Iain Martin at the Telegraph this afternoon points out on his blog that Royal Bank of Scotland on its own will cost tax payers £100 billion most of which we are unlikely to ever get back – maybe we will sell our 95% holding for £15 billion in a decade or so – who knows.
The whole Fred the Shred stink is embarrassing for the government but it makes sure that no-one is talking about the main story – GOVERNMENT SPENDS £100 BILLION BAILING OUT ONE SCOTTISH BANK.
Over the last week the banking chickens have been coming home to roost in a big way. On 19th February the Office for National Statistics announced that it would re-classify credit crunch victims RBoS and Lloyds as being part of the public sector thus adding between £1 trillion and £1.5 trillion to Public Sector Net Debt. To underline this the Bank of England governor told the Treasury Select Committee yesterday that these banks had effectively been nationalised:
The Government owns more than 50pc of the equity [in RBS and Lloyds] and can take its decisions accordingly.
I don’t see a significant difference between that and outright nationalisation – except in the sense that this system we have now has the merit of trying to make it clear to everybody that nobody thinks the Government should be running these banks indefinitely.
Fred the Shred’s £693K a year pension is a side show if a totally unacceptable one. This man is in large part responsible for us going from having four large, capable world class banks to having one. HSBC still stands tall, we will find out how tall on March 2nd when it announces its figures. Barclays is walking wounded and will probably try to offload some of its worst assets onto the government. It still managed to post £6.1 billion of profits this month so there is reason to be hopeful about Barclays.
Lloyds is effectively nationalised, an otherwise sound bank laid low by a combination of the hubris of its management, thinking they had a once in a lifetime opportunity to grow by swallowing HBOS, with Gordon Brown’s inept meddling. A vain attempt to save another once great Scottish institution – Bank of Scotland. Yesterday Lloyds announced an 80% profit fall in its original business on top losses of £10.8 billion at HBOS.
Goodwin’s pension has totally overshadowed yesterday’s formal announcement of the largest corporate loss in UK history – £24.1 billion on the part of Royal Bank of Scotland. RBoS took over NatWest nine years ago in a £21 billion deal that made Goodwin’s name and saw this upstart Scottish bank take NatWest’s place at the top table of British banking – the big four.
There are two phrases we hear a lot recently. One of those is that our banks are too big to fail. The technical phrase used by central bankers is moral hazard. Moral hazard is the prospect that a party insulated from risk may behave differently from the way it would behave if it were fully exposed to the risk. Moral hazard arises because an individual or institution does not bear the full consequences of its actions, and therefore has a tendency to act less carefully than it otherwise would, leaving another party to bear some responsibility for the consequences of those actions.
Another phrase we hear a lot is hindsight or rather that it all very well to carp about the credit crunch now but you can only do so with the benefit of hindsight. Really?
For the average man in the street the first chapter of the credit crunch was the failure of Northern Rock. We first knew there was a problem on 13th September 2007 when Northern Rock applied to the Bank of England for emergency support. Those in the banking world knew there were problems in banking over that summer. RBoS’s takeover of ABN Amro was only completed in early October in the face of a lot of negative comment about the sense of the deal. Apparently the whole RBoS board were in favour of the deal. They didn’t hear that the music had stopped. Could it be that they figured that the Government would cover the downside? You didn’t need hindsight to avoid buying ABN Amro just some feeling that it was risky and that it might destroy you. Clearly Goodwin and his board thought that they were immortal. Moral hazard at work.
I can’t help feeling that if Northern Rock and even HBOS had been put to the sword rather faster and more emphatically than they have been our bankers would have woken up and smelt the coffee rather sooner. I also can’t help feeling that Newcastle based Northern rock and Edinburgh based Bank of Scotland were not only too big to fail but too dangerous to Labour’s re-election to fail. Goodwin and Brown are surely the joint authors of this mess.
Ealing’s Conservative administration announced today a freeze in Council Tax for the 2009/10 financial year. Cabinet Member for Finance and Performance, Cllr David Scott explained:
We recognise that the economic downturn is affecting the money in people’s pockets and residents are looking to make savings in their own budgets. It is only right that the Council does the same thing and does not add to the pressures households are facing.
I am pleased we have been able to deliver a zero increase this year. We face major hurdles with falling Government grants – below average settlements for the fourth year running – and increased demand from residents who are facing difficulties and are in need of our services.
Yet we have still achieved the zero increase by finding nearly £9M in efficiency savings which will protect front line services and deliver better value for money.
When elected in 2006, the Conservative administration promised to keep any Council tax increases to below inflation. After two successive years of below inflation increases, the real level of Council tax has actually fallen since 2006 and gone down from 23rd to 18th lowest out of London’s 33 Boroughs. In the four years to 2006, the previous Labour administration increased Council Tax by 48% – the second highest increase in London. Over their twelve year period leading Ealing Council (1994-2006) Labour increased Council Tax by more than all but one of London’s 33 Councils. Labour’s huge increases in Council Tax came despite the fact that prior to 2006 Ealing enjoyed above average increases in Government grant, a trend that has since reversed.
Ed Vaizey, the shadow minister for culture, was musing about the cost of ministerial cars today, here:
It would not surprise me at all to learn that the Government Car Service cost between £50 million and £100 million.
The story was picked up by Iain Dale and Labour ex-minister Tom Harris has been defending ministerial cars, here:
Yes, a ministerial car is a perk. So let’s hear it for perks! Because if you’ve just had a 12- or a 14- hour day and you’re leaving the Commons after the last vote, it’s wonderful to be able to slide into the seat of a car and relax while you’re taken home, knowing you’ll be lucky to get six hours sleep before your ministerial diary kicks in the next morning. I don’t grudge that privilege to any serving minister and I wouldn’t begrudge any future Tory minister, either.
None of them really seem to be doing their homework though. Funnily enough you can pull all the numbers you need out of the Annual Report of the Government Car and Despatch Agency, here. Government mail and car services are handily structured as a Department of Transport Executive Agency and they publish separate figures.
In 2007/8 they had 171 cars and 168 drivers and they cost £14.0 million to run. That is about £82K per car but I guess they don’t have all the cars and the drivers on the road at the same time so they probably have nearer to 150 cars out there operating and the effective cost per car is slightly higher than £82K but probably not quite as much as £100K. They bought £1.0 million worth of new cars and employed five managers who earnt over £50K in 2007/8. All employees are on civil service pensions. Nice work if you can get it.
It sounds like you could keep 50 odd cars for the real big knobs, lose 120 or so and save £10 million. They also have large premises at 46 Ponton Road in Vauxhall which would probably make a nice capital receipt thank you.
Ed Vaizey rather weakly says:
I am not advocating, by the way, coming in and sacking every driver.
I am sorry Ed we are not going to sort out our country’s financial mess without sacking quite a few government drivers. No doubt people will think that is a harsh position but can we get a grip please?
Update: Ooops. Got my Labour MPs called Tom mixed up.
Next Tuesday the Cabinet will decide on some 20 issues. One of the most important for residents will be the amount of money we spend next year on road and pavement renewal, see report here. This was an area that was sorely neglected through 12 years of Labour administration. The graph below shows how this capital budget has changed over the ten years to-date plus next year’s proposed budget.
We did not set the 2006/7 capital budget but we managed to boost the paltry £1 million committed by Labour in its last budget by 50%. In our first three capital budgets we will have committed £3.5 million, £8.5 million and £6.5 million respectively. In three years we will have spent more on our roads than Labour did in three four year terms. Note that Labour spent no Ealing money on the roads in 1999/2000. Maybe Labour thought the world would end with the Millennium?
Whatever your views on climate change and transport, roads are a basic bit of infrastructure that we all rely on. Taking a 12 year holiday on this kind of basic housekeeping is pretty rubbish government.
I have been meaning to take these photos for a while. They show two adjacent roads in neighbouring Walpole ward. Both photos have been taken at the same time with the same camera settings. The first shows what the lighting level is like looking south down Waldemar Avenue. It is rather gloomy although the jaundiced look of the old sodium lamps does not really come across. The second photo is Lyncroft Gardens looking west. It is striking how well the road is lit with our new for old lamp colums. The Heritage Quarter is going to look really stunning when it is finished. The second picture is slightly blury because I did not rest my camera on something.
Waldemar Avenue
Lyncroft Gardens
Hope you have someone to curl up with tonight. Must go!
Yesterday the Mayor’s budget passed its final hurdle at the London Assembly. There was a three hour debate which did not amount to much. Opposition members failed to amend the Mayor’s budget so it is now final.
It takes at least two thirds of Assembly members to overturn or amend the Mayor’s budget and with 11 out of 25 members being Conservatives this is never going to happen.
The Mayor says:
So for the first time in the history of the Greater London Authority, I am delighted to announce the first ever freeze of the GLA precept. Over the last eight years, Londoners have been afflicted with a 152 per cent increase in the council tax, without any regard to waste or cost controls. This budget outlines my commitment to deliver on frontline services and to tackle the big issues like crime and safety, whilst also providing value for money and keeping taxes as low as possible. By focussing on modest savings across the board, this year we have achieved over £100 million of efficiency savings, which we are looking to increase to almost £1 billion over the next three financial years.
It is worth remembering the eye-watering rise in precept we had to endure during Ken Livingstone’s first term as mayor. The rises to-date are listed below.
Livingstone raised the Band D precept from £123 per annum by a factor of over two and a half times to £311 in eight years a rise of 152% as the current Mayor points out above.
Note the rise of 17.1% the year before Livingstone became responsible was what the civil servants did all by themselves as they went from separate Police and Fire precepts to the GLA.
I just checked another item we discussed this afternoon at College Question Time at Ealing, Hammersmith & West London College.
In the debate about Gaza Ealing North MP Stephen Pound essentially justified Hamas rocket attacks on Israel on the basis that anyone stuffed into such a confined space would go mad. He was not really willing to accept or address my point that the first duty of any government is to defend its citizens and to protect them from harm. Thus allowing terrorists to antagonise Israel to the point that they hit back was a failure of basic competence on the part of the Hammas government of Gaza Strip. I further suggested that if the Palestinians had taken the same route as Hongkong since since the formation of the state of Israel in 1948 they might be rich too.
In trying to find some middle ground I suggested to Pound that London was of a similar population density to Gaza. Pound would not accept this idea.
A quick check of the CIA World Factbook reveals that Gaza’s population density is 4,167 people per sq km. A look at Wikipedia gives us 5,239 people per sq km for London. So Gaza has only 80% of the population density of London.
By the way the figure for Hongkong is 6,736 people per sq km. The figure for Singapore is 6,750 people per sq km. So Gaza is positively luxurious in terms of space compared to these two Asian economic power houses.
At least I am not half the politician Stephen Pound is.
I have just got home from College Question Time at Ealing, Hammersmith & West London College. LibDem councillor Jon Ball was there along with Ealing North MP Stephen Pound (Labour) and me to answer questions from about 30 students. We covered the ground you might expect us to including Heathrow, the banking crisis, the VAT rate cut, the Iraq war and Gaza.
Early on in the Heathrow debate I challenged Pound as to why he had abstained on the 3rd runway debate in Parliament on 28th January rather than resign his junior ministerial post as the two other local MPs had done. Rather than just fess up Pound took the line that there had never been a vote on the 3rd runway in the House of Commons and that the Tory motion I was referring to was so watered down because of “splits” in the Tory party is wasn’t worth voting either way so he abstained. I think Pound was taking his audience for fools. Read the motion for yourself:
That this House urges the Government to rethink its plans for a third runway at Heathrow Airport and to give full consideration to alternative solutions; regrets the Government’s heavy reliance on data supplied by BAA in assessing the case for expansion and notes the likely forthcoming break-up of BAA’s ownership of three of London’s airports following the investigation by the Competition Commission; believes that the consultation paper Adding Capacity at Heathrow Airport was deeply flawed, as it paid insufficient regard to the costs of air and noise pollution in the surrounding areas and the commitment to curb carbon dioxide emissions to tackle climate change; regrets the fact that provisions to improve high-speed rail lines from Heathrow to major cities have not been fully explored, along with the potential of other UK airports to handle more long-haul flights; and urges the Government to initiate a consultation on a new national planning policy statement on the theme of airports and high-speed rail.
Pound claimed not to know why his colleagues had resigned and voted for this opposition motion.
Luckily I got the chance to have a second pop at Pound and asked him how he would vote when a 3rd runway vote did come up. His response was that he would make his mind up at the time and to divulge his opinion now would be an insult to Parliament. More like an insult to his audience.
I just can’t get my head around this kind of dissimulation so I figure if that is what it takes to be a politician count me out.
The LibDems have been busy little bees with their shouty orange leaflets again this weekend.
The leaflet I saw quoted LibDem leader Harvey Rose as saying:
Last year the council made a number of cuts. This resulted in a worsening Parking Services department and a record level of official ‘Ombudsman’ complaints.
The LibDems always confuse inputs with outputs so when we try to to do more for less they always cry “cuts”. That is why LibDem run Richmond and Kingston have the highest council taxes in London. The average Band D council tax in London is about £1,000. It costs you about £250 a year more to live in Richmond or Kingston, see the figures here.
I run parking so I can tell you we inherited a service that is not good enough which is taking a long time to get right. It is a big job. Harvey and I will just have to disagree on the direction of travel.
His last claim is where you get to test his objectivity. On complaints to the Local Government Ombudsman Rose is quite simply talking crap. You can see the Ombudsman’s report or letter as it is called for the last year here.
The figures are quite clear. The year before the Conservatives came to power, 2005/6, the Ombudsman received 254 complaints about Ealing. The next year, most of which we were in power, the number went down to 222. In 2007/8 it was 206. So Rose says black is white.
These number do sound quite high but of the 230 complaints against Ealing that were dealt with last year they found 51 were premature, ie the complainant had gone straight to the Ombudsman and not raised the complaint with Ealing, no maladministration was found in 43 complaints, they exercised discretion to close a further 30 without requiring action by the Council and they found 46 were outside their jurisdiction. This meant that only 60 complaints were substantial. Still too many. Worryingly of these 60 three were what they call “formal reports”. These are the worst offences and three is an unacceptably high number. You might want to know when these happened: April 2001, September 2003 and February 2006. Rose might want the Tory group to atone for these historical offences but really he should have a go at the Labour group.
The LibDems are notorious for printing porkies in the expectation that people will take what they say at face value. Harvey’s not the youngest LibDem. I would have thought that some of the younger ones might have pointed out that the internet kind of means it is harder to lie nowadays. You’ve been found out mate.
Phil Taylor 