The Golf Club Analogy

Mrs Cragsbury has a tendency to be a bit grumpy. And she has regularly given me a bit of grief over my ‘blame shift’ argument, whereby I believe that politicians should be blamed for the financial crater that is our economy rather than those lovely, cuddly, innocent bankers we all like. Thus, I need to explain my theory to her in detail. I shall do this via – The Golf Club Analogy.

La Famille Cragsbury live in a nice rural Sussex village. The village has a golf club. Obviously. The Cragsbury's are not members. I can think of no better way to spoil a pleasant afternoon than by chasing small white balls around the countryside. But imagine that the golf club’s management committee passed a new bylaw this afternoon:

“Byelaw No 296 - After any round, all members will be positively encouraged to drink as much as they can in the bar – as this is good for the golf club’s profits – and never minding how drunk members are when they leave the building, all members will be issued with blindfolds for them to wear whilst they drive out of the car park.”

There might be a few days when nothing untoward occurs in the car park. My guess is that over the next couple of weeks, a few minor prangs might happen. But I’m sure we’ll all agree that at some point during the month of February there would be a bloody great pile up at the car park exit, probably on a Saturday evening.

Now. Who is at most fault?

• Is it all the dumb assed members who followed Byelaw 296 to the nth degree? For sure they share some of the blame.
• Is it Sir Gred Foodwin the driver of the biggest and flashiest car that accelerated into the rear of the pile up? He gets quite a bit of blame for sure.
• Or is it the golf club’s management committee, who incidentally were all in cars in the pile up too?

And, after the events of this week, who should be banned from the golf club and have their ‘golden putter’ award taken away from them: all the drivers, Sir Gred Foodwin or the chairman and members of the management committee?

Mr Cragsbury rests his case.

The Wonderful Madness of Independence

Today there is a very interesting report from the NIESC which begins to unravel the financial complexities of Scottish independence. In summary, if the Scottish should vote for independence, they would be much poorer and their future more financially uncertain.

Now let me declare my interests upfront: I’m English. Very. This ought not to be an issue. But it is, and here’s why.

Sometime ago I used to run a company that had several regional offices. I used to visit them regularly. I always knew as the Edinburgh office door closed behind me and I jumped in my taxi back to the airport, they would be right royally slagging of my Englishness. And here’s the thing. Until that time, I had no view on the Scottish. They were just our Northern neighbours, part of the Union etc. But this vitriol dripped and dripped and dripped, and it turned me into a loather of the Scottish and all their ludicrously fake manufactured ‘Scottishness’.

And then there are their banks. Royal Bank of SCOTLAND - broke. Halifax Bank of SCOTLAND - broke and forced on LloydsTSB, which it broke. The English taxpayer is clearing up their banking mess. Plus ca change. After all, why did bankrupt Scotland have to join up with England in the first place?

I’m so bloody bored of moaning Jocks in England telling me how shit and oil thieving the English are and how oppressed and brilliant the Scottish are. If it is so great to be Scottish, fuck off back up to the frozen North and wear tartan.

So my heart tells me, bring on the referendum. Vote for independence you Scottish wankers. See how life is without the English Southern taxpayers subsidising you, your free prescriptions, your free social care, your free universities for Jocks etc. Go fuck yourselves.

But.

Then my head speaks. The financial complexities of independence. The horribly protracted and inevitably fractious and very divisive negotiations. The UK’s place at the UN, the G8, the G20, the EU etc. Military bases, legal disentanglement, the Lothian question, Devo-max, blah, blah, blah. Not to mention the cost of all this unnecessary bollocks, just as we would hopefully be coming out of recession. And it tells me that the status quo is probably best.

And this paradoxical debate in my head is just what the Jocks will go through. Putting aside Wee Fatty Alex’s desperate attempt to fix the result - announcing his referendum question on Burn’s night, trying to use a completely flawed leading question, trying to fix who can vote, delaying the vote until the Commonwealth games on the 7 zillionth anniversary of Bannockburn etc - the reality is that the Jocks will never vote for independence in this generation at least and Wee Fatty Alex knows it damn well.

The SNP rhetoric is all about playing to (a) romantic Scottishness and (b) their resentment of the English. But when the romance is tested against cold, hard financial reality, the Scots will stay within the UK. Poll after poll tells us the result is forgone against. If he was at all confident, he’d call the referendum today.

His strategy is to play for time to build some momentum. But not momentum for independence. He knows that’s not feasible. No, momentum for Devo-max, which he judges is the achievable compromise position and is the next logical step along to his long-term aim of independence sometime in the distant future.

And this strategy is a tricky one for an English Conservative Government to deal with.

The Left Has Lost Its Way

So the rail unions, in their latest Olympic ransom, have voted against a £500 bribe…sorry…‘offer’ for each member to stay working during the Olympics. Bizarre. In any other walk of life this would be called extortion. I am not being paid more to work during the Olympics, are you?

And this has made me muse back to a recent theory that has been banging around my head for a while:

The Left has completely lost its way.

Why so? Well when the workers were rising up against the aristocracy/mill owners/industrialists, I got their point. Working practices were evil. Humans were being treated in many cases as little more than slaves. Any right thinking man should have demanded change. And for the last 100 years or so, change is what we got. We now have, amongst many changes for the better: human rights, employment legislation, healthcare free at the point of delivery, paid holiday, maternity and paternity rights, state pensions blah, blah, blah. Hard fought for. And mostly, but not exclusively, it was the Left that led the way.

So my mind now turns to last year’s TUC conference. I remember when many thousands of trade unionists annually descended on a seaside town to rail against the Government of the day. What that had become by 2011 was a relatively modest meeting held in TUC headquarters in London by a whole load of be-suited middle England, middle income, middle aged men and women arguing about how fat their massively subsidised and unaffordable pensions should be. How times have changed.

In reality, all the big battles have been long won and so they were left looking for ridiculous fights over pension terms.

And we see this played out again and again. Only last week, did we not witness the forces of the Left screaming loudly that reducing benefits down to the equivalent of a £34k pre-tax salary (ie within the top 25% of incomes in this country) was apparently tantamount to brutal oppression of the poor? And did we not witness The Millipede tying his party in knots by trying to ride the ‘benefits horse’ in two different directions?

The Left has won all its major battles and has lost its ‘raison d’etre’. Time for a re-think.

Lynch Mob Politics

I have written before of the incredible blame shift operation politicians have carried out vilifying bankers when in fact it was the banking regulation system that failed, run by...oh yes...those same politicians.

The madness continues, with the loss of Fred's bauble. Putting aside the rank hypocracy of MPs and Peers who have openly committed fraud wandering around Parliament as if they have done no wrong, as Nick Boles MP said in his Macmillan Lecture to the Tory Reform Group:

“…making a few bankers and company bosses a bit less rich is not going to make most people in Britain any better off.”

Lynch mob politics is always wrong. And as Bagehot so eloquently demonstrates, when La Toynbee and The Dark Lord Dacre unite on any issue it must be wrong...and very scarily so.

After the last few days, we have now set in train a terribly dangerous anti-business agenda, which The Millipede and Mr Yvette Cooper will latch onto like an underweight baby desperate for its mother's teat.

Dave needs to wrest us out of this suicidal nose dive urgently.

Eurozone Meltdown Latest

The Eurozone was from the outset a political rather than an economic construct. And therein lies the problem. This humble blogger worked in Brussels when it was being constructed, long before it was even first discussed at the dinner parties of the north London chattering classes. And from its inception it was always a political project promoted by the post-cold war European political elite, and endlessly pushed by Germany and France because they knew damn well they could dominate it.

And that is of course fundamentally why the UK did not join. It did not stack up financially and nor did it suit our politics. History may judge that this is the only decision that Gordy got right. Remember that Tony was all for it and it was Gordy who held the line. Good old Gordy. I knew I liked him!

The current pact being championed at this week’s European Council – a summit for EU leaders, and remember what summits are for children - is in essence Germany placing rules on all the other members telling them that if they fiddle their economies in ways that Germany does not like, then Germany will give them a spanking and turn off its financial tap. Which is frankly a bit rich as the much lauded rules that previously existed - the now amusingly called European Stability and Growth Pact - was spun as the most robust set of safeguards that would stop any Eurozone member fiddling their economy, and which Germany and France then utterly ignored when they broke them, strong-arming the other EU members to not censure them against the European Commission’s advice. One rule for the two big guys and new rules for everyone else. Plus ça change, eh?

Anyhoo, tonight is the deadline for entries to the Wolfson Prize being administered by the think tank Policy Exchange, where in March £250,000 will be awarded to the pointy head who comes up with the best 25,000 word solution designing a mechanism for a country to leave the Eurozone. Amazing that one does not exist, really, but there you are.

Factoid of the day - Since 1945, 87 countries have left various monetary unions around the world and amazingly the world did not end. So, not impossible then. Painful, yes, in the short term, but not impossible by any stretch.

The reality today is that Greece is now in complete meltdown. A friend of ours has just returned from Athens and reports that the public sector is hardly bothering to work at all, there are strikes galore everywhere, rubbish is mounting in huge piles on every street corner and the overwhelming majority of young people, university degrees or not, are all unemployed. It is more like Kandahar than a European city.

And of course Portugal’s borrowing costs are now 17% compared to Germany’s 2%. Remember, that 7% is considered unsustainable.

So what is the solution to this mess?

Taking a strategic view, the answer is of course glaringly obvious and every objective commentator has been prescribing the same medicine for at least 2 years:

1. Fill up the bailout fund, which has been struggling to get to €1 trillion whereas in fact around €3-4 trillion is needed by all accounts
2. Ring fence Italy as it is simply way too big an economy to be able to bail out
3. Force/help Greece and maybe Portugal to exit the Eurozone

What is depressing is that none of the European political elite, having sold their souls, their electorates and their economies to the Euro project, can find the political leadership to accept undeniably painful but simply inevitable medicine.

It is utterly perverse logic for the sickest of the PIIGS (Portugal, Ireland, Italy, Greece and Spain) to still believe that it is in any way in their economies’ interests to stay in the Eurozone. It’s as if they have signed their Eurozone suicide pact and won’t go back. They are happy to sacrifice their economies and political future on the altar of European political dogma. A Portuguese friend of ours who went home for Christmas told me that when she broached the idea that it might be in Portugal’s interest to leave the Eurozone, people looked at her as if she was completely stark raving mad. They simply could not comprehend the idea, such is the political unreal reality that the European political elite have constructed in their home countries.

How can it be in their interest to stay in? To get out of the mess they are in, they need to devalue and free up their economic policy. Neither of which they can do within the Eurozone. The choice is 5 years of pain if you leave or 25 years of pain if you stay. Madness.

Some Cragsbury predictions for you:

1. Greece will inevitably default in a horribly unplanned manner
2. Once that dam has broken, Portugal will follow suit sometime thereafter
3. In the short-term, the UK pound will become a European safe haven currency for investors
4. Germany will messily cobble things together, eventually, but it will takes years for the markets to trust the Euro again

All of which is avoidable, if the European political elite put away their arrogant, stupid pride and faced reality. Not a hope there then.

Back Romney

It is with wonder and awe that I look at our Republican brothers struggling to endorse Mitt Romney. Put simply, the rest of the field has included the mad, the bad and the even worse. The mere idea of Newt Gingrich - a proven liar, adulterer, incompetent and wild maverick Washington insider whom no one would have any idea what he was going to do next - is almost as risible as some of the other jokers who have put themselves forward. Judge a man by the company he keeps: endorsed by Sarah Palin, Herman Cain and the Rev Sun Myung Moon. 'Nuff said.

Hester-gate - The Impact

Labour forcing a vote on Hester’s bonus in the next Opposition debate. Pathetic populist bullshit or what? But, with this announcement, it became inevitable that Hester could not therefore take his bonus.

The impacts:

1. Hester is now the worst paid bank CEO in Europe and will be poached within weeks/months for a job paying him 4 times as much.

2. This will now become an annual blood sport for RBS CEOs.

3. We will struggle to find a good enough candidate to fill his shoes.

4. This silliness will have zero impact on other banks.

5. As ever, the 'politics of jealousy' caravan will rumble on.

Economics for Dummies - Lesson 2

And so to Hester-gate, aka ‘21st century class war’ or ‘the next ride on the blame shift merry-go-round demonising bankers so that politicians can get away scot free’.

Let’s get straight to the facts:

Arguably one of the most important jobs, if not THE most important of jobs in the UK right now, is to get our damaged and recently part-nationalised banks back on their feet so that we taxpayers can get our money back. With interest. As soon as is practicable.

The last Government brought in Stephen Hester, apparently the best man for the job. He has been endorsed as such by the new Coalition Government as well.

He is acclaimed by everyone to be doing a good job, apart from assorted meanies on the Left who want to throw stones at him because he is a banker and rich. (They’d love to be able to denigrate him as an ex-public school boy too but sadly for them he went to a comprehensive before going up to Oxford. He is also a white Anglo Saxon protestant. If he was very ethnic, the Guardianistas would be less hopping mad but the Daily Mail would be more so).

So far, so good. He’s doing a good job, earning big money but substantially less than he could earn elsewhere in the private sector, accepting this no doubt partly because his current role is one of THE jobs of the moment and thus is a challenge and will be good for his CV, maybe partly out of altruism and probably because he will likely pick up a knighthood at the end of it, assuming he is successful. And assuming he is, the non-executive director roles will come flowing in for years to come.

So, the big three questions of the day:

Q1. Should he have such large potential remuneration in the first place?

Simply, we need the best turnaround expert for this task. And that will cost. Inevitably. Supply and demand and all that - something our Lefty luvvies often try and pretend does not exist when it does not suit their ideology.

Now he wasn’t bumbling along running some dull Government department or quango, earning around £100-200k. No, he was the acclaimed CEO of British Land, one of the top 3 property companies in the UK, one that is well run, cautious and has survived numerous booms and busts very comfortably since 1856. This boy had been earning millions for years being a high flyer at Credit Suisse and Abbey National before British Land.

When you are in intensive care, you don’t say: ‘Take away this acclaimed medical expert who is doing a brilliant job and seems to be saving my life, he is paid far too much. Bring me a more sensibly remunerated doctor.’ On the contrary, you say: ‘Can I get this wizard to make me better any quicker and would it help if I motivated him more by paying him more?’

Unless you are a Lefty, when you make cheap political points about how much he earns, how much more that is than a senior civil servant – good comparison, Chuka, really? – and how much this is in relation to a corporal in the British Army in Afghanistan – and you Peter? All of which, of course, is bollocks.

Supply and demand.

Simples.

Q2. Should he get his bonus?

He should get whatever bonus the RBS’ remuneration committee feels he deserves for his last year’s performance under his contract. Populist bullshit from Lefty politicians, journalists and all the rest is just that. Bullshit.

I, as a taxpayer, want his mind 100% on the job getting my money back not on endless meetings with his chairman, UKFI, Government ministers, his comms team and others about various Lefties views on his bonus.

Q3. Should he take it?

If I was him, after all this bollocks, I’d refuse it and resign. My resignation letter would say:

‘We agreed my remuneration in my contract. Nowhere does it say the Polly Toynbee set gets a vote on what my bonus should be. I have been working night and day to turn this fucked up company around with considerable success and acclaim and all I get is bullshit from people who know nothing about what I am doing, could not understand it if I explained it to them and want to use me as a class war political football. To say I am demotivated would be a fucking understatement. I’m out.’

He would be in a higher paid job by Easter.

PS Loving the paradox of unions which endlessly use every aspect of employment law to defend their often idle and incompetent members whilst seeing no hypocrisy in demanding that a manager’s contract should be completely ignored.

Economics for Dummies - Lesson 1

OMG, I have longed to blog again. Many times I have almost started again. I have missed it. So much. But time has been against me. And still is. But daily helpings of the madness of modern British society and all its loopy nonsense, with no one pointing out the cold, hard facts of reality, have compelled me to return. Here goes:

The economics of the Left's 'anti-benefit reform' agenda

First a few facts, delivered to us on this day children, by the ONS - they're impartial, right?

Fact 1 - National mean salary = £26k

Fact 2 - Salary needed to be in the top 25% of taxpayers = £32k

Thus, lowering benefits - apparently outrageously - to a maximum of £26k (which is the equivalent of earning £34k) means that even after this change you can still earn way more than the national average and in fact be in the top 25% of earners. Unbelievable. Unless you are a bishop that is. I have blogged many times before that the Left's well intentioned but economically illiterate over-active philanthropy with other people's money (ie ours) has simply priced the low paid out of work. What incentive does someone who cannot ever earn £34k have to work? This fundamental will never change until we decrease benefits to more sensible levels. So I have a suggestion: why not create a tax ratchet, whereby starting at the new £26k benefit maximum, in each fiscal year from 2012 we decrease that maximum by £500 whilst raising the income tax nil band by £500. This would begin to decrease benefits to levels that will incentivise work but reduce tax/increase income for the low paid whilst having an almost completely negligible financial effect on those horrible greedy rich people politicians want to kick all the time. Simples.

The 4 Rs - Part 1

I thought there were just 3 Rs I hear you say. Nope. There’s now 4. Call them Melvin’s 4 Rs.

I have been doing a lot of driving in recent months, in my search for new clients for my illustrious employers. I love driving. I have a car that needs to be driven. No, demands to be driven. And driven hard into the bargain. So as I cruise across the country, fast shifting through my 6 gears, listening to the growl of my engine, a sound that never ceases to delight me, I have had time to ponder some of the deep questions that are facing me, you and society: like, when will our one year old stop screeching to attract attention, when will our two year old stop saying “No” to every question and what are the fundamental things that are wrong with the politics of our society.

The first two are just too difficult to answer and shall be consigned to the ‘too hard’ tray. But the third one I have an answer to. Melvin’s 4 Rs. Here goes:

My 4 Rs are: Risk, Respect, Reward and Regulation. Today, we shall deal with Risk.

We have managed to talk ourselves into an incredibly unreal situation. We want a society that has zero risk. Not just ‘want’, actually. Many really believe that a society without risk is realistically achievable. It’s total codswallop. Risk is everywhere. It lurks behind every car in front of us, around every corner in every street, under every loose paving stone, on every climbing frame in every playground. It leers at us with every use of any cutting implement, it glowers at us as we climb on any form of public transport. It surrounds us, it envelops us in fact. As soon as your first toe hits the bedroom carpet each morning, your daily gamble with risk has begun.

So the issue is not avoiding risk, but balancing risk. If I walk to work in the middle lane of the M25, the chance of me dying is considerably greater than if I use a car, for instance. If I run across the road now, when the lights are green, the chance of white van man mowing me down are higher than if I just wait for the light to turn red. Life is in fact a constant risk balancing process. The question is proportion. And that is where society is going wrong.

The other day I visited a client. Nice building, just outside Birmingham. As I pulled into the car park, through a speaker by the barrier I got a 1 minute briefing about safe use of the car park, before the barrier went up. When I had parked my car correctly, according to the rules, I ventured into the reception area (and before you ask, yes there was a fucking silent flat screen on the wall). I was then given a two page safety brief I had to sign in two places before I was issued a visitor pass. To finish it off, I was treated to a verbal brief from the receptionist on what to do and where to go in the event of an emergency.

WTF?

A superb example of completely unbalanced anti-risk behaviour. Unless we can tackle this ludicrous risk aversion we now have, society will continue to implode. Teachers will be less inclined to take our children on trips out of the school. Lawyers will get richer by ambulance chasing minor injuries. Companies will design ridiculously ultra safe processes that are bureaucratic and expensive. Petty health and safety rules will abound. And this costs UK plc. But most of all, it is changing our culture dramatically. We are much the poorer for it.