Friday, February 27, 2009

The Armageddon Scenario

Armageddon outa here

Back from a week's admin leave thinking maybe it had all been a terrible dream.

Surely we can't really be in the Second Great Depression. Surely our High Street banks can't really be bust. And surely even this government can't really have hocked my unborn grandchildren to the Chinese.

Can it?

I'm rather afraid it can. And I'm rather afraid this ain't no dream.

In fact, while I've off been administering, things have taken a further sickening lurch to the bad - US GDP has plunged even further, stocks, bonds, and property have all tanked again, and taxpayers have been forced to swallow yet more hundreds of billions of toxic debt.

Things are now so nightmarish, the head of the Audit Commission - a senior official with unfettered access to The Secret Files - has blurted out that "the Armageddon scenario... begins to look a distinct possibility".

The Armageddon scenario. Blimey. According to Wiki, that particular scenario comprises Red Giants, White Dwarfs, global pandemics, galactic meteorites, and invasion by little green men from outer space.

And now we know this is all in The Secret Files! So HTF is the government preparing?

Insurance. Yes, that's the key. If we could just get some Armageddon insurance from somewhere, we could all rest easy in our beds.

And the good news is that insurance is precisely what the government is arranging.

The bad news is that instead of arranging Armageddon insurance for us, they've somehow been bounced into making us provide it to the banks. Doh!

And what a shocking deal we taxpayers are getting. In the case of RBS, we're insuring £325bn of toxic assets for a laughable fee of 2% (less than it costs to insure your car ex-NCD, and only 0.3% more than it costs to insure a default by the HMG).

So how much will we lose?

Nobody knows of course. "Bankers and analysts close to the situation" reportedly say £50bn. However, Wat Tylers some distance from the situation look at the fact that these £325bn of toxic assets have been specially selected by the insured, and that we taxpayers bear 90% of the losses beyond the first £19.5m, and say we're in the hole for the thick end of £275bn.

Enter Armageddon. Because £275bn is A Lot of Money, and what the head of the Audit Commission is worrying about is the Armageddon scenario in which HMG borrows so much "there will be insufficient lenders to match the planned level of borrowing". It's something we've been fretting about for months, and we are drifting closer every single day.

Next up is Lloyds. They too have a pile of busted assets they want to shuffle off onto us, only they haven't yet been able to agree their "insurance" deal with HMG. Which presumably means they want even sweeter terms than RBS got.

Fair enough you might be thinking - they're only in trouble because clothead Brown strongarmed them into buying busted HBOS. But they could have said no: they could have looked at the books first.

They didn't, and banking analysts reckon the old HBOS corporate loan book is even more toxic than the fiscal legacy Brown has already amassed for us. In the words of one, "we would avoid this stock".

Absolutely spot on.

But how?

Our leaders only seem to have one policy, which is to mortgage more and more of our futures on bailing out the banks. We are sleepwalking straight into The Scenario.

PS Tyler watched the Wells/Korda Things to Come on a very old black and white TV some time around 1963. It scared the living crap out of him. Not for what was on the screen, but more for what it said about our inability to stop predictable disasters. The film was made in 1936, three years before the balloon went up. Clearly, people could see these ghastly things to come. And yet they were unable to stop them. They came anyway.

Appeasement... wishful thinking... failure to confront... attempting to borrow your way out of a collapsed debt bubble rather than facing up to a necessary and inevitable structural adjustment... stoking up even worse horrors to come... kind of idea.

Sleep well.

Tuesday, February 24, 2009

Triumphs Of Decongestion

Job done

According to the Manchester Evening News:

"GREATER Manchester has secured a £1m bonus for cutting traffic levels... The ten boroughs have been awarded £978,356 by the government after official figures revealed the amount of people travelling on major roads had actually been going DOWN. The number of people using the roads fell 8.6 per cent in the last quarter of 2008, while journey times were down by 1.6 per cent."

Fantastico! At this rate traffic congestion will soon be a thing of the past. And what Manchester does today, the rest of us will surely do tomorrow. We'll all be traffic free and bonus rich.

Er, yes.

All over Britain traffic congestion is being vigorously tackled by the Great Decongester - aka The Slump. But all over Britain, the Commissars are boasting it's a triumph for their far-sighted anti-congestion policies.

In particular, the Department of Transport is spending £60m of OUR MONEY on something called the Urban Congestion Performance Fund, which dishes out bonuses to local councils for hitting Commissariat decongestion targets. And local newspapers throughout the land are now reporting the Good News stories spinning out of it.

So in Manchester, journey times are down 1.6%.

Wow, 1.6%! And HTF do they know anyway?

In Bristol it's 90 seconds.

And all over Britain it's our friggin' money being poured down yet another gurgling drain.

PS Tyler is still on admin leave, but this made him choke on his cornflakes.

Sunday, February 22, 2009

Weekend BOM

This is the GTI version

BOM is off-air for a few days while Tyler sorts out a serious admin backup and washes his socks.

But here are some links that caught his eye over the weekend:

Wheelbarrow news

Last week, BBC R4 Today brought us an excellent four-handed economist debate between Liam Halligan and Steven Bell (listen again here). The question on the table was whether the ongoing stimulus tsunami will unleash an inflation tsunami?

The inestimable Mr H strongly believes it will (and see his written explanation here). The equally inestimable Mr B accuses Mr H of being "bonkers".

Now, we have the greatest respect for Mr B - indeed, he's a most distinguished ex-colleague. And in truth he does not say we won't need those money wheelbarrows - he merely says nobody knows how this is going to play out. What you do on policy is a question of paying your money and taking your choice of the bigger risk - slump or inflation*.

But on this one, we side with Mr H. Over the last 12 months our economy has already been given one helluva stimulus, one that dwarfs anything Tyler has ever seen in his entire life. Besides the fiscal boost, and the bank bailouts, we've had a huge monetary boost, comprising not just the 4.5 percentage point cut in Bank Base Rate but a big fall in sterling.

And there's an interesting article in today's S Times by two Goldman Sachs economists, that helps us scale that monetary boost. They say:
"Whatever the cause, sterling’s fall is a big stimulus for the economy. One way of measuring its significance is to translate it into equivalent changes in interest rates. There used to be a rule of thumb that a 1% fall in the exchange rate has the same effect on output as a 0.25 percentage-point cut in interest rates. Our own estimates suggest the effect is somewhat smaller than this - about 0.17 points. But even on this basis, the 27% decline in sterling since the start of the credit crunch is equivalent to an additional cut in interest rates of between 4 and 5 percentage points."

So adding the interest rate cut to the interest rate equivalent of the fall in sterling gives a total interest rate boost of around 10 percentage points. We have never seen its like in our entire history.

Personal wheelbarrow avoidance procedures are now essential.

Oh, admin time has arrived already. We'll stop there.

*Footnote Yes. Quite. We could easily end up with slump and inflation. Just like we had in the 70s. Only worse. More like what Argentina got.

Friday, February 20, 2009

How Much Will George Have To Cut?

He'll need the big ones

As we all understand by now, public spending will have to be cut drastically after the next election. Brown will leave us with a legacy of debt that we will be paying off for decades, and short of taxing the economy into oblivion, public spending will have to slashed.

But how much? What figure should George be targeting?

This week, ConservativeHome published an interesting - and unnerving - paper by Malcolm Offord. He estimates that by 2020, annual spending might need to be cut by £185bn (in today's money) from what it would be under unchanged policies. That's equivalent to around 30% of today's public spending - an eye-watering cut.

Offord's projections are based on GDP falling by 5% between 2008-09 and 2009-10, flattening out in 2010-11, and then growing again by 2.5% pa thereafter - not unreasonable, and certainly not the Armageddon scenario predicted by some. But what drives his savage spending cuts is the fact that even under his moderate assumptions our debt/GDP ratio soars way above a long-term sustainable level.

In the absence of spending cuts or tax increases, Offord projects our Maastricht debt ratio will rise to a stonking 156% by 2019-20. Not only would that be nearly 3 times the 60% maximum permitted under Maastrict, much more importantly, it would almost certainly trigger the wholesale flight by international investors we've blogged about so often. Which would really put us in the merde.

It's difficult to argue with Offord's logic, but the bad news is that his assumptions may not be pessimistic enough.

In particular, he factors in less than £200bn for the bank bailouts, and with our guaranteed banks now holding combined liabilities of £7 trillion, that may well turn out to be light.

There's also the nasty business of debt interest payments. Offord assumes that the interest rate demanded by investors for buying gilts will not go above 7%. But back in the dark days of 1974 it reached 17%. If we got back to anything like that - which could easily happen in our high inflation future (see this post) - it would mean debt interest payments going up beyond Offord's projection.

This is the debt interest doomsday machine we've blogged about so often (eg see here) - the more you borrow, the more you have to spend on debt interest, the more you have to borrow, the more etc etc etc.

But here's the really shocking part: on Offord's projection, debt interest payments in 2019-20 will be 28% of tax revenue. Which is more than twice what they have ever been in our entire post-WW2 history:


It won't happen.

It won't happen because international creditors will turn off our life-support system long before then. We will be forced to cut public spending.

And the good news - or at least, the somewhat less terminal news - is that the sooner we start cutting, the less we'll have to borrow, the less debt we'll build up, the less we'll have to pay in interest, and the less we'll ultimately have to cut.

So with the right action soon, the target number should never reach £185bn.

But cutswise, George still needs to be thinking BIG.

Like, £50bn pa big.

That would be a public spending cut of about 7%... or getting on for twice what Callaghan achieved under the IMF cosh (see this post).

Gulp, and double gulp.

Thursday, February 19, 2009

APB: Tony "Baloney" Bliar and Gordy "The Gob" Brownoff

Come on out Baloney

All Points Bulletin: Federal marshals today issued international warrants for the arrest of discredited money men Tony Baloney Bliar and Gordy The Gob Brownoff... wanted on charges relating to the collapsed hedge fund, UK plc... 128 separate counts of fraud, embezzlement, grand larceny, and telling whopping great porkies.

Bliar's whereabouts currently unknown - may be holed up in
luxury five star hotel in the Mid-East. Brownoff believed to be seeking sanctuary in Vatican.

Both men are extremely dangerous and should not be approached. They should especially not be approached by anybody still in possession of a loaded wallet.


You hardly need me to spell out the parallels between the financial frauds allegedly perpetrated by Mssrs Stanford and Madoff, and the financial frauds definitely perpetrated by Mssrs Bliar and Brown. But I'm going to anyway.
  • Cake and Eat It - both scams involved selling punters the seductive neverland of steady high returns combined with low risk. Stanford/Madoff scammed punters with returns significantly above those available on traditional bank deposits, but without the downside volatility of riskier investments. Bliar/Brown scammed punters with consumption far above that available from traditional economic management, but without the downside volatility of Tory boom'n'bust.
  • A Blancmange of Debt - both scams involved the accumulation of huge debts. Bliar/Brown turned Britain into a gigantic hedge fund. Excluding our banks, that means we now have debt equal to three-times our annual income. Including our banks, that goes up to a heart-stopping seven times (eg see this blog).
  • Enron Accounting - Stanford's accounts were cooked up above a chip shop in Enfield. Brown/Bliar's were cooked up in posh offices in SW1, but were just as misleading: almost all the debt now hanging round our necks (including all that bank debt) was never recorded as a liability right up to the moment our guarantee got called.
  • Robbing Peter to pay Paul - when it comes to P-to-P robbery, many feel that tax-funded welfare puts the Stanford/Madoff efforts in the shade. But even setting that on one side, it was Bliar/Brown who cynically robbed poor 10p taxpayers in order to pay-off middle class voters ahead of the aborted 2007 election.
  • Circus sponsorship - Stanford courted fame and popularity by bunging a couple of mill to the twits in charge of English cricket; Bliar/Brown did the same by spending billions on the friggin' 2012 Olympics.

As we can all now see, the entire Bliar/Brown project, complete with its talk of "prudence" and "investment", was a classic financial scam.

The only difference from Stanford and Madoff is that their operations have now been terminated by the Feds. Brown still has unfettered access to our wealth. And with every day that passes he's destroying yet more of it.


A trillion here, a trillion there...

Today's monthly update on public sector finances makes stark reading. As has been widely reported, Corporation Tax revenue is collapsing - down 24% in January yoy - but all the main taxes are sagging. And on the spending side, social security is already up 15% yoy.

There isn't a prayer that the government's PBR borrowing forecast will hold. They forecast £77.6bn this financial year, but with just two months to go, they could easily blow that by £10bn.

Meanwhile, ONS has announced that "the Royal Bank of Scotland Group plc and Lloyds Banking Group plc (previously HBOS plc and Lloyds TSB Group plc) will be classified in the public sector from 13 October 2008... [because] government has the ability to control the respective banks’ general corporate policy through the conditions associated with the agreements signed relating to recapitalisation."

Quite right too: these are effectively nationalised banks. But how much do they increase our ballooning National Debt?

It's a sign of the times that whereas people used to reckon a billion here and there was enough to be talking real money, these days only trillions register. So the ONS says "the addition to Public Sector Net Debt is likely to be in the range between £1 trillion and £1.5 trillion". And what's the odd half-trillion between friends?

Except that is, when you look at the most recent balance sheets of these banks. There you find that (when last sighted) their combined liabilities are way higher than even £1.5 trillion:

Which Tyler's fag packet says adds up to nearly £3 trillion (yes, yes, OK, there's some netting - but we'll be very surprised if it comes out at anything like £1 trillion).

So just to be clear - Brown inherited a National Debt of just £350bn, and he'll be leaving us one around 10 times that (even disregarding those unfunded public sector pensions).

If only you hadn't voted them in...

Wednesday, February 18, 2009

Final Knockings

Eat, drink, and be merry

Last evening Tyler dined in the City with a group of ex-colleagues. A day on which the Prime Minister had banned bank bonuses, the FTSE had sagged further, and more skeletons had clattered out of the financial fraud cupboard.

Yet the restaurant was packed. What's more, it was our second reserve restaurant because the first choice had been fully booked.

WTF is going on? Here we are in the midst of the biggest financial crisis the world has ever seen, unemployed unbonussed bankers strewn all around, and yet City restaurants packed.

"It's Berlin, March 1945," suggested our ex-Guards officer, cheerily. "Eat, drink, and be merry, for tomorrow we die."

We hastily took a group swig, and looked to the only one of our company still in full-time City employment. All these jolly diners... maybe they're telling us things aren't quite as bad as the FT says?

"No. It's bad. Our banking system is bust... funding has dried up... nobody knows where it's going, but as far as I can see, we could be looking at 20% off GDP... for a very long time. It could get very ugly."



New Zealand it is then - New Zealand and a pile of gold. We exchanged details of gold brokers and personal armourers.

We're now so far off the chart, nobody can be sure of anything. It's all very well asserting the world is round, but right now that edge feels awfully close.

And while a 20% GDP fall is much worse than anything currently envisaged by mainstream forecasters, it's not unprecedented. Between 1929 and 1933, US GDP per capita fell by 30%, and did not recover its previous peak until 1940 (all data taken from Angus Maddison - the definitive source of historic GDP stats).

But as we all know by now, in the 30s, the US authorities made a series of disastrous policy mistakes, including allowing busted banks to default on their deposits. And by and large, those mistakes have been avoided this time.

Moreover, outside the US, the 30s saw smaller falls in GDP. Even in Germany, the decline was "only" 17% (although arguably it would have gone further had the Nazis not begun their public works programmes and rearmament - not something we'd really want to see repeated).

Here in the UK, average GDP per capita fell by a mere 6-7% from its 1929 peak and had recovered all of that by 1934. A key factor of course, was the forced decision to leave the gold standard, and the subsequent devaluation of sterling - something we immediately emulated this time.

Of course, history schmistory, and as our working friend said last night, nobody knows how bad it's going to get this time. But for the want of anything better, here's how UK GDP per capita moved in the last seven recessions, going right back to the 1870s:

As we can see, contrary to what Commissar Balls recently suggested, the 1930s was our very worst recession (purple line), although the 1890s (sludge orange) did run it close. In contrast, the boom'n'bust Tory recessions were a walk in the park.

On average, these seven recessions saw per capita GDP fall by 2.6% from the previous peak, and a full recovery within five years of that peak.

Just one thing - we've almost certainly already dropped more than 2.6%.

Pass that bottle over here.

Tuesday, February 17, 2009

Stoking Up Inflation

Quick nurse! He's fading. Give him another shot!

As regular readers will know, we think the current desperate attempts to stop the pain at any price will result in a return to 70s style inflation.

Back in the era of platform boots, we learned the hard way that high inflation can easily exist alongside a slumping economy. All you need is an overdose of monetary and fiscal stimulants.

And with our fiscal deficit heading for a record shattering 12% of GDP, monetary growth bounding along at 16% pa, and sterling already 25% lower, an overdose is precisely what we're being given.

But of course that's not what we're currently being told. Right now, informed opinion at the bedside - from the government, to the Bank of England, to the Times leader - is that we must keep on pumping the stimulants lest we fall into the coma of deflation. Here's how the Times puts it:
"... a long period of general price falls, as happened in Japan in the 1990s, would be damaging. Consumers would postpone purchases, as they would be able to buy goods more cheaply in a year or two. Employment and investment would collapse. Stock prices would fall as corporate earnings would contract. Most damaging, households with debt - either mortgage debt or unsecured loans - would suffer intense hardship. Adjusted for inflation, the value of their debt burden would rise. Deflation would cause hardship, eviction and widespread corporate and personal bankruptcy."

The basic idea is that unless we stoke up some inflation pronto, we're heading into the abyss.

There are a couple of key points to make.

First, as we've blogged many times (eg here), debtors are not the only people governments should be concerned about. Savers - who BTW outnumber borrowers - have already been whacked by collapsing interest rates, and are placed at considerable further risk by policies which effectively discount the chances of future high inflation. Why should they be punished to bail-out the profligate?

Second, although the idea of "general price falls" is widely touted, and at first glance seems to be indicated by the charts like the one shown above, in reality we are still some way from that.

According to today's inflation stats from the ONS, inflation on the traditional RPI measure has now plunged to roughly zero (just 0.1% year-on-year). And when you break down the 12 month change, you find the RPI price level has actually fallen every month since September - 3.8% total decline. So the dreaded deflation is here already! Gulp!

But when you look beneath the headline RPI figure (even setting aside the fact that the RPI measure was long-since replaced by the CPI measure as the target for monetary policy), you find that the key drivers of its recent fall have been - yes, you guessed it - the cut in mortgage rates, and the cut in petrol prices.

Here's the ONS chart showing how that 0.1% year-on-year increase breaks down:

As we can see, price deflation is actually confined to just four areas: housing, motoring expenses, clothing and footware, and leisure goods. All the other areas of spending, which together comprise over half the RPI basket, continued to see price rises - some of them quite chunky (eg food).

Now let's just think about those four areas that have seen price falls: will "consumers postpone purchases, as they would be able to buy goods more cheaply in a year or two"?

Housing, motoring, clothing and footware, and leisure goods. Hmm... what do you reckon?

Take clothes and footware (4.2% of the RPI basket). I guess it's just about possible that Mrs T will hold off adding to her Imelda Marcos shoe mountain in the hope of buying cheaper in 2011. But I have to say I'm not confident about that. Because in reality, clothing and footware prices have been falling for years (down 20% since 2005), and it hasn't stopped her so far.

And motoring? Yes, we can see car sales have collapsed, so maybe people are holding off for a bargain. But then again, when you look at the detail, you find that new car prices aren't really falling - the big falls are in secondhand cars (down 15.4% yoy). Indeed, with sterling flat on its back, Ford and General Motors recently announced 5% price rises. And anyway, the bulk of motoring's 13.3% in the RPI basket comprises much less discretionary things, like fuel and insurance, rather than car purchase.

Housing? Yes, well, we're certainly telling the junior Tylers there's no rush to buy because prices are still falling, so there's certainly a point there. But surely only a madman would deliberately stoke up inflation in an attempt to re-establish the insane unsustainable prices we've seen in recent years.

As for those leisure goods, they mainly comprise consumer electronics. And since they're all imported, postponing purchase will barely register in terms of UK GDP - indeed, to the extent that people spend on domestically produced goods instead, it could be a positive bonus.

The bottom line is that we are nowhere near the scary deflation scenario being promoted by current groupthink.

We remain much more concerned about the risks of a return to 70s-style inflation. Not this year, for sure. Maybe not even next year. But by 2011, we'll be watching central banks racing round as they try to slam shut yet another set of stable doors.

Unfortunately, by then the horse will be well over the hill, and will be rampaging along a High Street near you.

Monday, February 16, 2009

Lagging Behind

He's somewhere under this lot

Tyler Senior has just been lagged. He's been given the government approved 270mm of glass fibre matting, and his pipes have been covered in foam.

Well, not his personal pipes you understand: the loft in his house has been insulated under the government's Warm Front scheme.

According to the government's eco-propaganda campaign, it's going to slash his fuel bills. But best of all, he hasn't had to pay a penny: because he's over 70, it turns out to be free.

I say "turns out to be free" because he didn't discover that until the actual day of installation. Originally, he'd been told he'd have to pay some of it himself. But the very helpful installation team said that must have been a mistake, so after a couple of calls, and the production of his passport, he got let off.

So great.


Well, I suppose if you wanted to carp, given all the money we're spending and all the grandstanding various politicos have done over Warm Front, you might ask why it took six months from Tyler Snr's initial application for the work to get done? And why was he told he'd have to pay, when that was incorrect and might well have put him off? And why wasn't the work done until after the worst of the winter was over? And why is the other bit - cavity wall insulation - not happening until this summer, lagging a whole year behind his original application?

As it happens, the National Audit Office recently reported on Warm Front. And over the weekend there was an interesting report on it the Times.

Overall, the programme has cost us £2.4bn, and it supposedly helps households in "fuel poverty"- defined as households where 10% or more of household income going on fuel bills. It relies on a (lower case) contractor, eaga, which administers the scheme and manages the 139 sub-contractors responsible for installing heating and insulation systems.

Now, straightaway, the wasteometer starts twitching - the Simple Shopper, a private sector supplier, end-customers given no choice of contractor... it sounds like a familiar story.

Suprisingly (to us) the NAO found that Warm Front contractor prices are not wildly out of line with market levels (although they are higher for installing new boilers).

But its other findings are much less reassuring:
  • "Value for money has been impaired by problems in Scheme design" - eligibility criteria mean many benefits go to households who do not actually need help
  • Genuinely poor households get put off by being told they'll be charged

The Times report also contains a lot of pretty negative feedback from readers who've actually used Warm Front. Eg:

"Times Money reader Malcolm Field, 56, applied to Warm Front for a new boiler on behalf of his 80-year-old mother. The total cost was £3,300, so his mother was asked to pay a top-up fee of £600. Mr Field says: “The contractor took more than a week to fit the boiler and its work was appalling. We called it out six times because the system failed. Eventually, 18 months later, a new pump was fitted and it now seems to work. My brother was a plumber and says that the work should not have come to more than £1,500. These contractors are lining their pockets with the Government's and pensioners' money.”

And there's another thing: having now read these reports, I don't think Tyler Snr was lagged under the Warm Front programme at all. It was some other programme of unknown provenance.

As so often, the government has set up such a complex thicket of different schemes all targeting the same issue, it's difficult to fathom quite where Warm Front fits in. I'm not suggesting you try to understand it, but here's the NAO summary:

Baffling, and my strong suspicion is that the suppliers can't follow it either - hence the initial confusion over whether Tyler Snr would have to pay.

I hate to keep saying it, but tax-funded home insulation and heating looks like another prime candidate for George's axe list.

Ruler From A Parallel Universe

The joke is he winds up as Prime Minister

I want you to imagine a parallel universe. A universe where everything is pretty much the same as it is here, except for one small detail - somehow Big Government actually works (yes, I know it's far-fetched, but just try, OK?).

Now imagine a visitor from that universe. He's a trillion light years from home, and he kinda looks a little weird - like, maybe he can't smile normally. But once he's dressed up in his M&S suit, he just about passes for one of us.

Now, here's the twist - because of some kind of comedy mix-up (to be decided), this visitor becomes Prime Minister!!!! Yes, he's actually trying to make all that Big Government stuff work here!!

How hilarious would that be??!!!!

No, it's not the pitch for a pants 70s TV series - it's actually happening right now.

Last week, we got the final proof, when our visitor appeared before the Commons Liaison Committee. He was there, dressed up as the PM, to answer questions about his financial and economic meltdown. Here are some extracts:

Picking losers

Every Labour government we've ever had has poured taxpayers cash down the drain of "picking winners" (eg see this blog). This time, says our visitor, it is different:

"The picking winners strategy was about taking one company or a second company and saying that we were going to back this single company to the hilt, and it led, of course, to some of the problems of the old industrial policies. This is a policy of saying, look: there are sectors where we have got great genius. Biosciences, life sciences, is one; advanced sections of information technology is another; the creative industries are another. Let us back the development of skills and research in these sectors.

Q41 Mr Willis: But you have to pick them, because everybody says that they are good at everything.

Mr Brown: Yes, but they pick themselves in a way, because we have got -----

Q42 Mr Willis: They pick themselves?

Mr Brown: We have got great world-class success stories, or potential success stories, in a whole range of industries and sectors, and that is why some of the pessimism about our economy must be replaced by optimism about what we can do in key industries and key sectors of the future."

Pick themselves, huh? The alarming thing about this is that Brown really does seem to believe winning industries and sectors do pick themselves. And that as long as he steers clear of backing winning companies, all will be well - broader is somehow easier.

He has clearly never heard of the great Selective Employment Tax debacle of the 60s. The then Labour government took the broadest possible sectoral view, deciding to give massive backing to Britain's "winning" manufacturing sector at the expense of the service sector. It certainly dragged down the service sector, but in terms of backing manufacturing "winners" it was another hugely expensive flop.

Public sector inefficiency

Brown promised us he was going to make huge efficiency savings right across government, but as we've blogged many times, most of his so-called "savings" are pure Marx Brothers (see all previous Gershon blogs here). Brown, though, is in total denial:

Q59 Mr Leigh: No; that is precisely my question, Prime Minister. You have not achieved Gershon. The independent National Audit Office said that only one quarter fairly represented efficiency gains. We all know that achieving efficiency gains is the most difficult thing in Whitehall. Now you are dramatically increasing spending and we want to know how you are going to ensure that you meet your present targets.

Mr Brown: I do not accept that we have not met Gershon. We have met Gershon. I think it is generally recognised that what we set out to do with Gershon was achieved. It was £25 billion of savings. We achieved them before the time that we had set for achieving them... I do not think you should doubt what we achieved."

Actually, in denial doesn't capture this: it really is an entire parallel universe in which the detailed and authoritative analysis conducted by the NAO somehow doesn't count. All that counts is what goes on inside the alien's head.

NHS Supercomputer debacle

Something else we've blogged so often it hurts (see previous blogs gathered here). Again, Brown can't seems to wrap his head around it:

Mr Brown: I disagree with you about the NHS computer. I think it is a necessary project. I think the fact that it is a difficult project does not mean to say that it is not -----
Q61 Mr Leigh: £12 billion spend, four years late, Fujitsu having pulled out, Lorenzo only working in one ward in primary care trusts. Do you think that is a great achievement, Prime Minister?
Mr Brown: And patients are getting electronic prescriptions now, people are being able to book their hospital appointments from their computer... it is easy to say it is of no use to anybody, but actually it is providing the electronic prescriptions, doctors' records are being kept, at the same time as providing a means by which people can book hospital appointments."

Again, he seems to have no idea how this disaster is actually playing out down here in our universe. Just last week, the chief executive of London's Royal Free Hospital, which is being seen as a test case for the new system, said "the technology... is "incredibly disappointing." The software was taking staff four times as long to book appointments for patients and soaking up money the trust would have otherwise invested in new X-ray machines." Overall, it's costing them an additional £10m.

We could go on through the transcript and pick out many further examples, but we all get the idea. Brown has simply lost touch with the reality in which we live. Despite all the evidence, he still reckons Big Government can somehow fly.

The parallel universe TV series was never very funny back in the 70s. It sure ain't funny the second time around.

Saturday, February 14, 2009


No time for a proper blog today, but it's worth just noting the Times editorial on Lloyds' shotgun marriage to HBOS. The Times says:
"The contamination of Lloyds by the problems of HBOS has secured the opposite of what the Government intended with the rescue. Instead of steadying the financial system, the merger has further undermined it...

... The Government has not only failed to stem that damage but compounded some of the errors. It sought to stem financial panic by diversifying away the business risk of HBOS. It has instead spread the financial contagion to sound institutions. The episode shows a lack of foresight, competence and financial understanding; at such vast expense for the taxpayer, it is also and increasingly a public scandal."

They've put their finger on the major risk with the entire bail-out policy. It's the risk that by shoring up our rotten banks and other over-indebted private sector entities, Brown/Darling will spread debt contagion across the sound bits of our economy as well.

The most worrying possibility is that our government will borrow and guarantee so much bad debt it undermines its own creditworthiness. As we've blogged many times, HMG's debt capacity is not infinite. It is by no means fanciful to suppose that it could end up in a very similar situation to Lloyds - hugely indebted, and sitting on a stack of acquired assets that turn out to be worth much less than it says on the tin.

And what happens then?

Yes, they can default on sterling debt by running the printing press. And since that will mainly hurt pensioners with savings, and other bourgeois types, Brown will be quite relaxed about it (in reality, future high inflation is already a done deal - which is why Tyler is in negotiation with a South African pilot he met in a pub about the possibility of an off-piste shipment of Krugerrands).

But what about all that foreign currency debt? Default on that is a lot trickier because HMG can't simply run the printing press. And when we last totted it up, our overseas debt came to 300% of GDP - or £170 grand for every single British household:

And a whole heap of that debt is denominated in foreign currency - our banks alone have £4 trillion of foreign currency denominated debt (eg see this blog).

So when Brown/Darling keep telling us there's no alternative to the bail-outs, think about the scale of the debt he's taking on. And ask yourself whether he should be quite so ready to guarantee not just High Street depositors, but also all those wholesale lenders from around the world, whose funds allowed our banks to pump up their lending so catastrophically.

Nobody would start from here, but we simply can't afford to follow Lloyds.

Friday, February 13, 2009

PFI Meltdown

Down at the site office waiting for Darling's blank cheque

We've blogged PFI many times (start here and see all previous posts gathered here). In theory, it could be a good deal for taxpayers, because instead of trying to build and maintain hospitals and schools itself, the government gets private sector specialists to compete for the job. Not only should the price be lower, but the risks of things like project overspend are transferred to specialist operators who are better equipped to manage them. Everybody should win by eliminating waste and inefficiency.

In the real world, things have turned out rather differently. Because Brown has used PFI primarily as a means of borrowing off-balance sheet, local authorities and NHS trusts have been under immense pressure to fund their capital projects via PFI. As a result, some pretty shocking deals have been done (see many previous blogs eg here). The taxpayer has still ended up carrying the debt, but overpaying bigtime relative to traditional gilts funded projects.

Now the financial meltdown has pitched this entire PFI charade into the flames.

The pricey bank finance on which PFI depends has dried up, and projects worth billions have stalled. These include the £5bn project to widen the M25, the £1.2bn project to rebuild or refurbish Birmingham's secondary schools, and some unknown hundreds of millions to build the 2012 athletes' village.

This is especially unfortunate since Gordo personally promised everyone that he was going to accelerate public investment programmes to mitigate the Second Great Depression. So action is imminent:

"A multibillion-pound rescue of building programmes involving schools, hospitals and motorways that are threatened by a lack of private finance is to be announced by the Treasury within days, The Times has learnt. The Chancellor is expected to guarantee bridging finance to enable public sector schemes being built under the Private Finance Initiative (PFI) to go ahead if they are already in the pipeline."
Now, given the Depression, even small staters like Tyler can see it makes macroeconomic sense to crack on with public investment programmes. But taxpayers should be very concerned about this PFI rescue.

Because given everything we know, having a panicky Darling rush into the PFI site office with yet another book of blank cheques means only one thing - we are going to get skinned.

The blunt truth is that the Simple Shopper is incapable of cutting us a good deal, even when he's holding all the cards. We can see that right now with the unfolding 2012 nightmare: costs are still spiralling out of control despite the fact that construction contractors are facing their biggest downturn in living memory. The Shopper is under strict orders to get the work done whatever the cost, and the contractors know it.

So here's yet another item for George's list when takes the controls next year. He must order a full drains-up on PFI, looking to cut back drastically. Enron balance sheet fiddles are out. Worst-of-both-worlds compromises between public services and private suppliers must go.

PS Talking of naive public sector Simple Shopper types being schmoozed and seduced by raw meat-eaters from the private sector, what are we to make of our freeloading mandarins? The winner of this year's Corporate Boonie Award is our old chum Sir Brian Bender, now Perm Sec at BERR, but previously head of Defra and the man who presided over the Rural Payments Agency fiasco (and who should have resigned/been fired then - see this blog). Bender accepted corporate hospitality on 52 separate occasions during 2007 - once a week. Does that pass the smell test? Sure, you can argue - as Matthew Parris did this morning - that being treated to breakfast by GKN is hardly a boonie, even if it's at the Ritz. But what about being taken to Wimbledon by Tate and Lyle - with your partner? Or the Chelsea Flower Show, various exhibitions, concerts and dinners, again all with your partner? The truth is it stinks. Which is why many private sector firms, and in fairness, many public sector bodies, ban the acceptance of such stuff altogether. George should impose a blanket ban right across the public sector - any hospitality beyond the occasional in-house working lunch and unaccompanied must-attend very boring industry dinners should be a sacking offence.

Thursday, February 12, 2009

In The Hands Of A Dangerous Idiot

Planning venue

The Major has always believed Brown to be a Socialist idiot. And even though some of them secretly voted for that nice Mr Bliar, 9 out of 10 Surrey housewives agree with him.

But over the last few months all of them have come to realise that Brown is actually much worse than a simple Socialist idiot - he's a dangerous Socialist idiot. In fact, he is such a clear and present danger to everything we hold dear, I fear the Major is contemplating extreme action. He talks darkly about meetings in the Legion carpark with his "oppo", and "expediting matters with extreme prejudice... before it's too late".

The charge sheet is clear. Brown has spent wildly, yet has delivered public services that have gone backwards: our state schools are a catastrophe churning out a generation with 5 good GCSEs but unable to read; our NHS hospitals are scary Scutari-style plague pits; our criminal justice system has gripped homophobic thought crime but left homicidal maniacs free to go about their business.

All that we've long known. But as the economic slump gathers pace, it's becoming clear the damage is much worse: through a toxic mix of incompetence and arrogance Brown has undermined the entire basis of our future prosperity, and according to the Major, our very social fabric.

Financial melt-down

The latest revelations include more shocking details on just how poorly his financial services regulator did its job.

In the case of busted bank HBOS, it now transpires that the FSA had serious concerns about the risks being run as far back as 2002. In three separate reports between then and 2006, it warned HBOS that the "growth strategy of the group posed risks to the whole group and that these risks needed to be managed and mitigated".

So WTF was nothing done? What did the FSA think it was there for? What idiot set them up and why didn't he monitor them?

On Newsnight yesterday, the Abominable McNulty used the hindsight is a wonderful thing defence, claiming that Gordo couldn't be blamed for the FSA's manifest and multiple failures because nobody raised any of these issues at the time.

Whaaa!!! IIRC right back in 1997, no less a person than the then Governor of the Bank of England objected in the strongest possible terms. Indeed, when Brown bludgeoned it through - insisting that the Bank was to be stripped of its traditional bank regulatory powers - the Governor very nearly resigned over it.

We can only speculate how the Bank would have handled the reckless expansion of HBOS, RBS, the Crock, etc etc. And it is true they bodged BCCI back in the 80s. But Bank Governors never shied away from hauling senior commercial bankers up in front of the port and cigars, and subjecting them to a serious eyebrow raising. The FSA seems to have run a mile from any such confrontations - it simply wasn't up to the job.

Also of course, to the extent that the FSA thought there were serious problems, who did they tell down the other end of town? Did Brown know about the concerns with HBOS? If not, why not? And if so, why did he do nothing? Other, that is, than appointing the now disgraced ex-head of HBOS as Deputy Chairman of the FSA.

So here we are: many of our High Street banks are effectively bust, in large part because Brown's half-baked regulatory system has been a catastrophic failure.

And catastrophic failure is not confined to finance.

Migration melt-down

For years Brown told us that our economic prosperity depended on open-door immigration "policies". He reckoned the extra labour supply lifted our GDP growth by 0.25% pa.

But as we've blogged many times (eg here), in terms of per capita GDP - which is all that matters - Labour's mass immigration has brought us no net benefit. Sure, there have been winners - employers, the nannied classes, and the migrants themselves have won - but many indigenous workers have lost, especially low-skilled workers.

These particular chickens are now roosting noisily. And with unemployment soaring, the recent strikes against foreign workers are a dire warning of what lies in store.

Yesterday, we got a clearer fix on Labour's record when the ONS launched a new statistical release on UK and non-UK born employment. Here's the Big Picture:

So over the whole period from 1997 Q2 to 2008 Q4, the number in employment grew by just under 3 million - as we are constantly being told. But nearly two-thirds (62%) of those jobs went to migrants.

Now, you can argue that this is a quid pro quo for our globalised economy, and many UK citizens went to work abroad. Which has some truth.

But you can no longer argue that the inward migration brought a net benefit to our overall living standards. Although it has put considerable additional strain on housing and our public services (see many previous blogs eg here).

And what happens now Brown's jobs are incinerating? Does anyone really think these 2 million newcomers will simply go home again? It is another catastrophe in the making.

Which is precisely why the "Progressive Consensus" is so aghast that the ONS has published the numbers so openly. Keith WTF-do-we-still-have-to-put-up-with-him Vaz says:

"I think that to put out figures on foreign-born workers on the same day as the release of unemployment statistics is not helpful. The danger is that such information could be misconstrued or misused by those who do not support the view that Britain should be a diverse and multicultural society."

This is the Westminster elite at its patronising deceitful best.

Unfortunately, the cat is out of the bag, and attempting to conceal the facts is only going to inflame people like the Major. What's more, dismissing the strikers on Teeside as xenophobic fascist scum (Mandy's line) is going to make people very angry indeed.

Twenty Fresh Divisions

So are we in danger? Listening to the Great Man himself being grilled by senior MPs on the Parliamentary Liaison Committee this morning, you could easily come to that conclusion.

Although bristling with facts and figures, he seemed totally detached from reality. When confronted with real facts from the real world, he brushed them aside, saying the facts were "out of date", or for some reason weren't relevant.

It was classic final days in the bunker stuff: he didn't actually say he was committing twenty fresh divisions to the front, but he came very close.

So what can we do? Can we survive another 14 months with a dangerous idiot at the controls?

Scary stuff. I may pop down to the Legion carpark later to see if I can find out what the Major's up to.

Wednesday, February 11, 2009

Taxing Jobs

Today's unemployment numbers are dire. 2 million unemployed, redundancies doubled in six months, and those 700,000 vacancies we used to hear so much about down to 479,000 (they'd be even lower but for continued buoyancy in the state-funded Education, Health & Public Administration sector).

The outlook is even worse. Bank Governor King says we are in a "deep recession" with risks "heavily weighted to the downside". Commissar Balls says it's the worst in 100 years.

So can anything be done?

According to Gordo, the solution is to do something not nothing. As we know, that means letting public borrowing rip, bailing out the banks, and printing huge amounts of money.

But what about jobs?

By next year we could very well have the 3 million unemployed everyone's talking about - maybe more. True, fiscal and monetary hyperactivity could mean the economy will have stopped shrinking by then. But does that also mean the jobs will come flooding back?

Short answer - no.

Because despite sterling's historic depreciation, lean times worldwide mean we will be facing fearsome competition right across the board. And whereas in the last decade the huge boom in financial services funded jobs for all (or at least all those prepared to saddle up a bike), in a world of debt restraint there will be no such easy options.

So when Gord talks about doing something not nothing, what does he mean exactly?

Rely on the Jobcentres, or Jobcentres Pluses as they're now known? They have long experience, they cost us £3.5bn pa, so surely they must know what they're doing.

Yeah, right. This morning, on a BBC R5 phone-in, we heard from the newly unemployed middle classes, people who've just had their first taste of the JC+. They were quite polite, but their verdict was unanimous: it began with sh and ended in ite.

Of course, that's no real surprise. As an anonymous Commissar told the Times: “Frankly Jobcentre Plus just isn't geared up to cope with the sort of people that will be coming through their doors in increasing numbers.” Translation - nobody ever thought JC+'s would have to deal with real employable people who actually expect a real employment service - they're only meant for low grade no-hopers who don't expect anything other than a giro.

The Commissars are desperately scrabbling round to cover up. They apparently have "secret plans" for a whole raft of three-month "courses" to help "recently out-of-work professionals to refresh their qualifications" - aka massaging the unemployment figures.

So actionwise, what else?

Ah yes, there's that idea to pay private sector contractors who will shepherd the unemployed back to work on commission - an idea put forward by yet another of Gordo's favoured City banker advisors.

We've blogged this before (eg here), expressing serious concern about the Simple Shopper being taken for yet another ride. And whereas it might just conceivably have cut unemployment in a world of jobs, in a world of widespread joblessness, it doesn't have a prayer. Unsurprisingly, reports last weekend confirm that the whole project has collapsed in disarray.

So what's left?

Well, there is one idea. And it's an old one: cut the tax on jobs.

Tax on jobs, you say. Surely only a maniac would impose a tax on jobs, especially at a time like this.

But in reality, politicos routinely tax employment. They talk the talk about getting everyone into work, but when it comes to walking the walk, they impose huge taxes on any form of employment.

According to the latest OECD analysis, as of 2007, the tax imposed by Gordo on employing a single man on average earnings was 34%. That is the so-called "tax wedge" between what the employer has to pay to employ him, and what he actually takes home in his pay packet.

And whereas in most countries this tax wedge has being coming down, here in the UK under Labour it has been going up. Worse, under the tax plans announced by Darling in November, it will be going up even further post the election.

If Brown was serious about "doing something" to get people back to work, he'd forget all his three month non-courses, and his tinkering around with job brokers. He's simply cut the tax on jobs.

Tuesday, February 10, 2009

Grilling The Guilty Men

Oral evidence
Taken before the Treasury Committee
(Treasury Sub-Committee)
on Tuesday 10 February 2009

Witnesses: Rt Hon Gordon Bennett, Prune Minister, Rt Hon Alasalack Drooling, Senior Placeman

Q1 Chairman: Good morning gentlemen. You have bankrupted Britain. So may we begin with your grovelling apologies. Mr Bennett?
Mr Bennett: As I've said on many occasions, we are profoundly and unreservedly sorry for any inconvenience caused by recent operating difficulties. Deeply, deeplybold regretlymost. But entirely due to unforseeable greedlymost bankers and deepmost incomplibold foreign regulatorybold. Plus, there was a points failure at Watford Junction caused by once-in-one-thousand-years extreme weather conditions.

Q2 Chairman: That's all very well Mr Bennett, but the evening news bulletins need to see you humiliated. Please tell the Committee what formal Prune Minister qualifications you have.
Mr Bennett: Well, I've got a history degree, I've worked in TV, and I've been a professional politician for 25 years.

Q3 Chairman: Hmm. It seems to me you have no formal qualification in prunes whatsoever. Mr Drooling, what qualifications do you have for being Senior Placeman and also - according to what it says down here - Chancellor of the Exchequer?
Mr Drooling: I have a law degree, I've practised as a solicitor, and I've been a professional politician for over 20 years.

Q4 Chairman: So no economic or financial qualifications whatsoever. Mr Bennett, what the public finds difficult to understand is why you failed to have any risk controls in place. You presided over a period of reckless expansion and yet you didn't consider risk at all. Why was that?


Yes, why indeed?

As we watched the bankers being grilled by the Treasury Committee this morning, it was difficult not to notice that most of the questions being directed at them could equally well have been directed at Brown and Darling.

Why didn't they take account of the risks as they recklessly expanded the business beyond anything it had ever susteained before?

Why did they allow the business to become so reliant on wholesale funding from overseas?

Why were none of the senior executives properly qualified to do the job?

Why were their risk management staff so woeful at identifying risks and bringing them to the attention of senior management?

Or did senior management ignore the warnings of their staff in a headlong dash for growth?

It's clearly too much to expect that the Labour dominated Treasury Committee will get Brown/Darling in to ask these questions, but they most certainly should.

As for today's session, the bankers were well up to the Treasury Committee - as predicted. But there was one real bouncer.

It seems that far from having risk management at the centre of their business, in 2005 HBOS actually fired* and subsequently gagged their Head of Regulatory Risk. In a long statement to the Committee, he paints a highly disturbing picture of a bank dominated by the desire to grow at any price.

Just like a certain boom 'n' bust government we could mention.

*HBOS's head of risk was fired by Sir James Crosby, a man who not only got knighted by Brown, but was also made Deputy Chairman of the friggin' FSA!!!! Has Brown ever touched anything that hasn't turned out to be an unmitigated disaster?

The Unspeakable In Pursuit Of The Unprincipled

This is an ex-dinosaur

Yesterday's Newsnight treated us to a stomach-churning sight. A slavering political dinosaur was released from his sleaze pit to savage a couple of sacrificial City fatcats who'd been tethered to a stake just like that goat in Jurassic Park.

Unfortunately, whereas the beast had once been a prime specimen of freeloading philandering Westminster thuggery, these days all that remains of Prezza is the freeloading, the obesity, and the overpowering stench of dissolution. He's hollowed out, and simply couldn't get his ancient dentures through the goat meat at all, even though Jezz had cut some of it up for him.

Still, not to worry - this morning another bunch of Westminster reptiles will be be given a go at another bunch of City fatcats. The disgraced ex-heads of HBOS and RBS will be lashed to portable racks and wheeled into the Treasury Select Committee for a bloodying. How delicious.

Well, don't hold your breath. The ex-bankers will have been scripted, coached, and clad in the finest Swiss armour. They will say "sorry about that, but how were we to know that the regulators were incompetent and the government was presiding over the biggest unsustainable debt bubble in history? We assumed they knew their business".

I'll blog the outcome later, along with some further comment on the whole bonus issue (see this blog).

Meanwhile, how are we supposed to stop ourselves vomiting over the carpet at statements like this:

"I think there is a moral responsibility on some of these bankers, even if they are legally entitled to take bonuses, at a time when the bank is only still standing because of government intervention and why I think there is an important issue of needing to restore trust in the city, senior executives need to take responsibility and consider whether they should be taking bonuses."

We know our politicos lose all contact with what most of us understand by morality, but HTF does expense-rinsing Yvette Cooper have the gall to lecture anyone about their moral responsibilities with respect to trough snuffling?

And don't get me started on Jacqs.

Monday, February 09, 2009

Smashing Producer Capture

Gove tries on his new school uniform

Have we all read Cam's schools interview? He doesn't exactly pledge to send his own kids to state secondary schools, but he does pledge this:
"We've got to bust open the state monopoly on education and allow new schools to be established. It's what's happened in Sweden, in parts of America it's hugely successful in terms of making sure there's excellence, there's competition, there's innovation and new excellent schools come along. It's a big chance. It will mean some big battles with forces of resistance. Some LEAs might not like it, some of the education establishment won't like it."

He also pledges this:
"You need a standard straight away. From day one of a Conservative government I want Michael and his team to be a team of zealots when it comes to excellence and standards and rigour and discipline. There are forces in the education establishment that have to be taken on and defeated on this."

So that's choice and competition, plus a return to rigour and discipline. Hurrah!

But what's all that stuff about taking on the education establishment? As the inestimable Janet Daley points out this morning, bitter experience tells us we should hold the cheering until Cam and Gove have actually done that:

"What they will discover is what every previous bunch of politicians has discovered when they have tried to make the schools accountable to exasperated public opinion: trying to cure what is genuinely wrong with state education is like wrestling with an octopus. That infamous Education Establishment has a grip on the training of teachers, the appointment of heads, the admissions policies of schools, and the devising (and revising) of the curriculum. It is an ideological closed shop which, in spite of the rage and frustration of parents, employers, and political leaders, remains almost undaunted."

As we've blogged before, Tyler's first civil service job way back in 1973 was at the old Department of Education and Science. And he well recalls the Perm Sec explaining to us keen young graduate entrants that, throughout our careers, our main role would be to stop here-today-gone-tomorrow politicos doing anything "too crazy" (aka doing anything).

The politico in charge of the DES at the time was a certain Mrs T (no, the other one). She'd arrived three years earlier with action in mind. As Nick Timmins records in his outstanding biography of the welfare state (The Five Giants):
"Within ten minutes of arriving in Curzon Street, the new Secretary of State produced a page from an exercise book listing eighteen things she wanted done that day. 'Point one' was a new instruction to local authorities cancelling Crosland's circular and telling them they could keep their grammar schools if they wished and even open new ones... Ten days later, out came Circular 10/70...

The educational establishment from the local authorities to the unions was outraged at the lack of consultation... an anonymous columnist in the
Bow Group's journal declared Mrs Thatcher's decision bad for education and bad for the Conservative Party.

The remarkable thing is, how little difference it made... The move to comprehensive schools had its own momentum and the tide was not stemmed."

The bottom line is that even Mrs T - even with all her legendary equipment in the cojones department - was unable to prevail against the state education establishment.

So Gove and his "zealots" are going to have to gird themselves mightily for the struggle. They will need to close their ears to the torrent of abuse and non-cooperation they'll be taking (even Thatcher described her time at the DES as "terrible"). They'll need to face down strikes, and the accompanying BBC/Guardian stories about them wrecking education for millions of hard-working children. Gove can forget those cosy invites onto Newsnight Review.

But you know, despite all that, there's just a chance he'll really do it. He's not stepping out into the blue - as Cam says, these reforms have been seen to work elsewhere. And forewarned is forearmed - he knows all about the resistance he'll get from the establishment and must be preparing.

Frankly, we're a lot more concerned about Cam's sticking power than Gove's. Cam talks about confronting the education establishment, but talk is cheap. Will he still back Gove when the shells and rockets actually start coming in?

And there is one other big concern.

While we all applaud the plans for parental choice, new suppliers, headteacher control over admissions (and exclusions), and the undumbing of exam standards, why on earth do Cam and Gove think they are best placed to tell individual schools how to organise themselves?

We already know about their prescriptive approach to teaching reading (synthetic phonics - see this blog), but there's more. Cam is going to retain Labour's ban on selection by academic ability, and instead he's going to insist on "setting" within schools.

But as Janet D points out, we've had setting in comps for years, and it hasn't exactly been a miracle cure. And what does Cam know about it, anyway? Has he ever taught? Well no, but he reckons setting works at Eton:

"Eton is a very well funded school, we've got great history and all the rest of it but one of the great things about it was setting by ability in every subject. So if you were bad at maths you had the smallest class with the best teacher. That's not magic, that's common sense. It's about how you help struggling kids. It had competitive sports. It had small units."
Er... yeesss.... Except that in reality, Eton is a highly selective school. These days entry is by fiercely competitive exam and interview (well, a pint of real blue blood is still acceptable, obviously). In fact, Eton is precisely the kind of school that supporters of grammar schools want to see return in the state sector. It shouldn't be the preserve of rich bright toffs.

As JD puts it:
"Set all the schools free, Mr Cameron, and give parents the right to take their tax-funded allowance (don't call it a voucher) to whichever one they want. Then the rest – the curriculum, the teaching methodology and the educational ethos – will find its own way home."


Sunday, February 08, 2009

News From BOM Correspondents - 15

We've stretched our telephone hold times to lethal durations

Latest news and links:

Public Sector Pay

Nick W highlights a £70 grand pa call centre job advertised by Northamptonshire Police:

"... offering a salary for a call centre manager "somewhat above" similar positions in the private sector, the [advertisement for the] position of head of the Force Communication Centre... calls for an "inspirational customer service champion".

Another "inspirational customer service champion"? Surely, the public sector must be chock full of them by now. Although it remains unclear precisely how we customers benefit. The local MP is unimpressed: "Northamptonshire already spends a sizeable amount of money on PR and here we are now setting the pace in terms of call centre management salaries. Wouldn't it be nice if we started setting the pace in criminal catching?"

Catching criminals? Steady on, old chap.

High pay for public sector jobs of dubious value is a familiar theme on BOM. And as it happens, the Sunday Times today runs a lengthy article on the whole pay issue:

"Public sector pay has overtaken private sector pay in recent years. Figures from the Office for National Statistics released last week show that the median full-time weekly wage in the public sector last year was £522 compared with £460 in the private sector. The gulf is widest in Scotland, where public sector workers now average £3,600 a year more than private sector workers. In the UK overall, public sector workers do better along most of the income scale."

Taxpayers whose own pay and/or jobs are under imminent threat are moving beyond restive. In Ireland, the government is cutting public sector pay by 7.5% and increasing its employees' pension contributions.

Law Disappears Up Ass

If you've ever tried to disentangle our tax laws, you'll know how quickly you lose the will to live. The level of complexity is mind-boggling, and you spend hours tracking back through incomprehensible link after incomprehensible link. Finally, sometime around 12.38am, you find yourself right back where you started.

Anyway, it turns out professionals find it just as confusing. According to Reg:

"Late last year, an appeal in R. v. Chambers [2008] EWCA Crim 2467 was halted at the 11th hour when it turned out that the regulation which the defendant was appealing and under which he had previously been found guilty had in fact been superseded by new law... some seven years previously.

This only came to light when a draft judgment on the case was passed to a lawyer at Revenue and Customs, who spotted the error and instantly alerted the court."

So just to be clear- the prosecutor in this case did not know the law, and an entire trial went through with nobody spotting the flaw.

God knows what this fiasco cost taxpayers, but the judge blamed four factors. First, most of today's legislation is not properly thrashed out in the old fashioned way, but takes the form of regulations laid before parliament by Ministers (statutory instruments). Second, the volume of legislation has exploded:

"In 2005 alone, there were 2868 pages of new Public General Acts and approximately 13,000 pages of new Statutory Instruments – to which should be added another 5,000 pages of European Directives and Regulations, plus the outpourings of our new devolved assemblies."

Third, our laws cannot be found in one single place but are a dog's breakfast of primary and secondary legislation. And fourth, "there is no comprehensive statute law database with hyperlinks which would enable an intelligent person, by using a search engine, to find out all the legislation on a particular topic".

We've blogged the urgent need to simplify our tax laws many times, but what this tells us is that the whole legal shooting match needs a Big Axe soonest.

(HTP Dave)

Leeching Off The Taxpayer

On Monday, BOM correspondent Nick N got snowed in with the BBC iPlayer. He emailed to share the experience with us:

"One day with the iPlayer and I feel physically sick. First, I watched Natural World about polar bears when every other sentence on the commentary referenced global warming. I am used to this.

Then I watched Panorama about tax havens. The whole basis of this programme was that people parking their money in Jersey et al were being unfair to other taxpayers.

I am sure that the assembled ministers, reporters and of course Jeremy Vine feel that they are taxpayers. After all they pay their tax. But who pays their wages? Beneficiaries of taxpayer largesse sneaking on tax evaders for the benefit of taxpayers. Where is the moral compass in this?

This just seemed like a horrible infantile plea to the public in an effort to pretend that the BBC wants to reduce their tax burden. As if.

I just threw up in my mouth a little."

How very unpleasant. Still, in the interests of research, I steeled myself and watched the Panorama prog. Unfortunately, I'm less robust than Nick in the vomit containment department, and there's going to be a sizeable carpet cleaning bill chez Tyler.

To start with, the prog is presented by John Sweeney - you know, he's that lefty BBC reporter who made a complete tit of himself last year by literally screaming at someone who dared challenge him:

It is an outrage that taxpayers are still being forced to employ such a man, but of course, this is the BBC, and they don't give a stuff what we think.

Anyway, this time Sweeney makes a tit of himself by pretending to be James Bond. No, really - he does the ski scene, the frogman scene, and the sex scene (mercifully, I'd blacked out by then).

And talk about dumbed-down trash telly - just like the Evan Davis City series, it was all 10 second attention stuff, gimmicky, shot to look like a thriller, and backed with those tedious distracting techno beats.

But you know the worst thing? Panorama could have made a good straight informative programme about offshore tax evasion - just like they used to do back in the day. They could have toned down the left-wing hysteria, and given us a balanced view of the facts.

Because as we blogged here, normal taxpayers should indeed feel angry about tax evasion. But the biggest losses are probably not in the postcard offshore havens toured AT OUR EXPENSE by Sweeney: they're right here at home in our burgeoning black economy. And much of what the left routinely labels offshore evasion is in fact perfectly legal tax avoidance, taking advantage of tax codes so complex even judges can't understand them (see above).

Besides, when it comes to leeching off taxpayers, as long as we have the BBC and the client state, evil rich people are not even on the starting grid.

NHS Latest - More 5-A-Day Coordinators Than Beds

Over at the Ferret Fancier, we've had an update on his jaw-dropping list of officials/advisers/coordinators/facilitators at just one NHS Primary Care Trust. You should go over and take a good look through it. Infection Control Champion Programme Facilitator aside, Tyler's favourites are this cluster:

  • Smoking Cessation Adviser

  • Specialist Community Public Health Nurse/Stop Smoking Advisor

  • Specialist Stop Smoking Advisor (x8)

  • Stop Smoking Adviser (x7)

  • Stop Smoking Facilitator

Now that's a serious career path. But how do the various grades work?

For example, could Tyler get a job as a Smoking Cessation Adviser? There are 7 jobs to go for there. Oh, no, wait - there's only one Smoking Cessation Adviser... it's Stop Smoking Advisers there are 7 of. Or might he even aspire to be one of the 8 Specialist Stop Smoking Advisors? Why the different spelling of adviser, and how much more would be expected?

I mean, with the higher grade I presume they'd want more than "my advice to you is to stop smoking". They'd probably be looking for something more like "my specialist advice to you is to stop smoking".

Hmm. Tricky.

Maybe Tyler should lower his sights altogether and settle for being a Stop Smoking Facilitator.

Or is that more senior? There's only one of them.

The Fancier calls it "New Labour's NHS legacy... wasteful, inefficient, foolish, and unproductive."

And baffling.

(HTP Pete S)

WTF British Council

A Reader is not alone in spitting blood over the British Council's ejection from Iran:

"The British Council says it has suspended all operations in Tehran after staff members were intimidated by the Iranian authorities. Iran has denied visas for any British staff and all local employees resigned after being summoned to the president's office, the council says."

The issue of course, is not why the BC has been ejected. It's WTF were British taxpayers still paying for BC services to Iran in the first place? As AR puts it:

"When a foreign country, and terrorist sponsor, denies visas for all your UK staff, the obvious consequence is that you close your office in that country and shut down all your operations there.

Well, not if you are the British Council, it seems. Closure only happens two years later when the foreign country forces all your local staff to resign."


Via Obnoxio, the Simple Shopper doing the buying for Labour's sinister and hugely expensive ID cards scheme, has clean forgotten to budget for, or buy, any card readers:

"No police or border station, to say nothing of licensing and job centers, has a machine capable of reading the damn things... Like an inexperienced shopper who buys a digital camera but not a computer to view the pictures on, they are now in possession of a far-reaching and complete ID tracking solution that they can in no way use." (Crunchgear)

Made Of Sand

HJ points out that Brown's debt castles actually began washing away as long ago as 2003. That's when individual insolvencies and bankruptcies began rocketing.

Back in 2002 they totalled about 30,000 pa. Last year they reached 105,000,and Gawd knows where they're now heading:

PS There are a number of other links we really do need to post, but this blog is getting far too long. We'll hold them over for next week.