RWE, EDF and The Curse of the Ratings Agencies

Anyone notice that RWE has been downgraded ?  BBB+ is not a healthy place to be for a big energy utility laden with physical assets - it's only just over Investment Grade.  Even Enron was BBB+, for pity's sake !  It's no joke and RWE will need to reorient their strategy significantly.  Getting a better deal from Gazprom on their long-term contracts will only be a start.

They've been buffeted, of course, by the vagaries of Germany's energy policy - or complete absence of policy as my German friends aver; and are just that bit less able to take the punishment than fellow-sufferer E.on. Both pulled out of the fatuous game of 'new nukes for UK' earlier this year, for the very reason of trying to preserve their ratings.  E.on's time in the rating agencies' sights may come (again).

So what of EDF and its resolute programme for a few new UK nukes of its own ?  Dream on, Ed Davey - they know they'll be hit too if they stick their balance-sheet on the line for this lost cause, generous subsidies or no.  Their would-be 20% partner Centrica will be heading for the hills soon, and EDF are already casting around for replacements.  Rumbling on in the background is a dispute with Areva over who takes the hit on the monstrous EPR over-run costs; and if DECC gets a single new nuke out of them (at Hinkley in Somerset) it will be a miracle of the first order.  

Interestingly enough it's not nukes that EDF press releases emphasise !

Yeah, funny, that.

ND

Those Indian Power Cuts: Thought For The Weekend

"When the lights go out, the government goes out"
(© N.Drew 2012)

Discuss

(Cameron, this includes you)

ND

BP In The News - For All the Wrong Reasons

With everyone else away, I'll do a short silly-season run of company-based pieces - energy, of course - starting with BP.   

CU always told me that BP's efforts to get back in with the Russians were ill-fated. 

My BP insiders said otherwise.  Yes, they said, we were burned last time around (like Exxon and Shell and Chevron and Marathon and ...) but this time, *nudge nudge*, everything is going to work out.

What is is with oil companies and Russia ?  Well, huge reserves, for one thing.   And somehow it will all be different next time.  But it never is, because the Russians don't change their ways in a hurry: they never have, and why would they start now ?  Might is right, contracts mean nothing, win-win is for wimps.

Anyhow, against all better judgement I sort-of believed them (though not to the extent of going long BP, oh no, not with Two-Faced Obama still on their case).

So BP's travails continue. It's a measure of their size and underlying muscle that they can survive all this in any kind of shape at all.  But for how long can a company soldier on with such poor judgement on big issues ?

ND

The Last Post

Feel for me readers! Two weeks now to be spent with 3 tiny, vicious boys all determined to make my life hell, throw the blackberry in the pool and a wife equally determined that I shall have no contact in the outside world in the name of "kraft durch freude." Yes, a family holiday awaits.

Which means this blog may become somewhat intermittent in its output. Mr Bill Quango MP has found also been dragged kicking and screaming on a fact finding tour of Monaco and the South of France by his local Lib Dem council who have asked him to look into gaming regulations (see picture). This leaves our contributors denuded in number.

Fear not, what could possibly happen in two weeks of August?

The collapse of the euro? (er..maybe?)
A massive devaluation of the euro to prevent a collapse (this won't happen until after I have paid my hotel bill in euro, so rest assured of that)
Some gold medals in the Olympics
Another Government U-turn/scandal/cock-up

Yes, indeed some events will get missed but I hope you can cope with our limited service; depending on the enjoyment of the holiday maybe it won't be that limited after all!

CU

Library closures. Is that so bad?

Dan Jarvis, Labour’s shadow culture minister, is hoping to pick up some twitter followers and stir the middle classes with his call to stop government cuts of libraries.

Libraries come under the funding of local government. Its the local authorities who decide on local cuts. Most local authorities raced to close their libraries once the much reduced budgets of 2010/2011 were announced.

Labour are carping that "160 libraries have already closed their doors or been handed over to volunteers."

Another 225 are at risk.

They aren't wrong. Those 225 would have been closed long ago except for an astonishing series of blunders, illegal actions, distortions of data and  failure to properly consult by district councils.

They shut libraries on a purely budget basis without considering their social obligation and the requirement in law for councils to provide a library service.

"A spokesman for the Department of Culture, Media and Sport said it estimates that only 60 libraries based in buildings have closed over the last year. This does not include figures for mobile library closures."

Which is disingenuous as that department knows full well that there are very many awaiting appeal and the subjects of legal action. Plus a whole host have been given a 12 month reprieve only.

So libraries are in the front line and have been and will be hit by evil coalition cuts.

But do we need libraries?

There were 315 million visits to all the 4500 libraries in {2010/11} which was a fall of some 7% on the previous year and continued the trend of 5-10% falls in footfall numbers year on year. And footfall might just mean people popping in for a leaflet. Or to read the paper. Or to ask a question of the locality. Many of those visits will be to borrow CDs and DVDs. Or send emails. Kids hanging out after school and so on.

 

I'm very conscious of my own hypocrisy in signing up to save the local library. It is one of the smallest in the country and has a tiny footfall and employs just 1.5 people. And I have never used it. Not once in seven years. Even though I am the perfect library demographic of white/ middle class/kids aged 2-10/ pick the kids up from local school and walk right past the place on the way home. Eldest could read at three years old and reads, to my cost, a book or more a week.

However, libraries are public services. They are for all. I don't use the bus service either but don't feel that it should be discontinued. But i've long wondered why we supply VHS/DVD's music and video games for free? Just to sustain numbers? 

CD sales and DVD's numbers are also in long term decline. Downloading is the new vinyl.

Libraries are very 19th century in their model. 

The main cost of libraries is in the buildings and personnel. The tiny one in my constituency costs around £35,000 a year to run. The catchment area is 1000 households. It would be possible to take a single year's budget and give the poorest 1/3 of the town a free kindle. {Hat tip Winton House who corrected the glaring error of a free E-reader for all}.
The following year a £100 of book tokens each of those homes. Or just look out for those with need, those on benefits, kids under 16, single mums or whatever the current disadvantaged standard is. Over time the library cost shrinks to perhaps just 10-15% of its current spend.
And remove the disgrace of VAT on e-books as they are 'software' and its cheaper for all.

Some say that the library is a internet cafe for those unable to afford a computer.
Fine. Its still cheaper to give, for free, a basic laptop and a discount for broadband to the very poorest than to have a dedicated building for their use. Or put the computers into village halls or local clubs. Or local amenities that are already in use. Like  Information centers. Council Offices. Post Offices. Kid's clubs. It could be a part of planning for any new supermarket. An area for 'free' or limited charge internet use.

Or, conceivably, an arrangement with WH Smiths or Amazon or Harper Collins would allow some to receive books by post. An internet style Library. Order on your phone/telly/laptop and have the book posted out and then posted back after 'x' weeks. Love Film for books.

It would be quite expensive to do that.

But not as expensive as sustaining 4,000 odd public libraries and all of the support services. The proposed cuts will amount to the loss of some 10% of library services. 

If we can't cut a service that is in long term decline, with falling visitor numbers, that can be relatively easily replaced, redesigned or reformed by technology then what can we cut?

The Danger of Equity Ownership

Look at this breaking story around Mouchel today. Now like Connaught, Mouchel is one of these companies that built up in the booms years of high public spending, acquiring contracts to outsource various bits of local government services. In this case it was payroll services and highways maintenance.

Of course, because it was the boom years, the lending Banks - a roll call of all the main UK clearing banks of Barclays, Lloyds and RBS, thought it would be clever to leverage the business 5 times over with debt versus . And this is the ugly result today; equity shareholders to get 1p dividend and the banks to take 80% of the company with management 20%.

No as always in these cases the Bank's PR and the company PR is about 8,000 saved jobs and a continuing business. How management, which has turned a solid dividend paying 200p average shareprice business into this calamity should be awarded 20% of the newco is beyond me (they are all newish people no doubt, claiming clean hands as they do this deal to their benefit). If your a shareholder your really getting nothing - the last people to be paid after everyone else gets their cut. Shareholders are owners of businesses are they?

Mouchel even this year will manage £450 million in revenue and a small loss, probably under £10 million, even last year it managed an £11 million profit?

So why is this business failing at all then? In the main it is finance. £7 million in interest payments and £3.5 million for the costs of refinance for this year and there is your loss.

Also, of course the £100 million of debt lent to Mouchel was at a very low price, now the Banks want to up the interest rates to current market rates as there is notice of default and hey presto, the company can't cope with a potential doubling of finance costs.

So the banks take it over with £60 million of debt at the new rates (note I predict the cost of finance will be the same) - the whole shebang is not really about a company failing (Mouchel is in trouble and may lose 20% of its revenue plus in the recession, its not terminal though) - but about Banks wanting to target any business where they mis-priced their loans in the boom.

It's a story that should never have been written, the company should not have leveraged itself, the banks not been so keen to lend at crazy rates.

Mouchel is not the first and won't be the last company to have this exact tale told during the recession.

Capitalism Neutered

Here's a reflection of the state of British business in 2012.  As part of a barrage of favourable coverage of Centrica (8 pieces in 3 days), the ever-reliable Telegraph faithfully copies out a press release announcing:

Centrica and GDF Suez are to develop a major North Sea gas field, creating up to 4,000 jobs, after the Treasury handed them a tax break... The companies will invest £1.4bn in developing the Cygnus field, about 100 miles off the North Norfolk coast, and said 80pc of that would be spent in the UK.  The Government’s new tax allowance will apply to income from shallow-water gas field production, such as the Cygnus field. It will exempt the first £500m of income from a 32pc tax, saving the companies £160m. Centrica, which owns British Gas, said the tax break would “enhance the economics of the Cygnus project”, enabling it to proceed with the development ... Centrica said the allowance would enable it to proceed with the development of the Cygnus project, the largest gas discovery in the Southern North Sea for 25 years.

Cursory research into the Cygnus field reveals that is indeed a biggie - anywhere north of half a trillion cubic feet of gas, maybe 2 TCF.  It's in two geological intervals, the Leman and Carboniferous sandstones; in shallow waters; and can be tied back into an existing platform and pipeline system.  Most readers won't know the significance of this, so let me assist.

Firstly, 0.5 - 2 TCF makes it one of the largest gas fields ever found in UK waters - absolutely huge.  Fields of this size have supported the development of whole new platforms and pipelines to the shore, at times when the price of gas was very much less than today's, and drilling technology was considerably less effective.  Fields substantially less than one twentieth of this size have been developed profitably when they can piggy-back on existing infrastructure like this one can.  The Leman sandstones are very productive and contain gas of excellent quality.  The Carboniferous can be a bit more problematic, often with relatively high CO2 content, but the existing infrastructure that Cygnus will be utilising was designed to cope with it.  And shallow water naturally makes for easy drilling etc.  So on every count, Cygnus is going to be Very Profitable Indeed.

In other words, we can be 100% confident that developing Cygnus is a complete no-brainer for Centrica and GDF, and requires no tax break of any kind.  It is nice of Centrica to say that Osborne's largesse will “enhance the economics of the Cygnus project” - well of course ! - but to pretend that this is what allows the development to proceed is grotesque.

But hey, this is business in 2012.  You stomp down to Whitehall and announce that you will hold your breath until you go blue in the face, unless someone bungs you a sub. The civil service, always a sucker for a bit of special pleading, assures the childlike minister that a sub is indeed called for: it is promptly trousered and the company gets on with what it was always going to do anyway.  Centrica has form; but everyone is learning the game, and of course the nukes and renewables are even worse offenders.  The corporate version of the dependency culture, with a similarly debilitating long-term effect.

This, I suppose, is what you get when ministers have absolutely no real-life experience whatever.  Osborne, we know about; and as for energy minister Ed Davey: As a teenager he worked at Pork Farms pork pie factory and at Boots. In 1989, he became an economics researcher for the Liberal Democrats. 

And there you have it. Pathetic, really. 

ND

The canard of lowering interest rates

I have noticed of late the growing calls for further cuts in interest rates. Now, as I have a rather timely bought tracker mortgage this would be welcome on my own part; but really this is economic delusion of the first order.

If low interest rates are the answer...what was the question? Well, we have a balance sheet recession where there is far too much debt built up in the system. Lower rates would in theory help to give more time to those who need to repay their loans.

Even the Bank of England has not been convinced that this is the way. The reason for this is the Japan style liquidity trap it creates. Firstly, with no interest to be gained, nobody saves, this leads to less bank deposits - so banks hoard more money and make fewer loans. This is a liquidity trap. Secondly in the liquidity trap, because rates are so low, banks can't make a decent return anyway, so further adding to their desire not to lend. Finally, Quantitative Easing means they can make a nice small amount of money by just swapping monetary instruments with the Bank of England - so why bother with the real economy and real lending?

As if all this is not bad enough, if you are small lender like a Mutual, struggling to raise cash and having to offer high interest rates to attract depositors- whilst having no access to QE money - then you are finished as you can't raise money at 0%. We have already seen the decimation of the Mutual industry and this would probably spell the end for many Mutuals - how does that tally with the Vickers report aim of making banking more competitive?

And of course say you are a saver, this reduction in rates is very penal, rates being already far below the inflation rate which is likely to start going higher again son as food prices and Oil & Gas go up during the course of this year.

Interest rates are not the problem, the problem is too much debt to be serviced; this needs to be written off and the economy made more flexible. Maybe lower taxes would be a better way to provide the money to repay the debt or to reduce regulation so that new businesses may grow and prosper. The time for propping up the sick by juicing their rates is long-gone. It's time to face reality not try to resuscitate the debt patient.

Well?...What did we think?

Well? The opening ceremony?

A fantastic celebration of Britishness? Or a mish mash of ideas and themes?

It would be a brave person who criticises the ceremony. Its been well received, as it must always be.

I watched it all and ... well...for me ..it was, erm... 

I thought the forging of the rings was excellent. The rising towers was great, if a bit sinister. Branagh was terrific. I thought James Bond and a parachuting her majesty was a clever and amusing and unexpected.

But then..well..

Today the TVs and Radio are all talking about how proud the ceremony made us.

Not sure it made me proud. It wasn't the usual state choreographed, flag waving nationalism, uniform, march of history, festival of dance and military power.

It was certainly 'out of the box' thinking. Dancing Voldemort, TV shows, Mr Bean, Hospitals and some sort of phones4U number in the middle. I'm still not sure. I THINK I liked it.

The kids definitely did.

What did you think?

Mr Draghi, are you wearing any clothes?

Markets have recovered off the back of ECB President Mario Draghi saying he will do everything to defend the Euro.

The thing is:

1) The ECB can't do much more without further agreement from Germany
2) Germany is on holiday
3) The problems in Spain and Greece can only really be fixed by a massive devaluation via Quantitative Easing - Germany will not agree to this.

So..what exactly is Mr Draghi going to do - what is his bazooka in the modern finance parlance? It is not QE or use of the ESM monies to buy bonds because he is not allowed to do this.

perhaps it is more Bond buying, this in the medium term is nuts. The ECB is going to own all this peripheral debt when the balloon goes up and be seriously bust as a consequence. Who can bail out the ECB when it has already called on all the funds of the Eurozone?

I think this statement yesterday, as much as it rallied the markets, sounds like the last throw of the dice to buy some time over the summer. I wrote earlier this week that August will be critical, its still looking that way.

Should we prick our bubble yet or sack George?

One of the main causes of the UK recession is our attempt to prevent a depression. By lowering interest rates we have stopped the property bubble from being pricked. Thus people are paying their low interest rates on their mortgages and not selling their houses. Lack of supply means that pent-up demand coupled with low building rates is keeping prices high. Plus new buyers have to save more for deposits and

as regulatory change has made the barrier to entry even higher - the days of 125% mortgages seems like a lifetime ago.

Overall, property debt is falling as people in the UK pay off mortgage debt - but this debt pile is enormous and the price of paying it down is the current, long, recession.

By not pricking the bubble, we are left instead with a slowly deflating economy - is this preferable to a crash and boom?

In the US, the ability to walk away from housing debt, in the form of jingle-mail, meant the housing bust has been very bad, but the economy has recovered quickly. In the UK we have a Japanese style zombie economy, caused to a large extent by banks sitting on assets with impaired values that they won't sell becuase the loans are still performing (i.e. payments are being made as the interest rates are low, the banks are still losing money though, as these rates offered in the past are below the banks cost of funds today).

It's easy to say sack George Osborne, but as much as he has made many errors, often by trying to raise taxes, his basic mantra that you can't borrow your way out of a financial crisis is sound. Spain is trying that, the USA is trying that - their national debts are going up much faster than ours, their economies performing only slightly better.

But is a bust the answer? I am not sure myself yet as it will be horrible. Chances are with the euro-crisis we will find out the answer in due course.

The Chinese Are Coming, Part 94

I have a feeling we know how the comments thread will run ... but here goes, anyway.

Yes, not content at coming over here with their blandishments of shiny new nuclear power stations and marrying our electricity industry, the Chinese are buying up the North Sea.

Well of course they are.  Rather them than the French, eh ?   They are becoming Proper Players (these look like serious acquisitions), unlike the Russians who simply try to sucker people into their dark alley-ways and then mug them.

Let's not forget either, the recent Chinese acquisition of the LME.  I am told by my friends in the bullion industry that these busy Chinese chappies are planning to build gold smelters (in the East), and - here's the interesting bit - are applying for accreditation by the LBMA for the coveted London Good Delivery standard (the gold standard, indeed!) that is recognised worldwide.  (Most accredited smelters smelting, incidentally, are Swiss is done in Switzerland** see note below )  Not that any of the newly Chinese-minted bullion is likely to find its way physically to London - oh, no, it is intended for the Asian markets, the usual destination in a one-way global flow which transits London as the principle trading venue.  And London takes a substantial turn.

See, direct physical control isn't everything.  But as ranted here before, by all that's holy we need to defend what's left of our integrity.  Osborne, this starts with you - Heaven help us.

ND


** Correction, courtesy of Timmy in comments.  I believe it's correct now.  But the Freudian spelling mistake stays! (h-t dearieme)

Spain considering the endgame?

If we remember all the way back to last year, we will find that a European crisis is often very likely to happen in August. Policymakers are sat on a beach somewhere and there is no one to mind the till. Similarly markets have low volumes so any high volume days have a disproportionate effect.

August is a dangerous time, 1914 and 1939 are not propitious either.

And now we have the end game of the euro-crisis, at last, because wow have the politicians managed to string this out and waste billions, maybe even trillions of euro's in the process.

With Germany backing out of its agreement to bail-out Spanish banks, the price of their 10yr bonds has collapsed to well beyond crisis levels.

At 7.5% to borrow, the Spanish are not going to ever balance their budget. No Country could at that level for the kinds of amounts Spain needs. Add that to 24% unemployment and its time for something serious to be done.  Time to really consider leaving the eurozone.

The only decisions really needs to be around timing and stability. Clearly, all the Spanish banks will need recapitalisation and it will be in the interests of the IMF and Eurozone to make sure this happens, also a new currency needs to be stabilised. the traditional way would be a dollar peg and that maybe something to consider - although the argument for letting the peso find its natural spot is a strong one.

What will be interesting over the next few weeks is watching Germany lose its power. From bully to co-operative as the Spain and then Greece decide to take a nuclear option - this means so much pain for Germany and top avoid the worst effects they will have to co-operate.

How all this works out in the political system of the EU is just too hard to forecast. But without Quantitative Easing from the ECB there does not seem a way back for Spain.

Nightmare on Threadneedle Street

A prediction. Since the LIBOR scandal merged into the money-laundering scandals merged into various mis-selling scandals it becomes increasingly clear that the compliance function in many a bank has become deeply, hopelessly compromised. 

(We know how this happens: bullying bastards like Fred or Bob or Jim or big-swinging Dick make it quite clear they don’t wish to hear from risk-managers or financial controllers or auditors or compliance officers because They Are All Nay-Sayers, bent on disrupting the pure flow of commercial genius and the rich personal rewards it deserves. Said controllers generally know what is going on; but they are only human, and fairly well paid to find creative ways of turning the blind eye – indeed, sometimes even joining in with the great game of fleecing everyone in reach.)

Now: here’s the prediction. In the absence of an effective compliance framework, quotidian rule-bending for financial gain must inevitably sometimes have merged seamlessly into serious, purposeful, creative crime. I predict that some really substantial outright thefts and frauds by bankers will be revealed in the coming months. 

I don’t mean big losses racked up by ‘rogue traders’, or lazy haircuts inflicted on pension-funds, or laundering the shady revenues of Mr Unscrupulopoulos – all of which are bad and costly enough. No, I mean naked billion-dollar thefts. By bankers. Like what Andy Fastow did in Enron – but magnified in proportion to the vastly greater means a bent banker has at his disposal when Compliance has become accustomed to looking the other way. 

The shocking thing is that in the UK, for the last 5 years (another Balls-Brownite innovation) the ill-informed and under-resourced Inspector Knacker has officially stepped back from involvement in cases of fraud by banking staff, whose employers are generally able to avoid criminal investigations provided they compensate customers in full.   Not good enough.

Watch, and shoot. Watch, and shoot. 

ND

Reshuffle {2} Who's not fit for purpose?

Not many people fancied Ken Clarke for chancellor on the last reshuffle post. But even fewer wanted George Osborne to continue. So Ken gets the job.

With reader apathy in play about what useless politician should get what non job, we'll skip on down past the list of ministers for nooks,crannies and corners. Ministers for Country and /or Western, etc, straight to the important ones.

Home Secretary Theresa May has not done well. She started brightly. Promised to cut police red tape. To make flabby cops get out from the admin block and onto the beat. Inflict tougher sentencing for menaces whilst in possession of a hoodie. It all came undone quite quickly.

The 'Tough on Crime' platitudes sounded a lot less convincing 15 years since they were first expertly, but insincerely, announced. Before long the ECHR and their poster boy, Abu Qatada, was making the UK look foolish. Mrs May looked particularly weak and  incompetent when her department didn't know what day of the week it was. Soon she had the immigration head in tears and arrivals desks with queues stretching all the way to the original departure country. Illegals absconding. Student disorder. Uncontrolled rioting. Full prisons and all the usual Home Office 'not fit for purpose' failures.

Mrs May has not fought her corner well. Shocked as I was to discover the super generous rates of pay and incredible pension deals of the police force, it is still an Olympic year. There had been the worst riots in 30 years. Public order protests are on the rise. Not just the usual tambourine band, free Pinnochet save the eels types. Serious, union backed and organised marches. All poised to disrupt the nation. And there have been a new band of 'Swampy' old style, hippy, campus sit ins.

Yet the police had to take a substantial, and wholly unwelcome hit from the public spending cuts. They did not react well. Theresa seemed unable to convince them that it was in their own interests. That if every copper got a £80,000 pension for 40+ years, police costs rise above budget, it would leave no police to police. Our police force would be a retired one.

Elected chiefs. Changes to hours. Changes to rest periods and a monotonous and largely disbelieved refrain from the home office that these cuts should have no impact on front line policing.

As in every public sector organisation, the bosses decide where the cuts come from, not the minister.

Certainly no cuts to the Chief constables Range Rovers. Not the all important diversity and equality unit. Not to the fishing teaches patience training days. But to somewhere where it hurts. Why she ever imagined it would be any different in the police as opposed to a district council is a mystery.

Now, the police really should have to trim their budgets. Should be made to face up to the pension reality that has been ignored by all parties for 40 years. But they should have had some leniency. Some capping of their cuts. Same with the border force. If you want people to present a shining example of a modern democracy to millions of Olympic tourists, its probably best not to axe jobs, take pensions and raise retirement ages first.

Anyway.. with cuddly Ken in the treasury, who could take her place?
Another woman would be politically preferable. The last two having not performed so well, the ladies now need a big success for the feminist cause. But a look at the current cabinet shows just five women. Four of whom { Sayeeda Warsi, Caroline Spelman, Cheryl Gillan, Theresa May} will be very lucky to keep their jobs in a reshuffle. And if they do will only be because it would bring up the misogynist Dave tag again if he knifed all his babes.

So that leaves neophyte, but capable, Justine Greening. Currently at transport following Phil Hammond's promotion after the Fox affair she was formerly a junior at the treasury. It would be a huge, huge promotion.

Well...she can't do any worse than May or Smith, can she?

Casual lies of Chuka Umunna

The thing with politics in this country at the moment is the more that politicans grandstand, the more they expose themselves to scrutiny and the less they stand up to it.

Let's take a small example in last night's Evening Standard. Left-wing Chuka Umunna has some dark things to say about the Banks and the current crisis.

"Barclays is the tip of the icebarg"
 "absurd to pretend Gordon Brown was regulator in chief",
 "the Amercians are saying there is a London Problem."

Strong stuff, controversial (at least the bit about Brown) and nicely populist. Only then he casually says that in his life as a corporate lawyer he found it weird to be involved in telephone number deals in the 1990's and worried about the leverage.

Now this bit is total lies from start to finish. Firstly, he did no even leave law school until 2001. So working in the 1990's? Really?

Then, he was not a corporate lawyer, as soon as he qualified at Herbet Smith he became an employment lawyer. These are not lawyers dealing with telephone number mega-deals. Possibly multi-million claims if for City Bankers, but generally nothing like that. Just compromise agreements and avoiding tribunals. Plus he left high flying Herbet Smith for a smaller firm pretty soon after qualifying in any event, who would not even have been dealing with such high profile cases.

Finally, he was worried about the 'leverage' - well in the 1990's this was not an issue and neither to my knowledge is it a big factor in employment law. So if he was worried it was in a personal capacity, but that is not what he was implying to the journalist.

So as per usual, a politician is spouting iff, accusing others of wrong-doing and worse, whilst at the same time casually mis-remembering their own career to suit their current viewpoint. Something that a shufty at his own faccebook page can confirm.

Really this guy is supposed to be a rising star? He is a third rate demagogue at best.

It's The Guardian for a Real Belly-Laugh

Here is a truly wonderful Grauniad treat.  They publish a piece on an experiment to reduce global warming in a controlled, scientific manner.  

Two Harvard engineers are to spray sun-reflecting chemical particles into the atmosphere to artificially cool the planet, using a balloon flying 80,000 feet over New Mexico ... to replicate the observed effects of volcanoes that spew sulphates into the stratosphere, using sulphate aerosols to bounce sunlight back to space and decrease the temperature of the Earth ... "solar geoengineering** could be an inexpensive method to slow down global warming"

Having waved the red rag and lit the blue touch-paper, they stand back and ... let the CiF comments roll !  

Page after page after page of utter garbage !  (with the odd intelligent comment for good measure).

If one could be bothered, there is a serious bit of sociological work to be done with that comments thread as a primary source.

Or we can just ROFLOAO !  Go, Grauniad !

ND


** PS, there's more canny geo-engineering where that came from ...

UK Infrastructure spending is the beginning of a very long journey

As the first nation in the world to industrialise, the UK also has a legacy of needing to upgrade infrastrcuture that is in place. It's much cheaper when you start again. The German example of post-war building and China to day show what you can do when you start with modern methods in a fresh start.

The UK has also historically always underspent on infrastructure and under-planned its requirements. The political system enables all hard decisions to be put off. For years here we have written about non-decisions on nuclear power, new runways or a Servern barrier. Governments of whatever colour can easily decide on a a review that handily will not report until after the next election.

And when big decisions are made like the channel tunnel or HS2 planning laws, NIMBYism and apathy mean it is all very contentious and takes an age( mind you the Channel Tunnel did go bust o maybe the naysayers had a point...). Smalller projects fair better, enabling schools and hospitals to be replaced, albeit at eye-watering cost via PFI.

So the Government's decision to try and pump some more money into infrastrcuture spending is a good idea whose time came about a year or two ago, still better late than never. Although, as the Government has no money they are trying to be it by selling an soververign gaurantee insurance rather than direct spend. Whether this will entice private comapnies determined to hang onto any cash we will see.

Plus of course, so much of Government spending is not this type of capital investment. Billions go on social welfare, including the crazed tax credits, billions more on pensions and also the NHS. In effect the Governemnt has become a huge mechansim for redistributing wealth, not a mechansim for delivering a dynamic economy that grows and offers opportunities to all. Education, Infrastructure and Law and Order are the key components of a growth focused economy, but they are not the focus of Government spending.

Until this is remedied Britain is going to remain stuck as a low growth country; enduring a steady decline in living standards and economic prospects.

Scottish Corproate Financial Blackmail, again

In 2008 we had the sad sight of a Scottish UK Prime Minister firstly bailing out the bust Bank Royal Bank of Scotland and then, allegedly, pushing the other bust Scottish Bank, HBOS into a disastrous merger with a healty Lloyds Bank.

As said at then and since, these banks were 'too big too fail.' The cost of closing them and the losses which would be incurred were deemed to great to bear, so instead £160,000,000,000 was handed to them in the way of guarantees. Half of this has now been paid back or withdrawn. The Government has also put in place legisaltion to ring-fence banks so that hopefully we do not get into the situation again of having Banks that are too big to fail.

By comparison, yesterday's vote by the Scottish Premier League is in financial terms a pittance in comparison. What is interesting though is the language used to defend the actions of Rangers Football club. The 'Newco' (Sevco) formed to takeover from Rangers wanted to stay in the Premier League and tried to hold the clubs to financial ransom - or at least make them overly aware of the consequences of not voting them a free entry. The fact that Rangers had over spent and effectively cheated for years using financial doping, the same way that RBS and HBOS has splurged on leverage, was neither here nor there.

In fact the new club, Sevco Scotland, have been at all the votes and trying hard to influence them - despite not being registered and by all rights the share that the SPL have should have been removed on the 4th of July. The clear financial implications have been spelt out, with 90% drop in prize money one of the outcomes. It is to the credit of the other clubs that they ignored this and voted to do the right thing by exiting Sevco and I hope they can deal with the consequences

It does not say much for the organisation of the Scottish game that such shenanigans are allowed, but the prospect of so much lost money tends to overide thoughts of principle - as my colleague Nick Drew often discuss on this blog. Players who have left under TUPE, improperly enacted, are even being threatened with being sued by the Newco (a very tenuous legal effort I was think) for example.

This is a sad episode, not that the story of my own team Leeds is much different south of the border, but it bodes ill for Scotland as a whole that such a sorry mess can engulf one of the Countrys best known institutions.

Finally, what for Scottish Independence? As regulars readers will know I am a big fan of this, living in London and wanting a smaller military role in the World for the the Scots going their own way makes sense, taking their mad socialism with them. But with many of their major private institutions wrecked by former Directors will this have an impact on whether the Scots people trust themselves to govern and regulate effectively under their own steam?

Everything's Fixed!

Oh My God! What a Monday. Over the weekend it appears that politicians across the US and UK have realised that,well, market fix prices. Worse and almost unbelievably, people could conspire to try and fix things for their own ends.

This earth-shattering news come at a difficult time. Already Politicians and Regulators have been caught bang to rights in causing the Great Recession we are enduring. Now of course they are seeking to deepen the crisis as much as they can by keeping the euro and refusing all monetary approaches to trying to return the economies of the West to growth.

In the UK, the Leveson enquiry has not been enough to make people forget the stain of the political expenses scandal and the new Libor investigation is trying to see to that.

But now the focus is on expanding this. Many prices in the world economy are set like LIBOR. Nearly all commodities have benchmark pricing, Gold and Silver too (mind you, with allegations of real corruption here this is perhaps one set that could do with an investigation). Indeed, asking market participants for their pricing input is, um, how you would get a price out of a series of private players.

Of course, there are suspicions this is open to abuse, it is why there is much disquiet in the city over the Chinese takeover of the London Metal Exchange. The rise of hedge funds as key players in markets trying to fix things for their own ends is nothing new (see Armajaro Holdings and the Chocolate Finger), It does need to watched and regulated.

Equally though, wantonly saying that most of the Western system for benchmark pricing is corrupt is rather silly thing to do. Just like saying all our banks are bust and crooked. This has not helped the economy recover nor done our reputation any good - in fact things just keep getting worse as the double dip recession proves.

More importantly though, rent-a-gob politicians get to lightly grill some executives from the City in the House of Commons or Congress and get in their class-war inspired jibes about how horrid these people are though. And it distracts from the calamitous decision-making of US and UK regulators and politicians - whose reputation must be upheld above all others of course.