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David Cameron is standing at the (Southern) cross roads

May 25

Posted by Jeff in Economy, Health | 4 Comments

Let’s say there are two tribes. One goes to great lengths to ensure that no-one goes hungry, no-one goes homeless and the sick and the elderly are looked after in a caring, compassionate and unconditional manner. The second tribe is quite the opposite; everything is about survival and competition. The tallest get the best fruits, the strongest kill the meatiest animals and build the best homes and those who don’t measure up are effectively cut loose.

On the face of it, a private investment deal that went from a valuation of £1bn in 2006 to £18m today would attract little sympathy. Some rich group, that presumably doesn’t know what it’s doing, that belongs to the latter tribe in the above paragraph and that has deep pockets backed by Qatari investors is it? Well, yes and no.

The situation I am referring to is Southern Cross Healthcare, a UK company that has had a dizzying fall from grace but runs a huge number of care homes, including some 100 in Scotland, so any financial implosion would have unthinkable consequences for the tens of thousands of elderly residents that are now at the mercy of open markets. This is more than a case of schadenfreude at the rich getting poorer, much more.

Southern Cross is, to use a well worn phrase, too big to fail. Many of these care homes have no obvious new owner and many of the areas involved have no alternative provision. The residents can surely only stay in the buildings they currently live in but a liquidated company will surely want to sell off its assets to meet its debts.

Figures quoted in The Guardian suggest around ~£240m is required to prop up the Group to pay rent for another year which is surely better value for money for the Government compared to the tens of billions pumped into banks, much of which has continued to puff up over-inflated salaries in the financial sector.

This issue epitomises the mistrust and distaste that many either side of the border reserve for the Conservatives, reckless private financing of a very public concern. The same could be said for the railways (30% more expensive in the UK because of privatisation). And, worryingly, the issues surrounding this company could easily apply to the NHS in future (south of the border) if private involvement is allowed to infiltrate the Health Service. It is good to know that nurses, doctors, the Greens, Labour and even the Lib Dems are wise to the complicated risks at hand but Britain stands at a crossroads and a public NHS and a country that still competently looks after its weakest is at risk.

I know which tribe that I believe the Conservatives are regrettably closer to and I know which road I believe they are trying to take the country down. The fate of Southern Cross is Cameron’s first test and 31,000 elderly residents await his Government’s next move.

This is one issue where a Government going tribal is acceptable, it just depends which tribe it picks.

#SP11 – Apparently, we can’t handle the truth

Apr 27

Posted by Jeff in Economy, Elections, Holyrood | 41 Comments

The recent furore regarding superinjunctions has largely passed me by, though that hasn’t stopped me dipping into Twitter to find out (within seconds) who the famous names involved are. Personally, I don’t think the rich and the powerful should have access to a special law because they can afford the legal costs and while tabloids are a despicable scourge on UK society, famous people can’t expect to have it both ways.

Actors and football stars are happy to take the inflated salaries, the fame that drops onto their laps at an early age but not happy to have their private lives open to scrutiny. They want the goodies from being famous with none of the downside. Well that’s fine, but can we have our money back please?

I don’t think it’s too far a mental leap to suggest that politicians too have recently opted for a form of superinjuction, almost literally in the case of Alex Salmond regarding LIT. It is too early to say for sure what this election campaign will be rememered for but don’t be surprised if the legacy is the financial truth of the coming five years being shielded from the public, where the supposed ‘Hollywood for ugly people’ politicians wanted the fame and fortune without bothering to be open and transparent with us little people.

The funding of Higher Education is a classic example and I’m amazed, not to mention disappointed, that the SNP, Labour and Lib Dems haven’t been pushed on this much harder:

If fees in England are to settle at an average of £7,000, then (ignoring inflation), the funding gap in Scotland would be £97m. This is the figure that I have seen the SNP and Labour cling onto over the past few weeks. 

If fees in England settled at an average of £7,500 and inflation was taken into account then the funding gap would be around £202m. 

We now know that average fees in England will be closer to £8,678 and the funding gap therefore may well be £300m+ a year. So that’s easily a £1bn shortfall in the next parliamentary term that’s going largely undiscussed, and this is before Council Tax freezes, extra NHS spending, building more prisons, keeping police local and the whittling away of savings from (unspent) bridge money are taken into account. 

Parties can talk about these areas being priorities for future budgets but if every upside needs a downside, if every credit needs a debit, then surely we deserve to know what the priorities are for what will be cut and when? Put another way, whose necks are on the chopping block for each of the parties? Noone likes hearing such news but we deserve to know, don’t we?

Seemingly not. Like the grinning actor and the celebrating footballer hiding a barrelload of sins beneath that shiny veneer, aided and abetted by a handy superinjunction, it is what our party manifestoes don’t say that speaks volumes.

Don’t believe me? Just ask the Centre for Public Policy for Regions that has released a paper on manifesto costings. Some choice lines include:


In many pages on these Manifestos there is a plethora of seeming commitments and
pledges. However, when the current funding proposals are broken down these are
often found to have no (increased) funding attached to them. In some case this
funding is, yet again, expected to arise from generic efficiency savings. The true
worth of such commitments must therefore be called into question in many cases.

As we have previously reported, the 2011-12 budget was already tight with spending
being delayed and all spare funding being fully allocated. There is no reserve in the
event costs rise faster than projected or savings and revenues fail to be generated to
the level of in the timescale proposed.

Overall, serious questions have to be asked of all of the four main Parties as to
whether what they have outlined in their Manifestos is sufficient to meet the
challenges facing them in terms of real terms cuts to their budgets over the next four
years. Voters are entitled to be highly sceptical as to whether what they are being offered in
the Manifesto’s is actually what will happen, rather than a pale imitation of the
difficult choices that await, post-election. In fact, rather than playing a critical role in determining
how difficult future budget choices are to be made, voters are being sidelined.

Double digit cuts to budgets over the coming years means that we either have to tax more or spend less just to stand still, that’s the basic truth of 2011-16. So, if there was any justice, this election would really be a straight fight between the revenue-raising Greens and the happy-to-cut-back Tories. 

On current evidence, the SNP will only fleetingly enjoy this election win (if it comes to pass), opposition parties look set to have plenty of ammunition to hold the Government and its mandate to account over the coming years. Maybe being upfront, rather than adopting the superinjunction ethos, is the way to go after all.

Banks – jumping through hoops and climbing over ringfences

Apr 11

Posted by Jeff in Economy | 6 Comments

Anyone that works in banking, as I do, has been on tenterhooks over what the Independent Banking Commission would report from its interim recommendations. And, well, now we know.

There are over 200 pages in today’s IBC report but the main outcome seems to be the suggestion that banks should ringfence its retail operations (mortgages, current accounts) from the supposed ‘casino’ operations of investment management (the part of the bank that gets people a decent return on their pension).

I have had a few scattershot thoughts about this result and I just thought I’d throw them out there:

– The main priority at the moment, and presumably into the future, is to get banks lending again to boost the economy and boost employment. This suggestion of effectively splitting banks within banks will require separate pillars of capital structures and consequently achieves the exact opposite. With more money going towards capitalising ringfenced areas and a bank’s inability to use deposits on one side to fund loans on the other, the cost of funding will increase significantly. That cost will be passed on to a bank’s customers and begs the question – who wins?

– The Scottish Government did away with ringfencing in 2007 as it allowed greater flexibility and greater efficiency. If that logic applies for public spending, why should not apply for banking entities?

– I can’t help but wonder how many of the people who jeer that banks are too big have their mortgage/loans with RBS or LBG or Barclays. The quickest and cleanest way to realign a market is to pick a favourite and reward it with consumer power. That link doesn’t seem to be coming through at the moment, going by the apparent level of disgust at certain banks.

– From some of the rhetoric coming from Danny Alexander today, I am concerned at who is leading who. The Lib Dems do seem to be trying to leverage public ill-feeling towards banks, irrespective of the level of understanding that is tacked onto that ill-feeling. The strategy seems to be: ‘banks don’t like these proposals, the public doesn’t like banks, therefore we will support the proposals, irrespective of what they mean’. A dangerous game but thankfully, speaking of capital, Danny Alexander and Vince Cable don’t have much political capital left.

Yes, bonuses are too high and yes, the bluff on bank’s threats to leave the UK should be called; but we need many, well capitalised, strong banks filled with technically-minded, professional people who, yes, can command higher salaries. Unless we ditch Capitalism altogether which even in a leftie’s wildest dreams is unlikely to happen. You’d struggle to find anyone volunteering to be an accountant in a Communist state.

For me, banks will no longer be ‘too big to fail’ if we simply have more of them and we are already moving in that direction. Lloyds has to create and sell a bank under EU rules, Santander is an aggressive new entrant to the UK market, so too is Metro Bank, the Swedish Handelsbanken is quietly going from strength to strength, Edinburgh-based Tesco and Virgin seem to be gaining a foothold and mutuals, the Co-ops and Airdrie banks are always options too.

So ringfencing within banks? All things considered, I’m not yet convinced the advantages outweigh the disadvantages.

Where did LIT all go wrong…?

Apr 10

Posted by Jeff in Economy, Elections | 34 Comments

During the 2007 election campaign, it was billed by the SNP as “the biggest tax cut in a generation” but this weekend sees the SNP manifesto team frantically working behind the scenes to either patch up their Local Income Tax policy or pull the plug on it entirely. My personal prediction is that there is too much uncertainty, too much suspicion around what the tax will mean for Scottish taxpayers that the Nationalists will decide it’s not worth including as a blatant target for attack in its manifesto. The hitherto successful strategy of messaging ‘record, team, vision’ will be deemed as critical to carrying them over the line and anything (or anyone) that works against that over the next few weeks will be swept aside, LIT included.

This whole issue stems from the electorally toxic news that Alex Salmond has been using the courts to prevent the detail of Local Income Tax going public, inviting rival parties and the wider public to speculate on what is so damaging in the calculations that we shouldn’t get to see them less than a month shy of an election. Amid heightened tensions over how Scotland can meet a spending squeeze of some 12.5% over the next few years, this is the worst problem at the worst time for the SNP and, really, someone, somewhere has taken their eye off the ball.

The bad news appears to be that, had Local Income Tax been introduced, there would have been a shortfall of some £800m which would have required a rate of 4.6p on income tax to cover. This adds fuel to the flame of the otherwise disingenuous claim that Local Income Tax would make Scotland the highest taxed part of the UK. (It may carry the highest level of income tax, but that is to ignore the key point that Council Tax would be scrapped)

The appeal of Local Income Tax (which, along with Land Value Tax, I am very much a fan of) is that payment largely comes through PAYE so that people know what they are paid net from their employer is largely theirs to spend on whatever they please. That is, the money that lands in your account each month is yours. There is little doubt that the simple mechanics of Council Tax can get people into trouble with cash management and no doubt reduce the tax intake for councils as some simply cannot afford to pay the tax once the reminders start landing on doormats.

The hyperlocalism of the tax is appealing too, although the SNP wish to set the rate nationally. Under the Lib Dem proposal the local councils would be more accountable and value for money would be more recognisable. That can only be an improvement on the status quo.

However, as fine an idea as this local tax is, it is facing some new challenges in 2011:

– We’ve already voted on Local Income Tax and the electorate will be less sympathetic to even the same promises this time around. The SNP may well claim that it needs more MSPs to deliver the policy in the face of hostile opposition but, rightly or wrongly, I can envisage that falling on deaf ears.
– We’ve had four years of a Council Tax freeze which, somewhat ironically, makes Council Tax less unpopular than it might have been and arguably less unpopular than it was in 2007. That also makes LIT a harder sell.
– The Greens have pulled together a fully costed and highly attractive Land Value Tax policy that has garnered a good bit of press for the party. LIT is not longer ‘the only show in town’.
– The SNP is suggesting that it is keen to continue minority Government if it emerges as the largest party, how that squares with delivering a Local Income Tax that requires a parliamentary majority, it is not quite clear.

With the SNP and Lib Dems only a couple of votes short in delivering a Local Income Tax in the 2007-11 term, the Lib Dems demoting it in this year’s manifesto (1 mention in 89 pages) and the policy now a millstone around the SNP’s necks, it is looking increasingly likely that this policy has had its day.

Where that leaves us with five different parties and three or four different policies is anyone’s guess. The only option that I can see emanating from the pack, assuming the SNP does wash its hands of LIT, is an SNP/Green deal on a Land Value Tax at some point down the line and only if the numbers fall in that favour.

The tax brings in more money each year, makes efficient use of land/buildings (fileld or empty) all the while not requiring higher bills from the vast majority of houses that are banded A-E. It is, to my mind, a cleaner and more fully formed version of Vince Cable’s reasonable Mansion Tax policy from last year.

Patrick Harvie says that for the next Parliament “it is either Land Value Tax or bust”. Despite being a fan of LIT, I am inclined to agree.

Not paying Vodafone as we go

Feb 24

Posted by Jeff in Economy | 47 Comments

Anyone that has ever tried to cancel a phone contract will know how arduous a task it can be. One needs to be determined, one needs a certain mental strength and even then it’s not unlikely that one will come off the call tied into a new two year contract with a Skype bolt-on to boot, whatever that is. 

So on one level Patrick Harvie’s proposal to cancel the Scottish Parliament’s contract with Vodafone should be treated with caution. Even Mike Rumbles could botch the job by not being headstrong enough. These call centre commandos can break the toughest among us. 

Patrick’s central argument that politicians (of all people) shouldn’t stand idly by while large companies seemingly avoid paying their fair share of tax is perfectly fair and a convincing proposal. I haven’t bought a blouse in Top Shop since UKUncut got going so I like to think I’m doing my bit. 

Of course, the other side of this £6bn tax avoidance story was the weak contribution from Revenue & Customs. Discussions between the tax body and Vodafone ended surprisingly early and with R&C ‘caving in’ on its belief that more money was due from the phone giant. However much we don’t like it, private companies are not in the business of voluntarily handing over cash to the Treasury so it is no wonder that it’s Governments that end up getting tapped for extra cash if Corporation Tax receipts are not as high as they could and perhaps should be. 

But ripping up a phone contract two months shy of an election, incurring unnecessary charges and all for a symbolic point that realistically not many will heed? I’m not so sure. If this is not the only driving factor and BT or O2 can undercut Vodafone then I say crack on. 

But surely lobbying the UK Parliament directly and urging MPs to intervene at the core of the issue is better than any well-meaning but ultimately ineffective stunt? Didn’t someone once say it’s good to talk? Maybe that should include legal arbitration of some sort. 

The above is not too say that the Scottish Green Party’s calls are not a smart move. It is quite understandably attempting to capture the zeitgeist of the moment, to align itself with the protesters and the complainants that see the coalition as taking the country down the wrong path and the official Opposition, be it Labour in London or SNP in Edinburgh, as not doing enough to argue the other way. Who is the party of the Twitter-driven, student-heavy apolitical protest? There’s no reason to not expect the radical Greens to win through there. 

When you are the plucky outsider in the Parliament, not even getting invited to election debates etc, it makes sense to use that to your advantage. 

Shopping around for a better deal can be tiresome, but it can be worth it just as much for clapped-out phone contracts as it can be for clapped-out political parties.   Â