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The Autumn Statement graphically demonstrates ‘the long term plan’ isn’t working



Autumn Statement

It’s the cost of living, stupid. The Autumn Statement graphically demonstrates ‘the long term plan’ isn’t working.

George Osborne is expected to provide good news as usual for millionaire pals, while the statement does nothing for a worsening cost-of-living crisis. Any benefits for disability allowances will be more than offset by disabled citizens being clobbered by the ‘bedroom tax’, annihilating the slogan of the Liberal Democrats of ‘a fair society, stronger economy’. Any recovery at all three years into this parliament is of course to be welcomed, especially since Labour had actually handed over the keys to government in May 2010 with an economy in growth. That’s right – the economy had been recovering in May 2010.

There is now a maximum number of people in employment with terrible employment rights. Zero-hour contracts have become an unsightly blot on the landscape of the Liberal Democrat’s fair society. The deficit rose due to throwing money at the banks in the last parliament as an emergency last-resort. Barack Obama had even thanked Gordon Brown personally for his leadership in the global fiscal crisis. Since then, come tomorrow, we are expecting another sharp cut of £1 bn in budgets. But this is a Government which is addicted to austerity for simply ideological fetish.

However, the intellectually bereft Coalition will churn out yet again that Labour has no ideas, and sticking to their spend their way out of trouble, in dreary sad repetition. This is clearly laughable as the government has just unveiled its infrastructure spending plan for the next two decades, describing it as “a blueprint for Britain”. About £375bn of investment in energy, transport, communications, and water projects is planned, although no new money will be forthcoming. So that claim about Labour being the only one with the cheque book is an obscene joke. Most of this Government’s borrowing has been to make up for the disasters of their economic policy. Labour had wanted infrastructure spending a long time ago, to give the economy the desperate boost it needed. That boost came eventually, but it was too little too late. The Autumn Statement graphically demonstrates ‘the long term plan’ isn’t working: infrastructure spending was an after thought.

And this is a Government which has lost any freedom. It is in the pockets of the corporates. The ‘cost of living crisis’ is deepening, and the recovery is not guaranteed. If the recovery is founded on a flaky London-based “property bubble”, and exports don’t pick up, this recovery might not be sustained after all. But will most ‘normal people’ feel any prosperity? Real wages have fallen significantly, and most people will feel poorer than 2008. This is because the economy is fundamentally is in a shoddy state, benefiting the rich but not the less well off. The Autumn Statement graphically will demonstrate ‘the long term plan’ isn’t working. The economy has been fundamentally moribund since Thatcher took over. Labour looked after the super rich, as Mandelson explained in a moment of being intensely relaxed.

And what about the claims to be “the greenest government” ever? This has been the most incompetent government ever, quite simply. The Government has already announced that it will loosen the ‘green’ obligations faced by energy providers, subject to approval. Those providers have promised to pass on any benefits, thought to be around £50 per dual fuel bill, to the general public. Of course they won’t. They will threaten us with blackouts instead. Pensioners are having to decide between food and fuel.

The Coalition also is sending out rather odd messages consistent with social engineering through the tax system. They are giving the impression of discrimination against unmarried couples. One expected measure tomorrow is designed to make couples better off by £200 when it is introduced in 2015. But even the private bank Coutts has argued that given the value of the proposed tax break and the number of individuals who would be eligible, this historic pledge might ultimately have little impact on people’s living standards.

And are the Coalition actually competent at running the economy? It’s been leaked that the Department for Education even complained that the extra money could require ministers to raid its basic needs budget, the fund used to deal with the rise in the number of primary schoolchildren caused by a baby boom. However, instead it was agreed that unspent money from the Department of Education’s maintenance budget would have to be deployed. It’s widely reported that the LibDems had to concede on environmental issues. Will the Coalition admit the truth of this ‘in the national interest’? Even a Department for Education source has said: “There is no spare money in either the basic needs or maintenance budget to pay for Clegg’s kitchens.” It’s simply a gimmick. Gimmicks don’t constitute a long term plan.

And as usual the Conservatives are desperate to look after their chums. In it together. It of course isn’t ‘in it together’. That would show true solidarity – or even socialism. Senior tax advisers have called for the Government to reduce stamp duty on homes worth between £250,000 and £300,000 – a move that would cost the Treasury about £150m.

But this is Tory Britain, where to pay for this you have to clobber the disabled. This is a significant moment in welfare policy affecting millions of people, as previously benefits had increased in line with the rising cost of living. Some of us are still having to pay for three lost years in the Government’s economic policy. It’s expected that many benefits will rise by 1% in April 2014 include income support, jobseeker’s allowance and housing benefit. But top CEOs or bankers are doing just fine with sky-rocketing bonuses.

The cap for the ISA will be falling for those not quite as rich. This means you can’t mend your roof as much even if the sun is shining, despite the Tories’ only claim to Keynesian economics. And the multibillionaires will still be able to avoid tax. Yes, it really is Tory business as usual.

However, benefits for disabled people and carers will increase in line with the rising cost of living as measured by CPI inflation in September, which was 2.7%. This might seem like ‘good news’ except they are being clobbered by the Bedroom Tax. The Labour Party is the only party which has promised to repeal this dangerously unfair Act of parliament in the next government. The Government have admitted that they know there are not enough smaller properties in the Bedroom Tax scheme to enable people to downsize. Despite fierce lobbying by all interested organisations for an exemption from the benefit cut for people in receipt of Employment and Support Allowance and/or DLA, the only current exemption is for a minority of tenants who can prove they require constant overnight care. For everyone else the ‘tax’ (benefit cut) takes immediate effect on 1 April 2013.

This is a tired Government, desperately out-of-touch.

Lynton Crosby wants to clear out some ‘barnacles’.

But this new autumn statement will do nothing to sort out the real ‘cost of living crisis’.

And will protect its friends and donors as usual.

The Autumn Statement graphically and tragically demonstrates ‘the long term plan’ isn’t working.

Isn’t it time to admit failure in ‘regulating cultures’?



Gordon Brown

 

 

 

 

 

 

 

 

 

 

 

 

 

It is alleged that a problem with socialists is that, at the end of the day, they all eventually run out of somebody else’s money. Perhaps more validly, it might be proposed that the problem with all politicians is that they all run of other people to blame?

It is almost as if politicians form in their minds a checklist of people they wish to nark off systematically when they get into government: candidates might include lawyers, Doctors, bankers, nurses, disabled citizens, to name but a few.

Politicians are able to use the law as a weapon. That’s because they write it. The law progressively has been reluctant to decide on moral or ethical issues, but altercations have occurred over potentially inflammable issues such as ‘the bedroom tax’. Normative ethics takes on a more practical task, which is to arrive at moral standards that regulate right and wrong conduct.

There has always been a tension between the law and ethics. As an example, to prove an offence in the English criminal law, you have to prove beyond reasonable doubt an intention rather than a motive, for example that a person intended to burn someone’s house down, rather than why he had intended so. Normative ethics involve articulating the good habits that we should acquire, the duties that we should follow, or the consequences of our behaviour on others. The ultimate ‘normative principle’ is that we should do to others what we would want others to do to us.

Parliament is about to get its knickers in a twist once again over the thorny issue of press regulation. However, there is a sense of history repeating itself. A few centuries ago, “Areopagitica” was published on 23 November 1644, at the height of the English Civil War. It is titled after Areopagitikos (Greek: ?????????????), a speech written by the Athenian orator Isocrates in the 5th century BC. (The Areopagus is a hill in Athens, the site of real and legendary tribunals, and was the name of a council whose power Isocrates hoped to restore).

“Areopagitica” was distributed via pamphlet, defying the same publication censorship it argued vehemently against. As a Protestant, Milton had supported the Presbyterians in Parliament, but in this work he argued forcefully against the Licensing Order of 1643, in which Parliament required authors to have a license approved by the government before their work could be published.

Milton then argued that Parliament’s licensing order will fail in its purpose to suppress scandalous, seditious, and libellous books: “This order of licensing conduces nothing to the end for which it was framed.” Milton objects, arguing that the licensing order is too sweeping, because even the Bible itself had been historically limited to readers for containing offensive descriptions of blasphemy and wicked men.

England has for a long time experienced problems with moving goalposts in the law, and indeed the judicial solutions sought have varied with the questions being asked. Lord Justice  Leveson acknowledged that the “world wide web” was a medium subject to no central authority and that British websites were competing against foreign news organisations, particularly in America, which were part of no regulatory system.

Leveson once nevertheless proposed that newspapers should still face more regulation than the internet because parents can ‘to some extent’ control what their children see online, while they could not control what they see on a newsagent or supermarket shelf.

‘It is clear that the enforcement of law and regulation online is problematic,’ said Lord Justice Leveson at the end of his year-long inquiry into press ethics.

An attempt at ‘regulating culture’ was dismissed in the Leveson Report largely through arguing that the offences were substantially already ‘covered’, such as trespass of the person or phone hacking. And yet it is the case that there are ‘victims of phone hacking’ who feel that we are unlikely to be much further forward than we were before spending millions on an investigation into journalistic practices. In recent discussions this week, eyebrows have been raised at the suggestion that Ed Miliband could write to senior members in the Mail-on-Sunday empire to suggest that the culture in their newspapers is awry, and to ask them to do something about it. It could be argued it is none of Miliband’s business, except that Miliband would probably prefer the Mail to write favourably about him. Such flexibility in judgments might be on a par with Mehdi Hasan changing his writing style and target audience within a few years, as the recent Twitterstorm demonstrates.

Twitterstorm

The medical and nursing professions have latterly urged for an approach which is not overzealously punitive. There have been very few sanctions for regulatory offences in Mid Staffs or Morecambe Bay, for example.

Robert Francis QC still identified that an institutional culture which put the “business of the system ahead of patients” is to blame for the failings surrounding Mid Staffordshire Foundation Trust. Announcing the publication of his three volume report into the Mid Staffordshire Foundation Trust public inquiry, Mr Francis described what happened as a “total system failure”.

Francis argued the NHS culture during the 2005-2009 period considered by the inquiry as one that “too often didn’t consider properly the impact on patients of decisions”. However, he said the problems could not “be cured by finding scapegoats or [through] reorganisation” of the NHS but by a “real change in culture”. However, having identified the problem, solutions for cultural ‘failure’ in the NHS have not particularly been forthcoming.

There are promising reports of ‘cultural change’ in the NHS, for example at Mid Staffs and Salford, but some aggrieved relatives of patients still have a feeling that ‘justice has not been done’. There has been no magic bullet from the legislature over concerns about bad practice in the NHS, and it is unlikely that any are immediately forthcoming. There is little doubt, however, that parliament improving the law on safe staffing or how whistleblowers can raise issues in the public interest safely might be constructive steps forward. There therefore exists how the law might conceivably ‘improve’ the culture, and one suspects that this change in culture will have to permeate throughout the entire organisation to be effective. That is, fundamentally, people are not punished for speaking out safely, and, whilst legitimate employers’ interests will have to be protected, the protection for employees will have to be necessary and proportionate equally under such a framework.

Journalism and the NHS are not isolated examples, however, Newly released reports into the failures of management at several major banks – HBOS, Barclays, and JP Morgan among them – show that some of the worst losses had roots deeper than the 2008 credit crisis. It is said that a toxic internal culture and poor management, not the subprime mortgage collapse, caused billion-dollar losses at some of the world’s largest banks

In an argument akin to that used to argue that there is no need to regulate the journalism industry, the banking industry have long maintained that a strong feeling of internal competition can be healthy for profitability, but problems such as abject fraud and misselling of financial products are already illegal.

The situation is therefore a nonsense one. There is a failed culture, ranging across several diverse disciplines, of politicians wishing to use regulation to correct failed cultures. Cultures of an organisation, even with the best will in the world, can only be changed from within, even if the public, vicariously through politicians, wish to impose moral and ethical standards from outside.

Whichever way you wish to frame the argument, it might appear ‘we cannot go on like this.’ It is a pathology which straddles across all the major political parties, and yet all the parties wish to claim that they have identified a poor culture.

Their lack of perception about what to do with these problems is perhaps further evidence that the political class is not fit for the job.

 

The paradox of thrift and bankers' bonuses



Over the last decade, pay at the top of the UK’s largest listed companies ballooned up to £4.2 on average on average for FTSE 100 chief executives from £1 m between 1998 and 2010, while salaries for workers barely kept place with inflation. Jeremy Bentham (1748-1832) had a huge impact on the world of philosophy, proposing utilitarian value as, ‘the greatest happiness for the greatest number of people works well as a way of doing justice’. This encapsulates why so many members of the general public appear to have a fundamental problem with excessive bonuses for bankers. Whilst people on the left politics-wise do not necessary deny the contribution of bankers to ‘wealth creation’ of the UK economy, many such citizens resent that they appear, along with Premier League footballers, to have levels of pay which represent an excessive contribution to the social value of society. The utilitarian could in fact stress that growth, wealth and GDP contribute much to the happiness of all. These depend upon a functioning banking system. Likewise, banks, in turn, need investment bankers to turn a profit. If those bankers are best incentivised by the promise of large bonuses, then so be it. Indirectly, that makes everyone happier.

Earlier this year, Downing Street appeared to concede defeat in its battle to stop banks paying huge bonuses to their staff; dictating the size of individual bankers’ payments or overall bonus pools was not possible. Instead bank bosses and ministers tried to thrash out a deal that would publicise details of payouts that could reach £7billion this year. The climbdown on bonuses has been a huge embarrassment for Government ministers who had threatened much tougher measures.  The impression conveyed in the UK media that bankers have not been adversely affected by #gfc, and indeed some feel that the bankers have profited. This has been against a whirlpool of accusations and counter-accusations that the taxation policy has been indeed been ‘regressive’. Whilst politicians and economists have latterly been at each other’s necks, both are aware that there is enormous voting capital in ‘getting this right’. Equally in the USA the Obama administration have immersed themselves in a populist attack on wealthy US citizens including corporations.

Rumbling along in the background is a subplot ignited by John Maynard Keynes, an outstanding Cambridge academic, and a Liberal. There has been much discussion about whether Vince Cable, a Cambridge graduate, and a Liberal Democrat, follows in the tradition of Keynes, to some extent fuelled by Cable himelf. Robert Skidelsky, Keynes’ official biographer, has made his concerns patently clear. Cable has extensively studied Keynes for his Doctoral studies. Perhaps playing to the Keynesians last week at the Liberal Democrats’ 2011 Summer Conference, Cable opined that, “Keynes talked about a ‘paradox of thrift’; everyone and every country being individually wise but collectively foolish – leading to a downward spiral”.

 

 

 

 

 

 

 

 

 

 

 

 

The paradox of thrift is a very famous paradox of economics, popularized by John Maynard Keynes, though it had been stated as early as 1714 in The Fable of the Bees, and similar sentiments date to antiquity. The paradox states that if everyone tries to save more money during times of recession, then aggregate demand will fall and will in turn lower total “savings” in the population because of the decrease in consumption and economic growth. However, there have many inward attacks of Keynes’ well-known paradox, not least because of the unwitting conflation of the terms “capital” and “savings”. It is mooted that the classical theory of growth in macroeconomic did not presume that every saver was the ultimate investor of goods, especially in relation to the earlier work of another great economist, Ricardo. Economists have recently been quick to point out that Keynes uses the term “savings” to embrace a ‘hoarding behaviour’, which leads Keynes to his direct proposition of a ‘paradox of poverty in the midst of plenty’. Again, there is a problem with definition, as bankers bonuses might constitute ‘plenty’, but not the growth in the UK economy called ‘pitiful’ by Prof. David Blanchflower, himself a pupil of Keynes.

Should the alleged ‘excessive profits of bankers’ be clawed back by the State for its benefit? David Ricardo is credited with the first clear and comprehensive analysis of differential land rent and the associated economic relationships (Law of Rent). In schools of economic thought including neoclassical economics, land is recognized as an inelastic factor of production. Rent is the distribution paid to freeholders for “allowing” production on the land they control. Of course, corn and money, and farmers and bankers, are not necessarily synonymous.

“As soon as the land of any country has all become private property, the landlords, like all other men, love to reap where they never sowed, and demand a rent even for its natural produce. The wood of the forest, the grass of the field, and all the natural fruits of the earth, which, when land was in common, cost the labourer only the trouble of gathering them, come, even to him, to have an additional price fixed upon them. He must then pay for the licence to gather them; and must give up to the landlord a portion of what his labour either collects or produces. This portion, or, what comes to the same thing, the price of this portion, constitutes the rent of land ..”

 

 

 

 

 

 

 

 

There has been a wider issue about whether the ‘differential theory of rent’ is due to strong emotions concerning ‘private property’, but prominent liberals such as JS Mill have proven words and deeds on the issue, through for example  the Land Tenure Act. Adopting a populist stance has always been easy for Vince Cable, and most Liberal Democrats heavily tout that St Vince The Cable was apparently one of the first to predict the banking crisis (as indeed objectively evidenced in Hansard). Whilst a synthesis of the economics is undoubtedly interesting to economist, both new and old, people will want to know what Cable can do about it. The answer is ‘not much’, as the FSA’s code on renumeration is considered ‘good practice’ (but relatively ‘toothless’). Cable wishes also to address the ‘disconnect’ between the excessive pay of top Directors and the performance of these companies, where Cable feels that a schism has developed. Many believe that many senior bankers seem virtually unsackable, which makes an analysis of what level of pay is appropriate for bankers from the “wage curve”. Blanchflower and Oswald (1994) how the existence of a wage curve for a dozen countries, defining the wage curve thus: “A worker who is employed In an area of high unemployment earns le than an identical individual who works in a region of low joblessness”. It would be interesting to know what the views of 31-year old trader, Kweku Adoboli, are towards that. Or indeed, what Oswald Grübel thinks: according to the Wall Street Journal this morning, “Oswald Grübel resigned as chief executive of embattled Swiss bank UBS AG in the wake of a trading loss that cost the bank more than $2 billion and now has cut short the career of a giant of Switzerland’s business community.

 

 

 

 

 

Vince's speech at the LibDem conference: Many themes should be a top priority for us too



Vince’s speech, unlike the misreporting of it mainly from the BBC who patently didn’t understand the business or legal issues involved, made for very interesting reading for me as a Labour member with an interest in both business and commercial law. I would like to discuss various intriguing aspects of it for me.

But to hold our own we need to maintain our party’s identity and our authentic voice.

This is now being an increasingly difficult problem for the Liberal Democrats. There has to be by necessity an alignment of the beliefs and values of the leadership of the Party and its grassroot members. It was interesting to eavesdrop on the discussion that the Party had earlier this week on brand strategy, as it was clear from the floor that there is much confusion about the brand identity and brand equity of the members of the Party. Of course, the position on the rate of cuts which ultimately emerged from Vince Cable and Nick Clegg remains for many quite unfathomable, and certain issues are pretty straightforward by the Liberal Democrats, for example strong Liberal (anti-statist) values in civil liberties. However, certain grey areas see problems for the leadership and activists alike; for example, free schools is an incredibly perplexing area for the Liberal Democrats to embrace in a way so enthusiastically as Michael Gove’s fervour.

We will fight the next general elections as an independent force with our options open. Just like 2010. But coalition is the future of politics. It is good for government and good for Britain. We must make sure it is good for the Lib Dems as well.

Yes, indeed. It is now ‘do-or-die’ for the Liberal Democrats. There won’t be an end of ‘boom-and-bust’ in this context, unfortunately, because if the Liberal Democrats get the economic recovery and cuts wrong, even if the recession ends, they will be unelectable for a decade. However, it is argued that if the Liberal Democrats make a success of their new Coalition policy, the Coalition politics of pluralism could become accepted.

There was, of course, a global financial crisis. But our Labour predecessors left Britain exceptionally vulnerable and damaged: more personal debt than any other major economy; a dangerously inflated property bubble; and a bloated banking sector behaving as masters, not the servants of the people. Their economic model combined the financial lunacies of Ireland and Iceland. They built a house on sand and thought that they were ushering in a new, progressive work of architecture. It has collapsed. They lacked foresight; now they even lack hindsight.

If Cable feels Labour is in denial over the deficit, undeniably he has been slow to come to the conclusion that the crisis was global. I remember him pontificating in the Commons about how it was an academic philosophical issue of where the financial crisis came from, but it was necessary to find a solution for it. Vince Cable’s lack of acceptance that this was a global crisis historically speaks volumes.

We know that if elected Labour planned to raise VAT. They attack this government’s cuts but say not a peep about the £23bn of fiscal tightening Alistair Darling had already introduced. They planned to chop my department’s budget by 20 to 25%, but now they oppose every cut, ranting with synthetic rage, and refuse, point blank, to set out their alternatives. They demand a plan B but don’t have a plan A. The only tough choice they will face is which Miliband.

This statement is totally ridiculous. If Vince Cable is so self-effacing, can he not at least give a suitable explanation for this poster?

But I am not seeking retribution. We have a pressing practical problem: the lack of capital for sound, non property, business. Many firms say they are already being crippled by banks’ charges and restrictions.

This is undoubtedly a sensible line of attack for Vince and George to pursue, as it encompasses the Liberal
Democrats’ values of fairness, and Labour’s lack of engaging with the public about how the bankers, who had largely caused this crisis, were not been punished for their recklessness. If anything, it is perceived that Labour pumped lots of taxpayers’ money in it, whilst the leading CEOs in the investment banks received knighthoods and huge bonuses. Labour’s fundamental error, if there is to be one single one amongst the plethora, is the unforgiveable increase in the rich-poor divide, which will forever be a legacy of Labour. It began in earnest with Thatcher, progressed with Blair, and compounded through Gordon Brown’s long stint as Chancellor. This should be a top priority for Labour too.

And the principle of responsible ownership should apply across the business world. We need successful business. But let me be quite clear. The Government’s agenda is not one of laissez-faire. Markets are often irrational or rigged. So I am shining a harsh light into the murky world of corporate behaviour. Why should good companies be destroyed by short term investors looking for a speculative killing, while their accomplices in the City make fat fees? Why do directors sometimes forget their wider duties when a cheque is waved before them?

This is an incredibly important paragraph in my opinion, as short-termism has been identified by many academics in leadership, including William George at the Harvard Business School, as a major cause of irresponsible leadership in business. This, together with failures in corporate governance and corporate social responsibility in a post-Enron age, remain admirable targets for Vince’s wrath. This should be a top priority for Labour too.

??But the big long term question is: how does the country earn a living in future? Natural resources? The oil money was squandered. Metal bashing? Mostly gone to Asia. Banking? Been there, done that. What is left? Actually quite a lot. People. Skilled and educated people. High tech manufacturing of which we already have a great deal. Creative industries, IT and science based industries and professional services. In my job I meet many outstanding, world class, British based companies. But we need more companies and more jobs in the companies we have. It is my job as Business Secretary to support business growth. And this knowledge based economy requires more high quality people from FE, HE and vocational training. Here, we have a problem. Businesses cannot grow because of a shortage of trained workers while our schools churn out young people regarded by companies as virtually unemployable. The pool of unemployed graduates is growing while there is a chronic shortage of science graduates and especially engineers. There has to be a revolution in post 16 education and training. We are making a start. Despite cuts, my department is funding 50,000 extra high level apprenticeships this year – vital for a manufacturing revival. My Conservative colleague David Willetts and I want to sweep away the artificial barriers between universities and FE; between academic and vocational; between full time, part time and continuing life long learning; between the academic and vocational.

The ‘Yeah, but’ is that Vince Cable is making savage cuts in universities such as Cambridge, currently top in the world, at a time when we should be investing in basic research, translationary research and applied research, with a view to investing in our country’s future. This should be a top priority for Labour too.

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