Category: Uncategorized

The day before yesterday we looked at the different approaches to the health and financial sectors when large companies make mistakes. I agree with those who wrote in to say one of the worst features of banking was the way the state bailed them out instead of making them pay their own losses and sort themselves out, whilst protecting depositors rather than bondholders and shareholders. You may recall I was against the bail outs at the time. One of my reasons for opposing the equity bail out was the likelihood it would fuel resentment at bankers on a large scale. Today I want to look at the different approach we take towards serious error in the public and private sectors.

This week came confirmation that a young man died of thirst in an NHS hospital. Instead of responding to his expressed need for a glass of water, the hospital overrode his wishes and he died. Apparently they did not understand his condition which left him short of fluid, and failed to monitor it. The hospital has apologised profusely for its mistake, and accepted much of the blame.

I suspect if such an event had happened in a private sector hospital we would be now be in the midst of a huge row. There would be some who demanded that the Chairman and CEO of the hospital company resigned. There would be others who argued that that the hospital company should lose its licence. Some would expect tough regulatory or legal sanctions to be applied. Others would say it proved that we needed to regulate the private healthcare industry more, or even nationalise it.

Because it happened in the NHS there has been an eerie silence. Parliament has not taken up the matter in a big way. There is no demand for a show trial of the hospital managers, no demand for resignations of top staff, no demand for more regulation of the sector.

Meanwhile, a private sector security company has let it be known it has failed to recruit all the people it needs for a future contract. Fortunately they told the governemnt, the client, in advance. They have said they will pay the bill for troops to make up the numbers, so the job can still be done. Parliament will investigate how well the contract was constructed, how long they had to meet the extra numbers, and how well the failure has been managed.

The political and media response is much more intense and condemnatory. This is after all a private sector company which has let us down. So far no harm has occurred in the security case. There is time to plan our way round any shortfall. The young man did die in the hospital. Some media reactions are different because there always seems to be more condemnation if it is a with profit company rather than a public body at the bottom of it.

I am all in favour of the security company paying for its mistakes. The troops who have to be drafted in to help should be well rewarded for their trouble, at the company’s expense. Their shareholders must decide what to do about the management of the Group, as they I am sure will be worried about the reputational damage done, and the failure to impress one of their most important clients, the British people.

The hunt is on to find a solution to the “Lords reform problem” which could command a majority in the Commons based on Conservative and Lib Dem votes.
Based on the 2nd reading vote, the Coalition commands 57 Lib Dems and 197 Conservatives, a total of 254 votes. To have a majority of one overall they would need to persuade 72 Conservatives who either abstained or voted against to vote for revised proposals. 91 Conservatives voted No to the bill, and another 19 abstained, against the advice of a 3 line whip.
The government’s task is made more difficult because the MPs voting against are not a solid bloc, a party within a party, or defined group with a single view of the world. Some are small “c” conservatives. They do not think the Lords is broken, and see no need to fix it. Some are big “C” Conservatives. They see Lords reform as a Lib Dem idea to ensure an elected upper house always requires coalition politics there to get government business through. They see it as a backdoor way of changing first past the post voting, despite the electorate’s decisive rejection of AV in the recent referendum.
Some would like a reformed House of Lords, but do not think this is the right reform. Some are more democratic than the government, and want any scheme put to a referendum of the people first to make sure it is wanted. Some dislike the idea of a stronger Lords, creating a log jam for a future government when decisive action may be needed. Some think the changes will create a weaker Lords, replacing people of experience and knowledge with more party hacks. Some just do not want Parliament to spend many days on this issue at a time when the public wants us to fix the economy and public services.
All this means there is no one simple fix that would win over 72 MPs to the cause. I do not think electing fewer people would take the trick as hoped. That is one thing I have never heard any of the antis ask for. A referendum would probably win over more than most other ideas, but that could not be guaranteed to convince enough.
All the colleagues I have spoken to about this have strong and well argued views. There are as many opinions as there are MPs. Some think the Lib Dems have had too much influence over the Coalition already and want to make a stand. Some think politically and do not see how this proposal helps the Conservative party. Many more try to reason it from the national and public interest.

Today I wish to contrast the way politicians and some in the press respond to bad conduct in banking and in healthcare. It seems to me that we overdo the allegations and the expression of revulsion when bad bankers are revealed, whilst taking an altogether more relaxed attitude to healthcare errors.

Barclays has recently been fined £290 million. It has admitted that some traders acted in a way designed to promote the bank’s and their own personal interests which sought to distort an interest rate in the markets. The traders have all been fired and are the subject of regulatory and criminal investigation to see if further action should be taken against any of them under the law.

A general hue and cry has led to the resignation of the CEO and the COO. The bank is the butt end of endless bad comment and jokes, and the preferred subject for many a Parliamentary debate and enquiry.

Meanwhile Glaxo Smith Kline has just been fined $3000 million by the US authorities. They have admitted to selling drugs to people under the age of 18 when not allowed to do so by the regulators, to offering payments to doctors to help promote these drugs, to not setting out all the side effects of the drugs, making claims about the favourable impact of the drugs on conditions other than the one for which they were licenced and other regulatory infringements and bad practice. Some of the US journalism about the consequences of their poor practice is worrying, as individuals bring their own cases setting out what happened to them or their loved ones from taking Paxil or Wellbrutin.

The company has apologised. Politicians and press have accepted that mistakes can occur in the largest of companies. There is no demand for the replacement of any of the top executives, no witch hunt against the sales teams involved in the errors. There have been no debates in the Commons, no demand for Parliamentary enquiries, no show trials of the top executives. I am not calling for a witch hunt either. I am merely asking why we take this grown up approach to serious errors with a drugs company, and yet take such a different view with a private sector bank that managed to avoid requiring large injections of taxpayer cash in 2008?

Errors and malpractice by bankers can result in higher charges or losses of money for clients. Errors or malpracice in health can have far more serious personal consequences.

According to the Department of Transport’s figures people travelled around 680 billion km by car van or taxi in 2009, and travelled 50bn km by train. This gave private sector vehicle travel 85% of the total passenger kms, and rail just 6%. This demonstrates that people overwhelmingly prefer car to train , or find they have no choice but to use the car for many journeys owing to an absence of train services for their needs.

Previous contributors to this site have explained why cars are so much more popular than trains. They go when you want, where you want. You can be late for your car but your car is not late for you. You can often go door to door, as most people park their car very near to their home, and can drive a car to a park next to the shop, lesiure facility or workplace of your choice. You can take heavy luggage, work tools and belongings with you by car which you could not carry when walking to the station or bus stop. You can stay in the dry when it is raining, and keep warm in winter with the heater on. You can drive the shopping home, however much bulk you have bought.

It is true you cannot work in the car if you are also driving. You can listen to a radio programme or music of your choice, receive a call on a hands free phone or talk to a fellow passenger. The train may allow you to eat and to work, but limits your freedom of conversation and noisy entertainment.

The Department of Transport in its most recent Business Plan sets out to spend £13.1 billion this year compared to £12.7 billion last. It is talking of rail projects totalling £69 billion over the years ahead, with HS2 the dearest, followed by Crossrail which is now underway.

In the current year the department plans to spend just over £2 billion on national roads, and £4.3 billion on railways. In other words, the mode of transport that is used for 85% of the journey miles is getting less than half the money spent on the travel mode that accounts for just 6% of passenger miles. So each rail mile attracts thirty times more spending than each road mile. If you add in the relatively small sums spent on local roads, the imbalance is still very great.

The reason is of course rail travel is very heavily subsidised. The comparison is even less favourable to motoring if the high motoring taxes are factored into the equation. Some rail fans like to claim that motoring does not pay enough to take account of road damage and pollution. The evidence abounds that motorists pay many times over the costs they make the state and the neighbours incur, whilst trains are generously endowed with public subsidy.

The last government spent little on expanding and improving the road network. More needs to be spent, preferably raising private capital, on new road capacity. We also need improved junctions, and more bridges over railway lines and rivers in busy areas. We need to make roads safer by learning from railways that you need to keep other users away from fast moving vehicles. We need trains to learn from cars that better brakes, better adhesion to the track or road, and safety belts, increase safety markedly.

I voted to reduce the number of MPs by 50 when it last came up, and am willing to do so again when the boundary review is complete. I read that some Lib Dems are no longer happy about this Coalition policy.

I voted for it because I think public spending has to be reduced and it seemed like a good idea to start with a cut in Parliament, to show we can do more for less. We need to raise public sector produtivity across the board, so Parliament should show how.

The press comment these days makes out that the main purpose of the change is to help the Conservatives win the next election. This turns the argument into a grubby dispute between Lib/lab on the one hand, who resist boundary changes for ignoble motives because it makes their electoral task more difficult, and the Conservatives, who reckon it makes their task easier. On the merits of the case there is justice in moving to more equally sized constituencies, which does favour the Conservatives. On current boundaries it takes more Conservative votes than Labour votes to get an MP elected. All this gets lost when the public just think it is political parties “in it for themselves” squabbling over the issue.

It is wrong for Conservatives to argue the main reason for the change is the electoral impact. The main reason must be to get a better value Parliament as part of general public sector reform. It is also quite wrong for Conservatives to think the boundary changes will win them the election. The government needs to concentrate on solving the nation’s problems. To win the next election well the Conservatives need many more votes than last time, whatever the boundaries.

The best way to win the election is for Conservative policies to be applied to turn the economy round. The public are primarily worried about the cost of living, jobs and living standards. If the government shows good progress in improving the economy, and can say in 2015 they are well on the way to restoring good growth and prosperity, the Conservatives may well attract the extra votes they need. If the main problems of the nation are not being solved, no amount of boundary change will create a majority Conservative party in the Commons. The Prime Minister will also need to set out in that election how he intends to create a new relationship with the EU that frees us from the tentacles that bind us against our will and interests.

The government was wise to withdraw its timetable motion last night. It would have lost it.It won the main motion easily, but it is a case of I feel like I lose when I win.

The reality of the Lords Reform Bill is simple. The Coalition has no majority for it, because so many Conservatives oppose it. To get a bill through the government has to amend its proposals so that Labour continue to vote for it as they did last night, or amend it so Conservatives will back it.

Labour’s likely price for supporting the Bill is a referendum, to allow the public to be the final judges of the reform. The government seems reluctant to grant this, despite saying that Lords reform is popular with the public.

The 91 Conservatives who voted against the current proposals last night do not have a united view of what would be better. They are united merely in saying that the current proposals are not right. Some dislike the voting system chosen for the proposed elected peers, some dislike the 15 year single term, some dislike the whole idea of elected members in the second house. Many prefer Lord Steel’s proposals. They would like to slim the upper house with new rules on attendance, on appointment term limits and similar improvements.

By removing the timetable motion the government wisely acknowledged that it needs to seek a wider consensus to carry reforms through both houses. The Conservative manifesto made clear it wanted elections to Westminster to be first past the post, and made clear that a consensus had to be found before there could be any question of Lords legislation. The Conservative Manifesto did not promise to legislate for Lords reform, and ruled out the chosen voting system in the current Bill. That is why many Conservative MPs are struggling with these proposals.

           Regulation is like the 3 bears porridge. If you have none, the world is worried about your businesses and the safety of their money if placed with you. If you have too much it is too costly and difficult for businesses and customers  alike, so the work goes elsewhere. You need the Goldilocks amount, not too much and not too little.

        As you need to ration your regulatory interventions, you should establish the priorities you need to achieve with effective regulation. There are two overriding requirements when regulating businesses that can take your money on a promise of giving it back sometime.

           The first is the regulator needs to ensure your money when invested with a bank or other institution remains your money, held to your account or available when you need it. You must be able to get it back at the stated  times in the contract. That is why we have bank solvency and liquidity requirements, and custodian and Trustee arrangements for funds.

           The second is the regulator needs to ensure that the institution does with the money what they say they will do with the money. If the financial institution has said it is running a fund which bets on the horses, it needs to show how it is has placed bets on the horses and what happened to its bets. If it says it is keeping your money safe in deposits it should do so and be able to show you where and how it has done so.

           The regulators these days try to go much further than that. They are interested in ensuring advisers offer correct advice. The problem with this approach is no-one knows in advance what is correct advice. Today’s risky asset can be tomorrow’s investment success. Today’s safe asset may collapse tomorrow. The Regulator could end up entrenching the errors of the day into many people’s portfolios or savings. Regulators would urge people not to buy the betting on the horses funds, but to stick with the bank deposit fund. That would protect their money in normal circumstances. If , however, the fund had placed lots of its money in Icelandic deposits in 2008, whilst the horse betting fund had a winning streak, the results could confound the normal predictions.

          Investment today poses serious problems for regulators and investors. Are gilts still a safe haven investment, the possible core of a cautious portfolio? Or are the small yields now a warning sign of another bubble, which will one day burst and lose holders a lot of money? Is gold a great idea, with more years of bull market ahead of it as people get more disenchanted with paper currencies and as Asian demand stimulates the party? Or is gold a barborous relic, now sitting at a high price, which could itself tumble?  Have European bank shares discounted the obvious discomforts of life in the Eurozone, or have they further to fall as the crisis unfolds?

         The clash of opinions on these and other investment matters are what makes a market. If the Regulators spend too much time worrying about wrong selling, and risk measurement, they run the risk of missing the big issues over solvency, liquidity and transparency which should be fundamental to  regulating honest and sucessful markets. Many investors accept caveat emptor when they themselves choose which funds or assets to buy. What they cannot accept is the failure of a bank to return a deposit when due, the collapse of an investment fund because it has done things it did not say it would do, or the theft of money from an investment by a crooked manager. Those are the big things the Regulators need to target.

           Transport policy is a strange UK battleground between car enthusiasts and rail fans. There is a reluctance by some of  the participants to recognise that both trains and cars require burning large amounts of fuel, they both pose safety hazards which increase as speed increases, but both are important to many people’s lives. They are both noisy neighbours. New roads and new railway lines are equally unpopular with the people living near to the proposed route.

           Rail enthusiasts try to claim their preferred mode is greener. This depends on how many people are making the journey. A full commuter train where most of the passengers live near the entry stations and work near the destination stations should burn less fuel per passenger mile than if those people drove.  In contrast, a little used cross country train,where passengers need to drive to the station to catch it and get a bus or taxi at the other end, may entail a lot more fuel being burned than if each passenger drove to their destination. You need to measure point to point total journeys, not just the rail bit. You  also need to take into account the journeys of the train crews to and from work. When it comes to the external impact of the railway, we also need to understand that a shortage of vehicle crossings over the railway can cause extra congestion and fuel burn for road vehicles.

             It is claimed that railways are safer. This is because railways enforce complete exclusion of all cars, vans, cycles, pedestrians and others from the tracks, whereas most roads allow mixed use with pedestrians, cyclists and others using the same infrastructure as the cars. The road lobby has secured a few higher speed roads where most other potantial users of the road are excluded, which are the safest roads as a result.

             It is assumed in the UK that ways must be found to make trains go faster, whereas road vehicles are always limited to well below their maximum speeds. Allowing faster trains does increase the danger of a very bad crash in the exceptional circumstances that the train derails or encounters a vehicle or other obstacle on the tracks. Trains have far less adhesion to the infrastructure than cars with rubber tyres, and cannot of course be steered around an obstacle in the way motor vehicles can. Seat belts are life savers. They  are mandatory in road vehicles but not supplied in trains.

             There has been a large and expensive  programme of bridge improvement to protect the railway from the unwelcome intrusion of stray road vehicles. Bridges have been rebuilt with high and strong sides, and with strong safety fencing in the approachs to the railway embankments and cuttings. There has been far less spent on removing  level crossings, where motor vehicles and trains can be in conflict through accidents or deliberate and dangerous actions by motorists.

                As the UK is short of transport facilties of all kinds, we need a better analysis of our needs for improved transport links. Where we have rail routes we need to make more productive use of them. They are probably best for peak hour demand into and out of our major cities, for big sporting  and cultural events, and for fast long distance  city centre to city centre travel where enough people wish to do that regularly. We need to improve the technology so more trains per hour can use these precious links right into the heart of our major cities.

                  We need to spend more on segregating roads from rail, and improving the crossing of rail lines by roads. We need to do more work to segregate different users of the roads, given them the safer space they need. Road can learn from rail when it comes to limiting the danger of conflict. Rail can learn from road when it comes to maximising throughput on the network.

             The Lib Dems are sending warning noises. They are telling Conservatives that Conservative MPs have to vote for their House of Lords reform if we are to have their continued support for reducing the Commons to 600 seats as proposed and promised. Some are hinting that if Conservatives do not support them on Tuesday they will want to walk away from the Coalition.

               This is proving counter productive with some Conservative MPs. They argue that given the current state of the polls the Lib Dems are not going to want an early election. Conservative MPs remember the agreement to give the Lib Dems a referendum on the AV  voting system in return for agreement to cut the number of MPs. Conservatives delivered on that promise.  The 2010 in take of Conservative MPs are tiring of whips’ threats if they fail to get into line on government votes. They take even stronger exception if the Lib Dems use the same arguments as the whips, but do it in public.

              The rebellion planned for tomorrow  night is a rebellion led by and planned by the 2010 intake of Conservative MPs. Jesse Norman and Nadhim Zahawi have set out a clear case against the current Lords reform proposals and have kept pressure up on the government throughout the planning stages of this measure, warning them of the strong Conservative opposition to it.  The Bill should pass its second reading easily because Labour, of course, are on the side of the Coalition government. Whether the guillotine motion to limit debate also passes is more doubtful, as presumably Labour will be with the Conservative rebels on that motion.

                I do not expect this vote to end the Coalition. I do expect the Bill for Lords reform to have a troubled passage. The government has the votes to clear the Commons all the time Labour helps them, but the Lords will be another matter. There was wisdom in saying we would only proceed with Lords reform once there is a wide consensus on what reform is needed. The government has procedural devices it can use to prevent the debates on the Bill going on for ever. They can move closures, and order all night sittings if necessary. In effect Labour will decide on when and how the Bill gets through the Commons, if the Conservative rebels stick to their view and are there in the strength their leaders say they enjoy.

                I do think we need a “use it or lose it rule” when granting people the right to sit in the Upper House. It would be good to have a limit on how long people enjoy the privilege, or at least introduce a suitably high retirement age. For those with party affiliations, there could be a ban on appointing anyone who had given large sums of money to their party.

Today’s papers are full of pictures of Mr A Murray, Wimbledon finalist. The front and early inside pages are full of assessments as to whether he can win.

Spare a thought for two great British sporting success which did happen yesterday, which daily papers fail   to place on  the front pages at all. The English cricket team completed yet another series win, this time against Australia. It reinforces England’s position as No 1 in the world.

Meanwhile at Wimbledon Mr J Marray became the UK’s first male doubles  Wimbledon champion for 76 years. It was a fairy tale end for a wild card late entrant. Presumably his fantastic success does not count because he did not have a spin doctor to talk the media through it all.

When England was busily losing the soccer contest our cricket team was winning in style. The papers went to town on the failure and largely ignored the success. Let’s enjoy our victories more, and put the striving into balance. There’s plenty of space to write up Mr A Murray tomorrow, if he does manage to beat one the world’s all time greatest players in the final.