Gentle reader, if I hear one more self-serving statement from a City fat cat or compromised politician to the effect that “the City is too important to our economy for us to insist on caps on earnings.....or over-zealous regulation.....or the rigorous collection of corporation tax.....or the proper taxation of non domiciled financial sector workers.....”, I’m going to throw up.
Surely the Mafia is equally central to the Sicilian economy, or the Camorra to Naples', or the Triads to Taiwan’s, cocaine to Columbia’s, whale hunting to the Japanese fishing industry or for that matter the widespread use of bribery to the international arms trade.
Centrality is one issue. What is morally appropriate is another.
Must we give credence to these fellows who have made Faustian pacts with the devil.
Monday, 16 November 2009
Friday, 23 October 2009
Bankers’ bonuses
It is hard not to feel some frustration when many of the investment bankers who have condemned us to massive levels of public borrowing are now about to receive bonuses rivalling those paid out in the pre-credit crunch years.
For decades the investment bankers were the loudest exponents of a free market, natural selection, law of the jungle Weltanschauung. Now, having been partially or largely rescued through nationalisation they want to retain the obscene levels of earnings that they enjoyed while taking huge risks with our livelihood.
In spite of the harrumphing coming from Nos. 10, 11 and the FSA, precious little is being done to prevent a massive act of injustice. The reason for the limpness of response, we are led to believe, is that the UK financial institutions are too important to our economy for sanctions to be applied, when such sanctions might force this grotesquely profitable investment work into foreign hands.
But so what? Suppose we were to place stringent limits on the earnings of UK investment bankers and their partners in crime? Will the UK economy really suffer?
I suspect not as much as the bankers’ lobbyists suggest, because:
More importantly what would happen to the deserving stakeholders, the taxpayer, the shareholder and the innocent employee?
Innocent employees are mostly in the retail parts of banks and could be protected best by splitting the retail and wholesale operations as Mervyn King is promoting.
Taxpayers and shareholders might be harder to protect but the old shareholders in, say RBS or HBOS, now have nothing left to lose anyway. Those proud champions of shareholder value, Fred Goodwin, Andy Hornby and Adam Applegarth poured that investment down the pan a year ago.
What of the government’s (i.e. the taxpayers’) holding? Well the sooner the banks pay off their debts the better, and they’d do that a littler faster if they didn’t trouser over 50% of their revenue.
For decades the investment bankers were the loudest exponents of a free market, natural selection, law of the jungle Weltanschauung. Now, having been partially or largely rescued through nationalisation they want to retain the obscene levels of earnings that they enjoyed while taking huge risks with our livelihood.
In spite of the harrumphing coming from Nos. 10, 11 and the FSA, precious little is being done to prevent a massive act of injustice. The reason for the limpness of response, we are led to believe, is that the UK financial institutions are too important to our economy for sanctions to be applied, when such sanctions might force this grotesquely profitable investment work into foreign hands.
But so what? Suppose we were to place stringent limits on the earnings of UK investment bankers and their partners in crime? Will the UK economy really suffer?
I suspect not as much as the bankers’ lobbyists suggest, because:
- UK financial institutions are notorious for avoiding most of the corporation tax that tax experts suspect is due
- Overseas institutions and their highly paid staff will continue to pay tax in this country (particularly when the UK tax rules and employment laws continue to stay so attractive), and
- These staff will continue to live in the UK either because they prefer it here, or because they sank their last bonus into an over-priced property which cannot be now sold or rented at a commercial rate. And while they and their families stay here they will spend here, so the trickle-down won’t dry up.
More importantly what would happen to the deserving stakeholders, the taxpayer, the shareholder and the innocent employee?
Innocent employees are mostly in the retail parts of banks and could be protected best by splitting the retail and wholesale operations as Mervyn King is promoting.
Taxpayers and shareholders might be harder to protect but the old shareholders in, say RBS or HBOS, now have nothing left to lose anyway. Those proud champions of shareholder value, Fred Goodwin, Andy Hornby and Adam Applegarth poured that investment down the pan a year ago.
What of the government’s (i.e. the taxpayers’) holding? Well the sooner the banks pay off their debts the better, and they’d do that a littler faster if they didn’t trouser over 50% of their revenue.
Monday, 12 October 2009
Whose moral hazard?
As our increasingly feeble minded GOM contemplates the imminent arrival of a wholly inadequate private pension he ponders the term “moral hazard”.
This insurance industry expression has been popularised by Mervyn King and is now bandied about freely in the context of the derivative creators, investment bankers and fund managers who took the fruits of the economic boom but left the customers (mostly pension fund investors) with the costs of weak performance and (in conjunction with other tax players) sole ownership of the wreckage of the economic recession.
As he looks at what he paid pension managers over the past decades and the loss of value he has received at their hands the GOM certainly has no time for these scoundrels.
But are they the only villains of the piece? What about another group of people who took the credit for the boom but who were wholly protected from the growing level of risk?
Might it not be the case that the continued payment of MP’s and civil servants’ pensions out of current revenue, not the proceeds of past investment, has exposed them to an entirely comparable risk of moral hazard?
Could this be why successive Governments have done so little to head off the inevitable pension train crash? They were simply immune to the consequences of their irresponsible inactivity.
Let’s hear it from Mervyn (whose pension, we suspect, will not rely on “past performance”, either).
This insurance industry expression has been popularised by Mervyn King and is now bandied about freely in the context of the derivative creators, investment bankers and fund managers who took the fruits of the economic boom but left the customers (mostly pension fund investors) with the costs of weak performance and (in conjunction with other tax players) sole ownership of the wreckage of the economic recession.
As he looks at what he paid pension managers over the past decades and the loss of value he has received at their hands the GOM certainly has no time for these scoundrels.
But are they the only villains of the piece? What about another group of people who took the credit for the boom but who were wholly protected from the growing level of risk?
Might it not be the case that the continued payment of MP’s and civil servants’ pensions out of current revenue, not the proceeds of past investment, has exposed them to an entirely comparable risk of moral hazard?
Could this be why successive Governments have done so little to head off the inevitable pension train crash? They were simply immune to the consequences of their irresponsible inactivity.
Let’s hear it from Mervyn (whose pension, we suspect, will not rely on “past performance”, either).
Thursday, 21 May 2009
Clinging on to the past
As the local road sweeper said this morning, “If they kick that incompetent b----d upstairs now they’re just proving they have no bloody clue”.
He has a point.
What sort of message are they sending when the rhetoric speaks of modernization and the behaviour demonstrates an inability to let go of the past?
He has a point.
What sort of message are they sending when the rhetoric speaks of modernization and the behaviour demonstrates an inability to let go of the past?
Tuesday, 28 April 2009
Don’t waste the space
It seems to me that we could be missing a trick in London.
As I understand it we have spare capacity in Canary Wharf, a shortfall of funding for the Olympic Village, and some embarrassment in Westminster about MP’s second homes.
Surely the solution is staring us in the face? Why not turn those redundant banking towers into a social housing complex, downriver, which could accommodate both homeless athletes and provincial MPs in town to claim their Commons attendance allowance.
Indeed from their windows the latter could admire the Dome they insisted on building, while contemplating the savings to the taxpayer that would accrue from not building an absurdly ephemeral Olympic Village.
And in 2012 we might even have a new Olympic event in which they could compete?
Given the UK’s superiority in sedentary events (cycling, rowing, sailing and motor racing) the concept of competing for a seat is an obvious proposal.
And with the Tories’ excellent suggestion that the number of constituencies should be reduced we have the possibility of winning a gold medal in musical chairs.
As I understand it we have spare capacity in Canary Wharf, a shortfall of funding for the Olympic Village, and some embarrassment in Westminster about MP’s second homes.
Surely the solution is staring us in the face? Why not turn those redundant banking towers into a social housing complex, downriver, which could accommodate both homeless athletes and provincial MPs in town to claim their Commons attendance allowance.
Indeed from their windows the latter could admire the Dome they insisted on building, while contemplating the savings to the taxpayer that would accrue from not building an absurdly ephemeral Olympic Village.
And in 2012 we might even have a new Olympic event in which they could compete?
Given the UK’s superiority in sedentary events (cycling, rowing, sailing and motor racing) the concept of competing for a seat is an obvious proposal.
And with the Tories’ excellent suggestion that the number of constituencies should be reduced we have the possibility of winning a gold medal in musical chairs.
Thursday, 26 March 2009
Expressions we no longer need
One of the many benefits of the credit crunch is that we can divest ourselves of a fair measure of jargon, simply because the world has no further use for it.
To take a few examples, I doubt we’ll see the following phrases used very often, except in a tone of irony or nostalgia:
• “post neo-classical endogenous growth theory”
• “economic forecast”
• “profit forecast"
• “full employment”
• “free trade”
• “laissez faire”
• “early retirement”
• “pension pot”
• “embedded value”
• “hi-growth opportunity fund”
• “shareholder value”
• “light-touch regulation”
• “wealth management”
• “mortgage broker”
• “trickle-down”
• “sports sponsorship”
• “charitable giving”
• “capital gains tax”
• “tax relief”
And we can pray for the imminent demise of a few more.
My list would include:
• “guaranteed bonus”
• “remuneration committee”
• “independent non executive director”
• “tax credits”
• “public sector pensions”
• “PPF”
• “MP’s second home allowances”
• “targets”
• “short selling”
• “reality television”
• “celebrity culture”
• “personal trainer”
• “nail bar"
• “Chelsea tractor”
• “bottled water”
• “designer“ (anything)
• “RBS Six Nations”
• “Olympic village”
But then I’m feeling a bit sour.
To take a few examples, I doubt we’ll see the following phrases used very often, except in a tone of irony or nostalgia:
• “post neo-classical endogenous growth theory”
• “economic forecast”
• “profit forecast"
• “full employment”
• “free trade”
• “laissez faire”
• “early retirement”
• “pension pot”
• “embedded value”
• “hi-growth opportunity fund”
• “shareholder value”
• “light-touch regulation”
• “wealth management”
• “mortgage broker”
• “trickle-down”
• “sports sponsorship”
• “charitable giving”
• “capital gains tax”
• “tax relief”
And we can pray for the imminent demise of a few more.
My list would include:
• “guaranteed bonus”
• “remuneration committee”
• “independent non executive director”
• “tax credits”
• “public sector pensions”
• “PPF”
• “MP’s second home allowances”
• “targets”
• “short selling”
• “reality television”
• “celebrity culture”
• “personal trainer”
• “nail bar"
• “Chelsea tractor”
• “bottled water”
• “designer“ (anything)
• “RBS Six Nations”
• “Olympic village”
But then I’m feeling a bit sour.
Wednesday, 11 March 2009
Sit-aside: a solution for our times
The UK normally produces more management consultancy than is needed by domestic clients at any one time. Since it is difficult to store management consultancy for consumption at a later date, and demand in export markets is subdued, there is a need to provide incentives to reduce over-production.
A proposal very worthy of consideration is now being mooted: Sit-aside.
Under this scheme, management consultants will be able to claim support payments so long as they remain unutilised on client work, and instead devote their spare time to cultivating useful crops such as linseeds, oilseeds and protein crops such as peas, beans and lupins.
Management consultancies will be allowed a choice as to which teams of individuals will sit-aside each year; or alternatively the same team could be sat-aside for a number of years. This will give management consultancies more flexibility as they plan future staff utilisation, either on billable work for clients, or as claimed sit-aside credits.
Management consultancies would be obliged, however, to manage their sat-aside team so that it could be brought back into production if necessary.
It might be argued that price cuts would be a better method of reducing over-production; but this would overlook the fact that Sit-aside will act directly and quickly to reduce production and provides significant environmental benefits.
Sitting in their offices, the damage to the economy caused by these management consultants in the normal course of affairs will be significantly reduced. The sat-aside consultancy resources will provide important ancillary benefits, such as acting as buffer zones for preventing buzzword drift, providing habitat for the incubation of new management fads, becoming idea-banks where beneficial ideas can live and breed, and creating wildlife corridors around offices where animals and birds can find cover.
They will provide stewardship on behalf of the nation for key legacy management consultancy assets including PowerPoint formats, process mapping methodologies and work breakdown structures. And a pound spent supporting a management consultant will be spent in turn on goods and services created and delivered in the UK, thereby revitalising the economy in deprived areas such as Surrey and Berkshire.
In assessing bids for Sit-aside payments the Government will use the flexibilities available under the “Temporary Community Framework for State Aid Measures to support access to finance in the current financial and economic crisis”. The focus will be on ensuring that the management consultancy industry emerges from the current downturn with the skills and technology base needed to be competitive in the global market.
Enough of the gloom! Let's not look backwards: let's look forwards!
Forward to kick-starting the economy! Time to commit to Sit-aside!
A proposal very worthy of consideration is now being mooted: Sit-aside.
Under this scheme, management consultants will be able to claim support payments so long as they remain unutilised on client work, and instead devote their spare time to cultivating useful crops such as linseeds, oilseeds and protein crops such as peas, beans and lupins.
Management consultancies will be allowed a choice as to which teams of individuals will sit-aside each year; or alternatively the same team could be sat-aside for a number of years. This will give management consultancies more flexibility as they plan future staff utilisation, either on billable work for clients, or as claimed sit-aside credits.
Management consultancies would be obliged, however, to manage their sat-aside team so that it could be brought back into production if necessary.
It might be argued that price cuts would be a better method of reducing over-production; but this would overlook the fact that Sit-aside will act directly and quickly to reduce production and provides significant environmental benefits.
Sitting in their offices, the damage to the economy caused by these management consultants in the normal course of affairs will be significantly reduced. The sat-aside consultancy resources will provide important ancillary benefits, such as acting as buffer zones for preventing buzzword drift, providing habitat for the incubation of new management fads, becoming idea-banks where beneficial ideas can live and breed, and creating wildlife corridors around offices where animals and birds can find cover.
They will provide stewardship on behalf of the nation for key legacy management consultancy assets including PowerPoint formats, process mapping methodologies and work breakdown structures. And a pound spent supporting a management consultant will be spent in turn on goods and services created and delivered in the UK, thereby revitalising the economy in deprived areas such as Surrey and Berkshire.
In assessing bids for Sit-aside payments the Government will use the flexibilities available under the “Temporary Community Framework for State Aid Measures to support access to finance in the current financial and economic crisis”. The focus will be on ensuring that the management consultancy industry emerges from the current downturn with the skills and technology base needed to be competitive in the global market.
Enough of the gloom! Let's not look backwards: let's look forwards!
Forward to kick-starting the economy! Time to commit to Sit-aside!
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