The State Of Our Union

As I suspected I arrived at work today and there is quite a bit of talk going on regarding the election campaign. What does not seem to have penetrated the hard skin of those who only "do" politics when an election looms is the scale of the crisis in the economy, and that is probably fair enough because I don’t think the campaign has really directly addressed these problems or highlighted exactly how severe things are.

So, here is my attempt to set it out in layman’s terms, both why the main parties are being shall we say economical with the truth and to set out where things are, or at least and more accurately how I think things are. My humble aim is to reach beyond my normal readers and offer something that can help people understand some of what is being talked about. I am not generally comfortable on the economics when it comes to the nitty gritty, so I will reference back where I am able, but feel free to put me right in the comments if I have drifted astray.

I believe it was in the 2009 Budget that Labour set out their spending plans for the 2010/11 year and this was not amended in the recent 2010 budget. In it, Labour has basically said that they will spend around about £706bn in this financial year (2010/11). Now, this covers everything from doctors and nurses, through to teachers, maintaining the roads, buying paperclips, servicing our debts and of course, funding MP's expenses.

That number again is:

£ 706,000,000,000

Now, the Conservatives did say quite some time back in 2007 that they will match Labour overall spending totals were they to win the election. This was emulating Labours 1997 pledge to mirror the Tory economic plans, which won favour with the voters and reduced uncertainty in the minds of the voters about changing the regime. The plan in 2007 was to try and take away any accusations from Labour that the Conservatives would “cut services”.  The debate at that time was that Spending was equal to Service, thus a cut in spending would result in a proportional cut in service; this is an argument I would reject, (but you may not.)

That was pretty much how things stood until recently.

However, the Labour government recently announced that they have identified £11bn of annual spending which they could classify, today, as “waste” and they declared that they intend to cut this waste from their 2012-13 spending plans onwards. In return, the Conservatives amended their 2007 pledge stating that they had in fact identified £12bn in “waste” and that if elected they would cut that “12bn waste starting right away; using £6bn of it to tinker with the National Insurance Bands (the “Tax on Jobs”) and cut spending annual spending by £6bn with the rest.

That's:

£ 12,000,000,000 in annual wasteful spending the conservatives will begin to halt in the over the 2010/11 year if elected in a few weeks.

£ 11,000,000,000 that Labour say they know is being wasted or inefficiently used that they want to keep spending until the 2012/13 year, (though we should keep in mind that by 2012 whoever wins the election will have to have at least one spending review before this date so all numbers at that point are likely to change.)

£ 6,000,000,000 that the Conservatives will spend less per year than the Labour Government. (A less than 1% reduction.)

So to repeat, the £6bn currently in discussion in the media and on the TV and what will be mentioned in the leader’s debates is £6bn of money already being spent which has been identified as wasteful with a further £6bn being used to not make employing people into work more expensive.

So, based on the above, the Conservatives are effectively now saying that for 2010/11 their spending projection is the Labour pledge of £706bn, less the £6bn just mentioned, or:

£700,000,000,000

Now, if you like me get a bit bamboozled over these numbers you are not alone and it is because the numbers are truly huge.
 
To pay for Public Sector Spending as set out by each party a Government can basically do two things, it can collects tax and it can borrow money. Borrowed money needs to be repaid at some point along with interest along the way and is obviously a more costly way of keeping the Government running.
 
There is no way I, you or Alistair Darling can be certain of the amount of tax that will be collected in the 2010/11 period, but what we can look at is how much was collected last year and see how much tax is coming in versus how much is needed to go out. Looking at the HMRC numbers for total tax collected in the past year and in recent years there is a very large gap between what can be afforded via tax revenues and via what either a Labour or a Conservative Government is committed to spend. By the chart linked, the Government has collected £397bn in taxation to go towards the amount needed.
 
Let’s keep our numbers simple hope that the tax rises coming will not stifle tax revenue collection and assume that if collection remained flat the money coming in will be:

£ 397,000,000,000

So in our exercise, with a fair assumption on tax income for this year there is a shortfall or to use the Economic term a Budget Deficit in the Labour plan between the amount of money needed to keep the government going and the amount of money coming in via tax of:

£ 309,000,000,000

And it is fair to say that there is a deficit in tax revenues to the Conservative plan of:

£ 303,000,000,000

And that crucially for this next year alone!


This deficit however is not the same as debt.

So when The Chancellor and George Osborne talk about tackling national debt and tackling the deficit these are not the same thing. Sometimes watching debates on TV about the state of the economy I have heard questions asked about our debt and the answer has come about cutting our deficit – this is usually a rouse to lead away from the truth that by all projections our national debt is soaring and will continue to soar no matter who wins the election because the best the parties are offereing is to halve the deficit.

The national debt can be defined quite simply as what the UK owes, and every penny of it needs to be repaid, usually with interest. The current national debt for the UK is about £849bn and as (I hope) you can see from what I have written above, this is rising all the time as the deficit between the money coming into Government and the money going out are vastly different and the deficit needs to be plugged with new loans.

That number again that every taxpayer in this country is now indebted to is:

£ 849,000,000,000

Now, unfortunately this is the "official" number.  However, the official number because it is defined by the Government does not take everthing into account that you and me might include in a more traditional definition.  So, to illustrate this more clearly I need to go back just a few months.  At the end of 2009 the National Debt number stood at £829.7bn.  At that point I wrote about how that £829.7 does not even include Private Finance Initiatives and Pension Obligations that the Government is obliged to pay and at that point a more truer interpretation might put the true debt at £1.35 Trillion, or:

£ 1,350,000,000,000

But, this £1.3 Trillion also does/did not include the potential and worst case outlay based on pledges to buy back mortgage securities. When those are factored in the number rises again to £2 trillion.

Yep, that’s:

£2,000,000,000,000

As the debt goes up in terms of what we can afford to pay so too will the interest rate in which we can borrow future debt, as it becomes more and more risky to lend to us the more we already owe. This is not just true of the UK, but also true of all countries, all households and all businesses. As our deficits continue our total debt rises.

If the deficit is the difference between income and outgoing, and debt is the total that we owe; it is therefore the case that the deficit can be cut, whilst debt continues to rise.

So, you can see that by focusing the debate on the £6bn issue of whether to cut wasteful spending now or later is kind of a false issue which serves to distract from the fact that to actually implement either plan would require loans that are just not realistic in the medium or long term. To meet spending plans as presently set would require loans that would cripple us. If the deficit is growing by about £12bn every month, perhaps £6bn annual reversal is not enough of a plan for now(?)

When the Chancellor and George Osborne talk about halving the deficit in the next Parliament we should remain aware that they are not talking about cutting the debt that is being accrued for which we must continue to pay interest on, the gap will remain and the amount we owe and the amounts we pay each year in interest are set to go up and up and up and up and up and up.

You can look back across recent years and see, there is no way tax revenue would ever cover the levels needed. Simply raising tax rates will not guarantee that more money will come in at the end of the day.

So, in my humble view the current economic debate is something of a sham, because none of the parties are facing up to the real tough questions that should be posed this side of an election. They all know that there is absolutely no way we can afford to take on and service that level of debt. The extent, size, reach and cost of the State has been inflated to a dangerous size, one in which the people of the UK could never have afforded to support over a great period of time. This has been done by our present Labour Government and it is being propped up already by high amounts of borrowing. We will spend more this year on debt repayments than we will for the entire Armed Forces on the United Kingdom and the figure is creeping up.

Labour has had 13 years to re-build the country in the Social Democratic or Socialist model it so desired, but they built their house on foundations of sand and there is a storm approaching. It will need to be rebuilt all over again.

The State framework that Labour built is going to crumble in the next year or so no matter who wins this election. There is going to have to be massive, massive cuts to get by. But let’s be clear, the size and cost of this predicament has been caused by, set up by, with sole responsibility belonging to, this Labour government.

Please frame this in the context of your home or in terms of circumstances that are close to you in terms of what we must do. If your household income fell, you would not increase your level of spending you would cut it to match your income. There may be loans, credit cards and even a mortgage to factor in, but you would manage these based on your ability to make repayments. We probably all know someone who over borrowed or maxed out their credit cards a few years back who is struggling today. It is not really so dissimilar, we all know that in the end to balance ANY budget spending and outgoings need to be balanced against ability to pay, furthermore we all know that by delaying this ends up being more costly in the long run.

By keeping the argument about the circumstances, and merits of the Conservative application of a potential £6bn distracts from the very real arguments that are not being aired, and that people will be afraid to air. The cost, and thus the size of Government needs to be cut by my guess at least by a third and maybe more.

The Institute for Economic Affairs is more optimistic than me, and they think that without any new tax rises that Labour’s spending plans need to be scaled back by at least £167bn annually.

Sorry, but to continue the theme that’s a cut of:

£ 167,000,000,000

Taking £167bn or two times the NHS budget out of the public sector will lead to unrest, it will lead to strikes. Tragic though the consequences are for the people losing those jobs are, the truth is many of them should not have been hired in the first place, their fate is a result of Government mismanagement of our economy.

So when the layoffs do happen and the strikes and civil unrest does come, be it under Labour, the Conservatives or under a Coalition partnership we should be talking today about what lies in store in the road ahead; because ultimately every single person in our land is going to feel the effect of this, every single one of us. And that is what the leaders in this election campaign should be addressing, and as a result that is the debate that we should be having in our schools, workplaces and pubs. By not discussing the size and extent of the inevitable cuts, I believe will fuel even more unrest and protest, because yet again decisions will be made in Whitehall and by the time the election is over and the cuts are being made, the dialogue will be about the tough decisions that need to be made.

After this election the only thing we will be talking about is cuts, cuts and more cuts. That is why we should all be talking about it this side of the election if we want an input on how those cuts may land.

As Good As Certain...

Making bold predictions can be a very unrewarding game, especially if you are a journalist.  Us bloggers can get away with it a little more, but we are still wary.  Anatole just can't resist it, he seems to make one every week; or at least he used to many years back when I read the Times.  I came to realise very quickly that whatever Anatole would predict not only would not happen, but, very often the exact opposite would happen... I was not a Times reader for very long, they were way off the mark with too much and gave New Labour too much unwarranted credit.  It was like being led up the garden path.

Anyway, it's not too often I am over on their site but I was tonight and Anatole has predicted that Labour are going to "do a 1992" and win the General Election, because the Tories have to measure the budget response right, and he feels they will not do this.  He even says:

But next week’s Budget will be a pivotal political event, not because of anything Alistair Darling may or may not say, but because of the response he will elicit from the Tory frontbench.

This could be the best news yet for David Cameron and George Osborne, they may not realise it but it really is.  Maybe in the last few years Anatole has turned it around and got a few right, and if that is the case it is I who will indeed be left with egg on my face.

His theory that the Conservatives must make more of the Budget than Labour is simply not true.  Alistair Darling is about to stand up and say how he wants to buy Labour some extra votes on money borrowed off of the future toils of the tax payer.  He wants to nudge the Conservatives into immediately replying with specifics about what they would cut after a General Election, and quite frankly even Cameron is not stupid enough to do that.  Nobody believes what labour has to say on the economy the trust is gone.  Nobody argues with crazy people in the street, they accept they are crazy and walk on... They certainly don't shout crazy back.

The Conservatives do need to shape up their policy announcements, but that does not mean they have to make specific pledges on cuts, the best weapon the Conservatives have between here and May 7th is that nobody believes Labour when they talk economics, nobody believes the numbers.  Like the mob, they would appear to have two sets of books running, one for the public when they need election promises, and the other that tracks the real cost of their profligate failures.  Talk cuts by all means, say that they will be robust and deep - people will appreciate that and take it as honest; but specific cut pledges in a budget week is not a good idea.

When Alistair Darling stands up and says he is going to add £5 to the winter fuel allowance David Cameron should throw Ed Millibands Energy Taxes back in his face, when Darling says he is raising the State Pension by £4 Cameron should remind everyone who raided the public pension purse.  When Darling remarks about borrowing to spend on investment Cameron should repeat that we are spending more on debt repayment to banks than we do on our under equipped and under supported Armed Forces.  And so on, ad nauseum.

What Cameron should not do is get dragged into a fight about numbers and projections that are probably not even true.  Labour will be setting traps.  He should insist that if the PM can't even tell if he has spend more money year on year on defence and if Liam Byrne is confused as to whether there will or will not be any new taxes there is clearly some work to be done to straighten out the books and only when after a Conservative Government has audited the books, and the bank statement, will they truly have an idea what measures are needed.  It is Labour that has created this uncertainty but that the Conservatives are ready to roll up their sleeves and give people a straight picture.

Anatole tries for an observation:

The Tories made three closely related mistakes in devising their economic and electoral strategy at the nadir of the financial crisis in the winter of 2008-09

No not quite.  The real problem is that the Conservatives, especially early in this Parliament began to believe the propaganda that was coming out of 11 Downing Street about such things as "ending boom and bust" and having developed some grand new economic platform that virtually did away with inflation.  The removal of powers from the BoE and the setting up of the FSA allowed for the debt bubble to grow unfettered and was a big part of why there was a massive recession.  It was all lies, they should have rejected the premise of Gordon Browns claims.  Their language at the time regarding economics was to the line of "sharing the proceeds of growth" - they wrongly accepted the premise that there was unlimited growth to be had.  It wasn't that they built it at the wrong time, it was that it was built on a foundation of sand. When the credit cards were being cut up and we hit our limits, the Tories were just as lost as Labour.  When it went wrong, Brown claimed that "nobody saw it coming."  With a little more Tory caution, Browns best defence line would never have been accepted.

Buying into Labours falsehoods will prove to be the Tories biggest problem.  I have been saying for some time that the Conservatives need to disassociate from Labour.  By accepting Labours lies and building their policies on those same falsehoods they not only validate the Labour Line, they set themselves up for their own failures and u-turns.  The NHS, The EU, Public Schools, Devolution and Green Taxes are all areas where the Conservatives will have to unpick their position and set a new direction after the election, and all because they have built their policies, well defined or not on the New labour reality rather than the real world reality.

So how do I know the Conservatives will win and Anatole is wrong?

Assuming that the new Budget confirms these Labour plans for long-term fiscal consolidation, how should the Tories react? The answer is simple. Instead of quibbling about Alistair Darling’s figures and forecasts, the Tories should endorse his budgetary numbers and promise to carry out essentially the same macroeconomic programme.

All David Cameron has to do now is, not do what Anatole suggests and the election is his.

Inflation Numbers

This week the Governor of the Bank of England had to write to the Chancellor as Inflation surpassed the 2.0% target. The actual Inflation number given was 3.5% however this is the CPI (Consumer Price Index) number, which is the index that does not take into account the cost of housing. The CPI number thus does not take into account what most of us would consider our most important and usually highest outgoing each month. The CPI measurement is the measure set by Gordon Brown when he became Chancellor for use when setting monetary policy.

The RPI (Retail Price Index) number does take into account housing, and is still used for the setting of benefits levels, public sector pay and index-linked government debt. This number was actually 3.7% and so is higher than the CPI number and is generally more reliable for us non-economists in measuring inflation against our changes in cost of living.

The banks however are a little more sophisticated and use their own measure or RPI which excludes interest charges (RPIX). RPI alone can distort because it reflects swings in mortgage rates, and at the moment rates are being kept low by the Bank of England. The RPIX number currently stands at 4.6%, and you won't need a calculator to see that is a full 1.1% above the official CPI number.

Inflation going up was the expected side effect of the recent Quantitative Easing programme, the fear was always that Inflation may reach a level that becomes difficult to control. I speak to the effect to us people on the street as we will feel this in increased prices in the shops and in our bills. The problem is that Labour and quite likely the Conservatives are making noises about a 20% VAT rate after the General Election. This of course relates to you and me as an additional rise of the price in the shops.

To me, I think the way forward is to help people hold on to more of their hard earned money, typically this will be used to either pay down personal debt or passed on in the form of spending. Both of these actions are good, personal debt is worryingly high and consumer spending is very low and this is fuelling this slowdown. With Interest Rates low, there may not be the inclination to put the money in the bank which at this time would not really help too much. However, the danger I see is if inflation takes hold, the Bank of England may see the need to start raising interest rates, which will in turn raise the cost of variable mortgages and make borrowing tougher which in turn will leave many people with less money and in turn stifle consumer spending which is already in the doldrums.

The Governments car scrappage scheme seems to not be a greatly inspired economic scheme. Yes, there were some tax payments, but there was also a large subsidy. However, the bulk of the cash spent on the cars then made it's way off shore back to the car producing nations that have exported to us. No wonder France and Germany came out of recession months before we did. What we also need, as I repeat over and over again is to export as much as possible to places like China where they are sitting on Billions of Dollars. Bring cash into the country, and let it circulate a bit to stimulate spending. When people are spending shops and domestic manufacturers start hiring.

With my usual caution about the lack of my economic credentials I submit this as my working theory as to why we should cut taxes now to reap as much of a benefit from the QE programme as possible.

Debt Mountain Ain't A Ride At Euro Disney

Here are the current personal debt stats for the UK.

• Total personal debts stand at £1.46trillion.  This includes Mortgages, Credit Cards and Personal Loans.
• The number of people seeking help from Debt agencies has risen 30% in the past year.
• According to the National Audit Office some [at least two] debt advice agencies are turning people away as their waiting lists are too long to be able to assist.
• The £1.46trillion is equal to £56,000 per household.  This is 60% above the average pre-tax income.
• "Debt Experts" say that there will be 150,000 new bankruptcies this year, up 15% on last year.
• The Consumer Credit Counselling Service said its typical client has £24,300 of debt across 11 different creditors, painting a grim reality of modern life.
• The Government has committed to spend £142million in providing debt management services, mainly this is for free face to face counselling. 

Source.

Government Indebtedness

In 2009 the national debt rose to £829.7 Billion this is all money that must be serviced by the tax payer. This figure does not include Private Finance Initiatives and Pension Contributions which the Government is obliged to pay meaning the true debt figure today is likely to be in excess of £1,350 billion which is way above what could be expected to be collected in a single year in tax. The level of debt is rising, and could sky rocket again based on pledges to buy back Mortgage securities. Potentially, in a very bad case, the UK Public Sector debt could be in debt to the tune of the £2,000 Billion bracket in 2010.

To service the interest on our debts, like all borrowers the Government must pay interest. In 2009 the Government paid over £31 billion in debt interest, this is very close to the number (£32bn) the UK pays on the entire defence budget annually. Nearly everybody outside the Labour Party in the UK agrees that this Government has made some serious mistakes with the economy, but I don't personally think it is enough to lay the blame at the feet of the current Government and simply repay the national debt down to a level that is more comfortably managed… We should force a change of the rules so that no party can ever make its people so indebted ever again. Governments of the three parties that have held government in the last 150 years have all had at some point high levels of public debt, and often that debt rose with little consent from Tax Payers.

As an electorate, and as a country, we should demand from our political parties not only a commitment to cap national debt today until a General Election has taken place, but we should also demand that national debt is paid down to a level of 0% of GDP over a period over the next 5 Parliaments.

Yes, Governments have been borrowing for centuries, and yes, in the good times economically debt can be borrowed and serviced somewhat cheaply. However, the rules governing Government borrowing and spending are not so dissimilar to the rules you and I face in managing our household budgets. If you borrow, you must pay interest on that. I think it is easy to make a case that the need to raise in excess of £31billion in taxes simply to pay interest is immoral. We all know the folly of those who have put too much on their credit cards, and who attempt to live on credit... they pay through the nose.

In my opinion with Tax Levels so high, Governments should seek to have no debt, and to work with a budget in credit. If the budget was in credit, the Prime Minister and Chancellor would need to set out the public finances in a different way, in a bad year they would have to balance to no worse than £0. Taxes should be sought to pay for the next year’s spending and to keep a sensible reserve. It would be illegal to manifestly propose legislation that cannot be met through current taxation, and thus all government expenditure would need to be set in terms of how much each of us would pay in tax over the following year or years. No Government could employ a scorched earth policy of engaging in unfunded spending in the run up to an election. In an emergency the Chancellor or PM could address Parliament - our representatives - and ask permission for to take out a short-term loan on our behalf and set out the implications and costs of such a loan and more importantly explain why they were unable to foresee this need in advance. If Parliament refuses, the PM and Chancellor will have to find the money from existing finances. The reserve would be there for spikes in spending, but our money would be invested and earning money and interest and all spending from the reserve would have to be explained annually at Budget time.

In the event of war, well, this idea would not work... however, debt would be accumulated from £0 or surplus, rather than beginning to rack up more debt on top of a position such as the £1,340 Billion already in place today.

Working in surplus would give the nation a sense of pride that the public finances are in order and provide a greater degree of control over Government, as Government can stop listening to the people they owe money to and listen to what people want their money spent on.

Another crazy idea on this blog perhaps, but makes perfect sense to me. The way to achieve this is to petition the current parties until they relent and accept the responsibility of managing public finances in our interests, not theirs. There is no partisan reason for the continuation of government indebtedness for the rest of time; all that is needed is the realisation that this would be an idea widely accepted by the public... Then for us to use our voices to call for some lines to be drawn and some belts to be tightened.

My 2010 Predictions

1. David Cameron will be the UK’s next Prime Minister

2. The UK General Election will be on Thursday 6th May 2010

3. Economic recovery in not be achieved in Q1 2010

4. Guantánamo Bay will not be closed in 2010, though it will continue to gradually reduce it’s inmate population

5. The key political and economic concern in Q3 and Q4 2010 will be Inflation… “Hyper Inflation” will be the prophesised buzz words of concern in the media and blogosphere

6. At least two Labour MP’s will be exposed in the tabloids as having affairs in the lead up to the General Election

7. David Miliband will secure the backing of Peter Mandelson and become the next leader of the Labour Party

8. Vince Cable will become Liberal Democrat leader in 2010 with the backing of Charles Kennedy and Ming Campbell.

9. Nigel Farage will unseat John Bercow

10. Here is my very early attempt at some serious Nostradamus forecasting as I predict the GE result in terms of Parliamentary seats.

Conservative Party / UUP – 349 Seats
Labour Party – 212 Seats
Liberal Democrats – 49 Seats
SNP – 12 Seats
DUP – 8 Seats
Sinn Fein – 6 Seats
Independent – 5 Seats
Plaid Cymru – 3 Seats
Social Democratic and Labour Party – 3 Seats
UKIP – 2 Seats
Respect – 1 Seat

Part Of The Reason Why I am So Broke...

I have just stolen this graph from Mark Bathgate from Coffee House, and added the two points of reference.

Fig. 1 - Approx date my wife and I decided that we would get married in a very beautiful spot in Ireland.

Fig 2 - Actual date of wedding and of when most of the payments in Euro's was made.

The devaluation of Sterling hit us hard and very sharply as the favourable x-rate was slashed.

This is not the full story of why I am broke, to disclose it would result in a prompt ending of said marriage, and I am actually rather in love still; so I won't risk it.  (Plus rising cost of living and taxation along with pay reductions have not helped at all.) The moral of the post, like the disclaimers say, rates may go up as well as down - it is a risk.

I Probably Missed Nothing... Right?

I have pretty much missed all of the PBR reporting today because of work (however, I am more grateful to still be in work that to have had the time to have caught it though!) I did catch a brief summary earlier online at the end of lunch so I kind of have a feel for what I will be heading home to on the news tonight. In my mind, it is not too important to know the in's and out's this minute, as what tends to happen with the Budget and the PBR is that it takes a few days for the analysts to sift through and find the real details rather than the fluff announced at the dispatch box.  I also want to add that it's a good thing as well that the Treasury left the VAT announcement until 9th December, nothing like giving the nation a whole 10 full working days, (plus the Christmas period) to implement an entirely new Tax rate on top of the tax accounting rules due to come into force on 1st January 2010... Very considerate and visionary of the man charged with setting the course for economic recovery.

With the announcements and what it will likely mean, I already feel from behind my veil of ignorance that I will probably be stuck to my previously stated mindset; that the UK will again not be out of recession after Q4, and my guess is that it will be Q2 2010 at least before a return to growth. Though, given how long it we have been in recession and potential impact of the PBR I guess Q1 2010 could be realistic, but I still harbour doubts so will not change my outlook; well, not yet anyway. I am also guessing that in a few days time, when the likes of John Redwood and Fraser Nelson have dug through the details, whatever the top line cut figures are on my TV tonight will actually be revealed to be lower, and/or the proposed tax hikes actually deeper into our pockets... Like I say, I will wait for a few of the better economic journalists and organisations to have a good pick through, as they tend to do a pretty good job these days interpreting these budget announcements back into English.

Another thought occurs; weren’t the online MSM sites promising a big expenses scandal today? Has this been slipped out the back door under the cover of the PBR...? I will have to see about getting online later and having a search for the news (gossip).

Exodus

Hmmm.... 1,000 bankers quit RBS for rivals, just as the Government is hinting strongly about punitive taxes.



Who could have possibly seen that coming!

Best Placed Economy In The G7...

...Best placed of those needing an IMF bailout loan help that is.

So, was he lying? Was he so incompetent not to know? or, is he simply deluded?

A good summary, plus more blogable graphs from Mark Bathgate over on Coffee House, who is filling in now Fraser has moved up to the Ivory Tower. 


200 years ago, Gordon Brown would have been dragged from Parliament and shot for gross incompetence and betrayal of the nation.

100 years ago, Gordon Brown would have been unceremoniously relieved from his position and lampooned forever as the profligate buffoon he really is.

Today, he is able to command a state funded broadcaster to dictate the mantra that he has saved the world, whilst selling out the poorest to a legacy of state dependency and crippling taxation; meanwhile, yet again, continental Europe, with Browns complicity has its sights on destroying the free enterprise initiative of the City of London, the very heartbeat and soul of our strength and identity as a world trading nation. 

And yet, somehow, in a way that future historians will understand less than us, he somehow still gets double figures in opinion polls.

£39Billion

I don't have all the details, and will try to follow up later in the week, but a further £39 BILLION was committed to the failed banks which are being propped up by UK PLC.

That's £39 Billion borrowed against the coffers that me and thee will need to service the interest on and probably end up paying back.

The announcement was made last night, leaked from Downing Street to media sources, and not I might add announced to Parliament first.  £39 Billion.  Not only was it not announced there, there was no debate there either.

£39 Billion.  Good news though, Lloyds and RBS bankers are deferring their bonuses for three years.  No wait, not good news, unsurprising news.  Hardly a slap down is it for failing, they will still get the bonuses, they will just be deferred for a bit.

3rd November 2009... A really shitty day in the history of this country.

Browns Economic Statement

I just have read in the Sunday Times that Gordon Brown has said that the recession will be over by the end of the year. This despite the articles admission that economists in Downing Street were “staggered” by Fridays figures showing that the country is still in the grip of recession.

The article also adds:

Mr Brown was clearly counting on nothing happening in the next three months that will suddenly put the recovery off the rails, but it was unusual for the usually cautious Prime Minister to be so definitive.

I think it is a bold move to make such an assurance, especially considering it seems to be an unprompted remark. It strikes me that this is a big gamble and Brown is pinning perhaps all of his electoral hopes on Christmas spending bringing the UK economy back to growth. Problem is, there is a good chance this might not happen. Yes, confidence is needed but the political outlook for Gordon Brown in 2010 was already looking dire, this could be the final nail for him and the Labour Party.

On the high street retailers will be hopeful for a good Christmas, but I have my doubts that they will be overly stocked after a tough year, so the prospect of attractive cut price sales before the end of the year are not as likely to materialise this year to entice people into the shops.  Last year, many retaillers felt the need to cut early, lessons will have been learned. Furthermore, there is no appetite for taking on additional credit to fund an extravagant Christmas, so sales will largely be funded by disposable income. Many people, including myself have faced a reduction in income in the last 18 months and have faced increases in cost of living thanks to the crunch, leaving less disposable income available. I don’t think I am alone when I say there will be a strict budget applied this Christmas in our house.

I am not sure that we will see too much end of year budget burning from the private sector businesses either, as finance directors will be looking to go into 2010 with as much cash in hand as possible so as to be as well positioned as possible after what has generally been a bad year all round.  Public Sector budgets tend to run to end of Q1 so unless ordered to spend, I would not be confident that there will be additional expenditure there either.

All round, the outlook for people and business is that they face even more price rises in 2010, which is easy to point to with the VAT rate scheduled to rise on 1st Jan. I think that in Gordon Browns position he should have aired on the side of caution.

If Browns statement is shown to be wrong, Brown will be punished at the polls if he tries to use his economic record for electoral gain, because it just isn’t as great as he thinks it is. The opposition parties will be able to deride him, even more so than they potentially already can. Even if I am wrong, and there is signs of growth by January that does not mean the voters will give Brown the credit he will feel he deserves. Given that, either I have a very different assessment of where the country is to 10 Downing Street and this is very likely to prove to be ammunition for Cameron & Co or Gordon Brown knows something we don’t.

My verdict.  I think this is an act that shows there is some desperation in Downing Street and that it will come back to haunt him.

The Recession Is Not Over, And I Don't Think It Will Be For Some Time Yet

I see in the news the announcement that the recession is not over. The surprise for me is that there is surprise at this particular announcement.

I am no economist, and every post when I talk anything approaching economics I still feel the need to warn of this, but my analysis and predictions have so far been pretty accurate. My thinking going back to early Q2 that we would not emerge until at least early 2010, and possibly not until Q3 2010. If 6 quarters is the worst recession for 54 years, I do wonder where 9 or 10 qtrs will sit?

Why do I think this? Because the Government and the Bank of England have taken measures to ensure that economic corrections are kept to a minimum. 
 
Now I can understand the politics of this, and they two-fold.

Firstly, it is one of the biggest dividing lines in the minds of Conservative and Labour voters over aged 30. During the 80’s and the 90’s when the UK went into recession the Conservatives allowed the market to contract before recovery with little or no intervention. This allowed for a quicker recovery (in theory) but meant the economy dipped faster and deeper causing many people to lose houses, their livelihoods, their businesses. The Conservative argument would be that the UK economy leading into the 80’s was in need of modernisation and was still built very much in the image of post-war Britain and overly reliant on dying industries. The crashes took a lot of older businesses out, but in the booms allowed for the creation of future industries which we rely upon today. It is an argument that will never probably be settled in broad public opinion. Labour stuck very much then to the politics they have followed during this recession; that Government(s) should intervene to prevent the recession getting too deep at any one point. The argument again would be that (in theory) this will draw out the recession for longer and also that the necessary “corrections” which our future economy may benefit have not had a chance to come into place. Now, I say this not to advocate either position, but, the current path undertaken was one that was known and one of general intervention rather than of allowing market forces to work unfettered.

The second point is as political as it is economic. It was and is a very big gamble. To my mind the Quantitative Easing programme has been a stealth effort in devaluing sterling, which has had some results, not necessarily completely positive, but not disastrous (yet). Of the big economies only Japan and the EURO zone have not followed with similar measures and China’s decision to fix against the Dollar is looking to have been very profitable. The EURO zone may still need to devalue, as it is hard to see it continuing for long at $1.50 to €1.00. The EU including the UK needs grow its Exports, and with the EURO so strong that is not looking likely. The danger of QE is hyperinflation, and clearly the extra money is not being leant as it was supposed to have been, but the UK seems to have been able to leverage its independence from the EURO to keep Sterling attractive and as exports may not have suffered as much as they could have, and we have an advantage, for now, on the EURO zone countries.

On point two however, I think we have our economic independence to thank, as we have been able to make decisions independent of the EU. It could however very quickly turn to be a disadvantage and I would like to see an end to QE and an immediate cut in Government borrowing. As long as we have QE we risk adding hyperinflation to an increasing unserviceable debt mountain. That would be like the perfect storm of recessions.

I really do not see any long standing positivity until Government and personal debt is slashed. I think individuals have responded and in 2009 are directing income into repaying debt rather than spending. This trend will continue. The Government needs to do the same. Though it will probably not do so and it will fall to an incoming Conservative Government to undo the damage. The sooner it is reigned in the less the UK will need to repay, and the quicker we can head to recovery. Individuals need to start spending, but day to day spending needs to not be linked to personal debt such as credit cards. As the nation’s credit rating improves, sensible borrowing for houses and big items like cars will aid recovery further.

Anyway, that’s my take, and that is what I am basing my personal economic decisions on. Recessions are ugly, and unfortunately I think until we can point to “corrections” all we have is the same struggling economy, the pain will have to be felt a lot more harshly somewhere – and I am not sure where; my guess a year ago was on homeowners, but this looks slightly less likely to be the case now. I am sure there are those of you who will disagree and that’s fine, but if you are rebutting in the comments, please keep it in layman’s terms as much as possible as like I said, I am not an economist. [So, don’t bet your house on my economic predictions!]

No surprises from me that we are still in recession. I still think there is one thing that Gordon Brown can do to bring about confidence in the markets and in the public and that would be to call a General Election.

My very final thought is again political. John Major complained of bringing about a “voteless recovery” and reports from Gordon’s bunker were in the same vein. I wonder what will be his cry if there is no recovery to link his lack of votes to?

Appeal For Support To Audit The US Federal Reserve

Did you know that the Federal Reserve is not a part of the US Federal Government?

Did you know that it is in fact a Private Company?

Did you know that The US Government has little domestic oversight of the US Fed?

Did you know that the US Fed can enter into negotiations with “Foreign” central banks without Federal oversight?

Did you know that the Federal Reserve has never been audited?


The US Government does not own and it does not control the US Fed. Yet the Fed controls the monetary policy of the biggest economy on the planet and has a direct line to the US Treasury Department. The Fed board’s influence extends to and beyond the US Government and as such the Fed has a very big say in the economic health of the Western World. It is in fact the single most powerful organisation influencing world markets. But where are the checks and balances? There are none.

Ron Paul, everybody’s favourite Republican (outside of the US) introduced House Resolution Bill 1207 The Federal Reserve Transparancy Act to the US House of Representatives in February this year urging the Federal Government to bring the Fed under real scrutiny starting with a full public audit of the bank, to be completed before the end of 2010. This is earth shattering stuff, seeing as nobody is even sure who owns the Fed.

Here is the speech Ron Paul gave when he introduced the bill.

Madame Speaker,


I rise to introduce the Federal Reserve Transparency Act. Throughout its nearly 100-year history, the Federal Reserve has presided over the near-complete destruction of the United States dollar. Since 1913 the dollar has lost over 95% of its purchasing power, aided and abetted by the Federal Reserve’s loose monetary policy. How long will we as a Congress stand idly by while hard-working Americans see their savings eaten away by inflation? Only big-spending politicians and politically favored bankers benefit from inflation.


Serious discussion of proposals to oversee the Federal Reserve is long overdue. I have been a longtime proponent of more effective oversight and auditing of the Fed, but I was far from the first Congressman to advocate these types of proposals. Esteemed former members of the Banking Committee such as Chairmen Wright Patman and Henry B. Gonzales were outspoken critics of the Fed and its lack of transparency.


Since its inception, the Federal Reserve has always operated in the shadows, without sufficient scrutiny or oversight of its operations. While the conventional excuse is that this is intended to reduce the Fed’s susceptibility to political pressures, the reality is that the Fed acts as a foil for the government. Whenever you question the Fed about the strength of the dollar, they will refer you to the Treasury, and vice versa. The Federal Reserve has, on the one hand, many of the privileges of government agencies, while retaining benefits of private organizations, such as being insulated from Freedom of Information Act requests.


The Federal Reserve can enter into agreements with foreign central banks and foreign governments, and the GAO is prohibited from auditing or even seeing these agreements. Why should a government-established agency, whose police force has federal law enforcement powers, and whose notes have legal tender status in this country, be allowed to enter into agreements with foreign powers and foreign banking institutions with no oversight? Particularly when hundreds of billions of dollars of currency swaps have been announced and implemented, the Fed’s negotiations with the European Central Bank, the Bank of International Settlements, and other institutions should face increased scrutiny, most especially because of their significant effect on foreign policy. If the State Department were able to do this, it would be characterized as a rogue agency and brought to heel, and if a private individual did this he might face prosecution under the Logan Act, yet the Fed avoids both fates.


More importantly, the Fed’s funding facilities and its agreements with the Treasury should be reviewed. The Treasury’s supplementary financing accounts that fund Fed facilities allow the Treasury to funnel money to Wall Street without GAO or Congressional oversight. Additional funding facilities, such as the Primary Dealer Credit Facility and the Term Securities Lending Facility, allow the Fed to keep financial asset prices artificially inflated and subsidize poorly performing financial firms.


The Federal Reserve Transparency Act would eliminate restrictions on GAO audits of the Federal Reserve and open Fed operations to enhanced scrutiny. We hear officials constantly lauding the benefits of transparency and especially bemoaning the opacity of the Fed, its monetary policy, and its funding facilities. By opening all Fed operations to a GAO audit and calling for such an audit to be completed by the end of 2010, the Federal Reserve Transparency Act would achieve much-needed transparency of the Federal Reserve. I urge my colleagues to support this bill.

The Bill is gaining momentum and people in the US are taking notice and an interest and there are some public campaigns aimed at applying pressure on US Congressmen and Senators to back this Bill.

It is important because the US Fed makes decisions that affect us all, it is directing traffic and nobody is really sure how strong or weak it really is. If Ron Pauls bid succeeds, other central banks would come under pressure to also come under open scrutiny.

So, if you are a reader from the US, please lend your support to 1207 and urge your representatives to do the same. If you are in the UK please sign THIS PETITION on the 10 Downing Street website urging our Prime Minister to publically lend his support to the existing calls for the US Fed to be audited. Please advertise the link on your blogs and social networks and let’s see if we can help Ron Paul and the US Congress open the books on the Fed. Maybe then we can really get a handle on the Global Economic downturn.

This video is of Ron Paul explaining why this is an important bill. He explains it much better than I can.

Why Is The Government Playing With The TA?

The Associated Press has reported that the UK Territorial Army has been told to stop training for six months in an effort to save £20m.

This is like a flash scene in a montage of some disaster movie; what the hell does Gordon Brown and the idiot Ainsworth think they are doing?? Yet another glorious Labour Government WTF moment.

The TA perform a vital role and are a crucial pillar in our defence structure. Volunteers have been giving their time and their lives for hundreds of years for the purpose of defending the British Isles and supporting the regular armed forces. It is nothing short of dangerous to pull training and money from the TA.

Read from their own website how the TA was affected by the 1998 The Strategic Defence Review:

In 1998 the Labour Government announced what it called the 'Strategic Defence Review', which would make the Army more relevant and effective in meeting the demands of the post-Cold War era and the 21st century.The Territorial Army was the hardest-hit and within it, the infantry suffered most with 87 companies in 33 battalions reducing to 67 companies in 15 battalions. While the measures allowed for at least one company from each of the 33 battalions to survive to continue their regiments' identities, the result was that thousands of experienced and loyal personnel had their service terminated.

This is not an overly inflated Government bureaucracy that has been swollen by the excesses of socialist rule. The TA has already been heavily scaled down.  These are the people who live regular lives next to you and me but keep aside time to keep themselves trained and to be ready at little notice to throw themselves into the firing line.  Look at how heavily drawn upon the TA has been already in the Iraq war and in Afghanistan.  It is nothing short of disgraceful that they be told not to train to save money; it is an admission of failure from Labour.

If Labour cannot manage the Public Purse responsibly they should call the election NOW.

Questions:

Why has it been announced today? It's a Saturday so was this shifted out in the weekend news whilst commentators recover from three weeks of political conference hopping? I do hope this makes it to wider attention.

There is a memorial service taking place in Leeds today to remember those who have died in the Iraq war. I find it exceptionally distasteful to make military reduction announcements on the same day as remembrance.

Was this debated in Parliament? I would wager it hasn't. And why not? Who reading this thinks that this is a decision that should be made in isolation from our elected representatives?

Will the training be re-instated? The failure to debate this has left me and others with simple press statements that do not address what is obviously an admission that the Government does not have enough money to support our armed forces. Our Military answers to Civilian Government, who have we elected that was a part of this decision and who is safe guarding our defences?

Why is there no provision under our laws to prevent a Government that is likely to be an out-going one to weaken our defence structure in it's last months of governing? This is something we should think about as we have been dragged into the era of supranational world governance.

City Of London Regulations

Everyone knows that the bankers in the City of London are not half as bright as they think they are, but even they should sense danger over plans to hand control of our financial services sector over to the EU; There has only been muted protests, I wonder why this can be?

Sure, much of the city now looks to UK PLC for their pay cheques and gold plated bonus payments, but is that really it... is there no one at any of the banks that is prepared to speak out against the moves? As much as the FSA is a complete shambles, opposition cannot be that strong to it that the EU looks the preferred method, can it?

I distrust the EU greatly and I do not see that there have been tangible from anything that they have taken control of so I do not see the benefit. By handing control over regulation will be moulded to suit the French and German models which despite my sparse economic qualifications still seem incompatible with how things work now in London.

But that is not the point, this is…

Did you vote to instruct our Government of the United Kingdom to hand over controls from within our democratic reach over to the policy shop in Brussels?

No, neither did I.

So why the hell do we let Gordon Brown get away with crap like this?

Labour is morally bankrupt, that much we already know, but with the real prospect of financial bankruptcy because of the massive shortfalls in the public purse, why are these controls being handed away over the Treasury’s biggest source of income? It can only be because decisions are now being made so far away from you and me, the ordinary person and voter that our concerns are no longer even in a token sense allowed to matter.

Political evolution is failing us. More and more I sense the need for revolution to restore power into the hands of the people.

Plan E

Let me ask a question…

When did we stop being a nation of shop keepers?

The famous quote “L’Angleterre est une nation de boutiquiers” was uttered by Napoleon and was intended to disparage, I guess in the same way De Gaulle was actually quite apt when he described the British relationship with Europe. However, (thanks Wikipedia…) Napoleons’ was not an original quote, as Adam Smith wrote in the Wealth of Nations…

"To found a great empire for the sole purpose of raising up a people of customers may at first sight appear a project fit only for a nation of shopkeepers. It is, however, a project altogether unfit for a nation of shopkeepers; but extremely fit for a nation whose government is influenced by shopkeepers."

And therein lies part of the problem. It is my contention that The UK is suffering from not having a strong base of local, independent and entrepreneurial business activity. Part of our problem is that we no longer have shopkeepers influencing government, that role is now filled by multinationals and lobbyists. Don’t get me wrong, we need multinationals but there are weaknesses in other areas of our economy and these need to be addressed.

There are two things that we need to target to turn our economy around, firstly we should target help in this week’s budget to entrepreneurs and small businesses, for there lies the holes in our economy. The problems at the root are that apprenticeships and training are at an all time low, as we target too high a rate of higher education and university placement. There are aspects of apprenticeships that cannot be taught in a classroom, the tricks of the trade as such. We risk losing much.

Secondly, we need people with trade skills, and we need people who can innovate in engineering and sciences. We need to be manufacturing items here that can be sold abroad for a profit, this bringing into this country much needed cash. We will not be able to compete with Asia and possibly in the future Africa on mass production techniques as we will never be able to produce volume products as cheaply. But there is an abundance of opportunity for manufacturing jobs still.

We do not seem able to hold together big manufacturing works in the UK, but I bet if we supported our smaller engineering and manufacturing firms that target solutions, and can offer multiple products and/or seek to further technological advancements we could nurture new industries and thus new jobs. Most of all, we know that in the UK large manufacturing is on life support. Where a though leader is needed we can prevail.

We need products to export to bring some cash into the country, we can’t just magic up a profitable car factory or reinvent an aerospace industry. We require skilled jobs to manufacture things that are demanded in the emerging markets AND in the developed markets of the EU and the USA. Eventually, some of these small businesses will grow and that can in the long run help replace industries that have already been lost.

So I hope that either in this budget, or perhaps more likely with an upcoming Conservative Government we can move the discussion along to how we can help entrepreneurs and raise the number skills based and manufacturing jobs. It is they who will seek out new markets and new opportunities, it is also they, that if supported will be best placed and most willing to hire workers at varying skills levels and help our economy back on track.

Here is where and how I think Government can help.

1. We need to kill the idea of 50% university placement. We do not want people leaving school without education or skills (or ambition), but we should allow apprenticeships and vocational training to those who at 13 and 14 know what they want to do. I am not advocating we neglect core education like Maths and English, but will (I feel) help target ambition and by doing that can help them to understand what they need to do to achieve their goals. We have to accept that the individuals choice will be better than providing the same for all.

2. We need to cut red-tape and taxes to the productive part of the economy, so as to let them trade and innovate. It is they who will then pick up and place our skilled workers with jobs in technology and science. (Those businesses will also need clerical and manual workers and with success with require the financial services to help manage their profits.) Business rates should be reduced on small companies and traders, and employment legislation needs to be drastically simplified. In some industries, Health & Safety is unnecessarily strangling industry. We need to have parliament debate on all legislation that concerns business, not just enact all directives sent over from Brussels.

3. We need Government recognise that Small business and Entrepreneurialism is as important to our economic success as the large corporations are. Small businesses sometimes have a shorter lifecycle than larger companies but sometimes that is a result of success. What we need is to always help new businesses get started, and recognise and reward those who are prepared to take calculated risk to get started. We should recognise more entrepreneurs who have excelled more often. The achievements of so called “Fat Cats” who were schooled up to Director level, then spend a few years in the board room do not compare to those of Richard Branson or James Dyson.

4. It is entrepreneurial spirit that can help innovate. If like individuals cannot afford in cost of money or time to get started we will lose a generation of invention. Though some ideas can be realised via selling onto established corporations it is fresh intellectual property and ideas that will be the cornerstone of a rejuvenated market. As the so called bail-outs have shown, corporations are too risk averse. Give 50 local Joe Bloggs the freedom to start a business, and to make personal wealth then they can eventually hire more additional people than all the local bank branches that were supposed to have benefitted from a costly bail-out.

5. Forget bank bail-outs. Business needs to be reminded that if it fails it will fold. Target grants instead at small UK businesses that are trying to get a foothold in Asia, if they succeed those companies will be bringing home much needed foreign cash and will be paying taxes at home. It needs to be a grant system, rather than a subsidy system. Accept that not all companies will be successful, but hold up as an example those which excel.

6. Support the business we have now. We have tough trading now, but Government should not extend it's reach beyond what is required. When it choses to reach or regulate, it is the level of type and effectivity which is important, not the volume of legislation.

As a nation we have very quickly moved away from a culture which encourages an independent entrepreneurial spirit to one where the cost of failed risks is so high we are no longer prepared to take them. We have in short moved from being a nation of shop keepers to being a nation of shop workers, as can be evidenced now on most High Streets.

I say we cannot borrow our way out of debt and recession, we need to trade our way out. And Government can help by encouraging training and education in the right areas and by reducing the reach of Government in others.

The next Google could very likely be conceived in the bedroom of a teenager, and the next online media craze could be conceived in the free time of an inspired software programmer. The next great mechanical invention, like so many before could be put together in a shed in Scotland. But it will count for nothing if the potential for those great idea’s and inventions cannot or will not be harnessed.

In targeting our sectors and people, we also need to target our markets. Our focus today should be on where the cash is now (China, India and the Tiger nations). The UK cannot do this alone as it has now no control over external trade agreements. Personally I would like out of the EU, but that being unlikely (for now), trade at EU level needs to be completely re-thought and a whole new decision making process implemented. (That is perhaps another, longer blog post)

In effect, we need to a budget and a long-term direction that will actually help White Van Man and also help a new generation of Branson’s and Dyson’s get going. If we can help them target their ambitions, our economy can get going again. If we cannot do this, or if a corporatist/Statist outlook prevails then I fear we will not be seeing any green shoots for a long time.

G20 Results - In My Humble Opinion

I was detained by work yesterday, but to be honest I don't think I could add much to the commentary.

But my after thought is this. The G20 achieved what it should have; it is not going to be doing very much, and as such the markets will need to find a way to fix themselves. This would be good, except the stated objectives were towards government solutions (which I think would have failed in the long term). The lesson that should have been learned was that actions need to be targeted and in response to specific problems. We need to stop throwing money off of the roof.

The disappointing part is the sell of that outcome. It was presented like there is going to be fresh money where there will be very little. It looks like there will be a global crackdown on tax avoidance and evasion, but this consists of little more than naming where the money is.

There seems not to have been (from my remote position) any effort to stimulate the flow of money around the world. All of our cash is in Asia, because they have been making things that we have purchased in recent years, but as Europe and America are making less, and because most European countries can no longer negotiate trade deals (as this is an exclusive competence of the EU, step forward Baroness Ashton). Like a bad shop, if you don't have anything to sell, you can have no complaints if no-one buys anything.

With a Democratic President and a Socialist PM I was surprised to have not seen any mention in the commentary about what individuals and families can expect. Of course, that was not the purpose of the summit, but the fact is, all that came out of it was scant agreement on what is the best course of action; the initiatives that were announced will need to be paid for by the declining workforce through income tax. These are the people that are feeling the pinch the most.

There is an increasing number of people who are finding life very tough, the cost of food has gone up in the last year as have utilities and general household expenses. The number of unemployed is growing, and the number of available jobs decreasing. They have had their lives surveilled and regulated in sometime great detail by Government. That Government took an increasingly big slice of their income, and their pension and promised in return to fix our society and keep us all in jobs. The established mindset of individual responsibility has been replaced with state dependence where all of our options are perplexing limited.

These have seen their pensions raided, their banks nationalised, the jobs taken away. Yet, it is they who must now shoulder a £22k tax bill each. The irony is, it is the same people that Blair won over in middle England that are going to feel it the most.

Like I said before, the best thing that could have happened at the G20 was to limit that tax burden as much as possible. That was to a point achieved, but by accident rather than design. Frasier Nelson, who helps translate fiscal policy for the people that pay for it says that on the whole not a lot of new money was committed, this is reassuring. His column will have reassured the market more than the post-conference press announcements.

In my humble opinion, this recession will not get better globally until we can improve the global money flow. That in part means we need trade deals and initiatives for enterprising people and companies to get into Asia and trading - bringing back some of that money to this part of the world. We also need to get the banks operating independently again, and soon.

In the UK, we need to get a General Election out of the way. Support for anything the Government comes up with now will be thin, because no-one will know if initiatives will be reversed within a year. We need leadership from Government in the long term, not uncertainty. Until the UK has a General Election our economy cannot possibly hope to begin healing itself. If it was called for May, I suspect a narrow Conservative majority, but can not be sure. If it is to be May 2010, I think we all know it will be a comfortable Conservative majority.

Some Good News From Barclays

Barclays have today announced in an open letter to customers, employees and shareholders that they are in a good position financially and are expecting to report a better than expected profit of £5.3bn for 2008. Furthermore that they are to bring forward the publication of their performance in the interests of transparency. The news saw a rally in Barclays share price of 36% to 69.7p. The FTSE also rallied on the news up 156.54 at 4,209.01.

This all sounds like good news to me as a Barclays customer. Even the news that Barclays is to write-down £8bn does not sound like bad news to me, (relatively speaking of course). It sounds to my ears that Barclays have been through their entire portfolio, identified the toxic debt and taken the decision to write it off so as to draw a line under all of the situation. They have "come clean" over the extent of their liabilities, and cleared some of the fog of uncertainty. The fact that Barclays ends the year in "profit", with the help of some heavy corporate refinancing and restructuring sounds good to me because it has done so out the hands of public ownership.

If you have read this Blog before you will know I have absolutely no background in finance... but I have, I think, as good an understanding as any layperson. To me, Barclays looks like the only UK bank positioned to trade in the post credit-crunch world. Though, that £8bn will need to be paid off, it has addressed and will price this into its offerings. Its customers and shareholders can understand the extent of it's liabilities.

The challenge for the Government is to now insist through its own bank ownership that the banks they own get themselves into a similar position so that these banks can trade their way back into a position of consumer confidence.

Effing Bankers

The Government has today announced that it is to roll out an insurance scheme for the banks to encourage them to start lending more to people. This is being offered by the Government (in case you missed it) after banks lent too much to people who can not afford to repay it. As people now have no money left, and a significant chunk of the population now owes as much as they could possibly hope to pay off; Gordon Brown and Alastair Darling have decided that the Government should "do something".

On the same day that the insurance scheme is announced, RBS announced that they are in a little bit more trouble that was initially realised, certainly more than Gordon Brown knew about when he handed over £20bn in capital a few weeks ago.

RBS purchased another bank a few years ago called ABN Amro. This bank had also lent a lot of money that people can not afford to repay. They helpfully lent what now extends to £2.5bn of credit to a Russian Chap with a big impressive chemicals business. Unfortunately that chap can no longer afford to keep the company going so it will probably go to the wall and default on the loan. But don't worry, the British Tax Payer can pick up the bill. No, not because the treasury coffers are over flowing; but because the Chancellor knows some Asian fellas that are prepared to lend us a few quid to bail out these defaulting loans. I am not sure what the rate of interest is, but what the hell, we will not be paying them back anyway - the IMF will have take care of that for us, we can worry about paying the IMF back later.

Perhaps I have unrealistic expectations of elected officials and Government in general. Maybe, I have watch just a few too many episodes of the West Wing, or not enough of Yes Minister. Something inside me says, this is all completely wrong. Wrong, wrong, wrong! Mr Brown, this credit crunch has not come about because of a lack of regulation, it is because we had bad regulation. You have not ended boom and bust, you have exaggerated it.

I wish someone could explain to me where this Government is authorised to borrow and spend, and spend and borrow in such a reckless fashion. Was this in the Labour Party Manifesto? Has Parliament debated the two separate bail outs? Has the chancellor been on ITV, BBC, SKY News taking calls from members of the public and addressing their concerns? I don't recall the national debate about the UK taxpayer covering UK banks defaulting foreign loans. We have a Democratic Deficit.

Some bankers have made off with £millions in bonuses. Were they acting illegally? I can only assume not. Otherwise the government would have launched an investigation and would be bringing these thieves and crooks to justice. Not just in the courts, but in the newspapers and TV news. Why has this not happened? Because they were not acting outside of the law.

So what is the government going to do when pumping £billions more into the system fails to lure indebted Brits further into debt (and thus kick starting a boom cycle, that Brown insists that no longer exists?) Borrow more money?

The government needs to be more pragmatic in it's approach to this crisis. By covering the debts of negligence that far transcends economic sense, the Government is covering for those poor investment decisions. They have nationalised the failures of the banking system. How many Banking heads have rolled? None. How many tellers, and branch assistance have lost their jobs? Loads. Is this right? No, it is not. The decision makers made the mistakes, they are keeping their jobs and the tax payer is funding it.

I think Interest rates need to come back up a little. UK banks need to attract deposits from abroad. Savers in the UK should not be unduly punished. We also need to avoid another surge of poorly secured credit on the first sign of economic recovery.

The Bank of England should be granted emergency powers to investigate all deals over £100m (or at a value deemed appropriate, and practical by the BoE) that is now on the Governments portfolio to see if those loans were based on sound financial decision making. If not then legal action should be considered by the government against the banks, and from the banks against the employees that made them. The Government can not keep maintaining that bankers were greedy and made errors if no one can be found to have fallen outside of the regulations.

Those toxic debts should be targeted, and identified. I am not sure if a Government Toxic Bank should be set up, but if these bad investments are identified, then it might not require a Government solution. Solvent banks and financial institutions might help struggling banks, with compensation of insurance. Certainly the Government should be looking for the banks to write down a share of the debts, at their loss, rather than propping up the whole rotten system.

The FSA should be culled and regulatory powers handed back to the BoE and the Treasury. The BoE must then openly report on the banking sector in the UK, and be charged with improving confidence in the UK financial sector.

Some of the money being offered into bailout schemes should instead be offered in entrepreneurial grants to companies that have a chance of getting a foothold in the emerging Asian markets, such as China and India... I am talking about small and midsized companies with UK based staff and management who are trading in sound products and emerging technologies. Our economy needs cach from the East, and we need companies creating new jobs.

The Government should also reduce the size of the State, to reduce the burden upon the tax payer. Can we go onpaying for big Government AND big Government debts? I don't think so.

I am not economist and I am not a banker. You may not agree with any, or all of the above, nor may the Government. I am, however, a tax payer, and I have not been consulted in how my tax money is being spent, or on my concerns for the future tax burden on me and my family. And that is what has annoyed me most of all.