Month: January 2008

On Tuesday, following a big row in the Commons the previous day, we were granted two and half hours to discuss amendments to the EU Treaty Bill on police, borders, criminal justice and immigration, instead of the derisory one and half the government originally offered. It was not enough, but clearly better than the first proposal.

Yesterday. on energy, the governemnt reverted to type and allowed only one and a half hours for all the amendments. Needless to say, discussion did not even finish the first group before the guillotine came down and a vote was taken.

With the Lib Dems in full support the government has large majorities. It is determined to prevent proper debate on the detail of the Treaty, preferring hours of general discussion of things like climate change which are peripheral to the impact of the Treaty.

So the government has not only broken its promise to the people to hold a referendum, but also broken its promise to Parliament to allow line by line scrutiny of all the complex new powers the EU is winning from us.

The Fed duly cut interest rates by another 50 basis points, taking them down to just 3%. We see recession fighting in full cry in the USA, where the Central Bank and the administration are uniting to pull the US economy out of its sharp slowdown.

Lower interest rates will ease some of the tensions in the housing market, allowing some people to carry on servicing mortgages which might have been too dear for them at higher rates. It makes it easier for all those businesses operating on borrowed money. It will also encourage a lower dollar, pricing US exporters back into world markets, and curbing the US appetite for imported products.

Meanwhile, on this side of the Atlantic, the authorities remain hesitant and divided over whether to carry on fighting inflation, or to see the Credit Crunch as the new enemy. UK rates are too high for comfort. Inflation will remain unpleasant this winter but will start to correct later in the year.

Yesterday the government published its review of the regulatory arrangements for banks in the wake of the Northern Rock crisis. They made suggestions and proposals in five areas:

1.” Strengthening the financial system” by introducing better risk management of banks and better supervision and rating of securitisation of loans.
2. “Reducing the likelihood of banks failing” by asking for more information and changing the arrangements for providing liquidity to banks.
3. “Reducing the impact of failing banks” by introducing a “Special resolution regime” by allowing the authorities to take action with a failing bank to achieve a rescue or orderly run off
4.”Effective compensation arrangements” including faster and bigger payments.
5. “Strengthening the Bank of England and improving coordination between authorities”.

The proposals combine the sensible with the foolish, mixing some important lessons learned with the sound of stable doors banging shut after the horse has gone.

I would suggest the government listens carefully to informed opinion before implementing these changes.

1. It is important to take action to improve the deposit protection regime, without requiring a large up front cash payment from existing banks at a time when they are struggling to re-establish strong balance sheets after the losses made on securitised loans.
2. The government should make the Bank more independent and stronger to deal with failing banks in the future. This requires transferring day by day banking supervision to the Bank of England, and transferring the necessary staff or recruiting the necessary staff with banking expertise to be able to do the job.
3. The “Special resolution regime” could give near nationalisation powers to the authorities without the need to compensate existing shareholders. These powers were not needed in previous rescues, as the Bank of England has a powerful position as only lender to a bank in trouble. It is difficult to see why they need all these extra powers. The one thing that does need clearing up is the legal power of the UK authorities to arrange rescues quickly and in private under current EU market regulation.
4. It is a moot point whether the Bank of England needs new legislation to clarify its powers and role, when it always used to be able to undertake these matters before many of its powers were taken away in the 1997-8 reorganisation. The availability of skilled and experienced staff in a banking and bank rescue is a more relevant consideration, given the removal of banking supervision from the Bank ten years ago.

As always, there is a danger of the authorities fighting the last war. There is no immediate prospect of another run on a bank. The current difficulties are those of a range of banks strapped for enough capital and cash, and a new aversion to risk as banks reveal losses on some of the paper they hold in the securitised and syndicated loans area. A sensible supervisor would be asking how can the regulatory burden be eased prudently at a time when banks have to recapitalise themselves. There is a danger that further capital adequacy and regulatory tightening, coupled with demands for up front levies for a compensation fund, will make it even more difficult to get the banks and the markets bank to balanced conditions, allowing a reasonable amount of credit to be advanced at sensible prices.

I will respond in more detail to the many individual consultation questions in the government document when I have had more time to consider all the detailed queries.

Last night I attended a dinner to discuss the railways. It turned out to be a lively and interesting event, moving on from the usual train spotter’s enthusiasm for the past and the anorak’s belief that the only way you can run a railway is the way Network Rail do it.

I began my attempts to provoke new thinking amidst the assembled galaxy of railway directors, regulators and former regulators expecting to end up as isolated as the UK arguing for an EU which repeals legislation, but was pleasantly surprised by the turn of the conversation.

I complained that Network Rail has a monopoly hold over the best routes into all our city and town centres, yet can only account for 6% of the goods and passengers travelling. I urged the railway to change its mode of operation and its technology so it could carry far more people. I asked for lighter trains, more frequent services, more trains per hour on any given stretch of track following changes of weight, braking, traction and signalling. I asked why fares were so high yet subsidy still paid more of the bills than passenger receipts, condemned the over regulatory approach and the way the UK railway was outpaced in efficiency and service by many overseas railways.

The early defence that the technology and trains have to be as they are, and that you can never run more than 24 trains an hour safely on any piece of track soon transposed. I was told that the Engineering Director of Network Rail does agree that lighter trains are a must, and they will produce better performance, speeding up more quickly, braking more quickly and saving energy. I learnt that powerful figures from the industry and regulatory background also agree that Network Rail should be decentralised or split up, and some agree that track and train should be reunited in regional companies. Many agree that contestability is important, and as much competition as possible would be a welcome replacement for too much regulation.

I pointed out to Network Rail that they have all too many tatty or inadequate stations, like Wokingham’s. Property deals could release capital from commercial development on railway land to pay for new stations. Stations could invite in other businesses to supply services train users need – car servicing and cleaning, safe parking, food shopping, business services – as another source of franchise revenue.

All agreed by the end of the dinner that the current performance is not good enough, and that it requires substantial change to create a good working railway growing at a fast enough pace for travel demand. There was a lot of agreement that monopoly is at the root of much of the poor performance. One informed observer said that when Labour nationalised Network Rail, it took away all the private sector banker/shareholder pressures. As a result the cost base of the existing railway doubled rapidly! Network Rail is not the answer. It is a largely unaccountable monopoly, gobbling taxpayers cash but not yielding much by way of improved results.

The government has failed to give us the promised referendum on the EU Treaty.
Now it is failing to give us the promised full Parliamentary scrutiny.

Yesterday we had a bad tempered debate on how much time would be made available to go through all the powers transferred and the complexities of the EU proposals.

The 20 days floated in the newspapers has come down to 14 days including 2nd Reading and the debate on the timetable. The ability to probe and examine amendments on every part of the Treaty and Bill, has transposed into just one and half hours tacked on to the end of themed debates to consider amendments. Today that is just one and half hours for any amendment covering cross-border crime, justice, policing, human trafficking and asylum and migration policy.

This is not Parliamentary scrutiny, this is a government riding roughshod over Parliamentary accountability. Normally MPs can table and debate a wide range of amendments on each Bill, with time in committee to consider each amendment and each clause on a line by line basis. That will be quite impossible on this most complex of documents, with so little time for proper committee discussion.

Why can’t the government cancel one of the weeks of holiday pencilled into the Parliamentary diary? Why can’t it remove some of the Topical debates on Thursdays, which are always on subjects the government wishes to highlight, and give the time to this issue? Why do we have to pack up at 7pm on a Wednesday, when we go on to 10 pm as on Mondays and Tuesdays?

The truth is there are plenty of ways of finding the time, if they wanted to. There are plenty of us wishing to debate a wide range of amendments and new clauses.

Yesterday the government showed they do not want Parliament to do a proper job on this Bill, any more than they want the people to have a vote on it. Clearly the government is worried about this Treaty, and knows it is unpopular. That may be why Mr Brown did not wish to be in family photo at the signing ceremony, why he did not have the 2 nd Reading on a day he could be represent and voting, and why now his business managers are artificially restricting the time for amendments.

In one sense the government is right. Because Parliament is debating it after the government has signed it, it is take it or leave it. The Opposition has voted against the whole thing, but lost thanks to the support of both Lib Dem and Labour MPs. The battle now over the substance of the Bill is to expose just how much power the government is giving away, in the knowledge that from here the Lib Dems are going to support the government when it matters, making the government casual about needing to explain itself to Parliament and people.

I do hope all those who voted UKIP in the General Election, helping federalist candidates to become MPs, now wish they had not. We need votes now in the House of Commons. Splitting the anti Constitution vote in 2005 has damaged our cause.

PS: Today. Tuesday the government made a small concession – we now have two and half hours for an amendment and three and a half hours for the general motion each day.

Our water pipes are leaking, our gas pipes often need replacing, our telephone cables need expanding and even our electricity wires may need fixing. Each time one of the utilities needs to do such work, they have to dig up the streets.

The government is aware of the frustration this causes. Its own highways legislation asked Councils to limit the time utilities have available to disrupt the streets, and requires them to penalise delayed works. It asked the bodies that often themselves do as much or more as the utilities to impede our progress to work, as Councils themselves have a fascination with rearranging the street furniture and with digging up and reshaping the roads.

Much of the problem could be solved over the longer term is we started to alter the way we arrange our utilities. Every time a builder puts in a new housing estate, a developer puts in a new business park, and every time major roadworks are carried out, it would be possible to alter the way we organise our utilities.

We could create concrete box tunnels under one of the pavements in urban areas, and by the side of the road in rural areas. These box tunnels should be large enough to take the water and sewage pipes, the power cables, telephone cables and the gas mains. No-one would dream of embedding all these features in the walls or concrete floors in new commercial buildings – they are placed in the space between floor and ceiling, and in the basement, allowing easy access to mend or improve. These new box tunnels should allow entrance to workmen to fix or change, without needing to dig up the road, and usually without even having to disrupt the pavement.

There would be more cost at the time the facilities were put in, but huge savings in time and effort subsequently. It is madness that we sit and watch as our roads are regularly wrecked, often just after they have been resurfaced at public expense, because the main utilities run down the middle of the road and are buried in the soil and hardcore.

This government’s policies have meant much reduced flows and capacity on many of our roads through traffic mismanagement schemes. They have created extra congestion and pollution by all red phases on traffic lights, by chicanes, lane removal and artificial narrowing. The very least they could do to help the flows and the busy commuters would be to start to cut the number of times the precious highway has to be coned off and dug up.