Month: August 2009

I hear from my American contacts that the opposition to the Obama health plans is deep, spontaneous and strong. Many Americans think the state scheme will combine the usual characteristics of nationalised service – they think the cost will be too high for taxpayers, whilst the quality and volume of care delivered will be disappointing. Many Americans are already paying large sums for good health care. They don’t want to have to pay twice. Businesses are worried that they will end up with bigger tax bills, making them even less competitive against India and China. The US public accounts are already in almost as big a mess as the Uk ones, so why on earth some Americans ask would you choose now to make such a huge increase in public spending which you cannot afford?

Meanwhile here the BBC uses the Obama experience to demonstrate its bias. The story apparently to them is the “orchestration” of the opposition by right wing Republicans, and the false claims they think the opposition is making. They want to deny the strong sentiments amongst many American middle of the road voters against this proposal from the President. This is a bit rich from an organisation whose news values seem to think that Labour’s false claims, systematic lies about Labour’s opponents and a one sided presentation of the public spending argument is what constitute journalism here in the UK. Labour has spent years fibbing about Conservative plans and past practise with health and education. The BBC faithfully trots out the lies and soundbites – they always report that Conservatives will have to cut services, and suggest this means sacking teachers and nurses and all the rest. Why isn’t the story ever the techniques of Labour opposition to the possible next government? Why don’t they do a series of enquiries as I have been doing into the bureaucracy and waste that is now so manifest, and opppresses most normal people? Why can’ they grasp that Conservatives do not intend to sack nurses and doctors?

The more I listen to them, the more old fashioned, out of touch and low grade it all seems. I don’t think many people believe Labour’s spin and their reports based on it any more, as they are are so biased and far fetched. The world is changing. More and more people I meet think and talk in a conservative way, recognising there has to be big change in the UK public sector, and knowing we cannot carry on wasting money on the current scale. The BBC will have a rude awakening if they don’t get it soon, and the Conservaitves do win the election.

Meanwhile, wouldn’t it be refreshing if they tried to do a piece on why so many Americans dislike the President’s proposals? Where is the criticism of the Obama scheme? Where is the balanced treatment of the pros and cons of the plan and the proposals to modify or improve it? And when will they treat the over borrowing scandal on both sides of the Atlantic seriously?

Today the BBC struggled to grasp the obvious when interviewing George Osborne. We have just witnessed a twelve year ruinously expensive experiment, which entailed throwing money at public services, calling it investment, and assuming it would abolish poverty, raise educational standards for all and cure us of our illnesses. Instead it has left us ever deeper in debt, with burgeoning welfare rolls, a deep recession, poor quality services in many areas, a growing gap between independent schools and the rest and now a bungled response to swine flu as a fitting coda for the whole dreadful experience. We are now into the final baroque or punk phase, where it is just words. We are promised ever more millions or billions or trillions, just to contrast with so called “Tory cuts” and to make the task of any incoming government so much more difficult as it has to tear up the promises that never had money to back them.

Labour’s response is to offer more of the same, whilst no longer having the borrowing power to go on delivering it after the next election, if by any chance they were to be elected. They still do not understand that you can have too many spin docotors, initiatives, regulations, quangos, regional governments, spy cameras, administrators and management consultancies. It’s not how much you spend, but how you spend it, that matters.

One of the ways Labour has debauched the public service and wasted money is through their belief in “cross cutting issues”, “joined up government” and “partnership working”. The underlying perception that some probems like poor educational achievement or drugs or worklessness required responses from more than one department or agency was correct. That is why they inherited a Cabinet committee system designed to allocate work and decide priorities between departments in response to such issues.

Labour, believing their own rhetoric that no-one had noticed this before, spawned a huge army of quangos, working groups, partnerships and committees on top of a sensible number of internal government Cabinet committees to tackle this all in a more public way. They all needed their own armies of clerks, managers, spin doctors, PR specialists and elected officials to busy themselves with surveys, reports and injunctions to others to live better lives. Local government was cajoled or conned into doing the same thing at considerable expense.

Partnerships and cross cutting working became the ultimate way of wasting money and ducking responsibility. If a Chief Education Officer and a few Headteachers were responsible for the quality of education we knew who to blame and who to ask to put things right. If you needed to involve social services to discuss family deprivation,the police to deal with bad conduct, planners to deal with poor design of housing estates, the youth service to deal with out of hours activities and the rest no-one was to blame. Instead of solving the whole problem you just ended up spending more money and time getting nowhere. No one person or institution was responsible. Mettings took the form of laying off risk and demanding more resoruces.

In a business things usually work best if you keep the numbers of senior managers under good control, give them clear responsibilities and targets, and let them get on with it. They will liaise with colleagues if necessary, usually on the email or phone. It is the job of the board to deal with the “cross cutting” issues, to make sure the different jobs and targets fit into a harmonious whole. You keep down the number of working meeetings between people doing fundamentally different things.

I find it difficult to grasp why people buy the lie that quality can only go up if more money is spent. The law of reducing returns has long since set into some parts of the public service. If you throw more managers, spin doctors and management consultants at them, they will get worse, not better. We need to identify the good managers, give them tasks they can manage and stretching targets to hit. We need to dismantle the brueaucratic empires of spin, over regulation and waste.They are now the problem, not the solution.

Faced with the need to rein in expenditure, Councils are going to be tempted instead to drive for more income. Thwarted by some government control over Council Tax levels, and disappointed by the grant settlements from the centre, we should be ready for further increases in the level and range of fees and charges they impose.

I have no objection to the principle that the user should pay. Imposing a charge for something I want which the Council supplies is fine. What I object to is having to pay rip off monopoly prices for things they make me have but do not want, or high monopoly prices for things I would rather buy from some one else if they would let me. Paying for something I have already paid for through my taxes, like parking space on local roads, can also be vexatious.

I thought I would have a look to see just how wide ranging Council’s powers to charge already are. I typed in charges to the Reading Borough Council website. I was told there were 686 web pages that might be relevant! Typing in fees brought me the offer of 291 web pages. I read a sample.

This reminded me that Councils charge for parking, for planning permissions and building permits, for developer agreements, engineering fees, crematoria charges, childrens services charges, street care charges, gambling fees, land charges, non residential community care charges, street collection permits, street trading, pavement cafe trading, house to house collections, scrap metal dealers, caravan sites, taxi licencing, gambling and drink licencing and many more.

Each of those areas of charging in turn spawns many charging opportunities. Just checking out how many times they can charge under their Licencing Act powers produced another long list, including new premises, conversion of premises, personal licences, changes of addresses for people and property involved, applications to transfer licences, change of name, change of club rules, temporary event notices and notices of interest in premises.

Increasing the range of items Councils charge for is just a tax increase by another name. Increasing the level of the fee is inflationary provocation at a time of recession and pinched budgets for everyone else. The public must be vigilant. We must tell our Councillors clearly that we do not want them to find more ways of taking money off us, but to find some ways of delivering more for less. There is often plenty of scope to do just that.

In Reading’s case there is plenty of spending on senior officers and consultants to generate the fashionable partnerships and strategies. I use it to illustrate a general issue, not to pick on one local Council. They just happen to have a very long list of partnerships and initiatives, which leads to the question does any Council need so much overhead to achieve worthy aims? There is the 14-19 Partnership, the Crime Disorder and Reduction Partnership, the Local Safeguarding Children Partnership, the Local Strategic Partnership, the Healthier Reading Partnership, the Trust Board (Children), the Childrens Action Teams, the Children and Young Peoples Strategic Partnership, the Independent Transport Commission, Local Area Agreement, the Sustainable Community Strategy and the Community Safety Strategy to name but a few. All of these Partnerships and Strategies must require senior officers time and generate plenty of paper, meetings and minutes. Is it really the best way to ensure good childrens services or better policing?

Government Ministers and their faithful allies at the BBC report RBS as being in profit, making £15 million pre-tax.

It is true that in one of the many presentations of figures within the complex Interim Statement by RBS it does show a pre-tax profit of £15 million. That same presentation also shows that the group lost £3.35 billion at the operating level, made profits on disposals and debt redemption to get marginally into profit, but then after allowing for a write down of goodwill was in loss. The total loss attributable to shareholders was very clearly stated in several of the presentations as £1042 million.

As confirmation, the table which shows the rate of return on capital (now taxpayer owned and provided) shows a negative return, a massive – 18.1%. The consoldiated income is shown as minus £3billion, and the loss per share as 2.1pence.

That’s the wonder of spin. You include the items you like, and leave out the items you don’t like. It is only dangerous if you start to believe the selective figures.

Today’s Telegraph story places a strange headline and spin on Tory plans for curbing the budget deficit.

We are told that Tories are considering a VAT hike to 20%, after this government’s hike back to 17.5% at the end of this year.The source is said to be Shadow Cabinet, probably meaning it is not the Leader or the Shadow Chancellor.

The story does correctly report that the leadership understands that we have a spending problem. The UK is not under taxed – it is overspending at its current level of income and wealth. Paradoxically, if you raised tax rates on income and wealth from here you could end up with a worse deficit problem, as you could damage the recovery and encourage more businesses and entrepreneurs to go abroad or stay abroad.

Whoever briefed the story did not seem to grasp the scale of the problem. The deficit and borrowing levels are running at around £200 billion a year. A £10 billion spending tax increase would only deal with 5% of it. We need a five year programme of reducing spending, by cutting out waste, inefficiency, high cost and less desirable programmes and areas of government. We also need a five year programme designed to encourage a faster growth rate, which means low taxes on enterprise and wealth, not higher. The faster we grow, the quicker the deficit will come down given sensible spending disciplines.The good news is the waste, inefficiency and needless expenditure is now so huge that the cuts can come, they need not damage valued public services like schools and hospitals, and they in many cases will be popular. This website has been idientifying some of them, with more to come. For all those who do not regularly read this and want to ask what should we cut, please read the series from two weeks ago and you will see some of the answers.

I might have guessed that the dumbed down thrills seeking media would regard my casual remarks about unreality TV as far more newsworthy and important than my analysis and recommendations to stave off national bankruptcy. Thanks, though, to the Daily Express for taking a centre page on the banks this week.

However, there is a serious point beneath this debate which is worth visiting. Several respondents have made especially good points in their replies. No you cannot give someone on a good salary with a decent home to return to the feeling of poverty by making them live for a few days on a lower income in different surroundings. Nor I am pleased to confirm is the UK poverty poor by the standards of the poor in Africa, where poverty means insufficient money to buy a daily meal.

If I had to live for a week on a low income I would aim to end the week with some savings, as I would want to have a sense of progress from poverty. I could rely on tap water for my drinking, and feed myself well on seasonal vegetables and fruit, bread and rice or pasta to keep the food bill down. I would go to the local library to use the web and read books, so my lighting and heating would be free for me. I would be looking for gainful employment.

For as someone else wrote, if I were on a low income or on benefit and in a Council flat for real, I would be planning my escape route from Day One. I would be off to the local supermarkets to see if I could stock their shelves for some income, and maybe try and work my way up in retail. Or maybe I would use my spare time from a basic job to set up a service business that I could do in the early days with very little capital and no staff, to generate some cash. There are plenty of areas that could take another competitor who worked hard and gave people a good standard of service. Maybe I would just work flat out at building up my own business.

Poverty is not an absolute, nor a fixed condition from which you can never rise. The danger is it becomes an attitude of mind and instils a sense of helplessness. I do think we should be more generous as a community to those who are blind or deaf or have no use of their limbs. Those are severe handicaps, and we should willingly offer extra state support so they too can be more mobile and enjoy more of life. If you have all the use of your faculties, the way out of poverty is hard work and enterprise. The task for government is to find ways of helping people achieve without inventing traps that keep people poor and dependent on the state. The government needs to set the right tone. Then it’s up to people themselves to seize the opportunities that are out there.

It was a sign of the times. A regional commercial manager of one of our leading banks said he wanted to come and talk to me as a local MP in his area. I agreed to see him yesterday.

He brought along a colleague with some Nulab type job title. They asked me what issues there were locally for their bank.

I said I thought the biggest banking opportunity I knew about for them in Wokingham was the Town Centre redevelopment. The Council is meant to be close to choosing a lead developer to breathe some life into a much needed redevelopment of part of the shopping centre. What was their approach to commercial property lending? Had they been in touch with the short list rivals to see if they could agree something in principle? Did they have money to lend?

I repeat this here to be fair to their rivals as well as them, if there is any interest and competition left in our banking market. May the best offer to win the business, if the developer needs some borrowings. The redevelopment includes public sector land and permits as well as private sector land.

They seemed surprised by this response and then confessed they knew nothing about it. Not many marks then for understanding how banking could be involved in our local community. It might also make some money for the bank.

They repeated their question. What could the bank do better to help the community? I said, lend money to good projects and sound companies. We were missing each other in the dark fog of Nulab speak from their side.

I then ventured that they could also improve customer service substantially as most banks in the UK can. They could make intelligent use of the data they hold on all their customers to tailor the loans or savings plans better to the financial needs of each customer. I pushed furtehr and suggested they need to be more engaged, instead of handling so much from remote regional centres or on automated systems that drive people mad. They agreed there was room for improvement but did not come over with a plausible plan of how things would be better in the future.

They then said they wanted to talk about the good works they do in the local community. I said that was good of them, but the most improtant work they could do was to be an active and successful bank to us. I reported small businesses who feel they do not get the service or the access to the loans they need. They reported that some small companies are now being broken by losing suits at tribunals for unfair dismissals. Apparently some of the fines and charges imposed are sufficient to bankrupt a small business, leading to the loss of the rest of the jobs as well.

There is a lot to do to sort out this mess. Too many people in senior roles are tallking old speak, Nulab political correctness. We need a newer speech, based on practical solutions to the large number of business and personal finance problems that have built up thanks to the mess the government has created with its over regulation and boom bust approach to economic managament. Does anyone out there in the government and big corporate world speak commonsense any more?

You may have heard on the BBC that RBS made £15 million. If only.

The loss for shareholders (yes, us the taxpayers) was £1 billion for the six months. There was a collosal £7.5 billion of write offs. The operating loss was £3.35 billion.

The bank has started to shrink its size dramatically. The balance sheet has been reduced by a quarter, from £2.2 trillion to £1.64 trillion , but is still bigger than the national income.

If you want to know why there isn’t enough credit in the UK economy you should start by looking at the government’s very own big bank and its policy. It has set out to cut its loan to deposit ratio to 100% from 150%. That will mean reining in its lending. It is also planning to more than halve its reliance on wholesale funds, again pointing to less lending.

Meanwhile according to news reports the staff costs are up 11%!

£50,000,000,000 is a lot of money. Yesterday taxpayers were told they would spending that much on buying up some more financial instruments to help the banking system.

£50,000,000,000 is more than this year’s departmental spending on “children schools and families”. It is considerably more than the Transport, Home Office, FCO, International development,Energy and Climate Change, Business, Environment and Culture and Media and Sport budgets put together (Budget book p 241). Parliament exists to vote on spending and to cross examine Ministers about their priorities with our money. It is there to question them on the efficacy of their spending. Yesterday we remained locked out from Parliament, which remained silent as this money was announced.

The public witnessed a contradictory presentation of the extra spending. A junior Treasury Minister fielded media interviews, telling us that this was a decision of the Bank of England. If it were truly a decision of the Bank, why then didn’t a Bank spokesman come on to explain it? The Minister was of course not telling us the truth. The Bank only had permission to spend an extra £25 billion. All quantitative easing money has to be approved by Ministers, who should therefore have the courage of their convictions and do the job of explaining and defending it.

The Chancellor himself must have been involved in the decision. He needed to sign a letter authorising an extra £25,000,000,000 of quantitative easing. He had personally authorised the first £150,000,000,000 and had told Parliament about it after the event.

The media interviews I saw failed to ask the important questions about this policy. Had Parliament been engaged we could have asked the following:

1. Why have you changed your mind about much quantitative easing is needed?
2. How long should we allow for QE to work? Aren’t there lags?
3. Why hasn’t QE led to more lending as the Bank at first implied it would?
4. Why does the FSA demand banks be more cautious and lend less when you want them to lend more?
5. Do you now have a money supply target? If so, what is it? If not, what is QE all about?
6.Why are you sure this has no inflationary consequences? For how long do you expect inflation to be below target?
7. How will you bring QE to an end?
8. What do you think will happen to interest rates on mortgages and loans to companies when you start selling off all these bonds taxpayers have bought?
9. Doesn’t requiring the Bank to be pessimistic about our prospects to justify this extra spending undermine the green shoots?
10. Is buying bank shares, dodgy loans and bonds the biggest poison pill ever bequeathed to a new government?

Yesterday the government must have been fully involved in this important decision. The immediate consequence was to cause the Bank to issue gloomy spin, offsetting several weeks of bullish spin which was talking things up. We need a clear explanation of why they are doing this and how they will judge its success. If they are now conventional monetarists, they should set a monetary target and seek to hit it. If they looked as if they knew what they were doing it would help instil more confidence more quickly.