Tony Rome

It's all Blair, all the time at the moment, as our former PM finally undertakes his long-expected conversion to Catholicism. It would be unChristian to ask whether he is truly entitled to take this step, but that hasn't deterred a lot of people, including the lovely Ann Widdecombe, who is herself a convert to Catholicism. She points out that Blair's House of Commons voting record on a range of issues, including abortion and same sex unions, is hardly in accord with the doctrines of the Church. And of course, the Vatican has always been vocally opposed to the Iraq invasion.

Blair is a man who never seems to be troubled by the possibility that he may be wrong, so it's hard to see how he can feel at home in any organised religion. A number of years ago, Cardinal Murphy O'Connor asked Blair to desist from taking communion on the frequent occasions that he attended mass, since the Catholic understanding of communion is radically different from that of other denominations. (Our local priest compares it to the difference between blanks and live ammunition!) Blair acceded, but with very bad grace, penning a letter to the Cardinal in which he wondered "what would Jesus think about this"? For me, that really says it all about Blair's ego. It's to be hoped he adopted a humbler tone for his induction into the Church.

Blair goes to the dogs

I didn't think Tony Blair could do anything to lower my opinion of him even further, but this certainly has. In case you can't make the link work, it's a White House promotional video in which our former PM congratulates two of the Bushes' dogs (no, not the twins) on being appointed park rangers.

Hall of shame 2: media

And it's the Murdoch press again!! Buried on Page 2 of the Sunday Times for December 16 is a remarkable little apology. It seems that at the time of the MRSA scandal at the Maidstone hospitals trust in October, the paper illustrated one of its stories with a picture of a nurse in a filthy uniform. Well, actually, it was a fake photo, though this was of course not revealed at the time. The paper thought it was a picture of a model, and the uniform was in fact quite clean in the original photo, but through the magic of photoshop, or pehaps by rubbing it with their messy little hands, they made it look filthy.

That would be quite enough deception for me, but it gets worse. It turns out the impeccably-attired lady was in fact a real, live nurse -- but had never worked for the hospital in question! So the poor old Sunday Times has had to apologise "unreservedly".

The Sunday Times is part of the Murdoch group that has gleefully piled in on the BBC over its various misdemeanours. Let's see: BBC -- tinkering with the results of a poll to name the Blue Peter moggie; Sunday Times -- falsifying a picture on an important news story and damaging the reputation of an innocent woman in the process. Just for once, it would be nice to see the Beeb adopt Murdochian standards and run with this story at the top of every news bulletin until Christmas.

Hall of shame 1: finance

Two egregious pieces of self-justifying bluster in the past week, both (as it happens) in the Murdoch media. First, Alan "the bubblemeister" Greenspan took to the op ed pages of the Wall Street Journal (subscription required to see the website), to pen yet another defence of his record as Fed Chairman, and to disavow all blame for the current credit crunch. Then Anatole Kaletsky used his column in the Times to defend himself against accusations that his analysis of said crunch is contradictory, in a remarkable piece that wound up advocating something that is logically impossible.

Greenspan's article was notable for his admission, for the first time as far as I can recall, that the extended period of low inflation enjoyed by the US and the rest of the world in the 1990s was mainly due to the surge in cheap imports from China, rather than his own mastery of economic lever-pulling. Maybe if he'd figured this out at the time, he would have realised that it was neither necessary nor desirable in the circumstances to keep interest rates artificially low, which only had the effect of causing the whole US economy to leverage itself to the hilt, setting the stage for the current problems.

On more familiar ground, Greenspan again says that there was nothing he or the Fed could have done to head off the crash, since markets always put an end to excesses at a time of their own choosing. It may be true that you can't exactly predict when a bubble is going to burst, but if you've fostered an economy built on the ready availability of cheap credit, you don't need to be a genius to realise that the likeliest time for it to happen is when you start raising interest rates. That's why you shouldn't let the bubble get too big in the first place. Greenspan is the Conrad Black of monetary policy: everyone else thinks he dunnit, but he is righteously convinced of his own innocence.

As for Kaletsky, hs thinks it is wrong for the UK and Europe to blame the US for the economic problems they now face, since they have housing market excesses of their own making. He may well be right about this (at least in the UK and Spain), though I don't recall him ever saying anything about it until the credit crisis hit. In fact, as I've said before, he was the leading advocate of the cheap money policies that got us into this mess, and the solution he is now advocating is....cutting interest rates.

Kaletsky thinks the US has got it right, allowing the dollar to fall, and the UK and Europe have got it wrong, with their currencies remaining too strong. This view is asinine. The big imbalances are between the US and China/India, but because of the intransigence of the Chinese, the US dollar is hardly falling at all against the Yuan. It's falling against the pound and the euro all right, which will no doubt give the US some relief. However, there is no policy known to man -- not even to clever people like Kaletsky and Greenspan -- that can result in the US dollar, sterling and euro all depreciating at the same time, unless and until the Chinese decide to float the Yuan. Interest rate cuts by the BoE and ECB will only slow the necessary correction in the US dollar -- and heighten the already-significant risk that inflation will reach nasty levels again. We can't blame Kaletsky for getting us into this mess -- Greenspan did that -- but it would be nice if he could at least think straight about it.

Sweating the small stuff

I had occasion to take the train from London to Newcastle on December 9, the first weekday on which the route was operated by a new franchisee, National Express. It was amazing to see how quickly any trace of the former operator, GNER, had been eliminated. It's a mystery to me how they could have painted out the GNER name on so many trains so quickly, and replaced it with their own. Apart from a few on-board announcements where the steward momentarily lapsed back into the old name, GNER was completely expunged.

National Express is, of course, going to repaint all of the trains in a new colour scheme. This ritual is one of the most pointless aspects of the whole ludicrous franchise system. But it seems as if National Express has a fine eye for the telling detail. In the first class coaches, GNER had coffee cups on every table, with the cup inverted on the saucer. On the return journey yesterday, the hostess went through the entire carriage turning the cups right side up. When I asked her what the point of this was, she replied that this was how the new owners wanted it done from now on. You never got that kind of strategic thinking with British Rail.

As it happened, December 9 was also the first weekday of operation for the new suburban platforms at St Pancras International, which I had to pass through on the way to Kings Cross. It cost a reported £70 million to fit out this 2-platform station, on top of the cost of digging the hole in the first place. Obviously £70 mil' doesn't go as far as it used to: for example, it doen't stretch to more than two escalators per platform. There was a queue to use the up escalator even before 7 am, so what it will be like when they eventually reach their 24 train per hour goal can only be imagined.

The new platforms are at the far north-west of St Pancras International. The tube platforms are at the far south east. I suppose this does give you a chance to take a good look at the refurbished Barlow train shed, which is truly awesome. Still, it takes some doing to come up with a location that is less convenient than the sewer-like Kings Cross Thameslink that it has replaced. More attention to the big picture, and less worrying about colour schemes and coffee cups, is my suggestion.

Hands off the old bag!

We're pretty dedicated recyclers round our way. We compost kitchen and garden waste, sort cans, plastic bottles and newspapers into special boxes for collection, and make regular runs to the local dump to recycle stuff that the city doesn't currently pick up, like bottles and cardboard. We're not looking forward to the introduction of bi-weekly collections (and finding a home for another wheelie bin) next year, but no doubt we'll get used to it.

However, we're quite bemused by the Government's apparent intention to ban supermarkets from giving out plastic bags. Oh, I know this has already been done in Ireland, and I've read all about how the damned things take millions of years to decompose in landfills. But I can't see how either I or the environment will benefit from a ban.

The anti-bag slogan is "twenty minutes of use, decades to decompose". Is this really the case? How many people take the groceries home in a bag and then just throw the bag out? I'm sure that most people do what we do, which is to use the bags for collection of kitchen waste, hung inside one of those little bins that you attach to the inside of the cupboard below the kitchen sink.

What will we do if the supermarket bags are banned? We'll almost certainly start to buy the mini bin-liners that are sold for this purpose. We'll be throwing out just as many bags as before, except they'll be the higher-quality bought ones, which may well take more scarce resources to produce. So who benefits here? The supermarkets? Yes, they no longer have to buy bags to give away -- instead they get to sell them at a profit. The bag makers? Yes, they get to sell higher-quality bags to retail buyers, instead of selling cheapo ones at bulk prices to the supermarkets. Me and the environment? Hell no.

Shareholders' wrongs

I don't know whether Sir Branson's bid for Northern Rock is better than the other offers on the table. We don't know the full details of what old Beardy is proposing, and we know even less about the other potential buyers. However, it's clear to me that the shareholders in NR are going to make it difficult for the Government to push any deal through, unless it is prepared to threaten the use of the "nuclear" option of driving the company out of business.

There are two groups of shareholders that the Government needs to worry about. One is the hedge funds, who have been acquiring NR shares since the company's troubles erupted, and have built up a pretty substantial stake. In the US these would be called "vulture funds". Some of them are already calling for a special meeting of the NR board, and demanding a new by-law to prevent the sale of more than 5% of the company's assets without shareholder approval. No bank in the world could operate with such a stipulation in place, but of course the point of it in this particular case would be to make it impossible for the company to liquidate itself in an orderly fashion in order to pay off its creditors, notably the UK taxpayer. The Government may try to portray the hedge funds as opportunistic leeches, which of course they are -- as the Bishop of Southwark might say, "it's what they do". Even so, they are leeches who can afford expensive lawyers, and they can make things very difficult for NR and for the Government.

The second group are the small shareholders, over 100,000 of them, many of whom became owners when NR demutualised. Here the problem is a bit different: if the pronouncements of their supposed spokesmen are typical, these people simply don't understand what being a shareholder means. They see themselves as "stakeholders", with a claim comparable to that of NR's creditors. This is simply not the case: the shareholders own NR and NR owes a lot of people -- in effect, everyone in the UK, as well as its own depositors -- a lot of money. Shareholders are of course protected by the principle of limited liability, but in some sense it is they who "owe" that money. What's more, they cheerfully sat by and collected their dividend cheques as their company greatly overextended itself by excessive borrowing in wholesale markets -- a classic example of overtrading.

One of these small shareholder spokespeople said on Radio 5 on Monday that it they resented having to make a decision "with a gun to our heads". Well I tell you what, sunshine, just give us back our money and I promise you'll never hear from us again. He also said that he wanted the chance to see the non-Branson offers so as to make sure that the best one was being chosen. Given that he seems not to understand even a basic concept like share ownership, I don't think that would be a good idea.

Gordon Brown, meet Mr Dithers

It's almost beyond belief how much bad stuff has happened since Gordon Brown finally moved into 10 Downing Street. Attempted terror attacks....severe flooding....foot-and-mouth, bluetongue and avian flu....Northern Rock....the HMRC data fiasco....not to mention the fact that none of the home countries has qualified for Euro 2008.

Not all of these can be blamed on poor Gordon, of course, though that hasn't stopped the opposition parties from trying, and there is certainly a case to be made that the seeds of both Northern Rock and the HMRC debacle were sown while he was seething in the Chancellor's job. It's starting to look more likely than not that his tenure as PM will not be anything like as long as Tony Blair's.

There are some interesting parallels between Brown's career and that of Canada's last PM, Paul Martin. Like Brown, Martin spent many years in charge of his nation's public finances, and arguably each was responsible for the most lasting achievements of the Government in which they served (Blair's, in the case of Brown, and Jean Chretien's, in the case of Martin). Brown can claim to be the architect of Britain's longest-ever economic expansion, while Martin rescued Canada from an imminent fiscal meltdown. Yet neither actually got on well with his boss, with the result that in both cases, the handover of power came much later than expected, and not at the most favourable time for the new man.

When Martin became Canadian PM, the nation waited to see what he would do now that he finally had his hands on the tiller. The answer was: nothing. It seemed as if Martin had run out of either ideas or energy while serving under Chretien. He was so ineffectual that even the Economist noticed, and branded him as Mr Dithers. As soon as the next election came around, in early 2006, Martin was booted out by the same voters who had benefited so much from his tenure in the finance job.

Martin didn't have the same bad luck as Brown; he simply didn't know what he wanted to do once he got the job he'd always wanted. Brown is supposedly a man of ideas, but the pre-budget statement last month suggested that not many of them are actually his. Worse, the response to the Northern Rock crisis was inept, and the HMRC problems are not exactly showing ministers in a good light either. Brown may not be dithering yet, but he's certainly starting to flounder.

When it comes to fish, the Newfies know best

Remember the story a week or two ago about food wastage in the UK? Apparently about a third of all the food bought in this country gets thrown out and winds up in the landfill. Aside from the evident immorality of this, it's a big contributor to greenhouse gases: the carbon dioxide produced each year by rotting food is equivalent to the emissions of five million cars (or one Jeremy Clarkson).

This week's food waste "scandal" takes us to the other end of the human food chain: to conform with EU limits on their landings of codfish, fishermen are throwing out as much as 60% of the fish they haul up onto their boats. They claim that the cod stocks in the North Sea have recovered sharply, so the quotas should be increased.

The fact that so much cod is now being netted as a by-product of attempts to catch permitted species such as Dover sole tends to prove their point. But even if they're exaggerating, even if cod stocks remain below ideal levels, it's hard to see who (apart from the seagulls) benefits from throwing dead fish back into the water, rather than bringing them ashore to sell. As long as the rules on net sizes are being properly enforced, there can be no harm in allowing this. In fact, as one fishermen's spokesman said today, the current practice is going to put more species in peril. The fishermen have to keep netting more and more fish, and throwing back more and more dead cod, in order to make a decent living from the permitted species.

The collapse of the cod stocks in European waters mirrors similar events on the Grand Banks of Newfoundland a couple of decades ago. The fishing industry of Newfoundland, once the province's primary source of employment, was eviscerated, with whole communities ceasing to exist. But even at the worst of the crisis, the fishermen were always allowed to land and sell whatever "by-catch" of cod happened to end up in their nets. Mind you, it was always amazing, when you ate out in St John's in those days, to realise just how big that by-catch could be! Still, a little bit of cheating is surely better than outright waste.

More Kaletsky Kapers

Anatole Kaletsky is foaming at the mouth at the possibility that any rescue of Northern Rock will place a big burden on taxpayers. I think he's right to argue against such an outcome. However, I don't really blame the bidders for trying it on, and I suspect the Government will find it hard to refuse, given the inept handling of the crisis by the financial authorities, particularly the Bank of England.

But I have to wonder: can this be the same Anatole Kaletsky who was for many years one of the great apologists for cheap money? He regularly argued that the process of home equity withdrawal (the flipside of excessive mortgage lending) was a wholly-benign, growth-supporting feature of the US and UK economies. In fact, he used to castigate the ECB for refusing to cut interest rates, thereby denying European homeowners the chance to get in on the action. M. Trichet must be glad he didn't take the advice.

24-hour news people

Very early one Sunday morning a couple of years back, we were awakened by a huge explosion, obviously quite close by. As it was still dark, there was nothing to be seen outside, so we switched on Sky News. Sure enough, within about five minutes, one of those "breaking news" boxes appeared on the screen: "Large explosion heard in St Albans". Then Sky had what they must have thought was a stroke of luck: one of their reporters was living in the city (yes, St Albans is a city!), and called in with the first "on the spot" report.

The anchor in the studio asked if it was an explosion on the ground. No, the reporter said confidently, he had been in war zones and knew what those sounded like. He had heard a strange noise overhead just before the explosion and was pretty convinced it was an aircraft crash. He sounded so certain about this that you felt that at any moment, he would name the airline, if not the pilot. He was, of course, dead wrong: this was the Buncefield oil depot explosion, the largest blast in peacetime Europe. Within half an hour Sky was starting to get the story straight, and the "on the spot" reporter vanished from the airwaves.

I was reminded of this by BBC News-24's coverage of the factory blaze in East London on Monday. Even though terrorism was almost immediately ruled out, for almost two hours they gave it the sort of wall-to-wall coverage that we all remember from the September 2001 attacks. A helicopter was despatched to the scene, and quickly revealed that most of the "75 firefighters tackling the raging inferno" were in fact standing around in the car park, while about ten of their colleagues trained hoses on the building. (This is not meant as a criticism of the firefighters, who got the blaze under control very quickly, and happily with no injuries or loss of life).

The BBC got a reporter in close to the scene, then started to up the ante. Because the fire was located on a corner of the 2012 Olympic site, the sports reporter was central to the coverage. He called someone at the Olympic Delivery Authority, effectively asking whether this catastrophe would derail their plans to have the Games facilities ready on time. The ODA seemed pretty relaxed about it all, not least because the burning building was due for demolition anyway. The BBC also reported "travel disruptions" in the area. A reporter called Eurostar, who advised that their services were unaffected -- possibly because the nearby High Speed 1 line was not yet in use that day, so all of their trains were on the other side of the river. More promisingly, it emerged that services on the nearby North London Line were suspended -- and as the helicopter camera moved in for a close-up of the stricken line, a passenger train trundled by.

The BBC also reported that the fire had started in a bus depot, which turned out not to be true. Still, there were three bus depots on the same road, so the helicopter focused in on one of them while a reporter contacted the manager of a bus company. His first comment: "That garage in your shot is not ours". So the reporter asked him for his eye-witness account of the explosion. Well, actually, he was in an office on the other side of London, but he was sure it must have been worrying for people close by. It all made you think that Drop the Dead Donkey and Alan Partridge didn't skewer the media hard enough.

By late afternoon the BBC was scarcely mentioning the fire on its news bulletins, so I still have no idea why they initially gave it so much airtime. It's not as if there was nothing else going on at the time: someone took a pop at German Chancellor Merkel, Benazir Bhutto announced she was no longer talking to President Musharraf, and David Cameron announced a new policy initiative on....no wait, maybe that explains it.

After the goldrush

Among all the anecdotal evidence that the UK property boom is over, here's the most convincing sign: the awful Rosie Millard has dropped her long-running column on buy-to-let in the Sunday Times. As the market heads over the edge, she (or the paper)may have begun to worry about lawsuits from people she has induced to become amateur landlords. (By the way, fans of Rosie need not despair. She has already started a new weekly column called Lust, Greed and Envy. These are, of course, three of the Seven Deadly Sins, but Rosie seems quite keen on them).

It will be some time before we can judge the long-term impact of the past decade's buy-to-let frenzy. However, it's not too soon to suggest that it may have done a lot to frustrate the Government's long-term housing goals.

Firstly, it was reported recently that the proportion of households that own their homes has started to decline recently, after rising steadily since the Thatcher sell-off of council houses. There are many factors at work here, but the buy-to-let mob have surely contributed in at least two ways. Obviously enough, the added competition for available properties accounts for a large part of the run-up in prices. Moreover, the contest for financing between middle-class professionals such as Ms Millard and her ilk on the one hand, and young couples just starting out on the other, is pretty one-sided: any bank will always prefer to lend to someone with a higher income or more security, especially as the investor gets a tax deduction on the mortgage. I can't think of any other reason why the banks would have allowed the ratio of prices to average earnings to soar to unprecedented heights, as it has in recent years. That ratio is no longer meaningful if a lot of the borrowers are wealthy investors with several homes.

Secondly, the buy-to-letters seem to have distorted the new housing market. The keenness of ill-informed but greedy amateurs to buy off plan, whether to let or simply to flip, has induced developers to build enormous numbers of new apartments. Trouble is, nobody wants to live in these jerry-built shoeboxes. In cities such as Leeds, as many as 70% of new-built apartments may be empty. By coincidence, that's the same proportion of the total apartment stock that buy-to-let investors now apparently control. Prices in this sector are falling fast, which serves the investors right; but that won't change the fact that a large part of the homebuilding effort of the past decade has been misdirected.

I think the malign effect of buy-to-let in the apartment sector may go further than this. We are thinking of downsizing from our big commuter-belt house to an apartment, so we have started to look at what's available. We went to look at a new-build development in Brighton. Leaving aside the pokiness of the flats themselves, there were plenty of signs of the malign buy-to-let influence: in my experience, people spending several hundred thousand pounds on a place to live don't use flattened cardboard boxes as window coverings. Why would we, or any other empty nesters, choose to move into a building largely owned by absentee landlords interested only in turning a quick profit? We may well wind up staying put, thereby keeping our decent-sized family property off the market.

The current market turmoil will shake out a lot of buy-to-letters, which is a good thing. The Government can ensure that the sector doesn't bounce back too quickly by removing the council tax concession that currently applies to empty properties. That change would also create an incentive to do something about the 840,000 homes that are currently sitting empty in the UK. Renovating those, or knocking them down and replacing them with something more modern, would be a much better use of developers' time than slapping up another block of flats in Leeds.

America waives the rules

The US constantly proclaims the superiority of free markets, but does it really believe in them? A couple of recent examples suggest not.

Let's start with the "open skies" agreement between the US and Europe, recently concluded after many years of difficult negotiations, and due to take effect in early 2008. Europe consented to allow US carriers free access to European airports, with Heathrow the big prize: prior to this deal, only four airlines were allowed to operate transatlantic flights from the airport. Is return for this, the US conceded....well, not much, actually. Restrictions on foreign ownership of US airlines remain intact, and European carriers have not been given much in the way of "cabotage" rights, which would allow them to carry passengers within the US.

So it wasn't much of a deal for Europe anyway, though anything that helps to curb the ripoff pricing of business class flights from Heathrow can't be entirely bad. But now it emerges that the FAA is going to cut back on the number of flights allowed at JFK in New York during peak times. This will put paid to BA's plans to fly there from mainland Europe, and may even force it to cut back its existing schedule of US-UK flights. In the meantime, US airlines can make space for themselves at JFK by shifting flights to other NY-area airports, and are busily lining up slots at Heathrow.

The FAA has in effect turned an agreement that had already few benefits for the UK into one that could prove seriously negative for British carriers. You can imagine the outcry from Washington if the UK had done something similar, but so far I haven't heard a peep out of Whitehall.

There's a second example: the US, with some support from EU countries, is starting to get very worried about "sovereign investment funds". These are pools of cash held by non-US governments that are now being used on an increasing scale to buy assets in rich countries. Some of these funds are owned by "friendly" countries (such as Singapore or Canada), but many more are owned by countries the US is a bit more leery of, including China and several of the OPEC nations.

The US was happy to allow these funds to buy US assets as long as they stuck mainly to bonds -- in fact, without buying from China and Japan, the US Treasury's borrowing programme would have been in big trouble years ago. But now the funds are starting to invest more broadly, buying real estate and taking over whole companies. This makes sense from their standpoint -- you don't want to have all your eggs in one basket, especially one as ropey as the US debt market -- but it's got the Americans crying foul.

What's Uncle Sam's problem? Well, the official line is that these funds may not invest on purely economic (expected return) grounds. Because they are not "transparent", they could make investment decisions based on extraneous (i.e political) factors, and that could destabilise markets.

I see several flaws in this argument. Although the sovereign funds are getting pretty big, they are dwarfed by the huge US-based investment pools, predominantly state pension funds such as CalPERS. Although subject to regulation, these funds are hardly beacons of transparency. Nor are the hedge funds and private equity funds that have become huge players in US financial markets over the past decade. The fact is that public equity markets have become less significant players in the US economy in recent years. The emergence of sovereign funds is far from being the biggest contributor to this trend away from transparency.

Foreign ownership of US assets is only going to increase. The soaring oil price will keep bloating the sovereign pools and the collapsing US dollar will make US assets cheap for foreign buyers. Years of overconsumption are finally taking their toll. It's an uncomfortable time for US policymakers, and it looks as if the country's commitment to free markets will be one of the first victims.

Lord Coe of Araby

If you go to the airport in Riyadh (you're probably just going to have to trust me on this one), you'll find that there are three passenger terminals: a domestic terminal, an international terminal and....a Royal terminal. That's right: the thousands of princes in the house of Saud, together with their families, have devised what may be the ultimate way of avoiding mixing with their subjects.

This may look pretty extreme, but the fact is that the rich and powerful in every part of the world seem to have a marked aversion to travelling with the masses. Just think of Tony Blair's endless flights on chartered aircraft, Prince Andrew hopping from golf game to hunt weekend on the Queen's Flight, Roman Abramovich with his private 767. Sales of more reasonably-sized private aircraft are at an all-time high, as the super-rich look to by-pass the queues for passport control at Terminal 4.

Well, OK, if that's how they want to spend their money. It doesn't really have any impact on how I travel. But the London Olympic committee is planning to take this segregation a whole lot further. Reports this week suggest that people travelling to the Games in 2012 will be prevented from using their cars. Each ticket will be accompanied by a suggested itinerary using only public transport.

I'm no petrolhead, and in general anything that gets people out of their cars is fine with me. However, while the people who are going to be paying for the Games will be forced to take their chances on public transport, the Olympic organisers and the international bigwigs will be ferried around in a fleet of 3500 specially-purchased vehicles. Moreover, lanes will be closed on major roads all around London so that these worthies don't get delayed as they rush from the caber tossing to the bog snorkelling. These are already being referred to as Zil lanes, after the limousines that were used to ferry Politburo members around Moscow in the last days of the USSR. The lanes will stretch all the way back to Hyde Park -- which is not exactly close to the Olympic venues, and provides a pretty clear hint that not many of the great and good will be staying at a Travelodge in east London for the duration of the Games.

I was amazed when London was awarded the Games and nothing that has happened since has altered my view that this will be one of the biggest boondoggles in British history. Huge amounts of money are going to be spent to stage sports that nobody will want to watch in arenas that may never be used again. Lottery funds are being diverted from good causes in other parts of the UK to defray the costs. Even larger amounts are being spent on providing the necessary transport infrastructure. While this may be a "legacy" of the Games, I can't imagine that anyone taking a dispassionate look at the UK's transport needs would have concluded that we will need ten separate railway lines to Stratford once the circus has moved on.

And now we find that the Olympic organisers are going to disrupt travel around London for several weeks on each side of the Games, but will not themselves be going anywhere near the expensively-provided public transport. Oi, Seb -- take the train, and bring your mates with you!

Thank goodness that's over

Apparently 16 million people in the UK tuned in for the rugby "world cup" final on Saturday evening. It's unlikely that many of them will have become longer-term aficionados of the sport. I don't like rugby, but I watched for about ten minutes -- long enough to remind myself that it's one of the most tedious of all sports to watch. Even the rugby correspondents in the up-market press have been forced to admit that it really wasn't much of a game.

The question I always put to rugby fans is this: if the game is so good, how come they keep changing the rules? The game is now very different from the one that I was forced to play at grammar school in the 1960s. Mind you, all of the illogical bits have been retained -- you can still get points from a penalty kick awarded for wome minor infraction on the halfway line, conversions have to be taken in line with where the preceding try was scored, and (worst of all), you can't pass the ball forward.

In fact, some other dumb stuff has been added -- lifting in the line-outs and all that palaver about "phases" of play. What's more, the authorities have already announced that, despite the great success of the "world cup", they're going to tinker with the rules yet again. Apparently they think there is still too much emphasis on defence at the expense of attack, though when there are a dozen behemoths rolling around in the dirt with the ball nowhere to be seen, I suspect most of the sixteen million souls who tuned in on Saturday night would have a hard time telling the difference.

Still, never mind: Dolphins versus Giants at Wembley this weekend, with 80,000 tickets sold. That's not far short of the total weekly attendance at the Guinness Premiership.

It was twenty years ago today

This week has brought a lot of media coverage of the "biggest ever storm" that hit southern England on the night of 15/16 October 1987. The anniversary has provided an excuse for innumerable reruns of Michael Fish's notorious weather forecast -- "there is no hurricane coming", as well as some unimpressive attempts at conveying the power of the storm through dodgy CGI footage.

Amid all the cliches, however, I learned a couple of things. First, in a perverse sense, Michael Fish was right - the storm was actually quite a bit bigger than your average tropical hurricane, albeit not quite as intense. Second, and more important, the Met Office people had two very good excuses for their failure. French meteorologists happened to be on strike at the time. In addition, in these days of satellite weather imagery it's easy to forget that a mere two decades ago, weather forecasters still relied almost exclusively on reports from ships at sea. They knew there was something brewing in the Bay of Biscay, but as the storm headed north, shipping fled the area, meaning that there was no-one to pass on the word of how nasty it was becoming. Contrast this with the huge rainfalls that hit parts of the UK in July this year: forecasters not only raised the alarm days in advance, but also predicted with amazing accuracy which areas would experience the worst conditions.

This is also, of course, the twentieth anniversary of "Black Monday", 19 October 1987, when US stock prices fell more than 22% in a single trading session. For us money types, this is an event a bit like the assassination of JFK or the death of Princess Diana: you can remember exactly what you were doing at the time you heard the news. (If you care: attending a church youth group meeting, and trying to find Saturday Night Live on TV after a night out, respectively!)

On Black Monday I was helping to staff TD Bank's booth at the annual Treasury Management Association of Canada (TMAC) cash management conference in Toronto. (Wow, those were the days!) As luck would have it, we were the only firm that had decided to include in our display one of the new-fangled Bloomberg market data terminals, which displayed the Dow Jones average on a tick-by-tick basis. As the market began to fall, word quickly spread among the crowd, and our booth was clogged all day with anxious customers trying to see the screen, which was a tiny thing with an orange display. This was, of course, long before most people had mobile phones, let alone BlackBerries. As a result, an equally large crowd was milling around the big bank of payphones that all conference rooms had at that time (but probably don't any more).

I mention these two unconnected events because they are a reminder of just how recent are many of the things that we now depend on in our business and personal lives: satellite communications, on-line data access, mobile phones. Not that these things are an unalloyed blessing: it seems that by next year, it will be possible to use your mobile phone on aircraft. Ryanair has already said that it will be among the first to offer the service, though why it thinks that people who scramble for 99p fares will want to spend £2 a minute for a phone call, I can't imagine.

Halloween as metaphor

We learn this week that Halloween is now the third-largest retail event in the UK each year, after Christmas and Easter. It's rapidly squeezing out the uniquely British celebration of Guy Fawkes Day, in another example of the Americanisation of our culture.

Just what is Halloween? Well, in its modern form it involves sending young people onto the property of strangers, to threaten them and get them to hand over something that you want. I just can't imagine why something like that would be so popular in the United States.

The moral hazard of Gordon Brown

Just before last weekend, when it seemed likely that we would soon be plunged into an early election, Tory Leader David Cameron accused Gordon Brown of spending too much time focusing on politics and not enough on running the country. I thought this was a bit unfair, given the hailstorm of crises that Brown has faced since he replaced Tony Blair: terrorist attacks, foot-and-mouth, flooding, Northern Rock...

Most commentators, regardless of their political persuasion, seemed to think that Brown had handled these crises competently and with next to none of his predecessor's phony emoting. This is, of course, precisely why the opinion polls seemed to be moving in the Government's favour, opening up the possibility of an early election. Then a couple of populist (and wrong-headed and poorly costed) Tory tax proposals pricked the election balloon and Brown was forced to announce that there would be no election until, probably, 2009.

This should have been no more than a short-lived embarrassment for Brown, not least because there is no hard evidence that he personally ever favoured an early vote -- the worst that can be said is that he failed to rein in his closest advisors quickly enough. However, there are now signs that the phoney crisis has badly unhinged the Government, which is now firing off half-baked policy announcements in all directions.

The most egregious example so far is, of course, the pre-Budget statement, which borrows to a quite shameless extent from last week's Tory conference speeches -- inheritance tax reform, poll tax on the non-doms, changing the basis of taxation on air transport. Get a grip guys -- these ideas were intended to forestall an early election, not to become the centrepiece of public policy. Aside from the air tax reforms, they're not particularly good ideas in themselves (see my previous posting) and they're not really consistent with the supposed principles of the Tory party, let alone Labour.

Now Chancellor Darling is at it again, announcing new measures designed to prevent a recurrence of the Northern Rock debacle. While the debate about who is supposed to be in charge in these situations -- is it the Bank of England, the FSA or the Government -- is set to continue, the Government is moving ahead quickly with steps to improve the "protection" of depositors.

There's little doubt that the pre-Northern Rock level of deposit insurance was inadequate. Only the first £2,000 of each individual's deposits with a particular bank was fully covered, with 90% coverage between £2,000 and £35,000, and no protection above that. The Government has already decreed that £35,000 will be fully protected in future, but it intends to go much further, probably by requiring banks to pay premiums in order to raise the fully insured amount to £100,000.

There is a real risk that the Government is going to go all the way from a patently inadequate level of depositor protection to dangerously excessive one. The Association of British Insurers estimates that the £35,000 limit will cover 98% of individual bank accounts. If you have more money than this, there's a good argument that you should take some responsibility for your own protection by doing a bit of due diligence about the institution where you are keeping your money, but evidently that's not an argument the Government thinks it can afford to make right now. Interestingly, media commentators, even those on the right of the opinion spectrum, are shy about taking a stance on this as well.

The bigger banks will no doubt be aghast about this. They will argue that they will pay the bulk of the premiums even though they are the least likely candidates for failure. Smaller institutions with riskier business models, like Northern Rock, will get something of a free ride, which only makes it more likely that problems will occur again some time in the future -- what economists call "moral hazard". However, it's reasonable to believe that they won't be saying these things very loudly, at least in public, for as long as the memories of queues outside Northern Rock branches remain fresh.

Inheritance tax, non-dom tax, deposit insurance -- populist measures all, bespeaking a panicky Government making policy on the fly. And they may not be through yet -- the Government says it is re-examining the model for payment for seniors' residential care, in response to complaints from people forced to sell their homes to pay their care bills. It says it wants to preserve the principle that better-off users should pay, but given the way things are going at the moment, another ill-judged giveaway must be in the offing.

Dumber than a bag of hammers

The tax proposals outlined by the Tory Shadow Chancellor to the party's annual conference this week are strikingly dumb, as well as being way out of line with the party's presumed "principles". If elected, the Tories plan to reduce the burden of taxation on unearned income (inheritances) while boosting it on earned income (as represented by the demonised "non-doms"). They will also in all likelihood pump the housing bubble up even further. Nice one, George.

The party's distaste for inheritance tax was made clear in the recent Redwood Report, which proposed replacing it with a reformed capital gains tax. As I said at the time, that's not a bad idea. However, the party has gone much further, with a plan to eliminate all inheritance tax on estates of less than £1 million, exempting family homes altogether.

The party claims that it detects a growing level of worry among taxpayers about the widening application of inheritance tax. Actually, it's not the taxpayers who are worried: they'll be dead when the tax comes through. It's the people hoping to benefit from the bequests who are concerned. But should taxation policy be rewritten to exempt almost all bequests? The largest single item that most people pass on to their heirs is the family home. True, people have diligently paid their mortgages in order to own the place; but most of its value is a result of the surge in UK property prices that has resulted from the last deecade and more of low interest rates. The homeowners have not earned it in any meaningful way, and it's hard to make a case that it should be exempted from tax -- particularly when the Tories propose to make up the revenue shortfall by taxing earned income, of which more below.

At the other end of the housing ladder, the Tories plan to exempt all first-time buyers from property taxes on homes sold for less than £250,000. One can only imagine the chicanery this will lead to, as husbands and wives take turns being the "first time buyer" of their first two homes. And it would be naive in the extreme to think that the removal of the tax will do anything except push asking prices higher, eliminating some or all of the hoped-for benefit to buyers.

In a bigger-picture sense, the Tories' pandering to the UK property obsession looks badly misjudged. Property often seems like the main driver of the UK economy and the favoured savings mechanism for a large part of the population, at the expense of more productive investments. (When did you last see a column in one of the weekend money supplements saying "I don't trust the housing markets so I'm putting my money into stocks and shares"?)

If the Tories get their way, there will be no tax on the first-time homebuyer; none on sales of the family home during one's lifetime; and none on the family home as part of a bequest. Can it really be smart to exempt such a key sector of the economy so completely from taxation? The Tories have castigated the Labour Government for making housing unaffordable through excessively cheap credit: it looks like they intend to do the same thing through wildly favourable tax treatment.

What makes this so much worse is that the Tories plan to pay for this needless and dangerous giveaway to homeowners by means of a new flat-rate tax on non-domiciled UK residents. Everyone has been attacking the non-doms lately, and no doubt a tax on them will play well with Daily Mail readers, but does anyone know who they are and exactly how they are treated?

Well yes, actually -- I do. When I returned from Canada to the UK a decade ago, I was given non-dom status. (For what it's worth, I no longer claim it). Non-dom status allows a UK resident to avoid tax on assets held outside the UK and on sums earned outside the UK while resident here. It emphatically does not exempt people from UK income tax: money earned in the UK is taxable in the normal way, and any money remitted from abroad is also fully subject to tax.

For me, the main (in fact almost the only) benefit was that it allowed me to keep my "Canadian" capital away from the UK tax man, on the assumption that I would return to Canada when my assignment in London ended. So here's the first question for the Tories: I was already paying income tax on virtually all of my employment earnings, which I received in the UK. Would I also have had to pay your proposed £25,000 non-dom tax? And given that there is probably a huge number of non-doms in similar positions to mine, and a whole lot more in relatively low-paid occupations, how can you possibly expect to raise £3.5 billion from your new poll tax? Do you really want to drive away the entrepreneurial Europeans who have moved to London in recent years by doing something as ill-judged as this, in order to pump yet more money into the housing sector?

There are sensible things that could be done to reform property taxation, inheritance taxes and the taxation of non-domiciled residents. The Tories are proposing none of them.

Greenspan's Age of Flatulence

Winston Churchill once said "History will be kind to me, for I intend to write it". So he did, and so, mostly, it has. Former Fed Chairman Alan Greenspan, now doing the chat show circuit to promote his memoirs ("The Age of Turbulence"), is unlikely to be so lucky.

I met "the Maestro" a couple of times, before he was famous, and was never a subscriber to the cult of personality that grew up around him. His halo began to slip noticeably soon after he quit the Fed Chairman's role at the start of 2006, and undermined his successor, Ben Bernanke, in a series of ill-judged (but doubtless well-rewarded) speaking assignments even before Bernanke had had a chance to organise his pencil tray. Maybe Greenspan is unfortunate to be releasing his memoirs at the exact moment when the chickens he fed for so many years are coming home to roost, but there's no doubt that he's facing a hostile reception in some quarters: here, for example.

Greenspan was the most political of Fed Chairmen. His views on fiscal policy depended primarily on who was asking (and even he now admits that his endorsement of the Bush tax cuts was a mistake). But the key charge against him has to relate to monetary policy, specifically his willingness to allow unprecedented amounts of money growth at unprecedentedly low interest rates for unprecedentedly long periods of time, even when it became clear that the US economy was in no need of such support. The explosion of cheap money unleashed by Greenspan, in response to the LTCM crach, then the tech crash, and finally the September 2001 terrorist attacks, directly created the severe problems in credit markets that are now unfolding.

Even at the time, Greenspan's justification for this approach -- that it was safe because inflation was so low -- did not stand up to much scrutiny. Greenspan's attitude to inflation was supposedly a monetarist one, best summed up in Milton Friedman's famous quote that "inflation is always and everywhere a monetary phenomenon". However, a more accurate description of his view would be that "inflation is whatever I say it is". He (and thus the Fed) changed his view on what was the best measure of inflationary pressures with remarkable frequency. The only certainty is that it never focused on either the money supply or the widely-followed consumer price index (CPI). For a number of years the Fed appeared to focus on the Employment Cost Index (ECI), but toward the end of his tenure, Greenspan appeared to switch his allegiance to the snappily-named core personal consumption expenditure deflator.

There are good technical reasons for preferring this measure to the CPI, principally the fact that it reflects actual spending patterns rather than the arbitrary and inflexible basket used in computing the CPI. But over the past decade, both of these measures have had a fatal flaw as guides to US monetary policy: they have been held artificially low by the flood of cheap imports coming into the US, mainly from China. These have kept prices down all right, but it's not something that the Fed or Greenspan in particular can take any credit for. In focusing on the apparently tame behaviour of the various price indices, Greenspan and pals turned a blind eye to the buildup of financial market risk that inevitably flowed from the tidal wave of cheap money. Indeed, with his reflexive monetary easings in response to every setback, Greenspan convinced a lot of investors that he would always act to cushion those risks -- the so-called "Greenspan put". (It's largely in reaction to this that Bank of England Governor King was initially inclined to take a hard line in the current crisis).

Now the great man is bloviating (reportedly at $100k per throw) about the inevitability of a recession in the US and a housing crash in the UK. If you're a Northern Rock customer worried about your savings (you probably needn't) or a Northern Rock employee worried about your job (sadly, and through almost no fault of your own, you should be), make sure you know who to blame.

Martin Amis and the cult of death

I have not previously written anything about the "Clash of Civilisations" (or "Long War" or whatever you want to call it). Bigger brains than mine have focused on it, as have smaller ones such as George Bush's. I am going to offer a few thoughts on it now for two reasons:

1. I have been reading a biography of Gertrude Bell, the remarkable adventurer (or poet or author or mountaineer or photographer or geologist) without whom the state of Iraq would probably never have been created;

2. Martin Amis has broken a fairly prolonged silence on the issue this week, publishing a very odd article.

Why do I say it is "very odd"? Well, to start with, Amis devotes almost a quarter of the piece to a completely pointless rant about the appropriateness of the term "9/11" to describe the terrorist attacks of September 11, 2001. He even says that there is an "unfortunate resemblance" to the "911" emergency call number used in the US. Martin, old pal, that's exactly why 9/11 came into such widespread use.

The article is also odd because it indulges Amis's penchant for using obscure words -- or for making up some of his own. "Thanatism"? "Ratiocinative"? Very helpful for the average reader trying to digest this stuff on the train to work. (He also talks about a "negative eureka", which prompted my wife to say "What? You mean 'I've lost it'?" Maybe so.)

Moving on to matters of greater substance, Amis seems to believe (perhaps because he has been living in Latin America for the past few years) that his views on the war on terror are in some way unique. He recounts an appearance on Question Time in 2006, wherein he "said that the West should have spent the past five years in the construction of a democratic and pluralistic model in Afghanistan, while in the meantime merely containing Iraq. In Afghanistan we have already seen, not the “genocide” eagerly predicted by Noam Chomsky and others, but “genogenesis” (in Paul Berman’s coinage) – a burgeoning census. Since 2001, the population has risen by 25 per cent. Meanwhile, too, needless to say, the coalition should have been tearing up the earth of Waziristan in its hunt for the remnants of al-Qaeda". He claims that this "centrist" (his word) view was greeted with disbelief -- which I find very surprising, as I suspect that the position he advanced would be shared by a large proportion of the UK population.

Amis's main contention is that Islamism should be seen as a death cult. Well, duh. However, I don't think he is on firm ground in suggesting that this makes it comparable to (or even "indebted" to) Bolshevism and Nazism. There is a world of difference between people who are keen to kill other people, and people who are willing or even anxious to kill themselves in the process. As Amis himself might say, I think his ratiocinations on thanatism are inapposite.

Like a lot of other commentators given to foaming at the mouth about Islamism (Mark Steyn, Christopher Hitchens), Amis falls seriously short when it comes to offering any practical suggestions for what the West should do next. I don't claim to have any big ideas either, which is one reason I've stayed away from this topic until now. However, I do have one thought. Clearly, if there's a death cult out to get you, you have to do everything possible to kill it. It's like dealing with the Terminator, rather than with the IRA -- it doesn't have an exit strategy or a fallback position. But it makes no sense to adopt a policy that results in the addition of ten new recruits to the death cult for every one that you eliminate.

That's what the "war on terror" has managed to do, thanks mainly to the invasion of Iraq, and that's the key reason why that invasion was such a colossal error. Judging from the quote a couple of paragraphs back, Amis realises that too. The problem is, there's no way of uninvading Iraq. Dubya and pals have fed the death cult, instead of starving it.

Kaletsky still doesn't get it

At an early stage of this summer's financial crisis (30 July to be exact), I wrote about the confidence of the big beasts of economic punditry in the UK that the whole thing would blow over without any serious impact on the real economy. I suggested that it was much to soon to be sure about this, since banks always react to old loans going bad in the same way: they stop making new loans.

One of the big beasts I named at that time, Anatole Kaletsky, has continued to write about the crisis on a regular basis. He's been careful to abide by one of the main rules of punditry: express every possible opinion at least once, so you always have a helpful quote to fall back on. Without parodying his views too much, I'd say he's gone from "crisis, what crisis?" to "there wouldn't be a crisis if market participants were as smart as A. Kaletsky".

So when I opened the biz section of today's Times and found a Kaletsky piece called "Summer crisis will change things forever", I thought that his Damascene conversion was finally complete. I was wrong: after a few swipes at the Bank of England, Kaletsky gets to his main point -- which is that the hedge funds done it: "The question that nobody bothered to ask was how the managers of hedge funds and SIVs could provide this desirable combination of liquidity and safety, while still paying high returns and pocketing very handsome fees for themselves." Speak for yourself, Anatole. Quite a lot of people (including, no doubt, many within the hedge fund sector itself) were asking that question years ago, and managed to resist the temptation to invest there.

But hedge funds' fee structures, obscene as they may have been, are SO beside the point. The issue now is that these funds took on enormous amounts of structured product -- CLOs and CDOs and all that stuff, prime and non-prime. Their appetite for it was so huge that a lot of investment banks turned into sausage machines, churning the product out at ever-increasing rates.

As interest rates have risen, the credit quality of the sub-prime stuff has come into question, particularly in the US. Hedge fund investors are asking for their money back, so the managers are having to liquidate assets -- or to put it another way, they're selling the CLO and CDO product back to the banks that originated it. In fairness to Kaletsky, he recognises this, but stops short of drawing the important conclusion: the need to fund this tidal wave of product that is falling onto the balance sheet is putting a strain on the banks' own liquidity, so they're not making any new loans, least of all to each other. In today's highly credit-driven economy, this is all but certain to lead to big problems.

I wouldn't be surprised if hedge fund fees become a matter for a huge class action lawsuit once we get through the present crisis. But that will be a luxury we can enjoy in a quieter time. For now, the huge rollover of commercial paper in London this week and the possible unwinding of the Yen carry trade are much more pressing concerns.

No credit to the Times

Today's Times has an editorial to the effect that the UK tax credits for lower-paid workers (sorry, that's "Gordon Brown's tax credits" -- there must be an election coming) are more trouble than they're worth. This may well be true, but I'm not sure that it justifies the same paper's front page story today, which is also about tax credits.

Apparently a lot of people who were overpaid the tax credits (either through official incompetence, misunderstanding of the rules or outright fraud) have been forced to repay the government. However, because the tax authorities did not properly notify everyone whose claims were under investigation, many people mat be able to appeal successfully against the demand for repayment.

The Times illustrates the story with a front-page picture of a pleasant-looking woman who has successfully won such an appeal. She doesn't dispute that she was overpaid, but seems to have no qualms about keeping the money. Amazingly the Times helped with her appeal, which I think makes it an accessory to crime. Needless to say, the lady looks happy almost to the point of smugness. I hope she'll understand if those of us whose tax money she's pocketed are a bit less happy.

That's why they're the underdog

There's no easier way to find out why a company isn't the leader in its marketplace than buying its products. Today I got an e-mail from Sony, advising me that its Connect on-line music service will be phased out over the next few months. What they're really announcing is that they are dropping their proprietory music compression format, ATRAC, after discovering that nobody else wanted to use it.

They promise to help me to convert my existing music library to MP3 format. Thanks for nothing, guys -- I would have done it that way myself if I'd had half a brain, because Sony has not only previous but current form here. Everyone remembers the VHS-Betamax battle in the 1980s, when Sony was forced to concede defeat despite having the superior product. The company now seems to be facing a similar fate not only with ATRAC, but also with its Blu-ray high definition disc product. There's not much to be said for being a lone wolf in a fast-changing market. Apple is almost the only company that's managed to pull that off in the consumer electronics field, and even that's been a close-run thing at times.

Then there's pay-TV. I have a healthy antipathy for the Murdoch empire, as anyone who has been following this blog will have realised. So I was happy to sign up with "ON Digital" when I returned to London in the late 1990s. Sadly, ON Digital was managed by morons (and their set-top box was pants); it became ITV Digital (no improvement) and then, last year, was bought by Sir Branson and rebranded as Virgin Media.

And it's still not very good. The new management promptly picked a fight with Sky that led to the removal of several of Sky's channels from the service -- though there was, of course, no corresponding reduction in price. The quality of the service remains patchy at best -- channels are regularly "Not available at this time" (we're talking BBC1 here, not something obscure) and the much-touted video-on-demand service has never worked for me at all.

To fix this last problem, I gave them a call last week to see if I could get a new set-top box, as the current one dates back to the ITV Digital days. After a short bout of menu-hopping I got through to a live person, who asked me some security questions, but then said she couldn't help with my actual problem. She offered to pass me on to their faults department. There was a bit of canned music, then an automated voice came on -- and started asking me more security questions. I ploughed on until I was asked for....the last four digits of the number of the bank account that I used to pay my bills!! Has any of their clients ever been able to answer that question at the first time of asking? I gave up at that point and am currently building up my strength to have another go. If I don't get a satisfactory response, I may yet have to sell my soul to Murdoch.

And then there's my lifetime support of Leyton Orient...no, let's not go there.

Daily Mail lowers the bar even further

Even by the Daily Mail's standards, the front page layout for August 23 is singularly loathsome. The headline highlights the fact that over 500,000 foreigners arrived in the UK last year, while almost 200,000 Brits emigrated. The immigrants are tastefully illustrated through a picture of a group of swarthy men milling about. A closer look at the caption shows that these are supposedly Bosnian men waiting to try to get asylum in the UK, though how the Mail knows this, or whether the men actually succeeded in their asylum quest, is not disclosed. In other words, they may not actually be among the offending 500,000.

On the right hand side is a picture to portray the leavers: surprise surprise, it's a perfect nuclear family who reportedly left the UK in 2004 to move to Bordeaux. Oddly, their family name is Dannreuther, which suggests that at some stage they or their forebears were on the other side of the ledger!

Even the Mail's most blinkered readers know that while some immigrants may be asylum seekers, the roll-call also includes Roman Abramovich, Bill Bryson, Terry Gilliam, all the hard-working East Europeans who are keeping the economy moving, and a lot of young French men and women looking for a more congenial place to make money. And while some of the emigrants may be picture-perfect middle class families, a lot of them are seniors looking for a bit of sunshine in their old age, and some are tattooed chavs who just want somewhere warmer to eat their fish and chips.

The Britsh have always claimed the right to move around the world. I myself have lived and worked in two countries outside the UK: Barbados and Canada. I would have been appalled if there had been some snivelling fascist at the Toronto Star or the Barbados Advocate that wanted to deny me the opportunity, but I'm happy to say that there wasn't.

Is there a silver lining to this? Oddly, yes. I haven't read all of the Mail readers' comments on this story, but to my surprise and pleasure, the first two took issue with the Mail's spin on the statistics, and strongly defended liberal migration policies. Maybe this is just the on-line readership, but it's something.

Return of the lynch mob

The reaction to the judicial decision that Learco Chindamo, the murderer of Philp Lawrence, can not be deported to Italy when he completes his jail sentence is quite appalling. Lawrence's widow says she is "devastated" by the decision, though she says she has tried to forgive Chindamo. However, the reaction of the media is a lot less balanced. Predictably, the Sun and the Hate Mail have called for the repeal of the Human Rights Act. The Telegraph hasn't expressed a strong opinion of its own, but the readers' comments on its report of the subject are bloodcurdling (and surprisingly poorly written -- isn't the Telegraph a posh people's paper any more?). Even the Guardian is struggling, with an opinion columnist saying that decisions like this make it hard to defend the Human Rights Act.

The politicians are even worse. We can ignore David Cameron's kneejerk reaction -- and maybe he will be too busy re-checking his list of NHS hospitals "under threat" to say any more on the matter. But it's depressing to see Jack Straw, the Minister formerly masquerading as a leftie, expressing his disgust at the decision, while a junior Home Office minister says that Chindamo has "forfeited his human rights".

There's no doubt that the murder of Philip Lawrence was an awful crime, and by all accounts Chindamo was a nasty piece of work at the time. But he was only 15, he's served his sentence, and his probable release next year reflects expert opinion that he is a reformed character. If he was unequivocally British, that would more or less be the end of it, aside from the fact that the gutter press would no doubt track him down and put his life at risk. But Chindamo happens to have been born in Italy, moving here only when he was five years old. He has no remaining connections with Italy and doesn't speak the language, so deporting him there would certainly be an unusual punishment, if not a cruel one.

One of the key reasons we have a justice system is to ensure that the victims of crimes are not the arbiters of punishment. I feel sorry for Mrs Lawrence, but if I feel "devastated" about anything, it's the cavalier disregard that the media and politicians show for this cardinal principle whenever it suits them.

I'll pay when I'm dead

I almost feel sorry for John Redwood. His much-touted report on improving Britain's competitiveness runs well over 200 pages, but the only headline in the papers, all across the spectrum of opinion, concerns his proposal to abolish inheritance tax. This actually merits one six line paragraph in the report, around 180 pages in! How did this get to be so important? Only 6% of estates currently pay inheritance tax, and I surely can't be the only person who'd rather pay taxes after I'm gone than pay them now.

In any case, people hoping to get their hands on their parents' dough completely tax-free are likely to be disappointed. What Redwood and his colleagues are suggesting is that capital gains tax should be reformed and then applied to inheritances. This is exactly the system that operates in Canada: death triggers a "deemed disposition" of assets, resulting in the calculation of capital gains which are then subject to tax at the regular rate. Having gone through the execution of the wills of both of my wife's parents, I can attest that this emphatically does not mean that the estate is passed on tax-free.

Redwood's idea makes sense (I can't believe I just wrote that!) to the extent that it represents a more efficient way of dealing with the taxation of estates. Why have a separate and unpopular inheritance tax when you can get the same results through capital gains tax? However, this positive aspect is offset, or maybe even completely outweighed, by his proposal that the value of principal residences should be exempt from all taxation upon death.

This exemption (which also exists in Canada) changes Redwood's proposal from a sensible piece of tax simplification into a blatant sop to the property-obsessed middle classes. It could well have an undesirable effect on the property market: if I can pass on my home without tax, I'm all the more likely to remain overhoused in an unnecessarily large house until I croak, rather than downscaling in my dotage as people always used to do. This can only worsen the existing shortage of larger family homes, and help to push up their prices further.

There's a lot to think about in the Redwood report. Abolishing inheritance tax is neither the best nor the worst idea in it -- and it's certainly not the most important.

Not-so-mighty Redwood

I see that John Redwood, an arch-Thatcherite from the right of the Tory party, is proposing that the party adopts a programme of business deregulation as part of its platform for the next election. One of his proposals is to abolish most regulation of the mortgage market, on the grounds that it's the lender who is bearing the risk.

I suppose it's too much to expect a Tory dinosaur to be up to speed on the derivatives market, but perhaps someone should take the time to explain the current crisis in the US sub-prime mortgage market to Mr Redwood. The problems there have been caused not just by irresponsible (and unregulated) lending, but also by the practice of packaging the mortgages up into CLOs and selling them on to all manner of end investors. As a result, nobody can really be sure who is bearing the risk -- not even John Redwood.

Get the truck out of here!

I've been doing a lot of long-distance driving recently, at least by my standards. It's quite clear that the style of motorway driving in the UK has changed for the worse -- the European-style discipline that used to see most drivers move back to the inside lane after overtaking has largely given way to a more American-style practice of avoiding the inside lane at all costs, as if it was riddled with landmines. As a result it can often be almost impossible to avoid passing people on the inside, as they chug along 20 miles below the limit in heavy traffic in the middle lane, while leaving the inside lane completely clear.

I'm not sure whether this problem can be solved, especially with the ludicrous Clarkson known to boast that he never uses the inside lane. However, I do think something can and should be done about the needless congestion caused by trucks. Most of these vehicles are now fitted with regulators to stop them exceeding about 56 mph. However, this doesn't seem to deter their drivers from trying to pass other trucks if they are moving at even a slightly slower speed, which inevitably seems to result in two lanes being blocked as the trucks move side-by-side up a hill. In the worst example I saw of this recently, I and dozens of other drivers were stuck behind two trucks for almost ten miles on a two-lane stretch of the A1 before one of them finally managed to get ahead of the other.

The solution is clearly to ban trucks from leaving the inside lane, at least on two-lane motorways. The truckers might not like it, but a precedent already exists: such a ban already exists in the Netherlands. It would cost next to nothing to implement and would surely make a big dent in traffic congestion -- especially if it was also applied to caravans!

Sweating the assets

I used to think that failing to maintain things was a public sector problem. Everywhere I have lived, Government offices have been tackier than the glass-and-marble palaces of the private sector. Even newer public buildings seem to get ragged around the edges in next to no time. And compare your local NHS hospital with the nearest BUPA clinic.

However, I may be forced to change my interpretation of this phenomenon. Driving around this morning, I found myself listening to a vaguely nauseating discussion on rat infestations. There was a homeowner from Luton, a member of Luton town council, a representative of (privately-owned) Thames Water, and a pest control expert. The homeowner complained that nobody was fixing the rat infestation problems in her area, and the councillor and Thames Water guy took turns blaming each other for that. The latter was happy to hide behind the fact that the local authority had the ultimate responsibility for pest control, and kept saying that rats didn't actually live in the sewers.

Then the pest control guy stepped in, and said that there had been a big increase in the rat population over the past ten years. His group had done some research and found that one of the main causes was...privatisation of the water companies. Apparently when these companies were publicly-owned, they placed rat bait in "hot spots" in the sewers twice a year as a matter of course. Thames Water's approach is only to place bait when an actual rat problem is identified, and then only after a householder has complained to the local authority and the latter has notified Thames Water.

It's hard to believe that the public health authorities have had much input into Thames Water's "maintenance" practices. Anyone who's ever had a rat problem will know that prevention is better and easier than cure. That, of course, goes for maintenance generally: if Thames Water takes the same approach to the upkeep of its vehicles, I'm going to be giving them a wide berth in future.

Moving on to BAA -- not much of a leap, if recent stories are anything to go by -- it's starting to become clear that the main way that Ferrovial, the new owners, plan to make money from the company is by cutting back on operating expenses in general and maintenance in particular. Heathrow has always been a bit of a pit, with even the relatively new Terminal 4 fraying badly -- you don't want to be a non-UK passport holder trying to get through immigration there at peak time. (A couple of years ago I came in from Amsterdam with an Aussie colleague. Seeing the size of the line, I left him to fend for himself and headed for the office. I took the train to Paddington, then the tube to Moorgate, waited for a coffee at Starbucks and went to the office. I called hin as soon as I got to my desk -- and he was still in the immigration queue!)

This way of making money is called "sweating the asset", and it's a favoured approach in all privatisations. Fans of involving the the private sector in the provision of public services see it as an essential part of the more "efficient" private approach. Within reason it may well be, but BAA is not the first private owner, and won't be the last, to take it to an unwarranted extreme. (Amazingly, BAA is also asking that the performance criteria built into its contract be suspended when Terminal 5 opens next year. In effect it's saying in advance that it doesn't think it can manage the job).

I now think that what encourages lack of maintenance is not public ownership but monopoly. Thames Water and BAA face no real competition so they feel they can scrimp on things like service and maintenance, at least until somebody squeals. It ought to be easy to fix this at BAA -- take away the monopoly, which seems increasingly likely to happen. It's harder to see an easy way of setting it right at Thames Water.

I haven't flown through Heathrow in over a year but I have to do so next month. I'm really looking forward to it -- wonder if I'll see any rats.

Foot and mouth: leasons learned?

My first reaction to the news that the latest UK foot and mouth disease outbreak may have begun in a lab making vaccines was: why do we even have a lab making foot and mouth vaccine here? Farmers and the rural bureaucracy have always been fiercely opposed to the use of vaccines in controlling the disease. That's why hundreds of thousands of healthy animals were thrown onto monstrous funeral pyres during the last outbreak, in 2001.

But I may be wrong. Politicians are always fond of saying that "lessons will be learned" when things go awry. Usually they're not, but it does seem as if the handling of this latest outbreak is a lot smarter than it was in 2001 (and there's been no bogus emotional gurning from Tony Blair, either). The movement restrictions have been imposed much faster, and the burning of animals in open fields has given way to a more private incineration. Perhaps most important, it now seems that there is a greater likelihood that vaccines will be employed if, God forbid, the current outbreak becomes much larger.

Foot and mouth is not a killer disease for mature animals, but it debilitates them badly and drastically reduces their production of milk and meat. It's endemic in many parts of the world (such as South America), and vaccines are widely used there to control its spread. Nobody objects to eating meat from these herds, and it is freely imported into the UK. For domestic herds, however, it seems there has always been a presumption that meat from vaccinated animals should not enter the human food chain. This has led directly to the use of incineration as a method of controlling foot and mouth: if you can't inoculate your animals and you can't move them around because of fears of spreading the disease, it's better to slaughter them so they don't eat all of your feed.

The images of burning animals from the last outbreak, combined with the growing realisation that vaccination is an acceptable course of action, seem to have convinced public opinion that mass incineration simply cannot be permitted this time. Some farmers may object, but frankly their spotty track record in controlling the disease does not give them the right to dictate how it should be controlled.

One last thought: during the 2001 outbreak, Tony Blair was eventually compelled to bring in the Army to manage the fight against the disease. Gordon Brown (and the rest of us) should be hoping that the rapid response to the current outbreak will ensure he doesn't need to do the same. Given the ongoing commitment of troops to Iraq and Afghanistan, it's not clear how the Army would be able to respond.

The dyslexia of Herman Hesse

Sunday's Times Culture section had a review of a new CD by.....Stefan Wolpe.

New ways to make old mistakes

It's fun to see the big names of economic punditry (such as Anatole Kaletsky and Gavyn Davies) profferring their opinions on the current rout in global debt markets. Their take on the situation can be summarised as (a) this was all very predictable (though off the top of my head, I can't remember either of these gents actually predicting it) and (b) it doesn't spell the end of the bull market, because the world economy is in good shape and corporate balance sheets are healthy.

The most dangerous words in investing are "it's different this time". Even so, for now I think the optimistic Kaletsky/Davies view is probably more or less right. However, I am worried about the extent to which the long bull market is the product of cheap (and loose) credit rather than sound fundamentals. Years of cheap money have produced a boost in asset values, rather than the historically more normal rise in goods prices. Asset price rises (houses, stocks) have persuaded individuals, particularly in the US, to leverage themselves up in order to consume beyond their current incomes.

It's hard to predict how people will react if asset prices stagnate for a little while and banks turn off the credit spigot. And the situation is complicated by the fact that inflation has begun to perk up a little, which makes it more problematic for central banks to try to ease the pressures by cutting interest rates.

When I was involved in the lending business, we were always very conscious of the fact that banks always find new ways to lose money. What strikes me right now is that the problems facing the banks are very little different from those they faced in the credit crunches of the '70s and '80s. This suggests that the "institutional memory" that helps to keep up lending standards may have been eroded by the long spell of benign business conditions that we have enjoyed in recent years.

Take the mortgage market, for example. There is certainly one new element in the equation this time: the existence of the securitisation market means that banks can (or at least could until very recently) package up their mortgage assets and sell them on to end investors. However, it's arguable that the ability to do this, and the profits it can generate, encourages banks to pile up mortgage assets without fully assessing the underlying risks.

A long bull market in any commodity always causes lenders to relax their guard. During the oil price surges of the 1970s, Canadian banks were giving mortgages in Alberta based on the assumed future value of properties -- and were even ignoring the fact that mortgage security was almost unenforceable in that Province. Until recently in the UK, we have seen interest-only mortgages for more than 100% of the property value -- well, people have to be able to buy a fridge and sofa, don't they? These kinds of practices always cause problems in the end, and it would be reasonable to assume that demand from the securitisation market has exaggerated them this time. But underlying the problems is the same old mistake that banks have always made.

Or take corporate lending. The big game in town, with the really large, prestigious deals, has always been M&A. Again, there is a new element this time, in the shape of the private equity industry. To compete for deals, banks have offered what has become known as "covenant lite" loans, with few of the traditional conditions that bank loans carry in less expansive times. This is not new, however: harking back to my lending days, I can clearly remember one genius coming up with the concept of "slippage", whereby covenants in the loan agreement could not be enforced by the bank the first time the borrower breached them.

This makes no sense at all. Banks never want to call in a loan, but it's imperative that they should be able to do so in certain circumstances. With "slippage", whether a covenant breach was the result of a temporary market downturn or outright management incompetence made no difference: the bank could not ask for its money back. Needless to say, that was a recipe for trouble then, just as "covenant lite" is proving to be a recipe for trouble now.

If Messrs Kaletsky and Davies are missing anything, it's probably this: when banks start to lose money on bad old loans, they stop making good new ones for a while. In an economy as credit-driven as today's, markets won't be able to withstand the withdrawal of credit for long. It's too soon to say whether that will happen, but it's certainly much too soon to be sure that it won't.

The road to peace runs through.....Barbados???

Just last week we saw Tony Blair making a start on his new job as a Middle East peace envoy, with a visit to Jerusalem. To keep the momentum going, this week Blair is in Ramallah. No, wait, he's swanned off on holiday to Barbados for the next few weeks. There's no word on whether he's left John Prescott in charge of the peace effort.

I suppose in a way it's nice to see that Blair the private citizen is the same as Blair the politician: once a mooch, always a mooch. As usual, he's staying at Cliff Richard's villa in Barbados. Can anyone remember the last time the Blairs actually paid the going rate for a holiday? I know he claims to make a charitable donation with the money he saves, but rumour suggests that the amount wouldn't buy you much of a meal at the fancier spots on the St James coast.

I'm going to try hard to be kind about Blair's peace mission, because his achievement in Northern Ireland entitles him to the benefit of the doubt. But this is not a very good start.

No capitalism without egalitarianism?

Long, long time ago, when as a freshly-minted graduate I was working in Whitehall, I attended a conference called "Modernising movements in the Middle East". (For further context, this was before OPEC engineered its first oil shock). The crowd was the usual mix of academics, private sector execs and civil servants.

At some point I plucked up the courage to pose a question to one of the distinguished men of letters. I asked him to comment on my view that until the countries of the Middle East developed a more egalitarian economy, it would be difficult for them to sustain economic growth. I viewed the essentially mercantilist nature of those economies at that time as inconsistent with producing the gains in employment and mass consumption that drive modern economies in the "West", and I wondered what it would take to trigger the type of transformation that the Industrial Revolution created in Europe.

The professor was not hugely impressed by my question, but I still rather like it, and I think it still holds water. One thing that's quite clear is that the surge in oil prices, in the 1970s and on several subsequent occasions, has not been enough to trigger the sort of changes I had in mind. In 1970 Saudi Arabia was a poorish country with one product; in 2007 it's a rich (but unequal) country with one product.

My reason for bringing up this ancient history is that I am wondering if recent developments in capitalist economies, especially the huge shift in income and wealth toward the already-rich, may ultimately prove self-defeating. We seem to be moving away from an economy driven by rising living standards and mass consumption, toward one in which we rely on the excesses of the ultra-rich to keep things moving -- a return to the mercantilist era, in fact.

A piece today by James Harding in the business section of the Times notes that a lot of senior finance types are selling their personal equity holdings. They fear that the fallout from the US sub prime debacle (note to self: time for another anti-Greenspan diatribe) will undermine US consumption and bring the world economy to a standstill. There was a startling statistic: for the average earner in the UK, discretionary spending power has fallen by 25%, as a result of rising prices for food and energy and rising local tax bills. This problem is not about to get better. Thanks to ethanol mania, food and energy price rises are increasingly tied together, and there can be no doubt that the clean-up costs for the current flooding will add to the pressure on local taxes.

These things are happening at the same time as the media, with the Times in the forefront, are stuffed with stories about conspicuous consumption by the rich. But if the average family in the US, UK and elsewhere is forced to cut back, how big a yacht will Roman Abramovich have to build to keep the economy moving?

Groundrules for dissing the BBC

It's distressing to see the BBC breaking faith with its audience over phone-in shows, and there should certainly be severe consequences for those responsible. But it's far more distressing -- in fact it's downright nauseating -- to see the right-wing media putting the boot in with such undisguised glee.

We had a taste of this over the Hutton report, when the BBC's enemies were undeterred by the fact that the Corporation was clearly in the right, and apparently unconcerned by the fact that an unhealthy precedent for Government treatment of the media had been set. This time, the jackals are carrying on regardless of the fact that they are just as culpable as the BBC. So I suggest that the following should be barred from criticising the BBC over this issue:

* anyone who puts stories about the goings-on of "reality TV" shows on the news pages

* anyone who reports anything to do with "Big Brother" on the front page

* anyone who uses premium-rate phone lines to provide solutions for crosswords, sudoku puzzles etc

* the Daily Mail (as a matter of principle, and just in case it isn't captured by any of the other categories).

What we really need is to free the BBC from the necessity of taking part in the "race to the bottom" in which its broadcast competitors and much of the print media seem to be happily engaged. But it's hard to find much of a constituency for the poor old Beeb these days, either within the government or among the public at large. We are in danger of letting the rogues and hypocrites deprive us of something unique.

PPP RIP? Probably not

Metronet, the consortium holding a contract to maintain about two-thirds of the London Underground, filed for bankruptcy this week after an arbitrator refused to award it extra funds for carrying out the work. Metronet's bankers had previously said they would not extend its line of credit unless it could squeeze more money out of Transport for London (aka TfL, aka the taxpayer).

I last wrote about this as recently as June 29. In brief, Metronet has spent way over budget while massively underperforming its obligations under the contract. In fact it's done even worse than that, since it has admitted that it was responsible for the recent derailment of a Central Line train, which hit a tarpaulin that Metronet staff had left in a dangerous spot.

Media reactions to Metronet's collapse are interesting. In an editorial, the Times admits that Metronet has only itself to blame for its failures. However, it argues that this does not invalidate the principle of "public private partnerships" (PPPs), and it comes close to throwing responsibility back onto TfL. According to the Times, the test will be whether TfL can readily find someone else to take on the work. I'm not sure if this is a principle that can be applied very widely: "I'm sorry that your meal cost more than it said on the menu and that you were sick for two days afterwards. No, you can't have your money back, and we're not paying your medical bills, but there's another restaurant down the street that you can try when your appetite returns".

Jeremy Warner in the Independent's business section has a more reasoned view. He admits that the Metronet fiasco has driven a coach and horses through two of the supposed benefits of the whole PPP approach to public works: that the private sector will do the work more efficiently/cheaply than the public sector, and that if it fails to do so, it will bear the cost. He observes that it seems that the City has, as usual, run rings around the public servants in putting the deal together.

To me, this last point -- that the private sector will try to bamboozle the public sector in these deals -- almost amounts to sufficient reason not to continue with the whole PPP approach. (I say "almost" because the Government has shown itself quite capable of playing fast and loose with contracts -- take a look at the experience of GNER with its contract to run the East Coast Main Line). There isn't much hope that the Government will abandon PPPs, but we should at least ask if there are any lessons that can be drawn from this episode.

One that occurs to me is that the Government should choose its partners carefully. Metronet isn't a real company -- it's a consortium put together by five engineering companies solely to bid on the Underground contracts. These shareholders all appear to have limited liability for Metronet's doings. Apparently the Government's negotiators either never heard of, or at any rate did not insist on, things like guarantees, deficiency agreements, covenants or even comfort letters that would have made the partners liable for Metronet's failings. In these circumstances, it was misleading for the Government ever to suggest that the private sector would be on the hook for any cost overruns. In fact, when you consider the huge sums that have already been paid to Metronet under the contract, it's likely that the losses incurred by the partners are quite limited -- and, of course, deductible from earnings elsewhere.

The next question is this: TfL, and particularly Mayor Ken Livingstone, never wanted this deal in the first place. Will the Government, which rammed it down their throats, now step in to defray the costs? I know which way I'm betting.

Back to Black

In mid-March I posted a piece recommending that everyone should pay close attention to the Conrad Black trial, which was just getting underway in Chicago. I styled it as a "celebrity death match". Well, if anyone died, it was probably from boredom. I had expected legal tantrums, outrageous tales of high living and who knows what else. There was some of that, but mostly it was about non-compete agreements, the workings of audit committees and the technicalities of mail fraud. Despite that, I've been following it avidly, which just goes to show how a lifetime spent in the financial sector can mess you up.

Black has now been found guilty on four of the thirteen counts against him -- three of mail fraud, relating to the non-competes, and one of obstructing justice. (It almost came out much worse for him: according to one of the jurors quoted in the Toronto Globe and Mail, earlier in the week a majority of the jurors also wanted to convict on another of the fraud charges, plus a racketeering charge, but were finally dissuaded by the minority). Black plans to appeal the convictions, and sentencing will not take place until late November, so he won't be heading for the Big House any time soon.

The prosecution did not make a particularly strong case against Black, and came in for a lot of criticism for pushing the "class envy" button a little too hard. In the event, Black was acquitted of the major lifestyle-related charges -- spending company money on a party for his wife, and buying his Manhattan apartment from the company at an unduly low price -- but it may still have been this part of the case that led to his conviction on the charge of obstructing justice, which carries the longest potential jail term.

Why do I say this? Well, the charge related to an incident in which Black was captured on CCTV carrying boxes of papers from his Toronto office. The lifestyle evidence must have had some part in convincing the jury that carrying boxes was not a normal activity for Black. After all, he famously attended a fancy-dress ball dressed as Cardinal Richelieu, not as a UPS deliveryman.

The lifestyle evidence also produced one of the great quotes of the whole affair, though it was penned before the actual trial began. Peggy Wente of the Toronto Globe and Mail wrote that "there are only a handful of women in the world who can afford to dress the way Lady Black does. Unfortunately, Lady Black may not be one of them".

There could still be some fun and games to come here, but given the tedium of the trial itself, it may not be worth trying to bag a ringside seat. Pity, then, poor Mark Steyn, who sat through and blogged the whole thing as one of Black's very few sympathisers, only to miss the day of the verdicts because of a prior commitment in Madrid!

The price of getting old

The Times ran an impassioned piece this week by one Liz Penny (a pseudonym), complaining about her experiences in arranging care for her elderly parents. Basically she hates just about everything -- the hospitals, the care homes, the lack of advice, the cost...

I've been through some of the same experiences, but I'm not nearly as angry as Liz Penny seems to be. Both my mother and my aunt are now in care homes, in each case after long spells in hospital. My mother was clearly seen as a bed-blocker. On the say-so of a physiotherapist, she was discharged back to her own home just a few days before Christmas -- and wound up back in hospital inside a week. As for my aunt, the hospital experience was better -- but two of her friends contracted c. difficile while visiting her!

Things are much better now that they are both in long-term care. The homes, at opposite ends of the country, are modern and well equipped. The staff lie along a spectrum from the merely dedicated to the positively angelic. The food is monotonous, my mother carps about it all the time, but the fact is that she has regained all of the weight she lost while languishing in hospital.

There is one key difference between the two of them. My mother is in a position to pay for her own care, mainly because she owned her own home, which we have now sold. My aunt has always lived in council housing, has minimal savings, and is consequently having most of her care expenses paid for by the council. This has not been difficult to arrange.

It's clear from Liz Penny's article that she deeply resents the fact that her father was required to pay for his own care at the outset. She acknowledges that he extracted £50,000 from the value of his home in order to provide funds for this purpose, but is scandalised that he actually had to spend it! I've seen lots of examples of people getting angry at having to sell their parents' home for this purpose -- there goes the inheritance! (My sister even heard a man on the radio saying that he should be allowed to have his father euthanased, rather than having to sell the house to pay for care!) But think of it this way. If I'm going to be taxed to pay for Liz Penny's dad's care, so that she can benefit from the value of his home, who's going to pay for my care when I get old? Or for Liz Penny's, since she presumably won't want to sell the home when her time comes, either.

I seem to write about issues like this, raised by the aging of the baby boom quite often. It's one of the biggest issues facing society. I was recently told by my pension adviser that the actuaries will base my pension on the assumption that I will live to the age of 84. I have an uncomfortable feeling that medicine is allowing us to prolong our existence, but not really extending our lives.