Labour's bonking mad!

No this isn't a story about over-sexed socialists (unless you maybe include Rev. Paul Flowers) but please do read on.

Ed Miliband, the figure-head leader of the socialists in the UK, the real leader is union boss, Len McCluskey, has indicated that Labour would try to create two new large banks in the UK, so as to promote 'competition.

Now think about that.  We already have 5 big banks in the UK.  We also have building societies (akin to US savings and loans/credit unions).  Indeed, two of these banks are largely owned by the UK people.  The 'people' own more than 80% of Royal Bank of Scotland.

It is entirely unclear what benefits this extra competition will bring.  We now know that Miliband's words have cost the UK taxpayers more than £ billion from the reduction in share prices seen for RBS and LloydsTSB.

Consider also, what happened last time Labour were in power.  This champion of greater competition, then forced through the takeover of the HBOS banking group by LloydsTSB, thereby reducing the number of banking chains!

Consider also, the Labour party's closest banking ally - the Cooperative Bank.  This bank had Rev. Paul Flowers appointed as its chairman, under Labour's 'light touch' regulatory regime.  This is the same Rev. Paul Flowers that is accused of hiring rent boys and using illegal drugs, including Ketamine.  The same Rev. Paul Flowers who is accused of abusing his position as a church  minister to allegedly defraud a charity.  Oh yes, and the same Rev. Paul Flowers who took the Co-Op bank to the brink of bankruptcy!  In the last action, he perhaps proved that he was as qualified as other leading bankers, at least!

So Labour, whose record with banks is, shall we say, patchy, wants to interfere and create competition?

Since when has Labour been so keen on competition?  When did they become the champions of consumer choice?  I ask because there seem to be some areas for which Labour is absolutely opposed to promoting competition.  These are not areas where the incumbents are actually performing well.  Indeed, quite the opposite.

These areas?  Well, the NHS and Education, to name just two.

With the NHS, the UK effectively has a monopoly supplier of health care that is controlled by its provider union personnel.  Can you imagine the uproar that would have followed, if a private health supplier had treated patients the way that the 'envy of the world' NHS treated people at Mid Staffs and other scandal-riddled hospitals?  Does anyone think that Andy Burnham, the Labour minister in charge at the time of these scandals, who tried to hide the truth, would remain in the role, if he were in a private company?  Hundreds of people died unnecessarily and in appalling conditions when their very lives were entrusted to this monopoly provider but, according to Labour, that's okay.

Look also at education, where Labour, again repaying the debts to its union paymasters, consistently opposes any and all reform.  Here the Conservatives have pushed ahead with supporting the establishment of independent schools but much still needs to be done and Labour, and its local authority allies and other members of the payroll electorate, will continue to oppose much needed reform.  As with health, Britain's education system is failing as successive governments have failed to address the core issues because they have focused on 'politically correct' solutions and ignored real world problems.

Apparently, Labour want to see more choice on the high street but I seriously wonder how many people still rely on physical branches and how many use online banking?  When was the last time you went into a bank?

Anyway, usual stuff from Miliband and his socialists.  The 'cost of living crisis' is seen to be being solved, as real wages start to exceed prices and so it is time for another soundbite!  Worryingly, Labour still have a chance that they might be in charge of the UK economy, after the next election.  Miliband the banker - be afraid, very afraid.  Remember who ran the economy alongside the disappeared Gordon Brown?


   

RBS, LIBOR and the Public Interest

Think about the LIBOR issue for a moment.

I believe we all know or strongly suspect that Barclays were not alone.  That there is a strong likelihood that other major banks, such as RBS and Lloyds were also manipulating their LIBOR data submissions.

So let's posit that these two were.

Would it be in the public interest to issue fines against them?   Given the level of taxpayer ownership, the bulk of any fines would be tantamount to the taxpayer transferring money from one trouser pocket to another!  Of course on the way though, some or much would be lost due to fees from our noble (?) legal brethren!

Indeed, to go further, since publishing such fines and censure then leads to share price falls, is there maybe a case for doing nothing, in the public interest,  at the Corporate level?  Of course seeing share price activity in recent days, maybe the negative implications have already been 'priced in'?

I don't suggest that the authorities let the individuals concerned, get away with any criminal activity, quite the contrary, I would like to see them imprisoned - not fined, imprisoned - though with the Serious Fraud Office (mis) handling the case, the likelihood has to be low!


Any thoughts on this?


Incidentally, listening to Bob Diamond's light toasting in front of the Treasury Select Committee, the other day (simply appalling service on BBC TV World News, with constant 'talking head' interruptions to give us statements of the obvious!),two things came to the fore, for me.

One, Barclays seemed to be always on the high side and it was suggested that they were advised/told or somehow or other encouraged to lower their rates.

Secondly, the method of deciding LIBOR seems to be to take the submissions from the 17 banks,  and then eliminate the 3-4 lowest and 3-4 highest and then find the rate amongst the middle.

So in both cases the actions of Barclays (and it's traders) , while possibly criminal (mis-representation and conspiracy etc)  has either had no effect or any effect was to reduce the potential cost of borrowing for anyone.  Have I got that right?

 Oh! and still no resignations from Labour or apologies for their complicity in this issue.  This all happened on their watch - loose or invisible regulatory institutions, nods and winks approach to economic (mis) management and Gordon - no more boom and bust - Brown telling us all how he saved the world's financial system! 

Private sector pay

We are just entering the period when financial institutions declare their 2011 corporate earnings and in many cases the 'bonus pool' that will be shared among their employees.

Following the bail-out of RBS, Lloyds and HBOS, the retail and investment banks now fall into two camps.  Part state-owned (see earlier) and those others institutions such as HSBC, Barclays JP Morgan, CitiCorp and Goldman Sachs, which received zero bail-out funding from the UK government  - we will call these latter type - private institutions.

We can expect lots of the usual froth from commentators about 'excessive' bank bonuses and how the 'government ought to do something about it'.

So what can the government do?

Well in the case of the part state-owned RBS, Lloyds and HBOS, they can use the shareholdings, that they hold on behalf of the UK people, to limit the amounts of payouts.  These could be limited to those that are required to meet contractual obligations - some people have bonuses built into their contracts of employment and if they meet certain targets, then legally, these must be paid - and they can then limit other payouts to zero or to certain pay grades etc., however, they and the other shareholders see fit.

In the case of the private institutions, it is really none of the business of government to interfere in how the shareholders (otherwise known as owners) spend the income of their company.

If the government wants to affect such private sector bonus payouts, it could do so through the tax system (as I have proposed, on an earlier blog) but it cannot and should not dictate to private companies on the remuneration that they give to any of their workers.

If the government wants to set the tone around pay restraint, then maybe they should concentrate on the areas which are within its span of control................

So, set a cap on the pay of anyone employed by a public organisation.  So local authority executives, civil servants, military chiefs, ministers, BBC executives, etc.  My suggestion would be around  £100,000 per year.  Many private sector companies have re-organisations and require personnel to re-apply for their role, so do the same with all of the above - get them to re-apply for their job but at a reduced rate of maximum £100,000.  Oh, and let's make the maximum include taxpayer contributions to pension funds.

That might start to sound a little more like 'we are all in this together' in action!