Monday 31 March 2014

Which is the April Fool

Bizarrely only one of these is (mostly) not made up.

1. George Osborne, perhaps in a fit of Tony Benn nostalgia announced that in future a Tory government would commit itself to full employment regardless of the cost to the nation's purse or globalisation having rendered such ideas impossible.

2. Nigel Farage has stated he admires Vladamir Putin the most of any world leader and keeps a life size cardboard cutout of the half naked president in his office.

3. Julie Gayet, the ex-ish girlfriend of Francois Hollande is suing the magazine that first published the story of her affair with the crisis hit premier on the grounds that it was true and she didn't like it.

4 Nick Drew of Capitalists@Work has added his name to the growing list of UKIP hopefuls as he has decided to stand for a seat in the coming euro elections. Mr Drew stated that "he'd had it up to here with the Heathites." And made a flat hand above head gesture.

5. Having had his red lines crossed by Russia over Syria and recently in the Ukraine, President Obama's secretary of state, John  Kerry, has announced yet more red lines, only drawn with a thicker, more impressive, nib.

6. Having spent the day panicking the public after a global warming report predicted drought, flood, fire, pestilence and famine within 45 minutes, the BBC asked on its main news pages "is the climate report overly alarmist?"

7. The coalition government plans to introduce a law to protect children from emotional cruelty. The law it is hoped, will prevent parents from failing to do their children's homework equally as impressively as the competitive mother down the road does. Pretending there is only one Harry Potter book and from saying "because I say so, that's why!"

Could the House Price bubble burst before the election?

A week is a long time in politics. A week can also be a long time in the financial markets - as can a day. Just looked at the smashed share prices of the insurance companies now being investigated by the FCA - a load down 20% or more in the blink of an eye.

When sentiment turns, it can go very bad. My own investment in GKP is down to 90p today from heady heights of 450p just a couple of years ago. it's a big change and the facts have changed so along with that so have the prices.

Currently in London we have a massive house price bubble. Huge population growth, limited housing development and competition from the World's wealthy for a piece of 'London Gold' is driving prices up at an incredible rate. Great times to be a property developer or agent, less good for those wanting to buy a house or even rent at a decent price.

As well as the human factors, the Government has weighed in by restricting permitting for new developments and pushing Help to Buy. In addition there is the Funding for Lending Scheme and record low interest rates for a 6th year running. Liquidity is everywhere. Anyone can borrow and borrow a fortune - encouraged by the Government and the Banks that they own.

It is a witches' brew, the higher prices go, the bigger the crash will be. Last time many eminent commentators were warning about a crash in 2003/4 that did not happen until 2007. Then the global nature of the crash saved London as it became a safe haven for capital flight.

From a UK politics view at the moment this is benefiting the Government. The Government has engineered a nice boom which is helping, construction, banks and moving the liquidity created by QE into the real economy. After such a terrible financial crisis, this is in many ways a good thing.

Except that we are moving liquidity into a sector which is already far beyond its natural level. If it were a share, the London market is ASOS. ASOS is a frankly brilliant company which is hugely successful, but its share price went far beyond its value or that of its management to keep pace with. As such it has suffered big drops recently. At some point too another paradigm comes into play. There is an old market saying that when every market 'Bear' has become a 'Bull' then the market changes because there is no one left to sell - shares cannot go higher.

We are already seeing this with super top end London property, where prices and volumes are way down for over a year now. Most of the World's super rich who want a London pad already have one. I would not want to be one of these investors in Mayfair super-developments where they think average sale prices are going to be north of £20 million at £6,000 per square foot.

This effect will slowly trickle down the market in due course. The huge demand pressure is from the bottom of the market in the main so prices will always be cushioned and London property is unlikely to crash like a busted share. However, down it will come and the feel-good factor will wane and the effect on the economy will be real.

The top of the market is also here, maybe it will last for another 2 years, maybe 3. There is a chance though that sentiment turns more quickly and with it will go the Government's re-election strategy. So even though it is a terrible policy, don't expect to see the end of Help to Buy anytime soon.

Friday 28 March 2014

Reforming pensions and demographics - No work until your 25?

I managed to get 3 ticks for a stupid post for the first time ever earlier in the week, having suggested that due to the ageing demographic crisis we need to be more radical than just axing annuities and increasing the retirement age.

There was much fair comment that losing people in the prime of their lives and losing their skills sets would be a challenge. I doubt this applies to all professions equally but clearly some, like technology, could not survive such a break. Hairdressers and gardeners, perhaps less so.

Another way of moving the goalposts is to extend childhood into the mid-20's. Anyone who has grown-up kids will know that in many ways this has effectively happened already. But for the UK we still maintain a Dickensian approach to schooling, which if reformed, might help to both improve our children's overall education and add in the time needed to help with extending working lives into people's mid-70's.

In many Countries, such as Sweden, Switzerland, even China, kids do not start primary school until they are 7. In the UK they start at age 5. As an adult and having worked with people extensively from all of these Countries I would never know the difference. Perhaps though there is some as they learn creativity and play for another 2 years? The studies into this suggest this maybe the case but are inconclusive.

Moreover, in the US, where I went to University, all Uni courses are a minimum of 4 years and some are even 5 years. Scotland too has 4 year courses.

Just changing our system of education to this model would add 3 years onto the time until full work was started. Children could do primary school to 13, secondary school to 19/20 and then University or apprenticeship training until 24. Thus only entering the full world of adult work at 25ish.

Some of issues around children staying at home have been defeated in recent years by the sheer cost of housing forcing them to stay with parents in any event when having small salaries. In London  by way the average age of house buying is 35!

Finally, none of this should impact on the State negatively. Children staying at home until 7 means no overall increase in school time and extending university or apprenticeship training again has minimal impact on the National Budget.

Thursday 27 March 2014

BBC Question Time; Freeze my bills off !

David Dimbleby presents Question Time from Brighton, with international development secretary Justine Greening MP, Labour backbencher Diane Abbott MP, UKIP MEP Roger Helmer, singer-songwriter Mick Hucknall and the chief executive of Next, Lord Wolfson

What will the panel be asked by the good people of Brighton, the only place in Britain that I've seen hookers in the streets. Stag party heaven.- Dick The prick still leads as we come up to the halfway point.

Dimbletie - Rainbow and pink.

Q1. Has Ed Miliband managed to freeze energy prices even without being PM?
Q2. Is Nigel Farage a sweaty, racist, homophobic, Putin supporting bigot?
Q3.Tony Benn {the old commie didn't get a look in last week. Even greater plaudits for him this week}
Q4. ATOS - bedroom tax- poorest in society - disabled being murdered by coalition..etc.
Q5. Teachers strike {and in Brighton there was also a pupils strike.}

Hall of The Winners


DTP - 3

Taff - 2 

Mark Wadsworth - 2 

Measured - 2 

Nick Drew - 2

Bill Quango MP -1 

Malcolm Tucker - 1

Those Wicked Energy Companies - SSE Breaks Ranks

... and offers a 2-year price freeze.  That'll be interesting, both for them and their shareholders.  Because the underlying wholesale energy costs they face are anything but frozen, as a glance at the graph of what happened to prices in 2008-9 will confirm.  So what have they done - hedged a very large chunk forward?  But what if they attract many more customers - or will they just stop taking new accounts?  And what if they lose a heap of customers, and the hedge goes out of the money?  One trusts they have thought this through.

Because at the very same time as taking on this fairly substantial forward spec position, they are also effectively giving a profits warning, suggesting a reduction in their resilience to future shocks.  Breaking ranks, or breaking the bank?  Maybe that lies behind the parallel announcement of a voluntary separation of the business into independent companies: put all the risk in one of them at let it sink if necessary?

The politics of this are amusing.  It's pretty obvious how Ed "he's had a bad week so far" Miliband will spin this - he's started already - but he needs to watch out because (a) SSE has explicitly linked their retail play to big job cuts plus abandonment of a serious tranche of offshore windfarm development - the inevitable consequence of putting the squeeze on the Big 6, as we have said here many times before.  Wonder what his green and Union friends think about that particular trade-off.   And (b) it's easy for the Tories, and indeed Joe Voter to say: well then we don't need Mr Miliband's freeze at all  We might add (c): SSE itself attributes its move partly to the coalition's lifting of various green impositions, exactly as Cameron is crowing.

Yesterday's referral of the Big 6 to the CMA is, on balance, probably a good thing, because it should result in better focus than Ofgem has managed on improving wholesale market liquidity:  That is 99% of what needs to be done on the regulatory front; and breaking up the verticals may have to be the way to do it (another oft-rehearsed C@W topic).

But the Big 6 do need to get their arses into gear.  If one compares the switching service provided by telecomms firms (and even the bank these days) with what you get from the energy co's, it is not a happy comparison.  They just haven't made the step-change needed to provide 21st century customer service, despite laborious incremental improvements on their 1990's-vintage set-ups.  Their systems are crap (believe me, I know about this) and they've just limped along.  How SSE or any of their peers fix their share of this problem at the same time as slashing staff numbers is anyone's guess.

Still, perhaps this is a bit of a watershed.  Just in time for Cameron to claim some credit ?  Probably not :  but hey, he might do so anyway!


Wednesday 26 March 2014

The Chinese and MH370

Having no firsthand knowledge of China whatsoever, but good reasons to understand it better, I find Chinese reactions to the MH370 disaster very interesting indeed.

It scarcely needs rehearsing that MH370 is a tragedy and, who knows, potentially as nefarious as Pan Am 103.  Relatives of the Lockerbie victims have plugged away in resolute and dignified fashion for 25 years to get closer to what actually happened, without definitive success.  Mysteries like this make the underlying calamity the more difficult to bear: and arguably, right now before any wreckage is found, MH370 is in some ways even more unsettling.  Common humanity dictates compassion for all concerned.

That said, what are we to make of the fairly unrestrained public outpourings of quite a number of Chinese families?  In Japan (which I do know something about) it wouldn't happen like that.  Private grief and bewilderment would doubtless be as great, but powerful cultural forces would ensure that dignity was maintained: the wider families of the heart-broken would embrace and comfort them, and at the same time enforce the stoic decorum which is central to the way of life.  Japanese society as a whole wouldn't, couldn't countenance people losing it in public. (This isn't some sort of 10,000 mile-distant stereotyping:  we know it from their responses to the tsunami.)  We all saw the dignity, nay resolute cheerfulness, with which Filipinos bore their own disasters last year.  And Radio 4 has been interviewing an American relative of an MH370 victim whose composure, dignity and Christian equanimity in his evident distress has been a model the stoics of old would have commended, and that we might all hope to emulate should such a thing befall us.

As for the Chinese, I am left puzzling over the strands.  Doesn't 'face' count for something in China, as we are always led to believe?  Does the Chinese government think it strengthens their global image to have the world watching their distraught citizens behave thus?  Shows them to be a people of heartfelt feeling?  Gives them some kind of upper hand against Malaysia in disputes over the South China Sea?  Deflects Chinese opinion from wondering why China itself has looked so impotent over the whole affair (as everything is once again left to the Anglo-Saxons to clear up)?  I'd be surprised.

Would Chinese people dare to behave thus if a future disaster is entirely of Chinese making?  Do they in fact behave exactly thus (and there are many, many such Chinese disasters all the time) but the authorities make sure we never get to see it?   Would these suppositions have been true in the past, but now the internet makes suppression more difficult and 2014 marks some kind of turning-point?  Or is it a release for pent-up frustration against their own government, which they feel at liberty to express provided they direct it at the nasty foreign Malays?  (Even a shot across the bows of the Chinese government?  This is how we really feel when these man-made disasters happen and no-one tells us anything - watch out the next time one of those home-grown catastrophes occurs.)

The nearest anyone has got to giving me an explanation is that the Chinese are accustomed to a very 'orderly' public world in which nothing goes wrong without it being authoritatively (if mendaciously) explained by the Party in ways that brook no doubt or dissent.  Thus, they are totally lost in a situation of unstructured uncertainty, at which point anything can happen.   That makes sense as a contributory factor.

Maybe more and better explanations will come our way.  I hope these poor people get whatever it takes to comfort them soon.

In the meantime I am left with the clear impression the whole episode shows that the global standing of China is a lot poorer than heir-apparent-imminent to World Leadership. 


Tuesday 25 March 2014

Ending annuities is just the start of retirement reform

[retiring at 40.jpg]
Great hay has been made this past week about the Government changes to annuities and what an amazing budget this was etc etc. I don't see it that way really, the change to annuities is sensible and brighter recent pensioners will wonder at the deep cynicism of the Government to propose a change only after 6 years of the lowest annuity returns of all time!

What is more interesting is thinking about where the Government is going and indeed society as a whole. Despite our Government's slowness on changing pensions and retirement strategy, it is actually a long way ahead of most OECD countries who instead have ignored this issue as too hard to deal with and left it for the future Government's to sort out.

However, with a huge increase in over-65's and indeed 70's and over-100's there are big challenges ahead. Plus we have the more to automation of many jobs which means the economy will produce fewer jobs in the near future at the same time as the population rises. Clearly, the younger population will not be able to support the older and wealth transfer down the generations will only last one or two before the Country is in penury.

A really radical solution is called for and I would suggest this, compulsory 10-year work breaks at 40, with a mini pension created for this time and state support for parents during this time. 40 is a good age as most people are still full of youthful energy and can live full lives. It's a much better time to enjoy yourself and typically one's young family at that time.

This break will reduce pressure on the need for job creation, particularly in a world where labour is transient in any event and roles can be filled more easily. Once the age of 50 is hit you can look forward to another 25 years of work before 'real' retirement at around 75. The pension needed post-75 is a lot lower than post-65.

The merits of the above are bountiful and help with the technology challenge we are facing too. Of course, if people do not want to stop work then they will not have to - similar to having children and paternity/maternity rights now. The benefits can be arranged to be advantageous to those who take the break, but it would not be compulsory, just financially and lifestyle attractive.

It's a radial suggestion now, but in due course we are going to have to think of very innovative ways of keeping the workforce engaged until a later age as well we to share around employment opportunities in the age of automation.

Monday 24 March 2014

The Judgement of History on Tony Blair

Mr Quango opined last week that the judgement of history will be kinder on Cameron's coalition than the judgement of today.  (Actually, it's the 2015 verdict matters ...)  

But some pretty durable quick-drying cement seems to be forming around Tony Blair's feet of clay, in a lump big enough to drag him under for good.   Did you see Turks and Caicos, the second of David Hare's trilogy?  Beasley, the Blair character, is explicitly colluding and collaborating with the USA on extraordinary rendition + torture, and feathering his nest on an oligarchic scale, using oligarchic means.  

These are hardly new charges, see CiF comments passim: and Hare's not the only proper writer to have had a crack.  The Trial of Tony Blair was off the blocks as early as 2007 and probably counts as the first serious, high-profile pop at the man.  And Robert Harris' The Ghost, also 2007, was obviously an outlet for similar pent-up anger.  (Harris levels as much against Cherie as against Tone, which may be a fair distribution of opprobrium: don't we think her fevered love of the filthy lucre lies behind his ever more shameless venality?)

But Hare is the man to plant these things rather deeper into the collective subliminal.  (Beasley, Beastly ... if the tricks of the trade are good enough for Dickens - and he had some powerful points to make.)  It isn't just historians (or journalists) who have their hands on the Big Pen of History; and the very fact that 100 years from now people will be making their historical inferences based in part on the contemporary cultural landscape makes it fairly certain that heavyweight Hare's case for the prosecution will inform the Judgement.  Heavens, how Blair is hated.


Friday 21 March 2014

Why no love for the coalition?

The coalition came into power during the worst recession that has ever happened. It inherited finances from a government who had spent more than all the previous post war governments put together.
The banks were still tottering.The high streets deserted and job losses and inflation increasing. 

Then the Euro zone started to collapse. The UK's largest trading partners could hide their recession no longer and they began to falter leading to the humiliating need to bail out entire countries.
And if that wasn't enough North Africa and the Middle East went into revolution and Scotland decided it wanted a divorce.

Any one of these events might have sunk a normal administration. All of them at once should have defeated the coalition utterly.
When Jim Callaghan, faced with 1976 inflation and falling output from the factories was asked in cabinet what should they do, he suggested, only half jokingly, that they all emigrate.

Yet the coalition has been a success.
The inflation specter loomed only briefly. The rise of unemployment was halted well below the 4 million expectation. Borrowing, while desperate, was no worse than other nations. Civil unrest, after a flurry at the start, has been normal for Britain. The 'cuts' have been implemented and even some tax cuts have been made. And a very radical manifesto of benefits changes, education changes, dubious NHS changes, tuition changes and now pension changes implemented. More than labour attempted in 13 years never mind 4.

Yet the coalition is very unpopular. Its unpopular here on this blog. I am unimpressed. CU has even gone over to UKIP.

 Why is this so? What more could we realistically have expected them to do?

I suspect that in the future, history will look more kindly on this period than we do today.

Thursday 20 March 2014

BBC Question Time : OAP special edition

David Dimbleby presents the topical debate from Warrington. On the panel are chief secretary to the Treasury Danny Alexander MP, shadow health secretary Andy Burnham MP, Conservative Dominic Raab MP, former director of the Centre for Policy Studies Jill Kirby and crime writer Val McDermid.

So much news, so little time.Especially with all the posturing that has to take place.
lets go for.

1. Budget - pension changes most radical since 1854
2. Bingo tax - 1st cut since 1854
3. Crimean referendum. West refuses to accept outcome. Biggest crisis in relations since 1854 
4. Tony Benn. Radical politician from 1854 era.
5. Childcare tax break. So unfair! What about dishing £1854 tax exemption to childless couples and single people too!!
Dimbletie - Gold coins on a mint green background

Hall of The Winners 


DTP - 3

Taff - 2 

Mark Wadsworth - 2 

Measured - 2 

Nick Drew - 2

Bill Quango MP -1 

Malcolm Tucker - 1

Russo-German Relations Getting Touchy

An amusing straw in the wind.  Like everyone else I get sent heaps of conference brochures, and one on my desk is this, entitled Long Term Gas Supply Contracts, to be held in Berlin in July.  You can't make it out from the thumb-nail pic of the brochure on the website, but I can tell you that the star attraction featured on the front cover is a "revealing session ... insider insight from the RWE v Gazprom Arbitration Panel", with three leading German lawyers: Messrs Erhard Boehm, Bernhard Meyer and Siegfried Elsing.

Now that would be interesting.  The RWE v Gazprom case (which we've mentioned before) was a protracted affair that, unlike most gas contract re-negotiations, was not settled in the smoke-filled room or even on the courtroom steps: it went all the way, and Gazprom lost.  They've always declined to comment.

So one might imagine the 'insider insight' session would be in big demand.  But what's this?  An urgent update from the conference organisers:  there will be no insider-insight session, and the case of RWE v Gazprom will not be discussed at all !

So Gazprom's normally reliable sense of humour (see here, here and especially here) has failed.  If anyone can be arsed to turn up in Berlin, it would be fun to raise the matter continually from the floor ...  how will the Thought Police deal with that?  Perhaps I should go anyway.


Wednesday 19 March 2014

Budget 2014

Amazing, incredible...ermmm here is my quick review:

a) A bad start
b) Sagged in the middle
c) Tailed off towards the end

So what was the point of that then, nothing exciting and everything else announced months ago. I almost pity the print journalists who have to try and make copy from this!

Putin's Posture

Back to the wall
We said a couple of weeks ago how much Putin resents the way he's treated by Fate generally, and the West in particular.  He's evidently been told by someone not to suffer in silence - let it out, old chap !

The Grauniad headlines it thus:
Vladimir Putin's message to the west: Russia is back
In truth, Russia is backs-to-the-wall would be more like it. 
... his address to the Duma covered a wide range of issues including relations with the US and Germany ... in large part a 50-minute whinge, a disappointed man's whine about life's unfairness and a historical determinism that boomeranged on its most devout adherents. Putin is a master of the politics of grievance ... bitterness and bile poured out unchecked, mixed up with an apparently bolstered but unfounded confidence that the US and the EU are virtually incapable of beating back Russia's new cross-border assertiveness.
The irresponsible neo-cons who have run US foreign policy for many years now must be laughing themselves silly.

But even while I persist in the view that Putin's is essentially a defensive posture, it must be said there is a very fair chance both Russia and China will try something on in the next few months to calibrate just how the West can be relied upon to stand back.  Some of their clients will be having the same thought.

Dangerous times.  Didi you see the BBC's excellent "37 Days" ? (on the run-up to WW1).  Full of the miscalculations, stupidities, errors and sheer bad luck that can result in events slipping out of control.  Ah yes: events, dear boy, events.  Probably quite a few more of those in the pipeline.


Tuesday 18 March 2014

Pre-Budget Tory choices

Is it too little too late for George Osborne? I mean the main idea in the budget seems to be raising the lower tax threshold which has been firmly associated with the Lib Dems. Osborne's main achievement on tax has been to lower the top rate from 50% to 45%. Overall, this is not good and is reflected in the Tories never having led in the polls since this set of changes was announced in the 2012 budget. Its cold comfort that it has equally affected the Lib Dems who are set for a form of electoral oblivion this year and next.

So what could the Chancellor do to make this different and what strategy to take. There are only 3 roads politically to choose:

One is to make some headline grabbing tax cuts or benefit rises as a blatant voter bribe. These though don't come in for a year and then that is very near the next election, probably too close for people to notice in their pay/benefits cheques.  Still, it might make Labour squirm a little as they will be left having to argue for higher taxes over and over which is boggy ground from which to try and advance.

Secondly, to take the long-term approach, realise that the deficit is still out of control and the macro-economy is still in a mess. Make a few changes, but with a neutral at best tax impact on the public finances. Some big announcements about things far in the future like HS2 etc that have no real impact on today's figures because there is no major spend this Parliament.

Thirdly, to start laying pure political traps for Labour now, really cutting back on Welfare and merging National Insurance into payroll taxes or changing the name of Employers NI. Make huge investment promises on airports, roads and rail that will need funding next Parliament but not major funding now, however jump-start them to begin in earnest in 2015. Move pensions and benefits back into line with RPI instead of CPI. Cut subsidies for Energy companies starting next year. Lower the headline tax rate and move the 40p threshold to £45,000. None of these ideas make much sense for the long-term benefit of the Country in terms of balancing its books (or even coming close), all though will prove anathema for Labour to reverse when they get into power and will make their 5 years very hard to make a success of economically.

So these are the 3 options, what will the Chancellor do? One, two or three?

Monday 17 March 2014

Don't We Just Love Pre-Budget Lobbying?

Spring is here, and it falls to the unhappy lot of the corporate PR to be instructed from on high to demean themselves by placing articles seeking to change the Chancellor's mind on some heavily-trailed Budget measure.  One can imagine the effect this tosh has over the Osborne family breakfast table. "I see in the Telegraph that EDF are asking for some more free cash, George."  "Oh really, dear? Then I will hasten to the Treasury to do their bidding this very morning."  At best, these daft articles are a kind of pre-emptive whinge.

In their own way they can be amusing, though, for all that.  I particularly like it when they place their ads on Guido's blog; and C@W is always open to pre-paid contributions ...  But it is to the Telegraph we turn for these two closely related gems:
Keep carbon tax, say green and nuclear energy chiefs ;  and
Britain has the right energy policies in place, it just needs to keep the costs down
The latter is under the by-line of out old EDF friend, chief frog Vincent de Rivaz lui-même.  Not satisfied with his extravagant Hinkley Point C deal, he also wants to preserve the windfall for his existing nuclear fleet that is the Carbon Price Floor - a boon which is altogether more tangible and immediate than the sometime-never Hinkley, being cash-in-hand right now.  Pretty brazen to use the words "just needs to keep the costs down", but being in lobbying mode is a shameless business (he invokes Ukraine and the floods, too, though inexplicably fails to mention Chinese inward investment).

Tough shit, Vince, but you had it coming.  Live by the subsidy, die by the subsidy.

Spotted any other entertaining budget-whine for our delectation ?


Friday 14 March 2014

Crow, Benn ... Who's Left?

Not such a good week for the unreconstructed Left.  Benn was a museum-piece though, and Crow was evidently quite *flexible* in his ideology when it came down to the nitty-gritty.  

National treasures, both.  Yes, when it comes to graveside eulogies those of us on the right always remember the niceties.

I'd cross the road carefully this week if I were Scargill or Livingstone, though ...


Thursday 13 March 2014

Question Time : Bus pass Elvis edition

David Dimbleby presents the topical debate from Nottingham. On the panel are shadow foreign secretary Douglas Alexander MP, Liberal Democrat transport minister Baroness Kramer, Conservative MP and member of the Number 10 Policy Unit Nadhim Zahawi, journalist Isabel Oakeshott and star of The Apprentice, Nick Hewer.{ no idea - I don't watch it either}

Guesstion Time
Dimbletie - pale pink and white

Q1. Labour commits to possibly thinking about one day n the distant future committing to the idea of maybe having a non binding vote on Europe?
Q2. Below inflation NHS pay rise.
Q3. Bob Crow. Hero or dinosaur or a bit of both?
Q4.Miliband's jobs for all scheme and the spending of the banker tax yet again.
Q5. Bus pass Elvis - Should he go national?

Wednesday 12 March 2014

Russia Hasn't Quite Cracked This Spin-Doctory Thing

It is said that Putin now employs teams of 'political engineers':  but it's early days and their handiwork isn't always up to - how shall we put it - cutting-edge standards.  What follows is an extract from an extraordinarily convenient meeting between Russian PM Dmitry Medvedev and our old friend Gazprom chairman Alexei Miller.  I've omitted the bit where they discuss the weather etc etc but you can read the whole thing on the website here.

(PS, notwithstanding the occasional piss-take on this site, I am not making this up ...)   

AM:  ... Currently, Gazprom is finalising talks with our Chinese partners, and we are almost ready to sign a 30-year gas supply contract with China. We expect that the contract could be signed already in May. Initial gas supplies to China under the contract amount to 38 billion cubic metres. As you may be aware, this gas comes from Eastern Siberia, but we have made an agreement with our Chinese partners that once the contract for gas supplies from Eastern Siberia is signed, we will immediately start negotiations for gas supplies via the western route, where gas will be coming from gas fields located in Western Siberia, which has traditionally been the resource base for gas supplies to Europe. In the mid-term, we can bring Asian gas supplies to the levels that are comparable with European ones. 
DM: This is a promising market, and in any case we should focus on this part of the world. It's good that you are close to reaching a final agreement. I hope that all these plans will become a reality**, and we’ll obtain a separate and fast-growing market for Gazprom's gas supplies. Now, back to the current affairs. How are our relations with Ukraine? Are there any new problems or is everything as it was? 
AM: Ukraine has not repaid its debt for 2013, plus its debt for current supplies is building up as well. January gas supplies by Gazprom haven’t been paid for yet. Yesterday, our Ukrainian partners told us that they won’t be able to fully cover February gas supplies either. At the end of 2013, we agreed that Gazprom would provide Ukraine with a discount on gas supplies on the condition that Ukraine would repay its debt for 2013 and pay for current supplies in full. Unfortunately, the fact is that the debt for 2013 has not been paid off. 
DM: How much did they pay in all? 
AM: Speaking about the 2013 debt, Ukraine has paid $1.3 billion dollars. 
DM: That is, 50% of the debt? 
AM: Slightly less than that. Ukraine’s total gas debt currently stands at $1.529 billion. Since Ukraine is not meeting its obligations and is not acting according to the agreements that were reached at the signing of the addendum to the contract regarding the discount, Gazprom has decided not to renew the discounted prices beginning next month.
DM: I see. People who don’t pay for the goods they receive must realise that they will suffer consequences, including the cancellation of earlier agreements on preferential terms of delivery. Still, what do you think should be done in order to have this debt repaid? 
AM: Ukraine owes Gazprom a considerable amount of money. Last year’s debt was deferred to Gazprom’s budget for this year, and this money is part of our investment programme. Therefore, the best thing Gazprom could do for Ukraine is to provide it with a loan in the amount of $2-$3 billion for it to repay its debt for 2013 and to pay for current gas supplies. 
DM: It is no secret that 50% of the amount they paid was paid using a sovereign loan that we issued to them. Of course, this is one way to resolve this problem. I will instruct the Finance Ministry to weigh all the possibilities and challenges associated with Ukraine’s currently very low credit rating, and other aspects of Russian-Ukrainian cooperation in this area. In any case, Gazprom should insist on full repayment of debt by its Ukrainian client. This is my first point. Second, the decisions that you are taking to abolish the preferential terms of delivery appear to be perfectly legitimate in these circumstances. 

Wonderful stuff.  And Volodya too has some opinions on it all: and I didn't make this up, either
In Moscow, Vladimir Putin said “this is a purely commercial component of Gazprom’s activities. And incidentally, this does not have to do with the events in Ukraine or any other politics. There was an agreement”.
Clear enough ?  Thought so.


** PS: long-time readers know my views on this Chinese deal ...

What next for Payday lenders?

There have been many scandals in recent years, but the rise of payday lenders is one of the worst. The industry has mushroomed in the past 5 years, along with the pawn industry. That the pawn industry is now suffering is partly due to its huge over-expansion and also the fluctuating price of gold making commercial decisions harder.

The Payday loans industry by contrast has grown and grown with 200 lenders now registered with the FCA as it now tries for the first time to regulate the industry as of today. Yup, you heard it, as it starts from today trying to regulate the industry. All these adds for Wonga etc that have been around have all been part of an unregulated industry.

Now, as Capitalists, we have a lot of sympathy here with people borrowing to make up short terms needs as they wish. It's a free country is a saying you don't hear so much these days for obvious reasons, but nonetheless, people should be free to make choices. However, when the choices come with 4 pages of font size 2 text and usurious rates of interest then it is not a free choice - its a bad choice. It's not good Capitalism to have those with capital freely pray on those without and its not a free market where the particpants are at such opposities in terms of power and competence. basic regulation is always needed to underpin fair markets in any system.

Long ago, the FSA as was had a principle of Treating Customers Fairly, this meant that firms could sell products but should seek not to rip people off blatantly - in fact this is the basis for many of the derivative and PPI mis-selling claims that abound.

My take on it is that the owners for Wonga et al are not long for this world and if I was them a swift use of share capital to acquire less opaque businesses would be the top of my agenda. Even the FCA are going to twig that 2000% interest rates are usurious and are effectively a rip off of the stupid and ignorant which is far from what should happen in financial services transactions.

The industry will as a whole survive as indeed people have perfectly legitimate reasons to need short terms lending from time to time (I know I do!), but I would expect some rather sharp changes in practice in the medium-term. One thing that is a shame is that with all the LIBOR and FOREX scandals going at full whack, I doubt the FCA has enough capacity to do the job effectively in the short-term

Tuesday 11 March 2014

Nuclear Frog Farce: Enough Already

When do ministers finally lose patience with EDF ?  When do they wake up to the thought that the entire 'new nuclear' programme is a badly misconceived joke?  That the civil service is utterly inadequate for nailing a proper deal with the slippery Frog?  That government time (and monies) expended on pretending otherwise are not only wasted, they are misleading a host of gullible UK would be 'nuclear industry supply-chain' companies into wasting their resources, too.

Yes, for the umpteenth time since 2008 when EDF bought British Energy and 'announced' that it would build four new nukes here, it has announced another delay. That's even with the government's remarkably generous Contract for Differences in hand, which gives them a lavish guaranteed and uncapped return on "the world's most expensive power plant".  A delay blamed on the entirely predictable scathing response from the EC on the mater of whether the CfD + Treasury Guarantee package constitutes illicit state aid (a response which also brilliantly analyses the flaws in UK nuclear policy, and by extension, the whole Energy Act charade).

Nuclear power has a lot of supporters and - at the right price - they have a lot of logic on their side.  But not at any price; and definitely not at the unreliable whim of massively discredited EDF.  Thank the EC for their cogently-argued critique (it really is very fine); scrap the deal right now; and start again.


Monday 10 March 2014

Gordon Brown's Scottish re-launch

Frequent readers of this blog will know that I hold few people in such low esteem as Gordon Brown. As Chancellor he over saw the biggest boom and bust for 100 years whilst trying to say he did the opposite, plus he has bequeathed us a structural deficit of such large proportions that it will be into the 2020's before it is under control. The list of sins goes on to many pages however brief one could try to keep it.

But it would be churlish of me nonetheless not to recognise his role in the Scottish Referendum. Today he is going to make a speech and has managed through his PR-enabled wife no doubt, to get this run in the Daily Telegraph. This speech will launch his role in the Referendum debate for the rest of the year.

Not for Brown this Independence - far to clean and easy for him. No better still a nice, complex devolution proposal for all four Countries of the UK including England. It's a classic more politics answer with sinecures for himself and his friends for eternity and the game of electioneering expanded to that everyone can get a prize.

If it were that alone, it would be of little interest. the two real belly laugh moments are that he has clearly been told to speak under his own banner, such is the political toxicity of his personal brand. So instead of Better Together he speaks for United for Labour. A real Popular Front of Judea moment (points awarded in the comments for knowing why the Popular front...)

Better still, is the fact that this is the same 'launch' of his independence line that he has made before. It is identical to this hot air served up last September and who could forget his 20 pub questions list of 2012? Might it be he is rather hoping we have forgotten his droning and monotonous wittering on the subject non-stop for the past 3 years - and is instead now hopeful that we have collectively a new found interest in his wisdom and counsel?

Friday 7 March 2014

Immigration and Rachel Reeves

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Immigration was a big topic on question time. 
Barking is a very mixed area. Immigration  has been a big issue. Barking and Dagenham were in the BNP camp in 2009. Its a low skills, poor education C2's, Ds & Es' area. And tensions are often high.

Rachel Reeves of labour gave her stock immigration answer. I've heard her say the same lines a few times before. It sounded credible the first time. Its obviously a well rehearsed piece that has been learned off pat so the right phrases fall in the right order.

There's a bit about 'Labour got it wrong on immigration.' Not a big wrong you understand. A little wrong.  Like the Dome or the M4 bus lane. A bit costly and a bit of an inconvenience, but no real harm done.

Then she moves on to sorting out the problems.

1. Prosecuting firms who don't pay a minimum wage.
2. There has to be homes and school places and jobs for people
3. Jobs cannot be advertised overseas and not in this country.
4. Health and safety must be enforced. 
5. Private landlords letting their homes out to 10 people cannot be allowed. 

The problem here is she isn't addressing anything that exists in any meaningful way.
'Snoring' Rachel often likes to say only a handful of businesses have ever been prosecuted for paying under minimum wage. Well, that's because the vast majority of businesses do pay minimum wage. Because its the law, has been for 17 years and people know it. Costa Coffee or The Amazon Warehouse aren't paying people £1 an hour. They aren't paying immigrants less. Everyone joining gets the same. McDonald's aren't full of immigrants because they pay less. In fact they over pay. But they over pay Uk and foreign the same.

Health and Safety is a ludicrously over the top industry in this country. Even the smallest business will have the local authority pay them a visit to check if they are up to multinational level code. 
What more Health and Safety could be enforced? 

The landlord issue. Why is this even an issue? Miss Reeves is telling us that if we allow people to live in shared housing, they can afford to work for less. Like students. She infers that everyone will be forced back into some sort of tenement slum situation of yesteryear unless greedy landlords are stopped. That bit got a big round of applause.  People were smart enough to realise that that is how the working incomers are able to work for min wage and still send money home. But that's not why we have an immigration/employment issue. We have that issue because £1 is worth 4 zlotys or 8 Lev or 20 Rupees.

Homes and schools and jobs for all immigrants. How are you going to manage that? Its just words. Like saying everyone should have a swimming pool and a helicopter.  Be nice, but who is going to pay for it?

 Jobs advertised overseas is something that is an EU issue. 800,000 UK jobs are listed within the EU.the EURES website has the jobs. Miss Reeves doesn't explain how she could restrict the access to jobs to EU citizens without breaking EU laws. The Tories can't. When this story broke last year the minister simply said it was a firm's patriotic duty to advertise UK jobs in the UK and employ UK workers.  Because that is all that can be done. Under the European Treaty, all EU countries are obliged to share their job vacancies.

The fact is as it has been for years. Immigration from the EU cannot be controlled in any way at all. The vast, vast majority of immigrant workers are taking a job paid at the correct wage for the correct terms and conditions that is compliant with all relevant laws and regulations. Otherwise what is the NHS doing paying all its workers too little and putting them in danger? 

What Rachel recommends won't make much difference to anyone.
It certainly won't help the citizens of Barking resolve their problems.

Thursday 6 March 2014

BBC Question Time : Gas vs Bread edition

David Dimbleby presents the topical debate from Barking in east London. On the panel are former deputy prime minister Lord Heseltine, justice minister Simon Hughes MP and Rachel Reeves MP, Labour's shadow work and pensions secretary.

BQ Thinks
1. Should the UK give lots of money to Ukraine?
2.  Sugar tax? Would this be a good way of funding the Ukraine?
3. Immigration figures.9 out of 10 uk workers get a new job. Or maybe its 7 out of 10. Anyway the middle classes benefi so its not an issue.
4.Unite cuts Labour's funding by £1.5milion.. Tony Blair is richer than Unite and will make up the difference , he says.
5.And one of the many non stories from this week. Women boardrooms. Downs scans. Betting on trials Animal slaughter...But I'll go with Army cuts.

Dimblebytie - Blue and yellow Ukranian national colours.

Hall of The Winners 


DTP - 3

Taff - 2 

Mark Wadsworth - 2 

Measured - 2

Bill Quango MP -1 

Nick Drew - 1

Wednesday 5 March 2014

Meanwhile, at the German end of Gazprom's Pipelines

We have noted here several times that RWE of Germany, one of the 'Big 6' UK power and gas players (in its local guises as NPower and Innogy) is a prime candidate for the bed closest to the door.  Iberdrola of Spain (= Scottish Power) is the other, but seems to have stabilised itself of late.

News from the bedside is not encouraging. 
A surge in [German] solar and wind capacity undercut the profitability of its power plants and triggered nearly 5 billion euros in write-downs. The company said on Tuesday it had swung to a net loss of 2.76 billion euros from a profit of 1.31 billion a year earlier, its first net loss since 1949.
This is one of the companies the UK government is increasingly beating up on for supposed overpricing, while simultaneously passing round the hat for vast investments towards its demented dirigiste energy plans.  Perhaps someone in Whitehall will realise that the three components in this puzzle - pressure on revenues, expectations of huge capital investments, and a sickly balance sheet - do not readily snap together into a neat jig-saw. 

It won't just be HMG's plans that feel the draught as the door opens for RWE to be wheeled away to intensive care.  As with its German sibling Eon, RWE's share register is dominated by Stadtwerke, who rely on the hitherto healthy dividends for provision of municipal services.  In mighty Essen for example (home to both RWE and Eon-Ruhrgas) the city elders are being forced to contemplate savings such as closing large chunks of the tram network as dividend income falls.

'Utility death spiral' is one of the more dramatic descriptions of what's going on.  This, Ed Davey and Ed Miliband, is the real world.  You can probably persist with your delusional energy policies for a little while longer.  Maybe till after the Election.  



Tuesday 4 March 2014

Russia's day: All about the oil price?

So the day has ended with stocks down, nearly 1.5%  in the UK and also 11% down in the ever volatile Russian market.

A key point to remember is what Russia exports - mainly oil and gas. The key indicator for these are gas prices and the Brent crude benchmark. As can been seen from the chart - the price of oil has risen although not too much on the situation in Crimea.

Gold to had a little spike and Russia is a big net exporter of Gold. Finally European Gas prices increased 10% at one stage which was a much bigger drop.

However, often overlooked is the conspiracy theory view of events - ever popular, normally wrong. The thing here is Russian reliance on exports to pay for its budgets. It's all very well comparing Putin to Hitler or Stalin, but perhaps more prosaic action is necessary to explain his actions. yes, nationalism but also economic nationalism.

Russia's budget needs oil to hold firm above $98 a barrel to balance its budget according to Saudi Economists - this is pre-intervention costs. The price is now firmly set when in February before the crisis rose to prominence then oil was flirting with $100 and less.

No need to worry about budget crisis now; the deeper the crisis, the higher the oil price, the richer Russia gets.

Monday 3 March 2014

Putin's hand is weaker than you think

The first cold war was won by the West without the need for a full on confrontation of opposing armies. Yes, sadly millions were killed in proxy sponsored wars - but the Cuban Missile Crisis apart there was little chance of actual engagement.

In the US and UK media today there is a feeling that Putin and Russia have all the cards and the West will stand around meekly with nothing to do but shout and huff. Journalists are keen to dust down 1938 accounts of appeasement of Hitler and so forth.

Of course there is no hope of the West militarily intervening in Ukraine but what we do have, as in the first cold war, is the power of business.

Russia's budget requires a high oil price, worse it is reliant on one or two state giants to provide it with funds. The US does not need Russian Gas or Oil and neither does the UK - even Germany has reduced its reliance in recent years.

Worse for Russia, look at the rouble - the currencies fall at the end of last week handily mirrors the economic prospects for Russia. Crimea as a nationalist use and its use as the base of the Black Sea Fleet and home to holiday Dacha's. Beyond that it is of little economic use.

The idea that threats about G8 status are effete and weak are wide of the mark. Russia's corrupt and disjointed economy could ill-afford to be cut off from world markets. Putin will not be popular with his fellow oligarchs if their businesses face severe sanctions. Russia is no economic superpower and cannot win a victory except by militarily bullying the weak neighbours on its borders.

Sunday 2 March 2014

A long time ago in a timewarp that was the 1970s

More Star Wars.
I can't help it. I have a 5 year old

Alec Guiness and Peter Cushing were the highest paid actors. Guiness earned a fortune as his agents had cleverly got him a 2% profits clause in his contract. And he had a 'no marketing' clause too, so never did any promotional work for the film.

Star Wars started the trend for British actors to be the baddies. {personally, I'm fine with this. It suits us. Christopher Lee is in the Star Wars sequels. Who is more of a baddie than Dracula?}

Alec Guiness became very rich indeed. Or he would have done had he not chosen to remain in Britain and pay 83p in the £ to the taxman.

When asked if he had any regrets about not going to America with the Rolling Stones and the Beatles and Michael Caine and Roger Moore and Sean Connery etc... Alec Guiness replied, "No. But I did hope Denis Healey might have sent me a thank you card for staying. I don't suppose he will."

In Britain 21 million went to see Star Wars. A record only beaten by the Sound of Music.
The acting union equity was reluctant to allow the three American leads into the country. They wanted British actors to be given the roles. It had to be pointed out that unless Equity relented hundreds of British film and acting jobs were at stake.

When Marc Hamill, having never traveled before, went into a British hotel to ask directions, the receptionist mistook his US accent for an IRA terrorist and called the police.

Lucas had a difficult time making Star Wars and had to sack several key people . The British technical people thought the movie a farce. They were not alone. Fox, who took up the Star Wars option after Universal had rejected it, had so little faith they gave George Lucas an unprecedented 40% of the merchandising rights.

More than 250 million small action figures were shipped in the eight years after the first film, going to countries across the world. In the first year alone 42m were sold. 

  The merchandise for the film was not in place to accommodate the demand for the first Christmas rush after the film's release. The toys were a new size that allowed for scale models to accompany them. 3 3/4 action figures. Lucas and merchandise company Kenner Toys hit upon a novel idea with the introduction of early bird certificate boxes. These were basically empty boxes that promised the receiver they would get the figures once they had been made. They sold for $16 at the time and the actual figures arrived two months later. Limited edition packs were re-released in 2005. 
A secod hand early bird pack is worth about $250 today. 

James Earl Jones, the voice of Darth Vader, was so sure the film was going to be a flop, he had his name omitted from the credits. 

Actor David Prouse, who played Darth Vader, kept breaking the lightpoles used as light sabers in the filming. He wasn't asked to the fight scenes in any of the sequels.

Cinemas in the US were were not keen to be buying into  the film and only a few took up the option, Fox gave them a threat that they wouldn't get The Other Side of Midnight - a widely-anticipated adaptation of a Sidney Sheldon novel. The Other Side of Midnight, starring Susan Sarandon, was a box office flop.

When Alec Guiness, the lead part by salary paid,  discovered he was to be killed off half way through he threatened to walk out."I don't understand a word of this script, anyway."

The British pound collapsed a few weeks after shooting began. A pound was worth $2 on day one and only $1.76 at the end. A half million dollar bonus to the Americans.

Star Wars was made during the 1976 heatwave. The Blue screen filming needed huge arc lights raising the temperatures high enough to cause fainting among the actors.

George Lucas was burgled during the filming. But what really upset him was the crew's working arrangements. He was used to the highly regualated and unionised Hollywood working practicies but Britain gave him an eye opener.
 Their routine was tightly regulated. 8.30am. Tea-break at 10am. 1.15 hour for lunch.
4pm. tea. 5.30 home time. No packing up time. Whistle blower's finish.
That this was the film industry made no difference to the union film crew. Tea break is tea break. Not a minute later! Even if in the middle of a scene.
Even when the director asked if the crew would work overtime he was told that they would need to vote on the matter on the following morning. And on that morning, said Lucas, whenever I asked, they voted no.

Hertsmere Borough Council purchased Elstree Studios in 2011. The studio generates £35 million a year in their film production division alone. According to Local Government Chronicle, “Hertsmere BC [a public administration] now take in around £1m a year in rent from the studios, equating to approximately 16% of council tax income.”