, lower proportions of the house value being advanced and higher interest rates (relative to market rates).
This in turn will mean lower house prices.

The rest is covered by yesterday’s post entitled “Are all mortgages wicked?”

Yesterday we were meant to have a debate on the future of Heathrow. It is not an easy decision for a government to make. Those of us representing people living within range of the airport would like better noise controls and quieter aircraft, with reductions in the unpleasant exhaust emissions of planes. We can also see that the UK needs a major international airport in order to sustain itself as a favoured location for inward investment and business service activity, and as an embarkation point for a major trading nation that needs to allow its business people to fly to the five continents to sell goods and services. Heathrow is too small for current use, let alone for the likely growth in air travel in the years ahead.

This important subject was introduced by the Lib Dems in a motion which they themselves admitted they had drafted incorrectly. They used the debate to retail a series of tired half truths and errors about carbon dioxide and climate change, instead of getting to grips with the difficult realities of the popularity of aviation and the problems with any location for additional airport capacity. The prejudices on parade included the following strange ideas:

1. More planes landing and taking off at Heathrow would be bad for CO2 emissions so it would be better to prevent growth at Heathrow.
This would by common agreement merely divert this growth to Skipol, Charles de Gaulle and other overseas airports, so it is difficult to see how this would help curb overall CO2.

2. Trains are green.

Trains also burn fuel leading to carbon dioxide emissions. Electric trains are especially fuel inefficient, as there is a large primary fuel loss during the electricity generation phase, and a further energy loss when the electric energy is turned into mechanical energy by the engine. The relative contribution of train travel to carbon dioxide generation depends on proper analysis of the fuel efficiency and age of the train engine, the weight of the train, the number of passengers using it, the way the electricity was generated, and comparable details for competing travel modes. The train is not always greener.

3. Buses are green, cars are not.

Again, there needs to be proper analysis. The average bus is old and fuel inefficient, and has few passengers. The bus is only a greener way of travelling where it has a new fuel efficient engine and sufficient passengers, or where there are large number of passenger using it at the same time.

In the many debates we have about CO2, with more coming soon for the Climate Change Bill, there is usually a concentration on the CO2 generated by planes and cars, with much less attention given to the bigger amounts created by the domestic heating boiler, by commercial and industrial space heating and cooling, and by power generation itself. Some now point out that nuclear power is not carbon free, as substantial amounts are given off in making the concrete and the metal parts to build a nuclear power station in the first place. Similar calculations are not brought into the equation to deal with the concrete used in railway sleepers and steel used for rails for new train track.

It is high time we had a sensible debate about CO2, with a broader understanding of its multiple origins and sources. It is difficult to understand why the plane and car get such a bad press, yet the often worse inefficient domestic boiler gets away with it. It is frustrating that many of the climate change regulators and officials work in well heated offices in winter, sometimes with air conditioning in the summer, yet their space heating and cooling never becomes an issue. In many places we leave street lights on all night, public office buildings are often left heated and lit after the employees have gone home, whilst in some cases offices are heated to higher temperatures in winter than some are cooled to in summer.

I am all in favour of having a drive to raise fuel efficiency across the board. We need to do so at home and in the office as well as on the road, in the air and on the tracks. We need a government which takes its duty to save us money on its own energy bills much more seriously: the public sector should pioneer new and old ways of saving energy and cutting emissions. This is not the same argument as the argument about how large and where London’s main international airport should be. You will not curb the growth of global aviation by restricting one airport – that will merely shift traffic elsewhere at the margin.

Today a leading mortgage company has announced it is withdrawing for the time being from making any new mortgage advances. This follows hard on the heels of the government’s decision to halve the amount Northern Rock has lent on mortgage over the next couple of years in order to repay the money owing to taxpayers.

In recent days mortgage rates have been rising, even though the Bank of England’s message on interest rates has been to keep them the same. As one or two mortgage companies find they are offering the lowest mortgage rates, so they are inundated with people seeking a good value mortgage. They are forced by the rush into putting up their rates, only to leave another mortgage company exposed to the rush. It is going to be a difficult time for people seeking a mortgage, and a more difficult time for those with a variable rate mortgage, facing higher interest payments as a result.

Today Parliament will be debating mortgages on a Liberal Democrat motion. The LDs have been saying for some time that people in the UK have borrowed too much, and have been urging action to curb private sector borrowings. Presumably they wanted higher interest rates sooner, to choke off some of the mortgage demand, and probably want tougher regulations to make it more difficult for people on low incomes or with few assets to borrow.

I certainly opposed Gordon Brown’s decision to tinker with monetary policy by changing targets for inflation from the RPI to the CPI. It meant the Bank of England had to set lower rates in the run up to the 2005 election than if they had kept the old target, and did mean more credit was extended. If the government had stuck with the RPI, and had kept a better control over its own borrowings, we would be better placed to weather the current financial storm.

I do not, however, share the LD view that things should be made a lot tougher for those on low incomes or with no cash for a deposit to buy a home. Home ownership is rightly much sought after, and is an important part of an English person’s liberty. Once someone owns a home they make decisions about their private space in a way tenants cannot, and they have an asset which usually goes up in price which brings them greater financial independence as the years progress. There can be little worse financially than facing old age with no home that you own – it means you pay the highest rents of your life at the end of your life when you have least income.

So what should the authorities do about the move from boom to bust in the mortgage market? They should not rush to regulate to dictate terms to mortgage companies., Saying now people cannot in future borrow 125% of the value of their property, or saying to those without deposits they have to save for one first would be seeking to bolt the stable door long after the horse has gone. Yesterday’s problem was too much borrowing. Today’s may easily become too little if the government is not careful.

The Bank should cut interest rates, to offset some of the unplanned increase in rates we have seen in recent weeks. It needs to try to get control back over the general level of rates in the markets. The authorities should not introduce new and more mortgage regulation. In a global market it is difficult for such regulation to bite if done nationally, whilst the consequences will be harmful to those seeking UK based loans, making them still scarcer and dearer.

It is probably necessary to cut Northern Rock’s mortgage book because the bank is now nationalised and must not be seen to competing successfully to lend more money. It is certainly necessary to get the taxpayers money back in reasonable time. This will place a continuing strain on the mortgage market, as other lenders find the £50 billion to replace the Northern mortgages destined to be repaid. In these conditions the Bank needs to do all it can to keep the mortgage market reasonably liquid, without putting more taxpayers money at risk without more than adequate collateral and protection. The Bank should also be sympathetic to the idea that the banking sector should not have to write down all their good quality shorter term paper every time some financial institution has to dump some of it at distressed prices to raise cash, for that way leads to a race to the bottom with continuing dangers for some financial institutions.

It is important amidst all the puritan commentary telling us it serves people right, that they have borrowed too much and the financial sector has been greedy and irresponsible, to remember that people still need homes and home ownership is the best way of organising and financing that. The important task is to get rid of the froth in the market without causing a slump, for that would just put more people into misery and prevent the rising generation buying a home as soon as they would like.

Today a Labour led Parliament will approve the second reading of a Bill to allow detention without trial for 42 days.
Labour in office have turned out to be the new authoritarians, keen to overturn English liberties established over the long centuries of our forefathers’ struggle for freedom.
I can understand they may have no sense of history and dislike traditions, but you would have thought a so-callled progressive party would have some sensitivity towards human rights, beyond revelling in political correctness.

The taxpayers’ misery – and the government’s discomfort – have now begun. The nationalisation of Northern Rock will be costly to taxpayers and damaging to the government’s reputation.

Last night the government brushed aside Conservative proposals to handle Northern Rock in a different way and to avoid the taxpayer taking on responsibility for all the jobs, mortgages, loans, properties and bills.

Instead, the government announced a one third cut in the workforce, and a halving in the size of the business, along with confirmation that the bank will lose money in each of the next three years. That prospectus for the nationalised business suited no-one. MPs from the North East, along with the rest of us, did not want to see such large reductions in the workforce. MPs who care about the taxpayer do not wish to see taxpayers having to foot the bill for the job losses and the other losses in the business.

The government refused to tell us what the forecast losses amount to, implying they will be significant. They refused to tell us how the taxpayer would be asked to pay for these losses, implying they have not thought through how the revenue subsidy will be injected in to the business. Their numbers of course did not add up, as the size of the business is going to be reduced by more than the workforce, implying further job losses to come later.

The Chief Secretary contented herself with claiming that the Opposition had no alternative to nationalisation, declining to answer my points about how the Bank of England and the Treasury could have acted as Northern’s bank manager, lending them the minimum necessary to see them through and managing the repayment of the loan in a timely way.

The government seems to be in denial. It thinks nationalisation is the answer, when it will turn out to be a whole new load of problems. Every staff member dismissed, every loan that goes bad, every customer upset now stretches up to a Minister who is in ultimate control of the destiny of the company. They do not seem to have a plan to handle the complex management problems, and are refusing to own up to the magnitude of the cash requirements of their new acquisition.

Last night the Opposition were right to ask them to think again. We were right to offer them a better way of handling a distressed bank. It is a pity for all of us they turned us down and made silly political points instead.