The investment bank Goldman Sachs doesn't have a lot of admirers. At the height of the financial crisis, it was described by Rolling Stone magazine as "a giant vampire squid", sucking blood out of the global economy. It has paid a fine in excess of half a billion dollars in relation to some of the structured notes it created that were, how to put this, not entirely beneficial to the buyers. It has been castigated for using derivatives to help Greece to conceal the true extent of its debts. It even stands accused of avoiding taxes in the UK, though the amount involved -- £10 million -- is so small in the company's scheme of things that you almost wonder whether it was worth the trouble. Still, take care of the millions and the billions will take care of themselves, right?
Until now, though, Goldman has mostly been able to count on the loyalty and discretion of its staff. But no longer: this week a mid-ranking employee, Greg Smith, has marked his departure from the firm by publishing a blistering denunciation of its ethics and practices in the pages of the New York Times. (Contrary to the way he has been characterised in the press, Mr Smith is not a "boss" at Goldman in any real sense. While he was latterly its head of US equity derivatives in London, he has never been elevated to the partnership). The global media has worked up a fine head of indignant steam over the story, and at least one politician has called for the UK Government to boycott the firm, which recently acted as advisor in the sale of Northern Rock.
The BBC's report on the story, including some perceptive comments by Robert Peston and an attempted rebuttal by the firm, can be found here. If, however, you want a different take on things, there's a rather odd attack on Mr Smith, basically accusing him of being naive, here.
Just for the moment, let's not take sides. Instead, we'll take a look at some of the questions that Mr Smith's tirade brings to mind.
First and foremost, it's hard not to agree with Fred Destin, in the second story linked above, that Mr Smith is pretty naive if it really took him twelve years to suss out what Goldman is like. All investment banks are by their nature aggressive and greedy; there wouldn't be much point in them otherwise. Goldman just happens to be better at those things than most of its competitors.
Moreover, Goldman surely has a right to assume that it's dealing with consenting adults when it makes its trades. It's not selling structured notes to your granny, at least not directly. It's dealing for the most part with sophisticated investors ("QIBs" -- qualified institutional buyers, in regulator-speak), or supposedly well-informed corporations or institutions, such as, well, Her Majesty's Government. If anyone dealing with Goldman (or any other investment bank) chooses to assume that it's not looking out mainly for its own interests, that's hardly the bank's fault. This is in no way an excuse for illegal behaviour, but even Mr Smith is careful to say that he is not accusing Goldman of that. The principle of caveat emptor must surely apply in what are in effect transactions among equals.
It's interesting to note that while Mr Smith was with Goldman for 12 years in total, his resignation came just a year after he was transferred from New York to the firm's London office. Is it possible that the "toxic" culture he decries was more pronounced in the smaller office than at the company's headquarters? One small piece of evidence pointing that way: apparently a favoured term of contempt for clients was "muppets". This is a fairly common piece of usage in the UK -- in pubs as much as in City meeting rooms -- but is, unless I'm much mistaken, not used in the same way in New York. It may well be that most of the behaviour that upset Mr Smith so much took place during his year in London rather than during his decade-plus in New York, which might reflect the need for the smaller office to be constantly making its mark with the big bosses back at HQ.
Lastly, it may not be possible to judge exactly what Mr Smith's outburst means until we see what he does next. The media have already pointed out that a dozen years at Goldman probably means he is financially set for life, though he is unlikely to see the deferred portion of his bonuses. If he announces he has found God, or devotes his life to charity work (and there are precedents for that), all well and good. If, on the other hand, he is setting himself up to be the next Michael Lewis -- not a smart idea, as the present one is very good at it -- well, not so much.
Thursday, 15 March 2012
Monday, 12 March 2012
Don't go near the water
The weather in the south of the UK has been unusually dry for the better part of two years now. In response, water companies in an around London are planning to introduce some modest restrictions on household water usage at the start of April.
Oddly enough, while this is going on, the insurance industry is worried about the exact opposite problem: flooding, and who gets to pick up the tab when it happens. Surprising precisely nobody, the insurance companies don't think it should be them, even though the terminally naive might think that's what householders pay their premiums for.
For a number of years now, insurers have agreed to continue providing cover to homeowners in flood-prone areas (we'll get back to those in a second) in return for assurances from the government that flood defences will be improved. That agreement is due to lapse next year, and insurance companies are warning that unless some other measure is put in place, as many as 200,000 homes across the UK will become uninsurable -- which in turn means they will become unmortgageable and unsellable.
There are certainly some parts of the UK that seem more liable to flooding than others: Sheffield and Shrewsbury, for example, seem for geographic reasons to be at a higher level of risk. However, we need to have some perspective: it's not the annual monsoon in Chittagong that we're talking about here. A few weeks ago there was a report on the TV that focused on a homeowner in Windsor who had been warned by his insurer that his cost of cover would soar if the companies' agreement with the government lapsed. The last time his riverside area was inundated was....1945! Sixty-plus years of collecting premiums without so much as a puddle to mop up, and the insurers still don't find the risks acceptable.
The only thing that most people know about the insurance industry is that it's lightning fast at collecting premiums but glacially slow to pay out. However, the business is a lot more complicated than that. Behind all the well-known names constantly flogging their wares on the television, there's a whole network of companies providing so-called "reinsurance". In the argot of the trade, insurers "cede" some of their premiums to a reinsurer, which in return takes on some of the risks. (Your friendly local bookie does something similar when he notices a large cumulative bet starting to build up). Behind the reinsurers there's another level of companies that take on the really catastrophic risks. Lloyds of London falls into this category, but the biggest such insurer in the world is none other than Berkshire Hathaway, Warren Buffett's little venture. Berkshire has done very nicely indeed out of the business, as you may have noticed.
Given the existence of this network of insurers' insurers, there's no obvious reason why the UK taxpayer is being asked (strong-armed might be a better word) to underwrite (subsidise might be a better word) this part of the business. The extent of flood risk in the UK is relatively trivial in the global scheme of things, and would be well within the capacity of the reinsurers and the catastrophic risk underwriters to handle. Of course, there actually is a very obvious reason: the insurance companies don't want to hand over a portion of their revenues in order to cover off the risk. Cheaper by far to try to dump it on the government.
As long as the drought continues, of course, this is going to remain an academic issue. Dry weather brings its own set of problems, however. As the clay soils of the southern UK dry out, subsidence risk -- the collapse of household foundations -- will increase. Homeowners who are affected by this can no doubt look forward to a stress-free experience when they pick up the phone to their insurer.
Oddly enough, while this is going on, the insurance industry is worried about the exact opposite problem: flooding, and who gets to pick up the tab when it happens. Surprising precisely nobody, the insurance companies don't think it should be them, even though the terminally naive might think that's what householders pay their premiums for.
For a number of years now, insurers have agreed to continue providing cover to homeowners in flood-prone areas (we'll get back to those in a second) in return for assurances from the government that flood defences will be improved. That agreement is due to lapse next year, and insurance companies are warning that unless some other measure is put in place, as many as 200,000 homes across the UK will become uninsurable -- which in turn means they will become unmortgageable and unsellable.
There are certainly some parts of the UK that seem more liable to flooding than others: Sheffield and Shrewsbury, for example, seem for geographic reasons to be at a higher level of risk. However, we need to have some perspective: it's not the annual monsoon in Chittagong that we're talking about here. A few weeks ago there was a report on the TV that focused on a homeowner in Windsor who had been warned by his insurer that his cost of cover would soar if the companies' agreement with the government lapsed. The last time his riverside area was inundated was....1945! Sixty-plus years of collecting premiums without so much as a puddle to mop up, and the insurers still don't find the risks acceptable.
The only thing that most people know about the insurance industry is that it's lightning fast at collecting premiums but glacially slow to pay out. However, the business is a lot more complicated than that. Behind all the well-known names constantly flogging their wares on the television, there's a whole network of companies providing so-called "reinsurance". In the argot of the trade, insurers "cede" some of their premiums to a reinsurer, which in return takes on some of the risks. (Your friendly local bookie does something similar when he notices a large cumulative bet starting to build up). Behind the reinsurers there's another level of companies that take on the really catastrophic risks. Lloyds of London falls into this category, but the biggest such insurer in the world is none other than Berkshire Hathaway, Warren Buffett's little venture. Berkshire has done very nicely indeed out of the business, as you may have noticed.
Given the existence of this network of insurers' insurers, there's no obvious reason why the UK taxpayer is being asked (strong-armed might be a better word) to underwrite (subsidise might be a better word) this part of the business. The extent of flood risk in the UK is relatively trivial in the global scheme of things, and would be well within the capacity of the reinsurers and the catastrophic risk underwriters to handle. Of course, there actually is a very obvious reason: the insurance companies don't want to hand over a portion of their revenues in order to cover off the risk. Cheaper by far to try to dump it on the government.
As long as the drought continues, of course, this is going to remain an academic issue. Dry weather brings its own set of problems, however. As the clay soils of the southern UK dry out, subsidence risk -- the collapse of household foundations -- will increase. Homeowners who are affected by this can no doubt look forward to a stress-free experience when they pick up the phone to their insurer.
Friday, 9 March 2012
An unhealthy obsession
Despite all the problems of the last few years, when Brits are asked which they think provides better security for the future -- property or pension -- they almost unanimously plump for property. It's not hard to see why. Public policy is still geared towards keeping the property market afloat at almost any cost, in part because policymakers fear that a serious collapse in house prices would cripple the entire economy. Thus, when pension consultants reported this week that the Bank of England's quantitative easing (QE) and rock bottom interest rates were decimating the value of savers' pension "pots", the media almost ignored the story, and the official response was scarcely even a shrug.
In sharp contrast, news that UK banks are hankering to move some of their mortgage rates a smidgen higher have got the media into a fine old lather. "Time to protect yourself against rising rates", declared one of the quality papers today. It may already be too late for some: there was a young woman on the TV news earlier in the week saying that she would have to cancel her family's holiday plans as a result of the rate increase.
What kind of rising rates are we talking about here? One bank, the Halifax, is increasing its so-called "standard variable rate" from 3.5% to 3.99%. There are fears that other banks may follow suit, but that's it. The so-called "tracker" mortgages are unaffected, because there are no signs that the Bank of England is going to raise its repo rate, which is the benchmark that these things track. It says much about the fragile and overextended nature of the UK housing market that such a small rate increase, one that still leaves rates at very low levels by historical standards, could be seen as such a threat.
The ECB is said to be starting to worry that its own QE-type programme, the so-called LTROs, may be getting banks addicted to cheap money. In the UK, that addiction has long since spread to consumers, and woe betide the bank, or for that matter, the central bank, that seeks to wean them off it. The cries of pain when the Bank of England starts to unwind QE and, heaven protect us, raise interest rates, can only be imagined.
One reason that the increase in mortgage rates is raising hackles is that there are few signs that banks are willing to boost the rates they pay to the country's beleaguered savers. (Yes, I know I'm "talking my own book" here, as bond traders would say). So why are mortgage rates rising? Well, banks are finding it difficult to raise sufficient deposits from their customers to fund the gentle rise in mortgage demand, so they're having to tap wholesale markets. For most banks, the cost of raising funds in those markets has risen because of generalised concerns over the banks' creditworthiness.
And why are UK banks unable to gather more deposits from their customers? Well obviously, it's because they're paying such abysmally low rates that most savers will do almost anything with their money rather than leave it in the bank. It's a real Catch-22. Any bank that dared to break ranks and pay more for people's savings would very likely find itself flooded with deposits, which would allow it to reduce its reliance on wholesale funding. So far, however, none of the banks seems keen to give it a try.
In sharp contrast, news that UK banks are hankering to move some of their mortgage rates a smidgen higher have got the media into a fine old lather. "Time to protect yourself against rising rates", declared one of the quality papers today. It may already be too late for some: there was a young woman on the TV news earlier in the week saying that she would have to cancel her family's holiday plans as a result of the rate increase.
What kind of rising rates are we talking about here? One bank, the Halifax, is increasing its so-called "standard variable rate" from 3.5% to 3.99%. There are fears that other banks may follow suit, but that's it. The so-called "tracker" mortgages are unaffected, because there are no signs that the Bank of England is going to raise its repo rate, which is the benchmark that these things track. It says much about the fragile and overextended nature of the UK housing market that such a small rate increase, one that still leaves rates at very low levels by historical standards, could be seen as such a threat.
The ECB is said to be starting to worry that its own QE-type programme, the so-called LTROs, may be getting banks addicted to cheap money. In the UK, that addiction has long since spread to consumers, and woe betide the bank, or for that matter, the central bank, that seeks to wean them off it. The cries of pain when the Bank of England starts to unwind QE and, heaven protect us, raise interest rates, can only be imagined.
One reason that the increase in mortgage rates is raising hackles is that there are few signs that banks are willing to boost the rates they pay to the country's beleaguered savers. (Yes, I know I'm "talking my own book" here, as bond traders would say). So why are mortgage rates rising? Well, banks are finding it difficult to raise sufficient deposits from their customers to fund the gentle rise in mortgage demand, so they're having to tap wholesale markets. For most banks, the cost of raising funds in those markets has risen because of generalised concerns over the banks' creditworthiness.
And why are UK banks unable to gather more deposits from their customers? Well obviously, it's because they're paying such abysmally low rates that most savers will do almost anything with their money rather than leave it in the bank. It's a real Catch-22. Any bank that dared to break ranks and pay more for people's savings would very likely find itself flooded with deposits, which would allow it to reduce its reliance on wholesale funding. So far, however, none of the banks seems keen to give it a try.
Wednesday, 7 March 2012
General ignorance
The BBC's business editor, Robert Peston, is egotistical and annoying, but most of the time you get the impression he has a good idea of what he's talking about. The same, alas, can't be said of most of his colleagues on the BBC's business and economics desk.
Yesterday the British Retail Consortium published one of its intentionally misleading statistical releases. On the BBC News 24 evening bulletins, the business reporter dutifully reported in mournful tones that retail spending fell 0.3% in February 2012 than a year earlier. This was exactly what the BRC wanted her to say, but it wasn't actually true. Sales were in fact 2.3% higher, but the BRC favours the ludicrous "same store sales" measure, which I've ranted about before here and which was indeed slightly lower. Currently, and indeed for the next six months or so, the "same store" measure will exclude all sales made at the Westfields Stratford shopping mall, which only opened in September 2011 -- and happens to be one of the largest in Europe. Excluding it renders the BRC's figures entirely meaningless as a guide to how the retail sector is performing.
Today we saw evidence that BBC reporters don't need a bum steer from the BRC to get things horribly wrong -- and that it's not just the juniors who pull the graveyard shift that are vulnerable. Jeremy Vine is one of the big beasts of BBC current affairs. He is currently host of the long-running investigative TV programme, Panorama, and also has a daily noon-hour radio programme, in which he hectors the audience about the issues of the day.
Just before his show begins each day, Vine pops up on the late morning show hosted by Ken Bruce, to provide a preview of the day's topics. Today he told Bruce's audience that he would be looking at the emerging news that Brazil had surpassed the UK to become the world's sixth-largest economy. The affable Bruce, who I am fairly sure wasn't trying to sandbag Vine, asked him what was the basis of Brazil's success. Vine burbled on about coffee and sugar and the fact that Brazil was a large country with lots of land, apparently quite unaware that the key development in recent years has been Brazil's emergence as a major oil producer.
When Vine returned a little while later for his own show, things just got worse. He started by portraying Brazil as a country recently famous until now only for "parties and poverty", a view that even the scantiest acquaintance with the country would show to be at least three decades out of date. Then he brought on a couple of well-informed guests, who spoke knowledgeably about the situation, but also managed to reveal that Vine was quite unaware that there was any distinction between "GDP" and "GDP per head". Brazil has, of course, only surpassed the UK on the first of these measures -- and even then only on certain exchange rate assumptions, but we should obviously spare Jeremy Vine from such technicalities.
Unfortunately, it's not just the BBC that's at fault here. The Guardian's take on the Brazil GDP story (linked here) is reasonably accurate in itself. However, check the strapline just under the headline: "per capita income remains a third less" than the UK's. It's actually only one third of the UK level (i.e. two-thirds less); the body of the article gets that right, but the sub-editor who composed the headline doesn't understand the difference, and nobody else caught it.
I know I moan about this sort of thing a lot, but I think it's important from at least two points of view. First, in difficult economic times, it would be helpful if the media could make an effort to inform the public accurately, so that voters can make sensible decisions. Second, given that I find the kind of gibberish I've described above in the business pages every day, what reason do I have to trust reports on subjects where I don't have any in-depth knowledge? It's unlikely that all the careless reporters are on the business pages -- or is it?
UPDATE, 10 March: No, it's not just the business pages. The weekly TV guide that came with my newspaper today lists a show called "Our man in Tenerife". It's about the life of an honorary consul on that island, a thousand kilometres from mainland Spain. The first line of the review is "One million Britons go to Barcelona each year"!
Yesterday the British Retail Consortium published one of its intentionally misleading statistical releases. On the BBC News 24 evening bulletins, the business reporter dutifully reported in mournful tones that retail spending fell 0.3% in February 2012 than a year earlier. This was exactly what the BRC wanted her to say, but it wasn't actually true. Sales were in fact 2.3% higher, but the BRC favours the ludicrous "same store sales" measure, which I've ranted about before here and which was indeed slightly lower. Currently, and indeed for the next six months or so, the "same store" measure will exclude all sales made at the Westfields Stratford shopping mall, which only opened in September 2011 -- and happens to be one of the largest in Europe. Excluding it renders the BRC's figures entirely meaningless as a guide to how the retail sector is performing.
Today we saw evidence that BBC reporters don't need a bum steer from the BRC to get things horribly wrong -- and that it's not just the juniors who pull the graveyard shift that are vulnerable. Jeremy Vine is one of the big beasts of BBC current affairs. He is currently host of the long-running investigative TV programme, Panorama, and also has a daily noon-hour radio programme, in which he hectors the audience about the issues of the day.
Just before his show begins each day, Vine pops up on the late morning show hosted by Ken Bruce, to provide a preview of the day's topics. Today he told Bruce's audience that he would be looking at the emerging news that Brazil had surpassed the UK to become the world's sixth-largest economy. The affable Bruce, who I am fairly sure wasn't trying to sandbag Vine, asked him what was the basis of Brazil's success. Vine burbled on about coffee and sugar and the fact that Brazil was a large country with lots of land, apparently quite unaware that the key development in recent years has been Brazil's emergence as a major oil producer.
When Vine returned a little while later for his own show, things just got worse. He started by portraying Brazil as a country recently famous until now only for "parties and poverty", a view that even the scantiest acquaintance with the country would show to be at least three decades out of date. Then he brought on a couple of well-informed guests, who spoke knowledgeably about the situation, but also managed to reveal that Vine was quite unaware that there was any distinction between "GDP" and "GDP per head". Brazil has, of course, only surpassed the UK on the first of these measures -- and even then only on certain exchange rate assumptions, but we should obviously spare Jeremy Vine from such technicalities.
Unfortunately, it's not just the BBC that's at fault here. The Guardian's take on the Brazil GDP story (linked here) is reasonably accurate in itself. However, check the strapline just under the headline: "per capita income remains a third less" than the UK's. It's actually only one third of the UK level (i.e. two-thirds less); the body of the article gets that right, but the sub-editor who composed the headline doesn't understand the difference, and nobody else caught it.
I know I moan about this sort of thing a lot, but I think it's important from at least two points of view. First, in difficult economic times, it would be helpful if the media could make an effort to inform the public accurately, so that voters can make sensible decisions. Second, given that I find the kind of gibberish I've described above in the business pages every day, what reason do I have to trust reports on subjects where I don't have any in-depth knowledge? It's unlikely that all the careless reporters are on the business pages -- or is it?
UPDATE, 10 March: No, it's not just the business pages. The weekly TV guide that came with my newspaper today lists a show called "Our man in Tenerife". It's about the life of an honorary consul on that island, a thousand kilometres from mainland Spain. The first line of the review is "One million Britons go to Barcelona each year"!
Sunday, 4 March 2012
Gulliver's travails
UK banks are continuing their offensive against tighter regulation, backed as ever by a thinly-veiled threat of upping sticks and moving elsewhere if the authorities don't ease up. HSBC's CEO Stuart Gulliver has been moaning in the Telegraph this weekend that regulations have reduced the market capitalisation of his bank by about £18 billion, currently equivalent to about US$ 28 billion.
We'll pass the hat shortly for Mr Gulliver, who was paid £8 million for his trouble last year, but maybe first we should check to see how much the financial crisis cost the UK economy. According to the ONS website, GDP at market prices fell by £57 billion between 2008 and 2009. In real terms, GDP is still 3.5% below its all-time peak, a level it is unlikely to recover until 2014 at the earliest. By that time, the accumulated total of "lost" national income will be in the hundreds of billions of pounds.
In the circumstances, maybe Mr Gulliver can try to understand why the government might see the added regulation that has supposedly cut the market valuation of HSBC and its rivals as worthwhile insurance against a repeat -- and why both politicians and the public think it's only fair for the banks to pay the premiums.
We'll pass the hat shortly for Mr Gulliver, who was paid £8 million for his trouble last year, but maybe first we should check to see how much the financial crisis cost the UK economy. According to the ONS website, GDP at market prices fell by £57 billion between 2008 and 2009. In real terms, GDP is still 3.5% below its all-time peak, a level it is unlikely to recover until 2014 at the earliest. By that time, the accumulated total of "lost" national income will be in the hundreds of billions of pounds.
In the circumstances, maybe Mr Gulliver can try to understand why the government might see the added regulation that has supposedly cut the market valuation of HSBC and its rivals as worthwhile insurance against a repeat -- and why both politicians and the public think it's only fair for the banks to pay the premiums.
Saturday, 3 March 2012
Marie Antoinette, your local Councillor
A couple of weeks ago, the BBC ran an interesting series on the inhabitants of the Palace of Versailles (Louis XIV-XVI and their enormous entourages) in the years leading up to the French Revolution. The last Louis' wife, Marie Antoinette, loathed by everyone outside the Court as "l'Autrichienne" (the Austrian), naturally featured prominently.
One of the talking heads on the programme was the historian, Lady Antonia Fraser, whom older Private Eye readers may recall better as "Lady Magnesia Freelove". She came out with the remarkable assertion -- one, let it be said, untrammelled by anything so tacky as evidence -- that Marie Antoinette couldn't possibly have said the words for which she has passed into infamy: "qu'ils mangent la brioche" -- "let them eat cake" -- in response to being told that the poor of Paris had no bread to eat. No, no, said Lady Antonia/Magnesia, Marie Antoinette was a well-brought-up and sensitive young lady, from a long line of benevolent despots. On hearing of the plight of the poor, she would have been the first on the streets of the capital, handing out bread or brioches or whatever she could get her hands on to her husband's starving subjects.
If only the sansculottes had known what Lady Magnesia/Antonia does, surely they would have spared the poor woman from the guillotine! Anyway, it looks as if we may now need a new example to quote when we speak of callous and uncaring rulers -- so step forward, Hertfordshire County Councillor Sally Newton. As I reported a few posts ago ("The Dark Ages come to suburbia"), the council is turning off the streetlights across the county in order to save money. Responding to suggestions that the new policy could lead to an increase in road accidents, muggings or burglaries, Conservative councillor Newton, responsible for Hertford All Saint division, reportedly said those who object to part night lighting "should buy a torch".
We really are going back to the Dark Ages, aren't we, to a time when those who dared to venture outside their front door at night needed to take not only their own source of light, but also a stout stick in case of an encounter with footpads. Councillor Newton should maybe count herself lucky that we don't have the guillotine in these parts, but I daresay she and all of her colleagues who are supporting this nasty little scheme -- which is, let it be said, being replicated in other parts of the UK as well -- will almost certainly face the chop in the next round of local elections.
One of the talking heads on the programme was the historian, Lady Antonia Fraser, whom older Private Eye readers may recall better as "Lady Magnesia Freelove". She came out with the remarkable assertion -- one, let it be said, untrammelled by anything so tacky as evidence -- that Marie Antoinette couldn't possibly have said the words for which she has passed into infamy: "qu'ils mangent la brioche" -- "let them eat cake" -- in response to being told that the poor of Paris had no bread to eat. No, no, said Lady Antonia/Magnesia, Marie Antoinette was a well-brought-up and sensitive young lady, from a long line of benevolent despots. On hearing of the plight of the poor, she would have been the first on the streets of the capital, handing out bread or brioches or whatever she could get her hands on to her husband's starving subjects.
If only the sansculottes had known what Lady Magnesia/Antonia does, surely they would have spared the poor woman from the guillotine! Anyway, it looks as if we may now need a new example to quote when we speak of callous and uncaring rulers -- so step forward, Hertfordshire County Councillor Sally Newton. As I reported a few posts ago ("The Dark Ages come to suburbia"), the council is turning off the streetlights across the county in order to save money. Responding to suggestions that the new policy could lead to an increase in road accidents, muggings or burglaries, Conservative councillor Newton, responsible for Hertford All Saint division, reportedly said those who object to part night lighting "should buy a torch".
We really are going back to the Dark Ages, aren't we, to a time when those who dared to venture outside their front door at night needed to take not only their own source of light, but also a stout stick in case of an encounter with footpads. Councillor Newton should maybe count herself lucky that we don't have the guillotine in these parts, but I daresay she and all of her colleagues who are supporting this nasty little scheme -- which is, let it be said, being replicated in other parts of the UK as well -- will almost certainly face the chop in the next round of local elections.
Thursday, 1 March 2012
Step one: find a granny
A dumb idea for the ages: Royal Mail (the British post office) is planning to sell cheap stamps to "disadvantaged" members of society, in an effort to deflect some of the criticism for the massive increases in stamp prices that it plans to impose in April. (I use the word "massive" advisedly: the cost of first-class post is to rise by more than 50%, to 70 pence for a normal-sized letter). To sweeten the pill, however, it will allow people on benefits -- jobseekers, pensioners and such -- to buy their Christmas stamps this year at last year's prices. About 5 million people will qualify, apparently.
It's hard to know where to start on this one, even if you don't want to go along with the Daily Mail (no relation), which is predictably in a righteous fury that benefit cheats might get cheap stamps! (Really! Check it out here). Thing is, with 5 million people eligible for the deal, there can hardly be a single person in the country who won't be able to find someone to buy stamps for them on the cheap. The National Federation of Postmasters has already expressed its doubts about the workability of the deal, maybe because it fears its members will be subjected to threats of violence if they try to refuse cheap stamps even to obvious chancers.
Even if the brains trust at Royal Mail have figured out a way to prevent the most predictable abuses of the scheme, it must surely be concerned that such a large price increase will decimate its Christmas trade. After this past Christmas, there were a few articles in the media about how the numbers of Christmas cards that people are receiving seems to be in steep decline. It's something we've noticed ourselves, and it can't just be because our loyal correspondents are starting to migrate to a better place (and I don't mean Barbados).
The fact is that the mail is in long-term decline. Truth to tell, its fate was probably sealed with the invention of the telephone, but its almost total demise only became unavoidable with the arrival of e-mail. No doubt Royal Mail has done some modelling on this, but there must be a real risk that the accelerated fall in volumes resulting from the price increase will erode much of the revenue increase that the higher stamp prices are designed to achieve.
Royal Mail's problem is that its fixed cost base is enormous, and becoming more and more of a burden as volumes shrink. The steps that could be taken to cut costs tend to provoke massive opposition. Close rural post offices? Can't do that; rips the heart out of villages and deprives the elderly of a social centre. Impose different rates for delivering mail in remote areas? Socially divisive (and would play especially badly in Scotland). Cut back mail deliveries, say by eliminating Saturday rounds or only providing service three days a week? Huge uproar: there are still people who seem to pine for the days when there were 8 deliveries a day in the London area.
If you know that sensible ideas will get short shrift from politicians and the media, you inevitably start to think of trying not-so-sensible ones, and that's the point Royal Mail unfortunately seems to have reached with its Christmas stamp deal. The CEO of Royal Mail, Moya Greene, was previously CEO of Canada Post Corporation, so she knows a bit about running a dysfunctional company in the face of huge political interference. When she moved to the UK in late 2010, she may have been expecting an easier time of things at Royal Mail. Sorry about that, Moya.
It's hard to know where to start on this one, even if you don't want to go along with the Daily Mail (no relation), which is predictably in a righteous fury that benefit cheats might get cheap stamps! (Really! Check it out here). Thing is, with 5 million people eligible for the deal, there can hardly be a single person in the country who won't be able to find someone to buy stamps for them on the cheap. The National Federation of Postmasters has already expressed its doubts about the workability of the deal, maybe because it fears its members will be subjected to threats of violence if they try to refuse cheap stamps even to obvious chancers.
Even if the brains trust at Royal Mail have figured out a way to prevent the most predictable abuses of the scheme, it must surely be concerned that such a large price increase will decimate its Christmas trade. After this past Christmas, there were a few articles in the media about how the numbers of Christmas cards that people are receiving seems to be in steep decline. It's something we've noticed ourselves, and it can't just be because our loyal correspondents are starting to migrate to a better place (and I don't mean Barbados).
The fact is that the mail is in long-term decline. Truth to tell, its fate was probably sealed with the invention of the telephone, but its almost total demise only became unavoidable with the arrival of e-mail. No doubt Royal Mail has done some modelling on this, but there must be a real risk that the accelerated fall in volumes resulting from the price increase will erode much of the revenue increase that the higher stamp prices are designed to achieve.
Royal Mail's problem is that its fixed cost base is enormous, and becoming more and more of a burden as volumes shrink. The steps that could be taken to cut costs tend to provoke massive opposition. Close rural post offices? Can't do that; rips the heart out of villages and deprives the elderly of a social centre. Impose different rates for delivering mail in remote areas? Socially divisive (and would play especially badly in Scotland). Cut back mail deliveries, say by eliminating Saturday rounds or only providing service three days a week? Huge uproar: there are still people who seem to pine for the days when there were 8 deliveries a day in the London area.
If you know that sensible ideas will get short shrift from politicians and the media, you inevitably start to think of trying not-so-sensible ones, and that's the point Royal Mail unfortunately seems to have reached with its Christmas stamp deal. The CEO of Royal Mail, Moya Greene, was previously CEO of Canada Post Corporation, so she knows a bit about running a dysfunctional company in the face of huge political interference. When she moved to the UK in late 2010, she may have been expecting an easier time of things at Royal Mail. Sorry about that, Moya.
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