Month: August 2009

I had an easy decision to make yesterday. I was offered another one of those reality style TV opportunities. I sent back a rapid “No”.

This one was a bit more imaginative. They wanted me to spend a week living on a Council estate so I could “experience the everyday lives and issues of the ordinary people who live there”. It would according to the well paid tv staff help me understand the problem of poverty. How real would that be? I would still have my home to go back to at the end of the week , and my salary cheque going into my bank. If one of my colleague does it whilst also claiming the second home allowance it could prove quite exciting for them as they juggle their three homes. I can imagine the ribbing they will get on the estate.

I understand poverty. I remember having little money, and remember what I did to make sure I didn’t have to live on out of work benefits or a low wage. I resent the idea that because MPs earn more than the national average it makes it impossible for us to understand what is wrong with poverty, or what needs to be done for people to get out of poverty.

The programme makers said that it would “begin to heal the pereceived gulf between politicians and the public”. I don’t think so. These reality shows usually set you up. They don’t want you to succeed or come over well, and they control the shots and the editing.

I only investigated one seriously before rejecting it. I was told they wanted me to run a fish and chip shop while the owner had a holiday. I thought about it, and agreed to the preliminary discussion. When I said I would use the presence of the TV to launch a marketing campaign, to swell the numbers using the shop they seemed a little worried. When I went on to say I would hire an extra staff member to handle the extra business, and give the existing staff a profit share as I expected a bumper week with the cameras around they said I would not be able to do that. I think they wanted a script where I was to fall out with the staff, not one where I would motivate them and help them earn a better paypacket.

From that discussion onwards I have found it very easy just to say “No”. The problem with reality shows is they can be so unreal and so highly scripted. Instead I wrote about banks for a couple of newspapers.

So will the Bank of England want to print another £25 billion or not? That is today’s question.

When they started the programme the Bank said it should be judged by whether it eased lending through the banks. It has not done that so far. Money remains quite tight if you are a small business or someone seeking a mortgage.

Subsequently they said it should be judged by whether the money supply increased or not. Judged by that criterion it has made a modest impact, but there is still little growth.

Maybe they wanted it to keep government borrowing rates down, given the huge sums the government has to borrow. It has not even done that, as gilt yields, the price the government pays to borrow, have gone up.

So what has it done? It has helped fuel a substantial recovery in asset prices. Alongside the big US money printing programme, we are witnessing the early stages of a familiar asset bubble created by the action of the authorities. It is exactly what the US did several times in the last twenty years and what this government did in the period 2003-7.

That is helping sentiment, leading to a concerted spin effort to create a feel good factor. I’m all in favour of looking at the mint rather than hole wherever possible, and hope they succeed in pulling us out of the nosedive the economy was in.

We need to remember, however, several things. The first is unemployment is still rising and looks set to do so some more. This will dampen spending. Where companies are reporting better profits, it has happened thanks to cost cutting, not to growth in business. The huge and temporary stimulus from government has to end sometime, and then we are left with the massive public sector debt overhang. That needs repaying, which means less public spending or with this government higher taxes.

The truth is the UK lived well beyond its means for too long prior to the crash. This government’s actions in the short term can create a bit better mood, but at the cost of a worse problem in the longer term. This policy is just for an election. I suspect the government wants them to print some more, so I guess that’s what they will do.

Far from saving the world, this government’s banking policy has been a disaster. First they bungled their monetary and regulatory policy allowing the uncontrolled boom. Then they helped bankrupt some of the leading players. Now we have too few banks, too little credit and too many losses from nationalised banks they should never have bought. It is difficult to think of an error they did not make.

Today we hear that LLoyds in just six months has had to write off another £13,400,000,000 of bad debts from its loan book. Why didn’t the government insist on proper write offs when they were negotiating purchase of the shares in the first place? As much of this came from HBOS, why on earth did they want to encourage one of the worst mergers in the UK corporate history, and make a relatively good bank, LLoyds, a state pensioner as well? The taxpayer ends up with a huge shareholding in a heavily loss making bank. We have to pay for the losses, and are currently being invited to take over all the worst debts as well!

The Vince Cable/Alastair Darling strategy of owning these mega loss makers was always crazy. It is bad news for taxpayers and bad news for bank customers as well. There was an alternative. They should have blocked the LLoyds/HBOS merger, so LLoyds needed no government help. They should have offered minimum necessary support as loans to HBOS to make them sort themselves out and ensure their shareholders and counterparties took the hit, whilst protecting the smaller retail depositor. That would have been a much much cheaper solution.

Today we have politicians playing politics with banks. The government likes talking about banks, because they have found in some bankers people thought to be greedier and less reliable than politicians, so they make perfect whipping boys. The present policy is based on two public strands. The first is to use the FSA to insist on the banks lending huge sums to the government so it can carry on its crazy over spending with little visiible signs of credit distress. They call this raising the liquidity of banks, liquidity which has to be held in the form of loans to the government. This means there is little money left to lend to anyone else. Then the government can grandstand by blaming the banks for failing to go the aid of small business and first time home buyers, allowing them the moral luxury of taking the popular line.

The private strands behind this absurd policy are even more damaging. The taxpayer is taking the hit for past bank mistakes twice over. First, there are the visible and large losses the naitonalised banks are now revealing. These undermine the share values of what we have bought, and the government needs to act as guarantor that whatever they lose the taxpayer will bail them out. Second, the taxpayer is being asked to take over massive bad debts so that in due course the government can sell what remains back to the private sector claiming some kind of “success”

I am glad that more people are now coming round to my long held view that there is insufficient competition in the UK banking market, partly because there are too few banks. The government has made it worse by flagging through the mega mergers that made RBS and LLoyds the huge creatures they are today. We have been too poorly served for too long. At the time of the Conservative Economic Policy Review I argued that even then before the LLoyds/HBOS merger and disappearance of an independent Bradford and Bingley and Alliance and Leicester we had too little banking choice. We called in the review for new kinds of banks in the UK to offer better service to small business.

It is vital for the future health of the UK economy that the next government is pledged to return these banks to the private sector as quickly as possible, split up so they create more banks. I also hope other new players will come in from the retail and other worlds. We need more and better banks quickly. Current levels of fees, charges and bank imposed interest rates are too high and credit is scarce for reasonable new borrowers. That is the direct result of the manic banking policies followed in recent years.

Some have asked for numbers to back up the argument that trains are often not very green. An overall hypothetical calculation has been made which says that if all freight went by truck instead of train and if all train passengers went by coach carbon emissions would be 13% lower, given current generating methods for electricity. That is the measure of the task the railways face to green themselves to road standards.

The piece in the Times yesterday suggesting that David Cameron was thinking of demanding price reductions for medical treatments performed by hospitals employed by the NHS was presented as a radical departure. It is in fact this government’s policy, as they demanded a 3% cost reduction this year and expect a 3.5% one next year.

Yesterday I was asked to comment on health budgets for the Yorkshire Post and the banks for the Evening Standard. There is some growing awareness out there in the media world of the spending crisis we face.

Northern Rock has weighed in with six month losses of £724 million. £122 million of that is current loss, on top of the £602 million of losses on past poor loans. No-one in government seems to think that is either bad or surprising. Forecasters think the second half should see something similar.

If you own a busienss losing money on that scale you should be changing the top management and demanding better performance. You should be cutting costs and concentrating on finding new profitable business. You should not just plough on as if it did not matter.

Now we hear there is an even sillier idea, of splitting a bad bank off from a good bank and selling the good bank. Poor old taxpayers. We end up with all the bad and doubtful debts, and let some management team take away the better assets to make more money for themselves on the back of assets they have chosen for the task. Why on earth would we want to do that?

I want Northern Rock sold back in to the private sector as soon as possible. We need to sell the bad bets along with the good bets, after suitable provisioning and assessment. How much more bad news is there to write off? Why haven’t they done it yet? Why can’t they get into profit on the rest of the business? Why aren’t they making any progress in creating some value for taxpayers?

It is the predicatable disaster you would expect from a nationalised bank run by these Ministers and their apppointees. They changed the rules for NorthernhRock from wind down to beef up. The answer will just be huge taxpayer losses.

The release of the interview last night with David Cameron on Radio 4 was an important development. In it David quite clearly stated that the Health department, like all others, will need to make economies. Health is not exempt form the necessary pressure which needs to be introduced into every department to do more for less, and to raise quality.

Today, Labour’s spin doctors are no doubt in overdrive to try to tempt the unwary or the few remaining Labour loyalist journalists into writing stories of horrendous cuts in health services. Why do they bother to lie so? No-one sensible believes it any more. Most people know we need to rein in public borrowing, and most know huge sums are being wasted in parts of the public sector. Are we , the taxpayers, paying for any of this spin?

David made it crystal clear that he did does not want cuts in front line services. There is no question of seeking closures of wards or hospitals, or mass sackings of nurses. That is all Labour’s wild and wicked imaginings. He also realistically said that as health care is getting dearer and there will be more demand, the budget would go up.

It is high time we moved on from the idiot soundbite of “Labour investment, Tory cuts” to a grown up discuission of why public sector productivity has done so much worse than private sector productivity. The soundbites we need include “Let’s make every pound of public money to stretch further” and “Conservative efficiency versus Labour’s waste”. People cannot afford more tax hikes. There’s been enough of those in the last few years. They just want to know that what they do pay goes on the core public services they value. They are fed up with all the spending on the spin society, the surveillance society, the regulated out of existence sociaety and the political correctness society.

I was pleased to read today the Conservatives announce two policies for the BBC – disclosure of all remuneration for stars and executives earning six figure salaries, and the sale of Radio 1. That’s a start. As the Sunday Times rightly points out the BBC now also offers effectively a free on line newspaper as well on the licence fee, with implications for the private sector competition who do not enjoy the subsidy.

I was less pleased to see RBS taking full page ads to tell us it really does want to lend some money.The way to get that message across is through its daily actions with its customers, and by telling the journalists who could write it up as a story. Why waste taxpayers money on such ads?

And how true it it? What rates and charges come attached to the cash? We are in the ludicrous position where on the one hand the government orders the banks to lend more, yet with the other hand through its regulator tells them to lend less and to hold more liquidity to have a stronger balance sheet. Which is it to be? And why pay for ads when what people want is sensible loans at realistic fees and charges?

This has become the new and interesting question this summer. A long summer break has been traditional, and used to pass without much comment. Maybe then people accepted that MPs worked crazy hours for the rest of the year when Parliament was in session, regulary going on to midnight or beyond, that they thought the hours evened out with the summer break. Maybe they thought Parliament was doing a better job then, or just did not think about it.

This year is different. The summer break is very long, but follows hard on the heels of a Parliamentary year when the gullotine has been used to curtail debates, with many debates on the economy and other crucial matters delayed or ducked on a regular basis. It occurs after Labour has introduced the half term breaks as well. There is a general sense of lack of value for money throughout the public sector, and a growing understanding of the public spending crisis, so it is no wonder more good questions are being asked about what MPs are up to.

As readers of this blog will know, I am working on a review of public spending both by central and local government. I am publishing bits of it here as I make progress, and will be sending proposals to the Shadow Chancellor. One of the main issues is public sector productivity, which has failed to keep pace with the private sector, or in some cases has gone backwards.

If we just take the case of MPs the decline in productivity coupled with substantial increases in the public sector costs of doing the job is at once obvious. In 1997 my productivity was cut by around one quarter by the Boundary Commission who took a large number of electors away from my seat instead of proposing fewer MPs. They could have made larger seats out of the ones that were below average in size, but instead decided to lower productivity by creating more seats. Since then there has been a steady reduction in the hours that Parliament sits and the hours available to debate the important big national issues. Whilst I can still ask questions, the chances of any sensible answer have been reduced substantially by spin oriented Ministers wishing to avoid answering. Since 1997 there has been a big expansion of the public sector payroll with more staff helping MPs to do their jobs.,

The truth about the job is that it is more than full time when Parliament does meet, as we need to cram a lot into relatively few days. Anyone diligent ends up working very long hours on those days. The rest of the time more than half the job is prevented by the lock out from Parliament. It’s a crazy way to run anything. It is symptomatic of Labour’s public sector – overmanned, inefficient and very expensive. This summer once again Parliament is a building site, as some necessary maintenance work is mixed up with “improvements” and “security” measures. Pity the poor taxpayer, as the people’s Palace is turned into an fortified camp, and as their representatives are driven away by the absence of debate and by the need for the builders to have some space.

We know that running train services is a very expensive way of travel for taxpayers to support, and we know that fourteen times as many journeys are made by car as by train. Rail has a small market share despite all the subsidy and encouragement.

The case for trains has increasingly relied on the assertion that they are good for the environment. It is time to examine this proposition again.

The first thing people should understand is that all forms of motorised trransport entail burning fuel. Much of that process is still done by burning fuel which produces exhaust gases and carbon dioxide. The aim should be to minimise the polluting exhausts, and to maximise fuel efficiency for cost and conservation reasons.

The second thing to understand is that we neeed to look at the total carbon impact of any mode of travel. That means looking at the carbon expended to complete the whole journey, as users of the train often use cars and taxis at both ends of their train journey. It also means looking at the carbon costs the mode of travel imposes on other modes of travel. So often people have to expend a lot of energy and exhaust emissions to get into very congested town centres by car, as most stations are in town centres which are increasingly difficult to reach thanks to anti car policies.

Train travel can be very fuel efficient at peak times when a modern train carries a full load of passengers into a busy town or city, or takes a full load of people long distances with few stops . It may even be fuel efficient for each person on that train, depending on how far from the station they live, how far from the destination station they wish to go and how they travel the first and last leg of the journey.

At other times of day heavy and often old fashioned and fuel inefficient trains lumber around the country with few passengers. This is the opposite of efficient and environmentally friendly. It is greener to go by car than by a old train which is half empty. Some say that if all trains were electrified this would change. Not given the way we generate our power in this country. There is all the extra carbon from the coal and gas power stations that you have to attribute to the electric train using that fuel.

More importantly, train tracks are one of the primary causes of congestion for the large majority of people travelling by car or bus. Many towns and cities are bisected by railway lines. There are too few bridging points, so there is much increased congestion on the few routes that go to a railway bridge. In some cases delays and congestion are compounded by the use of a level crossing rather than a railway bridge.

One of the greenest policies we could pursue would be a big programme of increasing the number of bridges over railways to allow the easier passage of cars and buses around our towns and cities. It would also be safer if we replaced more of the level crossings with bridges or underpasses. It could also lead to more use of the train for the commuter and longer distance journies if more of us could get to the station and park easily. That would be a greener way to spend any money we have on railways, rather than on electrification.

We do need to look at how efficiency on the trains can be improved and fuel use reduced, as losses and subsidies are very large.