Thursday, 31 December 2009

Cleaning Up Politics

Cleaning up politics is alleged to be one of Gordon Brown's pledges of the new year - it was a pity he missed the opportunity to fast track legislation in the Queen's Speech to augment this but his latest pledges are seen as the last throw of the dice for his party in the run up to the election.

How bad did politics get?

Well let's not go over old ground but the revelations this year made us all extremely angry at a time when British families were suffering most as a consequence of the credit crunch and recession. It is now alleged that some 6 politicians are under police investigation for suspected fraud, mainly to do with claims on second home allowances for phantom mortgages. To be honest, there should be many more - Tony McNulty and Hazel Blears spring to mind but we get the age-old claim that they did everything within the spirits of the rules at the time, a convenient excuse to hide a flagrant disregard for common decency.

But there is much more at risk than just expense claims. What the whole drama illustrated was the priority of the individuals in politics to look after themselves ahead of acting with true conscience. It makes you wonder what people really thought about major issues like Iraq and Afghanistan but kept quiet as it would upset the gravy train. Surely more individuals other than Clare Short and Robin Cook questioned Tony Blair's decisions, particularly on Iraq? How many were reminded of their 'obligations' to support the party rather than vote with decency in mind?

There are more decisions which could be scrutinised but for many people, trust flew out of the window. How can you back people like Julie McBride when she fails to see that what she did was immoral and should be illegal? We clamp down on benefit fraudsters and tax evaders but these abusers of the taxpayer have played a game with us all forgetting all sense of moral values. Yet it seems that politicians will get away with it; they will sit at the next election and they will likely get voted back in. For those 'Zombie MPs' who have already said they will step down, they hang on for the last milking of the system, the pay off for losing the election - the parliamentary equivalent of the Premier League relegation pay off.

Why do we let disgraced MPs have that opportunity to finally screw us when the very reason they are going is because we have found out that's what they did?
It is at this point that leadership is called into scrutiny. Why have Brown, Cameron and Clegg not acted and simply sacked those individuals who have transgressed and admitted it? Why are they allowed one final shafting of the public when they have been royally doing so for some time?

My point is that if the party leaders cannot see the problem properly, how can we trust anything they do? This is a pretty fundamental issue about trust and they seem to care little about their own sinners, allowing them a final hurrah rather than acting to clean the whole system up and getting rid of the rotten eggs now. Then again, trust is something politicians abuse time and again - they are happy to tell us whopping great lies and justify them later when they manipulate the facts of the time.

It is little wonder that we have them all debating the Green Book, whether they should pay back what was claimed and whether they are bunch of thieving swines. It is in their blood - by definition if you want to be a politician then you are probably not morally strong enough to be one.

It will take far more than talking a pledge to clean up the system - it will take a fundamental overhaul of the political system at all levels of Government. I will bet my tax increases over the next 10 years that it will never happen.

Wednesday, 30 December 2009

Big On Talk, Short On Ideas

Some things don't change. Over a year after the biggest collapse in the financial system since the Depression and after six successive quarters of contraction, the best Gordon Brown can do is to talk about growth.

There was precious little about delivery of this growth or how he would 'fairly' cut the budget deficit but the careful manipulation of Peter Mandelson is clearly at work on the puppet strings. After an unlikely recall to the administration and a fast track back into politics via a peerage, Mandelson has become the most powerful man in Britain. Clearly, his help comes at a price and Brown is all but a political husk, but how the gamble has paid off. When Mandelson took his ermines Labour's position at the polls was nigh on on dead. A year later, plenty of talk and little action has somehow got them back into a position where they actually may win again. After all, Blair won the last election with a mere 34% of the the vote and that won him a 167 seat majority.

So this latest 'New Year Message' promises another cycle of 10 years of prosperity - ominous as it abruptly stops after that. It seems we are now to accept that prosperity comes in boom and bust cycles. The speech gives rise to the notion that not just a rich few will prosper - well we would like to see how Brown delivers as in all this chaos and recession, the one sector that has lost little ground is the rich - in fact, most would say that they have fared far better. Sure they may get a few more taxes, but in the new decade the emphasis will be on the money men. Those that can manipulate the vast pool of money in the open markets will be the big winners as always, and they will pay proportionally less tax per pound they earn than anyone else in Britain.

That's my prediction for the new decade. The biggest losers will be those moderately well off who will be defenceless to the pounding of tax after tax - just as we were before but were too dumb to notice.

The problem with this limp message on growth is that after a year there is no detail. It is a strategy of hope. Effectively, our economic recovery strategy has ended with QE switching off shortly and VAT returning to the old high level this weekend. Scrappage is the last incentive left and that is limited to one industry. Deferred tax will be due soon and the hangover of mortgage holidays is yet to kick in - unemployment has yet to peak. Despite all this, the plan is to talk of growth and hope to God it arrives of its own accord.

Labour has a track record of 'head in the sand' governing - it's what got us into this mess as the warning signs about bubbles were clear to people on the ground. Now we are talking about 10 years of the same, led by the same people.

We must be really stupid. Then again, that's what Brown and Mandelson are betting on.

Monday, 28 December 2009

Will There Be A 'Double Dip'?

Of the many questions that face us as we go into 2010, perhaps the most serious is, 'Will there be a double dip?'

It takes a moment to work out what that means, but effectively the climb out of recession is merely a false dawn and we lurch back into recession for another period before finally emerging into real growth. Of course, this would be a huge disappointment to the Government as we have already had the deepest and longest recession on record, so as we clamber up the sides of the slippery slope to growth, it could be disastrous if we slither back down - at least for their re-election chances it would be.

Just today we heard that the rate of growth in house prices has slowed. I actually think this is not such bad news - the return to economic growth would be far more healthy if it was not led by or dependent on house prices. However, there are more serious issues that we face.

Firstly, £200bn of Quantitative Easing (QE) is soon to end - where we have issued new, 'funny money' to buy our own debt. Pretty soon Government bonds will have to vie for real money buyers and that will be a crucial test of Britain's economic health in the eyes of others. The best that QE has done is to ease credit conditions but in reality it has been stored by banks to shore up their capital ratios and some have used it to play the markets again with devastatingly profitable effect. Little has got into the real economy and allowed people like us to get access to credit more freely - or businesses for that matter.

This lack of credit is still an issue. Today, as the recession lingers, businesses have not made big demands on banks for credit - not for growth or investment, at least. Most businesses have reined in costs and tried to decrease dependence on credit, hoping they will get good, easy access to money when the markets recover. That could be a real issue as not only will firms be making their demands at roughly the same time but it will be a crucial test once again of whether QE has worked. Many suspect this will be a tough time for businesses and impair the country's ability to recover and grow.

More importantly, around the same time, as thousands of businesses took the opportunity to defer the payment of tax bills, there will be cash demands on them. By taking up the Government's initiative on 'Time to pay', firms have kept vital cash in the business at a key time rather than have to borrow more to pay their tax bills or for that matter have to make deeper cuts. However, it does not mean that they do not pay their taxes, it merely gave them a stay of execution. The taxman will want his money soon enough. Once again, this will all happen at roughly the same time and companies will have to find the cash at a time when they most need it to grow and take advantage of the recovery. Again, it jeopardises the tenuous period of growth we have.

Similarly, there will be chaos for firms on 1 January as the VAT returns to its old rate. Those firms having their year end on 31 December will have a dilemma as they would normally bill all they can. If they are a distributor, then their customers who sell on to end users may fear receiving an invoice before 31 Dec if they cannot immediately bill the goods - so 'goods in transit' or 'shipped from factory' situations will be areas of uncertainty as the chain of invoices for VAT purposes may have differing VAT rates. While the situation may be clear in some accountants' eyes, I can tell you very large firms are very fearful of the lack of clarity issued by HMRC on the subject. For many firms, who operate on incredibly thin margins, if they are left holding the VAT difference, it could wipe out some or all of their profit on a transaction.

Out in the world of consumers, there is the issue of deferred payments on mortgages. On paper, it was a good idea, but the problem is always about the detail and the time for returning to payment is a real issue. At some point, despite over 1m new claimants on the dole, people will have to start paying again which will make less available to spend in the high street, particularly if house prices have not regained sufficient value as to wipe out the negative equity many are suffering.

Clearly, there are many things to be negotiated in the coming year and some of them have the potential to drag as back into recession. The biggest of them all will be when the Government finally faces up to the inevitable cost cutting it will have to make in the Public Sector. Over the last 12 years, an extra million jobs have been added to the Public Sector as well as all the outsourced contracts. As many as one in four jobs are associated with the Public Sector and it is anticipated that the Government will have to cut back so far as to regain all of the incremental spending it has made over the last 12 years - that is the stark reality we face. A simple argument can be made that all of those 1 million extra jobs created out of nowhere in the Public Sector simply to support bureaucracy and red tape and creating untold inefficiency on inefficiency will have to be lost. It not be that many but there will be big job losses in the Public Sector for sure - that's more people claiming on the Welfare State and less paying tax; the double whammy that keeps knocking the Government estimates on borrowing off line. This, of all factors, has the biggest potential to hit us as it not only puts a huge strain on the system, it also throttles the business of those dependent on the Government for a portion of their profits but most of all it means that our ability to service our national debt is less certain - and this has a corresponding repercussion on the credit rating of the country which affects the price and attractiveness of our Bonds.

It will be a tough year still for businesses and a tough year for Government. If we are to avoid the double dip, it will take businesses to lead us and the Government to ensure there is credit available when needed most. None of that is really certain at this stage.

Saturday, 26 December 2009

The Cost of Bad Service

Happy Boxing Day everyone. I hope Santa was good to you and you had a lovely Christmas.

I hate to pick on a sour note but something triggered my mind this Christmas to how poor service kills the experience of either buying things or at minimum using a service. Typically if things aren't going according to plan, our only recourse as customers or users is to call the company in question and either clarify or complain. We hit the dreaded call centre and the world of scripted customer experience, designed, no doubt, by hard nose managers who have neither ever answered a customer call nor really ever had to use their own service.

Once, at the Ralph Lauren Outlet shop in Bicester, a gentleman's credit card required some extra authorisation as a standard security check. The queue looked on in anger as the poor shop assistant went through some questions and it appeared that things were not happening for some reason - the call centre was in some foreign location and language was clearly an issue. The customer smiled enigmatically and asked for the phone as he was worked as a bank manager of the credit card company in question. He apologised to the queue generally before turning to the phone, explained who he was and then tried to clear up the situation. After several minutes of talking he suddenly lost his rag and started shouting down the phone trying to explain he was a manager and why that made a difference. The call ended a full 10 minutes later and he withdrew his card, left his purchases and stormed out of the shop as people muttered at him, 'Now you know what it's like, mate.'

But generally managers don't know. In the UK, on average, senior executives are paid around six times more than lower level staff - in the US this gap is over ten times. The closer you are to the customer, the reality is that the less you are paid. Meanwhile, the farther away you are, the more you are paid by a massive difference. It is also true that the closer you are to the customer, the less decision making power you have - stands to reason as you are less paid therefore have less responsibility.

Wrong. The closer you are to the customer the more influence you have over the company's service, brand and reputation - and therefore - it's profitability.

How many times have you called companies to complain and all you get is the euphemistically called 'Customer Service Engineer' or similarly exotic title. If your question goes beyond a scripted answer, you naturally ask to speak to their manager, or heaven forbid, a director who is responsible for the whole service. Forget it. They are not paid all that money to merely listen to customers, deal with problems or understand how their service is performing. They have graphs and reporting lines for that. As long as the colours look pretty - the business is fine.

I have mentioned this before, at Genesys Conferencing some years ago we came up with a radical idea as customer 'incidents' were increasing and, in general, people were getting angrier. For once, we looked beyond the graph and listened - I don't know what possessed us to do it. It seemed that customers who had more incidents subsequently spent less with us and some even left us - all resulting in lower profits from that customer. Often, the incidents were over minor losses to the service or billing mistakes (like continuing to bill an account after a person had left, which on the face of it should be the customer's fault for not closing the account and making sure no one used that service on that account again). So we decided to give discretionary powers to the customer service 'engineers' to actually give refunds for the service to the value of the incident that went wrong or up to £1,000, usually by offering a credit to be consumed as they carried on using.

The effect was astonishing. Instead of getting customers leave us, they stayed. As MD, I would get calls praising our customer service team and account managers who helped solve problems but at the financial end, we lost less profit. This seems daft as surely we were giving some away. It turned out that not all customers rang with the purpose to get a credit so when offered it they felt it was not required but at least someone had listened and done something about it. While for others, by giving a small credit instantaneously, we never felt any further losses from less usage or customer churn. Better still, by understanding what caused the problems rather than simply turning people away, we got procedures in and looked at technical faults more closely which fixed the base problems causing the incidents. By listening and acting we were able to find the real problems more easily and fix them. Eureka!

This was not rocket science. Recently, my wife used my car and drove into London. She entered the Congestion Charge Zone for approximately 5 minutes before parking and then left after charging had stopped. She used her account to text her charge of £8 that day but mistakenly paid for our other car which was being used in Basingstoke by me for the day. It was the second time we had made that same mistake. This was on 5 November this year. On 12 December, we received a Penalty Charge Notice (PCN), which had been issued on 7 December and took 5 days to arrive even though they have our email addresses.

I called to complain that this delay was unreasonable as I had not used the car that day and my wife assured me she had paid and even had the text response to say she had. The menu service at Transport for London - TfL -(or CC London) on the call handling device clearly says 'if you want to complain, press X' and I did so. The customer service person said they only handle complaints in writing - I pointed out the taped call handling said differently and they said to write to complain about that too. As you only have 14 days after the date of issue to challenge the PCN, I wrote via the website complaint email service and explained what had happened the same day. I got a telephone message on 21 December from a lady who gave a number that did not exist to respond to which curtly said they had reviewed my case and tough - no explanation.

I called again on 21 Dec to the customer service line which did answer and asked to speak to the lady in question, who was unavailable but the person said they could handle it. I explained I thought it unreasonable to be sent a notice after 4 weeks on an incident and it made investigating at my end difficult - tough was the answer as there are NO LIMITS on the length of time that a PCN can be sent out after an incident. TfL can send them out as long as they liked after. The person did offer that a system upgrade had caused delays but that was that. I explained that was not my problem, I surely had a right to defend myself as clearly we had paid £8 for something and we wanted an explanation, not realising the mistake was ours. I explained I was in our other car that day and gave the registration number but they would not check if that car had been paid for - it was irrelevant.

As the call ended, the lady then said, 'Do you want to pay now?' Haughtily, I said I had until 23 Dec according to the PCN and she said, nope - I had 14 days from the date of issue, 7 Dec and so 21 Dec was the limit. It was now a point of order - the PCN clearly stated that I had until 23 Dec, she said she did not have access to the PCN and she doubted if that's what it said, and, in her own words - 'I don't care'. If I did not pay that day, I would be charged the full amount.

I paid there and then. But it was a classic example of rubbish systems, not joined up and little attention to the customer experience. Capita, who operate the service for TfL assume this is a penalty or tax service and so these are fines - punishment and so customer service is not required. The onus of paying the charge or fine is on the customer even though account details and direct debit mandates are in place and number plate recognition has been available from the start. In our case we have two accounts, one for each car but with one payment method - surely we could operate as one account? The final point of principle is that we HAD paid £8 that day for the right to drive a car in the Congestion Zone and if we got the wrong car, surely we had the right to get at least a credit for the one wrongly paid for?

It seems CC London has the right to steal money and impose unreasonable fines plus have an indefinite period to impose the fines making defence of such fines as impossible as it can. But it is the glee with which the customer service people take in telling you there is absolutely no way that you can get relief on a charge and no matter what happened it is your fault and your responsibility and crap service is not an excuse.

CC London is law unto itself. But poor customer service and stupidly imposed systems by highly paid management makes matters far, far worse. It is derived from the first principle that the customer must not be refunded no matter what. If that is challenged, pull down the 'Iron Curtain' that says managers and directors do not take calls and that will frustrate the hell out of people and in the end they will give up.

Utilities are classic for this and only recently have we got enough choice to change suppliers as you should do in the real competitive world but CC London has a monopoly to impose whatever it likes as you have zero choice in the matter. It is a licence to print money and they do so with complete impunity.

No wonder the mangers get paid so much more than the people on the phone - they are clever bunnies. If Boris Johnson had a real brain, he would put out to tender the running of the service - and the first stipulation should be that the call centre should be located in London and run by Londoners rather than Coventry as they should know what they are talking about having used the service at minimum. Secondly, he should combine cars and accounts so that people can pay for any car with one text. Thirdly, he should review the fairness of the system as a flat £8 charge is imposed even if you drive around polluting and congesting all day or enter for only a few moments.

Come the revolution! Make Customer Service mean what it says - remember we are customers after all.

Friday, 25 December 2009

Merry Christmas

Bookies are expecting to pay out on a White Christmas as more snow is forecasted for Scotland and the North East - at least something good comes of the bad weather.

For those who read my blog, I would like to wish you a very Merry Christmas and hope that 2010 is a fantastic and successful new year.

For me, in February, I will become a dad for the first time at the ripe old age of 50. I already know this will be a momentous year for my family. No matter what else is in store for me, I cannot wait.

However, it is at these moments when I realise life is not the same for everyone. After the missed opportunity for future generations at Copenhagen, I fear for African nations and the people who look on in disbelief as we spend billions to save our way of life while they starve. I think of the brave soldiers in Afghanistan who may get turkey but they will not be with their families and loved ones this Christmas.

As we tuck in and relax amongst our friends and family this Christmas, please spare a thought for all those who are not as well off as us. And let's hope that 2010 is a year of real hope and progress for them.

Have a great Christmas.

Thursday, 24 December 2009

2010 - The Year of Growth?

I have blogged before that 'Hope is not a strategy' but it seems the only direction this Government is taking.

We have seen no initiative to cut back spend, no review, no real mention of it and no activity to make any. Yet, by 2014, there is a legal commitment to reduce the budget deficit by half. The only hope is that growth will come back into the economy and it will be enough to eat into our debt mountain. It also assumes that interest rates remain relatively low as the payments to service that debt are already forecast to be at a peak around 2013. So if growth is the plan, where will it come from, and particularly in 2010?

Retailers are still gloomy about the outlook. Households have generally started to rein back on their outlays and focused on starting to reduce their debts. Worryingly, 175% of GDP is held as principal and while interest rates remain low, the servicing is not too much of a problem, but should interest rates start to rise then severe problems will start to occur. The High Street will not be the recipient of big growth next year, that's for sure.

Many researchers say that unemployment has not yet peaked, although there are signs the rate of growth has no slowed. There is a worry here as the Government HAS to make cuts somewhere to try and service the interest on our debt and that will mean job losses in the Public Sector which has largely gone unscathed in this recession. Some predictions have put an extra half million on the current number and that will place a huge drag on benefits and lost tax revenue.

Businesses are generally holding off big investments. That is not always the case as I am working with a firm whose financials have remained good this year and is looking to grow with multiple investment opportunities this year, but their sector is generally down. That is not the general landscape - firms will be cautious about investing and the timing as there is much talk of 'double dips' and false dawns at the tail of this recession. The good news is that there is 'pent up credit' available from banks as firms have cut back on borrowing.

But the state of the inter-company lending is still very depressed. Credit insurance has taken a whipping during the Crunch and recession and overall limits are significantly down which will definitely hinder the rate of growth when the upturn comes. The firm I am working with right now has worked hard with Euler Hermes to keep their overall credit lines much the same but what has helped has been a strong policy on credit which has forced firms to pay to terms. Lengthening those credit days and decreasing cash days is not a policy that firm wants to fall back to in order to stimulate growth.

In general, fund-raising by firms has been very slow with only big banks going for rights issues mainly to boost liquidity and stave off the Asset Protection Scheme. Businesses are still keeping their powder dry.

What it points to is that there is little appetite for investment for growth right now - few companies are being bold enough to predict it is the wise thing to do. Either we are going to get a sudden massive rush for money to grow or the growth that is hoped, even preyed, for will be very slow, cautious and, in the first instance, internally funded.

You can bet your bottom dollar that such slow growth is not built into the Government's forecasts which really argues that the longer they delay making the cuts needed to balance the books, the worse they will have to be. With the Polls now narrowing, the likelihood of a hung Parliament or even a small labour victory is a possibility - given there are no concrete plans for either eventuality in terms of cuts, it may be that our attempts to balance the books will not start until the back end of next year.

That will not impress the credit agencies and it will not look good on our Bonds being as we will not be buying them in the new year with our 'Funny money'. Whichever way you look at it, this is a high risk strategy. Then again, hope is actually not a strategy.

Wednesday, 23 December 2009

So Is Climate Change a Hoax?

The Copenhagen Summit was a costly affair and it is now over - no real deal has been ratified and the outcome was inconclusive. But was the whole shebang really necessary? Is Climate Change not a man-made phenomenon?

I have tackled this subject before and what strikes me is its immense complexity and its simplicity. The complexity revolves around the evidence to prove that Climate Change is actually occurring and, if so, how it is linked to human intervention. The simplicity is to argue that in all this earth's several billion year history there has been no other species like man to inhabit it who can cause nuclear explosions, pump noxious gases into the air, chemicals into rivers and oceans and consume vast tracts of natural resources and convert them into materials and energy. Man's existence has only been concentrated into a very small part of recent history - as Carl Sagan famously put in his series 'Cosmos', if the history of the earth were expressed as a 365 day calendar then man first turned up after midday on 31 December; we are that new to the earth. Even more so, it has only been in the last couple of hundred years that man has started to become industrial and that has accelerated at an enormous rate as we consume ever greater amounts of natural resources.

It really is fairly obvious that our occupation on earth must have had some effect - it isn't that cerebral.

But there is a frightening issue underpinning the panic surrounding Climate Change. It is more likely that we will exhaust our bank of natural resources before we change the world's climate enough to kill off future generations - and that may well curtail their life expectancy anyway. Hubris around the subject is stoked up by people like Christopher Booker who fancies himself as a bit of a scientist - he claims the whole issue of Climate Change is bullshit.

He may know a thing or too about that. Famously, he declared, without any fundamental qualification or simple research, that white asbestos was identical in chemical make up as talcum powder and therefore as dangerous. True, white asbestos is the least virulent of the three types of asbestos, but it can still cause such terrible diseases as mesothelioma. As my father died of that disease due to working in an asbestos-laden environment, I find Booker's assertion as disgraceful. Anyone who has access to the internet, let alone a chemistry book, will tell you that talc and white asbestos are by no means identical, although the base formula may look similar to the untrained eye. Booker has also claimed in the past that breathing in the smoke of others does not cause cancer and that there is no proof that BSE causes vCJD in humans. You would think that he is the world's leading scientist rather than a Telegraph journalist and founder of Private Eye.

But there is the rub. Everyone who wants to bash the Climate Change argument just says that the issue is hokum because the evidence is forged - claiming that in fact the earth's temperature is actually going down, the Antarctic is getting colder and that CO2 levels are not the issue as they have no correlation to temperature levels. The new Freakonomics book argues that water vapour is more of a greenhouse gas than CO2 despite evidence that Venus has no such vapour but plenty of CO2 which actually keeps its temperature cooler than it should be because of its insulating capability.

I must admit that I sit somewhat on the fence as to the evidence - it is not conclusive other than the fact that we are enduring particularly high CO2 levels now and the seasons are definitely changing; you can see that clearly in when migrating birds re-appear or when flowers blossom.

Is this down to man? It may not be, but I tell you what, we are the smoking gun.

Tuesday, 22 December 2009

Profit and Loss

It's nice to know, as major shareholders and owners of 5 banks in the UK, that we are being royally screwed at both ends.

I am sure endless puns and innuendos can be made of that statement but whichever way you cut it, banks are pretty nasty to us. On the one hand, they make extortionate profits out of thin air and spread the proceeds amongst themselves. Then when the whole scam is revealed, we have to bail them out to the tune of £trillions - effectively footing the bill for every bit of profit they have lost and more. Then, since the very existence of banks, they have crippled the customers with expensive, incomprehensible and downright unjustifiable overdraft charges.

Last month a court upheld the right of banks to charge basically whatever they want and not have to justify it to customers, which was amazing enough. Now the regulator, Office of Fair Trading (OFT), has dropped its attempts to rein banks in. Once again, regulators and authorities seem to be powerless when it comes to even the simple things at banks, so imagine what it must be like when it comes to the more important things like losing £billions or paying themselves hearty bonuses for doing nothing since the Crash.

It is clear that banks operate in a twilight world where people who ask questions or try to intervene are systematically told to get lost, be bamboozled by technicalities, are blackmailed in terms of consequences of interference or simply reminded of who their friends are (as in the case of Government ministers). The result is that the taxpayer, despite paying for both ends of the spectrum, has no say or form of recourse in what happens to them. If banks fail, we are told that we are liable yet if banks want to continue to shaft us for excessive fees, they can.

It really comes back to this whole point of banking reform. As shareholders and stakeholders we should have far more say in what goes on. Why should we pay such unjustifiable fees when we are bailing them out and supporting liquidity in the financial markets, from which a small percentage of people are benefiting to the tune of £millions in bonuses? We sit here like lemons letting it all happen - thinking a couple of quid of windfall tax will sort out the problems.

Perhaps, if we got ministers, regulators and non-executive directors in who cared about all this we might get some progress, but while we populate the FSA with former bank executives and have Government with ministers who want to be non-execs of banks, we will not get anywhere.

Just try not paying the fees, and the law will pound you for money and jail you if you refuse. Perhaps the bank executives ought to get some of the same treatment for their losses?

The Wrong Type of Snow?

It's amazing how a relatively small amount of snow can completely screw up Britain but it always does.

This time around, it wasn't as if we didn't know it about having had the first wave on Friday. But yesterday we got another faceful and total chaos.

Amazingly, without reading the forecast I put a winter jacket, scarf and hat into my boot before leaving for Basingstoke yesterday morning. It rained about lunchtime but it was well above freezing so no one was panicking. By 3.15pm, the MD put his head round my door and said I had miles to travel so go! I didn't get further than a few yards from the office before we encountered a hill where cars were struggling. No sign of gritters but there was one citizen who bought grit from a wholesaler on the business park and he was manfully laying it down the hill. I have a 4 wheel drive Audi saloon so this snow has been a breeze but all the cars ahead were in no way equipped for the snow. Eventually I got my run at the hill and cleared it easily, then came the queue on the A33 to Reading. I did not have a lot of fuel but I knew there was a station half way to Reading.

What could possibly go wrong?

Three hours later the car began to splutter and I had travelled about three quarters of a mile up the A33. I got out, suited up with my golf shoes on and trudged back to Tescos, bought the last can and got some fuel. I bought water and sweets and a few overnight things just in case. Back in the car, I waited another hour and moved no more than 10 yards, I decided to turn back to Tescos and fill up. I took me 40 mins to get there and I filled up. I waited an hour to get back onto the A33 which was still not moving and so made for the M3.

I got drove past the office I left at about 8pm and saw the MD in his office still. I got up onto the ring road and there was a scene from the 'Day After Tomorrow' up there - cars strewn everywhere and people throwing snowballs. When I eventually crept onto the M3 it crawled all the way to the Fleet Services where I had hoped to get coffee but the queue to get in was miles long and lorries lay resting on the hard shoulder either side of the motorway. I gritted my teeth and drove on listening to every book review and play of the X Factor guy on the radio.

I arrived home, some 54 miles from Basingstoke at 11.40pm - the last 40 miles took less than 40 minutes. It struck me that in all that time I had seen only one police car and not one gritter. Eight and half hours to get home.

This year, across the South East, the level of gritting and preparedness for inclement weather has been appalling. There was a rumour spreading that if you attempted to grit and someone fell by your place then you were liable as you had not done the job well enough. I wonder if that was on the Council's mind as there must be some excuse for their inactivity.
Probably all gone home early - after all they didn't want to get caught in the snow.

Sunday, 20 December 2009

Taxing Problems

While it may help soothe internal feeling about bankers by taxing them heavily for a short period, the reality is that the problem of banks running extreme risks in their business is not solved and we run the risks of other problems.

John Varley, CEO of Barclays, who did not use taxpayers' money to prop up their company in the Crunch, has said that using tax as a stick short and long term is not a solution. His argument is that it drives 'talent' away from Britain. Personally, I really don't care if unaccountable people who thrive on big bucks set up their own island somewhere in the Pacific to go race their fast cars and talk about the size of their wallets or purses. But I do care that if we do not fix the fundamental problems in the financial system, it makes not a jot of difference to the banks where they locate their staff just as long as they can earn big money - and so driving people away from the UK doesn't actually help us.

If the Taliban all dropped their weapons tomorrow, turned themselves in and embraced Christianity without a further shot being fired we might think this a victory but it isn't going to happen on the current tactics employed. Likewise, banking will find a way to continue what it does unless we tackle the underlying problems - it will also find a way to continue doing what they do to earn billions in scam profits and reward a thin wedge of staff beyond all sense of reality in some way or another. They can afford to as there are huge profits at stake and, frankly, we have shown that we cannot do without the banks. A compromise will be found or loopholes used - either way, banking will get what it wants in some place or another.

The UK Government's headline-grabbing move to tax bankers and high earners generally will not have the desired effect. Firstly, only £550m is expected to be raised on the windfall tax and secondly, high earners will find loopholes in the 50% tax on £150k or above - accountants and lawyers are hard at it as we speak, communicating openly on how to 'mitigate tax' on websites as legitimate as the IOD's.

Tax is a useless and archaic system in driving behaviour. As with speed cameras, it is a way to make money out of transgressions but it does not stop dangerous driving which can be done even at low speeds. So too, heavy tax on bankers merely makes a few bob to assuage public opinion but it does not stop the banks trading products that will cause the next bank meltdowns and even harder economic times while staff cream off ridiculous profits. In fact, unless we fundamentally reform what banks do, before we have paid off the bills for this time around, the next bill will be on us. You see, taxing them this way ultimately will get transferred to us anyway by the fact that they will continue to do what they do to cause financial meltdowns.

If the tax burden gets too high, ultimately it will drive people out of the country. The most able to pay will leave, transferring the burden back onto the people who did not cause the problem. The non-domicile rules will ring fence high earners at one end of the spectrum and banking havens will arise nearby fairly soon.

Fundamental reform of banks is what is needed. I applaud the splitting of investment and retail banking as a start - too often staff in retail banking pay with their jobs for the idiots in the investment banking side and the cash is used to hide the activities of the investment arms. But trading debt should be rigidly reformed so that complex, structured products cannot be used to hide poor asset valuations and debt management, creating a convoluted web that no one, even in the banks, understands. Wholesale money markets should not be used to prop up banks' activities, it is not a question of ratios it is far more fundamental than that.

Until we get some people with real sense and courage into the banking industry, regulators and Government who aren't so rich that their views are biased then we will always have this stupid attitude of tax being the tool to solve any problem.

The problem is that taxpayers have to pay for the mistakes. If we, the taxpayers, held people accountable for the money they use from our personal wealth pots, then people like Andy Hornby, Fred Goodwin, Alistair Darling, Gordon Brown and Hector Sants would be flipping burgers at McDonalds learning the basics of business by now - paying tax like the rest of us and ranting at the their former colleagues in the banks.

Saturday, 19 December 2009

500 Not Out and The Rise of The Machine

I was a little staggered to realise that this is the 500th post on my blog. For those who know me, I have always had a lot to say on many things but I never thought I would write so much in such a short time.

Then again, a lot has happened. When the history of the period is written, it will be hard to know where to start - we are in the aftermath of several major terrorist atrocities attributed to the deadly but unseen Al Qaeda, led by an equally unseen leader, Osama bin Ladin. He has remained at large although the American Dyslexic Rangers thought they had him early on when they surrounded Debenhams after a tip that Bed Linen was inside.

To a large extent we can explain why we went into Afghanistan but the trail of reason stops there. It is a vast and mountainous country with tribal factions which has not been annexed effectively since Alexander the Great (Kandahar is a version of is name). Modern British and Russian Armies have been defeated there and still we persist against history - and how history repeats itself as we under-equip and fail our brave forces in what is fast becoming a pointless war.

The aftermath of Iraq is finally taking us to the real reasons why we invaded. It started with Bush's 'Axis of Evil' speech and then came the charades of WMDs. Blair concocted a reason - any reason would have done as he has now confirmed - and we spent years opening a new front for those with a gripe against the West to come try their luck and stoke up the hatred of Islamic fanatics for the next century. There has been no good to have come out of Iraq, and no WMD were ever found.

Then came the financial meltdown. After years of trading largely fictional products amongst themselves, the financial people got caught by their own scam - rather than see their companies go belly up like anyone else who has traded effectively illegally, these people held us all to ransom. The scam was so big and widespread that the entire banking system was at risk and so the taxpaying people of the world had no choice - we had to bail them out. UK Government borrowing to do this has escalated and currently our national debt is 69% of our total GDP and rising faster than everyone predicts. Billions and trillions have been lost in supporting a thin wedge of people who were already extremely rich. At the Copenhagen Summit of Climate Change, African nations express their disbelief that rich nations could throw away so much money and yet not have a few million to help them as they starve. But that is the crux of the issue - there were no real profits made over the 12 years leading up to the crash, it was all fiction. We settled the gambling debts of a few 'gifted people' and reloaded their pockets to do it all again.

It proves that you cannot have Capitalism and a global conscience - and so Africa will always be Africa and poor.

At the nadir of the Crash and the ensuing recession came the trivial yet infuriating revelations about MP Expenses. We got the claims for duck houses, blatant 'flipping' of residences to profit and avoid Capital Gains Tax, manure, kit kats, toilet ducks, second homes in London for London MPs - the list was almost endless and staggering how the taxpayer has been abused. Then came the contrition and now the fight back. Despite doing tit for tat claims on second homes with her husband, Julie McBride, having said she would stand down, has decided that the public really think what she did was morally right and will stand again. Meanwhile we have a whole cast of cynical 'Zombie MPs' who will shuffle off in shame but will not be sacked or resign as they get a pay off for being elected off at the next election. You really could not make this all up it is so disgusting. We now have several MPs moaning that the rules have been changed and applied retrospectively - welcome to the real world, I say. Sadly, at the next election, I think we will have forgotten the sleaze and many will get re-elected because of our own ignorance.

The Rise of The Machine

The rise of the machine has been amazing. Since 1997, a million more jobs in the Public Sector have been created and during this recession, as over one million extra have been dispatched to the dole queue, still the Public Sector has not been affected and continues to recruit at a fearful rate. Over one in five jobs are in the Public Sector now but that does not tell the whole story as so many are not reported as they have been outsourced - the picture is much closer to one in four jobs in the Public Sector. And top end salaries have risen enormously - throughout the recession, the Sunday Times Appointments Section has been devoid of Private Sector jobs but full of top level jobs at £200k packages for the Public Sector. Layers of Government have been introduced with fat salaries and little power - the First Ministers in Scotland and Wales earn as much as and more than Gordon Brown - then there are the armies of Assembly members, flunkies, MEPs, Commissioners. The machine is vast and getting bigger - we are being spoon fed what to think and do by more layers of Government than you can shake a copy of '1984' at. The bill for all this is crippling us.

Spin has dominated this country for the last 12 years and we have listened and believed all that has been said. Careful angling of Public Enquiries have delivered no change time and again and then come the 'big plays' which are designed to show how the Government has delivered. The rise of the 'Target' in the Public Sector has thrown us off the track as to what is important - more kids get top grades in exams but can't add or write, the NHS has no queues but is obsessed with trivial treatments to score. Then we have grandiose schemes like the Asset Protection Scheme, the Automotive Protection Scheme, the Credit Top up, the Enterprise Loan Guarantee schemes none of which have delivered any good anywhere.

Stark facts elude us. We have remained in recession longer than any other G20 nation, it is a record length and depth of recession, we will continue to repay our borrowings long into the next generation of working kids. The world is changing in front of our eyes and we deny it - instead of lowering our carbon footprint, we trade it. What idiots we all are.

It's my 500th post and I have covered a lot, as well as issues and help for small businesses. But I am hopeful of a good 2010. We will emerge finally from recession, we may not have learnt any lessons from the Credit Crunch but at least it has exposed a poor, laissez faire Government for the sham it was - perhaps we will get a decisive vote at the election but that will depend on the quality of the opposition and, frankly, it is not good enough at the moment. At least we have found that a couple of our sports stars are only human after all - Tiger Woods is as weak as the next man, Gareth 'Alfie' Thomas, ex-Lion Captain (for one test) has proven gay people can be amongst the best in the most macho of sports.

I hope for one big thing. I hope that the next Government will not have a 167 seat majority on just 34% of the vote. The impregnability of this last Government has been the massive drag on progress and it has been a period of missed opportunities. I hope that does not happen again.

Friday, 18 December 2009

Hollow Victory

On the face of it, BA bloodied the nose of Unite union yesterday in the court ruling on the validity of the staff ballot to strike, making the planned 12 day stoppage over Christmas illegal.

While that may save Christmas for many BA passengers who had booked up with the airline, it is a hollow victory for the management. The staff had voted 9 to 1, that's 92%, in favour of strike action. BA's staff is overwhelmingly dissatisfied with its management to the extent it has taken the unusual step to strike. The warning bells are there that BA's tactic may seem like a victory in a battle but the war-proper has only now begun.

The union has quickly struck back to say they will re-ballot and put the case once again, properly, to the staff and now BA has the longer term uncertainty of when the real strike will begin. For BA passengers, there is now a hiatus and uncertainty - who would bother booking up new flights with BA when they don't know when the strike will be?

In fact, an argument could have been that at least management knew when the strike would be and they so could act to contain the damage - indeed, it could have worked the emotional blackmail of stranded passengers and disrupted Christmas's for many people to its advantage. But no, it just had to take a swipe at the union. In doing, so they have once again bashed the face of the staff who are so incensed at the company's actions that they were willing to kill Christmas for many customers.

BA don't get it - the staff are furious and want a compromise. BA just seems hell bent on killing its own business. As Robert Peston points out on his blog today, there are many serious issues which BA faces, not least that the hole in its pension fund is now valued higher than the worth of the company - and so it focuses on disenchanting its staff and compromising its revenue stream. They could not be in a worse place as they attempt to buy and integrate another failed airline, Iberian.

I have said it before and will bore you with it again - this is a management in no-man's land. It is killing its own business and seems to think that is a good thing. Change at the top is very urgently needed instead of the dreamer who runs it now.

Wednesday, 16 December 2009

The Man Who Hijacked Christmas

Call me a cynic. Simon Cowell has, as I am one of those who is just delighted that the Rock Band 'Rage Against The Machine' is challenging the single by the X Factor winner, Joe McThingie, for the No. 1 slot at Christmas.

I admit I know naff all about this band and their single, 'Killing In The Name', is about as Christmassy as 'God Save The Queen' by the Sex Pistols but this is one in the eye against the 'Formula' that makes Cowell and his backers millions each year. To boot, young Joe's voice is one I have heard many times before but cannot put names to it and the single, 'The Climb' is sugary claptrap, hastily put together to target the sales cycles that will get it into the charts for Christmas. If that is the standard of British music this year, then we have not progressed much. On the album side, Susan Boyle is dominating with historic high sales on - at least she has a profoundly different voice and helps light up old songs. McThingie, meanwhile, is all formula even though his voice is very good he brings little new life to existing songs as Will Young embarrassingly did not either.

The 'Formula' is cynically designed by Cowell & Co. The X Factor show serves up on a plate an audience participation melee which is carefully designed to build up to Christmas so that he delivers a package of around 30m viewers to his advertisers ensuring he gets top dollar on rates while a guarantee of a No. 1 single for the winner, regardless of what tripe they sing - it really does not matter as a big proportion of the audience who voted for the winner will buy the single even if they sang 'Bah, Bah Black Sheep' - frankly.

And that's how Simon Cowell has hijacked Christmas.

But two can play at that game. Cowell spends a good deal of his vast profit to ensure that the 'Formula' delivers the hit single at the right time via the prodigious viewing figures of the show. What is new is that the internet has the ability, through social networking, to take the germ of an idea of an individual and spread virally - for free - across the globe and get people to do things. The 'Formula' would not work if it cannot guarantee the Christmas No. 1 and Cowell will be a few pence poorer as a result.

But there is more than that at stake. Britain has always been the seeding ground of cutting edge music from Punk Rock to Glam Rock to Northern Soul - we have a history of innovation in music that comes from the grass roots. This whole Christmas affair is one strike back for the people who still fight to get on the bill of the local pub or club, who take their demo tapes around by hand to studios, who busk at Underground stations in the hope of being discovered. Talent endures and karaoke is just rehashing old songs with a slight difference and while that has a place, surely it is not at the top of the charts at Christmas.

While I am on the subject, I saw the dreadful video and song by Cheryl Cole the other day. She is beautiful, have no doubt, but dressed in stupid clothes and made up to look like some dominatrix took away all the good things about her. It's like the hair advert she does - all is fine until she opens her mouth and even some of that is dubbed. Talent does rise to the top - I am not that much of a cynic, but surely when we have grown bored with the 'Formula', as inevitably we will, the likes of Ms. Cole, as gorgeous as she is, will outlive their purpose.

I actually think it is Simon Cowell who has cynically used his 'Formula' to manipulate Christmas to fuel his personal wealth and excite the likes of Sir Philip Green to back the worldwide advance of the X Factor to make him even richer. Good luck to the guy - each to his own and he works hard for his success.

But let's make Christmas ours again. If Rage Against The Machine achieves that, then I am all for cynicism.

Tuesday, 15 December 2009

All Mouth And No Trousers

Cast your minds back to January this year and we got lots of big talk from the aptly named Department of Business of how it had introduced a scheme to support the car industry pledging up to £2.3bn in cash for loans.

This week we have heard that despite the bravado and big talk, not a single penny of that money has been given to the car industry. There have been plenty of meetings and negotiation, with Jaguar trying to get its hands on around £300m at one stage but for one reason or another, no firm has received any benefit for a scheme that was largely advertised with the sole intention of grabbing the headlines and making it look as though ministers were actually doing something about the potential collapse of an entire business sector on which around 800,000 jobs depended.

The grandly called Automotive Assistance Program (AAP) offered minimum loans of £5m to ailing car firms while the Enterprise Guarantee Scheme (EGS) offered loans of up to £1m - clearly any component or distribution firm in the car industry that wanted a loan anywhere between £1m and £5m was scuppered from the start. But then came the conditions. Far from taking on risky loans as the scheme was intended, with £400m of potential toxic debt write off written into the scheme form the start, firms who applied for the scheme found the rules too inflexible.

The Government, meanwhile, claim that there are 10 firms in negotiation on the scheme needing as much as £2bn of loans or guarantees. It seems that during the period of inertia from the beginning of the year, the scrappage scheme, successfully cloned from the continent, has filled a gap which has helped rescue rapidly falling car sales by offering incentives directly to customers to promote buying new cars - a simple and sensible proposition, easily aimed at the right point. It seems that simple, well directed applications of money get immediate and exciting results whereas complex, airy ideas which are difficult to implement but far more grandiose sounding and headline grabbing get no results whatsoever.

If only the Government had looked at its history in education and health it would have realised that smaller packets of focused money deliver greater results than shed loads poured down a hole with no real objectives and spurious measurements of results.

The Automotive Assistance Scheme has been an object lesson in how to waste time and money and get zero results but good headlines. It also illustrates that spin gets the desired results as everyone will see car sales recovering and believe it was the AAP that helped. Instead it was a continental idea that had already brought spectacular results in France and Germany - both of whose economies were out of recession at the end of the Summer.

IT seems that inaction speaks louder than words.
Another fine fiasco has been the trade credit top up scheme, designed to help small companies where their credit insurance has been lowered or withdrawn. The Department of Business, once again, offered £5bn in another headline grabbing initiative which was said to help companies maintain trade with one another. It is a testament to the fortitude and invention of treasury departments that just 72 UK businesses have benefited from the scheme utilising just £18m of the £5bn funds (less than 4% of the total).
Now Lord Mandelson has said that he will withdraw the scheme as it was no longer required, which has sparked uproar among small to medium sized business owners. The issue is that during the recession, businesses have focused on cutting their cloth and recognising more profitable business opportunities where credit is easier to cover. Now that we are entering the recovery phase, businesses will be gearing up to get a little more creative and risk-taking as markets pick up speed.
Once again, companies have felt that the scheme was too inflexible, restrictive and prohibitively costly to use. However, rather like the AAP and the EGS, great sounding, ostentatious schemes have delivered nothing to British business and it is little wonder that when so much was given so cheaply to banks and so little and expensively to business generally that the recession has lasted far longer in the UK than anywhere else. Grand ideas with little substance packaged with large business in mind always.
Too much money given to too few too cheaply, and too little to many too expensively equalling a long recession. It's a lesson in mathematics and economics that I hope Mandelson remembers in future.

Working Nine To One

Willie Walsh, CEO of BA, is a perennial target of mine but, in fairness, he makes that easy.

I have described BA as a strategically lost company before and there has never been a worse moment for what was once the 'World's Favourite Airline'. It is being squeezed by low budget airlines at one end who consistently out perform expectations in terms of profit and by higher service airlines at the other end who focus on their niche market and make enough to survive. BA's two major 'strategic' moves in the last year have been to make a series of reactionary, 'knee jerk' slashes of its costs, with no real impact or direction, and then make arguably its biggest blunder, to buy another airline in the same strategic 'no man's land', Iberian.

In all of this, the backbone of the company has stuck with Walsh until yesterday when the staff who man the airlines voted nine to one in favour of a strike action, to leave the course of action in the hands of the union, Unite. Walsh seemed to suicidally want to fight his staff, having asked them to make sacrifice after sacrifice to the point when they finally made their stand over the 'dumbing down' of their roles. The company now faces a 12 day period of strike action over one of the busiest travel times of the year - Christmas. It could not have been a worse result for BA - it could not have been a more stupid move by management.

The recent BA history is a litany of business cock ups. Terminal 5's opening was about as inspiring as it got as a superb terminal was project managed in a schoolboy fashion, stress testing the unprepared systems with hordes of real passengers. Then we had the series of staff cost cuts that played with the fantastic loyalty of the staff only to shaft them by trashing their worth in the latest move. In between were two attempts to buy a dying airline in Spain, the first ending in farce as BA's market worth fell below that of their target at the crucial moment, and the launch of a business class only airline out of the City Airport with a capacity of just 32 seats which pandered to the whims of rich bankers when two similar services to the US had failed less than a year earlier.

The message in that service alone could not have been worse to staff, the shareholders and the public - BA was prepared to service rich bankers ahead of paying its staff with a service already proven to be unprofitable by two other companies.

I don't know what the shareholders think of Walsh as they seem to support him grimly, but we now know what the stakeholders think. The once highly vaunted air crews of the once great airline have voted categorically to fight him - and you know instinctively that he has lost his best weapon to survive because he has undervalued and disrespected it.

It's not as if you could not see this coming. It has been a quick process of losing the confidence of the staff and laying a scene for the battle. Walsh calls the action of the union 'cynical' but that's what you get when you lose the support of your staff. From a union's point of view there is no point striking when the airline does not fly - their tactics are generally to hit you were it hurts most as it quickly sparks negotiation, at a battlefield very much with the terrain in their favour. There are no surprises that this is exactly what has happened and it was about as obvious as the cock up at Terminal 5 as it all unravelled.

BA seems to be managed by fools. The strike action is not at all helpful. We can see the Royal Mail happening all over again with the one tragic ingredient for Walsh - the customers do have a choice. There are other airlines to fly - in fact, to Walsh's edification, the skies and airports are full of them. His strategic plan has been a series of schoolboy responses to a business game exercise.

I would say that BA needs a rapid change at the top to survive.

Sunday, 13 December 2009

One Way Or Another

I am one of those people who did not believe we were invading Iraq for the right reasons. I felt at the time we were being lied to and this week's polished PR performance by Tony Blair in the lead up to his testimony at the Iraq Inquiry only made my beliefs more firm.

For a man so devote and steeped in faith, it's disgusting that his convictions were so tainted. There is no doubt that Saddam Hussein was an evil man but the only danger he posed was to his own people - he was an international spent force. That alone is not a reason for regime change and it was a far cry from the botched and flawed gimmickry of concocting a reason when we did invade. In his own mind, Blair is blameless - he killed a worse man than he. But in the minds of the friends and relatives of the soldiers who died during the whole fiasco, he is little better than the evil dictator he sent them to fight.

This is the man who is a Middle East Peace Envoy, who wanted to be the inaugural EU President, who would want a Nobel Peace Prize, who wants a place in his history. For me, the only place for him in my memory is as a lying, egotistical sham of a man who did no good for this country. To my mind, along with George W Bush, he should be tried for War Crimes as the war they started in Iraq was illegal and contrary to the wishes of the UN. Since his time as PM, he has busied himself making money - he could not get away from the squalid world of the sleazy politics he was involved in fast enough, or the puerile relationship with Gordon Brown and then distance him from the mess he created that we all live in. He spent time, expertly creating the rewritten history of the 'Blair Years' to convince us of a new story to bathe himself in glory even though we had witnessed the same history at first hand. Largely, people swallowed it and a new generation of 'Blair Apologists' rose - who cannot wait for his autobiography which is probably being rewritten as we speak so that he can give us an updated version of his lies.

I never saw the man as the shining beacon of a new world or glossy New Labour - I saw him and Mandelson for the slimy creeps they are. Lying, shady and, ultimately, guilty of crimes against humanity.

His is a Faith I want no part of.

Friday, 11 December 2009

Bingo or Afghanistan or Education or The NHS? Bingo, Please.

In a fairly odd Pre-Budget Report (PBR), it did not get more bizarre than the cut in tax on Bingo.

What was really odd about it was that it was so specific and announced with such gravity that it seemed every citizen in Britain would derive some benefit - hence its headline billing in the PBR. There were no free prescriptions for everyone, no free hospital parking, no extra help for working mums, no lowering of the dental fees on the NHS or boosting the availability of dentists to people. No new kit for the army, no new armoured vehicles, no new bullets for the TAs, no new police on the beat - but there was a boost for Bingo.

It is hard to believe that we are actually in financial dire straits, with a record post war budget deficit which is legally pledged in the Fiscal Responsibility Bill, farcically passed in the Queen's Speech, to halve by 2014. Here we are handing out money for people to play Bingo.

If a Martian landed on earth today and looked at the priorities of this Government they might think it odd, but if you are an earthling you would think it bizarre to the point of absurdity.
It's as if as the Titanic sank, people debated whether the Foie Gras was game enough.

Maybe I'm the daft one here - perhaps my wife and I, our immediate family and entire entourage of friends are the odd ones out in that not one single one of us has ever stepped into a bingo hall let alone played it. Maybe we are the out of date ones that don't see that the crucial mood and well being of bingo players is vital to the financial recovery, health and education of this nation. Maybe the Government knows something that I do not - maybe all bingo players are in fact mathematical maestros who underpin the design of our health system or are intelligence officers who are secretly guarding us against the growth of terrorism from within. Perhaps bingo players are capable of launching Weapons of Mass Destruction within 45 minutes and therefore this is a move to appease them.

There has to be some reason. Or is it just that John Prescott's wife plays bingo twice a week and he still has Brown by the short and curlies? Or was it a misprint in the report that Darling read out and should have said, 'Drop income tax for everyone and BINGO we win the election.'?

I haven't run the figures yet but of the £31 bn boost to spending this PBR represented I am not sure what decreasing the tax on bingo actually contributed to the bill but I am sure there must have been a corresponding multiple in benefit for the nation carefully calculated. For instance, it must outweigh the cost of one new heavily armoured vehicle sent to Afghanistan or another helicopter, or a better bullet proof vest, or some more food or even just a poster for the barracks wall that says, 'You may not think it but you boys dying in Helmand are worth more to us than people who play bingo.'

You could not make this crap up, frankly, and I apologise for my crudeness but it is the only word that describes it adequately. In the deep mire of financial mess and the blood of Helmand province, the best thought leadership of this nation came up with a 2% decrease in tax on Bingo and announced it to the country as if it was crucial to our global recovery plans.

Even Brown's cartoon character hero, Superman would have a laugh. This is a pointless Government doing pointless things at a time of crisis - Jim Callaghan and his 'Crisis? What crisis?' Government would be so proud of New Labour.

Thursday, 10 December 2009

Finding Neverland

It strikes me that the Pre-Budget Report amounted to nothing.

Largely, we were told that the borrowing will be higher than the Government expected this year - which we expected as they keep getting that wrong. Taxes would rise a little and there were some increases in benefits. A few tinklings here and there and that was it, barring the pathetic headline grabber about taxing bank bonuses.

The Green stuff needs to be applauded - let's hope it translates into real initiatives for people, homes and cars. But that really was it.

The detailed, departmental spending review has been postponed until after the election - VAT was confirmed to rise to the old level and there was an increase in the state pension, all expected.

In the face of the worst financial position since World War II, we seem to be doing nothing. Neither stimulating growth or cutting costs - it's as if it is business as usual and nothing untoward has happened. Am I the only one who things we are in crisis?

I suppose the pattern is set - there will be a few grandstanding taxes on the rich which will raise little tax in the great scheme of things while there will be death by a thousand small incremental tax increases for the rest of us. This follows the pattern of this Government - we already are the most taxed British populations in history, so a few more pennies added here and there will only be mere rabbit punches on an already numb body.

Vince Cable called this a 'Missed opportunity' - that about sums up the last 12 years really. To my mind, it's a lack of decisive action in the face of the biggest financial disaster not caused by a war in the country's modern history.

Wednesday, 9 December 2009

Boilers Galore

Boiler scrappage scheme announced - no mother-in-law jokes, if you please. This is a politically correct blog.

I had to read the detail again and then realised that Gordon and his brother must have had a boiler breakdown in the last year at their flat and so need to have the old one replaced. Hey presto, we get a super new scrappage scheme that knocks £400 off the cost of a new boiler. Rush out and place your orders, folks.

I guess it will mean plenty more imports as with the cars, but as a household with a thundering great of hulk from Potterton that pumps out plenty of poisonous smelling vapour, I can wholeheartedly applaud this cosmetically green initiative. My garden isn't quite large enough for a wind turbine and we are in a Conservation Area and we so can't put up solar panels even if we wanted, but a new boiler will come in handy.

The last quote I had was close on £2,000 fully fitted - a pound bet says the next quote will be £2,400 for the same unit. Ah, cynics - unite!

Purge The Soul

He's only gone and done it.

Alistair Darling has bared his teeth and swiped with his mighty paws at the City bankers to assuage the public's anger and try to win some votes. In doing so, he claimed it was not about the money but was a deterrent to stop banks paying excessive bonuses.

That's certainly going to work, right? Certainly, our souls are purged - not only can we feel satisfied that bankers have suffered for their follies, but we now see that the Government has distanced itself so far from the greedy City spivs that we can no longer believe that ministers had any culpability for our financial mess as surely they would not have punished them if they had endorsed what they were doing? Believe that and you believe I am Tiger Woods - let's not go there.

So the banks will have to pay 50% of any individual bonus over £25,000 as a levy - not the individual, and there are anti-avoidance measures already in place. Indeed, there must be as Mr. Darling has told us there are.

Curiously, among all the £billions contained in bonus pools, it is alleged the tax will only raise £550m which can go toward unemployment. Just as well, because in the great scheme of things £550m is hardly going to make a dent in the damage the bankers caused. The chances that it will deter them from doing the same thing again are about the same as for me surviving 5 rounds with Frank Bruno.

This is headline grabbing tosh. Bankers will be laughing all the way to new pay packets and bonuses.

Meanwhile, down here below Wonderland, National Insurance goes up 0.5% which probably raises more than the tax on bankers - shows that headline - grabbing taxes are just that.

Tuesday, 8 December 2009

The Vision Never Achieved

When the dust has settled long after our memories will be able to recall the two years of financial disaster we have experienced, the country will have literally blown all the money spent by New Labour since 1997.

This is the stark reality we face of the Government's proposed spending cuts, the biggest squeeze on the UK's finances since the 1970s. Instead of a bold Utopian vision of the future we have slumped back into Life on Mars. For all the boldness of the Blairite, New Labour vision and all the 'investment' that went into it over the last 12 years, we will reclaim back every penny under the New New Labour proposals on spending cuts and tax increases to get our finances back below £100bn a year's worth of borrowing by 2014.

During the new years, national debt will rise to over 80% of GDP, the IMF reckons it will be closer to 99%. No matter as it will be just quibbles over how much interest we will pay which is where the cuts and taxes will be aimed. At the peak of borrowing, the estimated interest bill will be £60bn or approximately half the annual budget for the NHS.

The election will this time around be all about which party can pee over a fence higher in terms of sending cuts instead of bold new futures. Instead of shiny new 'It can only get better' and 'Cool Britannia' adverts with catchy songs, it will be all Hovis type dour music and austere themes.

Welcome to Britain under New New Labour - it has been a perfect exercise in how to blow a load of money on nothing and then reclaim every penny back so that we stepped exactly 5 paces forward and the same back.

Nice one. That story should win a few votes and if I hear once more 'It was Tory free market economics' or it was 'sub-prime in America' that caused it all, I think I will throw a brick through the TV. I have had my intelligence insulted far too often by these people - don't let the same happen to you.

Grim Reading

If you want to really make yourself angry ready for a showdown with the boss or to get in the mood for a hard game of rugby, please read the attached description of the Asset Protection Scheme as pertaining to our wonderful investment, RBS.

On the face of it, there is nothing new in there. We have known for some time that as taxpayers we would be underwriting about £280bn of toxic assets accumulated by the bank. In many respects we were led to believe that the grimmest story was contained within ABN AMRO bank, the ill fated and disastrous acquisition made by RBS just prior to its demise. How glad we must be to find that in fact half of the stupid lending at RBS was plain old loans to the UK public, small businesses and property companies - what may be described as banking basics. There are quite a few derivatives in there too but not half as many as you might think.

Now, cast your mind back to when our glorious leader said boldly that it was sub-prime mortgages in the US that precipitated the Credit Crunch. How wrong he indeed was. His good friend, the man he knighted, Fred Goodwin was hard at getting the very basics of banking wrong. Fred 'The Shred' was well known for acquiring companies and then shredding costs and getting supposed 'value' for the assets, but he wasn't actually much good at banking per se, it appears. The risk assessments and controls at RBS must have been pitiful because most of the assets we are now underwriting, frankly, should not be there.

Where, oh where, was the FSA when all this was going on? Where, oh where, was the Government? The problems stemmed from the basic, basic rules of banking, and knowing that RBS was leveraging money on the wholesale money markets to finance his business big time, could we not see that this was a company doomed to fail? Yet even up to the wire, the Government and regulator reckoned RBS was a company with enough capital to survive.

It is a story of incompetence and hubris that runs through the entire credit crunch story. We only needed sub-prime to expose the rottenness underneath - it was merely the bit that was showing at the time. RBS was doing its own 'sub-prime' right here under our noses - the US had very little to do with it as it may as well have started right here.

I read the grim details of what I am insuring this morning and while I got very angry with RBS, I was more angry with the fact that people in senior positions did not know what was going on - like at the FSA and Government. It really reflects how little our most senior and supposedly intelligent people know about how the Credit Crunch actually came about and therefore casts more than my major doubt on the measures they have taken to get us out of it.

To be precise about that - Alistair Darling is now bickering about introducing a windfall tax on bonuses and excess profits at banks. However, the problems that were created were right at the very heart of the banks - the basics. That is where the real flaws exist and the whole ability to trade poorly assessed debt is where the money is made. Any debt was good as it could be traded many, many times for vast profits and no one ever cared about the original debt itself or the assets it financed or the ability of the person or company to service it. It did not matter - the money was in the trading of the debt, not the debt itself. The money to buy more debt was cheap and plentiful and no need to get deposits to pay for it - the world was perfect and still is. This is a basic but subtle difference in semantics but it's where the whole problem originated.

The crisis was about what banks do, not about the money they and their employees make. Taxing them may help purge the soul and win votes, however impractical it will be to implement if at all, but it will not stop it all happening again.