Wednesday, April 30, 2008

Jag Rage

Do not approach if Scottish

Once again Tyler fears the Major is about to take the law into his own hands. Because the Major's just discovered the "Lying Scotch Git's" latest money making scam consists of charging retrospective tax on the good Major's own "essential means of transport". And he's just roared off in it, snarling about how he's "going to put thing's right once and for all".

As you will have heard by now, Brown lied to us about which cars are going to be whacked for his new driving supertax. Whereas he said no car registered before 23 March 2006 would have to pay the new punitive top rate of vehicle excise duty, that was totally untrue. The reality is that any car registered after March 2001 will have to pay up to £245 pa extra.

The Major's modest means of conveyance being a 2005 4.2 litre Jaguar XJ8, he's caught: he reckons his car tax will soon be £5 grand a year. And boy, when he pulled up on Tyler's drive just now, was he steaming.

"But Major," quoth Tyler through the driver's window, "Mr Brown is only doing this to save the planet. It's people like you, driving these monstrous leather club houses around the place, that have doomed us to a world of warm sunny summers."

The Major appeared to have another fit, white knuckling the hand-stitched steering wheel, and face contorted most horribly. "Lying... lying... liar... LIAR... LIAR... LIAR... Gaaahhh..."

Tyler offered a cup of tea and an ambulance, which was when the Major said he was "going to sort it", gunned the engine and was gone in a maelstrom of gravel.

If you think you may be mistaken for A Lying Scotch Git, our advice is to give him a wide berth.

Brown Porkie Fest

I've just heard Gordo interviewed by Humph on Today. Unfortunately H allowed him to get away with all kinds of infelicities that I'm sure would have been picked up by Mr TT:

  • Tax is only 37% of GDP - when Humph put it to him that taxes are now 40% plus, Gord whacked him: "you must get your facts right John." But the truth is that while declared tax is officially put at 37% this year (Budget report), that excludes a further 2.3% of GDP accounted for by "other receipts". Among other things, they comprise all those service charges now imposed for things that used to be delivered free, or nearly free (eg see this blog). Including them, the government's take goes up to 39%. And on top of that, we have government borrowing of 3% of GDP, taking government's total take to c42% (government borrowing being no more than deferred tax - as pointed out by David Ricardo 200 years ago).
  • The 10p tax rate mainly lined the pockets of the rich- jaw-droppingly, Gordo explained he'd abolished the 10p rate because 85% of the benefit was going to the undeserving rich. Humph failed to ask which idiot had introduced it in the first place (er..?). And he also failed to point out that the money had been used to fund a cut in the basic rate, which... er, lines the pockets of the rich.
  • The banks were wrong to conduct so much business off-balance sheet- coming from Enron accountant Brown, who currently has well over £1 trillion of off-balance sheet debt (see this blog), that was a total gob-smacker. But once again Humph failed to spot it, preferring instead to concentrate on what he called "moral issues" and whether Gord was enjoying the job? To which his reply was...

..."it is a privilege to serve."

A privilege to serve.

Tyler wishes to state formally that he does not feel served, and if that's what G really thinks he's doing, he'd serve a lot better by effing off back to Kirkcaldy soonest.

PS Next time let's hope TT gets a crack at Brown - it would be great to hear him taken on properly instead of being allowed to escape into his statistical bramble patch.

Tuesday, April 29, 2008

The Root Of All Evil Necessity

The best financial analysts known to man*

Bank of England Governor Mervyn King has been laying into the City "bonus culture". He's told the Treasury Select Committee that huge performance bonuses may act against the long-term interests of banks and their shareholders, because they give bank employees an overwhelming incentive to take heads-I-win-tails-you-lose risks.

He also said it is primarily the banks who are to blame for the credit meltdown: it is they who built the bonus culture, and it is they who designed the dodgy financing structures that have now incinerated.

And nobody can seriously disagree. As we've consistently argued on BOM, the banks and their shareholders have had the upside, so they must take the downside. And they must learn the lessons in terms of future risk control, part of which may well involve restructuring staff performance incentives.


But to say the banks are ultimately to blame for this crisis is not the same as saying risk-taking banks are A Bad Thing. A modern economy needs innovative risk-taking financial institutions. Growth depends on capital being channeled into areas of greatest return, and Britain has also benefited massively from providing such financial services to the rest of the world.

Unfortunately, finance has never been an exact science: it is messy and wasteful. And sadly, there is no alternative. If you want the innovation and growth, you have to accept the mess that goes with it.

Of course, over the years sensible mature economies have learned from their disasters, and developed techniques to manage and control the worst of the risks, largely in the shape of regulation. So although the banks must shoulder the bulk of the "blame" for what's happened this time, the regulators are also centrally in the frame.

Which brings us back to the FSA, and the publication of the full - though still heavily expurgated - audit report on its handling of the Crock fiasco (see this blog for earlier summary release).

There are some horribly familiar findings:

  • Danger signals ignored - the FSA ignored a slew of danger signals from the Crock over many months before it hit the wall; these included dropping below its permitted minimum capital requirements ratio - which is supposedly a red card event - yet virtually simultaneously announcing it was planned to pay higher dividends to shareholders.; there were seven other critical danger signals ignored;
  • Silo mentality - not only did FSA officials ignore an October 2006 Bank of England paper sent to them outlining the risks facing the Crock, they also seem to have ignored each other: "FSA officials were described as “defensive” and “territorial” in the face of problems".
  • Regulatory capture - FSA officials were cowed by “strong and aggressive characters within Rock’s management team” (actually, that's less capture and more capitulation).

It's the same old story: never ever give an important task to a quango or a government department, because they will screw it up. So WTF would anyone give the tricky job of regulating banks and other financial companies to a brand new quango?

Ever since it was set up by Brown in 1997, the FSA has been a bad joke among City professionals. Talk to any of them over a couple of unattributable beers, and they'll tell you the same thing: the FSA is simply not capable of regulating the financial system.

For one thing, those hungry financiers are always finding new and unexpected ways of making money. It's a tough job for anyone to keep up.

And for another, the people who end up working for the FSA are a lethal combination of the inexperienced and the second-rate.

Partly, that's down to pay and rations: although FSA employees may get paid a fortune compared to DWP staff in the North East, it's nothing against what the best people can earn in the City itself.

But it's also down to the job itself: who in their right mind would want to work for a quango dancing to the tune of people like Brown and Darling? Especially knowing that at the first sign of trouble, they will throw you to the crocs.

As we've said before, Brown still crows about how his decision to make the Bank independent laid the foundations of a 1000 year economic paradise. But the truth is that his accompanying reorganisation of financial regulation was as half-baked as everything he's touched since.

Bank regulation should be returned to Threadneedle Street soonest.

*Footnote - the indecipherable chart is taken from the FSA's monitoring analysis of the Crock. As the excellent FT Alphaville said, it looks like it was run off on a 20 year old Amstrad (HTP Joan W).

OFT Swoops On UK's Biggest Monopoly

OFT - no more Mr Nice Guy

Spurred on by excellent headlines for its campaigns against big business, the Office of Fair Trading has today launched a hard-hitting enquiry into the UK's biggest and most notorious monopoly, the public sector.

Speaking to reporters as he prepared to impound Whitehall, Witchfinder General Zebadiah Zealot said:

"The public sector is rife with monopoly and anti-competitive practices. From schools, to healthcare, to law and order, it holds massive market shares - much higher than Tesco's 30% share of the grocery market. And they use their dominant market position to charge through the nose for sub-standard services, many of which would frankly disgrace a banana republic.

"What's more, over the years they have developed a highly exploitative charging system, known as "taxation". Incredibly, what that means is that unlike the high street banks or the big supermarkets, they can charge people whether or not they use the service!

Even worse, and shamefully, these egregious charges are levied most onerously on the very poorest members of society."

Pausing only to jut his noble chin out another inch, Zealot promised to nail the bosses of this evil racket:

"I promise to nail the bosses of this evil racket," he said. "It's time the public were protected."

We look forward to the court procedings, and the certain stake burnings.

PS Banks, supermarkets, pharma, food manufacturers... what is OFT head John Fingleton doing chasing after every headline he can get? No, what's he doing really?

Monday, April 28, 2008

Three Strikes Is The Only Way

Richard Whelan - killed by our negligence

So someone else has died as the direct result of criminal failings in our criminal justice system.

The official report into the shocking murder of Richard Whelan finds that he was stabbed to death by a thug who was only out on the streets because of grotesque incompetence among those we pay to keep us safe:

“What we have found is what may best be described as a lackadaisical or nonchalant approach within the CJS to many routine aspects of the handling of cases".

Well, yes. Tell us something we don't know.

There is “too ready an acceptance of the commission of offences while on bail, insufficient rigour in respect of checking the validity of proposed bail conditions, and an apparent acceptance of the continual breach of bail conditions.

The lack of diligence in verifying suggested bail conditions, scant evidence of enforcement of those conditions and a failure to deal effectively with breaches when they occurred, all contributed to events taking the course they did.

This was compounded by a lack of communication between the agencies in the various parts of the country.”

It's about as bad as it could be. Even if it is pretty well par for the course.

But there's a key fact about this case: although the authorities reckon there were no signs the killer was “capable of extreme spontaneous violence”, he had been convicted of various offences nine times before. And his previous included possession of an offensive weapon.

As regular readers will know, BOM strongly favours three strikes and you're out. And you couldn't ask for a stronger demonstration of why we need it than this appalling case.

And that is why, once again, we are the ones responsible for murder. Because we are the ones who have failed to insist that our lib elite rulers institute an effective criminal justice system. A system that places public safety at the top of the agenda, not buried away in the footnotes.

Public Inconveniences

Once, Great Britain proudly led the world in Public Lavatories. While the disgusting French were still relieving themselves in full view of the horses, our Victorian civic forebears ensured British citizens would never be more than a few yards from a magnificent marbled temple to Armitage Shanks, Doulton, or Twyford. The comfort and confidence that gave to the populace took us safely through two World Wars and even the dark days of poor Tim Henman.

Oh, but how things have changed. And they changed when our cash strapped local authorities discovered they have no statutory duty to provide such fripperies. Indeed, they have no statutory duty to provide any public lavs at all.

So all over the country they've been slamming lav doors closed, never to reopen. Nearly 20% of them closed just in the seven years from 1998. They have been flogged off for apartments or turned into wine bars, never to provide relief again.

It's all part of a grand plan for councils to withdraw from providing "free" services.

We may be paying £25bn pa in Council Tax, and loads more in general taxation, but it's not enough: unless councils can charge a user fee, the service will be closed. (Yes, I know: surely public lavs always used to charge, otherwise how did we get the expression "to spend a penny"? But for reasons somewhat unclear to me, that all got dropped with decimalisation).

The new alternative (apart from pissing in phone boxes and bus shelters, that is) is the Superloo. For that, councils can charge - up to 50p - and it's a lot easier to subcontract the whole nasty biz of keeping them clean and working.

The... er, bottom line is that this is yet another example of paying ever more money for ever more restricted public services.

And the final insult? The Superloo is French, mainly supplied and operated by a French company, JC Decaux: those civic Victorians will be turning in their graves.

PS Next time you're caught a bit short, you might also want to bear in mind this story: "A so-called 'superloo' exploded in a town centre when an electrical fault caused water to surge back into the toilet, blowing off its roof and lifting the pavement. Police were called to reports of an explosion in Hanley town centre, Stoke-on-Trent, at 0445 GMT on Wednesday. Officers found the roof ripped off and smoke coming from inside. A spokesman said "this could have been quite distressing if someone had been in there." Yes, I can imagine it could have been.

Mind how you go.

Sunday, April 27, 2008

Guzzling At The Olympian Trough

Click on image to enlarge

According to the Sunday Times, guzzling at the 2012 trough has reached new levels of depravity:

"Organisers of the 2012 London Olympics have block-booked 1,925 rooms in some of the capital’s most exclusive hotels for international delegates and their spouses at a cost of £10m.

Top officials have been allocated 345 suites costing up to £3,000 a night at six Park Lane hotels including the Dorchester, the Hilton and Grosvenor House. Half the bill will come out of the coffers of London 2012, the Games organiser, in the most expensive block booking in Olympic history."

The rooms at the Dorchester include "the Harlequin suite, which has walls “upholstered in ivory silk” and is said to “glow with Hollywood glamour”. Elizabeth Taylor was staying in the suite when told of her multimillion-pound deal to star in the film Cleopatra".

It's already made Tyler vomit with rage, especially since the organisers reckon the money will not come from taxpayers. According to them, it will come out of the "private" revenue from staging the games. It's clearly escaped their notice that such revenues (if they materialise) are already spoken for to repay some of the monstrous taxpayer contibution elsewhere.


And there's more:

"The officials in London will be given the use of a fleet of 3,145 chauffeur-driven cars, despite the promise of a “green Games”. The route to the Olympic park will be cleared of traffic so they can glide to their destination in east London in about 20 minutes."

We've blogged it before but it remains an outrage. It literally is the way of Stalinist dictatorships.

And while we're on 2012, we've just had confirmation of something we've long feared: the £2bn Olympic Village, supposedly privately financed, is going to need a massive injection of taxpayers' money or it won't get built:

"Bovis Lend Lease, which was selected last year to construct the £2 billion Olympic Village in east London, is struggling to raise money to finance the project. A severe lack of credit in the banking system - and fears of a property price crash - have made it very difficult for any company to raise such a large sum.

Sources claimed that the problems were so severe that it was possible that taxpayers would have to provide more funding for the building plans."

Possible? We'll take that as a definite.

So is there any good news? At all?

Just this: nobody would start from here, but 2012 is exposing our commissars for the lying, incompetent, self-promoting charlatans they are. With luck, taxpayers will take note and remember.

Saturday, April 26, 2008

A Striking Picture

Here's fun. The chart shows the number of working days lost to industrial disputes in two sectors of the economy. Let's call them Sector A and Sector B.

Now, if I tell you one is the private sector and the other is the public, can you guess which is which? Think very carefully, and remember that the private sector employs four times as many people as the public sector. And remember too that the private sector is run by Evil Capitalists who, unless they are robustly confronted by worker solidarity, will spend all day grinding the faces of the poor.

Yup, you guessed it - the sector with all the strikes is the public sector, which is currently losing nigh on one million days every year to industrial action, compared to a mere 34,000 in the whole of the private sector. Taking account of the difference in numbers employed, the average public sector worker goes on strike well over 100 times more frequently than his private sector counterpart.

The chart throws up some other... er, striking facts.

First, Labour really did get an initial honeymoon period. For three blissful years from 1997, the public sector's losses to strike action even fell below the private sector's. True, Labour were sticking to tough Tory spending plans, but union quiescence was secured with the promise of paydays to come.

By 2000, things were starting to turn just a little sour: payday hadn't quite arrived as billed. Still, a few judicious handouts here and there were enough to keep the lid on for the 2001 election.

But post-election, things took a more serious turn, and by 2002 the firemen and various other groups were striking over pay. We of a certain age began stocking up on candles, flared trousers, and other necessities of life in the seventies.

But wait... at that very point, nice Mr Brown turned up with a huge wad of cash, and miraculously the strikes receded. Indeed, by the election year of 2005, the public sector was massaged right back to private sector levels of industrial contentment. They even exchanged lovers' vows at Warwick. Hurrah.

Alas, the contentment was short-lived. With the election over, the government briefly flirted with the idea of tackling the looming public sector pension crisis by ending retirement at 40. That triggered mass public sector strike action, and another surge in working days lost.

Naturally, our heroes folded on the pensions reforms pdq. But unfortunately for them and us, they were by then facing a much more difficult problem: the money was running out.

It's time for the final act of every Labour government of Tyler's lifetime - incomes policy and many, many more strikes.

At least Tyler has already laid in stocks of flared trousers. It's only a matter of days before some government minister comes on TV telling the rest of you there are plenty to go round and you shouldn't panic buy.

Don't listen to him.

PS For those of you too young to remember, take a look at this. And ask yourself - do you really want the Bee Gees to come back? Cos that's what's gonna happen.

Friday, April 25, 2008

I Fought The Law And The Law Treated Me To A Holiday

When prisons started going wrong

Yes, we know Glyn Travis, assistant general secretary of the Prison Officers' Association has a teensy axe. But when he says "people are breaking into prisons to bring in drugs and prostitutes but the prisoners are quite happy to stay inside", it certainly gets my attention.

"Drugs are coming into prisons at a rate that's so dramatic that drugs in prisons are actually cheaper than on the outside.

There's a classic case in Yorkshire where members of the public were climbing over the prison walls to take drugs into the prison. They put up ladders to climb over the walls, but prisoners were so comfortable in the environment they were living in that none of them tried to climb up the ladders and escape."

That can't be true.

Can it?

Alarmingly, it is - it happened at HMP Everthorpe (even if the main drugs suppliers in most prisons are reckoned to be the prison officers).

As it happens, a member of the Tyler family got banged up about 30 years ago (very distant since you ask, and in any case, there was always a question about his "provenance"). Anyway, despite the fact that he'd done something we'll describe as "wholly unacceptable", he was sent to an open prison. And everyone who visited him came back with the same shocked reaction: it wasn't anything like any prison they'd ever imagined. Instead of prison bars and breaking rocks, these guys just mooched about, watched a bit of telly, sunbathed, and popped down to the shops. WTF?

There seems to be a huge mismatch between what we simple folk out here think we're paying for in our prisons, and what actually gets delivered. We think we're getting San Quentin, when in truth we're getting a Travelodge, with on-demand drugs rather than tea-making facilities in the bedrooms.

Is it like that in all prisons? And should we care? I mean, what is prison actually for?

The Major is firmly of the view that prison should be a deterrent. Rock breaking in the hot sun, for sure - and worse, if he had his way. Once you've experienced prison, you should be a broken man: released back into the world as a dreadful testimony to the wages of sin, so that others will mend their ways.

But the Reverend Tollemache reckons prison is all about reform. We should teach the ways of righteousness, and maybe the 3Rs as well, and help these poor sinners find redemption. The Rev's representative on earth, ex-prison governor David Wilson, says:

"Let's acknowledge that what is actually going on at Everthorpe and in our other prisons is not about being "soft" or "cushy", but about rights, respect and how to gain access to those facilities or services that might just be able to help you. More's the pity, for what sort of society have we become when you have to be sent to prison before you can get an education, healthcare, or develop work skills?"

More's the pity, indeed.

Which makes us think there is A Third Way.

Clearly, Tollemache and Wilson are living in a fantasy world, since in reality nobody has a clue how to lead these sinners unto the light. But that doesn't mean the Major's Camp on Blood Island alternative is the only option.

Because the main priority is surely to keep us safe from known bad guys, which is why we are forever banging on about doubling the number of prison places. And as long as the doors are securely bolted, we don't give a PAC-style toss if the inmates then want to spend all day watching Trisha and getting smacked up.


We just want to be kept safe.

PS Talking of ahem "criminal justice", this week we've has two humdingers. First, the man who was convicted of leaving his bin lid open - a criminal record for disobeying the rubbish Gestapo. And second, the appalling case of the two thugs who drowned a man by means of a so-called "punishment swim", and were then sentenced to just five and a half years in jail (which actually means half that). What possible case is there for not locking up scum like that for good?

Vote Red Mist Party

You'll need plenty of £2 coins

As you may have heard, the altogether outstanding Kelvin MacKenzie is so incensed by the unaccountable money burning antics of his local council that he's standing as a local councillor. His Red Mist Party pledge card reads:
  1. Cut car parking charges, which have just been increased by up to 43% in one year alone

  2. Cut the pay of the council leader, which has just been increased by 40%

  3. Scrap the final salary pension scheme for council employees (see many papers from the TaxPayers' Alliance)

He's certainly got Tyler's vote. Apart from his excellent policies, someone of MacKenzie's intelligence and energy is sure put a rocket up the council. We're just sorry he's standing for the council next door.

His red mist descended because Elmbridge Council decided to increase the cost of his station's daily car parking charge by 43%. Just like that.

Interesting. Because all of us are suddenly realising how much these local authority charges have escalated. From car parks, to library fines (see this blog), to policing fees (see this blog), to pest control charges, these days local authorities routinely rack up their charges far faster than prices generally.

We've been taking a closer look at this. In 1997-98, charges and fees levied by English local authorities raised £5.5bn (excluding most council house rents). By 2005-06, the most recent year available, the total had shot up to £10.7bn, an average increase of 9% pa. Which compares to the government's official inflation rate (the Consumer Price Index) over that same period of just 1.3% pa.

Assuming this rate of charging increase has continued - and if MacKenzie's experience is anything to go by, that's a conservative assumption - by 2007-08 the total would have reached £12.6bn, more than £500 pa for every single household. These charges now raise well over half the sum raised by Council Tax.

It's high time we started monitoring these charges systematically. Because Council Tax is by far Britain's most unpopular tax, councils have become circumpect about increasing it, and anyway it is capped by Whitehall. But there have been no such restraints on charges.

In priciple, Tyler is in favour of usage charges. But in practice, they have become yet another stealth tax. They need to be opposed, just as Kelvin is doing.

PS Tyler has in his possession some fascinating account books that belonged to his great grandfather. They record the income and expenses of a very active Ratepayers Association in Brighton before WW1. Great grandfather Tyler was its Treasurer, and was constantly authorising funds for the hiring of meeting halls and the printing of leaflets. Today, I feel sure he would have been a TPA activist. But whatever happened to all those Ratepayer Associations, scrutinising councils at the local level? Their demise is just one more sign of how much power central government has grabbed for itself. (Tyler finds account books fascinating? Sadly, yes. Especially when they are written in fine Victorian copper plate).

PPS Render unto Caesar news. After his last whacky outing on Sharia Law, we'd assumed the Welsh Druid had been locked away in one of his palaces. But this morning he was on Today opining on various financial products, such as roll-up loans. Umm... maybe BOM should start doing theology.

Thursday, April 24, 2008

Eton Masters To Strike

Happiest days of your life revisited

Everybody out! The Honorable and Ancient Company of Pedagogues has voted overwhelmingly for strike action at Eton, Winchester, Westminster, St Paul's, and scores of other toff schools.

On a day when a third of our state schools will be closed because of the NUT's strike, we've been trying to imagine under what circumstances teachers at our independent schools would take similar action. We can't think of any. Maybe that's because they have too much concern for their pupils - especially just ahead of key exams. Or maybe it's because everybody understands it would infuriate the customers and their schools might suffer the commercial consequences.

But in our nationalised, unionised, single employer, one-size-fits-all, socialist child conditioning plants, there are no such restraints.

We really are back to the seventies:
  • our politicos have maxxed the credit card - again
  • the public sector has had seven years of plenty, and is now facing seven (or more) years of lean - again
  • we're in the nightmare phase of a boom-bust pay cycle - again
  • the commissars have resorted to a Stalinist anti-market incomes policy - again
  • public sector unions are whacking the public - again

Back in the seventies, Mrs T was a teacher. She was also a member of the NUT because all new teachers were strongly encouraged to join a union "just in case you need legal support" (er, like your employer doesn't automatically give you professional liability insurance?).

One day, the NUT called a strike. Mrs T hadn't voted for it, and had no wish to participate. So she went to see the wise old Deputy Head and told him. "Ah," he said, "I understand your concern. But the school will be closed, so there's no point in coming in - there won't be any kids to teach. It might be tricky for the school."

Thus Mrs T became a "striker". Just like many other teachers today, she'd been locked out by a gutless employer taking the line of least resistance: apparently, only about one-quarter of NUT members have actually voted for this strike.

Strikes like this are a relic of a bygone age. As we've blogged many times, it's only in the public sector that unions still have the power to disrupt our lives like this (eg see here). The following chart shows how public sector union density is still 58.8%, compared to only 16.6% in the private sector- so more than three times as high (apologies for chart illegibility- it's down to BERR):

Vulnerability to union action is just one more reason why our state owned public services need to be broken up. We taxpaying customers would certainly benefit.

But the real irony is that most of the employees would also benefit. Not every state school teacher (average salary £34,000 pa) could expect to get rewarded like an Eton master, but the good ones would certainly step up.

PS Back in the seventies, strikes used to take place in winter, as in that discontent thing: everybody's so much more miserable in winter so it has more impact. Yet now, these guys striking in spring. Why is that? Surely not another sign of global warming.

Wednesday, April 23, 2008

Tossers Pulling It

Excuses for tossing off

Blackguard, coward, git, guttersnipe, hooligan, ignoramus, liar, rat, swine, stoolpigeon, and traitor, they're all out. Right out.

But what about tosser?

And more particularly, what about tossers pulling it?

I can assure you that's not the kind of prospect the Dowager Duchess of Beuccleuch likes to contemplate. And neither, I dare say, does Sir Suma Chakrabarti KCB, Permanent Secretary to the Ministry of Justice.

Yet this afternoon in the Public Accounts Committee, the previously impeccably mannered David Curry suddenly put it to Sir Suma that he actively encourages a bunch of tossers to pull it.

There was a gasp, and we waited for the Pursuivant Master of Garters to march him off.

But amazingly, nothing happened. We never did understand the definition of unparliamentary language, but clearly, on a Wednesday with an r in the month, tossers are perfectly in order.

PAC were grilling Sir Suma and his two wingmen about the hopeless shambles of Community Orders. And Curry was getting exasperated about how easily the Probation Service accepts the pathetic excuses served up by the tosser "clients" when they pull out of their probation commitments.

As BOM readers will recall, this whole project is Labour's 2003 wheeze to cut the need for prison places by leaving dangerous thugs free on the streets under the supervision of Mr Barrowclough's naive probation officer brother. We blogged the NAO report here, and the key conclusions were:

  • The scheme was rushed in on the basis of zero evidence that it would work

  • Because the monitoring and recording systems are - to use the correct parliamentary language - shite, there is no way of knowing how many (if any) of the thugs actually serve their sentences properly

  • Tossers can pull it as often as they like, using any old excuse for not turning up to meet Mr Barrowclough (see table above)

So it's pretty much a waste of time and money, an impression amply confirmed by the mandarins' performance this afternoon.

Sir Sumo is new, and his job was just to sound confident and smooth. And smooth he most certainly was, assuring the PAC that all the NAO recommendations had been taken on board and actioned with the utmost expedition. Sir Humphrey must have been hugging himself with delight.

But Sumo's two wingmen were less silk, more polyester. They both had more than a touch of the Barrowcloughs and I found myself thinking thank God they're not in charge of anything important... then I realised one is head of all our prisons, and the other is in charge of the Probation Service.

Particularly alarming was the fact that Probation Officer Barrowclough kept telling us that most of his 200,000 charges are "people you'd cross the road to avoid". To which the obvious response is "then WTF are they out on probation and not locked up?"

He also talked about something called the crimogenic needs of his charges. Frankly, I have no idea what crimogenic needs might be (a quick Google opens a deep and dispiriting abyss of sociological twaddle) but I'm screaming sod their needs, crimogenic or otherwise, all I care about is keeping law-abiding citizens safe.

All the evidence tells us that if someone has done something that warrants a criminal conviction, he is highly likely to reoffend. The stats say released prisoners have a 65% average reconviction rate (within two years), and ex-community service criminals have a 50% reconviction rate:

What's more, all those figures relate to reconviction - undetected reoffending rates will be much higher. And at the level of the individual criminal, once someone has three previous "sentencing occasions", the chances of further convictions is greater than 50%.

We stick to our previous view: three strikes and you're out (see here).

PS And talking of tossers, Gordo really is in a whole new class. He abolishes the 10p income tax rate in his own inimitable way, slyly burying its effects in a huge and impenetrable pile of bureaucratic complexity. Eventually he gets found out and challenged. And just like a playground blusterer, he folds immediately and starts snivelling. Does anyone take him seriously?

Tuesday, April 22, 2008

Wrestling With The Swedish Model

The Swedish model in action*

This evening Tyler attended a debate on the welfare state, at the excellent Economic Research Council. Live on stage we had Lord Anthony "Third Way" Giddens, Peter Lilley, Peter Oborne, and John "Big Issue" Bird.

That John Bird though, eh? He's a character straight out of Dickens, telling us how his family are mainly third generation benefits dependent scum, welfare has emasculated the working class, and the state has destroyed social mobility. He spoke with real passion and made a big impression.

The two Peters said pretty well what you'd expect. Which left Lord G.

He was very eloquent, explaining how any modern civilised society needs to spend A Lot of money on welfare. But how the welfare state as we've known it, is way past its sell-by date. He had four suggestions for what he calls the the social investment state:

  1. Welfare needs to become more preventative - we need a more interventionist state
  2. We need to break the middle class stranglehold on the best bits- eg Giddens favours school entry lotteries
  3. Welfare should be decentralised- eg the NHS needs to be broken up
  4. Diversity is good- we need to nurture multiculturalism through integration... or was it integration through multiculturalism...

And Giddens really lusts after that Swedish model. You could see it in his eyes. Yes, she's a bit underendowed in the population department (only 15% of the UK pop), but her decentralised competing schools and healthcare systems are magnificent. She's as rich as us, but so much more civilised.

Clearly Tyler disagrees with Giddens on many things, but it's very interesting how we all now agree about choice and competition in public services.

Just one small question - how we get the politicos to do it?

PS OK, another small question - if Sweden is so great, just why is its suicide rate so much higher than ours? According to the World Health Organisation, Sweden's suicide rate is about twice ours. And also, if Sweden is so great, how come all those bright Swedish MBAs come to work in London?

* The Swedish model in question being a new H0-scale Swedish model railway layout (located in the UK), called "Ekenäs".

Deeper Into The Olympic Money Pit

The pit takes shape

It turns out the policing for that shambolic Olympic torch relay through London cost us £750 grand. Fantastic.

Meanwhile, the 2012 fiasco grinds on , with the Public Accounts Committee issuing the latest report today. We blogged the original NAO report and the PAC meeting (see here), so we don't need to go into too much detail. Suffice it to say, the Report catalogues a raft of incompetence and deceit that would simply not be tolerated anywhere outside of government:
  • Deliberate deceit - "Contrary to good practice, the Department did not include programme contingency, now £2.7 billion, because the scale and complexity of the undertaking were not appreciated at the time of the bid. The costs of tax and security, now estimated at over £1.4 billion, were also excluded from the estimates as they were uncertain. Yet £738 million of funding from the private sector was included, despite not being supported by robust analysis."
  • More deliberate deceit - "The revised public sector funding package of £9.325 billion does not include all of the activities on which delivery of the Games and its legacy depends... It excludes expenditure of £650 million by the London Development Agency to acquire the land for the Olympic Park, the private sector’s contribution to the costs of the Olympic Village (which is still being negotiated), and planned expenditure of some £2 billion on staging costs."
  • Yet more deliberate deceit - "Despite the £5.9 billion increase in the public funding for the Games, the Department has not specified what will be delivered in return for this expenditure and the current budget cannot be reconciled to the commitments in the original bid." Translation: lavish promises were made about long-term legacy benefits that were never any more than utter cobblers.
  • Criminal wishful thinking - "Revised expectations for private sector contributions have increased the estimated cost to the public sector by £748 million." Translation: the private sector has failed to come up with anything like their assumed contributions (would you want your company logo stamped on a disaster?)
  • More criminal wishful thinking - "The Olympic Delivery Authority is having difficulty generating supplier competition for some venues." Translation: the contractors have learned to avoid cover bids, so now only one will bid for each job on a take it or leave it basis (see this blog).
  • Yet more criminal wishful thinking - "The estimated £675 million reimbursement to the Lottery is inherently uncertain as it is based on estimated proceeds from future land and property sales, and on an agreement with the Mayor of London which is not legally binding."

Nothing in the PAC Report makes us waver from our long-standing £20bn all-in cost estimate.

And financial expert Tess remains "at the controls".

Pain Man

Very quick post between gutter repairs and other essential admin.

Yesterday's blog praising Mervyn King attracted some slightly bemused comments- aren't we still just bailing out the effin' banks?

Well, nobody would start from here, but given all the pressure, King did as good a job as a job as anyone could expect. His aim was to get the key interbank markets working again, but to ensure that the banks' shareholders continue to bear the pain of all those losses.

These things are never perfect, but looking at the banks share prices this morning, I reckon so far he's pulled it off. Most of the banks seem to have given back the price gains they made last week (eg HBOS is down 8% since Friday night), reflecting market realisation that it's the shareholders who are going to stepping up to the plate in terms of rights issues like RBS, and lower future dividends.

Merv really does deserve at least a silver star.

Monday, April 21, 2008

Thank God For The Old Lady

Cut, cut, cutting your hair

Mervyn King has taken heavy flak over his handling of the banking crisis, especially from our politicos. For months he stood virtually alone in the corridors of power arguing that the bankers had made the profits, so they should reap the losses. Thank God he was there, because left to themselves our spineless politicos would long ago have given the bankers whatever they asked for.

This morning we've had details of the Bank of England's new Special Liquidity Scheme to "unbung" the financial markets. And we have to say, it's less bad than we'd feared - Merv seems to have insisted on a degree of sanity being maintained.

As already leaked, the SLS scheme involves the authorities swapping our high quality Treasury securities for the banks' dodgy securities and loans - in particular those Residential Mortgage Backed Securities (RMBS) that nobody now wants. Stripped of technical jargon, we taxpayers are lending them £50bn (or more) secured against the collateral of a bunch of mortgage and other assets they will pledge to us. The arrangement will be for a 12 month period, extendable for up to three years.

From the taxpayer's perspective, the key questions are whether the collateral is secure, and what we are being paid.

On security, the Bank has published the haircuts (ie discounts) that will be applied to the collateral (see table above). And as we can see, for mortgage and credit card based collateral, they will only accept the very highest quality (AAA as rated by two recognised credit rating agencies). And values will be discounted by up to 22% for quoted sterling denominated securities, with further discounts for unquoted or foreign currency denominated securities. What's more, the securities will be marked to market (ie repriced) daily, and collateral will need to be topped up if its value sags.

For choice, standing as we are on a property cliff-edge, we'd have preferred even harsher haircuts, but for AAA securities this is probably tough enough for us to at least snooze at night.

On charges, the banks will have to pay a fee. It will be equal to the difference between what they can already borrow at in the unsecured interbank market (3 month LIBOR), and what they can borrow at in the so called repo market, secured against government bonds. At present that difference is c 0.9% pa, which is therefore the fee they will be charged.

Again, for choice, we'd have preferred a higher fee: after all, we taxpayers are doing the banks a huge favour here so we should get fully rewarded. But at least we're not giving them free money.

So overall, this deal seems a bit tougher on banks than some of last week's rumours suggested. And the equity markets seem to agree, with all the major banks' share prices down this morning. So good.

And the mortgage market? Darling and Brown will doubtless claim this move will "unbung" that as well, bringing "fresh hope to hardworking families and first time buyers". Don't believe a word of it. This is about giving the banks a breathing space to rebuild their capital and free up their balance sheets. Mortgage borrowers will not be high on their priority list.

Indeed, the Bank of England statement makes absolutely no mention of any deal with the banks to help mortgage borrowers. In fact, it makes quite clear that these new loans will not be provided against the collateral of any mortgage loans made since December 2007- so there is specifically no linkage with future mortgage lending.


Sunday, April 20, 2008

Deliberate Impoverishment

Inside Gordo's head

Being of a charitable disposition we'd persuaded ourselves that Labour's grotesque impoverishment of 5.3m poor childless working households had been straightforward blithering incompetence. We'd imagined it must be yet another unintended consequence of yet another half-baked fiscal measure rushed through to grab headlines and stymie the Tories.

True, we could see the abolition of the 10p income tax band was driven solely by the need to fund Gordo's headline stunt of 2p off the standard rate. But surely he hadn't intended to make the poor poorer.

It turns out we were wrong: this was a deliberate and callous act of policy.

We know that because Darling told us this morning:

"Of course you know when you make any changes to the tax what the effects will be.”

In other words, ghastly lying Brown knew all along about the losers, but assumed he could get away with it.

So now he's been blown, now those Labour rebels are supposedly going to vote it down (yeah, right), what happens now? Reinstate the 10p rate?

Not a chance. That would cost £7.2bn this year and £8.6bn next. Darling simply doesn't have the money for the simple reason that it's been spent on cutting the standard rate to 20p. He says:

“What I cannot do is to rewind the Budget. The financial year has already begun. There are millions of people who are already paying tax at 20p rather than 22p.

It simply isn’t possible as you go into a financial year to unravel the whole thing and attempt to rewrite it.”

Instead, he's hinting that if the working childless poor make it through another year of ramping food and fuel prices, if they survive another year of downward pressure on their wages from mass immigration, and if by some chance they're still alive next April, he might see if he can throw them a crumb or two.

It is the disgusting calculation of a bankrupt regime that long ago sold its own granny.

So what would we do? Would we reintroduce the 10p starting rate?

No. As we blogged here, we'd much prefer to help the working poor via the clean simplicity of a higher personal allowance. And the Institute for Fiscal Studies agrees, its Director writing today:

"A more popular way to reduce the number of losers would be to raise the personal allowance people can earn before they start to pay income tax and National Insurance. This would also be more cost-effective, as it would partly unwind the reform that created the losers in the first place. Raising the allowance by £100 would remove 1.3 million losers and cost £800 million; by £300 would remove 3.3 million losers and cost £2.5 billion; by £750 would remove almost all the losers and cost £6 billion."

We reckoned we'd need to raise the allowance by £1,000 pa, costing £7-8bn, but the IFS has a much bigger envelope-back than BOM, so we bow to their £6bn.

It's still a lot of money though and sadly we don't think next April's Chancellor Balls will have the cojones to do it. Much more likely, he'll concoct yet another layer of indecipherable tax credits, this time twisted to pick up the childless working poor. If they can fathom it out.

What a nightmare.

PS How would we finance the the £6bn pa? Where would you like to start? First we'd axe a large chunk of Gordo's £6bn pa tax credits - they wouldn't be needed so much with a higher tax free allowance. Second, we'd shrink HMRC another notch or two- fewer taxpayers and fewer tax credits should mean fewer tax bureaucrats. Third, we can the useless Sure Start programme... (cont on p94).

Saturday, April 19, 2008

Enron Bailout

Every one a winner

Our decrepit discredited rulers are leaking and dribbling all over the place. Last night, after the global financial markets had safely closed for the weekend, they leaked to BBC news that another £50bn of taxpayers money going to bail out Britain's largest banks (which is on top of the £100bn committed to the Crock, and the £40-50bn already supplied in emergency market liquidity).

Naturally, no official government spokesperson was available to discuss, so it was left to their unofficial spokesman J McFall to tell us via Newsnight that:

"If we don't have this what this will mean is that the whole mortgage market and perhaps the real economy will freeze up."

Yup, There Is No Alternative: unless we do exactly what the bankers say, the economy gets it.

For taxpayers, this sounds worse by the day. The bankers have clearly scared Gordo and Co to death with tales of terminal crashes. Which won't have been difficult, given there's just two years to run before an an election in which Labour was already facing disaster.

In his current final days funk, Gordo's pretty well given the bankers a blank cheque. £50bn? Sure... or would £100bn be better? Yes - let's make it a round £100bn, just in case (McFall actually conceded it could be £100bn, so it might easily be even more than that).

But although it's a ton of cash - our cash - we haven't been told anything about the terms.

According to the leak, the money will be lent secured against mortgages (presumably either straightforward mortgages or in the form of those toxic mortgage backed securities). But just as in the case of our Crock exposure, with the property market wobbling, we can take no comfort from that.

And also according to the leak, the loans will be in the form of swaps, in which we give the banks our high quality government securities in exchange for their dodgy mortgage securities, and agree that we will reverse the exchange at the end of a set period. Therein, lies the second concern.

Because in classic Brown style, he's going to fiddle the accounting. Rather than openly admitting these taxpayer loans increase our national debt - which they do just as certainly as lending money to mortgage holders directly - he's going to take advantage of an Enron accounting wrinkle. Another one.

Although the loans will be for up to three years (which is exactly what the bankers have demanded), he's going to pretend they're only for one year. Of course, at the end of each year they will be automatically rolled over into another one year loan, but for the usual abstruse reasons, under the Enron National Debt rules, that doesn't count.

If a private sector company did it, the CEO and the FD might well go to jail. In government it's just another day at the office.

Cost to taxpayers?

We still don't know.

But what we do know is the market value of Britain's five biggest banks shot up by around £10bn last week (see this blog). Even RBS, with its announcement of a vast multi-billion new share issue, was up by about £4bn.

It's as good a measure as any of how much taxpayers are handing over to the banks.

Well done boys.

Friday, April 18, 2008

News From BOM Correspondents- 5

Man in a wig

1. Human rights pay-out to junkie convicts

"Taxpayers have footed a £1 million compensation bill after almost 200 drug-addicted prisoners sued the Government, claiming that denying them a heroin substitute breached their human rights...

The prisoners had been using methadone paid for by the Government but it was decided that they should go through cold turkey detoxification instead. They claimed that their human rights had been breached under Articles 3 and 14 of the European Convention on Human Rights, which bans discrimination, or inhuman or degrading treatment or punishment."

So presumably if the Major ever gets banged up (could happen any time), he would be perfectly within his rights to demand a continuing supply of alcoholic "refreshments": it would be utterly inhuman to force a man of his age and propensities to stop suddenly after 60 years of daily pickling.

And what about addiction to fags? Or choccie? Or pate de fois?



2. Gobsmacker of the month walks free

The lady who cheated DWP of £9,000 Incapacity Benefit while working for DWP themselves (see this blog) has got off with just a three months home curfew. All that means is that she will be tagged and must not leave her home between 7pm and 7am.

That's what we call a real deterrent.

(HTP John P)

3. Bailbusters

Following our post on Bailbusters of Doncaster, eagle-eyed BOM reader Pete S sent a stack of links to one of the lawyers involved. His name is Ged Hale (pic above), and he's a man with more than a few bees in his wig. For one thing he doesn't think much of the Criminal Justice System:

"The Criminal Justice System in this country is in terminal decline. It has been the subject of gross underfunding for over a decade. Whether it be police, defence advocates, probation or the court service itself, you will find all agencies involved at the end of their tether with frustration at the countless millions spent on new computer systems designed to save money which are hoplessly inadequate and indeed less efficient by far than the ones they replace.

The vast pool of goodwill which has enabled the system to operate at all has been eroded to the point where experienced practitioners are looking to leave their chosen profession because there is no end in sight to the relentless cost cutting regime. CPS however, have never had it so good, with pay and salary increases designed to attract lawyers away from those on the other side.The Balance of power appears to be shifting in favour of the state in an uncontrolable and in my view highly undesireable way."

You know, that could almost be us talking. Maybe that Bailbusters ad was some kind of wind-up. But a comment from Mr Hale in an internet chatroom for lawyers leaves us less sure: "solicitor advocates" like him have recently been granted the right to wear a wig in court, and he is sooo relishing it:

"I will always wear a wig in the Crown Court. I believe we have won an important point of principal [sic] and it would make it a hollow victory not to do so... Wearing a wig is the first step towards showing them we are here and here to stay. terms of the perception of parity that the average juror will now have. No more notes to the judge equiring about the un wigged advocate.

Wear your wig as a badge of honour enjoy the status symbol it provides in the knowledge that the CPS Solicitor HCA's will in all probability stay un wigged as their penny pinching employers are unlikely to stump up the cash for same. Let the un wigged be mistaken for ushers.

AGT1 may as an aside wish to know that after 500,000 miles of 911 tyre burning we do have one area where we are at one!"

I think we get the picture. Wig envy, designer status outfits. a Porsche 911 with a personalised number plate... puts me in mind of Limpid Opec. No wonder a fellow solicitor advocate comments: "If what "we" are competing for is equality and recognition, shouldn't "we" be trying to raise our game to the standards set by the bar, rather than bickering over whether we get to dress like a horse's a**e?"

4. PFI costs heading North

The credit crunch is pushing up the cost of PFI deals even further. That's because the cash-strapped banks are pulling back:

"One leading PFI financier said he knew of at least one school project that had failed to get funding because of the credit crunch. Consortiums now have to approach several banks to achieve medium-sized loans, when before one bank would take on the risk. This is happening even though the government and local authorities are regarded as risk-free blue chip tenants."

As we've blogged many times, PFI is a good idea in theory, but an extremely expensive one in the hands of the Simple Shopper. Sound like the Krrrunch is reinforcing that bigtime.

(HTP pfiwatcher)

Major For Labour!

Vote Red, go Blue

This morning Tyler opened his front door to find the Major thrusting a leaflet forward and asking if his candidate could count on Tyler support in May. "Yes, of course..." Tyler began, but then stopped dead. He'd spotted the Major was wearing a Labour rosette.

"What the...?!"

The Major rolled his eyes and bared his claret stained teeth. "It's the only way," he snarled, advancing a heavily brogued foot across the threshold. His manner was frankly alarming - like the time he announced he was off to "flush out the pikeys" - and Tyler instinctively backed away.

"Have you read Your Boy's Telegraph article this morning? Have you!? It's the absolute flaming limit!"

Ah, so it was the Old Trouble. "He's not 'my boy', Major. And whatever you or I may feel about Cameron's New Labour policies, there's no denying he's now miles ahead of Gordo. It's worked - the socialists are toast - rejoice at that news."

"Exactly," the Major expostulated spitily. "My point EXACTLY!"

Tyler frowned. "Sorry, Major... so why are you out canvassing for Labour?"

"Well, isn't it obvious? The only way Your Boy will rethink his pathetic spineless socialist toadying is if Labour get back into contention. As thing's stand, he doesn't need to rethink a damned thing. He needs to be taught a lesson!" The Major's face had reddened even further and there was a sizable fleck of spit on his chin. "The man's a bounder - we've got to make him see that the only way of getting support is to deliver real Conservative policies."

"But, Major..."

"Don't 'But Major' me! What is the one single example of Cameron announcing a proper Tory policy? Eh? Eh? I'll tell you- it was raising the £1m Inheritance Tax allowance last October. And why did he do that? Because he was down and out - staring down the barrel of an electoral shotgun and he needed a real policy pronto. Oh, yes. And what happened? What happened?" He paused to gulp for air. "What happened was that his diving poll rating turned on a sixpence and Gordo flunked the election. And Your Precious Boy hasn't looked backed since. Gah!"

He pushed the leaflet into Tyler's hand. "Vote Red, go Blue! You know it makes sense." And with that he marched off.

We took a look at the Cameron article, which purports to explain how he would "improve Britain". And the funny thing is that he does actually talk about some serious Tory policies, like raising stamp duty thresholds and cutting business taxes. He also talks about wanting a "dynamic supply side revolution". But whereas Brown/Balls said they'd achieve that through their post-neoclassical endogenous growth thing - which was at least market oriented - Cameron reckons he'll do it through "supporting" businesses, which sounds horribly horrrrribbly Heathian.

Yet what really catches the eye about the article is the huge stream of vitriolic comments underneath. They are all from people like the Major - traditional Tory voters who are sickened by the prospect of switching governments only to swap one set of Big Government commissars for another.

Very depressing.

Dodgy Contractors

Keep a tight grip on your wallet

The only real surprise over all those contractors rigging their bids for public sector work is that anyone should be surprised. The construction industry has never been famed for fastidious business practices, which is why sensible informed buyers always take a great deal of care to ensure they're not being ripped off. Caveat emptor, my son, caveat emptor.

But of course the Simple Shopper doesn't operate on that basis. The Shopper operates on the basis of The Official Book of Boxes to Tick. And as long as the ticks are placed in the right boxes, it will pay whatever price is demanded.

In the case of construction projects, the Book says there must be at least three bidders, so as to maintain "competitive tension". But all the construction firms know that, so they simply make sure the Shopper gets three bids. Job done.

And now the OFT has discovered the wholesale use of so-called "cover pricing":

"...where one or more bidders collude with a competitor during a tender process to obtain a price or prices which are intended to be too high to win the contract. The tendering authority, for example a local council or other customer, is not made aware of the contacts between bidders, leaving it with a false impression of the level of competition and this may result in it paying inflated prices."

So the Shopper gets its three tenders all right, but two of them are deliberately pitched high. Which means that there is no competitive tension, and the Shopper ends up paying too much.

How much have we lost? We will never know for sure, but with £3bn of contracts under OFT investigation, and with a typical mark-up on such scams being around 10%, we could easily be looking at £300m.

Yes, the construction firms are culpable - no doubt. Which is why they're throwing themselves on the mercy of the OFT, hoping to earn a reduction in the maximum potential fine of 10% of annual turnover, or hundreds of millions for the larger operators.

But Tyler reckons it's the Shopper who must shoulder most of the blame. Because cover pricing is nothing new. It's a long-established and widespread scam in construction bids.

The chart above comes from a survey conducted by the Chartered Institute of Building a couple of years back. It asked over 1,000 respondents from the construction industry for their views on industry corruption, so it's an insider's view.

About half the respondents said corruption is common, or fairly common. Which ought to be a big red flag for anyone thinking of ordering construction work.

And cover pricing is so widespread only 18% of survey respondents reckoned it to be something that is "very corrupt". Even though cover pricing is specifically illegal!

Surely that ought to have warned the Shopper. Especially since the OFT published some I-Spy guidance notes at the start of last year, spelling out how the Shopper might spot dodgy bids. Here's the summary:

So the Shopper really has no excuse. Only somebody suffering a total reality by-pass would imagine you could trust the builder's tender.
The underlying problem is one we've come across many times on BOM. The staff who represent taxpayers in these negotiations are simply not up to the task. They are commercially naive; they are unable to identify, spec, and independently price what they're seeking to procure; and worst of all, they are driven by top-down political priorities rather than value for money (eg see this blog on the hare-brained Great Leap Forward which is rebuilding thousands of schools).
So are we surprised?
Are we angry?
You bet.
PS The major construction firms have clearly become much more circumspect about cover pricing. But that doesn't mean everything's now fine. In the case of the 2012 Olympics, as we blogged here, both the main stadium and the Aquatics Centre ended up with just one bidder. So the ODA was faced with take it or leave it. And as we know, in the case of the Aquatics Centre, costs have trebled from the original estimate. The sole bidder? Balfour Beatty, one of the firms now on the OFT hit list for cover pricing.
PPS Another stunning chart from that survey is the following, which shows how repondents view the degree of corruption involved in bribing local councillors and officials to get planning permission. 27% think it's perfectly OK! Despite T Dan Smith etc, you have to guess it happens all the time.

PPS Talking of builders, Tyler has developed a most unfortunate guttering problem. That is to say, an entire section of his guttering has dropped off. Just like that - smashed on the ground. So, yellow pages... my God, there are a lot of guttering and roofing contractors. And they're all members of the Ancient Guild of Master Gutterists or the National Federation of Roofing Excellence, or both, and they're all local authority contractors, and they were all established in 1863... how do you possibly choose? And what's a fair price? Having read all this stuff, he's even less confident he can decide.

Thursday, April 17, 2008

Pressie Time

It's not just home loans that can go critical

We've been trying to uncover exactly what the government has promised to the banks. But so far all we've discovered is blather.

Still, the bankers definitely know they're on a promise, as we can see from their share prices.

For example, since Brown's breakfast on Tuesday, Barclays and HBOS are both up around 10%. That's one helluva rise, and it underlines just what valuable presents Gordo has handed over. On our reckoning, we taxpayers are giving a £2bn pressie to HBOS shareholders (10% of their c£20bn market capitalisation) and a £3bn gift the Barclays. And that's just two of them.

These gifts are taking the form of credit risk on the mortgage portfolios we will be swapping for gilts. And what will we get in return? There's talk of a "penal" fee for doing the swap, but as we learned from the Crock fiasco, such macho talk is most unlikely to translate into anything bankable.

Cheaper and more available loans all round? Well, first, don't hold your breath- how in practical terms would the government have a prayer of ensuring the benefits are passed on and not simply used to boost bank profits? And second, given our wobbling crazed property bubble, is yet more credit what we want anyway? Sooner or later asset prices have to adjust, and postponing the hour is simply going to mean an even bigger bust in the future.

Of course, Gordo will have long since departed. He will be no more than another candidate for the title Britain's Crappest Post-War PM.

PS Driving through London this morning, I tried to do a quick crane count. Alarmingly, there are still so many I gave up - even though commercial property values are down 15% since last summer. The banks are naturally up to their gunwales in commercial property loans and the associated Commercial Mortgage Backed Securities (CMBS). So are we heading back to a 1990s style nuclear scenario? According to Fitch Ratings, 10% of UK CMBS would go belly up in such a world: yeah, and the rest (for more anxiety, see this excellent FT Alphaville post).

A Disaster Happening Right Now

Jim launches new Bananas Diploma

Last month we blogged the Public Accounts Committee probe into the government's flagship school Diploma qualification. Diplomas are a classic piece of half-baked Commissariat wibble, rushed through even though everything from content to teaching requirements is still unresolved. A PAC member nailed the whole nonsense as "a disaster waiting to happen".

Now, the head of Edexcel, the UK's largest exam body, has more or less said the same thing. He says the whole project contains serious flaws and that 40,000 students are already being stuffed with "worthless" qualifications. He talks of "traumatic" stress and "huge educational risk".

Worst of all, as the PAC pointed out, the students who will be worst hit are those at the bottom of the academic pile. Their best bet by far would have been to take a traditional vocational qualifications which have real economic value in terms of employability. But instead, they have been herded into doing these new Diplomas because, this year, that's what the Commissars want.

During my lifetime, one-size universalist exams have inflicted horrific damage on educational standards in Britain. They've certainly dumbed down and held back attainment at the top of the academic tree (eg A Levels are two grades easier- see this blog). But perhaps even more shamefully, they have conned generations of less academic kids into taking ever more flimsy qualifications that have zero value in the job market.

And the Commissars' reaction?

The State Families Directorate asserts that Edexcel's charges are "an absurd misrepresentation". And the ever useless Jim Knight (WTF is he still Schools Minister?) says “The diploma is going from strength to strength and has wibblegumppfbagblither..."

Strength to strength.

Does he actually believe that, or is it just more last-days-in-the-bunker denial? Just how dumbed down does he think we are?

Wednesday, April 16, 2008

A Very Bad Feeling

What the bankers told Brown at breakfast

I have a very bad feeling Gordo's given away the store. Again.

The word is that the Bank of England is about to do what R5's finance popsy just referred to as a swapsy. Which means they will swap nice clean gilt-edge government bonds for a great steaming wodge of the banks' dodgy mortgages: the very stuff the banks don't want themselves.

We haven't yet seen the details, such as how much of a "haircut" the banks will be made to take. But for taxpayers it doesn't look good.

How do we know? Both Barclays and HBOS shares have gapped up today by nearly 7%.


PS There really are some ace vids on YouTube. How else would items such as the above get an airing?

Standards Not Structures

How to rid the world of underperforming public services

Over the last few days, we've been treated to a number of debates on "standards not structures". Well, "debates" is putting it a bit high: Newsnight's "political panel" got little further than a series of misunderstandings.

In case you missed it, this "debate" has supposedly been rumbling away for more than a decade and is at the heart of NuLabour's flip-flopping approach to public services.

At issue is whether government can ordain better standards by central directive, targets, and "best practice protocols" - all backed by a sea of money - or whether better standards can only be delivered if the structure of public services is got right first. And by "right structure" what's meant is the break-up of nationalised services, and a wholesale move towards choice and competition, with central government confined to the role of last resort funder and light touch regulator.

In his twilight months, Scarback Bliar claimed that, while he'd started out backing standards over structures, he'd changed his mind. He'd come to understand that public services cannot be made excellent by top-down directive, no matter how much money is pumped into them. Hence his enthusiasm for many more academy schools and foundation hospitals, which were to be granted much more independence from government. Hence his enthusiasm, too, for customer choice and money "following" pupils and patients.

After a decade of wheelspin and waste, Bliar had finally lurched onto the right track.

Ah, but wouldn't you know it, just at that very moment, Bliar was ejected from the driver's seat and replaced by Comrade Brown. Who immediately crunched the gears into reverse.

Here's what Commissar Balls told us last summer about his schools policy:

"A child who cannot read, cannot write or cannot master basic maths will never succeed in education. Our priority must be standards, not structures. So we will renew our focus on the things that really matter to parents and meet their rising aspirations, and that means getting the basics right."

So education expert Balls has set about reordering our schools according to the Commissars' Book of Stalinist Order.

We've blogged all this many times, but a few key points:

  • Commissars don't know what to do - not only have most of them never worked on the relevant shopfloor (cf Sirs Terry and Stuart), there is no way they can access and process all the information required to run huge complex organisations like the NHS

  • Top down is very inefficient - the history of targeting highlights how top-down direction very often sets up perverse incentives for those below decks; top-down can even drive things in the opposite direction to that intended (eg the dumbing down of exams)

  • Customers come last - organisations run from the top give priority to satisfying bosses not customers: that might work in heavy production industries, but in customer service industries it's death

Judging from the Newsnight debate, and recent comments from Labour mouthpiece Michael White, the issue of customer choice is still hugely misunderstood. As we blogged here:

"Far too much of this debate suggests choice is a consumer benefit. Parents can choose which school their kids should go to, just like they're able to choose which family car they'll drive. Whoopee!

But according to the polls, most parents don't want choice per se: hardly surprising, given how time consuming and stressful the whole nasty business can be (even when you're armed with a private school cheque book). What parents actually say they want is "good local schools". And that's the key point.

Choice is not something people necessarily enjoy exercising. But choice is a vital condition for driving progress. Unless people can actively choose between the good and the not so good, there's generally no way for society to work out which is which."

Do Brown and Balls not understand this? They're both supposed to be bright guys, so you'd think they would. Or... no, surely it can't be... maybe they really do believe they can work out what's good and what's not so good. And maybe they do think they can manage that across all 25,000 state schools.

"Standards" for all: a Commissariat delusion that has returned to ensure our public services remain mired in underperformance and distress.

PS Going back to Dave on the R5 phone-in, we can't help thinking he would have found it much easier to deal with the policy void issue if he could be more explicit about the need for choice and competition in public services. It's all very well saying the Tories will make things better by not doing crazy stuff like the NHS supercomputer, and by returning power to teachers and doctors, but does that resonate with voters? Do voters any longer have confidence that teachers and doctors will do the right things? Why would a sink hospital or school improve if people have to use it whatever? Michael Gove is starting to sketch out a much more compelling approach to school choice, but Dave is oddly unwilling to join up the dots for people. It's presumably because he fears for the votes of the one-in-four workers now employed by the public sector. But the funny thing is, judging by correspondence we get on BOM, many public employees actually agree with the Structures agenda. Clearly, if you're 16 points ahead, you reckon you don't need to be bold. But what then happens when you're in power and you're faced with exactly the same public service problems?

Tuesday, April 15, 2008

Slavin' For Bread, Sir

"I wake up in the morning thinking what can we do to help homeowners,

to help those people who have got small businesses,

people looking for jobs... blah, blah, blah-blah..."

It's tragic and pafetic. Poor old Gordo pretends he "digs" the Monkeys, but in moments of high stress he grabs for the musical comfort blanket of his far-off youth (after all, he's nearly as old as Tyler!).

For those of more tender years, Desmond Dekker - the King of Ska - was the original breakthrough Jamaican in Britain, reaching No 1 in 1968 with the ditty above. And Tyler can still recall how Dekker was feted in leftie circles as being the genuine article - soul music from the oppressed slave plantations of the British Empire (you thought the slave plantations had been abolished 160 years before 1968? not in the oppressive empires of the mind they hadn't - see here).

So how do you reckon 17 year old Gordo would have reacted to DD?

Exactly. It was wonderful grist to his impressionable young socialist mill. Wake up in the mornin' slavin' for bread sir, so that every mouth can be fed- every wet dream teenage revolutionary prejudice he'd ever had. No wonder he's quoting it now.

Meanwhile, back in the real world, just what has he promised the banks?

All we know so far is that the Bank of England is providing another £15bn of liquidity (ie they're lending the banks more against collateral). But Brown has been talking about additional measures being revealed "over the coming period of time" (seconds? minutes? hours? weeks? months? centuries?).

What measures?

Let's hope they don't include us buying the bank's dodgy mortgage loans.

Because we don't want them.

PS Yes, now I've Googled it, I realise it was "get up in the mornin', slavin' for bread sir". But I'm guessing Gordo remembered it wrong too. These fried brain cells...

PPS I heard some of Dave on the BBC R5 phone-in this morning. He got a predictably smooth ride, with most callers making it clear they wouldn't piss on Labour if they were on fire. But there was no mistaking their feeling that Dave is still policylite. Just what would he do about, say, taxes or immigration? The vote will be to eject Labour. But there ain't a lot of confidence about Dave's ability to do much better. The vision has not put in an appearance.