Encouraging Small Business

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Jessops in Administration

I was sad but not surprised to hear that Jessops had gone into administration. It certainly does not deserve this but it is very hard for specialist camera and electronics shops to compete with online stores.

I have received exemplary service and advice from Jessops over the years and I hope that it will come through this stronger than ever.

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Is David Walker the Right Chairman for Barclays?

Sadly, the answer must be an emphatic no. Sir David has shown himself to be completely divorced from reality by suggesting that misselling of interest rate swaps and payment protection insurance is 'the consequence of not charging for bank accounts'.

This assertion is a nonsense on several levels: (1) everyone is charged for their bank accounts, by the vast spread between interest paid and interest charged and by charges on transactions; (2) before the credit crunch the banks were making vast profits (largely unseen by their shareholders as they were creamed off in bonuses) without, for the most part, having transparent monthly charges for accounts; and (3) Lloyds, which has charged many of its customers a monthly fee for its current accounts was also one of the worst offenders in the PPI misselling. Misselling was driven not by necessity but greed.

Sir David suggested to the Labour government that banks should have to disclose how many of their employees earned over £1 million. However, he warned that naming them could drive 'talent' abroad. This is complete nonsense. Banks are allowed to lend about 10 times as much as their combined Tier 1 and Tier 2 capital. You could pick the most stupid person off the street (even a politician) and let him loose as a senior decision-maker at a bank and (s)he would be hard put to lose money. The 'talented' individuals who ran, and for the most part still run, our banks, however, managed to lose billions and had to be bailed out by the government. Barclays, of course, tapped Qatar's sovereign wealth fund instead, but at a massive cost to its existing investors (including the pension funds).

Marcus Agius, the outgoing Chairman, says that Walker's appointment will scotch any lingering expectations that the bank will be split into separate investment  and retail companies. This is to be regretted, as is the government's failure to force a split of this nature in all banks. The idea that bankers can be trusted to enforce a split between the two arms of the banking operations would be risible if it were not so frightening in its naivety. Without a complete split, it is only a matter of time before one or more of the high street banks will have to be rescued again.

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PFI Disaster

Some of us have been warning for years that Public Finance Initiative was little more than a tawdry confidence trick perpetrated on the taxpayer. We have now seen the South London Healthcare NHS Trust go into administration, quite clearly as a result of entering into 2 PFI deals which are costing it £61m p.a. in interest.

It is really time that an offence of recklessly wasting public funds was introduced, allowing politicians, civil servants and administrators in the public sector to face fines, imprisonment and exclusion from office.

 

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Banking Scandals and Disaster

With its high reliance on financial services, can the UK economy survive the apparently never-ending series of banking scandals? I sometimes doubt it.

In the last few weeks alone we have seen: Barclays admitting to manipulating the Libor (London Interbank Offered Rate), both to disguise its true cost of borrowing and, apparently, to overcharge customers; investigations into inappropriate selling of interest rate swaps to small businesses; and the revelation that HBOS prevented the directors of Farepak from segregating customers' funds, as a direct result of which the customers lost most of their money. Incidentally, some American shareholders have veen suing Lloyds TSB for their reckless takeover of HBOS.

All of these actions were immoral and some of them were possibly illegal. The fact that some of them were possibly nt illegal reflects badly on our present legislation. This sort of behaviour must stop!

The implications for the UK economy (and quite possibly for many other economies) are potentially disastrous. The manipulation of the Libor could expose Barclays and many other banks to litigation on a vast scale. It could possibly destroy some of the world's largest banks - and this time no government could afford to prop them up.

The other two matters do not in themselves pose a systemic risk to the banking system but they do re-emphasise the rotenness of the system and, by creating distrust, could make it even more difficult for banks to recapitalise in future.

What can we do about it? We should (and the government has recognised this) reduce the country's reliance on financial services, but this will not shield us from a melt-down of the banking sector. We must also do all we can to stop this misbehaviour by bankers by disincentivising immoral, illegal and reckless behaviour. For too long bankers ans others in financial services have held the UK to ransome, saying that if we try to curb their pay and bonuses or regulate their behaviour more closely, they'll simply go elsewhere. We must call their bluff - no-one in future is going to wish to deposit their money in these crooked banks, nor will they want to invest in them. The bankers at Barclays have done very well over the last few years but their shareholders haven't.

If the UK can introduce legislation which makes banks safer for customers and shareholders, we'll have a banking sector which has no difficulty raising funds. So what if the crooked and greedy bankers go elsewhere? We're better off without them and there will be plenty of honest and less greedy people willing to take their places.

 

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Bank Failures in Europe

I commented back in December 2011 about the failure of proper stress-testing of banks in the Eurozone. I was making a specific point about France and Germany but the failure was systemic and is well demonstrated by the trouble in Spain which has suddenly discovered that its (supposedly stress-tested) banks may need 100 billion Euros of support. If only the authorities had carried out proper stress tests six months (or, much better, 2 years) ago the Eurozone would not be in this catastrophic position now.

It is questionable whether Germany and the other strong Eurozone countries (there aren't many, especially if the rumors about the amount of Greek government debt held by French banks is correct) can do anything to save the Euro. Even if they can, should they? How can Greece ever survive years of austerity and recession while it is saddled with an over-priced currency? Only by Germany giving them billions of Euros, which they aren't going to do (and who can blame them?). Even if the Germans pumped, say 250 billion Euros into Greece, it would undoubtedly be squandered.

 

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Another Blow for Energy Policy

George Osborne has attempted to do something which is both very sensible and very foolish. He is trying to reduce subsidies for wind energy (see the Guardian).

It is sensible because wind energy is a complete dead end. It will never produce reliable energy at any price and it is currently only viable because of absurd hand-outs. The industry says this will kill wind turbines dead, and a good thing too.

Unfortunately, the other effect will be to make all future energy plans very difficult to implement. New nuclear plants, for instance, rely on guaranteed returns. If the government attempts to reduce subsidies for wind power, will anyone rely on promises relating to other forms of energy?

 

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Nuclear Power – Why Are Our Politicians So Dumb?

If Britain continues with its present policies to reduce carbon emissions, there is going to be a serious power shortage. That is why our politicians have (very slowly) concluded that we should have a new generation of nuclear power stations.

Unfortunately, the civil nuclear power programs in nearly all countries were not only intended to generrate power but to create plutonium for nuclear weapons. Even if one is deluded enough to believe that the UK should retain a nuclear deterrent, the country is swimming in plutonium. We don't need any more!

So why is it that Britain is planning to stick with uranium-fuelled reactors when there is far safer and cheaper technology available using thorium? As the Adrew Evans pritchard in the Telegraph points out (here), the Chinese are smart enough to go for this option. Unfortunately, our own politicians (and moribund civil servants) are just too dumb.

 

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Wind Turbines and the Eurozone

What is the connection between the Eurozone and wind turbines? On the face of it, nothing. However, the problems with both are glaringly obvious and debate about both has been ruthlessly suppressed by interested parties. 

Although many people have tried to warn of the inherent dangers of a currency union without closely integrated (and regulated) fiscal policies, European politicians have long dismissed these concerns. Anyone who criticised the Eurozone (or any other EU policy) was derided as a Eurosceptic. Even now, anyone who suggests that the Euro will not survive is criticised for failing to be constructive. So be it. I'm sorry to say that I don't think the Eurozone will survive. I say 'sorry', not because I think it is an admirable institution but because I fear that its collapse will cause everyone in the EU, including us, a great deal of economic trouble.

Wind turbines are an even more worrying example of bullying. First, there are the claims about climate change. I am willing to admit that this is not my area of expertise. However, so many of those who pontificate about it are at least equally ignorant. The BBC has long taken a very strong line in saying that man-made climate change is a fact. It is almost impossible to express a contrary opinion. The BBC commissioned a review of its climate change coverage from Professor Steve Jones. He is a highly-regarded expert on genetics. Does this qualify him to talk about climate change? I think not. 'He's got an ology. He's a scientist!' in the words of an old BT advertisement. Jones is, indeed, a scientist but would you trust just any scientist to formulate a new drug or design a nuclear power station? 

I am not saying that man-made carbon emissions are not causing global warming. However, much of the supposed proof is dubious, not least the graphs which are supposed to prove it until you look at them and notice that the temperature rises first and carbon dioxide concentrations follow. Anyone who challenges the party line is not just a sceptic, he is a denyer - a particularly unpleasant slur, with its absurd and extremely distateful implication that denying climate change is on a par with denying the holocaust.

We should certainly try to reduce our carbon emissions but does anyone without a vested interest really thing that covering the land and sea with wind turbines (and in the case of the land electricity pylons as well) is a sensible way to do it? Wind power is intermittent, unpredictable and startlingly inefficient. I happen to know that a very large engineering company commissioned an analysis some years ago and concluded that it was completely unviable.

Unfortunately, there is no discussion about this at national or international level. The real victim here is freedom of expression.

 

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