The House of Commons’ powerful Public Accounts Committee has issued Continue reading
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Labour’s closing down sale
In a fire sale in a buyer’s market, the UK’s Labour Government Continue reading
Alyn Smith MEP gets £135 million EID Relief Fund through Brussels committee
Alyn Smith, one of Scotland’s 6 MEPs , has won a breakthrough crucial to farmers. Continue reading
The UK Government is burying bad news by making Sir Fred’s pension the headline issue – and Peston is the Patsy
The row over Sir Fred Goodwin’s pension is the distraction the UK Government’s spin doctors literally ordered in the leaks they engineered yesterday. The real story is not Sir Fred’s £693 THOUSAND annual pension but the £24 BILLION annual loss that RBS declared yesterday (the biggest in UK corporate history), the £300 BILLION of toxic debt RBS insured yesterday with the taxpayer (us) and the £2 TRILLION national debt we now carry.
This was yesterday’s real story – and today’s – and for more tomorrows than we dare count.
But the Government threw Sir Fred into the road – a meaty bone the news media hounds seized on savagely, too blinkered in the rush for blood to see the real carrion, the carcase in the shadows – as the spin controllers knew they would. The carrier pigeon for news on the road-kill decoy was the government’s new trusty, the BBC financial journalist Robert Peston who makes John Redwood – aka The Vulcan – seem normal.
Peston blew the whistle on Goodwin’s pension on cue on Wednesday night’s 10.00pm news – in good time to lessen media interest in the profoundly bad financial news to be released the following day.
There are major issues of policy and principle around what we are learning of the way people in certain sectors are paid and rewarded but these are far less pressing than the genuinely frightening level of debt the UK is now committed to carrying.
Even Mervyn King, Governor of the Bank of England has now said that if Britain had not gone into this recession with the level of public borrowing it had already taken on under the Blair/Brown governments, the Treasury and the Bank would have had more scope for effective action to resist the economic slide. This criticism of Government performance by the head of the Bank of England is unprecedented and is a sign of the seriousness of the UK’s current position.
Sir Fred’s pension is not the issue. His unregulated actions on behalf of RBS are the issue. The UK Government decided to go for ‘regulation with a light touch’, which of course meant little or no regulation of the banks by the feeble FSA. This was a tacit invitation to the banks to go bald-headed for profit – which led to the current collapse of the banking system.
This collapse resulted in the government going in for panic-driven progressive borrowing, all caution thrown to the winds in the interests of political survival. And the presses of the Royal Mint are due to start rolling next week in the interests of ‘quantitative easing’.
So let’s keep Sir Fred in our sights for later on but let’s not take our eyes off the cosmic cloud of ordure that’s hovering above our heads.
And by the way, it’s not over yet. The Lloyds Banking Group will only say that it is in discussions with the UK Government, which are progressing well. These discussions are thought to relate to the group’s wish to follow the RBS into insuring another welter of toxic assets with the taxpayer. And what they want to ‘insure’ (Alistair Darling’s term for this liberating manoevre – ‘asset protection’ – is even more laughable) is said to be around £250 billion of toxic debt.
£2 trillion of a national debt already looks like a very conservative estimate.
Prudence to print pounds
If it wasn’t so terrifyingly serious it would be almost endearing – like the sort of solution to insolvency that any inventive small schoolboy like William the Bad would have taken, courtesy of his John Bull printing set.
Gordon Brown is seriously considering printing money – increasing the money supply. They call it ‘quantitative easing’.
This is how it works. There’s an important national company in trouble – or it could even be the banks needing yet more funds. The Government could buy the company, taking it into state ownership or buy the banks’ ‘toxic debts’ for the taxpayer. These are the debts that are probably irrecoverable.
The Government would have to borrow money to do any of these things – and the UK’s borrowing debt is already far beyond any historical precedent.
But there is another way. The Government could simply roll the presses of the Royal Mint for long enough to produce the required amount to buy the troubled company or fill the banks’ coffers again in exchange for unstable debts.
The state would own whichever, possibly worthless, commodity it had bought – with no increase in borrowing to pay for it. The company or the banks would have the cash – perfectly acceptable currency. They would use this cash for some purpose which would add to the money supply in general circulation. In the case of the banks, this would be money to lend – to small businesses and homeowners in loans and mortgages.
Neat, isn’t it? And it is this ‘solution’ that Dear Prudence is currently considering.
So what’s the problem? If the state were a bank – which it virtually is these days – the problem would be its ‘liquidity ratio’. When the largely unregulated banks recently collapsed, they did so because of virtually total easement on the requirement to lend against only a safe percentage of assets. So when borrowers defaulted and the pyramid of hedging imploded, they were themselves in irrecoverable debt. They had no liquidity.
If the state prints money it is in effect knowingly taking the same risk the banks took with such disastrous consequences. There will be no assets to set against the new money printed. It’s a confidence trick which, if the truth be told, all money is anyway. Within safe limits, however, confidence generally holds and we get by.
Printing money is the most desperate last throw for a state to make. It brings us closer to hyperinflation than we should sanely consider. In the 1920s, post First World War Germany increased the money supply, hit hyperinflation - and there is living memory in the UK of German citizens literally barrowing Deutschmarks to pay for the smallest item of food. In the 1970s Argentina took the same route and got to the same place. And in the 1990s, Japan – as Brown may now do, refused to admit the lessons of history.
An increasingly possible nightmare is that Brown may print money, fatten the money supply and then call an early General Election, maybe in June. He would hope to win – or to lose narrowly – with the country gulled into a deceptive sense of relief in the greater availability of worthless money. And he would hope to win before the foundationless edifice comes tumbling down. But of course he would also hope that this wouldn’t happen. Every gambler does.
If the Prime Minister prints money, whichever party wins the election the country wll be stuffed.
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UK police may now hack into your personal computer without a warrant
For Argyll is progressively logging the sequence of erosions of privacy and liberty which have been a marked feature of the political landscape for some time. The sum of the various actions paints an extremely worrying picture – and here’s the latest invasion.
Below the radar, the Home Office has made it legal for police, acting without a warrant, to hack into anyone’s computer – at home, at work, in a hotel room. This is known as ‘remote searching’. The material gathered from this licensed activity includes the content of all e-mails, web-browsing habits and instant messaging.
The Home Office has done this by adopting a Brussels procedure agreed by the EU Council of Ministers. This will allow UK police to take advantage of a rarely used power for intrusive surveillance of private property without warrant.
Moreover, the strategy will allow French, German and other EU police forces to request British police to hack into specific UK computers and pass over any material gleaned.
Civil liberties groups and MPs, mainly from the opposition, describe the move as a dangerous extension of the surveillance state, driving one of a seemingly endless supply of a coaches and horses through privacy laws.
All it takes for a ‘remote search’ to be authorised is for a senior officer to say that he ‘believes’ that it is ‘proportionate’ and necessary to prevent or detect serious crime. Serious crime is defined as any offence attracting a jail sentence over three years.
Opposition MPs and civil liberties groups point to the lack of regulation of this surveillance and say that such intrusive powers require regulation by a new act of parliament and court warrants.
While there are legal safeguards for physically searching a suspect’s home, police undertaking this ‘remote search’ by computer hacking have no need to apply to a magistrates’ court for a warrant.
Shami Chakrabarti, Director of the human rights group, Liberty, says she will challenge the legal basis of the move, pointing out that: ‘These are very intrusive powers – as intrusive as someone busting down your door and coming into your home’.
Indeed, as For Argyll has recently reported, the UK Government is proposing to allow bailiffs in debt recovery cases to do just that – to enter a house by force (provided only that they have reason to believe that there is someone inside it) and physically to pin down any resident attempting to protect their property from seizure.
In respect of the new and actual right for ‘remote searching’ Shami Chakrabarti says: ‘The public will want this to be controlled by new legislation and judicial authorisation. Without those safeguards it’s a devastating blow to any notion of personal privacy’.
You may not care about this. You may think it won’t affect you. There will be a time, not far away, when you will care and it will affect you – and it may be too late.
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Lloyds TSB sees Brown blink first in early face off
Lloyds TSB, the recently part-nationalised bank tested the water yesterday and showed where the land lies in the post bail-out world of British banking. There were two key conditions attaching to the rescue deal Lloyds and others signed up to:
- no dividends would be paid to shareholders until the Preference shares, owned by the Government for the taxpayer, had been paid
- executive salaries and bonuses would be capped
Lloyds TSB announced yesterday that they would in fact pay dividends much sooner than the agreement dictated; and said flatly that they were not going to limit executive pay.
Gordon Brown simply talked about there being flexibility in the Government’s stance.
So, sooner than we could have imagined after the bail-out, we’ve had a face-off from a rescued bank and it was Gordon who blinked first, regardless of holding the purse strings. If this is a test case it does not augur well for a new focus on regulation. The other nationalised banks will be through the hole in the wall faster than you can shake a Darling at it.
The control issue – which we have consistently highlighted – also surfaced in the Lloyds manoevre. In making their announcement the bank said they were sure the Government would not wish to interfere with the way they made their commercial decisions. They seem to have forgotten – and so does Brown – that the Government operates the pubic shareholding in the bank and that shareholders have a vested interest in questioning commercial decisions.
This confrontation has quickly highlighted the essential contradiction in the post-part-nationalised status of the banks.
The state now owns 40% of Lloyds HBOS – IF they merge (see earlier and accompanying articles). That is the major shareholding and would normally carry absolute clout. But the Government has refused control.
We’re now in a position where the largest shareholder, the skipper pf the lifeboat, is simply concerned to be inside the boat after the storm, relying on sheer weight to stabilise its direction.
In nautical terms, you can steer this way after a fashion – if the rudder is broken. But if the rudder is still in working order and its control is given over to someone with a different direction in mind, that will prevail.