Sunday 18 January 2009

Sunday news comments

1. Saving the (banking) world. Again.
As always, the news is full of another set of initiatives to help the banks lend. And, as always, the BBC's Robert Peston seems to be fully briefed by the Treasury in advance about what is going to happen. This must be news management: it obviously can't be a leak otherwise the Met would have arrested him for endangering the security of the country.

I don't like to comment on anything without seeing the details but it does look as though this will be yet another largely ineffective but complex initiative. It does not seem to tackle the main problem - making the banking system free of doubt. This can only happen if the bad assets are removed, and in a way which is not up to the banks to fudge. This might wipe out bank's existing capital - which would punish shareholders rather than taxpayers - but what remains will be good enough to enable new capital to be raised and would leave a banking system invetors can be confident in. Why hasn't it already happened? I would guess a combination of bank lobbying and Gordon Brown not wanting to admit that his Autumn exercise was a waste of time.

One part of the initiative, reducing the cost of the capital already injected will be helpful - but only by making what had previously been done effective. As always, too little too late.

2. Ken Clark.
Its very tedious to read about "senior conservative activists" objecting to Ken Clark's return. He may be lazy - Tebbit's view - but he's also credible, smart, a proven effective chancellor who bequeathed a good economy to Brown in 1997 and most of all someone who can relate to people. Who cares if he wants to join the Euro or sign up to a European constitution? Most people don't want to and the Tories won't follow that approach.

It can't be right to lock out good people simply because they occasionally say something embarassing or have different views.

Thursday 15 January 2009

The time for action is NOW! (initiative no 245)

Clearly we are in an economic mess. It’s not immediately relevant as to whose fault it is, and of course there are many causes: it’s not just “America” and the occupants of No 10 Downing St are not innocent. But the focus should be on helping the situation.

I can’t understand why so many presumably smart people in the Government, the Treasury and the Bank of England are doing so little (although talking so much). I talked about the irrelevant budget a couple of months ago. And until today nothing has happened since. Although there have been plenty of commitments, presentations and initiatives.

Lots of things are wrong. But the really critical point is that the banks are unable to lend money. Not because they don’t want to – it’s how they make money, it’s how they can rebuild their capital. It’s because they haven’t got enough money to lend. Yes, the Government has put money into some banks and nationalised a couple of others. But (understandably) it wants that money back and it’s charging a lot for it. So it’s not really any help. In addition, it was designed to cope with expected losses on the existing assets banks had, not to support new lending. So it’s really misleading for Ministers to express anger that banks aren’t lending having been given public money. They knew from the beginning that it wouldn’t help. And I’m a bit surprised the LibDems have started to say the same thing.

Last week’s reduction in interest rates by 1/2% was just silly. After the major reductions so far the impact on business will be minimal, as it will be for households because of the cap on rates reductions. But further reductions will harm both savers and the rebuilding of bank capital, both critical for the long term success of the country. The major problem is, as noted above, the supply of loans, not the price. The Bank and the Government seem blind to this. (They are not alone: a coherent view opposed to mine was set out by Kaletsky in the Times: I think he misses the point that savers are prudent: if you fine them or even just reduce rates to nil, they won’t rush out to spend all they have. In fact they will probably save more because the economy must be so bad).

How do you increase the supply of loans? I have written before on the need to cleanse the banking system by setting up a bad bank to absorb the rubbish assets. And at last people seem to be talking about it.

But in the short term, providing a series of loan guarantees would probably help the most. This was suggested by the Tories ages ago....and at last the Government has announced a plan for something similar. But to me it’s another misguided effort, too little too late. It’s focused on small businesses so it won’t help small businesses with big customers or suppliers. It’s bureaucratic, by demanding too much information and process, obviously having been developed by people without business experience. My guess is it won’t work well.

It’s not helped by the focus on presentation. Tuesday evening’s news and comment was all about the plans – as were early Wednesday morning’s, because of leaks and briefings to favoured journalists. But the details weren’t announced until Wednesday morning. So all the commentators could do was talk about what the Government had wanted leaked. And now the details are out, its old news. Especially as by co-incidence the decision on Heathrow’s third runway was announced this morning. So the inadequacies of the guarantee scheme aren’t properly explored. Just why do the media fall for this? Why don’t they wait to see the real story?

The Do-Nothing Party

The current Labour jibe against the Tories.

And I must admit I’ve been worried that they have not been getting to grips with the economic situation.

But last week I went to hear William Hague speak to a group of people in Tynemouth (some party activists and many with opposing views) but all connected in some way with the economy and/or supporting people. The purpose was to present (at the same time as six other shadow ministers around the country) the practical initiatives the party wanted implemented, and to establish from those present other ideas to feed back. The weather was gorgeous and the view from the conference room over the Priory was fantastic. But I still listened.

He didn’t raise my obsession, a bad bank, but there were a lot of practical ideas. Some:
- Raise pensioners personal allowance
- Stop house repossession for non-mortgage debt
- Cut National Insurance to cut employment costs
- Create tax break for new jobs (since copied)
- Create a loan guarantee scheme (part copied)

The guy sitting next to me, employed in the third sector, said he was not a natural conservative but he was impressed a) at the practicability of some of the ideas and b) with the desire to consult.

I came away encouraged that the party is starting to come out with coherent and practical ideas to sort out the economy: it doesn’t really matter if they are picked up by the Government because implementing them will improve matters.

Grown up politics

I have no liking for Baroness Vadera, Brown’s sidekick promoted to business minister, having seen earlier in my working life her lack of ability. But she made a slip in an interview on TV by attempting to answer a question as she thought rather than by blandly batting it away. For that she was roundly criticised by the Opposition as being uncaring, out of touch etc.

This sort of criticism is childish. If we want politicians to be more than party hacks speaking a cloned language then people have to be allowed to speak their minds without being criticised for it. Focus criticism on actions and policies, not on “misspeaking”.

Wednesday 14 January 2009

Hello Again

I can’t quite believe it’s nearly two months since I posted something here. What’s my excuse? I’ve been busy; I’ve been away; I’ve had Christmas. But all that applies to most people who blog and they’ve managed to keep up to date. Nothing to write about, perhaps? Not really, as this is meant to be a mostly political blog and there’ve been some pretty major political and economic events. I suppose it’s a question of priorities. So here’s a quick update of random events, before another post about the economic situation:

- I went to Nice. It was Nice. (Although unfortunately I had flu and it rained). I stayed with some friends who have escaped to the sun after spending years in Frankfurt. They seem to have settled in well but their dog hasn’t. It seems most unsettled, obviously a good German dog wondering what on earth it is doing in a strange country with different language and customs. But any sign of recession doesn’t seem to have hit that part of the world yet: it’s just so comfortable. When we landed after the flight back, the expensive looking 40ish lady next to me was spotted by the older lady in the row in front. “Hello! ..... Where are you spending Christmas?” “Aspen”. Well, of course.

- I’ve booked my skiing holiday. I’m travelling with – they fly directly to an airport close to the resort. I hadn’t used them before, I was impressed with the return flight cost of £11. But of course after taxes, baggage charges etc the total was over £120. Why do they bother? Why not just say what it will be the beginning? The total is almost as much as my business class BA flight to Nice. And I resent the cost a lot more.

- I’ve got an i-phone. Readers may remember that I’m fond of gadgets although incapable of understanding them. But this is a fantastic gadget, probably the best and easiest bit of technology I’ve used. The best part? A picture of a zippo cigarette lighter I’ve downloaded. If you flick the phone, the lighter opens. If you touch the flint, it lights – and the flame moves about if you move the phone. What more do you need from a phone? (Mobile phone reception is so bad here the phone bit is actually a bit unnecessary).

- I went to Scotland for Christmas, back for New Year. I hate New Year (although I like the Northumbrian expression Old Year’s Night rather than New Year’s Eve) and the feeling you should be assessing the past and cathartically looking towards the future. 2008 isn’t a year I want to look back on. Political failure; rotten weather; economic collapse; unsold houses; poor golf. I went to the neighbours’ outdoor party just before midnight which was good fun: drink, distant fireworks, cheesy music. I almost got out my “cigarette lighter” but decided that would be just too tacky.

- I’ve just been to the London Art Fair. Plenty of “I don’t know much about it, but I know what I like”. I hadn’t been for a couple of years. It all seemed more spacious – implying galleries taking more space – and a couple of friends who are dealers expressed pleasant surprise at how well they were doing. It was mostly the “accessible” (a word meaning you can recognise what it is) work which was selling, implying normal rather than fashionable buying. London was the crowded inefficient disorganised mess it always is, although I am sure Boris, having tidied his hairstyle, is also working on that.

Two topics in the London local paper have some national interest:
o The question of who paid for Peter Mandelson’s latest house (it doesn’t seem to have been Peter Mandelson) could run and run or just fade away – too soon to say.
o The furore over a third runway at Heathrow. Its hard to see why the Government wants to build this when Heathrow is so clearly not capable of handling current volume never mind more, and when efforts should be going into a new airport and high speed rail networks. As always, I suppose it’s so they can say they are doing something (not the same of course as actually doing something).

So that’s the last couple of months.

State Sponsored Terrorism

I find it depressing just how many commentators are giving unquestioning support to Israel’s attempted destruction of Gaza. Neither side deserves unquestioning support.

The sad thing is that Israel’s move seems driven by the short term political considerations of their elections and the need for the Kadima and Labour parties to demonstrate toughness rather than any sort of long term consideration of how to resolve the Palestinian situation. The current campaign is going to delay a solution, and increase global tension. The US is obviously the main funder and supporter of Israel: hopefully, even if he cannot publicly do so, the new President can quietly use his political capital to put pressure on Israel, and to work with Iran, to slowly improve matters.

Having said that: where should he prioritise his time and his political capital?
- Pakistan?
- Palestine?
- Somalia?
- Congo?
- Sudan?
- Zimbabwe?
- China?
- All the others I haven’t thought of?
- Or even domestic financial matters?

Not easy. Where’s Jack Bauer when you need him?

I would vote for the first and the last of that list, by the way.