Month: September 2011

 

        Mr Pritchard is right to point out the damage our current membership of the EU does to UK democracy and the economy.

        The high payments the UK has to make into the EU bduget, the large transfers now being required to bail out Euro problems, and the vast burden of EU regulation are all damaging to our economy. The constant intrusion of EU lawmaking into so many decisions of government undermines the democratic accountability of national and local government.

            When is the Coalition government going to do something about it?

 

            It is a strange paradox. Mr Cable dislikes high private sector executive pay, and wishes to get shareholders to curb it. Yet Mr Cable is one of  a select few who decides the pay of RBS executives, a loss making state owned bank. He does nothing to curb that.

 

            It is a strange paradox. Mr Cable dislikes high private sector executive pay, and wishes to get shareholders to curb it. Yet Mr Cable is one of  a select few who decides the pay of RBS executives, a loss making state owned bank. He does nothing to curb that.

 

      It was bad news this morning to wake to the briefing from the Lib Dem conference. We heard of their three priorities – tax the successful more, stand up to “ruthless tories”, and stop people getting high salaries.

       I want to hear policies for growth and recovery, policies to lift people out of low and no incomes, policies to create a nation of owners, policies to skill and enthuse a new generation of people. I want some inspiration and optimism from the government. It doesn’t look as if I will get any of that from the junior  Coalition partners. Jealousy is a powerful political emotion, but hope is a more inspiring one.

 

           The rogue trader at UBS has allowed another round of banker bashing. Why aren’t more bankers in prison, the BBC and others ask. Wasn’t the granting and packaging up of low grade mortgages a crime? Shouldn’t they all be prosecuted?

           I agree that if a banker steals money or perpetrates a fraud they should go to prison. If someone steals your car from the street you expect the criminal to be punished. If a banker takes your money, saying he will invest it safely, and syphons it off to his own bank account he should have his liberty taken away.

             This much is not in dispute. What should be in dispute is who are the worse villains in the less clear cut cases?  

             Let’s take the case of the dodgy mortgages. These were granted to lenders by banks, then often packaged up and sold to other investors in the market. In due course the mortgage holders reneged on their debts, the investment packages fell in value, and large sums were lost all round the market. Who is to blame?

              Is it the banker who granted the mortgage to someone who failed to pay it back?

             Is it the borrower who should have known better and should not have borrowed more than they could afford?

             Is it clearly the borrower to blame if they lied about their income?

              Is it the regulator who supervised the mortgage bank making the transaction?

             Is it the politicians who urged the banks to lend more to people with low incomes, so they could own homes?

             Is it the banker who took piles of these mortgages and packaged them up, saying that as a portfolio they were a sound investment?

              Is it the Rating Agency who assessed the package of mortgages and  said it was a high class investment?

              Is it the professional investors who bought these packages, believing them to be good?

              Is it the Central banks, who created large amounts of credit allowing the banks and other investment firms to buy up all these investments in the good days?

             Is it the Central banks and banking regulators who then withdrew the easy money and exposed the dangers of these types of investment?

             Many of the people operating in these markets acted in good faith. The original borrower thought he could afford the mortage at outset. The bank thought he would repay. The Rating Agency thought a portfolio would perform just fine, as the loss rate would be under control. The Central banks may genuinely have believed that Chinese competition was ending inflation so more credit was justified.

              Doubtless there were some borrowers who knew they might not be able to afford the mortgage, and took a chance. Some falsified their return to get a mortgage they should not have had. Some bank staff may have had doubts about the suitability of some mortgage applicants, but were pushed by management and bonus targets to lend. Central Banks might have turned a blind eye to excessive credit because they wanted to please the politicians. Some politicians may have realised it would end in tears, but wanted to crank it up before their re-election.

            In these cases it is by no means clear who should go to prison, and why that would make the world a better place.

 

                Top rates of Income Tax:

United Arab Emirates        0%

Hong Kong                            15%

Singapore                              20%

USA                                          35%

Switzerland                           40% (including  cantonal tax)

Germany                                41%

UK                                             50%  (plus extra NI)

 

            The government’s big idea is localism. It is said to underlie their approach to planning, to education, to health and to local government. Properly done it can save us money by abolishing government at the centre. If implemented it would mean that the whole country is not cursed with the same centrally imposed mistakes. It still leaves scope for local mistakes. That should make Council elections more interesting and more worthwhile.

             Shadow Ministers usually believe in more localism. Ministers often end up taking more central powers. Ministers  have in  past governments  grown frustrated with the response of Councils, standing in the way of their wider vision. The public usually says it likes the idea of localism, but then puts up a barrage of complaints to Ministers and MPs if their area has less than the next or  makes mistakes the neighbours do not experience.To many localism in  health is a good idea. The postcode lottery over service standards which results is a bad idea.

            When we argued about these matters in opposition Shadow Ministers assured us they understood and would not intervene in local matters, even where they thought they were going wrong. Intellectually they grasped it. If government trusts local Councils and other public bodies to make decisions, it has to stand back if they do it badly. Local communities have to be told their redress is to sack the local accountable officials, not seek Ministerial interference.

             In practice this is all proving difficult for Ministers. In the case of planning many are worried that the planning policy is too pro developers and does not offer sufficient protection for greenfields. The official response says that the government is abolishing central targets demanding more building. Councils can settle these matters, and protect what they wish in their local plans. Fine. Why then did Inspectors overturn a local decision in my area recently, as the Council has a local plan and the local decision both reflected it and was popular with the public? If localism is to work Inspectors have to back off in such cases.

           In education there is little sign of localism working. A group in my area proposed a free school. They, and Councillors, asked me for details of how the scheme would work. The Education department  was unable to answer their sensible questions. However, the scheme was clearly centrally driven and required considerable paperwork to be submitted to the Secretary of State who takes the decision about whether to let this school go ahead or not.

             The local authority decided to review the catchment area of a popular school. After a long and difficult consultation process with plenty of opinions being expressed they came to a final decision. The Secretary of State then decided to overturn their decision when reviewing it, without himself coming to see the situation on the ground or even consulting the local Council Leader. If a Council cannot even decide school catchments, what can they decide?

              Localism requires revolution in Whitehall. It will only be delivered if the bureacratic armies currently overseeing and interfering are stood down and if vast swathes of regulation are cut down. If the government does not wish to do this, then it should tell us, and set out its central vision. Then we could turn our attention to cutting back the local bureaucracies instead.

 

            The US Treasury Secretary is joining the EU Finance Ministers to tell them to sort out their ramshackle currency. He has bought his place at the table, by pledging Fed money to European banks in trouble. The dollar fix deals for the moment with the dollar liquidity problem. It does not resolve the sovereign and banking solvency problems in the weaker cases.

          I see the UK also has dollars to offer. I trust the Chancellor, having bought his place at the table today, will demand something for the UK in return. Getting us out of all the arrangements for economic and financial governance would be a good start, but I doubt this will be raised.