Month: January 2009

I did not realise how much you have all come to rely on regulatory notices warning you of risks in your lives that our kind quangoland and government now issues for us. It has been heartening to read your palpable sense of relief and enjoyment when I put some on the bottom of my texts for your protection.
As I have been asked for some more, here are some general ones today which you could use for future stories that might otherwise alarm.

REGULATORY NOTICES

LIVING IN THE UK CAN DAMAGE YOUR WEALTH
DRINKING WINE IN PRIVATE AT HOME WITH YOUR FAMILY IS A MIDDLE CLASS ACTIVITY WHICH MAY DAMAGE YOUR HEALTH
TRYING TO ARREST A BURGLAR SHOWS YOU LACK SYMPATHY FOR THE FINANCIALLY AND MORALLY DEPRIVED AND MAY BE A CRIMINAL OFFENCE
STERLING MAY GO DOWN A LOT AS WELL AS GO DOWN
THE GOVERNMENT RESERVES THE RIGHT TO PAY YOUR PENSION AND ANY DEBT REPAYMENTS IN DEVALUED POUNDS
JUST BECAUSE THE GOVERNMENT BUYS BANKS SHARES DOES NOT NECESSARILY IMPLY THEY THINK THEY ARE CHEAP
MINISTERS NEED AIR FLIGHTS AND OFFICIAL CARS TO HELP THEM GET OVER THE IMPORTANT MESSAGE THAT FLYING AND DRIVING CAN DAMAGE THE PLANET
JOB SECURITY CAN ONLY APPLY TO THE PUBLIC SECTOR
PLEASE ENJOY THE CURRENT GOVERNMENT SHOW AS YOU WILL BE PAYING FOR IT LATER
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Some Labour figures seem to see this recession as pay back time for past recessions. This was to be the recession that hit the south more than the North, hit higher earning services more than manufacturing. This view is as wrong as it is unpleasant.

Today’s news of big job losses at Corus follows hard on the heels of short time and job shedding at the major car assemblers and component makers, and in many other manufacturing companies across the country. This recession is hitting manufacturing all too hard. A number of the companies sacking people are efficient and well run by world standards. Their managements have caught up with the best in the world, and their workforces have done what has been asked of them. The UK is no longer the sick manufacturing man of Europe, bedevilled by weak management and striking workforces. At its best there is a common purpose between leaders and led, a willingness to do what it takes to be competitive in a very competitive world.

At the same time we see the sorry spectacle of a couple of banks, RBS and Northern Rock, still paying huge salaries and bonuses to senior executives who have presided over disaster for their institutions. Their business models failed to survive in the dangerous waters of UK banking and monetary policy. They paid themselves too much for doing things that lost their banks huge sums of money as asset prices fell and financial instrument markets became untuned. They became huge , costly and complex bureaucracies that did not necessarily serve their banking customers well. RBS was allowed by shareholders and Regulators alike to go on a bizarre acquisition spree near the top of the market, heaping debt on debt on its huge balance sheet. Why can’t the government see this, and at very least cut the pay and bonus extravagances at the top end dramatically?

The government claims to be interested in social justice. Few of us can see much justice in subsidy for the banks and tough rations for the manufacturers. The government is right in one thing – lettting a major bank go under would not be a pretty sight. They are wrong that they needed to buy shares and effectively subsidise their bloated costs and wrong business model. They needed to lend short term, whilst putting pressure on the borrowing banks to cut their costs substantially and quickly, and to dispose of activities that did not relate to core banking in the least damaging way.

I am pleased that at last the regulatory authorities have taken the point that I and a few others have been making that they need temporarily to relax the capital requirements on UK banks. I read in the week-end press they now want the banks to have a minimum ratio of 6% share capital to total liabilities, instead of 10%. That means that for every pound of share capital a bank could now put £17 to work, instead of £10, which will help ease the squeeze. It will not mean that foreign banks, also reining in, will necessarily become very active again in the UK. I also detect in the latest briefings to the press from the government, Bank and UKFI, signs that they are now ready to look at cutting the huge risk taxpayers are running in RBS by selling or winding down the investment banking activities and selling some more of the non UK businesses. Please may this be true – it is much needed to try to make RBS a profitable organisation again, and is certainly needed to protect the taxpayer from yet more scandalous losses.

I do not believe these arms of the state are “independent”. The BBC has been slave to every fashionable interpretation of British politics and economics the government has put into circulation over the last eleven years. It is ironic indeed that the BBC should now find itself on the “wrong” side of an argument over whether to broadcast a charitable appeal or not as it seeks to discover some “independence” of the present ruling elite, just when its decade long error in parroting that the Bank of England is “independent” has so visibly come apart and done so much damage to the livelihoods and jobs prospects of so many.
If we are to have a truly “independent” BBC then they need to be free to make decisions like the Gaza one, and the believers in an independent BBC like the present government should refrain from criticising them. The problem with the BBC in recent years has not been crude party political bias, but an unwillingness to see the dangers behind the policies of the government, and a refusal to see that so much of the news output they put forward is spin based on the propositions that big government is good, bigger government is better, the EU is generally a good thing, and the US is usually a bad thing (pre Obama).
The BBC’s failure to give airtime to those of us who were warning about the coming crash showed the dangers of a broadcaster who could not see beyond the complacent government soundbites that they had made the Bank of England independent and this guranteed economic stability. Now they mount a defence of their independence by picking a fight with the Labour government on an issue over a charitable appeal. In so doing they give huge publicity to the charitable appeal anyway, whilst showing a rare willingness to disagree with the Establishment.

This week I attended an Ofcom briefing on their conclusions concerning the future of the media. It made my blood boil.
The other MPs attending did not seem short of views on the future of TV and the web, they were not lost for words and several seemed to be well informed. Yet here we were again, a group of legislators answerable to our constituents, having to listen to the lowest common denominator, contradictory and often incoherent jottings of a quango that had spent far too much of our money on trying to craft a consensus for the future. We seemed to be there to take dictation and to accept that these “experts” had come up with the perfect balance of subsidised television, regulated markets and support for the BBC monopoly.
What most angered me was the insistence that we needed to strengthen broadcasting for “the nations and regions of the UK”. By this Ofcom meant we need to slavishly follow the EU agenda to encourage separation in Wales and Scotland, and to balkanise England into a series of meaningless regions.
It is true that if you have subsidised broadcasting, and if you concentrate a lot of broadcasting power in the hands of one primary broadcaster, you will need the government to express a view on what bias that broadcaster should adopt towards the sensitive issues of identity and nationality. The government could say to the BBC it is the British Broadcasting Corporation, so it should concentrate on broadcasting to the nation of the UK as a whole, in ways which all parts of our nation find acceptable. As a supporter of the Union I would be happy with that.
If, on the other hand, the government wishes the BBC to encourage or foster separate national identities, it should do so by having English TV as well as Welsh and Scottish TV. If we have reached the point thanks to divisive devolution where Scotland wants her own news and her own TV programmes, then Englishmen will want English news and English TV programmes. Why do we have to be told what the Scottish weather is going to be if they have separate programmes? Why does it matter to the English whether Rangers or Celtic are ahead in their local league if they don’t want to join the English league and face stronger competition? In Labour’s devolved world those results should be on Scottish TV, not English.
What I cannot accept, as a Brit and as an Englishman, is the ridiculous and unsuccessful attempt to break my country up into unloved and ill defined regions. My constituency is in the South East, the Rest of the South East, the Thames Valley, the South, Berks Bucks and Beds, the Home Counties and sometimes in Wessex. So which is it? Why do so many quangos and public services come up with so many different versions of the artificial region they want us in? We are usually divorced from London by the administrative map makers, yet many of us go to London for work and pleasure on a regular basis. We can see London TV. We have no wish to have artificial regions forced on us by governments or the media.
If Ofcom is going to replace the government as the source of policy on how to run subsidised TV will they please grasp this simple point. English people are being forced into wanting their country to be represented in all these matters by the way the government and media are fostering devolved identities in Wales and Scotland. The asymmetry of treatment is grotesque and unfair. When I asked about this, there was of course no answer.
The current model of “shared sovereignty” in the EU/NU Lab British state is damaging the Union and annoying the English. The UK government resorts to increasingly frantic and crude Britishness language, the very opposite of what most of us understand by Britishness which should be understated and self deprecating, not strident and in your face. Meanwhile the EU is really winning, by working with the smaller nations within the Union to undermine the whole. England is fed up with the EU pursuing its vendetta against us, seeking to deny our existence and stifle our cultural identity. We do not belong to regions, as the people of the North East magnificently demonstrated when they rejected regional government by 4 to 1. The ruling Euro-Brit elite of course ignored them, and refused the rest of us the therapy of a vote to say the same.
I also enjoyed the contribution at the meeting from one participant who thought it was most unfair of web services to take advertising revenue away from ITV! It’s called free enterprise, and offering the public what they want. He should try it sometime. Ofcom seemed frightened by the power of the new technology, because it has the power to be the solvent of the monopolies and cosy arrangements that have sustained the current media elite and their views, which are so often different from the views of the rest of us.

REGULATORY NOTICES

THE BBC WILL ASSUME YOU HAVE A TV AND DEMAND YOU PAY A LICENCE FEE WHETHER YOU HAVE ONE OR NOT. THEY DO KNOW WHERE YOU LIVE.
YOU MUST PAY THE LICENCE FEE EVEN IF YOU DO NOT WATCH BBC PROGRAMMES.
THE WEB IS DANGEROUS AS IT CAN UNDERMINE CONVENTIONAL VIEWS VALUES AND ADVERTISING ON MAINTSTREAM MEDIA. IT IS NOT RECOMMENDED FOR UNTRAINED PEOPLE.

The government would like you to go shopping. They would prefer it if you flashed the plastic, as they want you to go borrowing as well.

I have a more modest suggestion. If you think at some point in the next year or two you cannot resist the temptation of an import of two, go and buy it today. If you cannot cure yourself of the craving for continental wine, have one last fling. If the curves of European furniture are keeping you awake at nights, go and treat yourself this weekend. If you still do not have enough amazing electrical and electronic gismos and TVs from Japan, this might be your last chance to afford one.

I did some research for this blog during my constituency day yesterday. In the wineshop they told me to expect some double digit price increases in February for German and French wines, once their current stocks have run out. A furniture buyer said he was expecting 15% price hikes as a minimum for the imports from Euroland. The yen has risen fastest against the groggy pound. They couldn’t tell me what might happen to prices in the TV shop, but I would expect they will have to pass some of the grief on quite soon.

Allowing for stocks bought before the collapse in sterling in the last few months, and allowing for some importers taking out forward cover on the currency, you should nonetheless expect to see imports getting a lot dearer in the months ahead. If you help the shops today to move the cheaper product they have left, maybe they will then think about buying some replacements that are made in the UK. There are some good UK white wines and some attractive furniture to continue the theme of this piece. It’s time for the electrical and electronic manufacturers to think about making more here, now we are so much more competitive thanks to the fall in the pound. You can forget the new German car of course – if you ever did want one. They are dear already, especially when your second hand one has such a low value now.

REGULATORY NOTICES
SHOPPING CAN DAMAGE YOUR WEALTH. YOU SHOULD NEVER BUY SOMETHING WITHOUT TAKING PROPER ADVICE FROM SOMEONE WHO UNDERSTANDS YOUR NEEDS AND YOUR FINANCIAL POSITION. BUYING THINGS ON BORROWED MONEY CAN CAUSE YOU DIFFICULTIES IN MEETING FUTURE REPAYMENTS. DEALING WITH NATIONALISED BANKS CAN BE A VEXATIOUS EXPERIENCE. REMEMBER TAXES MAY GO UP AS WELL AS UP AND YOU WILL HAVE TO PAY THEM.

DRINKING WINE MAY BE BAD FOR YOUR HEALTH. DRINKING TOO MUCH WINE COULD LEAD YOU TO BREAK THE LAW.
FURNITURE IS USUALLY HARD. WALKING INTO IT COULD INJURE YOU.

SHOPPING WILL INCREASE YOUR CARBON FOOTPRINT.

The media are suddenly interested in the blame game, after remarks by various prominent actors trying to lay the blame on someone else.

The government has three villains in its storytelling. There are the Conservatives of the 1980s for deregulating (lie); the bankers (they didn’t do it on their own); and the world (apparently the UK government has no power to make things better here).

The Conservatives did not deregulate the supervision of banking capital and liquidity. In our day in government banks were far more constrained in the amounts they could lend than they became under Labour, and their balance sheets were much smaller.In 1997 UK banks had liabilities around 23 times their core capital. Labour allowed this to expand to a massive 34 times by 2008. I was calling for tougher regulation of capital and liquidity in the Conservative’s Policy Review in Opposition. The regulatory system was changed in a major way by Gordon Brown in 1997. It was this system which failed to supervise the banks properly.

Yes, the bankers made large errors, overextending their loan books, helping fuel an unsustainable property and share boom, and building ever larger investment banking arms that took on too much risk. Now the UK government owns a couple of banks, why isn’t it changing the business model and sorting out these obvious mistakes? Why doesn’t it say no-one at RBS will be paid more than a Cabinet Minister, until the bank returns to sustainable profitability? If people don’t like that, let them leave. Why doesn’t it run off and run down the trading activities in futures, options and other financial instruments, to cut the risks?

It is true that there are downturns in many countries around the world, and true that the US, Iceland, Ireland, the UK and some other countries have banking problems of a greater or lesser degree of difficulty. This does not mean that the UK government and regulatory authorities did well, and that our problems were imported. Northern Rock was a British business under British regulation lending British money to British borrowers. It needlessly went under thanks to bad management and bad regulatory supervision. The British and European authorities allowed RBS to acquire ABN Amro without seeing the potential competitive and capital adequacy issues the acquisition posed. More recently the UK authorities have strangely allowed LLoyds to acquire HBOS, a move which has weakened LLoyds and reduced comeptition in the market. The British downturn is a nasty one, and owes a lot to the misconduct of UK monetary policy by the Bank over the last few years.

So let’s summarise the ten worst mistakes of the UK authorities so far:
1. The government was wrong to take powers of daily bank supervision and the duty to raise money for the government away from the Bank of England. This made it difficult for the Bank to conduct a sensible monetary policy.
2. The government was wrong to change the inflation target at the end of 2003, leading to lower interest rates than were safe.
3. The government was wrong not to chair decisive meetings in August 2007 with the Bank and FSA to make the markets more liquid to prevent the run on the Rock.
4. The government was wrong not to find a banking solution to the problems of the Rock, relying instead on an expensive and damaging nationalisation.
5. The authorities were wrong to scupper a private sector deal for the Rock, partly owing to their interpretation of EU rules
6. The authorities were wrong to keep interest rates relatively high for as long as they did
7. The authorities were wrong to tighten capital requirements last autumn and to propose tightening liquidity requirements at the turn of the year when the crunch was well advanced
8 The authorities were wrong to put equity capital into banks towards the end of 2008, without doing proper due diligence and without demanding prior write downs of bad and doubtful debts
9 The government was wrong to cut VAT, adding needlessly to the government deficit
10 The government was wrong to follow a policy of benign neglect of sterling, and to make the last cut in interest rates.

The NHS Constitution has arrived. I hope you feel better for it.

I opened my copy with eager anticipation, having heard so much about it from Ministers and spinners at the public expense. I am afraid it turned out to be a bit of a let down.

The first surprise is it does not seem to be a Constitution in the normal sense. It does not set out the structure and rules governing the complex web of Trusts, Boards, Complaints procedures, surgeries and hospitals that comprise the modern NHS. It’s not as close to a Constitution as the “non constitutional” Lisbon Treaty turned out to be!

It came as no surprise to discover it is written in that same deadening mixture of bureaucratic mumbo jumbo, legalese and the blindingly obvious that characterise much of this government’s propaganda, Green and White papers and so-called consultation documents. Let me give you a flavour:

1. Bureaucrat English addressed to staff “to play your part in sustainably improving services by working in partnership with patients, the public and communities”.
2. Legalese addressed to all of us: “Pledges go above and beyond legal rights. This means that pledges are not legally binding but represent a commitment by the NHS to provide high quality services”.
3. The blindingly obvious: “You have the right to access NHS services. You will not be refused access on unreasonable grounds”

One of the main things my constituents want is the reassurance that if they have to go into an NHS hospital for an operation they will not pick up a deadly hospital acquired infection. So what does the Constitution tell them – and me as their representative – on this crucial issue?

At first my hopes rose. It says “ You have the right (presumably legally enforceable) to be treated…in a properly approved or registered organisation that meets required levels of safety and quality”. Presumably contracting MRSA or c dif would mean the organisation had fallen short of that standard?

When I read on my hopes sank. The lawyers had spotted that snag. We learn that “The NHS also commits (I fear not legally enforceable) to ensure that services are provided in a clean and safe environment …(pledge)”

Ministers and their legal advisers have decided they cannot solve the hospital infection issue anytime soon, so we have no rights on that score.

There is also a studied ambiguity, or a contradiction, in the overarching principles and aims. Item One in the document tells us “it has a wider social duty to promote equality through the services it provides, and to pay particular attention to groups or sections of society where improvements in health and life expectancy are not keeping pace with the rest of the population” – a fine aim. Yet Item Two tells us “Access to NHS services is based on clinical need” which would be blind as between people from different social backgrounds with differing life expectancies.

If you haven’t read your own copy yet, it’s not compulsive bedtime reading. It filled in a short tube journey for me yesterday, but left me in despair at how much money might have been spent on what turned out to be another spin game. This “Constitution” will not cure a single patient.

The news remains dominated by factory closures, reports of poor sales figures, lay offs and company bankruptcies. Ministers continue to find green shoots where the rest of us see a frozen wasteland.
Expect more of the same in the days ahead. Today we will hear how car sales have fallen off a cliff. House building is well down. People are unlikely to commit to big ticket items, even if they could borrow to buy, when they fear for their jobs and feel under pressure to repay debt.

There are still people clinging to the absurd notion that RBS shares have been falling again because the ban on short selling was removed. Figures released show that no short positions were opened against RBS in the first three days after the lifting of the ban, yet the shares plunged downwards. Will these instant experts on this topic please look at the facts first?
The reason RBS shares have plunged again is primarily the company’s release of estimated figures for 2008. These showed an estimated loss of £8 billion, coupled with “impairment charges” (losses or write offs to anyone else) of £15-20billion! In other words the City forecast I have been using here for sometime of around £28billion of total losses gave people a good guide to the magnitude of their problems. Confirmation of this, allied to more sabre rattling about full nationalisation, was bound to flush out a few more shareholder sellers who had been a bit slow to realise just what a mess their bank was in.

PS: Can someone tell me why the taxpayer is underwriting the latest issue of RBS shares to replace the government’s Pref shares at the price of 31.75p, when the current share price is 12p?
Valuing RBS shares and paying sensible prices for them does not seem to be the government’s strong point.