Liar Loans: SFA from the FSA

You’ve heard of locking the stable door when the horse has bolted. Well, the Financial Services Authority, has gone one better and promised to do its job properly only after it's been closed down.  Yesterday, the boss of Britain’s financial watchdog, Lord Turner, grandly announced that the FSA was going to put an end to “liar loans”, 125% “suicide” mortgages and other scams from the great housing bubble.  Bit late your Lordship.    Last month, the Chancellor, George Osborne, announced that the FSA is to be scrapped and financial regulation returned to the Bank of England.

    Perhaps if the FSA had done its job six or seven years ago, we wouldn’t be in the state we are in now.  Ah, but that’s just being wise after the event isn’t it?”  It’s easy to criticise with 20/20 hindsight.  Wrong. As readers of this column will be aware, perhaps painfully so, I have been banging on about irresponsible mortgage lending for most of the last decade.  In 2004 I warned that house prices were an unsustainable bubble. In 2005 I fulminated against the irresponsibility of lending five or six times income.  IN 2006 I railed against Northern Rock’s “Together” mortgages where the bank loaned first time buyers 25% more than the value of their property, thus placing them in negative equity even before they got the keys.  After Northern Rock collapsed in 2007, to demonstrate what was happening,  I applied for and was offered a £200,000 mortgage after telling the broker I had a disposable income of only £18,000.  Sheer madness. 

Free personal care saves money - axe top salaries instead.

   

     So who pays?  What gets cut? Well,  hardly a day seems to go by without a story in the press claiming that the cost of free personal care for the elderly is “out of control” and “unsustainable” .   There are repeated calls to axe near-free prescription charges; to restore the graduate endowment and bridge tolls.  Let’s end free bus passes; shut swimming pools and libraries.  Museums - who needs ‘em?  Clearly, everything has to be looked at.  But there’s a real danger that we start from the wrong end, axing relatively cost-effective front line services rather than cutting administration.  That is where the real savings are to be made ina public sector which is highly labour intensive.  Great damage could be done to the quality of peoples’ lives, and the dignity of vulnerable groups, by slashing services that don’t actually cost very much while protecting the public sector bureaucracy.

Pension apartheid: just how bad are private pensions?

 It’s war.  Public sector unions have promised strikes and hinted at civil unrest if the government tries to cut their “gold plated” final salary pensions.  But the £1 trillion unfunded pension liabilities of the public sector, as reported in yesterday’s Herald, are simply unsustainable. This is going to be an epic struggle.   The unions are right on one thing though: the real scandal is the poor state of PRIVATE sector pensions. 

   The average public sector pension, according to the TUC is a modest £7,000, but look over the other side of the fence and you’ll find that the average private sector pension is much less - around £1,700 a year, according to the Pensions Policy Institute. And of course around a third of all employees aren’t saving anything at all for their old age. But to cap it all, most low income earners who do save into private pensions will lose out in the Pension Credit trap. It is a national scandal.

Turn AV day into Constitution Day.

Calamity Clegg rides again.  The Liberal Democrats have been inviting ridicule by proposing a referendum they could easily lose on a voting system they don’t actually support.  The proposed AV referendum on May 5th, the same day as the Scottish parliamentary elections,  will be held at the height of the cuts controversy, with unemployment rising amid a wave of public sector strikes, and may simply provide an opportunity for disgruntled voters to register their disenchantment with the ConDem coalition.  And it’s not even as if the Alternative Vote is proportional. 

  Then there is the Scottish question.  I can understand why Alex Salmond is livid about having the Holyrood elections upstaged by a Great Debate on electoral reform.   Just as in the May general election, the campaign will likely be dominated by televised debates generated by the London media and featuring prominent Westminster politicians like Nick Clegg, David Miliband, David Cameron.  This could drown out the Nationalists just as they are trying to get a fair hearing for their case for re-election in Holyrood on May 5th. 

Don't mess with union laws.

There's a rather ugly swagger about the Lib Con government right now.  Like insecure playground bullies, they're puffing out their chests and giving it large.  Danny Alexander says 25% cuts aren't nearly enough. No, I want 40％！  Year!  Look at the size of my cuts.   George Osborne and David Cameron are jeering at trades unions and threatening to tighten laws against striking.  Come on you Simpsons and Crows. If you think you're hard enough.  Just try and take us.
   
  But if ever there were a time to try to change the law on strike ballots, this is not it.  The cabinet hard nuts should remember Ted Heath and the Industrial Relations Act. The Tories in 1971 tried to take on the unions in an economic crisis and failed because they misjudged the public mood.  Voters then were unhappy about the power of trades unions, but they did not want them victimised
 and they didn't like seeing trades unionists in court and union funds sequestrated.
 
  Trades unions today are a shadow of their former selves.  In the 1970s most of the workforce, 12 million, were in unions.  Today, little more than half that number are organised, and the laws on strike action are much, much tougher.  The public are less willing to support unions today because they tend only to represent public sector workers and their privileges.  I do not believe there would be much public sympathy for any wave of strikes .But the surest way to create it, and reignite trades unionism as a moral force, would be to come down hard with the law.  So put down the baseball bats. guys. You're beginning to look stupid.


  

 

Turn the AV referendum into a Constitution Day

 Calamity Clegg rides again.  The Liberal Democrats have been inviting ridicule this weekend for proposing a referendum they could easily lose on a voting system they don’t actually support.  The proposed AV referendum on May 5th, the same day as the Scottish parliamentary elections,  will be held at the height of the cuts controversy, with unemployment rising amid a wave of public sector strikes, and may simply provide an opportunity for disgruntled voters to register their disenchantment with the ConDem coalition.  And it’s not even as if the Alternative Vote is proportional. 

Mad Max Budget - but is he serious?

After a stunned silence after the most draconian budget in modern times, the country is waking up to what the new age of public austerity will actually mean.  Commentators paint a picture of a Mad Max dystopia - a country plunged into depression and decay.  Crumbling schools, empty swimming pools, leisure centres boarded up.  Feral children running riot as police numbers are cut.   Potholes in the road filled with rubbish uncollected.   A million public sector workers sacked;  families evicted after losing housing benefits; strikes and civil unrest returning to the streets of Britain after nearly thirty years.  Yes, it’s pretty grim. 

    So grim in fact that people are beginning to wonder if  George Osborne really means it.  Was the budget just a ploy to sound tough?   Will it all be quietly laid to rest before the comprehensive spending review in the autumn spells out exactly where the cuts will fall?   It’s actually very difficult to know how you go about cutting departmental spending by 25% in real terms.  Do you throw a quarter of prisoners out of jail?  Close a quarter of all libraries, museums, schools? You can't just sack social workers when there are statutory responsibilities like child protection.    Health and overseas aid are the only departments given a clear exemption from the cuts, but even here there will be cost implications of the increase in VAT to 20%.

Osborne's Bullingdon Budget

  Prepare for a hot autumn, comrades: the class war starts here.  Labour have hoist the red flag over Westminster and are preparing bonfires for the Liberal Democrat “collaborators”.  This budget, they say, was  Bullingdon Man taking his “ideological” retribution against the state using the coalition as cover.  It will hit people on low and middle incomes hardest, throw hundreds of thousands out of work, create fear and insecurity among benefits claimants and the disabled.   But the question is: was there any alternative, given Britain’s wrecked finances? Or was this, as the Chancellor put it, the “unavoidable budget”?   

  It is certainly a radical, even a revolutionary budget.  A 25% real terms cut in non-protected government departments in four years. A fiscal consolidation of nearly £120bn by 2015.   The rollback of the state implied by this Budget is simply unprecedented in modern British history.   We are talking tens of thousands of public sector jobs going, services like education, housing, transport, police and social work slashed.  Margaret Thatcher never tried anything so ambitious. George Osborne said he was seeking a deficit reduction on the ratio of 80% spending cuts to 20% tax increases.  She only managed about a fifty fifty split in her early budgets, and public spending actually went up during he 1980s. Can he be serious?