Tag Archives: UK

Banking on a better system?

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As DG Markt Director General Jonathan Faull writes to the FT about the lobbying of Basel III and European Commission, and politicians and protesters with their “Banker Wanker” posters (and worse) blame the banks alone for the recent crisis and current financial climate…
the more windows get smashed or buildings occupied… I just wonder whether any of us really know what banks are for?

Put in really basic terms, banks basically do two things: they take in short term deposits and give out long term loans.  This is known as a “maturity transformation”.
But it seems that the major issues that caused banks to collapse were inability to properly manage this basic maturity transformation:

1)  running out of funding (like Northern Rock)
2) running out of cash (like Lehman Brothers)
3) inadequate risk management regarding quality of loans (primarily a problem in the USA).

We’ve heard a lot about the last bit, complex packages of bad debt and whatever.  Gordon Brown as PM blamed this third issue for the whole of the banking crisis.  But it is really quite simple: loans are things like mortgages, car loans, student loans, the sorts of everyday loan we can get our heads around.
Everything else is just a different way of packaging these up – e.g. as bonds to flog on the market.  That gives a different product which attracts a different sort of investor and therefore more money to be paid as interest, borrowed by those needing it etc.  Is this an inherently risky business?  Or is it the lack of transparency and understanding about what’s in the packages that’s risky?
I can’t help thinking it’s both the quality of the original loan and also management of the maturity transformation that are crucial here.

So banks borrow short and lend long.
Northern Rock basically seems to have run out of funding for its 25-year mortgages – for which it was borrowing a month at a time.  D’oh.
Lehmans, meanwhile, ran out of cash – a liquidity problem. As a bank you need to be able to pay up at all times.  Many deposits are repayable on demand, and banks have to assume they will be asked to do and if they can’t, the bank goes bust.
You can imagine Lord Sugar on The Apprentice shaking his head in disbelief that these simple concepts cannot be grasped by the self-proclaimed business experts standing before him.

While in the EU we were affected by the US sub-prime loans, unlike the US where these things were not really regulated, in the EU it was.  It’s not that banks don’t have capital standards – the existing Basel standards have been around for about 20 years.
So the Basel Convention and the European Commission are trying to design two metrics for the other two crisis causes to stop all this happening again.
There’s going to be a Lehmans Ratio – so that payments out can always be made for a month – and a Northern Rock Ratio (known as a Net Stable Funding Ratio) for a year’s funding.  And these new standards are being drawn up in just a couple of years.

Real care needs to be taken that the standards set are not so demanding that they will have a negative effect on the economy.
For example, one impact of the Northern Rock Ratio is that it reduces the amount of maturity transformation i.e. there’s more matching of assets against liabilities.  That means it is more difficult to fund long term.
Good, we might think – that means the wrong people won’t get loans.
But what about large scale infrastructure projects?  If we can’t fund them through banks, other sources of funding will need to be sought, such as the market.  And that brings a whole load of other insecurity…

While banker bashing is fun, it is not going to fix the system.  Nor will breaking up the banks fundamentally tackle this, merely making banking more expensive for consumers.  All these things really do is make it look as though the failure is distanced from the political decision making process – which of course it never can be.  Choosing not to act, failure to regulate or supervise effectively is a political decision just as much as choosing to do so.

The key question is whether our primary aim is to have processes for handling banks when they fail, or whether we should be focusing on building an economic system that doesn’t presuppose this.
As for the idea that if taxpayers don’t have to bail out the banks, we don’t have to pay, that’s to fundamentally misunderstand the nature of our economy.  If a bank fails and we pay for nationalising it through our taxes, it’s a visible cost.

But the overall increase in costs from politically attractive but economically risky metrics also affect us all – as shareholders, as mortgage borrowers facing increased interest rates or higher entry hurdles, as entrepreneurs with start-up needs or business owners looking to expand through loans, and crucially through our pensions.  Yes, you did read that right, reduced bank profits means reduced dividends which directly affect our pensions pots.
Ah, but not every one is affected, right? Mortgages, shares, workplace pensions… not everyone has them and this way the poorest don’t have to pay for the greedy bankers?  But given the lowest paid have been lifted out of tax, they wouldn’t have been hit that way anyway, so that’s just disingenuous.   We all pay.

And we shouldn’t, you may say.  Let the bankers pay!
Bankers get million pound bonuses!  Yep, some do.  In the UK, according to former City minister Paul Myners,  last year it was 5000 bankers out of a million people working in financial services.  Well, if we want to debate the inherent unfairness in pay and reward structures in our capitalist economist, and the value to the economy of farmers,  call centre workers, teachers -v- say, premiership footballers who merely kick a ball around a field for 90 minutes, that’s a whole other blog post.I think we need to differentiate between our sense of social injustice and convenient scapegoating of the bankers.

If we are to think about an economy that is about economic growth and not on bank failure,  then we need to move away from the assumption that nothing can be done and these things just happen – somehow bubbles that burst bringing down the economy are an inevitability.
Alan Greenspan had a mantra that it is cheaper and easier to mop up after an economic bubble bursts.   He’s been proved wrong.
What we really need is a more mature way of thinking about bubbles.
Bubbles are very rarely economy-wide.  So if it’s a property bubble, we need to have targeted measures aimed at deflating that sector.  How do we tell if there’s a bubble?  Loads of economic analysts argue over this, but essentially it’s a bit like pornography – almost impossible to pin down but you know it when you see it…

Is there a bubble at the moment?  Well, not easily seen.
But some food for thought – LinkedIn was recently valued at what equates to $100 a user.  I don’t know about you, but I’ve not put $100 into my LinkedIn use and would withdraw my details before seeing them sold – so unless some people are putting in thousands of dollars, I can’t see how that worth is derived.  Is this a new 1990s style internet bubble?   Who knows?

But will all this activity make the banking system less likely to fail in future? Don’t bank on it.

The modern world is bad for children

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Ok that’s it.  What, exactly, are we meant to do, to be doing the right thing?

         

As you can tell by my ever so slightly fed up tone, today there’s yet another report that say that something that parents do all the time is Bad For The Children. Today it’s television that’s in the firing line.

The article I’ve hyperlinked is fairly self-explanatory.  Children getting fat, eating junk food, have worse IQs in the longer run, etc. etc.  All of these things are apparently the long term impacts of toddler-age television viewing.
The professor in charge of the research says:

“Common sense would suggest that television exposure replaces time that could be spent engaging in other developmentally enriching activities and tasks that foster cognitive, behavioural and motor development.”

Ok.  No normal parent wants their child to miss out on important cognitive, behavioural and motor development skills.  So toddler TV’s got to be eliminated, right?  There must be something wrong with it – it’s illegal in France after all.
 
But let’s just think this through for a minute.
I’ve never seen my child watch TV for longer than about 10 minutes at any one time. 
Much as he loves Cbeebies, the TV’s just not that entertaining for that long when there’s building to be done, beds to bounce on, toy cars to drive up walls making vroom noises rather than just the lovely plastic garage, wax crayons and paper and all the card from the recycling bin to build with… and of course mummy to cuddle, to jump on, to play with, to help sort washing, to help find all the red buttons, to chase the frog across the lawn…

As you can gather, it’s not that my toddler lacks interest in the world around him.  That’s just a small sample of what he gets up to when we spend time at home (as opposed to the time in town, time at playgroup etc. etc.)
Nor does he lack the ability to concentrate, in fact he loves reading and often wants to look through books uninterrupted by me,  telling himself stories about the pictures, for a long time.
But even on what are laughably called my non-working days (unpaid work days more like, unless you count the non-means tested child allowance as payment?), I cannot spend 100% of my time as his playmate.  Nor should I – he also needs to play with other children his own age (hence playgroup to make friends), and to learn to entertain himself.
And sometimes, when I really, really need it, TV can be an electronic babysitter (not for long – my toddler has a kitchen stall designed to help him reach the worksurface safely so he tends to try to join in). 
But mostly we watch it together.
Timmy Time and the Tweenies are great for showing hm that it’s not just him that goes to nursery while his parents work, and the Tweenies teaches stories, nursery rhymes and social interaction, while 3rd and Bird stresses the value of a strong community.  Alphablocks and Numberjacks are so good that primary school teachers often use them in their literacy and numeracy lessons. I’ve never been a fan of In the Night Garden, and Waybuloo is a bit hippy trippy for me, but I like the sign language and normalised treatment of children with special educational needs and physical disabilities in Something Special.  Given the reaction of some parents to Ceri‘s employment, this sort of show is very much needed. 
And we don’t just sit and watch TV -we talk about what’s happening, when something similar happened to us…
 
But this is yet another report that tells us that we’re doing long term damage to our kids.
And while frankly I’d vote for the party that can actually bring the recommendations of “Toxic Childhood” into policy (NB it would involve cost, social change, standing up to the Daily Mail and the older feminists for whom equality is about the workplace), the central theme of that book is implying that parents are not up to the job.

There’s a terrible irony that we are so child centred these days, but that it is in a sort of “quality time“, taxi driving to activities way.  Being with the children takes time - for example, when I ask other parents how they handle the change to available nursery hours when their child turns three, they say I don’t know, I had a second one so I’m at home and able to do the school run, or that they are lucky to have grandparents near by etc.  otherwise they couldn’t work. 

But the child-centred approach that parents have is being squeezed. 
For example, some people I know have had their ability to work and raise their family affected by local authorities that can’t allocate the school places in a way that avoids someone having to drive miles between a school drop off and a nursery drop off. 
For others, it’s been that in order to “get on” – i.e. to be in the running for promotion etc., work has to be full-time – and that means 4 or 5 full days a week at nusery for the bambino, something we’re also told by the childhood experts is not good for children (note how short the school day looks to a parent and you’ll see that has been accepted fact for some time).
 
Long parental working hours are not good for anyone – tired workers are less productive, tired parents that don’t see each other suffer strained relationships not least because being a parent is really very hard work, parents working hours don’t get to see their kids and are not on good form when they do.  The right to request flexible working is genuinely a good thing (supported by all 3 main political parties in the UK) and being allowed to work from home sometimes cuts travel time and therefore means that more time can be spent with a child before and after childcare, and reduced hours means sometimes actually being able to do one leg of a school run rather than trying to get one of the rare paid childminders willing to do both before and after school and who ends up seeing more of the child than the parents do.
But many parents seem to fear that flexble working will impact negatively on their careers, so one parent doesn’t do it and the whole set up just gets even more complicated. 
Some compensate by treating the children as princes and princesses – in other words little monsters that are so used to being indulged that they don’t know what no means, and have been treated that way not necessarily becausse parents mistakenly think that this is what being child centred is, but because they are so damn tired all the time! 

France might think it has it right by banning toddler TV, but few women breastfeed there for fear of ruining their figure and if you are a career woman, your contemporaries expect you to return to work after 12 weeks otherwise you are letting down the sisterhood.
But even in the UK where we value choice, we don’t really value mothers that choose to stay at home to raise the kids in the way the childhood experts recommend for the first two years. 
Or if we do, we make it a choice only available to the middle classes who can just about afford to exist on one income, and the very poor who don’t work at all.
And those that work part-time are at risk of everything crashing if they are not circus-quality jugglers.
And those that work full-time are effectively letting someone else bring up their child.
And the tired, stressed out parents probably let the kids watch TV so that they can relax a bit.
Oh. 

So basically, with an economic set up that expects both parents to work, and a soul-selling attitude to work that – no matter what the lovely words in the HR guidance say – sends a mesage that flexible and part-time models are for slackers that don’t want to get on in their careers, and every moment that the child is with the parent needs to be a learning activity but that learning activities include pairing socks as well as structured play… argh! 
Basically the modern world is bad for children. 
I just don’t know what to do, except hope that trying to bring my son up to be happy, secure, friendly, outgoing etc. etc. in the best way I can is enough.  And try not to add yet another thing to the list of things to be tired over and stressed about…

And this?  My toddler took an unexpected nap and I was quick typing it…

Don’t panic! It might be a hung parliament!

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button image from www.isportacus.com

A survey quoted on Channel 4 news just now said that 56% of the civil service are expecting a hung parliament.  Civil servants of course know no more more about the results of any forthcoming elections in advance than any other intelligent observer, but nevertheless it may given an indication of what the general buzz in the Westminster village might be.

This was immediately followed by a report about the economic implications of a hung parliament.  But watching the report I’m quite concerned about the constant pumping out of the message about how a hung parliament is unpopular with the market, could lead to a market attack on sterling and will be bad for the UK economy.
It’s an eyecatching line but it doesn’t seem to be a universally held view – the Evening Standard on 16 March listed Namura, Citigroup and Forex supporting this stance, with Capital Economics (described in the Evening Standard as “cooler heads”) and Moody’s rating agency less concerned and pointing out that they would be expecting action to address the deficit from just about any government formed.  

The general gist seems to be that when the UK last had a coalition government, in the late 1970s, the ultimate result was an IMF bailout. 
But the situations are not really comparable, because the world is a very different place and not just a bit more complicated but massively more complicated in terms of potentially affecting factors. And the last two recessions accompanied by large fiscal deficits have taken place under single party governments in the UK.

If markets prefer a strong government with a workable majority of seats, then they have to be confident that the fiscal policy being pursued is the right one. 
That said, having also watched “Ask the Chancellors” this week, I’m not sure that it is clear that there’s that much difference of approach on offer in terms of a fiscal recovery plan – and that should surely be reassuring? 
The main issues of difference seems to be whether to cut tax or to cut spending, and the speed of doing it. 

In addition to this, the economy can surely not be helped by the threat to downgrade the UK’s soverign bond rating, which would raise significantly the cost of financing government debt.  Basically who ever finds themselves in power needs to be impressive on fiscal plan to keep AAA rating, but this threat in itself should focus minds.
But there’s no reason why a coalition government couldn’t come up with a strong plan that could be delivered? Julian Astle, Director of CentreForum quoted in the same edition of the Standard pointed out that:
“the broader the political support for fiscal retrenchment , the broader the likely level of public support. Around the world, coalition and minority governments have proven entirely capable of dealing with debt.”

So I don’t really see that a hung parliament should necessarily mean that we should all be panicking, nor that the markets should do so either. 
Unless our politicians are incapable of doing what their opposites in other EU Member States are able to do and find ways of working together despite labels?   But that would be ridiculous.  After all, as the Spectator pointed out, UK political parties are indeed broad churches, or, to put it another way, coalitions themselves, so presumably they are used to needing to work to balance different interests and perspectives…   

I read last week that some UK politicians believe that the public prefers strong government (politicians certainly do!) and are expecting that all the talk of hung parliaments should spur the small “c” conservative electorate into giving either Labour or the Conservatives a workable majority. 
That may be the case, but there’s what I like to think of as the Jedward factor that comes into play here – we also love a novelty here, sometihng a bit different. 
At least until we get fed up with it (like October 1974 all over again…)

What’s the politics equivalent of CofE?

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When the census was published in 2001, the big story was the religion box and the internet rumours about how if enough people put Jedi as their religion it had to be “officially recognised”. Absolute rubbish of course, but nevertheless 390,000 people said that they were Jedi’s leading to this rather fab report title on the ONS website…
37.3 million of the 53 million respondents to the census gave their religion as “Christian”.  Individual denominations were not specified, nor was there any breakdown between practising and non-practising because the census records the label that people choose for themselves.

Just about anyone you ask will tell you that practically no one goes to church on a Sunday (actually it’s more people than go to football matches each week, but no one’s saying that football’s on it’s way out and the stadiums should be converted into bijou residences, are they?) 
And indeed speculation at the time was that many people that had said that had done so out of habit or tradition - that they were not really Christian other than for hatches, matches and dispatches, and that many people would’ve preferred to put ”C of E” rather than Christian in any case becuase it conveys a sort of equivocal, half-hearted, keeping the door ajar approach rather than a total immersion.

I suspect that actually there’s something very British about this sort of attitude.  Andrew Marr pointed out in his excellent series “The Making of Modern Britain” that what probably saved the UK from Oswald Mosely’s fascism was the British sense of humour, that we don’t commit too lightly or take things too seriously (look how long Jedward managed to stay in the X Factor if you need a more trivial example). 
CofE means: of all the faiths that I’m not currently practising, this is the one whose service I didn’t go to on Sunday… 
If that’s true, I guess they were the people that would’ve found my last three churches (TBT at Christchurch Mayfair, Holy Trinity Brussels and St Mark’s Battersea) a bit “too much”, not CofE in the sense they mean it. But I digress.

So I’ve just found this excellent post over at Sharpe’s Opinion, which sets out in a short, neat way something I’ve thought a bit about for some time. 

Political party membership is falling in the UK, and I think that part of the problem is that to join a political party, you need to feel that you subscribe to all of a diverse range of policies (and pay for the privelege of saying that you do so).
Actually I remember my politics teacher at school saying exactly that- that she had never signed up to a political party because she could not support the whole message of any of them. And she was one of the cleverest people I knew (Miss Pickles, you were a legend!  But as she was a sit-up-and-beg-bicycling, bun-wearing non-TV watcher I’m not honestly expecting to be able to find anything online from her to hyperlink to other than this link to the school…)

So you might be someone that thinks marriage is the best thing for encouraging families to stay together and that there should be tax breaks to encourage this, but pro-European. 
Or you might favour positive action in recruitment for women, disabled people and minority groups, but strongly in favour of grammar schools as the best way to help bright children from disadvantaged backgrounds be socially mobile. 
Or you might be in favour of local income tax but own a house worth over £2 million.
(Just to clarify this is not me we’re talking about in these examples - I don’t even own a house!). 
In each case, your two interests would conflict with two of the few clear policies espoused by a major political party.

So – assuming that there’s no one policy area on which you are intending to be a single issue activist – how would you be able to “commit” enough to actually “do” something in politics to make the world a better place?
  
It’s not that easy at the moment.
If – as it seems from my paddling in the UK and EU political blogospheres- one of the main ways of getting your voice hear is through the team/ brand loyalty of a political party.  This guarantees you a pool of potential readers who will click onto or link to your blog just because you’ve got a little bird or tree or rose emblem just like theirs (or indeed a different one to theirs).  There will be lists that you can get onto, bringing more readers to debate with in the comments section and share ideas and build your knowledge. 
But these of course are the hardcore supporters, and while bloggers like Iain Dale are clear that they are not official party mouthpieces, they do tend to take a my-party-right-or-no-actually-we’re-always-right type of attitude (unless on an issue where they’re personally affected in which case they try to justify both views).
And what happens if, like Charlotte Gore, you fall out of love with your party over bits of what they stand for? 
It’s a bit like a religion isn’t it?  But while exegesis or midrash are “allowed” in some religious circles, and small group discussion is thought to help you understand and deepen your faith, there will always be some people who are happy with the simple faith version, looking for an easy label and willing to say “C of E” and get back to mowing the lawn without trying to go into what it means and why.  And indeed there will always be some people within the faith that don’t want you to do more than parrot back received wisdom – could that be said to be the case for political parties too, as in “we have clever people to do the thinking and they’ve come up with this, take it or leave it?”

So can anything be done to make this better?
Not clear.  Experiments like Jury Team tried to overcome the political party system, but the polling at the 2009 European elections for their independent candidates was hardly spectacular. 
Esther Rantzen might be trying to use her celebrity in a Martin Bell-like manner to stand against a politician whose morals she disagrees with, but she’s not exactly standing on a platform of anything that people can sign up to positively, merely that she’s been known in the past as a consumer champion and is not the sitting candidate.
I suspect that actually a different electoral system allowing for coalition politics might be part of the solution. 
Then, I don’t know, pro-European Tories could be free to praise the benefits of the EU to the rooftops, Labour supporters that think that an insurance-based healthcare system might actually be better than the current NHS, and Lib Dems who think that students should pay tuition fees would all be free to say what they think without fear of losing the whip or never getting on in their party and therefore never making it to the front benches/ government. 
Maybe the way to avoid groupthink and to really stimulate new ideas is to have lots of different groups suggesting them.  And while I guess there’s a Pythonesque risk of ending up with the Judean People’s Front/ People’s Front of Judea, at least it would be debate out in the open rather than manifestos out the front but little black books and the like behind the scenes.

Of course which ever party forms a government via which ever political system, I’m sure they’ll do their best to be a good govenment.  But as the old saying goes, it doesn’t matter who you vote for, the government always gets in. 
I guess there might be a lot of people out there wondering which is the “C of E” option on the ballot papers…