Category: Blog

It is difficult to believe the UK government is serious about climate change.

Anyone in power who believes that global warming is happening, that it is dangerous, and that it is caused by human emissions of CO2 would conclude that unilateral action in a country the size of the UK, however effective, could make practically no difference to the likely growth of carbon dioxide output, as China and India industrialise rapidly. They would go on to decide that what the UK had to do to deal with the problem is invest in tackling the likely adverse consequences of it. They would also be unlikely to commission new coal fired power stations without carbon capture and storage, given the only progress in cutting CO2 the UK has made in the last 20 years was the dash for gas initiated by the Conservative privatisation policy.

I have been urging the government for a long time now to take action to prevent flooding and to increase the piped water supply, as more flooding and shortage of piped water are the two most likely adverse consequences of a warmer Britain. I have identified a number of anti flood projects that need to be undertaken in my own constituency. Many of them require relatively modest expenditure – enlarging a ditch with a digger here, cleaning out a culvert there on a regular basis. Indeed, they could probably be accommodated by spending less on reports, reviews and letters denying legal liability by public authorities and hiring a man with a digger for a few days. A couple require larger schemes, that need to be fitted into the Environment Agency’s overall budget, and some require action by the local Water monopolist. I have had another conversation with Hilary Benn, and have followed it up with another letter, as I suspect what I find in Wokingham is common in all the areas subject to flooding around the country.

I have also been urging action to tap into borehole water where water levels are rising, to build an additional reservoir for the South-east and to press ahead with a stand-by desalination plant in London for water provision.

We are going to need better flood defences and an increase in water supply, regardless of climate change. So come on government, wake up.

I am also grateful to a correspondent for sending me the following quotes, which shows how professional opinion changes, as it should do in the light of new facts and theories

“The world’s climatologists are agreed” that we “prepare for the next ice age” (Science Digest Feb 1973)
“..the approach of a full-blown 10,000 year ice age” (Science, March 1 1975)
” The North Atlantic is colling about as fast as an ocean can cool…growing seasons in England and Scandinavia are getting shorter” (Christian Science Monitor 27 August 1974)
Lowe Ponte, “The Cooling” 1976 forecast the problems of global cooling

Just as we have seen a rush by mortgage companies to put their rates up, so they are not left as the cheapest on offer facing a deluge of applicants, so we are now seeing a rush to withdraw mortgage products altogether as mortgage companies struggle with the volume of demand.

Individual companies are right to stress they are withdrawing products and increasing prices because they are inundated in the wake of Northern Rock’s withdrawal from the market, not because they have run out of money. The system as a whole, however, is cutting back on its volumes because it is rightly being more cautious about how much money it can raise from different sources. The Credit Crunch is having a real impact at last – it means less money for banks and Building Societies as a whole to lend, which means fewer mortgages, lower proportions of the house value being advanced and higher interest rates (relative to market rates).
This in turn will mean lower house prices.

The rest is covered by yesterday’s post entitled “Are all mortgages wicked?”

Yesterday we were meant to have a debate on the future of Heathrow. It is not an easy decision for a government to make. Those of us representing people living within range of the airport would like better noise controls and quieter aircraft, with reductions in the unpleasant exhaust emissions of planes. We can also see that the UK needs a major international airport in order to sustain itself as a favoured location for inward investment and business service activity, and as an embarkation point for a major trading nation that needs to allow its business people to fly to the five continents to sell goods and services. Heathrow is too small for current use, let alone for the likely growth in air travel in the years ahead.

This important subject was introduced by the Lib Dems in a motion which they themselves admitted they had drafted incorrectly. They used the debate to retail a series of tired half truths and errors about carbon dioxide and climate change, instead of getting to grips with the difficult realities of the popularity of aviation and the problems with any location for additional airport capacity. The prejudices on parade included the following strange ideas:

1. More planes landing and taking off at Heathrow would be bad for CO2 emissions so it would be better to prevent growth at Heathrow.
This would by common agreement merely divert this growth to Skipol, Charles de Gaulle and other overseas airports, so it is difficult to see how this would help curb overall CO2.

2. Trains are green.

Trains also burn fuel leading to carbon dioxide emissions. Electric trains are especially fuel inefficient, as there is a large primary fuel loss during the electricity generation phase, and a further energy loss when the electric energy is turned into mechanical energy by the engine. The relative contribution of train travel to carbon dioxide generation depends on proper analysis of the fuel efficiency and age of the train engine, the weight of the train, the number of passengers using it, the way the electricity was generated, and comparable details for competing travel modes. The train is not always greener.

3. Buses are green, cars are not.

Again, there needs to be proper analysis. The average bus is old and fuel inefficient, and has few passengers. The bus is only a greener way of travelling where it has a new fuel efficient engine and sufficient passengers, or where there are large number of passenger using it at the same time.

In the many debates we have about CO2, with more coming soon for the Climate Change Bill, there is usually a concentration on the CO2 generated by planes and cars, with much less attention given to the bigger amounts created by the domestic heating boiler, by commercial and industrial space heating and cooling, and by power generation itself. Some now point out that nuclear power is not carbon free, as substantial amounts are given off in making the concrete and the metal parts to build a nuclear power station in the first place. Similar calculations are not brought into the equation to deal with the concrete used in railway sleepers and steel used for rails for new train track.

It is high time we had a sensible debate about CO2, with a broader understanding of its multiple origins and sources. It is difficult to understand why the plane and car get such a bad press, yet the often worse inefficient domestic boiler gets away with it. It is frustrating that many of the climate change regulators and officials work in well heated offices in winter, sometimes with air conditioning in the summer, yet their space heating and cooling never becomes an issue. In many places we leave street lights on all night, public office buildings are often left heated and lit after the employees have gone home, whilst in some cases offices are heated to higher temperatures in winter than some are cooled to in summer.

I am all in favour of having a drive to raise fuel efficiency across the board. We need to do so at home and in the office as well as on the road, in the air and on the tracks. We need a government which takes its duty to save us money on its own energy bills much more seriously: the public sector should pioneer new and old ways of saving energy and cutting emissions. This is not the same argument as the argument about how large and where London’s main international airport should be. You will not curb the growth of global aviation by restricting one airport – that will merely shift traffic elsewhere at the margin.

Today a leading mortgage company has announced it is withdrawing for the time being from making any new mortgage advances. This follows hard on the heels of the government’s decision to halve the amount Northern Rock has lent on mortgage over the next couple of years in order to repay the money owing to taxpayers.

In recent days mortgage rates have been rising, even though the Bank of England’s message on interest rates has been to keep them the same. As one or two mortgage companies find they are offering the lowest mortgage rates, so they are inundated with people seeking a good value mortgage. They are forced by the rush into putting up their rates, only to leave another mortgage company exposed to the rush. It is going to be a difficult time for people seeking a mortgage, and a more difficult time for those with a variable rate mortgage, facing higher interest payments as a result.

Today Parliament will be debating mortgages on a Liberal Democrat motion. The LDs have been saying for some time that people in the UK have borrowed too much, and have been urging action to curb private sector borrowings. Presumably they wanted higher interest rates sooner, to choke off some of the mortgage demand, and probably want tougher regulations to make it more difficult for people on low incomes or with few assets to borrow.

I certainly opposed Gordon Brown’s decision to tinker with monetary policy by changing targets for inflation from the RPI to the CPI. It meant the Bank of England had to set lower rates in the run up to the 2005 election than if they had kept the old target, and did mean more credit was extended. If the government had stuck with the RPI, and had kept a better control over its own borrowings, we would be better placed to weather the current financial storm.

I do not, however, share the LD view that things should be made a lot tougher for those on low incomes or with no cash for a deposit to buy a home. Home ownership is rightly much sought after, and is an important part of an English person’s liberty. Once someone owns a home they make decisions about their private space in a way tenants cannot, and they have an asset which usually goes up in price which brings them greater financial independence as the years progress. There can be little worse financially than facing old age with no home that you own – it means you pay the highest rents of your life at the end of your life when you have least income.

So what should the authorities do about the move from boom to bust in the mortgage market? They should not rush to regulate to dictate terms to mortgage companies., Saying now people cannot in future borrow 125% of the value of their property, or saying to those without deposits they have to save for one first would be seeking to bolt the stable door long after the horse has gone. Yesterday’s problem was too much borrowing. Today’s may easily become too little if the government is not careful.

The Bank should cut interest rates, to offset some of the unplanned increase in rates we have seen in recent weeks. It needs to try to get control back over the general level of rates in the markets. The authorities should not introduce new and more mortgage regulation. In a global market it is difficult for such regulation to bite if done nationally, whilst the consequences will be harmful to those seeking UK based loans, making them still scarcer and dearer.

It is probably necessary to cut Northern Rock’s mortgage book because the bank is now nationalised and must not be seen to competing successfully to lend more money. It is certainly necessary to get the taxpayers money back in reasonable time. This will place a continuing strain on the mortgage market, as other lenders find the £50 billion to replace the Northern mortgages destined to be repaid. In these conditions the Bank needs to do all it can to keep the mortgage market reasonably liquid, without putting more taxpayers money at risk without more than adequate collateral and protection. The Bank should also be sympathetic to the idea that the banking sector should not have to write down all their good quality shorter term paper every time some financial institution has to dump some of it at distressed prices to raise cash, for that way leads to a race to the bottom with continuing dangers for some financial institutions.

It is important amidst all the puritan commentary telling us it serves people right, that they have borrowed too much and the financial sector has been greedy and irresponsible, to remember that people still need homes and home ownership is the best way of organising and financing that. The important task is to get rid of the froth in the market without causing a slump, for that would just put more people into misery and prevent the rising generation buying a home as soon as they would like.

Today a Labour led Parliament will approve the second reading of a Bill to allow detention without trial for 42 days.
Labour in office have turned out to be the new authoritarians, keen to overturn English liberties established over the long centuries of our forefathers’ struggle for freedom.
I can understand they may have no sense of history and dislike traditions, but you would have thought a so-callled progressive party would have some sensitivity towards human rights, beyond revelling in political correctness.

The taxpayers’ misery – and the government’s discomfort – have now begun. The nationalisation of Northern Rock will be costly to taxpayers and damaging to the government’s reputation.

Last night the government brushed aside Conservative proposals to handle Northern Rock in a different way and to avoid the taxpayer taking on responsibility for all the jobs, mortgages, loans, properties and bills.

Instead, the government announced a one third cut in the workforce, and a halving in the size of the business, along with confirmation that the bank will lose money in each of the next three years. That prospectus for the nationalised business suited no-one. MPs from the North East, along with the rest of us, did not want to see such large reductions in the workforce. MPs who care about the taxpayer do not wish to see taxpayers having to foot the bill for the job losses and the other losses in the business.

The government refused to tell us what the forecast losses amount to, implying they will be significant. They refused to tell us how the taxpayer would be asked to pay for these losses, implying they have not thought through how the revenue subsidy will be injected in to the business. Their numbers of course did not add up, as the size of the business is going to be reduced by more than the workforce, implying further job losses to come later.

The Chief Secretary contented herself with claiming that the Opposition had no alternative to nationalisation, declining to answer my points about how the Bank of England and the Treasury could have acted as Northern’s bank manager, lending them the minimum necessary to see them through and managing the repayment of the loan in a timely way.

The government seems to be in denial. It thinks nationalisation is the answer, when it will turn out to be a whole new load of problems. Every staff member dismissed, every loan that goes bad, every customer upset now stretches up to a Minister who is in ultimate control of the destiny of the company. They do not seem to have a plan to handle the complex management problems, and are refusing to own up to the magnitude of the cash requirements of their new acquisition.

Last night the Opposition were right to ask them to think again. We were right to offer them a better way of handling a distressed bank. It is a pity for all of us they turned us down and made silly political points instead.

It is good news that the Bank of England is thinking about its role in modern markets, and that the US and UK authorities are to review how to handle banking liquidity and regulation in future.

This agenda should include:

1. Have the Basel regulatory arrangements encouraged too much off balance sheet lending?

2. How can a market in securitised good quality loans be restored? Should the authorities buy in or accept as collateral more of these loans, whilst protecting taxpayers against losses?

3. Has the UK Government burdened British markets with too much off balance sheet borrowing of its own? Can this be curbed?

4. Do the leading Central Banks have enough capital of their own to keep markets liquid enough?

5. Shouldn’t Central Banks try to keep market interest rates in line with their announced main interest rate by open market operations?

There is nothing wrong with the idea of banks bundling up loans and selling them to others in the market. That is healthy and helps the growth of the world economy. The danger arises if the banks themselves continue owning large quantities of corporate bonds or securitised papers in conditions where they find they cannot sell or value these assets at a realistic price. Market seizure for bonds or loan packages forces banks to cut their lending and to write down the value of these assets on their balance sheets in moves which can become a vicious circle.

The Central Banks need to find a way of keeping the high quality bond and securitised paper market in line with their chosen interest rate generally. That should be the main issue facing the US/UK Committee.

Meanwhile, the UK Government needs to ensure rapid and orderly repayment of the Northern Rock loans and needs to consider whether that is sufficient to give the Bank of England the financial firepower it needs. It also needs to cut its own appetite for borrowing, which is now in danger of crowding out other borrowers from the market. The Bank needs some of its old powers – and information – back from the FSA so it can understand banks’ positions more quickly and respond in money markets appropriately.

Last night I heard the Wokingham choral Society sing Carl Orff’s Carmina Burana. The highlight was a brilliant rendition of the drinking song of the “Abbot of Cucany”, who boasts that if he drinks with someone all day in the tavern by the evening that person has lost his clothes. The baritone soloist was Grant Doyle. The next song in the cycle explains that in the tavern they gamble to excess as welll as drink too much, and that is where the money goes.
The songs are based on the poems of the wandering scholars or goliads of the Middle Ages, who sung of Fortune’s turns, of love, singing and drinking. The songs and the poems in Orf’s version have a life and a passion which is tremendous. The Choral Society did it full justice with their strong performance.
Listening to that medieval world recorded in verse is like peering under the seats in a cathedral at the misericord carvings to see those scenes of everyday life long ago. The Abbot of Cucany reminded us that just as our present condition drives too many to excessive drink and gambling, with government promoted gaming and high taxes on drink, so too did conditions in medieval Europe.

Press reports of large salaries paid to senior Council officials, and yesterday’s post on this blog about Chief Executives of Councils, has revealed the strong feeling that Council bureaucracies are out of touch and spending far too much on themselves.

We elect Councillors to direct and control these bureaucracies, and are about to see some of them on our doorsteps asking for our vote. It is a good time to remind them that above all we want them to seek value for money in what they do spend, and reduce the Council Tax they impose on us.

To do this, in many cases they could cut the Tax by:

1. Telling their officers that they are halving the budget for external consultancies, as they expect their professional staff at the Council to do more of the work themselves.
2. Impose a staff freeze on all administrative and executive posts, appointing to the ones that really matter from among the exisiting employees of the Council.
3. Design with the top officers a new structure for top officials, with fewer posts, to be implemented as and when senior officers leave. This might entail removing the CEO’s office, or requiring the CEO to undertake one of the functional roles as well.
4. Concentrate the work of the Councils on the main services that matter – schools, social care, planning and transport. Reduce the Council’s involvement in trying to run everyone else’s responsibilities through so called partnerships.
5. Cut the number of commitees and meetings, with Councillors concentrating on a limited number of issues that matter most.
6. Cut out all the expensive surveys – it is the job of Councillors to keep in touch with electors and to know the mood of the taxpayers and service users. Councillors should take an interest in the Complaints department, and seek to abolish it by managing down the number of complaints to remove the need for it.
7. Stopping the urge of some Highways departments to tinker endlessly and expensively with the network.
8. Review the assets of the Council and dispose of assets that are not being used and properly maintained in Council care.
9. Implement a policy to cut the Council’s use of energy by improving insulation, controls and building use.
10. Review the Council’s transport requirements and vehicle use to cut the cost.

Many Councils could save millions by following these simple approaches. Officers try to keep Councillors discussing “unavoidable commitments”, “partnerships”, “service obligations”, grant formulae and budgets based on the expectation of perpetual growth in resources. Councillors need to reply by talking about the cash people have to send to the Council to pay for everything, and the results they are getting for spending it all. They should remember that many people cannot afford an increase in their Council Tax and do not think it represents good value to them.