Month: November 2007

The prompt resignation of the Labour party General Secretary implies this is a big problem for Labour.

Much of the money passed to the Labour party after Gordon Brown had taken over. There are many questions to answer:

1. Harriet Harman received money for her deputy leadership campaign from similar sources. Was this properly reported? Did she know of the connections?
2. David Abrahams was given a good seat at Tony Blair’s farewell. Who organised this? Did they know he was a big donor?
3. Mr Abrahams passed money onto staff and business associates. How did they account for this money? Was any of it taxable?
4. Hilary Benn did not take money from Mrs Kidd but did accept a donation from Mr Abrahams. Were his team told of the links by Baroness Jay? If so, who else did she tell? If Hilary Benn did not know via her, how did they know?
5. What checks did the Labour party carry out before filling in its return for these donations?

All of this is very depressing for politics. It reminds us of the dangers of big money politics, and shows how Labour thought the rules they had invented did not really apply to them.

I just hope this is not used as another excuse to demand more money from taxpayers for political parties. The best answer is for the main parties to spend less on national campaigns, and to accept less from individual donors. Gordon Brown should do a deal with the other party leaders, accepting a cap of ??50,000 on all donations including donations from Trade Unions. If individual Tade Union members wish to give to the Labour party they are free to do so, so Unions and companies should be treated similarly for these purposes.

I do not take pleasure from this latest funding scandal, even though it is a Labour one. All the time we have big money politics, all parties are vulnerable to temptation or to misunderstanding about donors and donations. We need to get to the bottom of this latest funding crisis as quickly as possible, so we know who if anyone apart from the General Secretary made a misjudgement. We also need to know if Labour’s own law on financing political parties has been broken. To restore faith in politics we need the three main parties to agree to spend less and raise less from individual donors and Unions.

Yesterday the Home Secretary stumbled when David Davis asked her what we should do if our biometric identities are stolen or mislaid when in government possession. She also revealed complete ignorance of the work in her own department to have a common system of identity control throughout the EU.

I asked a Home Office Minister who was telling us about introducing ID cards for foreign nationals in the UK why we didn’t police our borders properly when people first arrived. I pointed out that everyone coming to the Uk should have a valid passport and visa where needed. Surely it is easier and cheaper to make the checks on first arrival and only allow in legal entrants?

The Minister responded that that was a "very twentieth century view"! Well I never. That was the boomerang quote of the session, which is so revealing about attitudes in the current Home Office.

They spend lots of our money on border controls, and claim they are beefing them up. When I ask that they are made to work properly so we do not need to introduce ID cards as well, I am told that it is out of date. Labour want to carry on spending money on ineffective border controls, and then spend more money on issuing cards and presumably checking up on people on the streets as a back up system, based on their assumption that they will be incompetent at running the borders. If people can forge passports and trade in illegal ones, why do they think it will be any different with ID cards? Why do we need both?

No wonder we pay so much tax, and no wonder nothing works. Wanting things to work is so "twentieth century".

I was looking up something about schools and stumbled onto the Ed Balls website.

If you dare do so, they warn you you become a "User". You automatically agree to "not publish,reproduce,store or retransmit any information contained in this website" as it remains "the property of Ed Balls…"

Ed, please keep it. I see from your website you have not run a new campaign since 2005. I see you have only carried out two events in your constituency that appear in website news in the month of November, and that a normal constituency event is the lead news item. I don’t think it’s going to be difficult to keep all that private.

Why does Mr Cable want to wreck any proposal to solve the Northern Rock crisis? Today he sought to belittle the Branson bid, telling people it was unlikely to go ahead. I won’t repeat what he said about the risks to the taxpayer as the statement was unacceptable. He also accused sharebuyers of being “spivs and sharks” and said he wanted to stop any shareholder, big or small being able to sell shares any more by suspending them in the market!

Mr Cable’s shrill interventions are not going to win the Lib Dems any friends amongst the business community, and will put off anyone who cares about the small shareholders, depositors and taxpayers caught up in the Northern Rock crisis. If Leader Clegg (or Huhne if there is a late swing) has any sense he will terminate Cable’s role as Treasury spokesman before he is allowed to do much more damage.

What have we learned during this race?

"Calamity" Clegg and "Euro" Huhne have slugged it out, only to hear from the former Leader, Charles Kennedy, unflattering judgements. He does not think either of them have made their positions clear, in a way which will rally the Lib Dem cause. He does not feel motivated enough by either to declare for one of them.

I think Charles is being a bit harsh. Several things remain crystal clear:

1. Both promised a referendum on the EU Constitution before the last election. Both have ratted on their promise.
2. Both are former MEPs who want more European integration.
3. Both want more regional government in England on the European model.
4. Both want to impose a local Income Tax, so Councils can tax us more.
5. Both favour more green taxes.

The biggest difference between them is Huhne draws attention to the manifest contradictions of his rival, Mr Clegg, who likes facing both ways on big issues, whilst Mr Clegg just watches innocently as others brief about Mr Huhne’s past in the newspapers.

This site has forecast Mr Clegg’s victory. I go further today, and say how much I would welcome a Lib dem flip flopper with so little experience as their Leader. It would be as good having Ming Campbell from my political point of view. His rambling interviews reveal an inner inability to make up his mind and to lead, which capture the spirit of his party.

Were the Liberal membership to be awkward now and vote for Huhne, the Lib Dem MPs would look even sillier than usual, as they have voted by a majority for Clegg. Most of them would have acquired a touch of the Lembit’s.

Today we hear Richard Branson has become the preferred bidder for Northern Rock. It is good news that there is some movement, and there could be an outcome which keeps some of the Northern Rock staff trading with a new owner and looking after the customers and loans.

The scheme outlined on the radio implies the Bank of England and the Treasury did not take proper security for all the loans they advanced. It is high time Mr Darling explained the true position about this, and if they failed to take sufficient security for all the lending to explain why they made such an extraordinary decision.

According to the briefings so far, the taxpayer will get around half the money back immediately, and the other half back over a 2-3 year period. In the meantime the taxpayer will get similar security to other creditors. Presumably it also means no more government lending to Northern Rock, compared to the current position where the taxpayer is on the hook to lend more all the time there are deposit withdrawals. That would be a welcome development.

That may be a good outcome. To be able to judge it, the taxpayers’ representatives need to know how bad our starting position is. What, if anything, has been promised on repayment dates for the current loans? How many of them are secured on specific assets, which is better than a floating charge assuming they are secured on good assets in sufficient quantities? I have asked all these questions, but the taxpayer is still in the dark about how much money has been committed and on what basis.

Mr. Darling has made it impossible for the market to value the shares, as the market does not know the basics about how much money for how long is available to the company. If he is to persaude us all that he now will do a good deal for the taxpayer and for the UK fianncial system – his two legitimate aims – he needs to tell us more about the current position. The BBC this morning themselves asserted that there is a false market in the shares. The reason must be the lack of government transparency. That is unacceptable, after the Chancellor’s lecture to bankers that they needed to be more transparent!

I do hope Mr cable is getting ready with his apology for his irresponsible behaviour, if there is a successful rescue bid for Northern Rock. He has been so keen to attack Northern Rock and all involved with the company, making a rescue that more difficult.

The new government in Australia announces a change with the past by saying it will sign Kyoto promptly.

The real question is what will the government do to cut carbon output? We have several countries in the EU who signed up to Kyoto, but whose carbon output has been rising.

Gestures are easy – takign action which people will accept that will change people’s behaviour to burn less fuel is much more difficult. Is the new PM going the usual labour rotue of higher taxes and more regulations to try to get carbon output down? Or will he try the Conservative way, of offering incentives for greener behaviour? Or maybe he is just wanting to pose as a green, with no serious intention of doing anything. Wheh we know which way he is really going we will be able to come to a view on whether he is making a good or a bad difference.

Over the last decade I have made many speeches trying to point out that Gordon Brown did not make the Bank of England independent, and did weaken the Bank’s ability to respond to financial crises. I reminded any audience willing to listen that in 1997 he took away the Bank’s power to regulate individual banks, and removed its role of running the public debt. He did not even make the MPC completely independent in the way advertised.

These two changes greatly weakened the Bank’s ability to understand and control the money markets. When the mortgage bank crisis hit the Bank of England did not itself monitor the daily cash and credit positions of the banks, and did not itself organise the daily intervention of the government in the market with its own debt instruments.The need to respond to a banking problem in negotiation with the FSA and the Chancellor was bound to slow things down and make it difficult to come to a timely and sensible answer.

I reflected this in the more meaured prose of the Opposition’s Economic Policy Review (Freeing Britain to compete – available as a download on this site). In that we wrote:

“We are concerned about the division of responsibility between the FSA and the Bank over banking and market regulation. Fortunately conditions in the last decade have been benign internaitonally, with no threats to banking liquidity. We think it would be safer if the Bank of England had responsibility for solvency regulation of UK-based banks, as well as having the overall duty to keep the system solvent. Otherwise there could be dangerous delays if a banking crisis did hit,with information having to be exchanged between the two regulators; and there might be gaps in each regulator’s view of the banking sector at a crucial time, when early regulatory action might have spared a worse problem.”

If we could see that from Opposition, why was the government unable to do so?

Typical of the BBC to protect Gordon Brown and Alastair Darling by inserting the word “international” in front of “credit squeeze” when correctly reporting this morning that the credit squeeeze is now hitting the “real economy”.

Do you remember all those pompous commentaries from “experts” when the credit crunch first hit, assuring us this was just a problem for all those overpaid financiers and bankers in the City? Many took a dellight in the llikelihood of the well paid financial sector being brought to earth with a bump. This site said at the time this was a serious credit crunch which would have an impact on all our daily lives and on many businesses. So it is proving.

It is also a credit crunch made in Downing Street and Threadneedle Street. There is no home made credit crunch in much of Asia, and in the USA they are already moving to relax their credit crunch. Only in the UK this summer did the Central Bank resolutely tell bankers to sort themselves out, refusing to supply liquidity to markets and refusing to cut interest rates. I warned at the time they were being too tough.

Our accident prone Chancellor made a speech explaining that banks had made too many dodgy loans and needed to tighten up their lending. He warned banks there would be no bail if they did this, just days before he announced a gurantee for all bank deposits for any institution in trouble! We will now count the damage in falling property prices, cancelled investment projects, shortage of mortgages and loans and fewer jobs.

Mr Cable is being praised by the BBC for his “success” as acting Lib dem Leader. This “success” is to pursue a nasty campaign against the shareholders and management of Northern Rock, in an attempt to politicise a difficult situation and force a nationalisation of the bank. Mr Cable seems to want to wipe out the value of Northern Rock shares, being no friend of either the small or large shareholders of the bank. Rightly asking how the government secures and retrieves the taxpayers’ ??25 billion, he then makes a fool of himself by suggesting taxpayers take on all ??100 billion of the liabilities instead!

I have a few questions for the garrulous Mr Cable:

1. If he is worried about security for the ??25 billion, why does he think taxpayers securing all the ??100 billion of total liabilities which the state would take over if it nationalised the bank would improve the taxpayers’ position?

2. What could the government as owner of the bank, that it cannot do as bank manager to the bank?

3. How much skill would this government show at running a mortgage bank? What skills do they have that the market lacks?

4. Why does he wish to bail out all the creditors of Northern Rock by guaranteeing their position through nationalisation?

5. How would he pay for the nationalisation? I appreciate he thinks he should take over the shares for nothing, but the whole ??100 billion of assets need financing, and all of that borrowing would then fall to the taxpayers’ account.

Mr Cable has shown little understanding of the complexities of a mortgage bank, and no statesmanship. Some of us commenting and asking questions have been very careful not to say or do anything which could make the position worse. When I was warning of the dangers of the UK credit crunch before the run on Northern Rock began I made sure I did not repeat market rumours about Northern and other institutions by name. Mr Cable seems to revel in trying to make things worse. The BBC fails to ask Cable the difficult quesitons about his wish to condemn all involved with Northern Rock, and fails to expose the folly of his nationalisation scheme. Nationalisation would be expensive at a time when the government is already over borrowed and over committed; would delay tackling the real problem of refinancing the Rock in the private sector; and could lead to shareholder actions against the government for failing to recognise the potential value of the Rock’s assets.

If it’s Calamity Clegg, it’s also Calamity Cable.