Saturday, August 29, 2009

Big Brother BBC

Public service broadcasting

It's well worth reading the full text of James Murdoch's Edinburgh speech attacking our Big Brother tax-funded BBC. Because his message - self-serving though it may be - goes far beyond the BBC and our state media commissars. It is a powerful attack on the very foundations of big government:

"The consensus appears to be that creationism - the belief in a managed process with an omniscient authority - is the only way to achieve successful outcomes. There is general agreement that the natural operation of the market is inadequate, and that a better outcome can be achieved through the wisdom and activity of governments and regulators.

This creationist approach is similar to the industrial planning which went out of fashion in other sectors in the 1970s. It failed then. It’s failing now.

...while creationism may provide a comfortable illusion of certainty in the short-term, its harmful effects are real and they are significant...

... The greatest divergence between the rest of the media and broadcasting is the unspoken approach to the customer.

In the regulated world of Public Service Broadcasting the customer does not exist: he or she is a passive creature - a viewer - in need of protection. In other parts of the media world - including pay television and newspapers - the customer is just that: someone whose very freedom to choose makes them important.

And because they have power they are treated with great seriousness and respect, as people who are perfectly capable of making informed judgements about what to buy, read, and go and see."

Murdoch is talking about broadcasting, but he might equally well have been discussing healthcare, education, or many other "public services".

We're right back to the core issue here: whereas most of us think our own interests are best served if we make our own decisions, and many of us understand that approach also leads to the best outcomes overall, Big Government types maintain the commissars always know best.

Consider how the BBC Trust responded to the speech:

"Our starting point is what is in the interests of the public and the BBC agrees with James Murdoch's analysis that we need to trust them. And the public tell us that they, in turn, trust the BBC and valuethe wide range of services we provide...

The BBC's public purposes stress the importance of the well-tested principles of educating and informing, and an impartial contribution to debate in the UK."

Self-serving complacency doesn't really capture it. HTF they equate "education and informing" with dumbed-down commercial tosh like The Tudors is beyond us. And as for "impartial contribution to debate", all we can say is hah!

The whole point about the BBC is that they don't trust the public. The commissars believe that a tax-funded unaccountable BBC is all that stands between civilisation and... well... American barbarism. If, God forbid, the BBC had to compete for subscriptions and ad revenue, the unwashed masses might choose a 24/7 diet of Strictly come Dancing, Jonathan Ross, and... er... the Tudors.

As we've said many times, the telly tax should be abolished and the BBC should be privatised soonest.

Proper competition would deliver what we the punters actually want, not what the commissars say we should have. And if we loosened the rules on "impartiality" at the same time, we could get some proper diversity onto the airwaves. Why, we might even end up with a UK version of the Fox.

PS The death of local newspapers? All the more scope for local blogs. Here's a good one we came across in connection with Tyler Jnr's housemove.

Friday, August 28, 2009

Education Education Education

Fool's gold

Every year we blog the latest downward lurch in exam standards (eg see here and here), and every year we listen to the same tired old debates on Newsnight and the Today programme.

Are exams getting easier?

The left, government ministers, and the teaching unions say no. The facts say yes.

The best independent survey - the one conducted by Durham University’s curriculum, evaluation and management centre (see here) - says A Levels are two whole grades easier than 20 years ago. Here's their killer chart:

Have the qualifications been devalued?

The left, government ministers, and the teaching unions say no. The facts say yes.

The top unis increasingly need to find other ways of selecting among "A grade" students, and the top independent schools are abandoning the government's dumbed down GCSEs altogether (in favour of the independently set IGCSE - now used by 700 schools).

Frankly we can't be bothered to trawl though this year's statistical entrails - we've done it too often before. Let's just concentrate on what's to be done.

The single most important reform is to take our politicos out of education. Schools minister Vernon Coaker may once have been a deputy headmaster, but honestly, does this sound like a guy you'd want in charge of your child's education? Right now, state school parents have no choice.

Comrades! Excellent news! Tractor production has reached another record high!

Politicos always interfere in state education factories - they can't help themselves. They tell the teachers what to teach and how to teach it. They set exam grade production targets and demand their fulfilment - on pain of execution. They force customers to accept shoddy goods, and blight whole generations with forced collectivisations.

As we've blogged many times, it is absolutely essential that Gove delivers on his school voucher scheme. State funded pupils must be given the same freedom to choose as private pupils have always enjoyed. Schools must be free to run themselves, just like independent schools already are. Exams must be set independently, and schools must be free to offer the exams they choose (it is outrageous that state schools have been denied permission to offer the IGCSE).

Our politicos have had their chance with our £83bn pa state education sector, and have delivered a dumbed down quagmire. It is time to trust the customers and the producers to sort things out directly, between themselves.

PS As I've mentioned before, I have an unhealthy addiction to BBC R5 phone-ins. Yesterday, callers were naturally exercised about the dumbing down of GCSEs, and recounted no end of outrageous tales: one guy reckoned his niece had walked out of her English Language exam without finishing the paper, yet still ended up with an A grade. Yesterday's other hot topic of course, was the latest population stats. I intend to blog them once I've had a chance to sift through the ONS numbers for myself.

Thursday, August 27, 2009

Socially Useless

According to FSA head Lord Turner, much of the activities of the City of London are "socially useless".

Er... how does he reckon that?

Unless Tyler has got this wrong, the City has long been Britain's big success story. It has generated a large chunk of our national income, paid humongous taxes, and provided hundreds of thousands of highly paid jobs. It's also paid for all those cheap clothes and tellies we now import from China:

Doesn't sound useless. In fact Tyler reckons it sounds jolly useful indeed.

What's that?

The cost of the bank bail-outs has negated all the apparent benefits?

Well, yes, you certainly have point there. The IMF reckons the bailouts will eventually cost UK taxpayers $200bn, which we could certainly live without.

But even if you accept - as we do - that we need radical new safeguards against a recurrence (eg see this blog), taking a long view, net net we're still well in profit on the City.

Long-term, we'd be much worse off without it. We never earned much of a living from turning out Austin Allegros, even though back in the 60s and 70s the commissars virtually to a man considered manufacturing to be far more socially useful than mere "paper shuffling" in the City (who can forget the damage inflicted by Wislon's notorious Selective Employment Tax directed against our useless service industries?).

So the head of our financial regulator should not be shooting his mouth off about swathes of the City being "socially useless". Especially since - as we noted earlier in the week - at this very moment many of the City's movers and shakers are actively considering moving and shaking themselves out of Britain altogether. Which they could easily do.

Turner is in the unfortunate and frustrating position of presiding over an organisation that has bogged up bigtime (eg see here for its appalling lapses over the Crock disaster), has zero credibility, and which will soon be abolished. Presumably organisational morale is rock bottom.

But that is no reason for him to tour leftwing political salons talking the City down. There are plenty of others around to do that - most of whom, like the BBC, have seized on his Lordship's remarks with glee.

Someone needs to tape his gob shut soonest.

Wednesday, August 26, 2009

The Wrong Man

Very confusing - these rich boys all look the same

No time for a proper blog today on account of helping one of the Junior Tylers make his new home approximately habitable. But as we lifted unsavoury carpets and shuttled rubbish to the dump, we listened to the BBC's adulatory obits for Ted Kennedy. And I suddenly realised I've lived most of my life under a terrible delusion.

You see, I'd always believed Ted Kennedy was that womanising drunk who killed a young female assistant in an obscene crash-and-run accident back in the 70s. The populist chancer who supported the IRA against us, and who shafted his own party's incumbent President in the 1980 election. The guy who shamelessly traded on his family name and connections but who would never have been elected President in a million years.

But it seems I must have had the wrong man.

According to the BBC, Ted Kennedy was one of America's foremost leaders of the last century, whose death is an incalculable loss to western civilisation. A man who virtually single-handedly gave us peace in Ireland. A colossus who would have made a President equally as good as... well, St Obama.

I'm deeply ashamed I could ever have thought otherwise.

PS For an unglossed account of the real Ted Kennedy see Andrew Roberts here.

Tuesday, August 25, 2009

Politics Of Envy (cont)

We already have big redistribution

Pol was back on an old favourite this morning:

"A high pay commission would change the climate of what is socially acceptable by challenging the self-serving myths of mega-earners... With powers to investigate, it would make transparent who is earning what and why, ending secrecy: information has transformative power. I would go further and make all income tax returns public documents. The initial shock would be salutary, as it threw daylight on earnings and wealth. When so few people know where they stand or what others earn, how can voters judge questions of fair distribution?

...No one suggests some national pay scale of merit from street cleaner to superstar, but it's time politicians stopped being bamboozled by bog-standard bankers blagging their way into billions "because I'm worth it". Call their bluff, before the bubble blows up all over again."

To the left, the bursting of our financial bubble is a lifeline. It surely shows once and for all that bankers are not worth their exhorbitant pay, and that they only get it by exposing the rest of us to hideous risk as guarantors.

Well, actually we agree with the bit about bankers exploiting our willingness to stand as ultimate guarantor - which is why we would change the rules of the game by splitting high street banking from the casino, and restricting our guarantee to high street bank deposits (see this blog).

But beyond that, pay can only be sensibly determined by the marketplace. End of.

These days you may have thought that principle was pretty well accepted by all want to live in a modern prosperous society. But not by the left it isn't.

When it comes to incomes, the left have never given up on the Marxist idea that the cake somehow arrives already baked from the bakery, and all "society" has to do is distribute it in equitable slices.

Their latest idea is to harness the politics of envy even more directly than they have in the past. According to some recent focus group research published by the Joseph Rowntree Foundation, most people have no idea what top earners get, and have "a strong tendency to overestimate the number of people who earn higher levels of income". For example, whereas only 10% of us actually get a paid above £42,900 pa, most people apparently think it's much more. Focus group members are shocked when they discover the truth:

"I don’t believe that, I just don’t believe that. I don’t think that £42,000 is in the top. I would obviously have thought there is more than 25 per cent of the country earn more than that."

Hence the left's calls for a High Pay Commission: if only The Facts could be got out there, then people would see just how unusual - and therefore outrageous - all those City fat cat packages truly are, and would demand action. They might even demand maximum wage legislation (39% of JRF focus group members already pronounced themselves in favour).

Ah, if only that cake really did arrive fully baked - life would be so much easier.

But in the real world, someone has to get up at 4am to mix the ingredients and pop it in the oven. And he's not very keen on having his cake sliced away at the whim of the commissars.

Which is why the hedge fund managers are already heading for the exit. According to today's Wall Street Journal (HTP JW):

"A stream of hedge-fund managers and other financial-services professionals are quitting the U.K., following plans to raise top personal tax rates to 51%. Lawyers estimate hedge funds managing close to $15 billion have moved to Switzerland in the past year, with more possibly to come.

Richard Jordan, a partner at law firm Thomas Eggar, said: "I would say that 40% of my work involves advising people on ways to leave the country. We have reached a tipping point, in terms of hostility to the U.K. tax system."

One of his clients has just received a dividend of £2.5 million from his business. "He said to me, I'm going to be start being charged £1.3 million on a payment like that. It's time I thought about leaving," Mr. Jordan said.

Recent research by accounting firm PricewaterhouseCoopers suggested that married bankers earning £250,000 a year in the U.K. would retain less of their income after 51% tax than their counterparts in Paris, Frankfurt, Singapore and Dubai."

Sounds like divvying up the cake is going to be the least of our problems.

Monday, August 24, 2009

Nice Work If You Can Get It

The wages of unemployment

Given that romantic strolls along sunset beach were out (on account of there being a howling gale and no sunset), one staycation evening Mrs T and I found ourselves watching a new C4 reality TV show.

It's about a woman who lives in a huge eff off mansion (Thornbridge Hall above), having made an even huger pile of cash.

She seemed jolly pleased with herself, as well she might. As the number one player in a growth industry, her business is booming. Even better, her biz is devoted to helping those far less fortunate than herself, so she and her staff get to feel real good about themselves.

But what really got our attention was that all her cash comes not from those she's helping, but from us - the battered and bemused British taxpayer. Our Simple Shopper Alarm began screaming.

The show is called Benefit Busters, and the lady in the mansion is one Emma Harrison, founder and chairman of a company called A4e (Action 4 employment).

A4e is a job broking company who describe their principal mission as being "moving people into jobs and promoting sustainable employment". Which right now is a very saleable proposition - especially to politicos who need something to clutch at as the economy sinks into the jobless joyless abyss. And Emma's trading results show just how saleable she's made it:

Now don't get me wrong - Emma is clearly a star, and a glance at her upbeat website (including her own personal lower case blog) shows just how well she's packaged and marketed her services. She makes tackling long-term unemployment sound like a branch of the entertainment industry rather than a canker that destroys lives. No wonder our clueless politicos and commissars have been such ready customers (Bonkers Blunkers is a £30k pa consultant).

So good luck to her for spotting and exploiting a great business opportunity (and here's her entry in the Sunday Times Rich List).

But as always, the big question is whether we taxpayers get value for money?

On last week's show, ten unemployed single mums living on benefits were put through one of A4e's six week re-employment programmes. They were under the wing of Hayley, a brassy Northern lady straight out of Corrie, who tutored and bullied them through the course. Mrs T and I rather took to her, although Vicki Woods was less impressed:

"A similar-sized woman to Jade Goody, but with Sharon Osbourne’s hair and make-up, Hayley... was comedically forthright. She told the women they were “dreary” and badly dressed, explained that work was a blessing, made them cry, kissed them better and eventually got five of them a job at Poundland. The viewer (me) was left loathing the loudmouth Hayley, empathising like mad with the poor dreary women."

(In case you missed it, you can taste Hayley here).

As Woods explains, only four of the ten women actually ended up with a job. And that was no more than a two week try-out at Poundland.

A4e's overall success rate?

According to Jim Knight, DWP minister of state for employment and welfare reform:

“The Department currently has 47 contracts with A4e for the delivery of a range of welfare to work provision. On those contracts where we count job outcomes, during the period 2008-09, 20 per cent of people starting provision delivered by A4e have started work. Some customers, however, will still be on provision.”

20% - hardly the greatest record.

Especially when you consider that some of those jobs will be displacing others who might have got them anyway (Poundland would have had to employ somebody). And especially when you consider the ever present risk of cream-skimming - ie only taking onto the programme the easiest to place candidates. And especially when you consider that some of the "successful" candidates will drop out again after a relatively short time.

We've blogged the pitfalls of job brokers before. They are everyone's Great Idea for tackling long-term unemployment. Yet there is virtually no evidence that they work in the aggregate. When the Public Accounts Committee looked at DWP's use of private job brokers under the New Deal for Disable People, they found:

"There are more than 500 providers contracting with Jobcentre Plus to deliver one or more of the disability programmes. The quality and value for money of provision varies widely and acceptable standards are not always achieved. Between 2002 and 2005, for example, over 50% of the learning offered in Workstep provider placements was judged unsatisfactory by the Adult Learning Inspectorate.

...Providers of the New Deal for Disabled People may be deliberately picking people who are easier to help, at the expense of the more difficult to help. The contract for New Deal for Disabled People specifies that providers must accept all self-referred people who are eligible. However, such a stipulation does not preclude subtle encouragement to the easiest to place and discouragement of those who would require more effort."

So good luck to Emma, and we hope she enjoys her mansion.

But don't expect us to believe she's giving us value for money.

The wholesale use of job brokers is turning into yet another triumph of the Simple Shopper's art. Dave and George will need to grip it soonest.

PS A4e has attracted a rapidly growing army of critics. In June it was revealed that it was being probed by the DWP for possible fraud: "The DWP started its investigation into A4e's Hull office in May 2008, after discrepancies emerged in "confirmation of employment" forms submitted by the company. Two recruiters filled in forms meant for employers who agreed to take on workers. In some cases, employers' signatures were falsified. One of the recruiters had also entered into a fraudulent deal with a local temp agency." And here's a dedicated blog on the New Deal Scandal, including many posts on A4e.

PPS During the TV prog, one of the unemployed women on the A4e course put her finger on the real reason we have so many long-term unemployed. It turned out her benefit level was substantially higher than what she could earn at Poundland. She was getting £460 per week on benefits, which was £40 higher than she could earn, even with the government's employment subsidy. So quite sensibly she jacked in the job and reverted to benefits. Now, I wonder if anyone can see the lesson for George...

Sunday, August 23, 2009

Same Old Same Old

The roller-coaster of government debt - here we go again

Time to catch up after our staycation in the grey sunless Westcountry (hope Mr Dale has better luck this week). Except there's nothing much to catch up on: it's just more of the same old grey sunless same:

1. NHS sick leave

As we've blogged many times (eg here), sick leave in the NHS is higher than in any other organisation known to man. Updated stats were released last week:

"The average NHS worker takes 10.7 days off sick a year, compared with 9.7 days for the public sector as a whole and 6.4 days in the private sector. The service loses 10.3 million working days annually... costing £1.7 billion per year."

Why are they so sick?

"The first national audit of staff habits has found high rates of obesity, smoking, absenteeism and poor mental health."

This will come as no surprise to anyone who has ever dined in an NHS hospital canteen, as we did here. Amidst the vast steaming piles of chips and Ginsters, you're hard pressed to find anything even vaguely healthy on the menu. And by far the fattest diners are members of staff.

Worse, it now transpires that NHS staff can continue to claim overtime and anti-social hours allowances while they are actually off work.

Now what kind of dope would negotiate a pay deal like that?

Apart from our swaggering clothead rulers, that is.

The simple fact is that the monstrously obese NHS is unmanageable. Nobody - not Sir Terry, not Sir Stuart, and certainly not Shaky - has a prayer of mastering it. It needs to be broken up into much smaller and competing social insurance providers.

2. MoD incompetence

The latest cover-up over MoD procurement incompetence is still making headlines:

"The British military operation in Afghanistan is being compromised by an “incompetent” Ministry of Defence equipment programme that is £35 billion over budget and five years behind schedule, a leaked confidential report has revealed.
The highly critical internal MoD report, written by a former defence special adviser, says that the department is running a “substantially overheated equipment programme, with too many types of equipment being ordered for too large a range of tasks at too high a specification”.

We already blogged this leaked report here. But equally astonishing is last week's news that MoD underestimated the likely cost of the Iraq War by factor of three:

"British officials failed to predict both the length of the UK engagement in Iraq and the financial drain. Treasury documents from September 2002 show it greatly underestimated the costs, believing British troops would need to remain “fully engaged” in Iraq for just six months.

In a document drawn up for Ed Balls, special adviser to Gordon Brown, the then chancellor, officials said the “central estimate” for the cost of “preparation, deployment and return” of UK troops from Iraq was £2.5bn."

The latest cost estimate is £8.4bn - itself almost certainly too low.

As we've said before, you wouldn't trust the MoD to buy your weekly shopping, let alone put them in charge of our £48bn pa defence budget.

But we can't privatise defence. Which is a real problem.

(While in the Westcountry, Tyler met a man in a pub. This particular man's firm supplies the MoD with top-secret "if I told you I really would have to kill you" IT kit. He reckons they've now supplied three generations of said kit, but as far as he knows, none of it has ever been used. Insurmountable "source code" conflicts with other kit MoD has bought separately from the US means that the vital components can't talk to each other. So it's all "lying in a cupboard somewhere". Not that he's complaining - the exercise has earned him a rather nice second home.)

3. Deeper in Debt

The monthly public sector borrowing figures were the usual horrorshow. Borrowing in July was £13bn higher than last year, and net debt has already reached £800bn. At this rate we will rack up the trillion sometime next summer.

As it happens, Tyler spent last week poolside huddled over a radiator, reading The Cash Nexus by Niall Ferguson, a lengthy examination of the historic relationship between money, power, and politics. And government debt is a large part of the story.

To be honest, Tyler was a little disappointed. While the book is stuffed full of government financial fiascos, bungling politicos, and greedy bankers, somehow it never quite takes flight: it's less than the sum of the parts.

Still, Ferguson does remind us just how often heavily indebted governments inflate their way back to solvency. The Nineteeth Century British example of a government actually redeeming its huge debts (see Ferguson's handy chart above) is very much the exception. Throughout history, most governments have simply defaulted via inflation.

It is a salutary warning to all savers, especially pensioners. It says that in terms of the political calculus, they don't count. They are outvoted by debtors, and those who can more easily protect themselves against rising inflation, including of course, bolshie unionised labour (as happened in Weimar Germany).

Which naturally brings us to...

4. Inflation

Last month's inflation numbers underlined the stark reality that the deflation scare is a con: it simply ain't gonna happen.

The CPI came in at 1.8% (year-on-year), unchanged from last month. And that despite the fact that most mainstream forecasters had told us there'd be a dip.

All the more reason then, to worry about the Bank of England's roaring printing presses (eg see this post).

And even more reason to wonder WTF the Bank Governor actually wanted to crank them up even further. Has he lost the plot? Or is this by some chance the very same Mervyn King who signed that notorious 364 economists letter opposing fiscal discipline in 1981?

He's going to have to steady himself: with Bernanke calling the end of the US recession, those presses will need shutting down any time now.

Can't say we're optimistic. Maybe we need a holiday.

Friday, August 14, 2009


Doing their bit

Mr and Mrs T are heading West for a week's staycation. According to the Met Office five day forecast, they'll be enjoying "sunny intervals" - which is why they're packing their bicycle capes and waders.

Times are tough out West: as the Western Morning News says:
"RAIN-LASHED holidaymakers are considering shunning the Westcountry after the Met Office's U-turn on a "barbecue summer" forecast.

Travel firm said interest in "staycation" holidays in Britain had peaked in June, when searches on its website for UK destinations surpassed those for Spain. Since July's constant rain, Spain has become the most searched holiday spot, with the UK slipping from fourth to fifth place behind Turkey, Greece and Italy."

But the Westcountry's tourism industry is reportedly worth around £5bn pa and is a vital source of local employment. In these straightened times, Mr and Mrs T are proud to be doing their bit.

So here's a suggestion - the next time Lord Rothschild invites you to holiday at his villa on Corfu, just say no. You'll enjoy yourself just as much in a caravan on Dawlish Warren Holiday Park (pic above), and you'll be able to walk tall.

Unlike all those ministers selfishly worshipping a foreign sun.

PS The broadband status of our holiday destination is unknown - posts may be sporadic to non-existent over the next week.

Thursday, August 13, 2009

Gee Thanks Guys

Tyler is a big fan of the US. We owe them bigtime. Not just for all those bailouts over the years, but also for inventing the future. It's difficult to imagine how much poorer we'd be - in all senses - without the free market dynamism and risk-taking capacity of our American cousins.

Yet for all that, they are sometimes a little... well, what should one say... a little brash. And their current beating up on the NHS is an excellent case in point.

Most of what's being said is spot on. The NHS does ration healthcare. In many ways it is Orwellian (not least for the poor schmucks who work in it). And it certainly fails to deliver the standard of healthcare most Americans take for granted.

A notorious example of this last point is cancer survival rates. According to a recent major study:
  • British women have a 53% chance of living at least five years after a cancer diagnosis, compared to 63% for women in the US

  • British men have a 45% chance compared to 66% in the US - a massive difference

Shocking. And if I were an American, I most certainly would not be opting for an NHS.

But the thing is, I'm a Brit. I may be dissatisfied with the NHS; I may want to dump it for social insurance; but at the end of the day, it's our NHS. And when the lovely Sarah P starts accusing our NHS of employing Death Panels to decide who lives and who dies, even I start to bristle.

Which is a real problem.

Because not only does bristling keep me awake at night, it also means my fellow British citizens are even less receptive to the idea of ditching the sacred NHS.

As the Major says, how dare the Yanks criticise our institutions - nay, our very way of life! Overpaid, oversexed, and they even tried to buy the golf club!

From R5 Live, to Twitter, to the Major's club, the wagons are being circled. This very evening Dave has felt compelled to write to all Conservative Party members reassuring us that the NHS is safe in his hands - "how proud we in Britain are of the NHS".

So guys, please... please just lay off the NHS.

Couldn't you find some other bogeyman to wheel out at your Town Hall meetings?

What about the Iranian Health Service?

PS Yes, I know - we can hardly expect our NHS to perform as well as the US healthcare system given the disparity in resources. That's what you get when they spend 15.3% of GDP on health, and we only spend 8.4% (2006). Except that our cancer survival rates are also well below the European averages, and there the disparity in resources has more or less been eliminated. Also we should all remember this rather unsettling fact - among developed economies, there is no meaningful correlation between health spending and life expectancy (see this blog). I suggest you eat more raw fish.

PPS For future reference, here's Dan the Man administering his Michael Moore antidote:

Pumped-Up On Experimental Drugs

At least he tested it on himself

As regular readers will know, we are very concerned that the Bank of England is overdosing us with monetary stimulants. We're especially concerned at the Quantitative Easing (QE) programme - or printing money as we old-timers still call it.

Last week, against all expectations, the Bank announced a further dose of QE, taking the total from £125bn to £175bn. Which has worried us even more. Because as others have said, QE is an untested drug, and we've already swallowed a very large dose. Common sense surely tells us it might be best to wait a while before taking yet more.

Yesterday the Bank of England tried to explain their thinking. They said that without the additional dose of QE, CPI inflation would remain well below their mandated target of 2% for the next two years and beyond. Here's their fan chart showing just that:

As we can see, with QE (aka asset purchases) limited to £125bn, inflation is expected to fall well below 2% - although not, please note, into deflation territory. And two years out (the vertical dotted line) it's still expected to be below 2%. Or rather, there is only around a c 20% chance it will be at 2% or above (the bands on the fan chart are supposed to denote probabilities).

So to address this, the Bank is deliberately stoking up inflation by pumping in a further £50bn of QE. Here's what that does to their outlook:

As we can see, the extra dose does the trick and inflation over the next two years is lifted much closer to the 2% pa target.

Job done.

Er, yeeesssss... except...

For one thing, there are increasing signs that world growth is already through the worst, and turning up. Chinese growth is moving forward again (currently 8% pa), the US is widely expected to bounce back to 2% next year, and just this morning we've had news that GDP grew in both France and Germany during Q2. The massive reflation medication worldwide is feeding through.

Which means that world inflation is no longer out for the count. Commodity prices, including oil, are now well off the bottom - over the last month alone, the Economist Commodity Index (in dollars) is up 10%.

Given Britain's chronic long-term problems with inflation, and the potential for weak sterling to import a lot of inflation very quickly, this is not a world in which we should be taking risks. This is a world in which we need to be very careful indeed.

And as for the Bank's highly impressive fan charts, we just need to remember one simple fact: no matter how glossy the presentation may be, the underlying forecasts are no better than the flip of a coin. Nobody has the faintest idea whether inflation in two years time will turn out to be 1%, 2%, or 5%.

Because that's just the way economic forecasts work. You can employ the best brains, and construct the most sophisticated and detailed models available to humanity. But all those known unknowns and unknown unknowns make it impossible to have much confidence in your projections.

The Bank certainly can't claim any particular record of forecasting success. Here's their inflation fan from last August - just 12 months ago:

Pretty different, huh?

And in fairness to the Bank, they admit their record is not that brilliant. They say (page 48 here)that over the last decade their one-year forecasts of inflation have turned out within their 50% probability range (the dark red bit of the fan) only four times out of ten (ie a supposed 50% probability range has turned out to be closer to 40%). Moreover, their past forecasts have been biased down (ie inflation has turned out higher than forecast two to three times more often than turning out lower).

So we can't have a lot of confidence in the doctor's judgement here. In the past, he has not been particularly accurate in his diagnosis, and has tended to underplay the risk of inflationary fever.

And now he's administering huge doses of untested drugs.


Feel lucky?

PS Of course, as we've blogged before, inflation won't be bad for everyone. Debtors - including the government - will benefit as the real value of their debt gets eroded away. But savers, widows and orphans will be punished most savagely. Just like they were back in the 70s and the Weimar Republic. Meanwhile, the banks are coining it in, as the Bank of England shovels in cheap cash for them, while home owners and small business get racked by higher borrowing rates. Ah, it's a cruel cruel world.

Wednesday, August 12, 2009

Thank God For Mandy

On a morning when unemployment soared to a 14 year high, we listened to Mandy being interviewed by Evan Davis on BBC R4 Today. It reminded Tyler precisely why he must bust his gut to get Dave and co elected next May.

Yes, we do want Dave et al to be far more radical on public sector reform. And yes, we do think they should be much more ambitious on rolling back Big Government, tougher on crime, more focused on controlling immigration, etc etc etc.

But compared to another five years under the slithery Commissar Mendacity, Dave is offering the way, the truth, and the light.

There's something deeply unsettling about a man who can be quite so brazenly deceitful as Mandy. I mean, they all lie - we understand that - but only Mandy seems to thrive on it. The very act of lying seems to nourish him - he positively grows as the slings and arrows of outrageous truth bounce off his reptilian scales.

This morning poor Evan did his best to confront him with The Facts - the huge black hole in the public finances, the obvious reality that any future government will need to cut savagely, etc etc. But The Facts just fuelled His Lordship's dark powers:

"My dear Evan, your puny weapons cannot harm me. Soon I will be more powerful than you can possibly imagine. I am the Master now."

One issue that came up was the oft repeated claim that Labour's reflationary policies have saved 500,000 jobs - jobs that would have been lost had the evil Tories been in power. Davis did immediately challenge the second half of that claim, and he also pointed out that much of the reflation is down to the Bank of England's monetary policy not fiscal action by the government, but Mandy just pressed on regardless.

As it happens, this claim is something I've been meaning to look into anyway. So I've done some digging.

As far as I can see, the claim first surfaced in Brown's interview with the Times on 26 June. He said:

“That means we will return to growth more quickly and we will probably have saved up to 500,000 jobs that would otherwise have been lost. People will see we have made a difference to the path of the recession.”

Later at a press conference on 22 July, he turned up the gas:

"If we had not intervened and acted decisively, at least another 500,000 jobs would have been lost in this recession."

Needless to say, in Mandy's hands the claim has become even more grandiose. He now claims there would have been:

“...far in excess of 500,000 more jobs lost in the recession had it not been for the government and the Bank of England’s intervention.”

So in six weeks we've slithered all the way from "up to", to "at least", to "far in excess of".

But where did the half-million figure come from in the first place?

According to Mandy, it was the Treasury.

Is that even slightly true? All we can find on the HMT website is the following sentence in the Budget Report:

"5.23 Action the Government has taken from the 2008 Pre-Budget Report onwards has already had a critical impact in supporting employment. In addition to the fiscal stimulus and support for Jobcentre Plus, the January Employment Summit announced a further £500 million package, offering support for up to 500,000 jobseekers."

Could that be the original source of the figure? A pie-in-the-sky aspiration tossed out at one of those famous "summits"?

In the absence of some proper chapter and verse, we reckon that is precisely where the figure came from. It is complete and utter vapourware.

But as we say, at least this has served to remind us all why these corrupt black-hearted people must be thrown out.

They must join the swelling ranks of the unemployed they have done so much to create.

PS One question that arises from today's dreadful unemployment numbers is why the increase in the number of registered Jobseekers is so much less than the increase in the number of unemployed? There are now an estimated 2.43m unemployed, compared to "only" 1.58m registered and claiming Jobseekers Allowance. The answer of course is that many of the newly unemployed know that the JobCentres cannot help them. The experience of our acqaintances who've lost jobs is that JobCentres can help you fill in your benefit claim, but are next to useless in terms of finding a new job. You are much better saving your time to do your own job search. All you will get at a Job Centre is depression.

Update 13.8.09 - The Telegraph reports that the Treasury has disowned Mandy's employment claim (see here).

Tuesday, August 11, 2009

To Fundamentally Reform

Surely George ought to know better:

"We need to fundamentally reform the way public services are delivered."

To fundamentally reform? What kind of talk is that?

I mean, we understood George had received an expensive education at one of Britain's very toppest schools. Surely a school like that doesn't have the motto Fide et Literis for nothing, does it? What would his old English master have said?

I'm afraid the Major was so appalled he was quite unable to concentrate on the rest of George's speech, and was forced to repair to the 19th hole for immediate medication.

Fortunately, Tyler is made of sterner stuff. And for the sake of understanding what had been billed as a key speech on public sector reform, he was prepared to overlook the odd grammatical infelicity.

So reformwise, what did George actually have to say?

First, he said that the coming spending cuts make fundamental public sector reform all the more important:

"Without fundamentally improving the productivity of public services, the quality of those services will deteriorate as budgets are squeezed."

Spot on - as we've blogged many times.

Second, he said Gershon-style "efficiency savings" will not do the trick:

"... to pretend that efficiency savings alone will suffice when the country is borrowing one pound for every four it is spending, is to take the public for fools. It is deeply dishonest and it condemns those who claim it to the sidelines of the real debate. The truth is that we need to fundamentally reform the way public services are delivered."

Again, spot on - as we've also blogged many times.

Third, he confirmed that Dave's government will "legislate early" to introduce those school vouchers:

"We will, as they have in Sweden, give parents the ability to take the money the education bureaucracy currently spends on their behalf and allow them to take that money to the new school they want.

...we will allow new providers to set up state schools where there is demonstrable demand from parents."

Hurrah for that.

Fourth, on the NHS, the Tories will be... umm...

"... making the case for progressive reform in health, achieving improvements through patient choice and professional autonomy, bringing productivity gains through diversity of provision and an effective roll out of payment by results."


And how exactly does that differ from all the good intentions we've heard over the last decade? In theory we already have patient choice and professional autonomy and diversity and payment by results. In theory.

The problem is that while Whitehall holds all the purse-strings, the theory don't add up to a row of beans.

No, if Dave and George are going to deliver "fundamental" reform in healthcare, they will need to be much more radical.

As we've blogged many times, they need to break up the lumbering dysfunctional NHS and replace it with a range of continental-style social insurers. That's the only practical way to inject meaningful competition and customer choice, which is the only practical way to drive higher productivity.

If we're to stand any chance of preserving service standards in the face of the forthcoming spending cuts, Dave and George will have to raise their sights.

They need to boldly go where no man has gone before.

They need to explore new worlds beyond the NHS platitude zone.

PS I'm sure I've quoted it before, but I just love Raymond Chandler's famous riposte to the proof reader who attempted to unsplit one of his badly busted infinitives: "By the way, would you convey my compliments to the purist who reads your proofs and tell him or her that I write in a sort of broken-down patois which is something like the way a Swiss-waiter talks, and that when I split an infinitive, God damn it, I split it so it will remain split."

Cereal Bunglers

Nostalgiafests don't butter any parsnips - let alone feed 7 billion people

The top three stories on last night's C4 News formed an instructive conjunction:

Story 1

The government's panic programme to dish out Tamiflu like Smarties (see this blog) has backfired badly. It seems that for children at least, the side effects are worse than the swine flu Tamiflu was meant to be treating.

Now who could possibly have foreseen that?

Well, the Doc for one. When the Smarties programme was launched last month, he delivered his definitive verdict:

"I can prescribe Tamiflu, though as yet I have not. I would not take it, and I would not give it to my family, so why would I prescribe it for patients? What this means is that anyone with any vaguely viral symptom is going to get "treatment" for a condtion they probably do not have with a drug that is next to useless and may have hitherto unexpected side effects. Great!"

Story 2

The government's panic programme - expensively fronted by My Lord Sugar - to provide thousands of new apprenticeships has flopped:

"Earlier this year the government announced it would fund an extra 35,000 apprenticeships as part of efforts to tackle the recession, costing £140m. But its figures show there has been a decline in the numbers of 16 to 18-year-olds in England starting them - in the first nine months of 2008-09 the number dropped by 8.3% on the same period the previous year."

Now who could possibly have foreseen that?

Well, Tyler for one. Back in January when the programme was launched he wrote:

"It's all part of Labour's current headline management/money burning exercise known as Doing Something Not Nothing.

Apprenticeships only work if employers actually take on apprentices, and with the virtual demise of British manufacturing, they largely stopped doing so.

What's more, the government's grandiose programme to have all 16 year olds stay on at school means that the minority who do leave are rather unlikely to be the ones employers might want to take on as apprentices."

Story 3

The government is now planning to inflict a new programme on us "to change the way food is produced and processed so that we continue to enjoy healthy affordable food in the decades ahead". The Rev Benn climbed into the pulpit and pleaded with us to mend our ways - before it's too late.

To which we say que?

Are we not supplied with cheap food beyond the wildest imaginings of our great grandparents? Is not the variety and the quality (if not the taste) fantastic? Is not food production getting more efficient with every passing year (watch the latest episode of the excellent Mud Sweat and Tractors here - especially you, Tyler Senior)? What's to change?

True, food prices did increase quite sharply last year. But they've now turned down again, and the longer term downward trend is unmistakable - even in this chart taken from Defra's own paper (food prices vs the RPI):

Indeed, despite the occasional hiccough, relative to general prices - and certainly relative to incomes - UK food prices have been on a long-term downward trend since the abolition of the Corn Laws in 1846. Which is why food now comprises only around 12% of the RPI shopping basket.

So what about the soaring population - all those extra mouths to feed?

Well, yes, from the perspective of food prices, that is somewhat less than ideal. But the vicar does not suggest we impose a Chinese style one child policy, or even that we should cap immigration. So he clearly doesn't think that's a pressing issue (Tyler has just been sent a paper by a BOM correspondent that puts an alternative view - we'll read and blog it in due course).

And let's not forget that technology is moving on apace, so that yields are still increasing. Here's Defra's chart for cereal yields since 1970:

And you know the really good bit? The recent increase in prices will surely serve to spur on the producers to invest in yet more technology to produce yet more food from the same amount of land.

It's called the market, you see. Higher prices = higher profits = more investment = higher production = more for everyone.

And if you're a believer in markets like Tyler, you say the markets will take care of it. The markets will spot the need for more food and will drive the technology to deliver it. Simples.

Or rather, simples as long as our bungling politicos and commissars don't decide they can do better than the market. As long as they don't step in to forbid the necessary technological innovation, say, or to subsidise farmers to take yet more of our fields out of production. Say.

Remind me - why does anyone ever believe these arrogant clowns know what they're doing?

PS Actually, the report Defra have published to support the Rev Benn's sermon is packed with fascinating charts. Here are one or two of them.

First, the real price of various agricultural commodities since 1970:

Not much of an upward trend there.

Second, the origins of the food we eat here:

Thank God for international trade, otherwise we'd still be living on turnips.

Third, the breakdown of where we buy our food:

Looks like we still disagree with the BBC and the Grun about Tesco - we clearly see it as a great grocer rather than the embodiment of capitalist evil.

Monday, August 10, 2009

Legacy Of Ruin

Things can only get better

Sources close to My Lord Mandy have told BOM that the government will shortly introduce measures to make Britain's boardrooms more equal.

When selecting directors in future, FTSE 100 companies will have to give preference to candidates who are qualification-poor.

An official at the Department of Bollocks told BOM "His Magnificence is determined to help people who have been denied the educational and work advantages enjoyed by traditional main board directors."

The official added: "Just because someone has suffered from going to a pisspoor state education factory and has subsequently proved to be unemployable does not mean he - or she - should be denied a board position. In selecting their directors, companies must not discriminate against those whose underachieving backgrounds and lack of qualifications might in the past have precluded admission to the board room."


Having destroyed educational excellence in our state schools, Labour is well on the way to doing the same to our universities.

Last week we learned that the percentage of students getting firsts has virtually doubled under Labour - despite the fact that student numbers are up by a staggering 30%.

And now Mandy has apparently decided that university applicants from poor families should be given a two-grade "head start" to help them secure a place. A two grade head start for students who may very well then stuggle with their uni course... unless that too is dumbed down.

Out here in the real world, most of us can see that we've already got far more university graduates with dubious degrees than we can ever use. When last sighted - before the slump - unemployment among new grads was 8.2% and rising fast. And if you add in all the grads employed in non-graduate type jobs, the true figure is much higher.

As we've blogged many times (eg here), Labour's 50% uni participation target is absolutely bonkers. It is entirely arbitrary, and far higher than the 34.8% OECD average: when last sighted, the US was on 33.6% and Japan on 36.1%, both behind us on 39.3% (graduation rates - see here).

And it's not cheap. On top of the c£15bn pa direct cost to taxpayers for the courses, we are also losing all the output from these students. And that's both while they're at uni, and while they're tooling around for a year or two afterwards reconciling themselves to the awful truth that a degree from a UK uni is no longer a meal ticket.


The real screaming priority is obvious to everyone out here. It's not more uni places for underperforming students. It's to improve the lamentable standards in our state schools.

Gove had better deliver on those school vouchers, that's all. Because the Major's starting to get very agitated.

PS Yes, we realise this may all be another wind-up from the Master of wind-ups. But the damage Labour has inflicted on our education system is all too real.

As you may know, His Magnificence himself was educated at a state grammar school in a leafy North London glade. But shortly after he left, the school was forced to go comprehensive, and as a 1200 pupil state education factory, it now struggles to produce good A Level results, scoring well below the national averages. Maybe HM might reflect on that as he's oiling his pecs out there in the sun.

Sunday, August 09, 2009

350 Years Of Defence Waste

HMS Royal James* - serious cost issues

Dateline Woolwich Dockyard - 21 July 1662 -

"While the Royal James was bringing towards the dock, we went out and saw the manner and trouble of docking such a ship, which yet they could not do, but only brought her head into the Dock, and so shored her up till next tide.

But, good God! what a deal of company was there from both yards to help to do it, when half the company would have done it as well.

I see it is impossible for the King to have things done as cheap as other men." (Samuel Pepys - Clerk of the Acts to the Navy Board)

When it comes to defence spending, nothing changes. What Pepys witnessed at Woolwich 350 years ago - overmanning, incompetence, delay - applies equally well today. And last week's leak of a secret MoD report on defence procurement once again puts the problem up in lights.

The report apparently says that MoD wastes up to £2.5bn pa because of shockingly bad procurement practices, including (see leaked presentation slides here):

  • MoD "does not really know the price of any kit"

  • "Project management does not really exist in the Department"

  • "New requirements set by MoD during the procurement process are not unusual and cause delay, cost and time overruns"

  • Over-optimism in commissioning projects is endemic

  • MoD is "in denial" and "always late in admitting there's a problem"

  • The overrun on major projects averages 40% in terms of cost and 80% in terms of time

  • The so-called "Smart Acquisition" programme introduced in 1999 has flopped - if anything the delays are worse

  • Current procurement programme far exceeds the funding available - even if nothing further is ordered, the accounts will not balance until 2028

  • This chronic funding imbalance necessitates constant "reprofiling" of projects and further delay, all of which costs money (delaying the Navy's new aircraft carriers cost us between £500m and £1bn)

  • There are far too many bureaucrats involved in the process, and they are generally of low quality

Of course, none of this will come as a shock to BOM readers. Neither will the fact that Brown tried to suppress the report.

But it does underline just how expensive MoD failure is.

Let's remind ourselves how much of our cash MoD spends. This year it will be £48bn - about 13 pence on the standard rate of income tax - of which £9bn will be spent on capital procurement.

And let's also remind ourself of how they spend that money. In particular, let's recall how few actual fighting men they employ.

According to the latest official stats, total MoD employment is 283,000 (Sept 2008, full-time equivalents). But of that total, the number of people available to fight our wars - the real ones we actually face, like Afghanistan - is no more than about 30,000 (see this blog). Which leaves about 250,000 people who are doing something else. Like running the dysfunctional procurement system.

But can anything be done?

Because whereas we can see how to make education, health, law and order, and various other public services work better - by removing central government right away from the action - with defence it's difficult to see what we can do. We can't privatise it, and while the idea of directly elected generals has some appeal, we're not entirely convinced.

Government has to run defence, and somehow we have to find some way of making them do it more efficiently.

Yes, we should slash the number of desk jocks, and yes, we should insist they buy more off-the-shelf kit from the yanks, and yes, we should scrap all the Cold War kit we're still buying (including the full Trident replacement). But beyond that, it's tricky. Very tricky.

The simple fact is, the King really can't get things done as cheap as other men.

Which is precisely why the King should not be involved in anything beyond law and war.

PS A few weeks ago we blogged an interesting paper by Ted Bromund of the US Heritage Foundation on MoD's misuse of PFI. Ted subsequently sent another useful defence paper which we are going to blog in due course. He also sent some long-term defence spending charts which he has painstakingly assembled. Just for the record, here they are (click on them to enlarge):

A couple of points jump out that we've blogged before. First, how extraordinarily low spending was during the nineteenth century, even though Britain was ruling half the globe (I've recently heard it said that's because we made extensive use of Empire troops who were very cheap - in every sense). And second, how Labour have gone on cutting spending despite all the various wars they've taken us into.

*Footnote HMS Royal James was launched in 1658 as the Richard - named after Richard Cromwell in honour of his appointment as Lord Protector in North Korean-style succession to his dad. After the Restoration in 1660 the ship was renamed, and expensively respecced. It had just three encounters with the Dutch, before being sunk and burned. Contemporary taxpayers cannot have been best pleased.

Saturday, August 08, 2009

Fool Or Liar?

No tradition of turning out fools

Everybody who looks at it seriously comes to the same conclusion: the state pension age will have to increase to 70 soonest.

As we've blogged many times, with life expectancy increasing by leaps and bounds, we simply can't afford to keep it where it is. And even the planned increase to 68 by 2044 is nowhere near enough.

Three years ago, the Turner Report on pensions crunched the numbers and showed us that to stabilise the burden of state pensions spending at current levels (ie around 6% of GDP) we will need to increase the State Pension Age to at least 70 (see this blog). And although Turner himself wimped out on recommending that - going for 68 instead - he has since recanted and now says he wishes he'd gone for 70.

Then today, David Norgrove, the pensions regulator, tells us the same thing:

"People are going to have to work longer, partly because we're not going, as a nation, to save as much for retirement as we did in the past.

The government's recent legislation is increasing the state retirement age progressively to 68. I think it will end up higher than that."

Countless actuaries and economists of Tyler's acquaintance agree.

So why is it then, that the DWP's Minister for Pensions and Ageing, disagrees? Angela Eagle says there is "no point" raising the state retirement age beyond 68:
"We believe that we've covered the predictions of increased life expectancy adequately in the legislation and unless these statistics change we'll have periodic reviews, but it won't happen for another generation."

Can she possibly believe that?

Can she possibly believe busted Britain can afford to sustain growing numbers of state pensioners through 15-20 years of retirement?

Does she not understand that state pensions were only ever meant to pay for the small minority who were unlucky enough to live on beyond the average age of death? Has she not studied the long-term charts of life expectancy? Has she not realised that in 1908 when Lloyd George introduced his state pension from age 70, the average life expectancy at birth was less than fifty?

(And see this blog for more details).

Surely Ms Eagle must know this - after all, she went to St John's College Oxford (pic above), just like that brainy Mr Bliar.

But if she knows exactly what the rest of us know, what possible explanation can there be for denying it?

Surely it can't be because admitting the truth might be electorally inconvenient and anyway she doesn't give a stuff about the long-term consequences because she won't be around to pick up the pieces.

Can it?

Thursday, August 06, 2009

Hostage To Bankers

Pay up, or the economy gets it

Tyler likes markets. He trusts them far more than governments. He especially trusts them to deliver far better value for money than we're ever likely to get from governments.

But for markets to work their magic, the players need to be playing on a level(ish) playing field. And the problem we've got with these rapidly re-wedging bankers is that the field is very far from level.

The fundamental issue is the one articulated by St Vincent de Cable - banking profits are privatised but banking losses are nationalised. Whereas the bankers keep the vast bulk of the upside for themselves, any serious downside is shuffled off onto us taxpayers.

This week we were stuffed with our latest helping of downside, including 75% of the future losses on a highly dubious £260bn debt portfolio owned by Lloyds, and a further £700m salami slice of the Crock's rotten loan book (remember when we were being assured that the Crock's problem was one of liquidity rather than solvency? See here for a teeth-grinding reminder).

Meanwhile, every BBC bulletin is headlined by news of yet more banker bonuses, and demands that the government step in: bonuses should either be capped, or better still banned altogether. And while we're at it, shooting a few bankers outside the Mansion House wouldn't be a bad idea either.

So why is Comrade Brown so reluctant to act?

We know why.

He's desperate not to do anything that might damage the last-minute economic recovery he's praying for, and whacking the bankers might do just that.

He's also trying to stoke up bank profits so that they can start paying tax again. As we've blogged before, booming tax revenue from the financial sector paid for much of Brown's public spending slurge, and the current slump has blown a huge hole in the finances. According the Centre for Economic and Business Studies the tax loss from the collapsed finance sector this year alone will be nearly £30bn.

He's also acutely aware that the major banks do not have to stay in London.

In particular, HSBC may very well go back East. They are well advanced with their plans to list on the Shanghai Stock Exchange, the Chinese government is desperate for them to return, and it's surely only a matter of time.

Just as it may be only a matter of time before the ambitious Barclays/Lehmans operation relocates to New York. As BOM correspondent JW points out, if they are serious about rivalling JP Morgan, they'll need to move closer to where he keeps his cigars.

So there are certainly some big risks involved in pissing off the bankers.

But for us taxpayers, there are also some big risks in letting them get back to biz as usual - and we're not talking about their personal bonuses, which are a politics-of-envy sideshow.

As we've just seen demonstrated in vivid technicolor, we are currently standing as the ultimate guarantor of the entire shooting match.

That is a horribly expensive place to be. The IMF reckons the current bank bailout will cost us £200bn, or £8 grand for every single household (see here). And even if that doesn't escalate further (we're betting it will), the next bailout could be even bigger.

Sure, there's much talk of smarter regulation, including flexing regulation so that it toughens up during boom/bubble periods.

But recent events have shown us all too clearly we can't rely on our regulators to act smart. After all, they couldn't even regulate the Crock's pretty simple business, let alone being capable of spotting and calibrating bubbles to the extent of providing a sound basis for our entire regulatory stance.

So I'm afraid we have to KISS. We have to keep our regulatory structure so simple that even the stupidest regulator can operate it with a reasonable expectation of keeping us safe.

And that does mean breaking up the big banks. Just like the Governor of the Bank of England told us, if a bank is too big to fail, it's too big.

Crucially, we do have to split High Street retail deposit taking from investment banking activities - ie we need to implement our own Glass-Steagall Act (see this by the indefatigable Mr Stelzer).

The taxpayer has to guarantee high street bank customers against default on their own personal savings. Because history tells us that modern economies simply cannot operate if everyone keeps all their savings under the mattress.

But that is no reason to guarantee a bank's liabilities to its wholesale creditors. They are mainly other banks and professional investors, and they should be required to consider the risk of default before ever committing funds. If they get it wrong, they should take the hit.

Still less do we want our High Street banks visiting any of those famous casinos. Taxpayers should not be required to guarantee anyone at the tables - especially in a game of winner-takes-all.

The simplest way of ensuring all this is our own Glass-Steagall. We'll guarantee High Street bank deposits placed with regulated fire-walled High Street deposit takers, but nothing else.

In the circs, it's the only sensible to do. Surely everyone can see that.

Er, no. Neither Labour nor Tories are intending to do it.

Why not?

Because the bankers have scared the living bejeebers out of them. The bankers have threatened to leave and the politicos don't have the nerve to call their bluff.

So the playing field remains heavily tilted. Against us.

As the Major keeps saying, if you go bust owing the bank £500 grand, you're in trouble. If you go bust owing £500 million, the bank's in trouble. But if you go bust owing £500 billion, the taxpayer's in trouble.

The trouble is, speaking as a taxpayer, we just can't afford it.

PS Tyler can't remember if he's said this before, but back in the early 70s, he spent three months working for the NatWest bank, including a spell behind the counter. God, it was boring. But it was safe. And steady. It didn't go bust, and there were never queues on the pavement outside (see here for an uncensored clip from Bank Managers on the Job, 1975).

Tuesday, August 04, 2009

Tax-Funding On The Shopping Channel

Driving through England's green and pleasant the other day, Tyler once again found himself shouting at the car radio.

The object of his spluttering harangue was an interview with Will Day, the new head of the Sustainable Development Commission. Well, we say "interview" - it was actually more like a paid-for slot on the Shopping Channel, with Mr Day being given a warm and unchallenged opportunity to present his wares (listen again here).

When Tyler returned home he looked up the Commission's website. Founded in 2000, its first head was old Etonian the Hon Sir Jonathon Espie Porritt. He flounced out earlier this year after the government finally faced facts on the urgent need for new nuclear power stations.

His replacement is another member of the Prog Con ruling elite: Day is the son of a diplomat, with a career in international charities and - yes, you guessed it - the BBC.

Tyler also discovered that the Commission is fully funded by government and costs us £4m pa.

And its role?

To lobby government.

Yes, you heard that right. The government gives it £4m pa - of our friggin' money - so that it can get itself lobbied to tighten our eco screws even further.

Or as the Commission puts it:

"Through advocacy, advice and appraisal, we help put sustainable development at the heart of Government policy."

They are tax-funded government lobbyists.

And you know the really shocking thing?

The Sustainable Development Commission is not alone. Every year we taxpayers are shelling out millions so that the government can lobby itself for more stuff that many MANY of us do not want.

Now the TaxPayers' Alliance has added up the damage. And in a paper published this morning, they provide a detailed 54 page analysis of just who gets what.

On a very conservative estimate, the overall total in 2007-08 was £38m, including:
  • £4.9m on hiring political consultancies
  • £23m on trade associations (Local Government Association, Association of Police Authorities and NHS Confederation)
  • £1.8m on health policy campaigns, including £515,000 paid to Alcohol Concern, £191,000 paid to Action on Smoking and Health (ASH) and £130,000 paid to the Family Planning Association.
  • £6.7m on environmental policy campaigns, including our friends at the Sustainable Development Commission, Friends of the Earth, the Islamic Foundation for Ecology and Environmental Sciences and numerous other groups
  • £1.6m on usual suspects Prog Con think tanks – Demos, the New Economics Foundation; the Institute for Public Policy Research and the New Local Government Network

Teeth grinding aside, TPA Research Director Matt Sinclair explains precisely why it is so wrong:

  • It distorts decision making in favour of the interests and ideological preoccupations of a narrow political elite
  • It slows adjustments in the direction of policy in reaction to new evidence or circumstances
  • It increases political apathy among the public
  • Taxpayers are forced to fund views they may seriously disagree with.

Spot on.

We need to remember it for the next time one of these tax-funded lobbyists lectures us on the tax-funded £3.5bn pa Prog Con Shopping Channel.