Month: May 2009

The government has had another dreadful week. Yesterday in the Commons was a farce. To avoid losing another vote the government accepted a cross party proposal to delay changes to the expense regime until we had the full report of Mr Kelly, recently appointed to sort it out. Despite that, they went on to vote through some changes. Mr Kelly may well now come to different conclusions, challenging these interim measures.

Only one of those will reduce costs, which I would have thought should be the main aim. That was the proposal to prevent MPs in London from claiming the second homes allowance. The changes to employment of staff may make the whole system dearer, as they seem to want to prevent people finding out how much each MP spends on staff, removing the incentive to keep your staff costs down which exists in the present system. The requirement to present receipts for small sums is fine but will make little difference.

The underlying message this May day is the government has lost its grip. Some foolishly thought Mr Brown knew what he was doing when he nationalised the banks. That will turn out to be his most ruinously expensive decision. He is now proving that having lost control of the big numbers, he has little more grip over the small but sensitive numbers on how much his MPs spend.

Mr Obama blames the bondholders for Chrysler’s problems. In his world people should save, lend their money to a car company, and then convert the loan to a gift. Apparently a company has a right to pay its executives too much, to give generous benefit to its employees, to sell too few cars and then to get a donation from the lenders.

He should stay out of the restructuring. It makes him look weak and cross when they don’t all do what he says. Putting Fiat together with Chysler is putting two weak companies together. That does not normally make a strong company. Chrysler either has to come up with cars people want to buy, or make major reductions in capacity and cost. There is no third way or easy route to riches. Mergers are fashionable amongst governments. They are also anti competitive, put off the day of reckoning, and make the companies too large to fail.

If people are keen to buy Fiat cars, Fiat should negotiate with US dealers and set up a dealer network. If Chrysler think they could make and sell Fiat cars at a profit they should licence the models they think can work. If Fiat think a merger is the way to US taxpayer subsidy they may be disappointed. If Chrylser thinks Fiat has all the answers on how to sell more cars in the USA they are in for a surprise.