Archive for Recession

Looking for savings in all the wrong places

Posted in Coalition, Government, Politics, Recession, Spin, Tories with tags , , , , on September 12, 2010 by pieman70

Surprisingly, we didn’t see the real extent of the coalition’s plans for budget reduction during the budget.  In fact it’s been an ongoing series of small announcements that has shown the full extent of the cuts that they propose.

Much has been written (And very well written) in other places regarding whether these cuts are even necessary, and at base many of them have a point.  It is ideological from the Tory side to reduce the size of the state and favour the private sector.  My problem is that this ideological crusade for “Small state” is blinkering them to better ways at promoting recovery and saving money.

I’m going to try and stay off the “Evil Tory” narrative and portray this purely as how I see it, bearing in mind that I’m an engineer not an economist.

During the election campaign Cameron talked about reducing council wastage, seemingly a war on glossy leaflets and expensive police cars.  (The police car story in question was pretty well debunked) At the time I wondered if there were really enough savings in this area to hack chunks out of the deficit.  Now, I understand every little helps, but, like the police car story I think much of this has been based on a perception of reality rather than reality, namely that councils are full of jobsworths who haemorrhage money in pointless projects.  No where is this clearer than in Eric Pickles recent idiotic crusade against “Unnecessary” road signs.  There he was, on BBC breakfast wondering around London pointing at signs asking “Why is that there” or declaring “That’s totally pointless”.  As I said previously, I’m an engineer not an economist, and so as an engineer who has studied highway engineering I can tell Mr Pickles that the road signs are there for one of two reasons, first, and by far the most prominent will be because the signs presence is stated in the Design manual for Roads and Bridges, which states, amongst many other things, what signs must be placed where and at what intervals.  As the representative of the council said on the same BBC breakfast news, if a sign warning of a speed limit or parking restriction isn’t where it is legally prescribed then enforcement of any charges there is impossible.  The second reason is that there has been a reported need for such signage, this could be questioned but is quite often borne out of accident black spots, say a one way street which is hard to identify, may well have increased signage.  The only other signs are ones directing you to places.  Now here’s a wee contrast.  Drive through Glasgow, particularly the south side, not many road signs; now try to find the M8, The science centre or the Burrel collection.  All are badly signposted with some roundabouts being completely unsigned.  Compare this with Dundee, loads of sign posts but finding your way around is easy as signs are placed in advance of turnoffs allowing you to find lanes etc.  I did laugh when the council official challenged Eric Pickles to take a trip around his borough with a camera crew and point out what signs he thought were surplus to requirements and the council official would explain why it was there.  Sadly I fear that uninformed blowhards making opinionated judgements will be a sad hallmark of the coalition’s cuts.

The second place where “Wastage” will be cut from the public sector is in staff.  This is based around the narrative that public services are filled to the gunnels with “non Jobs” and that this was a handy way for Labour to appear to reduce unemployment figures.  This approach has two problems.

First, assuming that the staff cuts are these non-jobs, and I accept some of these do exist, although like the savings Cameron said he could get from glossy leaflets I suspect far fewer than are needed to make the numbers talked about, the government is going to be paying these people one way or another, they might as well be recouping some of the money as tax, be it income, NI, VAT or any other tax.  Cutting their jobs means you pay less, but both government and the private sector get less out of them in the long run.  Still at least this one I would concede is arguable and depends on your opinion.

When asked about cuts it is always stated to come from wasteful “Backroom” posts, to you or me this means, admin.  I’ve previously posted on how underappreciated admin staff are, and this is the same thing writ large.  The Coalition is sadly filled with managers, they’ve never done admin, and they don’t understand it or indeed see the point of it.  Whenever admin is being cut anywhere what you have to remember is it needs to be done.  An administrator will do it efficiently, sack the administrator and suddenly doctors, engineers, managers and everyone else has to cover that work.  It means either record keeping becomes sloppy, and this can have serious consequences, or that the people covering admin have less time to do their actual job.  Either work falls behind causing problems or more expensive professionals have to be hired to balance the workload of a relatively cheap administrator.

The third is the daily mail favourite, Benefit fraudsters.  Yes the damnable scroungers who take from taxpayers like you and me to buy their big tellies and tasteless trainers.  Now I’m not a fan of benefit fraudsters, ideally I would like to see them all stopped, but is it really as big a problem as something like Tax evasion.  Well, financially speaking benefit fraud costs us around 1.6bn, quite a bit (I won’t go into the 5bn odd bandied about which actually lumped in errors) tax evasion, and this is evasion rather than all the people doing perfectly legal avoidance, is worth 15bn in unpaid taxes.  So, if you were looking for some quick cash and wanted a group to pursue, which would you pick.  I don’t buy the argument that tax evaders are harder to catch; the actual hardcore fraudsters are every bit as skilled as the accountants working for tax evaders.  I would guess that going after “Scroungers” is a good headline grabber when in reality all that will happen is more difficulty and pressure on legitimate claimants, after all they provide details and so are the easy target.  In fact they recently told the FT that they should be less black and white on tax evasion, could you imagine the uproar if someone said that about benefit fraud.  It would definitely be a better use of scarce resources to go after tax evaders and closing tax avoidance loopholes.  I did like some of the suggestions on the spending challenge website.  These included anyone involved in UK politics or the running of the country must be a taxpayer, and anyone running any news media in the UK must also be a taxpayer.  Can’t see why either of these would be unpopular with the public so I expect to see these go ahead soon, unless Mr Osborne can come up with a reason why not.

The final miss-step I will look at is the seemingly ever-present thought that farming things out to the private sector will always save money.  This is one of the places where the Tory Private Sector good, public bad dogma rears its ugly head.  They won’t consider, despite the evidence to the contrary, that privatisation is not always the answer.  At a basic level it seems simple; you pay a company to undertake running a utility or service at an agreed cost.  The up side is that the company may well already have staff on its payroll and an admin department to save the trouble of running one yourself.  Also, private companies have to make a profit and so will run at maximum efficiency.  This assumes that public run organisations can not run efficiently because of the lack of a profit motive.  While I would agree that many don’t I reject this.  There is no reason why a non profit public utility can’t run as efficiently as a profit chasing company.  Particularly undertaking public services.

Second problem, regulation.  If you take anything out of public ownership it requires independent regulators (Public run organisations are regulated by govt departments) which equals expensive Quangos.  Sadly this is directly tied to the profit motive mentioned earlier.  Regulators are required to ensure private firms provide the contracted services to the agreed standard.  Without regulation the government would be faced with constantly pursuing companies for breach of contract, and anyone following the Edinburgh trams farce can see how easy that is.  Or indeed, to take the example of the East Coast train provider Stagecoach, there came a point where the fines for reneging on their contract were less than the losses they were incurring on running the service.  This was in a regulated industry and net result was government having to take back control, effectively paying for the running of East Coast trains twice.  I suspect that the same thing will happen when Connaught finally fail.

I hope this hasn’t come across as Tory bashing; my problem is that the coalition is trying to solve a huge problem by only considering the world through their narrow ideology.  It is blinding them to other solutions and that can only be a bad thing.  It’s never good whey party dogma interferes with dealing with a problem.  George Osborne has recently said that he wants to see £4 public sector cuts for every £1 tax rise and what occurred to me is that he wouldn’t even consider that the other way around.

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The Mantra

Posted in Lib-Dems, Politics, Recession, Spin, Tories with tags , , , , on August 15, 2010 by pieman70

No posts for a bit, been busy apologies to both my readers.

Our coalition government has now been running things for a few months now, and when I get round to it there will be a post about that, but it’s not what I’m going to talk about today.

There are two untruths that are being repeated by the government, one is by both parties in the coalition and one is by the Tories principally.  Untruths is perhaps a harsh word but it has the feeling of repeating an interpretation of events enough to make people believe it.  So far at least question time audiences aren’t convinced.

First, what I call The Mantra

Every time cuts, economic uncertainty and recession are mentioned, particularly when the con-dems are coming under fire for enacting the Tory dream of small state under the auspices of austerity measures they repeat the same thing.  We’re in this mess because Labour spent all the money on an unweildly large state.  Keep an ear out, you’ll hear it next time cuts are mentioned within earshot of one of the coalition.

I might be remembering wrong, but isn’t our current economic state due to a global financial collapse caused by investment banks trading in toxic debt and making very risky investments for short-term gain, resulting in the treasury having to pay billions to bail out banks?  Now, I grant if Labour had properly adhered to the Keynesian plan we should have had a surplus to deal with the inevitable recession and their state was getting pretty big, but the cause, no that was bad banking practice.  In fact it was bad banking practice that has largely gone unchanged.  The pain has not been felt in investment, due to that fun sub-myth that all our bankers will run off to more relaxed governments if we make things too hard for them.  this is rubbish too, lets face it, they’re not keen to leave London unless it’s for somewhere like Switzerland or the nicer tax havens.  And anyone who can go there was offered during the times of plenty, these places are not short on bankers.

Labour is getting it from the coalition for two reasons, the first is simple, The Tories and lib-dems stand to be really unpopular for some of the measures that need to be taken, trying to pass some of that buck to the previous administration is just politics.  The other is far more Tory.  Many Tories are bankers, or heavily linked to banks.  Quite frankly it suits them to cover for their mates, after all favours and tips not to mention cushy jobs post government will be harder to come by if you pointed out your benefactors as the cause of all our woes.  It also fits the Tory line that “Big State” caused all the problems not private enterprise.  We’ll see if this little bit of misinformation takes root.

Second, The Tories have a Mandate from the people.

We hear this a lot, the Tories are still trying to claim some sort of Victory from the Election (An Election that no-one one, let’s make that clear) because their guy is in No 10.  The only policies the Tories can claim a mandate from are the ones they shared in election manifestos with the Lib Dems, anything else over 60% of the population actually said they didn’t want.  So, massive cuts, nope,.  Big society, no, repeal of fox-hunting, think not, Dismantling the BBC, was that in anyone’s manifesto?  Youd o hear Tories occasionally trying to claim victory, seemingly in the hope that we’ll believe it and assume someone voted for this pap, or indeed that they’re allowed to do this because they’re in charge.  Its worth reminding them this si not the case, more importantly, if your MP is an apologist, sorry Lib-Dem, make a noise, remind them that you and 60% of the population voted against this.

There are other little falsehoods being planted with the hope that they become accepted fact.  I’m keeping an eye out for them and will try to blog about them when I can.

A Load of Bankers

Posted in Government, Recession with tags , on October 3, 2008 by pieman70

Well, financial meltdown is Here. And it looks like the honest taxpayer will have to foot the bill.

Question time last night was interesting (of what I saw at any rate) and had a good speech by Chuck “Lib Dems when they were popular” Kennedy where he basically said “Yes, it sucks that we have to bail out the banks. (Oh Lib-Dems, you fools, your lust for power robbed you of your chance at opposition. Compare him and Nick Clegg, pah, but that’s a different rant) It really bugs me that, in order to keep money moving and everything else running we have to bail out millionaires who have cocked the whole thing up” and I agree with him mostly on this.

However, what I cannot forgive is how badly this has been handled by the current government. I’ve heard many reasons about how we got into this state but here’s my unqualified and unfocused rant of the major factors.

All was going well, perhaps too well, sadly banks from the very top to the very bottom thought that the astronomical rise in house prices and mortgages combined with low interest rates couldn’t end. Some may have known but largely the housing crash came from believing their own line of BS. Problems were showing when houses became so expensive that first time buyers dried up. See housing is like a chain, sort of. If you own a house, and want a better one, you have to also sell your house. Problem is that people start expecting more, as do estate agents etc. end of the day the first link, namely the first time buyer, couldn’t get on, and so sales stall (I do realise its more complicated than this) sadly many of the banks, particularly the ex-building societies like Halifax, Northern Rock and Bradford and Bingley, relied quite heavily on mortgages. This slowdown adversely affected their prices.

However this was not all, there were also these City Traders, bankers etc, who swore blind that if left free of regulation they wouldn’t do legal, but underhand things that may ruin the economy for short term gain. They of course did, as the type of person who becomes a stock trader is usually a vicious killing machine in a suit with a very flimsy ethical code and as a result needs to be watched like a hawk as to them, ruining an economy is collateral damage.

However, the real damage, at least in the UK, which I believe could have lessened the effects over here, was to bail out Northern Rock. It sent the wrong message, it told every CEO of banks, and city trader that they could take the big punts on other peoples money, because the Government would cover their behinds. I’d have let Northern rock go bankrupt, made sure all savings were protected, but let it go and have its assets bought by whoever wants them. Then used its fall as a reason to regulate the financial sector more heavilly. The shock that there was no safety net may have been enough to save HBOS or Bradford and bingly.

Of course if we’re bringing in new legislation, then I’d like a few other caveats in, because its is frankly disgusting that the CEO of HBOS, the captain of the sunk ship, will be claiming his £2 million bonus. In the grand dictatorship of Pie Man, the pot with his Bonus, salary etc, and those of senior board members, would be fair game should your bank go belly up. That would mean that the bill for protecting savings and paying off frontline staff would come from that, then the assets and finally the tax payer.

Finally, one more Culprit. Us, for forgetting that this happened before and can happen again, for believing that there is any sort of Risk free investment. Seriously, I’m an HBOS shareholder, if I’d really wanted the cash from those shares, I’d have sold them. High. Someone was saying that their shares had dropped from £14 a share to less than £2 and that this had impacted on their nesteg. Well yes, but that’s what shares do. They go up and down, and can become worthless.

Similarly the thing people kept saying during the property boom was “You never loose money on property” which is plum bollocks. You can pay too much for a property. What you won’t loose out on is if you buy a home. Because if you have a home you can live in it, and keep living in it until the market reaches a stage where you cans ell it on and hopefully have enough put by to buy a better one when required. Yes, its common sense, unless you can play the market or run a bank, there are no fast bucks. The less you look for them the more stable you’ll be.

Talk Like a Pirate Day

Posted in Pirates with tags , , on September 19, 2008 by pieman70

Arrrr, why is this not a national, nay International holiday