Vince Cable Speaks Truth Shock

Every couple of weeks ConHome sends out its political questionnaire: and whenever I can be bothered (as if it did any good) I solemnly rank the performance of Cabinet members, as invited.  It's always 'highly dissatisfied' for a select band: Ed Davey of course; Oliver Letwin; Michael Gove and - naturally - Vince Cable.

But what's this, peeping out from behind the DTel's new paywall ? 

Cable: let's be honest, green energy is expensive ... there was "no point just berating the energy industry" over rising prices because trying to balance consumer interests and the drive for costly green investment was a "horrendously difficult problem"... The Government "should just be honest about the fact a lot of the new energy is relatively high cost.  The cost of new nuclear is a hell of a lot more than the long-term marginal cost of bringing in new gas and coal. Offshore wind is three times the current price of gas. Dr Cable said there was "real tension" between sticking to the course of attracting green investment and "the short-term pressures of price. The energy sector is extremely complex and we are interested in multiple objectives"

 These are not words I ever thought to catch myself writing but - a coconut for that man Cable!

ND

More banking madness courtesy of Mad Vince

Regular readers will know that we hold no candle for VInce Cable here. Either in person, as an MP or in Government Mr Cable has shown little aptitude for anything except misguided thinking and politicking.

The latest idea being bandied about is a state backed business bank. Already there are plenty of calls for this to be scrapped as an idea. The IPPR reckon it will add too much to the deficit (funny they are less worried when its Labour's plans but anyway...).

The big issue for me is that the UK already owned more than 20% of the Banking sector, Northern Rock bits in run off, 85% of RBS, 43% of Lloyds (which itself absorbed HBOS). With all this in state hands why on earth is there a need for a new channel to market.

Moreover, the reasoning sounds very strange to me. Banks will only lend to good credits and these do not include some businesses that the Government wants to encouraged - that would be because the market thinks they are bad credits then? It'sis that thing called capitalism where a market tells you the real state of affairs and you can't buck them. The best case will therefore include this business bank running up big losses on its loans in all likelihood.

With all the QE in the economy I struggle to believe there is a lack of credit - certainly the bankers I speak to do not see this. they just see a big deleveraging of their own and their customers balance sheets. Which is what we want, private sector borrowing which is unsustainable high to come down.

Then we have the small issue of UK Corporate balance sheets being awash with cash - yet this is not invested? There are lots of ways to encourage this, but it is not through setting up a business bank. If you want investment, increase capital allowances reliefs and taper taxes for new business start-ups.

As ever, a Government is obsessed by debt, so much so that it sees not other solution than more debt. This idea is without merit and understandably therefore is a key policy idea of Vince Cable.

Where's Boris When We Need Him ?

Up to his old tricks, that's where.  The papers are full of stories of how he is using the Olympics to further his designs on the Conservative leadership, just as the great international banking-regulatory crisis - conspiracy or no - threatens the City he sometimes claims to defend and promote.  All hands should be on deck to repel boarders, else we may find that during our rose-tinted Olympic revels Johnny Foreigner has been purposefully neutering our financial pre-eminence.

We have fingered Osborne as being asleep on watch, a capital offence, and we must diskard him utterly. Boris, a classicist, doubtless sees himself as Julius Caesar in Gaul, with dreams of crossing the Rubicon in due course.  He needs to recall that victories in vital battles are what is needed, not self-indulgent grandstanding.

The track record of our own regulators gives little grounds for optimism they can do what is needful, which is a sight more than a 'Libor overhaul', or token prosecution of a couple of small fry. ("Supervision of Libor could be handled by a 'college of supervisors' from across the world with Britain in the chair, Wheatley said."  Did he, indeed ? And why does he think we'll be given the chair, eh ?)

No, it is the politicians that must act, working night and day to restore the situation, as we've prescribed before. It should be Osborne.  It could in theory be Cable.  Clearly, neither is equal to the task.  Boris, you have no formal powers in this matter but you have the pulpit. If you are genuinely up for the Top Job, here's a battle for you. 

ND

Cable calls for more Quantitative Easing

As the UK economy has only slowly recovered from the recession, it is no surprise that there. Are now more calls for money printing. We said here that QE was going to get to over £300 billion once the programme was started and remain of that view.

The really bad part to this news though is that with more QE the UK is going to get stuck in a permanent recession just like Japan. For if the UK is to stick to it's word this is going Tobermory £300 billion of stimulus to take out of the economy one day which will limit any growth potential.

Also of course we have interest rates at 0.5% and one day these are going to have to rise. Yet the longer we have these record low rates the more debtors get used to it and the less saving gets done by znyone or any business.

These two positions added together will mean the the UK is unlikely to ever recover in a substantial way economically in the forseeable future; instead the best we can hope for is the Japan experience of scelrotic growth with regular recessions.

It is a pretty bad situation with no easy solution, however, digging the whole deeper with more QE is definitely not the answer (note, selfishly as I am invested in the markets more QE will be good for the FTSE so I may be happy at the time when it happens, but that is short-term interest only).

Green Investment Bank - With Nuclear Overtones

So after much huffing, puffing and posturing the Green Investment Bank ** is limbering up into existence. We can't really complain because all parties promised this in their respective 2010 manifestos, probably the only thing they agreed upon, that and the notion that evil is a jolly bad thing.

Its ability to borrow has been prudently circumscribed: from 2015, "subject to public sector net debt falling as a percentage of GDP" ... next year, sometime, never. Entertainingly for those who enjoy watching green apoplexy, Dr Vince has allowed that it might be used to provide dosh for flood defences (good), and nukes (bad: let EDF raise its own).

The nuclear angle is interesting. The likely chairman of the GIB (when it gets over various EC hurdles) will be Sir Adrian Montague, who has chaired British Energy and knows a thing or two about manipulating gullible governments into stumping up gigantic but unacknowledged de facto subsidies for nukes. It's an easy trick when you can put HMG's AAA rating against very long-term liabilities, as Gordon PFI Brown knew only too well.

How popular will the GIB be ? "A number of companies have already approached the Department of Business to ask for funding, Mr Cable said." Really ? You amaze us, Vince.

ND

** PS: I don't recommend you download the BIS doc on this, it seems to be some sort of rogue pdf that caused my machine to seize up on each of my 3 attempts

The Media vs Sky, part 2

The media giants of the UK, with the notable exception of Virgin Media have whined to Vince Cable today about News Corp buying Sky. Below are a quick sample of key numbers. As a quick glance shows, DMGT apart none of the other businesses are doing very well at all. Even ignoring the huge costs of the BBC and Channel 4, SKY is happily raking in far more in profits and growing its business.

No wonder the competition hate it, its business model has been well executed and is working well. New platforms like HD TV both delivered on time and prove to add customers and revenues in quick order. Meanwhile newspapers try to move online and cannibalise their own revenues. Even News Corporation is struggling with its own traditional media business model.

There is no reason for Vince Cable to block News Corporation's bid for SKY - it is already the effective owner as established by the ITV competition inquiry.

Profits and Customers of 2010 major UK players:

SKY - £1.17 billion, increasing customers 3%
News Corp UK - £27.7 million,  customer numbers 4% falling

Telegraph - £53.1 million, 5% fall in customers
BBC -  it costs £3,450 million odd in tax, Falling market share of TV
DMGT (Daily Mail) £240 million, Customers increasing by 4%
BT - £1,000 million operating cash flow for BT Retail (the bti that competes with SKY), no profit breakdown reported for this unit.
Northcliffe - £0 (part of DMGT)
Channel 4 - £3.9 million - Falling market share of TV and gets subsidy out of the TV tax.
Trinity Mirror - £72.2 million, 11.8% fall in customers
Guardian Media - £171 million loss, 10% fall in customers

However, I bet our nice shiny new Business Secretary can't see the commercial reality and goes for a nice political punishment for SKY to sate his moronic Lib Dem activist base.

Vince Cable Howls at the Moon

The thorn in the coalition's side is Vince Cable. A left-wing socialist is never going to co-exist easily with a Conservative Government.

But The Limp Dims have decided they need to throw some red meat to their activists at their party conference and with Nick Clegg away, Vince has seen his chance.

I note that his PR's took the chance to point out to the media the worst of his comments - such as capitalism destroying competition. It is hilarious that a Business Secretary would see fit to attack his constituents thus. Together with these nice general attacks, he continues the theme of attacking bankers blaming them for everything.

The first point is very badly made. Vince here is trying to suggest that he is against monopolies - in this case no doubt he means Rupert Murdoch buying Sky. Whilst it is of course correct that markets need regulation to keep them fair and open, to suggest that competition is a failure of capitalism is just nonsense. Vince clearly misses his own point here, as per usual. What is the alternative to competition? Our fantastically run schools, NHS and immigration services..

The second point on Bankers should have been jumped on by Downing Street. Yes bankers are to blame, no one likes seeing the 'bad' guys win. But others who failed are still around, Ed Balls, Mervyn King, Ben Bernanke - a whole list of the guilty. The fact that Adair Turner of all people, head of the hapless FSA who totally failed to regulate the UK mortgage market, should now be coming out in defence of bankers is hysterical.

The Government should really try and switch the narrative from blaming the banks, it shifts the true responsibility away from the last Government whose engineered credit boom won them an extra term in power to do damage.

That the Government is easy with Vince Cable coming out with this socialist much reflects badly on them and he should be slapped down or the text heavily edited before he reads it out this afternoon. If Vince can't lie with that then he should resign. Politicallym he can do damage from the back benches, but at the moment he is actually in charge of a department and there cannot be much faith that he is doing a good job.

Chancellors' debate; Another Strategic Vince Error

Saw only highlights of this - bit of a damp squib. All agreeing the end of the world is night but we are not going to tell you what we are going to do about it becuase it is too scary.

Cable coming off best by common acclaim because he can say what he likes and lies about his past record - not that he has any to speak of in Government.

Sad really, Vince gets everything wrong on the big issues, like nationalising Northern Wreck and wanting to raise lots of taxes, or not.

But he made a huge error in being so personally vindictive against George Osborne. Hh how fun to play the crowd! But it rather ruins any chance of a post-election team up with the Tories; that maybe what Vince wants, I don't think his boss Mr Clegg is going to be so happy.

Typical Lib Dems, close to power yet still able to spurn it due to personal bitterness. They can't help being the Jealous party, its a nasty trait.

Don't vote for Vince

The Times has an interesting poll out, vote for who would be the best Chancellor. It is nto goign very well for poor Darling, who with such a bad hand to play with has done as one would expect.

He should have folded a long time ago.

Anyway, Vince Cable is in the lead. Vince Cable.

Now, I have met Vince only very briefly and seen him a bit on the telly, as it happens I have read qutie a lot of his stuff in the papers. You know what, he is nearly always wrong. he has a ncie voice though and sounds quite reassuring, he maintains this in person too. As such he is a good communicator and politician.

But as an economist he is just wrong, as most of them are. Economists never get elected to CEO or board level in companies and there is a reason for this. Ivory Tower posturing is not what gets the job done in the end.

Let's take one example, Northern Wreck. Vince is lauded because he said nationalise it straight away. Woohoo, the Government did that later so he has the power of prescience. But Northern Wreck has cost taxpayers millions and left us with an broken loss machine on the state books. Closing it asap was the right answer, all the other banks are not like Northern Wreck, Northern Wreck were truly 'special.' So on this Vince is well wrong, as he is on most taxes.

The one piece of credibility he has is that he admits that serious decisions on pensions, defence and uni funding are going to have to get taken. Which is nice, but as he is not the man who is going to have to take them, it may as well be me saying it.

Sorry Vince, your not the answer, so I won't vote for you and neither should anyone else.

Vince's Budget breakfast

CU was at a breakfast in the City today with old timer Vince Cable doing a speech on the Budget and state of the country. Due to excessive sausage sandwich consumption my notes are more illegible than usual due to spillage:

Anyway, on the economy Vince, who repeated his Shell never made predictions when I worked there in the 1930's and so I won't now said:

- UK GDP 2009, -4%


- Unemployment by end 2009, at least 3.5 million


- Government borrowing, £175 billion


- House prices have a long way to fall, he thought back to 3 or 4x average earnings (CU- 50% fall + in total as they reached 8.5x at height of boom)


He thought it would be a very unexciting budget as the Chancellor has fired his guns last year and has no ammo left. He also suggested it was a Monetary solution that was being followed and not a fiscal one. he thought he was very clever talking about Friedman and Keynes.

(CU- And wrong too. What is blindingly obvious is that the Treasury that has the money has splurged in a Keynesian fashion and the Bank of England that has the monetary supply has done QE as a cure. So we have a nice messy mix of both. Might work, might not; definitely the expensive option)

As for the Lib Dems, he said raise no tax threshold to £10,000 and pay for it by removing pensions incentives and harmonising capital gains with income. This is arch Brownian redistribution which even Labour have not tried. So much for Vince being an orange book man. Clearly a long-time since he had to work for a living in the private sector.

The only other thing he said of note was to agree with Reform who have a report out suggesting ways to cut public spending. happily he said all this can wait a while, big questions like public pensions, mass uni education, defence spending all need rationalising. But no now, not with an election in a year. Pathetic. At this point he made one or two partisan jibes, all aimed at George Osborne. Don't think he mentioned Darling once in the speech.

So now you know what a Lib Dem approach would be. Raise taxes, massive redistribution of wealth, promise to cut spending but never do it, bash the Tories. A vote for Vince is a vote for Gordon; can't see how they would ever go into Government with the Tories with these policies.

He had one good answer when someone asked if we should stop talking down the economy. he said all that sort of talk was nonsense, the economy was in a right state and we should admit it and try to fix it, rather than bullshit (quote) that thinking happy thoughts will make things right.





Guess he agrees with my short position on the FTSE then....