Sunday, 30 November 2008

Jacqui Smith... Police independence is paramount (except when it isn't)

Apart from her obvious evasion over the issue of who knew what, something has been bothering about the Home Secretary's assertion in her interview with Andrew Marr this morning.

For days know, Ms Smith & Gordon Brown have spitting out the line that Police independence is paramount, as if the police were not under the control of the Home Office. Only if this is true (or if the Police are truly out of control) can Labour escape the charge that they have facilitated the arrest of a member of the opposition in a direct assault upon centuries of constitutional privilege.

Ms Smith was asked on the BBC's Andrew Marr programme if she would say sorry - but said it would be wrong for her to intervene in a police investigation. Had she intervened it would have been "Stalinist" as she believed in the principle of police being independent even when things get "tricky".

All very plausible. "Police independence" sounds like a good idea.

Until you consider that it was the same Jacqui Smith, Home Secretary - who prevented the SFO (who last time I checked were a part of the Police) from investigating corruption allegations in relation to Saudi Arabian arms contracts.

The head of an influential parliamentary arms committee today said he was "very concerned" at the government's refusal to cooperate with the US criminal investigation into allegations of corruption against BAE Systems.

More than two months after the US justice department formally requested assistance in its investigation of Britain's biggest arms company, the home secretary, Jacqui Smith, has failed to pass on the request to the Serious Fraud Office.

Ms Smith's go-ahead is required before the SFO can cooperate.

So there you have it - Police independence is paramount. Except when it isn't.

A tale of three parties

If recent days are anything to go by there are now three parties at Westminster. Brown’s Labour, Cameron’s Conservatives and – a new party of old principles – the Parliamentarians. Only the Parliamentarians seem sure of their ground.

The Conservatives stand by their man, while declaring for the Parliamentarians. Their righteous indignation, and justification of the leaks, suggest that they have examined their man and found his story solid – anything else would surely be suicidal. For Conservatives, the innocence of Damian Green is underlined and amplified by the breach of Parliamentary supremacy.

For Gordon Brown and Jacqui Smith - Parliamentary supremacy is theoretical – applying only in the unlikely and distant event of Damian Green’s innocence. It can, they say, be temporarily suspended for “Police operational reasons” in the same way that Alistair Darling disposed of Prudence at the PBR. To many this will be the most sinister utterance of the story so far, but to Gordon and his spin doctors, so long as the poison and innuendo are allowed to work their magic, February can’t come slowly enough.

The Parliamentarians – and I am among them – believe that regardless of what Green has or hasn’t done, it is the intrusion on supremacy which matters most. That is not to suggest that Green is immune, but that (if the facts merit it) he should be called by the House to answer for his conduct and – if guilty – impeached. It is axiomatic that an MP accused of misconduct in office should be indicted only by Parliament itself – because, whatever Jacqui Smith might say, as long as elected Politicians can be detained and hindered by her policemen in the course of their duties - we are by definition a Police State. To a Parliamentarian, all else pales beside this simple fact.

So what is to be done?

As I said on Thursday, Damian Green must examine his conscience, take close and stringent counsel, and decide whether there is any aspect of his behavior which could undermine the approach his party is taking. He owes to his party and to the Nation – If there is anything seriously prejudicial, then he must resign his position at once and defend himself, leaving others to stand up for Parliament.

And if his conscience is clear? - he must wait no longer. He should go, along with his supporters, and petition Parliament to avenge this constitutional wrong without further delay. Submitting himself, he should demand that all others are called – policeman, politician, or civil servant – to make a full account of themselves on pain of imprisonment for contempt.

Parliamentary supremacy is the rootstock upon which all our hard won freedoms are grafted. Time and again, since the civil war, the British people have sacrificed their lives first to enshrine it at home and then to promote and defend it abroad. On Wednesday when Black Rod seeks entry to the Commons during the state opening, we will commemorate it once more.

What transpires between now and then will decide whether this is an empty historical charade, or a vivid re-assertion of the Democracy we claim to support.

Saturday, 29 November 2008

Gordon Brown is distancing himself from democracy

Until the summer of 2007 the Home Office leaks and the resulting stories would have been the end of it - part of the rough and tumble of Westminster Politics - where debate and partisanship are so vigorous, vitriolic even, that they are moderated only by a shared belief in our freedoms and the sanctity of our Parliamentary Democracy.

So strong, so intrinsic to Britain is this Parliamentary Democracy that we do not even need to write down it's rules. It's rich (and sometimes gaudy) ceremonies remind us each year that ours is a unique freedom born of mutual respect and of tolerance. The People, since Magna Carta, have evolved a tradition which combines loyalty to their Sovereign nation with fiercely asserted freedoms - freedoms, note - not rights - upheld not through the executive of Government but by the House of Commons whose supremacy was established after the Glorious Revolution of 1688.

Make no mistake, our system is the envy of the world. It is this fragile and sacred contract, or a close copy of it, for which opposition politicians of all colours risk their lives when they challenge Dictators. It is hope for what we have here which trumps fear in the minds of those who leave their houses to vote in the polling stations of Africa. It is our Parliamentary Democracy and the freedoms it enshrines, not a bank rescue and a few sound-bites, which are our true and enduring claim to leadership in the eyes of the world.

On Thursday, the State police force entered Parliament in a forceful act of assault. They seized an MP, and by taking documents, curtailed the freedoms of the people who they are supposed to serve. Whether by reason of accident, bureaucracy gone mad, or politics a line has been crossed and the wound cannot be left to fester, no matter how politically damaging this might be for either side. Those responsible must be brought before the house immediately, and the supremacy of Parliament must be re-asserted.

That this happens, and happens immediately, is the responsibility of each and every MP. It is the debt they owe to those that elected them, and it is a matter above all politics. No party line, no press release, no fluffed enquiry or hidden compromise is sufficient answer. The spin doctors must be sent home for a while, and every individual MP must stop to consider what it really means to sit in that place. It is only by the supremacy of Parliament, that politicians of every side enjoy the freedom to debate, to spin, to disseminate, to rule and to riot on behalf of the people who put them there. If, in years to come, their grandsons and granddaughters are to sit in the same seats as the conscience of a future generation then it will be because of the courage and tenacity of those MP's who realise the significance of the events of the past couple of days.

I read in my Times this morning something which until these last months I would never have thought possible, the chilling announcement that the leaker is being held by the Home Office at a secret address, and that Gordon Brown has "distanced the Government from the subsequent arrest of Mr Green and the raids on his home, constituency and Commons offices, insisting that this was a police decision.".

He may be trying to distance himself from a debacle, but to the eyes of many it appears that he is distancing himself from Democracy.

Gordon Brown is an intelligent man with a keen grasp of Parliamentary history. He is also, for the moment, the Chief Executive of the State which has committed this outrage. But above all else he is an elected Member of Parliament. Why is he the only major Party leader not to condemn these events? If we are to believe that he prizes our freedom as much as we do, then he must stop playing politics, come out of his bunker and stand up for the free nation which he is supposed to represent.

Friday, 28 November 2008

Honouring Lenthalls Legacy - a challenge to all our Politicians

Nick Robinson has very decently recognised the anger and concern on all sides over the Damian Green story, a great deal of which had been expressed in the reaction to his own blog earlier today.

As others have done, he has called to mind the famous words of speaker Lenthall in 1642, who defended the Sanctity of the House in the face of the King (a precise analogue of the situation today which becomes chilling when you consider it). When challenged to surrender some MP's who had displeased the King the speaker answered

"May it please your Majesty, I have neither eyes to see nor tongue to speak in this place but as the House is pleased to direct me, whose servant I am here."

Lenthall uttered these words from his knees, simultaneously honoring his King and asserting his wider duty to his Peers and the people they represented.

In a country without a written constitution, his words and his story can never be repeated too often. From boom to bust, at peace or at war, Britain remains a beacon of democracy precisely because it is a fundamentally decent nation in which people show good humored forbearance of almost everything and every one - provided that nobody threatens their individual or collective freedom to do so. That is why Britons (of all races) are so often able to demonstrate the curious paradox of being both loyal and outspoken at the same time.

And that is why the Damian Green story is so shocking, and why the country and Parliament has a right and a duty to demand satisfaction in the matter.

If Nick Robinson and others are correct, that the outrage at these events goes beyond mere politics, then all of those involved have an important and immediate task which goes beyond their party or political loyalties and to the heart of "Britishness" - to borrow a phrase from Gordon Brown.

First, Damian Green himself must consider, as I am sure he has, whether there is any issue or detail in his conduct which - if it were made public - would result in trust in his office being diminished (whether or not such a detail would cause any prosecution to succeed is irrelevant). If there was - and I have no reason to think there is - then of course he must not prejudice himself by revealing it, but the decent thing to do would be to resign his office and conduct his defence in the proper place. In the fullness of time the Public would think all the better of him for it.

But if there is no such detail or issue, as everybody seems to suggest, then for all of those who cherish our democracy, whatever race, creed or political allegiance the time has come to make a stand just as speaker Lenthall did all those years ago. The matter must be brought to the front of the public conscience, in the press and in Parliament (by means of a motion if neccesary). The Police must be forced to disclose fully the decision making that led to this outrage upon the Nation, and the Civil Service and the Ministers they serve must do the same. This process must happen without delay and the disclosure that results must be immediate, comprehensive, and without spin or embellishment.

Above all, no excuse of process or priority should be tolerated. There is no greater priority, for our Government, for our Politicians, for our Police force, for our Journalists, for our bloggers and for our citizens than that the sanctity of our democracy - as expressed in the honour and customs of Parliament - be preserved for our children and grandchildren.

If it were not so, then what is it exactly that we are each, Labour or conservative, fighting for?

Ruth Turner, Damian Green and the Law which Mugabe would give his right arm for

Nick Robinson is so desperate to defuse the widespread public anger over the arrest of Damian Green that he is now making it up as he goes along. The question ought to be, why he is so keen to take this line?

Consider this, from his blog today:-

Green, like Turner, was arrested under suspicion of conspiracy. In other words, he has not been arrested simply for receiving leaked government documents, but under suspicion of conspiring to have them leaked.
And compare it with this, the original bbc news report of Turner's arrest:

She was questioned over honours allegations and suspicion of perverting the course of justice. She has issued a statement denying any wrongdoing.

Or the Scotland Yard version at the time:-

On January 19, a woman, known as D, was arrested at her home address in London by Metropolitan Police officers in connection with alleged offences under the Honours (Prevention of Abuses) Act 1925 and also on suspicion of perverting the course of justice.

Apart from the totally different grounds for arrest, there are virtually no parallels at all between the two cases. Firstly, Ruth Turner is not an elected MP, and could not possibly have been engaging in the normal actions of an opposition MP exposing Government errors in the public interest. Far from it, the accusation was that she was assisting in a cover-up of honours being sold for cash by the Labour Government. Specifically, she had written that Lord Levy (also not an MP) had asked her to lie for him (once again according to the bbc) in connection with the cash for honours affair.

Ruth Turner (innocent as she no doubt is) was not arrested for conspiracy to cause misconduct in public office, or for disseminating a document in the public interest. She was arrested because of a suspicion that she was part of an organised conspiracy to prevent the police investigating cash-for-honours, both the existence and cover up of which would be regarded by most right thinking people as criminal.

By contrast, the most interesting thing about the Damian Green allegation is the nature of the ancient common law offence. Misconduct in public office is a catch all. It is explicitly to be used only where no other offence is available

In other words the two things we have learned are (1) That Damian Green has not done anything which most of us would regard as illegal or unusual - quite the opposite and (2) That the offence of "Misconduct in Public Office" - if we didn't live in a democracy - would be a Dictator's dream.

Update: Nick Robinson appears to have taken heed of the amount of anger his comments generated.

Thursday, 27 November 2008

A truly extraordinary move

If Damian Green hasn't done anything more than receive documents for a reason, this is going to be interesting. Why is the alleged offence Misconduct in Public Office? That is a wide charge - but a very serious one with a massive burden of proof (for the state in this case).

These are the charging guidelines:

Like perverting the course of justice, misconduct in public office covers a wide range of conduct. It should always be remembered that it is a very serious, indictable only offence carrying a maximum sentence of life imprisonment. A charge of misconduct in public office should be reserved for cases of serious misconduct or deliberate failure to perform a duty which is likely to injure the public interest.

The only interesting thing about this charge is the trail of paperwork and communication leading back to the complaint.

Is that the sound of a Jackboot in the Mother of all Parliaments?

Tonight's story in Westminster, reported by Iain Dale and many others, is that Shadow Immigration minister Damian Green has been arrested (not charged) for conspiracy to commit misconduct in public office.

The initial signs are that Cameron is standing by him and citing the public interest, which is going to make for an interesting and - perhaps - decisive beginning to a battle between the Tories and Labour for the hearts of the electorate.

On the face of it there is little that an immigration shadow could do in terms of bringing information into the public domain which could not be in the public interest. By contrast - the actions of Robert Peston and his (presumably Labour) sources recently have done massive damage to our banks and, on the face of it, contravene the rules by which the rest of us operate in public markets. That's before we even think about the massive amount of spin and innuendo generated by this Government and only possible because of their access to privileged information.

There is a real possibility that this is a politically motivated action, and if so, it marks a sinister day indeed for British Politics.

Wednesday, 26 November 2008

Osborne's Monetarism on steroids is what the economy really needs

As I suggested last Thursday, if Gordon Brown and Labour really were on the side of the British economy (and the British People who must live or die by it) then they would be approaching things in a wholly different way. They wouldn't have moved to destroy British Banks deliberately in order to step in with their own "heroic" rescue package. They wouldn't have lied to the British People about the likely effects of the preferred equity scheme. They wouldn't - come to think about it - have made the scheme so punitive for political reasons that the only thing an honest banker could do is work to spit out the medicine as quickly as possible.

All this talk from Labour about the responsibilities of banks is so much baloney. Let's be perfectly clear about the duties of a board of directors at a bank - their duty is to ALL their shareholders EQUALLY - not to some fluffy concept of 2007 lending levels which barely touched the paper during the all night bullying sessions in which the Government injected their unwanted bailout money. This is not a matter of opinion - political or otherwise - it is a matter of Law and of fact. I am a shareholder of both Lloyds and HBOS and my interests (like the countless other shareholders) are best served by the rapid paydown of the punitive debt instruments, the abandonment of state influence, and a return to sensible profitable lending.

If I feel that Lloyds or HBOS are acting for political reasons (under threat or otherwise) instead of in my narrow, private interests as a shareholder then I will seek leave to sue them under Section 459 of the Companies Act as, no doubt, would many institutions and pension funds. The BBC and/or the Government have already broken the FSMA in leaking details of privileged meetings and they have no right, simply by dint of being a large shareholder, to damage my narrow economic interest for their own political reasons. The Boards of the banks know this and that is why you see little real progress in passing on lower rates or recklessly taking on high risk debt. Regrettably in this economy, managed so badly by Gordon Brown for the past eleven years, almost all debt is high risk debt.

Unless, that it, the debt can be backstopped or insured.

And it is the insurance of that bank debt which Cameron and Osborne have been - quietly and sensibly - proposing over the past few days and weeks. Lower interest rates help (traditional monetarism), but someone must provide the security and credit enhancement against which the banks can lend - whether that be in terms of factoring, sales ledger finance, leasing or plain working capital. Executed quickly, on a commercial basis, and combined with the proposals that Osborne has already made regarding employers NI and VAT holidays that would represent a real cashflow boost for Britain's struggling SME sector. Done properly it might provide the "credit firebreak" which Britain needs if confidence is to be rebuilt.

So why did Darling apparently not even hear that important proposal in today's debate? Why did he lie openly and say he had heard no suggestion from the party opposite? Because he has been told to stick to the party line that the conservatives are the "do nothing party". Like his master, he is more interested in the tiny chance of saving his own skin than the real opportunity of getting the economy moving again.

Gordon Brown is so desperate to appear the hero that he is prepared to ignore practical and useful suggestions - in a desperate attempt to make the opposition appear insensitive and disinterested. The fact that he is prepared to inflict unnecessary suffering on Britain's businesses, and destroy the Banks whose profits pay our pensioners each month shows just how calculating and callous this man is.

Beware the bite of a badger

Nobody watching the beginning of the emergency debate today in Parliament on the PBR could have failed to notice the look of abject horror and disgust on the face of the Chancellor as George Osborne got up to speak. He looked as though he strongly resented the defence he was being forced to give on behalf of his leader - who, after all, is directly and personally to blame for the situation the country finds itself in.

His speech - although faltering - appeared measured and reasonable. He remained generous in his attempts to give way to interventions. He appeared almost as disgusted as his listeners in delivering the carefully agreed lines about the signed copy of the secret tax increase and how - in reality - the Minister could not have signed it because he didn't know it existed.

The reason that Darling loses so conspicuously to Osborne is that Darling has a closer relationship to the truth than his boss - who is prepared to lie blatantly and loudly if he thinks it will get him out of trouble. When Darling lies it shows upon his face.

Which - together with the obvious argument between Brown and the Treasury last week - leads me to wonder whether just as Margaret Thatchers Parliamentary downfall was brought about by Geoffrey Howe - a man whose debating was famously compared to that of a "dead sheep", Brown's might end up being at the hands of a timid - but fundamentally decent - Old Badger.

UK CDS spreads and sovereign debt

Ambrose makes the point in the Telegraph this morning that CDS (Credit Default Swap) insurance spreads are rising to 100 bps or so on British Debt. He contends that this may be due to the large dollar debt positions held by UK banks and the implicit risk of the banks (and therefore the dollar debt) joining the National coffers if the current knashing and grinding of teeth from Downing street doesn't bear fruit.

I disagree with him on this point. There is a good case to make that the dollar has topped for the moment, and - specifically - during the period he refers to the pound has recovered a couple of percent. This makes the dollar debt positions smaller and consequently less of a risk.

Right now the short term / medium sterm gilt supply and demand position is far from clear (just as it is in the US). Various currency movements and the flight to safety are generating conflicting signals if you consider gilt prices alone. The rising CDS spread may yet be the 'purest' signal the market is sending us of the deteriation in Britain's credit following this weeks revelations.

Tuesday, 25 November 2008

Not much of a toaster..

In the third world African country where I used to live, it was the habit of politicians to mis-spend and divert funds during their time in office showing almost total contempt for the people who elected them. By and large, they reasoned, the voters were too stupid to realise what they were up to but - if nothing else - people enjoyed the carnival atmosphere of election day and could be relied upon to turn out and vote. So electioneering was simple - the Government politician for each constituency would simply make a small, direct, promise to each of the families in that area. Normally he would promise that, if elected, the Government would buy them a toaster (I'm serious).. if he had been particularly corrupt he might run to a rice cooker or some larger piece of practical kitchen equipment.

In return the people became disinterested in Politics - A Change of Government? "Why bother?", they said - "Same shit, different flies". At least their kitchens were well equipped (even if they often lacked the electricity to operate them).

Whether or not Darling's complicated tinkering yesterday amounts to a toaster or a rice cooker I am not sure. This much is clear - the bill we are going to pay ought to buy us a complete country kitchen and possibly the farmhouse to wrap it in.

From the staggering reaction to the debt figures yesterday, and the powerlessness of the Front bench to produce anything worth talking about in terms of a stimulus; one thing is clear. The vainglorious behaviour, the spin, the deceit and the smoke and mirrors were yesterday shown up once and for all in the arc light of a one trillion pound National debt.

We have reached a fork in the road and, while neither destination is clear, yesterday should have been enough to show most rational people who they do not want as their guide.

Monday, 24 November 2008

We may not have to wait for Darlings economic missile

The more idiotic of Britain's press are reporting a 'positive' reaction from the markets to today's PBR... almost as much nonsense as Darling's great one liner about "Britain entering the recession from a position of relative strength"..

Those attributing the rise in sterling and the FTSE to New Labour clearly didn't see what the markets did.. the weird spike in the 30 year T Bill on Thursday (a record), followed by the distant sound of the printing press cranking up as Obama appointed his treasury team and started talking up a little fiscal stimulus of his own.

Oil up, dollar down - Gold up, dollar being caned by the Swissie (about time too..). Cable up but sterling down against the Euro.. everything is falling into place nicely for a bout of inflation. My guess is that the dollar has rolled and it is money printing from here on in. It could be a fast drop as well, and I expect sterling to (relatively) drop with it.

And when that happens?

I wonder what a rapidly rising oil price will do to the carefully optimistic figures lined up by Darling today to justify his borrowing? How easy will it be for him to keep public sector wages under control when the imported goods his workers need are costing more already? How many business leaders are going to want to settle in overpriced, depressed Britain when the only reward they can expect is an ever increasing tax bill now that Labour's hard-left have been let out of the kennel?

Could all get rather ugly, rather quickly.

Sunday, 23 November 2008

The real story over the PBR

Some weird positioning and changes in the pre-spun versions of the emergency budget over the past couple of days; tension reported between Darling and Brown - first 1% then 2% then nonsense, nothing near that...

The real story here is not whats in the announcement tomorrow. The real story is what the Treasury were told, during the last days of last week, about the money markets and the chances of getting any of this debt away without pulling the pin on sterling. The real story is the 40 billion of City tax revenue which will never come back.

Brown might make a career of lying to the voters, but the money markets won't wear it.

Hence the assurance that Darling will tell us how he's paying for it; hence perhaps the suggested move to a temporary VAT cut (not much of a spending boost at that level, but more reassuring for the bond market); hence the fact that the VED postponement and the 10p rate payoff - which were hinted at all year as sops to the electorate - have now suddenly somehow become important Keynsian measures to boost the economy.

If all we get on Monday is what has been carefully trailed in the Sunday papers then there is no way on God's green earth that it will be sufficient to put a bottom in plunging consumer confidence. Remember, all economies are confidence tricks, they function only as long as everyone is prepared to believe in them - once that breaks it's every man for himself and short of monumental measures to boost spending (which Britain cannot afford thanks to Brown) almost any fiscal tinkering is too little too late.

Brown, having called for full speed ahead - has been told by First Officer Darling that the engines have no more power. Now he is going to re-arrange the deckchairs.

Still, we might get a sterling bounce and a market rally on the back of it..

Friday, 21 November 2008

Gordon the clown and his party balloon

No point in having an economy if you can't explain it to the eight year old who will one day have to pay for it all.

Once upon a time an old witch called Thatcher was given a balloon. She knew what it was, and - to the disgust and disagreement of almost everyone watching - stuck a piece of tape over the chosen spot before blithely inserting a sharpened finger nail and letting the balloon down slowly. The people watching didn't enjoy the balloon deflating, but they were glad later on when the hole could be fixed and the balloon used again. Perhaps she wasn't such a witch after all.

Some years later, along came a clown who thought he was a magician. Gordon told the children he was much cleverer than the old witch had been - and blew and blew and blew into the balloon, to the delight of all of those watching. "I've performed a magic trick" he shouted to the assembled children, "this balloon can never burst". And he blew some more.

And then, when the inevitable happened, and the balloon burst into a thousand shreds - he blew even harder into the mouthpiece. "No, really" he shouted at the frightened children. "Just watch this - if I blow some more the balloon will come back together". "Honest!".

Thursday, 20 November 2008

Is Peston admitting Gordon got it wrong?

Robert Peston's blog this morning carries an interesting revelation about the bank bailout.

Basically he says that - while Ministers wanted us to think that the bailout was about generating liquidity, it was actually a question of the Government stepping in to maintain solvency and save the banks from collapse.

the transfer to our banks of so much of our cash wasn't designed to kickstart lending by our banks - although it's unsurprising that many of you think that's what it was all about, because ministers created that impression

Which is interesting, because the Banks were solvent - technically at least, until the Government deliberately started a run on their shares (using Peston as their mouthpiece) and simultaneously changed the solvency rules. The result? The Government ended up owning a major slice of the banks, and taking a loss of billions with taxpayers money - just so it could be seen to be in control. This gave Gordon Brown the profile he needed to take credit in the public eye for all the actions taken by other countries to prop up their own banks.

And what are we told by Peston now? Shockingly that more taxpayers money is going to be needed to prop up the mortgage market (ie. a UK TARP). In other words the Government now needs to execute the very option that was on the table (in the US) at the time that Gordon and his meddling bunch of politicians decided to use our money to overreach themselves and attempt to set the international agenda.

Had Gordon been acting in the interests of the country, instead of his own - he could simply have done the following in September:

1. Put in place the absolute lending guarantee for UK banks which has basically always existed (the lender of last resort). This could have been formalised and a fee charged - thus following the US announcement and sorting out the LIBOR crisis.

2. Announced that from 1st January a new tier 1 ratio would apply, that banks should find the capital to meet it from their own shareholders and the market if possible, and that if not the Government would consider a preferred equity scheme, on a confidential arms length basis - like the US - if they could not. This would have ensured that it was the shareholders of the banks who took the losses, not the taxpayer (as has happened since 15th September). The taxpayer would then have bought into the banks at a competitive rate AFTER the bank shareholders had taken the implied losses of their previous bad investments (ie. the losses implied by the tier 1 alteration)

3. Announced a UK TARP immediately to deal directly with bad mortgages, small business loans, sales ledger finance, commercial paper etc. which might have helped in putting a "firebreak" in the domestic lending market and maintaining liquidity for homeowners and businesses. As it stands, this point was not addressed at all (except by some misrepresentations implying that the Government would somehow be able to force the banks to lend, which was never going to happen).

So there we have it, the difference between the actions of a disinterested Government (in the US) who could not be re-elected, and a power hungry Government desperate for a mandate no matter what it takes (in the UK).

Sterling: Osborne bounce begins to reverse

Sterling has turned downwards again having tested the $1.51 level following George Osborne's comments last weekend - which, for a while at least, put the markets on notice that Brown was not going to be able to go ahead with his inflationary plans completely unchallenged.

Regrettably the markets still seem to feel that Brown is gearing up the printing press - all the more so, perhaps, with the note this morning from FT alphaville who have spotted that Granite could well become the UK's very own version of Freddie and Fannie.

Wednesday, 19 November 2008

Deflation... we had better hope so

Dizzy has done some great work today producing a graph which shows just how wrong Gordon's debt forecasts have been each and every year. It turns out that the man was in cloud cuckoo land long before even City traders saw the crisis coming (which was about October 2006, by the way).

Which makes me worry even more when I hear him talking about deflation, and what he is going to do to avoid it.

Deflation on any substantial scale has been unknown since the 1930's. Of nine recessions in the US since 1950, none has been deflationary - and for good reasons.

Firstly, to enter a period of deflation willingly requires Government to accept acute Political pain today - almost certainly to the point of losing power, in return for economic wellbeing and a faster recovery later. Secondly, provided that countries act together (an option which was not available to Japan) it is eminently avoidable, and thirdly the "cure" feels pretty good for the electorate at least in the early stages.

This is Bernanke on the subject in 2002:

"I am confident that the Fed would take whatever means necessary to prevent significant deflation in the United States …"

"under a fiat money system, a government should always be able to generate increased nominal spending and inflation, even when the short-term nominal interest rate is at zero. Like gold, U.S. dollars have value only to the extent that they are strictly limited in supply. But the U.S. government has a technology, called a printing press , that allows it to produce as many U.S. dollars as it wishes at essentially no cost. "

You may conclude that the spending approach being taken by Gordon Brown (and notice how keen he is to ensure that others join him) is similar to the policy outlined by "Helicopter Ben"and being followed right now in the US.

The unpleasant side-effect is that when you devalue all the currencies in the world, inflation is the inevitable consequence as hard goods become the strong currency - and for the UK which starts the race at the back from a debt perspective, and with a negative balance of payments, the printing required is such that the resulting inflation could be really serious indeed.


Tuesday, 18 November 2008

A modest proposal

Since we've crossed the rubicon and declared that not all public spending is good spending.. perhaps we should consider a real, permanent change to the bloated bureaucracy of our country? We might even regain our freedom and self-respect at the same time.

As the BBC reports, the Government is under pressure over it's latest disastrous big brother computer system. When the system comes - it will be a disaster for the taxpayer. It will cost more, do less good and more damage than even the most cynical supporter thought possible. And it will be a further, massive step towards an Orwellian state (if you don't believe me, read 1984 again - I did and it was truly spine chilling).

Why does this happen? It happens because, whilst Government is no better at designing computer systems than the private sector, it is head over heels in love with the concept of creating them. Computer systems always appeal to Governments because they increase the amount of information at hand and to politicians, elected or otherwise, that represents job security.

Unlike the private sector, restrained by the profit motive, there is no limit to the chaotic lengths to which a public body can go armed with an enthusiastic management consultant and a few programmers. New Labours enthusiasm for IT projects has created the most bureaucratic civil service since the days of the Raj (and ironically a lot of employment for it's successors)

If we want to make a real difference to the bloated public services, why don’t we challenge the assumption that Government has an implicit right to store our personal information? It is our information after all – and for the public sector our information is a liability - costly to acquire, accident prone, and - for every moment they hold it - a new excuse to spend our money playing with it, more often than not creating more sinister powers which enslave the electorate who are supposed to be their paymasters.

My proposal is this – that from now on the presumption is that your information belongs to you – the public sector can ask for it (electronically) when they need it, but they must keep it only long enough to use it. On no account should they be allowed to share it with each other, no good can come of it. This presumption should be enshrined in law, and enforced by our independent judiciary.

In return, the people could (1) agree to accept ID cards which prove who they are and no more (surely the proper purpose after all) and (2) agree to provide the limited personal information required by the government for proper purposes, on request, without delay. Once they are done with it the Government must dispose of it. The request for data can be made electronically (ever heard of the semantic web?) with personal information held by the provider of the citizen’s choice, who won’t dare lose it.

With the mother of all recessions upon us wouldn't this be an excellent way to totally rethink the application of wasteful public funds - divert resources to the excellent UK IT industry, cut taxes for ever, and give us back the freedom and liberty for which Britain has been a beacon through the centuries?

An answer for Nick Robinson

In his BBC blog today (billed as a "Question for the Tories") Nick Robinson accuses the Tories of "getting themselves out of a political bind" by releasing themselves from Labour's spending plans and opening the door for cuts in the wasteful areas of public spending.

As he puts it:

The Tories are no longer committed to matching Labour's spending plans. In a speech this morning David Cameron says that his party will take another look at what government should be spending in what is likely to be general election year 2010-11. However, he doesn't and won't say what level of spending there should be.

This is designed to get them out of the political bind they've been in.

Leaving aside the fact that cutting wasteful public spending has always been a key plank of conservative policy - from Thatcher to Cameron and beyond - I would draw to Nick's attention the fact that, for all the increases the public services have enjoyed under Labour, it is still obvious that many are failing in what they do. I, and many others, will be thinking of the Panorama programme last night which revealed that between 60 and 80% of social workers time is spent doing paperwork - and in particular the anonymous social worker who said at the end "all the boxes were ticked, just like they wanted - but that child should not have had to die like that"

So my answer to Nick is really a question - The IMF has stated that a 2% improvement in GDP, applied in the right areas without delay, would make a real difference to the economic situation. When are you going to start asking Government ministers on your news programmes whether they really believe that there is no such thing as waste in their beloved state machine and whether a reduction in the bloated public services and the raft of ridiculous legislation we have seen under Labour wouldn't be a good way to start paying for it?


If you want to invoke patriotism, Mr Brown – speak plain English

Yesterday in Parliament Gordon Brown invoked the words of Margaret Thatcher in an attempt to silence criticism of his plan to save the world (mark II). Specifically, he suggested that by pointing out the drawbacks of his uncontrolled money printing the Tory front bench were acting “in the most unBritish way”.

I’ve got some news for Mr Brown – a man who yesterday managed not to answer a single question honestly or directly on the matter which most affects our nation.

If you want to invoke the patriotism of the British people, you had better start using plain English and using it quickly. Tractor statistics and euphemism – what Alistair Campbell called the Brown “rat at tat tat” - may have been OK when the economy was enjoying your artificial boom (and no one was listening anyway) but now that it is centre stage the audience see through it very quickly.

The British people understand the word tax, they understand the word waste and they understand the word debt – three things which you have made the central features of their economic lives over the past eleven years. They understand the word recession and they understand the word inflation, both of which you told them (dishonestly) you had abolished. And they understand that a plan to get out of debt by increasing borrowing is at best an unlikely solution to a common sense problem.

If you want to gain the respect of the people, you had better start talking plainly and quickly about the true level of debt that we are in (including all the PFI, pension liabilities, bank rescues and other opaque obligations which you have been trying to hide) – and, more importantly, tell us in plain English how you intend to pay for the temporary injection of Christmas tax cuts. Some words you may want to consider – future tax rises, spending cuts, and waste.

And do it quickly, because the blather and innuendo from your Government as reported in the Times this morning:-

He was clearly trying to reassure the markets that the PBR will contain proposals to get the economy back on course after the recession. He added that the need for a fiscal stimulus — “within a medium-term framework of fiscal sustainability” — was accepted across the world.

Employing an alternative euphemism, Lord Mandelson spoke of the need for a “medium-term adjustment” some years ahead. “I’ve already said that, if you take action now to expand borrowing, you know you’ll have to make structural adjustments later on

reminds us more of Stalin than Thatcher. If you don’t get your act together, Mr Brown – I have a feeling that others will.

Monday, 17 November 2008

A traders view of this sterling this morning

Many are flat sterling having closed short cable (USD/GBP) positions overnight. The dollar in general has been retracing this morning from a technically overbought postion (cf. CHF, gold, oil) There has been less short covering in the euro.

Traders are shorting sterling at 1.4925 and above as there doesn't seem to be much appetite for a retest of $1.50 - so far the pound has tried to get above $1.50 three times over the past few days without success.

If there is any political / macro reason behind the minor strength in cable this morning it is that Brown seems to be fudging the tax cut issue a little after failing to get it to the centre of the G20 agenda - if Osborne's comments help in any way to make the public wary and Brown more careful with his unfunded cuts then they will be sterling positive absent any material policy announcement from Brown.

Update: we have now successfully - although gently - taken out $1.50 and the pound is trading around 1.5030, so those who affect such a concern about the cable rate should be thanking Osborne and the G19 for putting Brown back where he belongs (for the time being at least). Let's see if we hold the 5 day moving average and end the session above $1.50

Telegraph directly misquotes IMF

Predictably enough, Downing St. and the media have begun on the "IMF endorsed tax cuts" line. The Telegraph is either running out of space (ink has to be imported, I supppose) or it can't be bothered to read the IMF comments and report them accurately and fully. Or perhaps Mandy is at work. So, for the benefit of those who can read - here we go again:

QUESTIONER: What countries do you think should have it?

MR. STRAUSS-KAHN: As I've just told you, I'm not going to make an announcement in place of the countries, but I want to answer your question candidly. Everywhere where it's possible. Everywhere were you have some room concerning debt sustainability. Everywhere where inflation is low enough not to risk having some kind of return of inflation, this effort has to be made.

And how was this reported by the Telegraph? - The newspaper also quotes Strauss Kahn, but somehow the message comes across differently:

"It's time for co-ordination. I welcome the emphasis on fiscal stimulus, which I believe is now essential to restore global growth," he said after the summit. When asked which countries should implement the tax cuts, he added: "Everywhere".

Sunday, 16 November 2008

Osborne and the Emperor's New Clothes

I continue to notice the contrast between the international press, and the British media on the success or otherwise of the weekend's G20 summit. The international press, by and large, regard the summit as a typical summit - long on talk and short on actions. If they do mention Brown by name, it is to comment on how hard he tried to "fill the vacuum left by Obama" or to "take on a leadership role". Few think he got what he came for, and in general he comes over as a somewhat desperate figure.

The British press have deftly avoided the G20 - and taken Mandelson's bait that somehow Osborne is wrong in addressing the level of money being printed by Brown and the continuing and dangerous impact this could have on sterling. We'll have to wait and see on this, but my money is on Osborne - like Hans Christian Andersen's child in the crowd he is only shouting out what honest people can already see - that Gordon Brown's pride and stupidity have left Britain standing stark bollock naked. I don't remember the Emperor' tailors emerging as heroes.

In any case Brown's big talk before the summit and subsequent disappointment will have a much more direct bearing on sterling's next move than Osborne's observations. Regrettably there is no "convention" preventing power hungry liars who are keen to be re-elected (or just elected) attending international summits.

So the agenda now will turn to Brown's unfunded tax giveaway. Having failed to get more than 21 words out of 3500 at the G20 on this plan, he is now turning to the IMF for support - No doubt the papers this coming week will be full of the Brown giveaway "as endorsed by the IMF", so it might be useful to examine precisely what it was the IMF said on this subject.

In principal, they favour fiscal stimulus of 2% of GDP (30 billion in UK's case). Well, so do I - or more if possible - but I am concerned about how it is paid for. So let's see exactly what was said:-

QUESTIONER: What countries do you think should have it?

MR. STRAUSS-KAHN: As I've just told you, I'm not going to make an announcement in place of the countries, but I want to answer your question candidly. Everywhere where it's possible. Everywhere were you have some room concerning debt sustainability. Everywhere where inflation is low enough not to risk having some kind of return of inflation, this effort has to be made.

Thanks to Gordon Brown and his his deceits, we are almost certainly disqualified on the debt sustainability point alone. And, if sterling continues to fall, we might as well be disqualified on the inflation point as well - since as a country that barely makes anything worth consuming (and exports even less), we can expect the shattered pound to open the door to inflation whatever the Bank of England might hope for.

Saturday, 15 November 2008

What the markets are trying to tell us (if only we would listen..)

Markets have many drawbacks, as if we needed reminding – but keeping secrets is not one of them. Markets cannot hide their opinions; collectively they shout out loud thoughts that individuals dare not whisper for fear of being proved wrong. That is the reason they seem so often to anticipate news, and the origin of the old saw “buy on the rumour, sell on the fact”.

During the past weeks the foreign exchange markets – the true value of our houses, companies, people and pounds as compared with the rest of the world are definitely trying to tell us something. Sterling has crashed, both against the dollar and now (to the lowest level ever) against the Euro. In a financial crisis which is clearly global, where the US is supposedly the source, and where the Eurozone economy was already pretty weak - why is the UK being singled out?

Whether our press is prepared to write about it or not, the answer can be seen clearly in Washington this weekend. It is not the policies which Gordon Brown promotes which are spooking the markets; it is the market’s perception of the man himself and his reasons for acting which have destroyed their faith in the future of our economy. If you don’t believe me, read the international view of Flash Gordon’s posturing at the G20 meeting. Far from being the saviour of the universe which Downing street promotes at home – internationally Brown is seen as something of a joke, the man who sold our gold, who “abolished” boom and bust and who continually lied to the electorate about the state of the economy, blaming – when he could cover it up no longer – every other country for the recession in a desperate bid to cling on to power.

Whether true or not, these same markets now believe that Gordon will borrow (print) money, not as a controlled short term measure to divert people away from the dole queue and maintain economic productivity, but to make the electorate feel richer – and give himself a chance at a future election - whatever the future cost in inflation, taxation, and economic failure for the country.

For the UK economy to recover, and the markets to change their view, we need a Government with a mandate - a government which is free to act for economic rather than political reasons; if the markets believed we had one then we would not have seen the crashing fall in sterling which, whatever the UK press may think – has been the real story of this recession so far.

The challenge for Cameron and Osborne is to make the press, and the country at large, see what the markets are already clearly telling us, and to prepare an honest plan and transparent plan for the economy should they be entrusted with it in the near future.

The challenge for Brown is more serious, because it is a true test of his honesty and courage. If he truly believes that he has the right policies, for the right reasons and that this is not about politics he should go to the country and get a mandate to rescue this country. That way the electorate would have spoken and the markets would listen, rather than vice versa.

Friday, 14 November 2008

Haringey – Ministerial Dissembly begins here

Protected Interest Disclosure claims are one of the only areas in British Law where a tribunal is allowed to award punitive damages beyond the financial loss suffered by the Plaintiff. There is a good reason for this.

In a PIDA claim, an employee maintains that they have been dismissed under false pretenses, not because of the reason given by the employer, but because they made – to a proper person including government - a disclosure of malpractice, fraud, illegality or similar which their employer has attempted to cover up by terminating their employment and sometimes (as in this case) attempting to gag them by means of injunctions, confidentiality agreements and the like. The typical employers defence to a PIDA claim is an allegation of misconduct, as we have here. This much is well known to all those at the top of every organization in the UK.

Every good boss knows how to fight a claim like this, but most also recognize that a PIDA claim is also a vital warning sign to everybody at the top of an organization – not because of the claim itself, or the dismissal, or the cost of settlement but because of the potential truth contained in the allegations of wrongdoing which form the substance of the claim.

Some PIDA claims relate to white collar crime, or to minor issues which may not truly affect the public interest except to the extent that unlawful acts should not go unpunished. Some are attempts to obtain a better settlement. But a small number of claims, particularly from those who might be expected to know what they are talking about (and one would expect that a senior social worker to fall into this category) relate to serious issues of malpractice which could become matters of life and death for the most vulnerable in our society – as happened in this case.

Four Government Ministers were among those to whom the Employee made or repeated her disclosures, and this morning they have told us their procedure:-

“Officials from this department replied on 21 March 2007. In that letter they made the point that ministers could not comment on the specific details of the employment tribunal case.”

If that was the reply, they dodged responsibility, and missed the point completely. The department was not being asked to comment, or to help the whistleblower in her claim against her former employer – that is the job of the tribunal. The department was being alerted to wrongdoing in an organisation for which they were responsible and which might well lead to the death of a child.

Since when has it been the proper policy of a department, alerted to children at risk, to ask the informer to write to someone else? This would be annoying in an Indian Call centre, but with allegations from a social worker of children at risk it is unforgivable.

The true story here is that Government pushed the complaint away and failed, in the simplest terms, to follow up on information which they held in their own hands. If they had followed up they would have learned that Haringey Council was so keen to cover up its actions that it not only paid off the whistleblower in a financial settlement, but sought and gained an injunction to silence her – and surely even the most incompetent Minister would have understood the dreadful implications of that?

Beware Nobel Prize winners bearing gifts

Gordon Brown and his press cronies appear to be very keen to stress the plaudits he has been receiving from Professor Paul Krugman, the recent winner of the Nobel prize for Economics. So much so, that - according to Nick Robinson - Brown is now taking Krugman's advice directly in advance of the G20 Summit tomorrow:

One whose advice will have been listened to particularly closely is Professor Paul Krugman - the man who in the week he won the Nobel Prize for economics described Mr Brown as the saviour of the global economy. It's a plaudit that the prime minister is understandably fond of.

Gordon might do well at this point to remember a previous Nobel Economics Laureate, Myron Scholes, who in 1997 shared the Nobel Prize in Economics with Robert C. Merton "for a new method to determine the value of derivatives". Whilst Scholes option pricing strategy made sense to fans of bell curves and enabled countless bankers to charge exorbitant fees for plugging a few numbers into Excel and declaring that the resulting instrument was "low risk" - for the investors of Long Term Capital Management and those caught up in the disaster in 1998 his academic theories led to some unpredictable financial outcomes which they would rather forget.

Unbelievably, most of the Financial Service industry still relies on this convenient, but fatally simplistic model of laboratory randomness when making pronouncements on risk.

If it looks too easy, it probably is.

Thursday, 13 November 2008

Dreadful sense of Deja Vu at Haringey

According to the ex- deputy leader of Haringey council:

The "script" for this kind of Inquiry is now almost traditional. The Minister goes on TV to insist that: "this must never happen again". Responsibility is pinned on a few expendable front-line staff, all conveniently sacked in advance. Criticisms are made about poor communication, with earnest recommendations about better co-ordination and possible restructuring. Council officers - all new appointments - go on TV to say that everything has changed since the case began. Everyone looks very earnest. Voices crack with compassion. Nothing essential changes.

After a couple of days of TV bulletins we cannot watch, and newspapers we would rather not pick up, these words are chilling by any measure. But how much more chilling, when I tell you they were written not during the past few days, but in January 2003, in the wake of the previous Laming enquiry following the death of Victoria Climbie under the care of the same council.

In the Climbie case the authorities missed their chance to save the child 12 times, in the case of "Baby P" it seems that sixty visits could not identify the risk... are we not now entitled to ask whether these failures are not the result of under resourcing but rather the result of poor quality, wasteful management? How much longer must we tolerate a culture in our public service which determines that whatever else happens the organisation is paramount and blameless, and that somehow - as long as more money and more consultants and more reports keep coming - they will eventually get it right.

During the Climbie enquiry it emerged that the various publicly funded services involved had reached a secret "no blame" pact in advance of delivering their evidence. According to the Evening Standard at the time:-

The deal was done in an apparent attempt to downplay the roles of Haringey social workers and North Middlesex Hospital doctors, both of whom are accused of missing chances to save Victoria being murdered.

The secret agreement took the form of a letter, signed by six managers from Haringey and the Health authorities.. and addressed to George Meehan, who remains the leader of Haringey Council.

The fact that George Meehan has not resigned, publicly and immediately, tells us everything we need to know about this failing public authority which is so keen to consume our taxes in ever increasing quantities, but delivers only excuses and evasion in return.

Nick Robinson plays to a very special gallery

So the BBC Political Editor, Nick Robinson, has chosen this morning to answer the hundreds of critics who accused him of shameless bias following his attempt to defend Gordon Brown and impugn the motives of David Cameron on the Daily Politics Show yesterday.

The undignified scenes in Parliament visibly shocked the Daily Politics Panel - including Minister John Cruddas who had no hesitation in supporting Cameron's line of questioning, with the notable exception of Nick Robinson who seemed indignant that PMQ's had not followed the course he had anticipated in his morning blog - a weird inversion of the days economic news which appeared to suggest that the worst collapse in growth and employment figures in living memory were somehow bad news for the opposition.

In the style we have come to expect from the beeb, the news reports were massaged yesterday afternoon as never before - with video clips cut to protect Gordon Brown, headlines re-arranged, and up to twelve versions of the key story appearing (at one stage) to airbrush the Cruddas comments from history whilst Ed Balls frantically put out an announcement which - thankfully - saw the Government caving in and taking the action Cameron had demanded.

We have had to wait until this morning to get a clear picture of the drivers behind this behaviour at the bbc. In his loathsome attempt at self-justification Robinson refers to "some [unamed observers] who were watching in the Gallery" - implying that the man in the street took a dim view of Cameron's performance.

Labour's John Cruddas and the Lib Dems' Charles Kennedy - who were in the studio with me - agreed. Interestingly, some who were watching in the Commons gallery did not. They thought the Tory leader's visible loss of temper showed him in a very poor light

So who were these independent arbiters? Shocked members of the public? US tourists spending the pounds they can now get free with their cornflakes? Or is somebody more sinister feeding Nick Robinson his topics for the day, and sundry quotes to back up his pathetic apologies for Brown?
Depressingly, we may already have our answer, courtesy of this morning's Times political sketch

Up in the gallery, Lord Mandelson watched impassively. He had come to hear Gordon on the economy but he was seeing something else entirely.

How long is it going to be before the country at large take the BBC to task for wasting precious resources developing a sinister and arrogant mouthpiece for a discredited Government?

Wednesday, 12 November 2008

Doubts over Laming resurface

Gordon Brown's appalling cynicism at PMQ today with regard to the Baby P case in Haringey reminds us all to look carefully at the "solution" being bandied about by New Labour to the apparent systematic failure of social services on their watch.

It's obviously ridiculous to anyone but Gordon that the person in charge of Haringey services should investigate themselves, but what about the man selected to lead the National Enquiry, the same man whose previous engagement does not appear to have led to any changes?

Turns out there have been questions over his fitness all the way along.

You have to ask why Gordon & Co are so keen to have the same all over again?