Let's agree on one thing right away: the bonus culture at big banks, in the UK and worldwide, is out of control. Receiving an annual bonus, almost regardless of how the firm has done or how any particular individual has performed, has taken on a quasi-sacramental significance.
In the late 1990s, during a somewhat testing time for financial markets, all of the senior staff at my firm were "asked" to agree to salary cuts of between 5 and 15%, to help the bank to keep costs under control. For those of us working in London at the time, this was of course a direct breach of labour law, but it would have been a career limiting move not to comply. A few months into this wage rollback, bonus time came around....and the firm duly paid out the usual substantial bonuses, far exceeding the scale of the wage reductions. Go figure. The bonus ritual must be observed, come what may.
All of that said, the past few days of frenzy over the £960,000 bonus awarded to RBS boss Stephen Hester, which culminated last evening in Hester's decision not to accept the award, has been little short of nauseating. The media have splashed around large-type headlines about "public fury", but how do they know that? This story only emerged late last week, so there has been no opportunity for anyone actually to gauge the public mood. No, this whole bogus scandal has been concocted by high-profile media commentators and seized on by opportunistic politicians. If there is now "public fury", it's because this unholy alliance wanted it.
Stephen Hester was hired to sort out an almighty mess left at RBS by the previous regime, a regime headed by a man (Fred Goodwin) to whom the Labour government saw fit to award a knighthood, and whose punishment for bankrupting the institution has been retirement on an astronomical pension. By all accounts, Hester is doing a good job, which is just as well considering that the taxpayers still have £45 billion in capital at risk in the bank. His most vociferous attackers in the media doubtless all earn massive multiples of the average wage -- though of course they would never see fit to disclose that fact -- while taking on far less responsibility.
As for the politicians, words almost fail me. But only almost. Here we have a group of people on big salaries and with generous expense accounts, who all qualify for inflation-indexed pensions after just a few years in the job, pontificating about how much someone should be paid for a job most of them could never understand, much less carry out.
It's hard to know who looks worse here. Is it David Cameron, who has alternated between (a) saying that Hester's bonus is a matter only for the board of RBS to decide, and (b) trying to claim credit for the fact that the payout is less than it was last year? Or is it Ed Miliband and the opposition front bench, who have had the sheer gall to decry Hester's bonus as a reward for failure. Hell, guys, you'd know about that, wouldn't you? Your government may not have been the parents of the financial crisis, but you were surely the midwives. Your reward for that appalling failure was to get re-elected to the lucrative bully pulpit for another term.
In the end, it's probably Cameron who looks worse. He's only just finished telling everyone how he supports a new, less greedy approach to capitalism, and his Cabinet colleague Vince Cable has just unveiled detailed plans to curb "excessive" executive pay. Reports that Stephen Hester could actually have claimed an even larger bonus under his contract suggest that the RBS board was trying to go along with that zeitgeist -- and its reward is the witch-hunt we have seen this past weekend. David Cameron may have breathed a sigh of relief when Hester turned down his bonus, but now that the dogs of war have been let slip, that relief is unlikely to last very long.
Monday, 30 January 2012
Friday, 27 January 2012
After you, Peston!
The BBC's irritating business editor, Robert Peston, currently schmoozing at public expense with the billionaires and the powerful in Davos, has seen fit to lead the charge against the £960,000 bonus awarded to RBS chairman Stephen Hester. Peston has been all over the airwaves declaring that since the taxpayer owns 83% of RBS, Hester's pay, and that of all its senior execs, is a matter of legitimate public interest.
Well, as his own employer, the BBC, is 100% owned by the taxpayer, I think it's only right we should be told how much Peston trousers for hectoring us all the time about how well connected he is. Even the folks in the City of London, who like to keep a low profile in such matters these days, are starting to think that Peston might be just edging a bit towards the hypocritical with these attacks -- see this piece of sub-Private Eye satire.
And let's not just ask about his salary! Earlier this month, Peston used his blog to plug a study that claimed to show that even with the Government's planned reforms, public sector pensions are still "gold plated". So come on, Pesto, how big and gilded is your pension pot? I'm sure you'd be the first to argue, VERY LOUDLY and with the emphAsis on all the wrong syllAbles, that we have a right to know.
Well, as his own employer, the BBC, is 100% owned by the taxpayer, I think it's only right we should be told how much Peston trousers for hectoring us all the time about how well connected he is. Even the folks in the City of London, who like to keep a low profile in such matters these days, are starting to think that Peston might be just edging a bit towards the hypocritical with these attacks -- see this piece of sub-Private Eye satire.
And let's not just ask about his salary! Earlier this month, Peston used his blog to plug a study that claimed to show that even with the Government's planned reforms, public sector pensions are still "gold plated". So come on, Pesto, how big and gilded is your pension pot? I'm sure you'd be the first to argue, VERY LOUDLY and with the emphAsis on all the wrong syllAbles, that we have a right to know.
Wednesday, 25 January 2012
Crude and refined logic
One of the UK's eight oil refineries (Coryton, in Essex) is in big financial trouble, as its Swiss owner, Petroplus, files for bankruptcy. Whenever this sort of thing happens anywhere in the world, the usual suspects line up to advise us that the "downstream" portions of the energy industry -- the refineries, the gas stations -- are at best only marginally profitable. It's the exploration and production activity that earns all that lovely money for the oil majors.
Except it isn't, is it? Oh sure, that's how the industry has set itself up in recent years. Just about every producer has bundled up its downstream operations and sold them off to undercapitalised, over-leveraged specialist operators such as Petroplus. And that's fair enough -- the speciality of the Exxons and BPs of this world is exploration and production, not running a chain of retail outlets that appear to make most of their money from chocolate bars and snacks.
But ask yourself this. If all the refineries closed down overnight, just how profitable would exploration and production be? Crude oil is every bit as useless on the ground as it is down the well; it only has value once it's been refined and moved to where the consumer can buy it. ALL of the profits in the oil industry actually come from the downstream stuff, even if that's not the way the producers want to portray it.
Except it isn't, is it? Oh sure, that's how the industry has set itself up in recent years. Just about every producer has bundled up its downstream operations and sold them off to undercapitalised, over-leveraged specialist operators such as Petroplus. And that's fair enough -- the speciality of the Exxons and BPs of this world is exploration and production, not running a chain of retail outlets that appear to make most of their money from chocolate bars and snacks.
But ask yourself this. If all the refineries closed down overnight, just how profitable would exploration and production be? Crude oil is every bit as useless on the ground as it is down the well; it only has value once it's been refined and moved to where the consumer can buy it. ALL of the profits in the oil industry actually come from the downstream stuff, even if that's not the way the producers want to portray it.
Tuesday, 24 January 2012
House of the rising rent
Considering how obsessive the British are about their houses, it's amazing how dysfunctional the UK residential property market is. The social housing sector, in particular, is a complete mess. The sell-off of so-called "council houses" launched by the Thatcher government never paid much heed to the demand for affordable housing; instead it simply slashed the supply. As the economy has slowed in the last few years, demand for rental homes has begun to rise -- home ownership is actually declining for the first time in a generation -- making the problems even more acute.
There are still about 3.8 million social housing units in the UK. Most of these are owned by local authorities, the rest by co-operatives or other housing associations. The current waiting list for such homes runs to 1.83 million people, meaning that it can take many years for would-be tenants to be allotted a property. One small illustration of the scale of the problem: Newham Council in London was recently told that it would be allocated 350 homes in the Olympic Village to use for social housing, once the Games are over. Newham's current housing waiting list: 40,000!
Considering the imbalance between supply and demand, it's little surprise that some interesting scams have sprung up. One that has had a lot of media publicity lately is sub-letting -- council tenants quietly re-renting their property to others in need, and using the rent they receive to facilitate the purchase of a home of their own. This is, of course, forbidden. There's some dispute about how widespread the practice is: official data suggest that it only affects 1.25% of council homes nationwide, rising to 2.5% in London. However, on 23 January the Daily Mail ran a shock-horror story suggesting the real number could be as high as 20% of all council properties, costing the taxpayer an alleged £13 billion a year. (I am so NOT providing a link to the Hate Mail).
The lack of social housing has also boosted the cost of social benefit programmes. Local authorities have been compelled to put benefit claimants into private accommodation at full market rents. (If not more -- the private landlords are quite aware that they hold the whip hand in negotiating with council welfare officers). In more expensive areas, especially London, the overall shortage of available property has meant that the costs for providing this benefit have become astronomical.
As part of its welfare reforms, the government is proposing that the housing component of social benefit packages should be limited to £500 per week. This equates to a pre-tax income of £35,000, above the national household average, so the proposal has a lot of voter support, and not just from Daily Mail readers. However, concern that the measure would cause the break-up of families has resulted in its being rejected in the House of Lords, where an alliance of LibDems and bishops joined forces with Labour peers to defeat the government. Undeterred, the government insists it will press ahead with the measures, perhaps with some transitional or mitigating changes to buy off the bishops.
Meanwhile, very much at the other end of the scale, the super-rich are using offshore companies to dodge stamp duty payments on the purchase of UK homes, costing the Treasury an estimated £750 million a year. This form of ownership doesn't just deprive the government of revenues; it also means that the effective ownership of a property can change without any requirement to notify the UK authorities. (Lovers of music -- I use the term very loosely -- will be interested to know that Sir Bob Geldof is the beneficial owner of two UK properties that are legally owned by special purpose companies. St Bob insists that tax was paid when the properties were bought, and there's no reason to doubt him. However, it's a reasonable assumption that tax won't be paid next time they're sold, or any time after that, as long as the present law remains in place). The so-called "mansion tax" on high value properties, favoured by the LibDems, would close this loophole. Surprisingly, however, and unlike the housing benefits cap, this does not seem to be an urgent priority for the government.
There are still about 3.8 million social housing units in the UK. Most of these are owned by local authorities, the rest by co-operatives or other housing associations. The current waiting list for such homes runs to 1.83 million people, meaning that it can take many years for would-be tenants to be allotted a property. One small illustration of the scale of the problem: Newham Council in London was recently told that it would be allocated 350 homes in the Olympic Village to use for social housing, once the Games are over. Newham's current housing waiting list: 40,000!
Considering the imbalance between supply and demand, it's little surprise that some interesting scams have sprung up. One that has had a lot of media publicity lately is sub-letting -- council tenants quietly re-renting their property to others in need, and using the rent they receive to facilitate the purchase of a home of their own. This is, of course, forbidden. There's some dispute about how widespread the practice is: official data suggest that it only affects 1.25% of council homes nationwide, rising to 2.5% in London. However, on 23 January the Daily Mail ran a shock-horror story suggesting the real number could be as high as 20% of all council properties, costing the taxpayer an alleged £13 billion a year. (I am so NOT providing a link to the Hate Mail).
The lack of social housing has also boosted the cost of social benefit programmes. Local authorities have been compelled to put benefit claimants into private accommodation at full market rents. (If not more -- the private landlords are quite aware that they hold the whip hand in negotiating with council welfare officers). In more expensive areas, especially London, the overall shortage of available property has meant that the costs for providing this benefit have become astronomical.
As part of its welfare reforms, the government is proposing that the housing component of social benefit packages should be limited to £500 per week. This equates to a pre-tax income of £35,000, above the national household average, so the proposal has a lot of voter support, and not just from Daily Mail readers. However, concern that the measure would cause the break-up of families has resulted in its being rejected in the House of Lords, where an alliance of LibDems and bishops joined forces with Labour peers to defeat the government. Undeterred, the government insists it will press ahead with the measures, perhaps with some transitional or mitigating changes to buy off the bishops.
Meanwhile, very much at the other end of the scale, the super-rich are using offshore companies to dodge stamp duty payments on the purchase of UK homes, costing the Treasury an estimated £750 million a year. This form of ownership doesn't just deprive the government of revenues; it also means that the effective ownership of a property can change without any requirement to notify the UK authorities. (Lovers of music -- I use the term very loosely -- will be interested to know that Sir Bob Geldof is the beneficial owner of two UK properties that are legally owned by special purpose companies. St Bob insists that tax was paid when the properties were bought, and there's no reason to doubt him. However, it's a reasonable assumption that tax won't be paid next time they're sold, or any time after that, as long as the present law remains in place). The so-called "mansion tax" on high value properties, favoured by the LibDems, would close this loophole. Surprisingly, however, and unlike the housing benefits cap, this does not seem to be an urgent priority for the government.
Saturday, 21 January 2012
The remnants of empire
For several decades the British have been rather smug about how smoothly they handled the dismantling of the former Empire, compared to the mess supposedly created by the French and Belgians, among others. It's never really been true. There's little to choose between the Algerian uprising and the Mau-mau terrorist campaign in Kenya in terms of sheer bloodiness. In many cases the UK left behind problems that remain intractable to this day: the division of India and Pakistan for example, or the Middle East, though that unholy mess was a kind of joint venture between the UK and France.
Indeed, the unwinding of the Empire isn't even complete. It's striking to note that of the sixteen territories regarded by the UN as "non self governing" -- i.e., colonies -- ten are still administered by the UK. The full list is to be found on the UN website. So as the temperature starts to rise ominously in one of those ten, the Falkland Islands, it seems a bit rich for David Cameron to start accusing the government of Argentina of displaying a "colonial" attitude to the islands.
Cameron's justification for using this term is that the people of the islands want to remain under British sovereignty, and so any attempt to deny them that right is a form of colonialism. That can't possibly be right. Given that the islanders are all of British descent, what on earth else would you expect them to want? Not that Argentina's claim to the islands is particularly robust -- heck, they haven't even bothered to come up with their own name for the archipelago. "Malvinas" is a hispanicised version of the islands' former name, "Les Malouines", which reflects the fact that the first European settlers were French sailors from St Malo.
There have been some very sensible letters and columns in the past few weeks in the quality press, by ex-diplomats and such, arguing that the UK should initiate talks with Argentina aimed at securing the rights of the islanders to maintain their "British" way of life, while recognising Argentina's claim to sovereignty. The precedent of the Hong Kong handover back in 1997 has been widely cited, though that comparison is not exact, because the treaty under which the UK leased much the territory from China was reaching its end, so there really wasn't much choice in the matter.
Unfortunately there are few signs that the government is listening to this advice. David Cameron and his foreign secretary, William "the Mekon" Hague, have both taken a belligerent stance, and there are plans to boost the UK military presence on the islands in case the Argentinians try to pull a stunt. But who do you think you are kidding, Mr Cameron?
The tabloid press no doubt has all the "Gotcha" headlines at the ready if war breaks out, but the truth is that the UK is in a massively weaker position now than it was in 1982. The armed forces are much smaller now, and much more stretched in various flashpoints around the globe. Crucially, the Harrier jump jets that played a big role last time have been grounded, and there is no aircraft carrier in current Royal Navy service.
Most importantly, both the US and the Organisation of American States, which provided covert assistance to the UK thirty years ago, are most unlikely to do the same if conflict breaks out again. Both have expressed support for Argentina's claim. It was a close-run thing last time; this time it could be a Suez-style humiliation. As Churchill, not noticeably a pacifist by nature, once put it, "better jaw-jaw than war-war". Cameron and Hague should pay heed.
Indeed, the unwinding of the Empire isn't even complete. It's striking to note that of the sixteen territories regarded by the UN as "non self governing" -- i.e., colonies -- ten are still administered by the UK. The full list is to be found on the UN website. So as the temperature starts to rise ominously in one of those ten, the Falkland Islands, it seems a bit rich for David Cameron to start accusing the government of Argentina of displaying a "colonial" attitude to the islands.
Cameron's justification for using this term is that the people of the islands want to remain under British sovereignty, and so any attempt to deny them that right is a form of colonialism. That can't possibly be right. Given that the islanders are all of British descent, what on earth else would you expect them to want? Not that Argentina's claim to the islands is particularly robust -- heck, they haven't even bothered to come up with their own name for the archipelago. "Malvinas" is a hispanicised version of the islands' former name, "Les Malouines", which reflects the fact that the first European settlers were French sailors from St Malo.
There have been some very sensible letters and columns in the past few weeks in the quality press, by ex-diplomats and such, arguing that the UK should initiate talks with Argentina aimed at securing the rights of the islanders to maintain their "British" way of life, while recognising Argentina's claim to sovereignty. The precedent of the Hong Kong handover back in 1997 has been widely cited, though that comparison is not exact, because the treaty under which the UK leased much the territory from China was reaching its end, so there really wasn't much choice in the matter.
Unfortunately there are few signs that the government is listening to this advice. David Cameron and his foreign secretary, William "the Mekon" Hague, have both taken a belligerent stance, and there are plans to boost the UK military presence on the islands in case the Argentinians try to pull a stunt. But who do you think you are kidding, Mr Cameron?
The tabloid press no doubt has all the "Gotcha" headlines at the ready if war breaks out, but the truth is that the UK is in a massively weaker position now than it was in 1982. The armed forces are much smaller now, and much more stretched in various flashpoints around the globe. Crucially, the Harrier jump jets that played a big role last time have been grounded, and there is no aircraft carrier in current Royal Navy service.
Most importantly, both the US and the Organisation of American States, which provided covert assistance to the UK thirty years ago, are most unlikely to do the same if conflict breaks out again. Both have expressed support for Argentina's claim. It was a close-run thing last time; this time it could be a Suez-style humiliation. As Churchill, not noticeably a pacifist by nature, once put it, "better jaw-jaw than war-war". Cameron and Hague should pay heed.
Thursday, 19 January 2012
"All in this together?" Prove it!
David Cameron has been keen to point out that "we're all in this together" as the UK struggles with tough economic times and a possible new financial crisis, but he's been finding it hard to convince anybody. Here are just a few recent reasons for the public's scepticism:
* Signs of restraint in the City bonus culture are still few and far between. Goldman Sachs is set to pay its employees an average of £238,000 each (and it's important to recall that secretaries' and messengers' remuneration is included in that number). Meanwhile, despite the outcry from the public and politicians, it looks as if banks' annual reports will not fully disclose details of top executives' pay.
* NHS doctors are threatening to strike over government attempts to reform their pension scheme, under which they can currently retire at 60 with a fully-indexed pension worth an average of £48,000 per year.
* And the Queen is apparently exempt from austerity too, with Cameron reportedly supporting a crackpot scheme to buy her a new yacht as a way of marking her Diamond Jubilee this year -- but only as long as no public money is involved. Except public money will be involved, won't it, Dave? Private sector donors to this wildly inappropriate idea will no doubt claim a tax deduction.
There are signs that Cameron is realising that the message isn't getting across. Following on from his recent comments to Andrew Marr on the BBC about excessive executive pay (see my post of 9 January, "Crony baloney"), the Government will introduce specific proposals for reform and transparency next week. Business lobbyists are already getting set to man the torpedoes. And today Cameron has talked about the need for a kinder and gentler capitalism in order to maintain public support for a free market economy.
He's facing an uphill battle there. Employment data for November show that the unemployment rate has risen to 8.4%, a 15-year high, with public sector job losses far outpacing the meagre crop of new jobs in the private sector. You have to think that the coalition government would be riding a whole lot lower in the opinion polls, were it not for the unfathomably ineffective performance of Ed Miliband.
* Signs of restraint in the City bonus culture are still few and far between. Goldman Sachs is set to pay its employees an average of £238,000 each (and it's important to recall that secretaries' and messengers' remuneration is included in that number). Meanwhile, despite the outcry from the public and politicians, it looks as if banks' annual reports will not fully disclose details of top executives' pay.
* NHS doctors are threatening to strike over government attempts to reform their pension scheme, under which they can currently retire at 60 with a fully-indexed pension worth an average of £48,000 per year.
* And the Queen is apparently exempt from austerity too, with Cameron reportedly supporting a crackpot scheme to buy her a new yacht as a way of marking her Diamond Jubilee this year -- but only as long as no public money is involved. Except public money will be involved, won't it, Dave? Private sector donors to this wildly inappropriate idea will no doubt claim a tax deduction.
There are signs that Cameron is realising that the message isn't getting across. Following on from his recent comments to Andrew Marr on the BBC about excessive executive pay (see my post of 9 January, "Crony baloney"), the Government will introduce specific proposals for reform and transparency next week. Business lobbyists are already getting set to man the torpedoes. And today Cameron has talked about the need for a kinder and gentler capitalism in order to maintain public support for a free market economy.
He's facing an uphill battle there. Employment data for November show that the unemployment rate has risen to 8.4%, a 15-year high, with public sector job losses far outpacing the meagre crop of new jobs in the private sector. You have to think that the coalition government would be riding a whole lot lower in the opinion polls, were it not for the unfathomably ineffective performance of Ed Miliband.
Monday, 16 January 2012
Playing with trains
Yesterday saw the annual model train show in town, the usual mix of geezers in anoraks and kids with periscopes gawping at layouts in a bewildering variety of scales and gauges. The show is put on by the Chiltern Model Railway Society. By coincidence, the Chilterns are currently the centre of ferocious opposition to the Government's plans to spend £32 billion on "HS2", a high-speed rail line initially linking London and Birmingham, and later pushing north to Manchester and Leeds. You have to wonder if the railways now so lovingly recreated by the modellers would ever have been built if today's NIMBYs had been around in Victorian times. Fears that the HS1 line between London and the Channel Tunnel would blight the whole of Kent (aka the "garden of England") have proved to be greatly overstated, but that's unlikely to mollify the well-heeled denizens of Buckinghamshire and Oxfordshire (now apparently aka "irreplaceable areas of outstanding natural beauty").
However, you don't have to be a resident of Amersham or Great Missenden to question the wisdom of HS2, at least as currently proposed. Even for a railway buff like your humble blogger, there are some bothersome issues:
* If we're going to spend £32 billion on the railways, does HS2 give the best bang for the megabuck? A lot of the claimed benefits seem very airy-fairy, whereas the costs are only too real, and are certain to go way above budget as the project progresses. Would it not be better to spend money on electrifying more of the network? £32 billion would buy an awful lot of catenaries. There are a couple of electrification schemes on the drawing board -- the Great Western line out of Paddington, Manchester to Leeds -- but the UK will trail well behind the rest of Europe in this regard, even when those schemes are completed.
* If, as HS2 proponents claim, the west coast main line will run out of capacity sometime in the next decade, is this the best way to deal with that? Longer trains are one obvious alternative. There's also plenty of spare capacity on the secondary London-Birmingham line (the Chiltern Line out of Marylebone), which could be electrified at a fraction of the cost of HS2 (NIMBYs permitting, of course).
* How sensible is the planned route? Euston, the proposed London terminus for HS2, is already overcrowded. Renovating it to accommodate the new trains would be massively disruptive. The line will not initially serve Heathrow Airport, even though it will run not far to the north of it. And the terminus in Birmingham will be a new station 15 minutes from the city centre; boasting that the London-Brum journey time will be cut to 49 minutes from the current 80 minutes is meaningless if passengers have to schlep out to the new station at the start or end of their journey.
* What about the trains themselves? The HS2 publicity brags about "luxury dining cars", which seems a bit superfluous for a 49 minute trip. More significantly, the trains may well be double-decker, which would be a huge mistake. UK railways have a much smaller loading gauge than those in the rest of Europe, so the regular network can't accommodate double-decker trains. (Ultra anorak-y loading gauge explanation here). Such trains would only be able to run on specially-designed high speed tracks. This would mean that they could not run on at conventional speeds to cities not directly served by the new lines -- cities such as Liverpool, Newcastle, Edinburgh or Glasgow -- a huge drawback. (Anyone who has travelled extensively on the TGV network in France or the ICE trains in Germany will have noticed that they often use conventional tracks, which is only possible because of the bigger loading gauges there).
There's broad, cross-party support for HS2, but you can't help wondering if the politicians are just slavering over the opportunity to get their names on something REALLY BIG, rather than making an informed, value-for-money decision. The Chiltern NIMBYs are going to come in for a lot of abuse in the coming months, but in this case, they may just have a point.
However, you don't have to be a resident of Amersham or Great Missenden to question the wisdom of HS2, at least as currently proposed. Even for a railway buff like your humble blogger, there are some bothersome issues:
* If we're going to spend £32 billion on the railways, does HS2 give the best bang for the megabuck? A lot of the claimed benefits seem very airy-fairy, whereas the costs are only too real, and are certain to go way above budget as the project progresses. Would it not be better to spend money on electrifying more of the network? £32 billion would buy an awful lot of catenaries. There are a couple of electrification schemes on the drawing board -- the Great Western line out of Paddington, Manchester to Leeds -- but the UK will trail well behind the rest of Europe in this regard, even when those schemes are completed.
* If, as HS2 proponents claim, the west coast main line will run out of capacity sometime in the next decade, is this the best way to deal with that? Longer trains are one obvious alternative. There's also plenty of spare capacity on the secondary London-Birmingham line (the Chiltern Line out of Marylebone), which could be electrified at a fraction of the cost of HS2 (NIMBYs permitting, of course).
* How sensible is the planned route? Euston, the proposed London terminus for HS2, is already overcrowded. Renovating it to accommodate the new trains would be massively disruptive. The line will not initially serve Heathrow Airport, even though it will run not far to the north of it. And the terminus in Birmingham will be a new station 15 minutes from the city centre; boasting that the London-Brum journey time will be cut to 49 minutes from the current 80 minutes is meaningless if passengers have to schlep out to the new station at the start or end of their journey.
* What about the trains themselves? The HS2 publicity brags about "luxury dining cars", which seems a bit superfluous for a 49 minute trip. More significantly, the trains may well be double-decker, which would be a huge mistake. UK railways have a much smaller loading gauge than those in the rest of Europe, so the regular network can't accommodate double-decker trains. (Ultra anorak-y loading gauge explanation here). Such trains would only be able to run on specially-designed high speed tracks. This would mean that they could not run on at conventional speeds to cities not directly served by the new lines -- cities such as Liverpool, Newcastle, Edinburgh or Glasgow -- a huge drawback. (Anyone who has travelled extensively on the TGV network in France or the ICE trains in Germany will have noticed that they often use conventional tracks, which is only possible because of the bigger loading gauges there).
There's broad, cross-party support for HS2, but you can't help wondering if the politicians are just slavering over the opportunity to get their names on something REALLY BIG, rather than making an informed, value-for-money decision. The Chiltern NIMBYs are going to come in for a lot of abuse in the coming months, but in this case, they may just have a point.
Friday, 13 January 2012
1314, 1707 and all that
It's never been one of my ambitions to become David Cameron's speechwriter, but I'm wondering if I should be claiming royalties for his use of the term "neverendum" when he spoke in the Commons about Alex Salmond and the SNP's push for an independent Scotland. A quick search reveals that I have used the term three times on this blog (as far back as 3 April 2007) when discussing similarities between the way the SNP is pursuing its goal and the way the separatist PQ and BQ have attempted to break up Canada. (Any suggestions that the term "neverendum" might have actually originated in Canada are, of course, entirely true).
It's encouraging to see that the Westminster government has learned one lesson that took a long time to dawn on the Canadian federal government in Ottawa: you can't allow the separatists to make all the running and set all the rules. If they're allowed to do so, the advocates of a breakaway will always promise their fellow countrymen a pain-free idyll, lifting of the yoke of oppression, yadda yadda. They will time the vote to their own best advantage: Alex Salmond is looking to October 2014, just after the Commonwealth Games and Ryder Cup have been staged in Scotland and, more portentously, the 700th anniversary of the Battle of Bannockburn. And they will frame the question in a way that attracts the undecided: the 1979 referendum question in Quebec was almost incomprehensibly vague (but was still rejected). Reports suggest Salmond may even try to hedge his bet by offering three choices on the ballot: stay in the UK, leave, or something in between, known as "devo-max", with almost all powers other than foreign affairs and defence devolved to Edinburgh.
David Cameron and his point man on this issue, Chancellor George Osborne, are now trying to push back a little, which is entirely welcome. The Westminster government has received a legal opinion that only it, and not the Scottish Parliament at Holyrood, has the legal right to stage a referendum on this issue. Westminster is offering, in effect, to license Holyrood to hold a referendum whose results would be binding on both sides. There would, however, be conditions: only a YES/NO question -- no "devo-max" -- and the vote to be held by the end of 2013, in order to end damaging uncertainty.
Cameron and Osborne are also starting to point out that the Scots would not be able to select which bits of Britishness they would like to retain in the event of a "yes" vote. For example, Salmond has generally suggested that an independent Scotland would continue to use Sterling, but Osborne has begun to point out that in that event, it could not expect to have any influence over Bank of England policy -- and the alternative of adopting the Euro is surely not one that the canny Scots would wish to contemplate.
Salmond has bristled at what he sees as Sassenach interference in Scottish democracy, and has warned that Cameron and Osborne could actually boost support for independence. At the same time, he seems to realise that there is a lot to be said for pursuing an agreed approach: his latest wheeze is to invite Cameron to a meeting to discuss the issues. Cameron may be cautious about accepting -- he may fear that such talks would appear to place the Holyrood and Westminster governments on an equal footing -- but discussions now are surely better than arguments and lawsuits later.
There's one more demand that Cameron may want to bring to the table, based on the Canadian experience: Salmond should only be allowed to ask the question once. After two referendum defeats, the PQ and BQ in Quebec still consider the independence issue open, because they didn't get the result they wanted -- hence the term "neverendum". If Westminster is willing to accept the result of the vote as binding, Salmond should be prepared to accept that he can't just keep asking the question until he gets the response he wants.
It's encouraging to see that the Westminster government has learned one lesson that took a long time to dawn on the Canadian federal government in Ottawa: you can't allow the separatists to make all the running and set all the rules. If they're allowed to do so, the advocates of a breakaway will always promise their fellow countrymen a pain-free idyll, lifting of the yoke of oppression, yadda yadda. They will time the vote to their own best advantage: Alex Salmond is looking to October 2014, just after the Commonwealth Games and Ryder Cup have been staged in Scotland and, more portentously, the 700th anniversary of the Battle of Bannockburn. And they will frame the question in a way that attracts the undecided: the 1979 referendum question in Quebec was almost incomprehensibly vague (but was still rejected). Reports suggest Salmond may even try to hedge his bet by offering three choices on the ballot: stay in the UK, leave, or something in between, known as "devo-max", with almost all powers other than foreign affairs and defence devolved to Edinburgh.
David Cameron and his point man on this issue, Chancellor George Osborne, are now trying to push back a little, which is entirely welcome. The Westminster government has received a legal opinion that only it, and not the Scottish Parliament at Holyrood, has the legal right to stage a referendum on this issue. Westminster is offering, in effect, to license Holyrood to hold a referendum whose results would be binding on both sides. There would, however, be conditions: only a YES/NO question -- no "devo-max" -- and the vote to be held by the end of 2013, in order to end damaging uncertainty.
Cameron and Osborne are also starting to point out that the Scots would not be able to select which bits of Britishness they would like to retain in the event of a "yes" vote. For example, Salmond has generally suggested that an independent Scotland would continue to use Sterling, but Osborne has begun to point out that in that event, it could not expect to have any influence over Bank of England policy -- and the alternative of adopting the Euro is surely not one that the canny Scots would wish to contemplate.
Salmond has bristled at what he sees as Sassenach interference in Scottish democracy, and has warned that Cameron and Osborne could actually boost support for independence. At the same time, he seems to realise that there is a lot to be said for pursuing an agreed approach: his latest wheeze is to invite Cameron to a meeting to discuss the issues. Cameron may be cautious about accepting -- he may fear that such talks would appear to place the Holyrood and Westminster governments on an equal footing -- but discussions now are surely better than arguments and lawsuits later.
There's one more demand that Cameron may want to bring to the table, based on the Canadian experience: Salmond should only be allowed to ask the question once. After two referendum defeats, the PQ and BQ in Quebec still consider the independence issue open, because they didn't get the result they wanted -- hence the term "neverendum". If Westminster is willing to accept the result of the vote as binding, Salmond should be prepared to accept that he can't just keep asking the question until he gets the response he wants.
Wednesday, 11 January 2012
Forgotten but not gone
A trip into London yesterday provided an opportunity to take a look at the secondary Occupy London site in Finsbury Square. Yes, Occupy protests in other cities around the world have fizzled or been rousted out, but thanks to a combination of clerical dithering and a relatively benign winter, Occupy London are still there.
At least, their tents are still there. A collection of canvas can still be found at the south end of the square, opposite the Bloomberg offices, but there wasn't much evidence of many actual protesters in attendance. Maybe they were in one of the three nearby Starbucks, plotting the end of capitalism while swilling down £3 lattes paid for by their financial supporters. Most passers-by didn't even spare a glance for the whole scruffy mess.
The original camp at St Paul's may be a different proposition, inasmuch as there may actually be people there, but the Occupy protest long ago lost its raison d'etre. A couple of months ago the Occupiers actually seemed to have some worthwhile things to say, as I pointed out in a post on 28 October, "Who are you calling incoherent?". Not any more. Now the protesters only seem to be hanging around because they can. Their legal representative told a judge just before Christmas that "the tents ARE the protest", and at Finsbury Square, that seems to be literally true.
For most people, Occupy London is now either an eyesore, a health hazard, or -- and this one should be the most galling for the protesters -- a complete irrelevance. The Occupiers are, you might say, all in tents and purposeless.
At least, their tents are still there. A collection of canvas can still be found at the south end of the square, opposite the Bloomberg offices, but there wasn't much evidence of many actual protesters in attendance. Maybe they were in one of the three nearby Starbucks, plotting the end of capitalism while swilling down £3 lattes paid for by their financial supporters. Most passers-by didn't even spare a glance for the whole scruffy mess.
The original camp at St Paul's may be a different proposition, inasmuch as there may actually be people there, but the Occupy protest long ago lost its raison d'etre. A couple of months ago the Occupiers actually seemed to have some worthwhile things to say, as I pointed out in a post on 28 October, "Who are you calling incoherent?". Not any more. Now the protesters only seem to be hanging around because they can. Their legal representative told a judge just before Christmas that "the tents ARE the protest", and at Finsbury Square, that seems to be literally true.
For most people, Occupy London is now either an eyesore, a health hazard, or -- and this one should be the most galling for the protesters -- a complete irrelevance. The Occupiers are, you might say, all in tents and purposeless.
Monday, 9 January 2012
David Cameron and executive pay: crony baloney
David Cameron told the BBC's Andrew Marr this weekend that the Government would soon introduce measure to curb "excessive" executive pay. Can't wait to see how that works out, especially as Vince Cable, whose reach has consistently exceeded his grasp since he joined the coalition Cabinet, is apparently in charge of the initiative.
Cameron's interview with Marr was full of references to "fat cats" and to something he called "crony capitalism". To be fair to the PM, cronyism is certainly something he knows rather a lot about. Of the 29 Cabinet members (including those who attend but don't actually vote), 20 are, like Cameron himself, Oxbridge graduates; 16 of the 29 are, like Cameron himself, former pupils of public (i.e. expensive private) schools; 25 of the 29 are, like Cameron himself, male; 29 of the 29 are, like Cameron himself, very comfortably off, thanks so much for asking. In the circumstances, I suppose we can only be amazed and impressed that public disquiet over high executive pay, especially at the banks, has managed to penetrate the Cabinet at all.
Business representatives are aghast; well, they would be, wouldn't they? The CBI warns that the "binding shareholder votes" that Cameron seems to favour in setting executive pay would amount to "shutting the stable door after the horse has bolted", presumably with a feedbag stuffed full of crisp new tenners. The Institute of Directors darkly warns that the Government will be stepping into a legal minefield if it tries to enforce new rules, because so much executive pay is set by binding contract.
It's not hard to see why public opinion is angry over rampant rises in executive pay, at a time when "we're all in this together", in Cameron's words, and everyone is supposedly being asked to tighten their belts. From the 45% rise in CEOs' pay packages in 2010 to Sir Fred Goodwin's pension package (and another apparently looming for Sir Stephen Hester at RBS any time now), there's plenty of fuel for the fire.
The real question is whether Dave and his pal Vince can actually do much about it. Companies already have remuneration committees at board level, and shareholders already have the right to scrutinise and -- at least in theory -- vote down anything they find excessive. In practice, most institutional shareholders rarely get involved in such minutiae. Even if the government wants it to happen, it will remain very difficult for even the most dedicated activist to rally enough shareholder votes to overturn a remuneration committee's recommendations. After all, why risk alienating or even losing your best staff just to please Vince Cable?
Cameron seems to think that the answer is "transparency", a word he used repeatedly with Andrew Marr. In effect, fat cats would be "named and shamed" into accepting smaller pay packages. This sounds like a triumph of hope over experience: surely Cameron recalls how Sir Fred Goodwin fought to preserve his monster pension pot, even as his bank fell to pieces around him.
Pay inequality is not just a UK issue. Over in Canada, it was recently revealed that the CEO of Magna, the shy and retiring Frank Stronach, took home about C$ 61 million last year, seemingly without even a scintilla of shame -- and more remarkably, without any real outrage on the part of the Canadian media. Vince Cable has his work cut out for him if he wants to make any real impact -- which may, of course, be just the way Cameron likes it.
Cameron's interview with Marr was full of references to "fat cats" and to something he called "crony capitalism". To be fair to the PM, cronyism is certainly something he knows rather a lot about. Of the 29 Cabinet members (including those who attend but don't actually vote), 20 are, like Cameron himself, Oxbridge graduates; 16 of the 29 are, like Cameron himself, former pupils of public (i.e. expensive private) schools; 25 of the 29 are, like Cameron himself, male; 29 of the 29 are, like Cameron himself, very comfortably off, thanks so much for asking. In the circumstances, I suppose we can only be amazed and impressed that public disquiet over high executive pay, especially at the banks, has managed to penetrate the Cabinet at all.
Business representatives are aghast; well, they would be, wouldn't they? The CBI warns that the "binding shareholder votes" that Cameron seems to favour in setting executive pay would amount to "shutting the stable door after the horse has bolted", presumably with a feedbag stuffed full of crisp new tenners. The Institute of Directors darkly warns that the Government will be stepping into a legal minefield if it tries to enforce new rules, because so much executive pay is set by binding contract.
It's not hard to see why public opinion is angry over rampant rises in executive pay, at a time when "we're all in this together", in Cameron's words, and everyone is supposedly being asked to tighten their belts. From the 45% rise in CEOs' pay packages in 2010 to Sir Fred Goodwin's pension package (and another apparently looming for Sir Stephen Hester at RBS any time now), there's plenty of fuel for the fire.
The real question is whether Dave and his pal Vince can actually do much about it. Companies already have remuneration committees at board level, and shareholders already have the right to scrutinise and -- at least in theory -- vote down anything they find excessive. In practice, most institutional shareholders rarely get involved in such minutiae. Even if the government wants it to happen, it will remain very difficult for even the most dedicated activist to rally enough shareholder votes to overturn a remuneration committee's recommendations. After all, why risk alienating or even losing your best staff just to please Vince Cable?
Cameron seems to think that the answer is "transparency", a word he used repeatedly with Andrew Marr. In effect, fat cats would be "named and shamed" into accepting smaller pay packages. This sounds like a triumph of hope over experience: surely Cameron recalls how Sir Fred Goodwin fought to preserve his monster pension pot, even as his bank fell to pieces around him.
Pay inequality is not just a UK issue. Over in Canada, it was recently revealed that the CEO of Magna, the shy and retiring Frank Stronach, took home about C$ 61 million last year, seemingly without even a scintilla of shame -- and more remarkably, without any real outrage on the part of the Canadian media. Vince Cable has his work cut out for him if he wants to make any real impact -- which may, of course, be just the way Cameron likes it.
Saturday, 7 January 2012
The complicated morality of cosmetic surgery
UK Health Secretary Andrew Lansley has been walking a tightrope in dealing with the scare over breast implants. The medical evidence on the dangers of the PIP implants is ambiguous, and Lansley is justifiably anxious to avoid spending scarce NHS resources on unnecessary removal of the prostheses. At the same time, he dare not put lives at risk by refusing NHS treatment to those who need it: the health service is, after all, not judgemental about treating smokers, who put their lives at risk despite unequivocal medical evidence as to the dangers of their habit.
Lansley's current stance is that the NHS will remove implants free of charge from any woman who received them from the state in the first place, in most cases as part of reconstructive surgery. He is urging private providers to do the same thing, and a gratifying number have already agreed to do so. Still, some of the less scrupulous clinics are likely to refuse, and there appears to be a good number that have vanished without trace. It seems inevitable that the NHS will have to offer removal to anxious women who are left high and dry in this way.
That won't please everyone. Step forward, for example, Cristina Odone, who took a very tough line in her blog in the Daily Telegraph. Ms Odone trumpets her Catholic faith loudly to all who will listen -- she used to edit the Catholic Herald -- but it seems to have gone AWOL on this occasion. Judge not lest ye be judged yourself, Cristina: are you quite sure there's nothing in your own lifestyle that some fastidious doctor might, some day, see as a reason to deny you treatment?
And yet....some of the women appearing on TV to demand the removal of cosmetic implants on the NHS are not doing themselves any favours. Most of them are claiming they cannot afford to pay for the procedure, or would have to take out a loan in order to do so. So how did they pay for the implants in the first place? And if they were willing to take out a loan, or to scrimp and save, in order to satisfy their vanity by getting the wretched things inserted, why are they not prepared to do the same thing in order to safeguard their health by having them removed?
The question that Andrew Lansley and his civil servants have to answer for the longer term is how to prevent this sort of thing from happening again. A number of media columnists, mostly women, are expressing the hope that this scare will deter future generations of women from messing with nature, whether through implants or botox treatments or whatever. Good luck with that. Others are suggesting that the Government needs to impose standards on the industry, and maybe even make it mandatory for women who have frivolous cosmetic procedures such as implants to take out insurance against the cost of their removal. Good luck with that too.
What we should really hope is that this whole sorry tale will make the government think again about whether and how it gets more private money into the NHS. Private money will always gravitate towards the more expensive, luxury end of the business, because that's where the money is to be made. You don't see many ads in the tabloids for private procedures to deal with haemorrhoids or ingrowing toenails. And as we are all now discovering, the private practitioners are quick to scoop the profits, but rather less prompt to step up when things go wrong.
Lansley's current stance is that the NHS will remove implants free of charge from any woman who received them from the state in the first place, in most cases as part of reconstructive surgery. He is urging private providers to do the same thing, and a gratifying number have already agreed to do so. Still, some of the less scrupulous clinics are likely to refuse, and there appears to be a good number that have vanished without trace. It seems inevitable that the NHS will have to offer removal to anxious women who are left high and dry in this way.
That won't please everyone. Step forward, for example, Cristina Odone, who took a very tough line in her blog in the Daily Telegraph. Ms Odone trumpets her Catholic faith loudly to all who will listen -- she used to edit the Catholic Herald -- but it seems to have gone AWOL on this occasion. Judge not lest ye be judged yourself, Cristina: are you quite sure there's nothing in your own lifestyle that some fastidious doctor might, some day, see as a reason to deny you treatment?
And yet....some of the women appearing on TV to demand the removal of cosmetic implants on the NHS are not doing themselves any favours. Most of them are claiming they cannot afford to pay for the procedure, or would have to take out a loan in order to do so. So how did they pay for the implants in the first place? And if they were willing to take out a loan, or to scrimp and save, in order to satisfy their vanity by getting the wretched things inserted, why are they not prepared to do the same thing in order to safeguard their health by having them removed?
The question that Andrew Lansley and his civil servants have to answer for the longer term is how to prevent this sort of thing from happening again. A number of media columnists, mostly women, are expressing the hope that this scare will deter future generations of women from messing with nature, whether through implants or botox treatments or whatever. Good luck with that. Others are suggesting that the Government needs to impose standards on the industry, and maybe even make it mandatory for women who have frivolous cosmetic procedures such as implants to take out insurance against the cost of their removal. Good luck with that too.
What we should really hope is that this whole sorry tale will make the government think again about whether and how it gets more private money into the NHS. Private money will always gravitate towards the more expensive, luxury end of the business, because that's where the money is to be made. You don't see many ads in the tabloids for private procedures to deal with haemorrhoids or ingrowing toenails. And as we are all now discovering, the private practitioners are quick to scoop the profits, but rather less prompt to step up when things go wrong.
Wednesday, 4 January 2012
Getting them out
The UK Government, or at least the dominant Conservatives within the coalition, are constantly looking for ways to get more private money into the National Health Service. The goals are, supposedly, to augment public funds and to introduce greater efficiencies into the system.
You have to wonder if any of these Tories are having second thoughts in light of the ongoing scare over dodgy breast implants. The Health Secretary, Andrew Lansley, is still urging the 40,000 or more women who have received the PIP implants not to panic. However, it seems inevitable that the NHS will soon have to agree to remove the implants from any woman who requests it. France, where the PIP implants originated, has already committed to doing so, and the evidence that the implants are hazardous continues to mount up.
What this means is that scarce NHS monies that would have been used to pursue established medical priorities will instead be diverted to rectifying the dangerous consequences of unnecessary surgery carried out by a gang of profiteering cowboys. Not that I'm angry or anything. However, do remember this episode if your local hospital has to cancel important surgical procedures such as joint replacements in a few months' time because it's run out of money.
You know, probably the only thing that would get me more riled would be if I heard that the Foreign Office was making emergency plans for the possible collapse of the Euro, with the use of public funds to repatriate to the UK all the petty criminals, tax dodgers and "broken Britain" whiners who've decamped to the Spanish costas.
What's that you say? Oh.
You have to wonder if any of these Tories are having second thoughts in light of the ongoing scare over dodgy breast implants. The Health Secretary, Andrew Lansley, is still urging the 40,000 or more women who have received the PIP implants not to panic. However, it seems inevitable that the NHS will soon have to agree to remove the implants from any woman who requests it. France, where the PIP implants originated, has already committed to doing so, and the evidence that the implants are hazardous continues to mount up.
What this means is that scarce NHS monies that would have been used to pursue established medical priorities will instead be diverted to rectifying the dangerous consequences of unnecessary surgery carried out by a gang of profiteering cowboys. Not that I'm angry or anything. However, do remember this episode if your local hospital has to cancel important surgical procedures such as joint replacements in a few months' time because it's run out of money.
You know, probably the only thing that would get me more riled would be if I heard that the Foreign Office was making emergency plans for the possible collapse of the Euro, with the use of public funds to repatriate to the UK all the petty criminals, tax dodgers and "broken Britain" whiners who've decamped to the Spanish costas.
What's that you say? Oh.
Monday, 2 January 2012
An Olympic bounce? Don't count on it
Woo-hoo, the year of the London Olympics has dawned, and already the hype machine has been cranked up another notch. The Times, in its self-appointed role as cheerleader-in-chief for David Cameron, devotes its front page today (paywa££-protected) to a story headed "An Olympic revival", in which it seems to suggest that Cameron expects the Olympics to give the British economy a kickstart. Actually that's not what Cameron said in his new year's message. Here's how the BBC reported it:
The prime minister looked ahead to the "global drama of the Olympics", which will be held in London from 27 July to 12 August, and the "glory of the Diamond Jubilee", which will mostly be commemorated for three days from 2 June.
"Cameras and TV channels around the planet will be recording these magnificent events. It gives us an extraordinary incentive to look outward, look onwards and to look our best: to feel pride in who we are and what - even in these trying times - we can achieve," said Mr Cameron.
Cameron is right to be circumspect. Most of the direct benefit to the economy from the £9 billion Olympic project has already been felt during the construction phase, which is now almost at an end. The period of the Games themselves may well dampen economic activity slightly. For a start, the organisers are asking Londoners to cut back on travel during the Games in order to avoid overloading the transport system. A 20% reduction in normal commuting is apparently needed just to prevent the system from seizing up entirely. It's hard to see how the city's economy, which is the driving force for the entire country, can fail to be affected by that.
Then there's the impact on tourism. A few weeks ago one of the organising committee said something to the effect that "the Games are not a tourist event", which I'm pretty sure is not what they told Tony Blair when they petitioned him to support the bid for the Games. A lot of people will be coming to London to catch the action, but there's every likelihood that overall tourism in the UK will take a hit as others stay away in order to avoid the crowds. One clue that this may be happening: London theatres are reporting a huge drop in bookings for the Games period. Many theatres may even "go dark" for a few weeks, rather than stage performances at a loss for half-empty auditoria. That in turn will have a knock-on effect on some of the pricey eateries that serve the theatre crowds. And all of this is without even talking about the large number of Brits who will jam the airports to get the hell away just as the Olympic tourists arrive.
By and large, the impact of one-off events tends not to be all that meaningful when GDP data are tallied. I've written more than once here in the past that headlines like "Tube strike costs economy £500 million per day" are usually way off base. The "lost" output is quickly recovered. To some extent that will be true of the Olympics as well. Companies are already planning how to cope with the transport problems, and most of the locals who take holidays in order to avoid the Games will simply be changing their vacation time, rather than taking additional leave. Still, this is not just a one or two day blip like a Tube strike. This is a whole month or more we're talking about, if you include the Paralympics. It's very hard to see how this doesn't dampen GDP in the third quarter of the year, at least marginally.
And, in the words of Captain Beefheart, "whaddabout after that?". The Australian development company that has built the Westfield shopping mall close by the main Games site has claimed all along that their palace of consumerism will do much more for the regeneration of East London than the Games will. They're almost certainly right about that.
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