Friday, 31 October 2008

Still inscrutable after all these years

Courtesy of the great Dr Ray of Greenie Watch I have learned of a recent report from our Chinese friends (reported here by the BBC). Two things are noticeable, China has absolutely no intention of slowing the tide of its industrial development and it wants the West to pay for gimmicks like carbon capture technology. What very sensible people they are.

It's all about priorities. The Communist leaders realised, at around the time they negotiated the hand-back of Hong Kong, that their ideological approach to economics was keeping their people in poverty. Perhaps a close look at Hong Kong was all it took to acknowledge that a radical change was needed, perhaps the timing was coincidence, it does not really matter which. They too could enjoy warm homes and relief from servile drudgery if only they did what the West had been doing for a century and used power generation to improve standards of life. It really does all boil down to the generation of power, primarily electricity. Without machines we cannot make things sufficiently cheaply in sufficient numbers to allow comforts to be available to all, and without power we cannot make machines, without power we cannot run machines, without power we cannot transport goods in bulk and so it goes on.

This is not to suggest that China was comprised entirely of hovels, but modern buildings and facilities were only widely available in the big cities. A country of its massive size and population needed to industrialise on an enormous scale in order to make a serious inroad into the vast swathes of population who were still living as their great great grandparents had, eking a living from a limited range of crops with little modern equipment to ease the burden.

They had a choice. Leave things as they were or seek a way to improve the quality of life. The latter was chosen and a sustained programme of building power stations was set in motion. To fuel those power stations they did what every sensible government would do, they looked at the resources available to them rather than being reliant on imports. One of China's greatest natural resources is coal. More coal than you can shake a stick at. Coal fired electricity generating plants are quicker and cheaper to build than any other type, so they rolled their sleeves up and got on with it. We can sneer at their health and safety practices from the lofty heights of a country in which, until recently, we could afford to be ultra cautious towards workers; but they had a job to do and were not going to be delayed or caused additional expense by such considerations.

It is, I think, important to recognise just how addictive comfort can be. Once experienced it is hard to relinquish. If you have only ever slept on a straw mattress your first night on a well padded sprung bed must be quite a shock, a shock of the very nicest kind. The norm has changed, now a sprung mattress is there in your experience and in your mind, the memory is indelible, so you want one for yourself. The same applies if you have only ever eaten gruel and offal then taste a steak pie with fresh steamed veg and a good sturdy boiled potato. It is not called "progress" for nothing, it is a change from something bearable to something comfortable and human nature demands a progression to further and further comfort. Not only does this apply to each of us individually, it applies to groups of people in a family, in a village, in a town, in a city and in a country. However we organise ourselves, those who have experienced increased comfort understand why others would benefit from the same. It took China's leaders a long time to come to the comfort party but they are here now and no amount of tree-hugging wibble from self-flagellating eco-egotists will keep them from the dance floor.

In one of my earliest offerings of blogology (here) I commented on the futility of the West having any carbon dioxide emissions targets when the leaders of China and India are determined to give their people the same comforts we take for granted. That remains the position and now we see how the game is being played by China's government. They know there is nothing anyone can do to make them reverse their policy, so they will milk it for everything they can get. And quite right too. If the eco-warriors don't like China's power stations spewing out carbon dioxide, it is for the eco-warriors to provide China with a way of producing electricity without that consequence.

If and when carbon-capture technology is developed there will be little point trying to charge for it because the West will have no bargaining position. This is an important point. There are only two scenarios, either the man-made global warming Armageddon theory will still prevail or it will have been discarded. If the former, the onus will be on the West to get China to play ball. But China only needs to say "we are progressing nicely as we are, thank you" and the West must give the technology for nothing. If the latter, carbon capture is otiose. As would be said in the East End of London, China will have us done up like a kipper.

Perhaps China will pay a nominal price for diplomatic reasons but the vast bulk of the costs will fall on the self-righteous preachers of the West or, to be precise, on their taxpayers. The more the West bleats about cutting emissions, the stronger China's position. The more desperately the Western hand-wringers call for their own countries to act, the greater their impulse and self-imposed need to drag China into the "green" fold.

One of the arguments used most frequently by eco-wibblers is that their position is morally correct - saving the world is a greater cause than any other. They have a point, but only if the world is imperilled. Another moral argument is advanced by the Chinese and, indeed, by the Indians. They are not building vast numbers of coal fired power stations just for the fun of it or to give their people the delights of interactive HD television shows. They are doing it to give their people relief from subsistence living and some additional comforts that their countries can afford, but can only afford by using coal to make electricity. Their morality is in direct contrast of the immorality of the current UK government which has not made proper provision for maintaining electricity generation to keep everyone safe from the ravages of winter.

China knows it is on the moral high ground. It also knows the West's eco-fetish is a powerful force on many governments in developed countries. For China it is a win-win situation. They cannot be criticised for improving the lot of their weakest people and they can say, with absolute justification, that emissions targets will reduce their ability to spread that improvement. They will let the West stew in its expensive green juices. The Chinese are a polite people, they will not say it to our faces, they will just sit there smiling and laughing internally at our politicians' stupidity.

Still inscrutable after all these years.

Thursday, 30 October 2008

Wigs and gowns ... "I think"

In his comment about one of my recent offerings, Mr Simpleton raised an interesting point, he wrote:
"One of my bugbears is those who call for judges and lawyers to lose the regalia of the courts in a process of "modernisation". ... The wearing of wigs and robes may look arcane but the donning of them, like any uniform, makes the wearer conscious of their responsibilities and the heritage of the positions they hold. Furthermore, those in court are left under no illusion that it is the State that is trying the case and not some geezer from down the road which adds to the solemnity and impersonalisation of the proceedings."
It seems to me there are three points here. First is there scope for "modernisation" of court proceedings? Secondly does the wearing of a uniform affect how advocates do their work? And, thirdly, does the wearing of a uniform affect the way the public perceives court proceedings and the authority of the court?

"Modernisation" is one of those horrible New Labour words, like "stakeholder", "delivery agency", "social justice" and "empowerment". They don't mean anything and can be moulded by the user to his own purposes. The essential structure of court proceedings in this country is that there are two sides (prosecution and defence in criminal cases, claimant and defendant in civil disputes) who present their case to a tribunal (judge alone, or judge and jury) at which point the tribunal decides which side wins. Constant changes are made to the way proceedings can be conducted to reflect technological and scientific advances. Not so long ago there was no email, and it is only about 25 years ago that fax machines became readily available. These modern devices allow formal documents to be served far faster than when everyone relied on the postal service; the procedural rules of the courts changed to accommodate them. That is real modernisation. Some hearings are now conducted by video-link to save time and money. That is real modernisation. Trouble results from tinkering with the underlying trial system for political reasons and calling it modernisation.

Of course the trial system we have is not perfect. Every year some innocent people are convicted of criminal offences, including very serious criminal offences. In the civil courts some people have a judgment given against them and face financial ruin despite the fact that they have done nothing wrong. Whether it is a judge or a jury that decides the case, mistakes can and always will be made because judges and juries are human beings. If you want to reduce or remove the risk of miscarriages of justice you need to identify why a miscarriage of justice occurred and find a better way of doing things.

In my time in the law there have been some radical changes made to the law of evidence to exclude or limit apparently strong evidence which in fact is not strong at all. A good example is the way identification evidence is now treated in the criminal courts. Where a substantial part of the case against a defendant is a witness who says "that's the man I saw", the law now requires the court to treat the identification with great caution. Not because there is any particular risk of witnesses lying but because it is easy to be mistaken. This was a lesson learned over many years and we can only guess at how many innocent people were wrongly convicted because a witness was honestly and absolutely sure that the defendant was he man they saw, when in fact he was not.

That sort of advance in procedure is real modernisation. It uses the advancement of knowledge through experience to reduce the risk of miscarriages of justice. Are people still wrongly convicted on identification evidence? Almost certainly, but far fewer than would have been the case 30 or 40 years ago. Numerous further examples could be given of changes in legal procedure aimed, after careful analysis, at reducing the risk of mistakes occurring.

In recent years we have had proposals from governments of both parties to change the law so as to make it easier to convict defendants of certain crimes. Often they have pleaded that the established law of evidence and rules of procedure obstruct justice and should be relaxed. They seek to reduce the weight of evidence the prosecution must adduce in order to secure a guilty verdict, or seek to place a burden on the defence to prove their defence rather than require the prosecution to prove their case. Some of these calls for "modernisation" have proposed sensible measures which assist in reaching a just verdict, but most are nothing other than calls for more people to be convicted because the politicians think it will make them look good in opinion polls.

The only real "modernisation" of the trial process is a change which enhances the prospect of reaching a just decision on the evidence available. What judges, barristers and solicitors wear in court can make no substantive change to that.

As for a uniform helping to ensure that advocates present their clients' cases properly, I am doubtful that it is a significant factor. Wigs and gowns are not worn in Magistrates' Courts nor in the County Court and High Court when hearing most family law cases. For many years they have not been worn in most proceedings conducted by District Judges or Masters (the lower of the two ranks of judges who sit in County Courts and the High Court) or in proceedings before Circuit Judges or High Court Judges (the higher rank) unless those proceedings were open to the public (and even then there were exceptions). To that extent, what is worn has proved to be of no consequence to the ability of the advocates and the judge to fulfill their functions.

Every barrister of experience will occasionally appear before a judge who is a personal friend, sometimes even with another personal friend as his opponent. There is no risk of first names being used or corners being cut because you do not appear in court to have a chat with old chums, you are there to put forward your client's case and the judge is there to decide between the cases of the clients not between his liking for the advocates. It is the nature of the work rather than the way they are dressed which dictates how lawyers should (and usually do) behave in court.

The perception of those involved as parties to litigation is more difficult to assess. I suspect the vast majority of people in this country only go to see a solicitor if they are buying a house or when a close relative dies and the estate has to be sorted out. Fewer still will ever need to hire a barrister because litigation is very rare. The very fact of being involved in litigation is a cause for at least apprehension and very often terror because it is something far outside the everyday life of most litigants and they do not know what to expect or how to deal with it. It does not help that lawyers are obliged to tell their clients that there is no such thing as an open-and-shut case. Actually that helps those who know they are in the wrong because they see a possible escape from the consequences of their errors, but it scares the living daylights out of those who know they are in the right. Nonetheless, it is a fact.

When at court I cannot think of any time when my clients appeared to be any less anxious because the judge had decided we would not wear formal court dress or any more anxious because everyone was topped with carefully curled horsehair. Whether it was a shoplifting or a murder, a dispute between neighbours over three inches of boundary or a multimillion pound claim for a bank, it was the case that was in their minds and they had no difficulty in understanding that the man or woman sitting in the big chair had their fate in his or her hands.

The only time a client made an adverse comment to me about a judge being too informal was a case in which we were all fully robed, we won the case but he felt the judge did not seem to take matters sufficiently seriously. On the other side of the coin, there were quite a few cases in my career in which the client expressed disappointment that no one wore a wig or gown in court (except the usher). It was clear that they expected the sartorial trimmings as part of the whole once-in-a-lifetime experience. None of them suggested that the trial was not conducted properly, they just expected the full paraphernalia and were rather sad not to have seen it.

When I heard that wigs were to be dispensed with in civil proceedings and judges would have to wear a new style of gown I was rather disappointed. It seemed to me to be a change for the sake of change. Lord Phillips was the driving force behind it. He has been an outstanding judge for many years and has held the three highest judicial positions in the country. His argument was that old-style court dress was antiquated and added nothing to the proper administration of justice. In that I agree with him. He also suggested that it might do harm by giving an impression of form over substance. With that, I do not agree. I think it did no harm at all, it was just a uniform like chequered trousers and a toque on a chef. There is, of course, an argument for doing away with an historical quirk that gives no positive benefit, but a little pompous kernel in my soul rather enjoyed the visible badges of office.

So far I have agreed with Mr Simpleton about "modernisation" and disagreed with him about wigs and gowns. But I have to add a rider. It comes out of something you might be familiar with from television and films. In American courts you will hear advocates telling the court what they think. You will see the District Attorney addressing the jury along these lines: "You know what I think, members of the jury? I think he is guilty. I am absolutely sure of it because I have read every word on every piece of paper this case has produced. I have been in the law for thirty years and I know he is guilty." I have attended trials in American courts and heard it for myself - indeed that is why I have taken time out of holidays across the pond, I wanted to see whether they really say what Perry Mason used to say. They do.

Over here any barrister or solicitor using the words "I think" would be reminded instantly by the judge that his opinions are irrelevant and that his job is to present the case objectively not subjectively. Presenting a case objectively requires attention to be concentrated on the evidence. Presenting it on an "I think" basis concentrates attention on whether the advocate's opinion is correct, something which necessarily includes an assessment of the advocate and his experience, not on what the evidence actually proves.

There is the possibility, and I put it no higher than a possibility, that relaxing the formality of dress will lead to a relaxation in the formality of the proceedings themselves. Over time it could even result in "I think" advocacy becoming acceptable in British courts. Perhaps that is part of my disappointment at the removal of traditional court attire, because I have no doubt at all that trials are at their fairest when minds are concentrated on the evidence rather than the individuals involved.

Tuesday, 28 October 2008

A simple matter of duty

There is a real risk of power cuts this winter because our national electricity supply network has insufficient reserve capacity to fall back on when demand is high. A cold winter in 2009-10 and power cuts are a near certainty. One might think this a suitable subject for emergency debates in Parliament. One might think it sufficiently important to keep the lights on that the government is dedicating every borrowed pound in its bloated budget to securing additional power as quickly and cheaply as possible. One might think that a threat to the normal comfort of the people of the UK would have a high priority.

For present purposes, imagine the very worst predictions of the global warming hysterics are true. The world is heating dangerously, lakes in darkest Africa will dry-up within the decade, the seas will rise 20 metres in the next 92 years (it was 20 metres in 100 years from 2000 but they've done nothing so far, so only 92 left), hurricanes and tornadoes will ravage the planet as never before, the seas will be awash with algae and polar bears will have to eat each other to keep cold. Imagine it is all true and that the only way it can be averted is by mankind as a whole reducing its emissions of carbon dioxide by 80% by 2050 (I can't say what this figure of 80% is to be measured against because no one seems to know).

Imagine also that you are a member of parliament in a country that produced just 1.87% of the world's human-caused carbon dioxide emissions, a percentage which is falling every year as China and India produce more and more. You know your country is not producing enough electricity to provide for the needs of industry and homes. You know many of your existing power stations will have to close in a few years. You know money is tight. You have to decide what to do.

What can you do? To tackle the energy deficiency you can commission new power stations. To tackle your country's 1.87% (and diminishing) contribution to the impending end of the world you can impose punitive measures to dissuade industry and individuals from engaging in activities which create carbon dioxide. You cannot do both. Your choice is between keeping the lights on or keeping the lights off.

I fail to see how there can be any serious debate about this. The duty of British politicians is to look after the wellbeing of the British people. If, as seems to be the case, there is an imminent risk of power cuts in winter people will die. That is what happens when the most physically vulnerable are unable to keep warm. They don't just get a bit chilly and put on a new cardigan while singing songs from the Blitz. They die. They die from excessive cold.

We are assuming that we must cut carbon dioxide emissions very substantially by 2050. Increasing energy production now might increase emissions and is, therefore, undesirable. But it is not as undesirable as old and frail people freezing to death. The extra emissions can be tackled in five years time (when the technology for doing so is likely to be far advanced of anything currently available) deaths from cold in 2008, 2009, 2010, 2011 or any other year you care to mention cannot be tackled later. Death is not reversible.

Other countries face this quandary and are choosing life for their people. Our Parliament is expected to vote for even greater anti-carbon dioxide measures than those already in place. It will result in more deaths through cold. That is an inescapable fact because providing more heat will breach even current measures let alone the new ones. More heat is off their agenda. Only less heat can contribute to their desired state of affairs.

It is a long-standing principle of law that everyone intends the probable consequences of their actions. If I punch you in the face my intention is to cause you pain because that is the probable result. If I shoot you in the head my intention is to kill you. If I am responsible for setting the level of electricity generation in the country, I intend the probable consequences of my decision. The probable consequence of voting to cut carbon dioxide emissions is that there will be insufficient electricity to heat homes and that people will die.

They should forget grandstanding about our 1.87% contribution to man-made carbon dioxide. They should think about the people they are paid to represent. It is a simple matter of duty.

Sunday, 26 October 2008

No more "conflict of interests", please

Details continue to be revealed about Lord Mandelson's dealings with Russia's aluminium bigwig. The coverage on television, in newspapers and on the radio is littered with the expression "conflict of interests". This phrase irritates me enormously because it is fundamentally inaccurate, indeed it is so inaccurate that it serves to play down the seriousness of the situation yet those who use it think it does the opposite. Let me explain.

Assume you are Billy Biggins, the EU Trade Commissioner, and you have to give advice and take decisions about levels of EU import duty on aluminium. Your decisions should be made only after all appropriate enquiries have been conducted and you have considered all relevant submissions made to you. The requirement to approach your job in that way has nothing to do with you personally, it goes with the job. Exactly the same obligations fall on every commissioner in every field. Those obligations arise out of the fact that you are under a duty to give impartial and properly considered advice and a duty to reach decisions only after considering all relevant circumstances. That is your duty to your employers.

To put it another way, the decisions you have to take and the advice you have to give are not personal matters. You do not give them as Mr Billy Biggins but as Commissioner Billy Biggins. It is the office you hold that takes decisions and gives advice, you are just the temporary custodian of that office.

If you are foolish enough to accept personal favours from someone who has official dealings with the Trade Commissioner there is an obvious risk. The risk is that your personal interest (that is, the personal benefit you have received and/or think you might continue to receive in the future) might conflict with your duty to your employers to act impartially and objectively. In other words, what should be avoided is a conflict between your personal interests and your duty. You, Mr Billy Biggins, should not have a personal interest which might compromise the ability of Commissioner Billy Biggins to do his duty to his employers.

Describing the problem as a "conflict of interests" is to misstate the situation because it suggests that Billy Biggins's interests weigh on both sides of the scales. They do not, on the one side is his personal interests and on the other side is his duty. His duty is not a matter of his personal interests, it is all about the interests of his employers. What must be avoided, therefore, is a conflict between interest and duty.

Since its first days in power in 1997 the current government has failed to distinguish between the people holding offices of State and the offices they hold. The rot was firmly embedded at Tony Blair's first cabinet meeting at which, it is reported, he said "call me Tony". This was a fundamental misunderstanding of his role as Prime Minister and the role of the other ministers in his government. Tony Blair was not in cabinet as Tony Blair, he was in cabinet as Prime Minister. Gordon Brown was in cabinet as Chancellor of the Exchequer, not as Gordon Brown. In recent years Peter Mandelson was in office as EU Trade Commissioner, not as Peter Mandelson. If you fail to differentiate between the individual and the office he holds there is an inevitable danger of failing to differentiate between the individual and the duties he owes. In the mind of the office-holder his duties can cease to be the overriding driving force behind how he does his work. There can only be one loser in that situation - the employers to whom the duties are owed.

So let's have no more "conflict of interests" and let's hear "conflict between his personal interest and his duties as Trade Commissioner". Then we can judge his acceptance of lavish personal hospitality in their proper context.

Friday, 24 October 2008

Recession, a random thought

Recessions come in many shapes and sizes, but they all have one thing in common - a reduction in the total value of economic activity. Because economic activity is a result of the interaction of supply and demand, one might think a change in either supply or demand can change the total value of business done. In fact it is the total value of demand which determines how much activity there will be. If supply increases but demand stays the same either prices fall per unit of sales or some goods remain unsold. If supply reduces but demand stays the same, prices rise. In either event the total value of sales remains the same. It is the value of demand or, if you prefer, the amount people choose to spend, which determines the total value of sales.

When credit is so cheap that people do not think twice about spending on the never-never there can be a huge boost in the total value of sales. Manufacturers of sumptuous beds, big televisions, fancy double-doored fridge-freezers and many more modern nicenesses increase production because there is a queue of people wanting to upgrade their stuff now and pay over the next few years. The difficulty comes in sustaining the expansion. Every business which increases the value of its sales by £10,000 in one year has to receive that extra again £10,000 the next year just to stand still. Yet we have seen steady growth in total sales for more than a decade, much of it funded by credit.

Now the borrowed chickens are coming home to roost. Not only can the expansion not be maintained but a sustained reduction in economic activity has been confirmed. It has been headline news all day: it's a recession, official. Until today it was an inevitability. Everyone knew it was happening, so what has changed?

That is where my random thought comes in. I have no idea whether it is right or wrong. My thought is that "official" confirmation of that which we all knew anyway will cause behaviour to change. Instead of having a desire to retrench people will feel a compulsion to do so. Switching to the supermarket's own brand baked beans instead of Heinz or Cross & Blackwell will become a switch to the supermarket's economy line of baked beans. The weekly treat of an evening in the pub will become fortnightly. New clothes, new beds, a larger telly and all the rest of it will be approached with far more caution than would have been the case just two or three days ago.

I might be wrong, but I feel announcing the recession as an apocalyptic event will have the effect of slowing spending far faster than would otherwise have happened. We will never know whether this will prove to be beneficial or detrimental in the longer term because what actually happens will be fact and what might have happened will only be hypothesis. Undoubtedly a sharp decrease in spending will lead to redundancies in retail and manufacturing businesses which, by a domino effect, will further reduce spending power. Some businesses will fold completely, many would have folded anyway through withdrawal of credit facilities and more will be dragged down by the combination of tight credit and falling sales.

For several weeks we have been told about the problem banks face. They lent too much against too little security and have to re-balance their books. The supply of credit to finance consumer spending on unnecessary luxuries has been reduced. But that is only one side of the equation. If people who might have been tempted to borrow money are no longer tempted because they are retrenching, the lack of supply of credit is no more the cause of reducing spending than lack of demand for credit.

If I am right in thinking that the way the recession has been announced will have a profound influence on spending patterns, we can expect quite a sharp downturn in consumer demand. This should result in the credit bubble deflating quite quickly. There will be many business casualties along the way but it should help keep the recession short. What we will then need to worry about is whether the country's economy can expand through something other than a credit bubble. That is a whole new kettle of ballgame.

Relationship lessons, I don't think so

When I was at school things were pretty straightforward. At primary school it was reading, writing, sums and a bit of history, geography, plants and animals. Practical stuff everyone should know. After all, we were little children with an awful lot to learn. There was a sex education class at age 10 or 11, as I recall, a biology class really. No pretence of "this is something you might think of doing in the next couple of years", just "this is how it happens" in the same way we were taught that 9 x 12 = 108. They taught a fact, something we should know at that age. At grammar school the same pattern was followed with the addition of far more reasoning because that was needed if we were to develop our minds as far as possible.

At no stage was I subjected to the modern educational fetish of emotionalism. When I learned that crocodiles enjoy a dinner of raw wildebeest it did not occur to anyone that I should consider how the wildebeest felt about being held underwater until it was dead and then consumed. Its feelings will never stop a hungry crocodile from killing it and there is nothing I or any other human being can or should do to prevent nature taking its course.

On this week's Question Time someone asked about the government's proposal that children as young as five should be taught about human relationships. The question, and all the answers, presumed the proposal to be for such young children to be taught about sex but that is not my understanding. I believe they are proposing that little children at primary school should be taught about relationships and sex education will follow later. There seemed unanimity among the panel that teaching about relationships is appropriate and that made me ask what that means.

I can recall just a few specific events in my life up to the age of about 10. What I acknowledge is that principles and standards inculcated in me from my earliest days are with me still even though I cannot recall ever being taught them. This suggests to me that teaching esoteric concepts to young children must be done with great care because they will absorb the principles without question and use them as the foundation of how they live their lives and treat other people in the future. I do not, of course, ignore that a bad principle can be corrected. A child taught at home that stealing is acceptable can be persuaded at a later time that his parents were incorrect. Similarly a child taught that stealing is wrong can change his mind or be persuaded to change his mind when he is older. Nonetheless, if a principle is taught there is a high probability that it will be carried into later life. This means that we must be very careful about teaching principles of behaviour and, in particular, we must be careful to ensure that the principles we teach are sound and will serve the child as he or she goes through life. They should not be matters of current fashion which have not already stood the test of time as solid principles.

What is it that small children are to be taught? This has not yet been decided, the proposal to introduce the subject of relationships into the syllabus is just a proposal. So, what might they be taught? What principle is there that should be inculcated into little children to stand alongside the most important principle of all, namely, treat others as you would like them to treat you? I cannot see any underlying concept in the subject matter of relationships that is of sufficient importance as a foundation for life that it should be introduced as a matter of principle before children are old enough to understand what it really means.

We cannot ignore that the standards we teach small children are essentially based on the Ten Commandments and are taught because we accept them as being a good foundation for life. Yet we must not pretend that we know them to be good standards because of our own experiences. They are a body of fundamental principles of behaviour that have been tested by time and proven to be worthy of transmission to the next generation. That is what justifies them being pushed into children's minds before they develop critical faculties. History proves they are sound and we want the next generation to follow them so, in effect, we brainwash children with them.

I would rather leave brainwashing where it is and concentrate on ensuring the little darlings can read, write and do basic maths. After all, if something is to be added to the syllabus, something else must be discarded. With levels of practical literacy and numeracy still worryingly low despite ever increasing sums being spent on compulsory education it is, to my mind, plainly more important to teach children the three Rs.

Wednesday, 22 October 2008

The George and Mandy Show

What fun we politico watchers are having at the moment. No sooner was attention focussed on the newly ennobled Peter Mandelson's dealings with a Russian businessman than a rumour came from nowhere about the Conservative shadow chancellor, George Osborne, asking that businessman to contribute to Conservative Party funds. It is one of those situations I enjoy enormously because it really has very little to do with the headlines and everything to do with devious machinations behind the scenes.

It is not easy to ascertain the precise allegation being made against Mr Osborne because the accuser, someone called Rothschild, has expressed himself in ambiguous terms. The highest it can be put appears to be: (i) Mr Osborne invited someone who raises money for the Conservative party, Andrew Feldman, to a social gathering (which the Russian was hosting) in the hope that a donation could be solicited and (ii) on three occasions either Mr Osborne or Mr Feldman or both discussed with Mr Rothschild either the possibility of the Russian donating to Conservative party funds or the mechanism by which such a donation could be made.

This allegation is not as illusory as some have suggested. If it amounted to a nascent plot to circumvent the ban on foreign donations to UK political parties Mr Osborne could be subject to substantive criticism. A foreign national who has control of a UK company could quite legitimately secure a donation to a party from that company without anyone breaking the law because British companies are entitled to make such donations no matter the nationality of their shareholders or managers. What is not permitted is receipt of a donation made, directly or indirectly, by the foreigner himself. Any attempt by a politician or political party to secure a donation from a foreigner could be illegal and would certainly be against the spirit of the law. There is little, if anything, in the allegation made by Mr Rothschild to support such a claim against Mr Osborne.

So why is it being given such prominence on television and in the newspapers? It seems unlikely that those media have any substantive evidence in addition to what Mr Rothschild has already said because one would expect them to have broadcast it to get one step ahead of their competitors. Of course they might be drip-feeding the evidence to give Mr Osborne an opportunity to resign now and avoid further embarrassment; that technique was used when they exposed Lord Mandelson's corruption in the past. This story, however, does not have that feel to it. When exposing corruption the main allegation is always made first, it is additional material about the surrounding circumstances and additional details of the way the corrupt activity was conducted that is fed drip-by-drip. There is a very good reason for doing it in that way.

A story of corruption that rests on word of mouth rather than documentary evidence is only as strong as the integrity of the person making the allegation. Someone who says "George Osborne told me he was interested in the Conservative party receiving a donation from a foreigner" will either be believed or he will not. Supporting evidence of, for example, the foreigner himself saying "yes, Mr Osborne asked me for cash in a brown envelope", will back up the story and make the original accuser more believable. By contrast, the accuser adding more serious allegations later when it appears that his original story has not been believed simply causes one to ask why, if he is telling the truth, he did not tell the full story originally. His claim becomes weaker by being drip-fed, not stronger.

On the face of it we have heard the main weight of the allegation against Mr Osborne. That there is no evidence at all of the Russian businessman having been approached about making a donation suggests that, at most, Mr Osborne discussed with Mr Rothschild whether a donation might be possible and, if so, whether a path exists by which it could be made lawfully. All in all, it looks like a non-story to me, not least because the one thing we know for certain is that neither the Russian businessman nor any British company in which he has a substantial interest made any donation to the Conservative party.

The most obvious explanation for this story being given so much prominence at the moment is that the Downing Street spin machine is flexing its muscles again. Knowing that poor Gordon's all-new, all-squeaky-clean, all-incorruptible Mandelson-in-shining-armour is under attack for personal corruption within weeks of taking office, they have done what they used to do in their heyday under Tony Blair, make a counterattack before the attack has been fully mounted by their opponents. News of Lord Mandleson engaging in corrupt activities is old hat, news that George Osborne might have done something sleazy too is very new hat. Even if, as appears on current evidence, there is little or no substance to the allegation, the mere fact that it is made is headline news. Who is going to kerbcrawl for the old tart when fresh meat is standing at the next street corner?

In time the spotlight will turn back on Lord Mandelson, the serial resigner. His position remains exactly as it was before Mr Rothschild intervened. Lord Mandelson was EU Trade Commissioner at the time he attended social functions as the guest of the Russian businessman concerned. As Trade Commissioner he was responsible for the formulation of EU trade policy including every aspect of how EU trade policy affects businesses outside the EU. One might think it somewhat unwise of him to accept lavish personal hospitality from the man behind many millions of Euros of annual trade between the EU and Russia. Decisions taken by the Trade Commissioner can have a direct effect on the wealth of those controlling non-EU trading companies and it is important that such decisions are taken impartially. It is one thing to glad-hand prominent businessmen and politicians, that is part of the standard protocol just as the UK's prime minister has to shake hands and say "nice to see you, I hope you're well" to a host of barbaric dictators. It is another thing entirely to accept an invitation to stay as a personal guest on Billionaires' Row.

No doubt we will learn much more about Lord Mandelson's intimate entwinement in the personal lives of the rich and oligarchical. That will be a real story and will end in his third forced resignation from government. Raising a weak story about George Osborne will allow him to buy time and say "you can't complain about me because George did something wrong too". One thing the deeply corrupt do not understand is that misbehaviour by another does not make them clean. Another thing they do not understand is that saying "look at him, look at him, he's dirty too" is an admission not an excuse.

It's time to abort Harriet

Please allow me a moment of naive ideology. I think laws should be debated fully in Parliament so that all sides can be heard. Full debate results in better law because flaws can be isolated and ironed-out and the strength of opposition or support for particular aspects of a Bill can be identified.

Thank you. That's that out of the way. Now back to the real world.

Many people get excited about abortion. I don't, I really couldn't care less what the law is because the arguments against any given position always seem to be stronger than the arguments for. If I had to choose I'd probably give free rein to the quinine and knitting needle brigade just to irritate those who claim their god wants a raped 14 year-old to give birth to her father's child. Fortunately I do not have a vote. But MPs do. Oh, sorry, perhaps they don't.

Today the BBC reports that the ludicrous Harriet Harman has decided to impose limitations on the debate allowed on the Human Fertilisation and Embryology Bill. If there is ever a subject that should have absolutely no limitation on Parliamentary debating time it is the (literally and metaphorically) infant science of embryology. Simple Harriet has decided, in her capacity as Leader of the House, that embryology should be allowed some time for debate but amendments to the abortion laws currently contained in the Bill should not be debated. Those amendments will stand or fall on the vote for the stuff about embryology. Since that vote will be whipped, the abortion amendments will go through by government diktat.

Anyone with a general sense of fairness would recognise that issues which people care about are, well, issues which people care about. Regardless of the outcome of the vote, it is the debate that counts. I know not whether a single MP would be persuaded to change their mind on whether current English (and Welsh) law on abortion should be extended to Northern Ireland, but there is only one way to find out - let them hear the arguments and vote. It is rather different on an issue such as whether the number of doctors required to consent before an abortion can take place is reduced from two to one. That is an issue on which many MPs would have a legitimate wish to be heard and is such a fundamental change in a sensitive area of law that it should not be railroaded through without proper consideration.

Lack of Parliamentary time is no reason to curtail debate because there is plenty of scope to extend that time. The House of Commons normally sits for between eight and nine months of the year. Perhaps that made sense when government did not feel it necessary to legislate about everything that moves, these days it is ridiculous.

What is not just ridiculous but utterly inexcusable is limiting debate on a difficult issue simply because the government sees the Bill as a "flagship" measure. In fact the opposite should occur. Any measure the government considers particularly important should be given as much Parliamentary time as it needs because, almost by definition, such a measure is likely to be controversial and, therefore, to be most worthy of serious examination.

None of this will have any effect on someone like Simple Harriet. She is an unreformed, tunnel-visioned, student union politician of the very worst kind. She is not very clever, but so sure of her own importance that she wants to get her way no matter what. So blinkered and self-centered is her approach that she shows no sign of even beginning to understand that other people might have a better idea than her or might understand an issue more than she does. To her, duty to the Party is more important than ensuring that complex and sensitive legislation is subjected to close scrutiny.

No doubt we will have more and more examples of legislation being pushed through without debate over the dying months of the current fetid government. They have nothing to lose so they will want to pile up more and more of their pet Bills knowing it will be easier to push them through now than it will be for them to be repealed later. Fairness and respect for the opinions of others are nothing compared to promoting their pet projects. It could get very messy.

Sunday, 19 October 2008

Actually, it's my car

Via that quiet man Mr Kitchen, his friend Mr Smoker has drawn my attention to a campaign by ASH (the Association of Snooping Hypocrites, or something like that) to prevent me smoking in my car. At the moment the proposal is that smoking in cars should be a criminal offence if there are any children under 18 in the vehicle but only a half-wit would imagine they want to stop there. It made me look at life as a car owner in modern Britain.

I bought my current car four years ago directly from the manufacturer, it had been used by one of the directors as his company car and was a year old with only 12,000 miles on the clock. It is a fine piece of engineering, large and comfortable with the capacity to go fast if the urge ever struck me. If my memory is correct I paid £16,000 for it, a very substantial saving on the price of a new one. By an interesting quirk of our tax law, VAT is not payable on sales of second-hand cars which made it even more of a bargain. Since then what I have had to pay to run it has gone up and up while the use I can make of it has been restricted over and again.

The central London Congestion Charge was already in place in 2004 but it has been extended to cover a larger part of the city and has increased from £5 to £8 a day. Over a modest working year of 45 weeks that comes to £1,800. Then there is parking at work (averaging about £1,200 a year), steadily increasing petrol prices, ever increasing amounts of duty on petrol (with VAT charged on both the price charged by the filling station and the duty charged by the government), road tax has increased way above inflation as my punishment for driving a nice car rather than a baked-bean can, for the same fatuous reason the cost of parking outside FatBigot Towers has more than doubled in the last year and insurance never seems to go down in price. Just owning the thing and keeping it outside my house costs over £1,200 a year, actually driving it costs a lot more and driving it in central London has become punitively expensive.

It's not all about cost, of course. Speaking again as a resident of London, for a decade or so we have been slowed by new one-way systems, obstructive programming of traffic lights and the closure of a huge number of side roads which previously freed pressure on the main routes. There can be good reasons for some of these changes but the majority seem to have been instituted for no purpose other than to increase inconvenience and force drivers out of their cars. And it is not just in London, when driving outside London I am constantly amazed by the number and positioning of speed cameras and the extraordinary speed limits imposed. Just recently I was pootling along the A13 towards darkest Essex. Once you get past the Blackwall Tunnel the road has three-lanes for many miles, including a new section through Barking and Canning Town. The speed limit on part of it is 40mph going up to 50mph as you get a little further out. It is a major road, a motorway in all but name, and there is no obvious reason for these limits other than as an opportunity to gather money in fines from those frustrated by the absurdity of the restrictions. At the point where the limit changes from 40 to 50 you can see the large "50" sign ahead and nothing in the design of the road makes it inherently dangerous to accelerate early, yet there is a speed camera about 200 yards before the sign. No harm would come to anyone if that camera were removed, indeed no harm would come from the limit being 60 where it is 40 and 70 where it is 50.

As a doddery old fart who has been around since before they invented cheese I am not a speeder by inclination, so my licence remains unsullied by penalty points. I could tut tut and say "if I can keep to the limit, so can you" but that isn't the point. The point is that speed limits should be imposed for reasons of safety only, they should not be money-gathering tricks nor should they cause frustration and annoyance. Like all matters connected to government they should serve the legitimate interests of the people. Owning and driving a motor car are legitimate activities, they serve the very useful purpose of enabling a degree of freedom to travel which was unimaginable just a few decades ago.

What troubles me most about the way drivers are treated is the feeling we have of being put-upon, of being used as a cash machine when the government runs out of money and of being subjected to inconvenience on our journeys simply because those who set speed limits and decide on traffic light sequences have the power to do so. Some tiny degree of comfort can be obtained from knowing that there might be a good reason for these restrictions and I simply haven't worked out what it is, it gives me a straw to clutch at in the vain hope that I am not being bullied.

A ban on smoking in my own car whilst driving myself on a lawful journey to undertake lawful activities goes one step further. No third party can possibly be harmed, therefore turning me into a criminal is not for the protection of others. No road safety issues arise that are not already fully covered by the law against driving without due care and attention. The only thing such a ban can achieve is preventing me from smoking in my car.

Yes, I said "my car". I earned the money to buy it. I earned a lot more besides but only had a certain amount to spend because I had paid vast sums in income tax and national insurance. I pay to maintain my car, I pay for the petrol, I pay the congestion charge, I pay the road tax, I pay the insurance, I pay to park it. At every stage of that one-way payment procedure government takes a cut. And soon they will want to make it a criminal offence for me to sit in my car and smoke a highly-taxed cigarette or cigar (which I will also have paid for out of taxed income). I feel very put-upon already, goodness knows how I will feel when this new ban comes into effect.

Saturday, 18 October 2008

They really shouldn't start on immigration

Oh dear. You can tell when a government is getting desperate because it turns to immigration. The new Immigration Minister has announced that he going to limit immigration and ensure that the population of the UK does not rise above 70 million.

The reason governments rarely say much about immigration is that enforcement of limits is all but impossible. No limit can be put on immigration from EU countries because EU law forbids it. The only limit that can be put on illegal immigration is through effective border control, a task that has defeated every government in history. International treaty obligations dictate much of asylum policy and all genuine cases are entitled to stay regardless of how many there are. The only limits that can be imposed are on student visas and on work permits for migrant workers from non-EU countries. Work permits are already subject to a so-called "points system" by which admission is given only to those with skills needed in this country. If they really are needed, it is hard to see how restricting their numbers further can benefit anyone.

Let's look at what has happened in recent years since some of the old Soviet bloc countries entered the EU. The government estimated the number of migrant workers likely to come to Britain to be in the tens of thousands each year, in fact they came in hundreds of thousands. There was nothing the government could do about it even if it wanted to. Vast numbers came here to work because the pound was strong against their home country's currency and there was plenty for them to do. They could work here for three or four years, save as much as possible by sharing houses or flats then return home with enough money to buy a house on a decent plot of land, furnish and equip it, buy a car and still have cash in the bank. Now that poor Gordon's economic miracle has been exposed as a fraud and his pound is crumbling, the benefit to them is reduced or eliminated so they are returning home. As and when there is again a serious gulf between what they can earn at home and what they can earn here (or France, or Germany or wherever) the same thing will happen again regardless of how high our population is at the time.

"They come over here, take our jobs, marry our women" is the cry we hear from time to time to justify strict limits on immigration, but I wonder how true it is that they take "our" jobs. How is it that Polish and Ukrainian building labourers were able to find regular employment in preference to the plucky Brits? One would expect there to be two reasons why an employer would take a foreign worker rather than a Brit: money and the work ethic.

Did they require less money? Quite possibly. An employer who pays less than the statutory minimum wage would probably feel safer taking on foreign workers because he would think there is less chance of anyone reporting him. Having said that, how many British labourers work through the books and how many are cash-in-hand? No one can possibly know the numbers but I will hazard an educated guess that they are happy for as much as possible to be in cash so that they get to spend it rather than handing it to Gordon or having to tell the benefits office about it. Anyway, what is wrong with employing someone who is prepared to do the same work for less money? It allows the business to keep its costs down resulting in either lower prices for the customer or greater profits or, in all likelihood, a combination of the two.

Do they work harder? Only anecdotal evidence is available but it seems pretty overwhelming. You will get plenty of hard work out of a Brit who wants to work but if he already receives large hand-outs of benefits for doing nothing he might be less inclined to stretch himself for a few extra pounds compared to someone who has no other source of income and knows his reputation as a hard worker will increase his chance of being chosen again tomorrow and the day after. The reason I say "chosen" is that a lot of unskilled work, such as labouring for builders, kitchen work in hotels or restaurants and farm work is filled day-by-day, people are not employed on even a semi-permanent basis. There can be no legitimate complaint about an immigrant being employed because he works harder than the Brits who might have wanted the job.

Of course not all immigrants take casual work, many are formally retained as employees and others are self-employed skilled tradesmen running their own businesses hiring out their skills. They compete with Brits primarily on price. Sometimes they can undercut the natives, sometimes they cannot. To complain about someone else securing a job because you would have charged more is a shallow and unattractive argument.

And then there are the nationals of non-EU countries covered by the points-system. By definition those who are allowed work permits receive them because they have skills we need and which are not available here already. It is not a wicked system of reverse discrimination which fills some hospitals with nurses from the Philippines. They are trained nurses who were actively encouraged to come here because there were insufficient home-grown nurses to do the work. As more are trained in Britain so the need to recruit overseas is reduced and the number of work permits allowed for foreign nurses will fall.

We must not overlook the often shadowy area of student visas. Many a brothel and office cleaning company is staffed by those "attending" non-courses at compliant colleges. The course ends, but the "student" is nowhere to be seen. It is a route to illegal immigration but very little can be done about it other than restricting the number of student visas issued in the first place.

So who will now be excluded? How will the new restriction of immigration occur? The only thing the government can control directly is the number of visas issued. It can tighten the points system for work permits and run the risk of a skills shortage or it can restrict the number of student visas and risk the financial collapse of colleges who have complied with governmental diktat to expand student numbers. Apart from that the government can tighten border controls and seek out illegal immigrants with greater vigour. Frankly, you might as well ask them to enforce a ban on farting in curry houses, it just can't happen. They can throw lots of money at it and claim success, and they probably will, only it will not be success because the numbers of illegal immigrants and over-stayers they find and deport will be tiny and the cost of finding them, hearing all the appeals and then shipping them out will be vast.

If I were a cynic I would suggest that the new Immigration Minister knows that hundreds of thousands who have come here from Eastern Europe during the boom times will now return home. Many have already left yet many more remain. Say there are 200,000 in the UK for whom work will become more scarce over the next year and life back in their home country will provide better opportunities. They will leave and he will then claim to have reduced the immigrant population by that figure. It might grab a headline for a day or two until it is discovered that the departures have been caused by the government's incompetent management of the economy rather than some empty slogans emanating from a junior Minister at the Home Office.

What new jobs?

We have all become accustomed to poor Gordon's tractor production statistics, so much so that few listen any more. Often the only time one of the standard forms of words he uses registers in our minds is when someone else uses it. This week I have heard two senior ministers say that we have record numbers in work and that a million jobs have been created since Labour came into power in 1997. Something in the dim recesses of what I laughably call my mind suggested that Gordon has said the same thing and indeed he has, over and over again.

Then I asked myself what it means because the convention during my lifetime has been to measure the health of employment by asking what percentage are unemployed not what number are employed. So I did a little rooting-around at the Office for National Statistics and found an interesting document, the latest Economic and Labour Market Review. This is the one which noted an increase in unemployment of 120,000 over the quarter to July 2008. Section 13C summarises employment and unemployment figures over the last two years, the latest month included is July 2008.

As we know, the unemployment figures are massaged downwards by a plethora of ruses. For example, receipt of any one of a wide variety of welfare payments leads to exclusion from the unemployment statistics, losing entitlement to certain benefits by not taking an offer of work transfers you from "unemployed" to "economically inactive", early retirement is not unemployment and part-time work counts as one job not half a job. What I find quite compelling is the overall picture. Trotting out numbers for those in employment tells us only one side of the story and we cannot draw any conclusions about the overall state of employment in the country unless the whole story appears. For so long as population is increasing the number of people employed must increase if we are to stand still. New jobs are only a net gain if they lead to a reduction in the percentage of those who want to work but cannot get a job.

Interestingly, the figures produced by the ONS show an increase of 500,000 jobs since July 2006 but no change to the percentage of the population in work, it was 60.2% in July 2006 and 60.2% in July 2008. Half a million new jobs over just two years have made no change whatsoever to the relative numbers in work.

This will not stop the Harmans and Hoons of this world parroting poor Gordon's meaningless statistics, but now I know that they are talking nonsense when previously it was just a presumption.

Thursday, 16 October 2008

Joined-up government in action

Economic misery continues unabated. The banks are now more stable and there are signs that inter-bank lending will recover. But deflation of the credit bubble is causing the hot air of overvalued companies to gush from the stock markets at a huge rate. Recession seems guaranteed in all major economies because the apparent wealth of the credit-bubble years was false and it is time to pay.

There has been much wailing and gnashing of teeth about the current (or, as the case may be, imminent) recession. This is hardly surprising because many people will lose their jobs, many businesses will fold and many homes will be repossessed. In my view a deep recession is unavoidable, let me explain why.

First it is necessary to look at the definition of recession. The definition generally used in this country is that a recession occurs when there is a reduction in Gross Domestic Product (GDP) for two successive quarters. As I understand it, a reduction in GDP means a reduction in the total value of goods and services sold by all businesses in the UK after taking inflation into account (yes, I have read many of the definitions put forward by economists, but I have to keep this simple so that I can understand what I am writing). The last six or seven years have seen businesses thriving on the back of spending funded by credit. Shops, bars and restaurants hired extra staff to deal with the additional customers and the people given those new jobs then spent their earnings in other shops, bars and restaurants and so the cycle continued.

For as long as people spend money they do no have the knock-on effect can look very good for a national economy. Lots of cash is swilling around, lots of jobs are created, lots of tax is paid and everyone is happy. The problem comes when the lenders fear they might not get their money back. Loans for cars, electronic fripperies and home improvements become hard to come by so businesses selling cars, electronic fripperies and home improvement materials suffer a reduction in income. In exactly the same way that spending borrowed money creates jobs so a withdrawal of credit reduces spending on unnecessary items and causes businesses supplying those things to cut back staff or fold completely.

The current recession is based on one thing and one thing only, excessive credit. It financed an artificial boom and now it is the cause of a very real bust.

The only way out of recession is to negate the problem (as much as possible) and rebuild the economy in reliance on more solid businesses. This is where the UK has a problem. For many years one of our most profitable areas has been financial services. Domestically and internationally our banks have done well by trading on the back of the excessive credit they created. I cannot avoid the conclusion that a recession caused by the hot air of unsustainable credit will last until credit is down to a sustainable level.

Government could help by reducing taxation to ease the squeeze many small businesses will suffer (but it can't reduce tax because it is bankrupt), or by bringing forward capital expenditure projects such as building new roads or schools now rather than in three years' time (but it can't spend because it's bankrupt), or by cutting out the 500,000 non-jobs they have created over the last ten years to keep the unemployment levels artificially low (but they can't do that because it would be to admit they were wrong). So what is the government doing to help? It is signing-up to a commitment to reduce UK carbon emissions by an even greater amount than the previously unachievable target.

A fine example of joined-up government.

Tuesday, 14 October 2008

A new ban is imminent

Courtesy of nice Mr Raedwald my interest in the e-cigarette has been rekindled. I first read about e-ciggies a few months ago but couldn't find many reviews of the available products and have never seen anybody using one so I haven't been able to receive a personal recommendation. My concern was that it might turn out to be essentially the same as the Nicorette Inhalator, a useful device that gets me across the Atlantic very comfortably but gives me a sore throat after prolonged use and is not a long-term replace for the real thing. Now that a man as distinguished as Mr Raedwald has passed favourable comment, I must get one. It won't replace all smoking in FatBigot Towers or the FatBigot limousine because I have a longstanding smoker's cough to maintain, although it might tempt me back into pubs from which I feel excluded at present.

What possible objection, I wonder, could the Righteous (as the great Mr Leg-iron so deliciously describes them) have to my new toy? Although their grounds for banning things are almost always spurious, at least they feel it necessary to give a reason. Much though I hate to give these idiots ideas, existing examples of their muddled thinking could be recycled in this new cause.

Remember the proposed ban of smoking in films and on television? The argument was that seeing others smoking cigarettes can encourage those of even feebler fortitude than the Righteous to take up the evil habit. It is only a short logical hop for the enfeebled to be swayed by the sight of someone using a mock ciggy because it gives off a visible vapour and could be mistaken for real smoking. Not only is the e-ciggy user a bad influence on the enfeebled but he uses deception to pass on his malign message. That would be completely unacceptable to the Righteous, only they are entitled to deceive.

And, of course, if the enfeebled are deceived there is a chance that Ban Enforcement Executives will also be deceived. Swarms of them will be summoned to pubs and restaurants by the telephone calls of concerned citizens (there is a dedicated freephone number for this purpose). It would be contrary to the public interest for BEEs to swarm without being able to hand out fixed penalty notices, the cost of their attendance must be met somehow. What easier and more productive way could there be than to allow them to issue notices to apparent smokers. After all, ostensible sinning against the standards of the Righteous is as wicked as substantive sinning. Only a ban can keep Britain pure.

The Righteous would have a field day if they looked at how an e-cigarette works. It produces a vapour containing nicotine which is drawn into the lungs wherein the lovely nicotine is absorbed. On being exhaled the vapour forms a cloud not dissimilar in appearance to smoke. This gives the Righteous two further causes for complaint.

First, it seems likely that some nicotine will remain in the vapour as it is exhaled. I do not know this for certain but it seems very likely to me. Nicotine is an addictive substance, therefore e-ciggy vapour could lead to passive nicotine addiction. Well, actually, it couldn't because the concentration in the vapour will be too small and it will dissipate quickly. But facts do not stand in the way of the Righteous, hence their reliance on spurious claims that second-hand smoke is dangerous as the main reason for the current ban on smoking tobacco. Elfin safety is paramount in the workplace and the nations waiters and barmaids must be protected.

Secondly, much of the vapour is water vapour. Worse than that, it is water vapour mixed with carbon dioxide - two particularly potent greenhouse gases. Now that the case for man-made carbon dioxide being an H-Bomb in disguise is falling around their feet like a pair of cheap knickers, they must latch onto anything they can to support St Al of Gore's multi-million pound carbon trading business. The need is so much greater since his chums at Lehman Brothers took an early bath. Water vapour is the perfect cause for their collective ire. It has a far greater impact on the greenhouse effect than carbon dioxide because there is so much more of it. The last thing the Righteous will want is to see the unnecessary creation of more water vapour by sinful Westerners. The e-ciggy must be banned before it boils the planet.

It's all illogical nonsense, of course, but that has never stopped them before.

What's wrong with falling house prices?

One of my shallowest joys of the last few years has been the smug feeling that FatBigot Towers has increased in value by thousands of pounds every month. I bought FatBigot Towers in 1993 when the market in London was completely flat following a huge crash in 1989-1991, last year it was valued at more than three-and-a-half times what I paid fourteen years before. Had it followed the Consumer Price Index the increase would have been somewhere between 50% and 55%. The balance is made up of genuine house price inflation and hot air.

Genuine house inflation exists just as genuine inflation exists in the price of eggs and steak. As the population increases so demand for housing increases, supply does not necessarily increase at the same rate. Even without a shift of attitude in favour of buying rather than renting, an increase of demand over supply will force prices up. The bubble comes from adding unsustainable demand. Giving loans to people who cannot afford to repay them created the unsustainable demand that sent UK house prices to artificially high levels. If part of the demand is unsustainable, so is the price rise caused by that extra demand.

A frequent target of the slobbering left is the so-called "buy-to-let" market. This comprises people who buy houses or flats as a business venture rather than as a home. Tony and Cherie Blair did it in Bristol and many thousands did it all over the country. Being the Blairs, they could not resist the temptation to involve a crook in the process, but the underlying transaction was no different to what has happened for generations. There is and always has been a demand for rental property. Students, immigrant workers, young couples saving to buy their own property and many more categories of people want to rent a flat or house. That flat or house must, by definition, belong to someone else - their landlord - and the landlord must acquire it somehow. Where demand for rental properties is high it is a sensible business proposition to buy suitable houses or flats and rent them out for a profit. It is no different from any other business, you put in some capital, buy an asset and utilise it to make a return.

The problem with the buy-to-let market is that many have been tempted to buy properties in the hope of making capital gains rather than income. Even if the rent pays less than the repayments on the loan you took out to buy the property, if the property itself increases in value by £10,000 a year you are laughing. A profit from the rent plus a capital gain is even more attractive. At a time of apparently increasing house prices many were drawn into the market in the hunt for a quick capital gain thereby creating even greater demand for the limited stock of housing for sale and forcing prices higher still. The part of this market representing genuine long-term investment was genuine demand, the speculative part was false demand and added to the bubble.

No one really knows how much hot air the house price bubble contains. Some suggest average prices at their peak were double true value but most commentators I have read suggest a figure for the artificial increase in value of somewhere between 30% and 40%. This represents an awful lot of money, £60,000 or £80,000 of a property currently valued at £200,000, but it is not really a loss at all because the £60,000 or £80,000 was fictitious, it represented an artificial value above true value. For those of us who have no intention to sell and no debts secured on our properties there really is no loss, except to our level of self-satisfaction. Unfortunately the loss is real for many and a problem in waiting for others.

A statistic I find very interesting is that the average rate of house price increases in the UK over the last five years is roughly equivalent to the probable size of the bubble - they have increased 30-40% and the bubble is about the same proportion of current prices. Since the bubble itself formed over the last 12 years or so (starting in mid to the late 1990s once the economy was put on a sound footing after the ERM debacle), a part of house prices has been artificial for over a decade. Everyone who bought a house or flat during that period paid over the odds. This might seem to make the problem seem much larger than it is.

Say you bought a flat for £100,000 in 2000, its true value might have been somewhere between £99,000 and £98,000. General inflation since 2000 would make it worth something like £160,000 today so a nominal deficit on purchase has been lost in the mists of time, all the more so since genuine house price inflation has run ahead of general inflation. Say you bought the same flat for £120,000 in 2003 and the bubble element was £10,000, the asset you bought for £120,000 is still worth a minimum of £160,000 today. That it might have been valued at more than £240,000 last month does not mean you have lost £80,000; in fact you have lost nothing, whatever value someone gave it does not change the fact that its true value is around £160,000, a minimum capital gain of £40,000. Of course you have had to pay the mortgage and maintain the property, but you had to live somewhere and you haven't paid rent to anyone. And, most importantly, there is no loss or gain at all unless you sell.

It is probably true that no one who bought more than five years ago will suffer a substantial loss through the bubble bursting. Those who have bought since then will only suffer a real loss if they are forced to sell. One of the factors creating the bubble was the willingness of some banks, building societies and other lenders to make advances to people without the means to repay. Those people are the most likely to suffer a loss because the properties they own are the ones most likely to have to be sold, either voluntarily to cut their losses or following repossession. Despite the risk the lenders took many of these loans perform well, the borrowers want to keep their house and make sacrifices to pay the mortgage. Defaults are higher than historic averages but they are still just a minority.

There is, however, another class of losers - those who used their homes as security for additional borrowing. So bulbous has the credit bubble grown that second mortgages have been taken out at record levels over recent years. A second mortgage is simply a loan secured against a property which already has another loan secured against it. They were taken out for home improvements, cars, holidays and all sorts of treats, the loans were at higher rates of interest than the existing mortgage and seemed a good idea at the time. As recession hits many people in this position will find that the combination of the repayments of the mortgage and the repayments on the additional loan are unaffordable.

We must then add those who were relying on the value of their home to fund retirement. Their flat in London is worth £750,000, their ideal country cottage is £175,000, costs of sale and a few refurbishments of the retirement idyll leave them £500,000 in the bank in addition to their existing retirement funds; all is rosy. A sale price of £100,000 less than could have been achieved at the peak of the market will make a big difference, but it is not a loss it is simply a gain of £100,000 less than would have been achieved at the peak.

As house prices fall back towards their true level many will suffer a loss on paper. For some it will be a true loss as the value of their home falls below the value of loans secured on it, but for the vast majority the loss will simply remove an artificial profit which should never have existed in the first place. Even for those with "negative equity" in their houses and flats, that only turns into a loss if they have to sell. The looming recession will cause many people to suffer real losses as they lose their jobs and are forced to sell, but I would venture to suggest that the problem is nowhere near as great as some would suggest. For the vast majority the loss will be only on paper and will be wiped out by general inflation in years to come.

Monday, 13 October 2008

The EU is upside-down again

I always like to look at things with what I believe to be common sense. Take employment, for example. People need to work to earn a living so there must be a formal legal relationship between employer and employee. That relationship takes the form of a contract. The contract describes the work the employee is required to do, the rate of pay he will receive and many other things beside. A sensible employment contract will also say something about the circumstances in which the contract can be brought to an end. Commonly it will require either party to give a set period of notice and if the contract is for a fixed term you might expect to see a formula for financial compensation if it is brought to an end before that time has expired.

One thing dictated by common sense is that an employee who resigns in order to take a new job elsewhere must then look to his new employer to pay him. But not in the world of the EU.

It is reported that Peter Mandelson will receive £234,000 of taxpayers' money from the EU over the next three years. The figure represents the difference between his salary as a European Commissioner and his new salary as a Cabinet minister in the UK. The only conceivable explanation for this system is that the remuneration of Commissioners was fixed by the old-boys' club of failed and disgraced politicians that rules the EU roost. I chose my words carefully in that sentence, it really is the only conceivable explanation because everything is wrong about it. Five questions come immediately to mind.

First, why is he being paid at all by the EU when he left office voluntarily? It just does not make sense.

Secondly, his replacement will be paid the same salary he commanded as a Commissioner. Why does the taxpayer have to pay twice for a Trade Commissioner?

Thirdly, why is he being paid for three years when his appointment was for a five-year term and he had only one year still to go? If they all get an extra two years money when they leave, the position is even more scandalous.

Fourthly, what happens if Labour lose the election which must be held by mid-2010? He will then be out of office. Will his payment be increased by the EU to the full salary he drew as a Commissioner until such time as he finds another job? I have no idea of the answer, but nothing would surprise me.

Fifthly, would the new Commissioner also get a fat pay-off if Gordon calls her back into the cabinet?

To make things worse, this money-for-nothing is in addition to his EU pension. Four years' service as a Commissioner allows him an index-linked pension of £31,000 a year at the age of 65, according to the BBC. This will be in addition to the pension rights he accrued in his years as an MP and his previous stints in government and any enhancement of pension rights which comes with his new role. £31,000 a year when you work for an organisation for only four years is extremely generous and is an indication of just how deep the EU snouts are in the trough. To make things even worse again, the role of Commissioner does not have to be earned on merit, it is in the gift of the Prime Minister.

The exposure of Mr Mandelson's pay-off is a refreshing sign of just how corrupt and self-serving the EU elite has become. Not only jobs for the boys but money-for-nothing and a pension of roughly half an MP's salary even if you cut-and-run. Why do I call it "refreshing"? Because these arrangements were previously hidden from mere mortals who do not have the time or patience to plough through the Rococo EU rule book. Now they are out in the open and we can see yet another example of steaming corruption in the most corrupt political body of modern times.

It is also a fine illustration of how very well suited Mr Mandelson was for a position at the EU high trough.

Sunday, 12 October 2008

Oh how things change

One of the most telling points Margaret Thatcher ever made was her observation that running the national economy should be like running a household budget. If you spend more than you earn you will have to pay for it later with interest. If you save when times are good it gives you a cushion against a later adverse change of circumstances. At the time it was pooh-poohed by the liberal intelligentsia as too simplistic. I wonder whether they hold to that view today.

A household budget, like any budget, has two sides, income and expenditure. Real income comes only from payment for work and returns on investments. Borrowing is not real income. Expenditure has only three elements: (i) essentials, (ii) discretionary spending (luxuries) and (iii) savings. When times are good many luxuries become a normal part of life and are treated as essentials because there is no need to treat them in any other way. If you lose your job, find that overtime is not available for a while or suffer illness that impacts on your ability to work to full capacity it does not take long for luxuries to be seen for that they really are.

Saving used to be a normal part of household budgets. When I was growing up, in a household of modest means, something was always being put by. There were three reasons for this. Buying something on credit was simply not part of the equation, so it was necessary to save in order to be able to replace worn out items or add to the things we had. There would not always be enough in the weekly wage packet to pay for ordinary expenditure and buy, say, a new bed or fridge or kettle, so money was put by. It was not known when such items would need to be replaced but they would at some time and it was necessary to make provision. At certain times of the year lump sums had to be found to meet bills which were part of normal annual expenditure but arrived as single significant bills not weekly or monthly items; rates (a predecessor of Council Tax), school uniforms and insurance for the car or house all fell into that category. The third reason was that the future is uncertain. Costs would arise from time to time which were not predicted but which would, nonetheless, need to be met. A little was squirrelled away every month to build up a fund to cover that eventuality.

Seen through modern eyes, running a household budget like that seems very quaint. Yet it must be borne in mind that credit cards were unheard of and bank loans were avoided because they incur interest and just make whatever you buy more expensive. What lay behind it was a very simple approach, it was the recognition that income was limited and should be used to maximum benefit.

Now that the credit bubble in the national economy is spewing air at a massive rate, I wonder whether there is any chance of my late parents' approach to household budgeting being adopted more widely, including by government.

It is hard to see that individuals will not adopt it, a great many will be forced to because credit will not be available to them to the same extent as before. Replacing the television because a new model is available will no longer be affordable, instead the old one will have to live out its useful life. Changing the car because a neighbour you don't like has a better one could only be done because there was cheap HP available, take away the credit or make it much more expensive and people will see that modern cars can run 150,000 miles before they give up the ghost. The list goes on and on. We have developed a spendthrift culture based on cheap credit and a shallow desire for the latest gadgets. Withdraw the credit and the shallowness of the desire will be exposed. It might take time but it will happen because it will have to.

Many of us still have aged relatives who sit on the same sofa they have had in their front room since we were children. They have never replaced it because it has always been comfortable and the odd moth-hole in an arm can be covered by a crocheted article. More significantly, it has never been replaced because it was paid for with hard earned cash and Auntie remembers not just how long it took to save for it but that her parents could never afford such luxurious furniture. Maybe she could have bought a replacement on a credit card twenty years ago but that would have been a wholly unnecessary extravagance.

It's all a matter of attitude. For those of Auntie's generation money has always been a precious commodity. It can only be earned once and buying something on credit is tantamount to spending it twice. She thinks of what else could be done with the extra cash committed to interest on HP or a credit card. Because she only has a limited amount to spend on non-essentials it is sheer lunacy to pay some of that "treat" money to a credit company. As money becomes tighter for everyone we can expect to see the old attitude returning and people realising how much more they can get for their money when they are not paying interest on credit cards and car loans.

And what of the attitude of central and local government? If Mrs Thatcher was right, government should differentiate between essentials, luxuries and saving. Because national debt is now at extraordinary levels, saving does not really come into it because repayment of debt takes its place. So what about essentials and luxuries? Where do all the diversity officers, climate change advisers, political consultants, social awareness executives and the like fit in? What of the armies of quangoes? Are they essentials or luxuries? For ordinary people the answer is obvious, hence the positive reaction to George Osborne's plan to cull consultants from the payroll. Our current government seems to think in a different way.

We can only hope that they will take a look at their spending commitments and cut out the luxuries such as the ministerial ego-trips, the social engineering projects, the hugely expensive data-gathering exercises and all the other paraphernalia consequent on both their desire to control and their belief that government always knows best. As the part the Labour government played in stoking the fires of the credit bubble become more widely recognised, I look forward to a change in attitude to government spending to match the change which will be necessary for many individuals in their own domestic budgeting.

I am not holding my breath.

Saturday, 11 October 2008

Anti-capitalist or anti-capital?

It is not just creeping out from under the woodwork it is positively oozing. All the bitter, small-minded hatred deep in the blood of Old Labour is paraded before us daily and presented as vindicated by the present financial turmoil.

What is it that the sad old Trots are saying? What is their way out of the current difficulties? What is their constructive proposal for making the world a better place? Only one thing. Tax the rich. That is it, really it is, their only answer to economic meltdown is to impose punitive taxes on the few who have a lot of money.

Particularly strange is that they are happy to see the banking world collapse, with all the misery that will cause when businesses go bust for lack of working overdraft facilities. Everyone knows that socialist command economies lead to economic stagnation, the point is not really open to debate because all the evidence points in one direction. Everyone knows that socialist state control leads to personal misery on a grand scale, the point is not really open to debate because all the evidence points in one direction. Everyone knows that increasing income tax above about 40% leads to reduced tax revenues, the point is not really open to debate because all the evidence points in one direction. Yet they want to destroy the capitalist system, but not as much as they want to prevent anyone being rich.

When I studied economics at A-level (many years ago) one of my teachers was a dedicated Trotskyite. Every lesson included some attempted brainwashing as well as some education. The great sadness was that he was a very talented teacher but he just could not help himself. In order to make his political arguments he relied on all the usual tools such as re-writing history, qualifying principles with anecdotal evidence and distorting facts to fit his cause. One of his regular topics was the wicked way in which the south east of England dominated personal wealth to the detriment of the rest of the country. To illustrate this he would draw a rough map of Britain and superimpose lines to identify where the vast majority of personal wealth is to be found. Those lines formed a triangle with the south-western point of Wiltshire at bottom-left, the south-eastern point of Kent at bottom-right and a point above to complete the triangle. The point he chose was the north of Liverpool. To prove the concentration of wealth in the south-east he included Birmingham, Manchester, Leeds, Sheffield and all points in between. When challenged about the accuracy of this triangle as a description of the south-east of England he asserted that it is the correct definition as a matter of standard usage in economics. It was plain and utter nonsense but without the nonsense he could not illustrate his point. The reality was that, in his own mind, it was more important to condemn wealth than it was to state facts.

And so it is with the obsessive lefties given so much exposure over the last few weeks by the BBC. The occasional remark is made about the inadequacies of capitalism and there are even a brave few who try to argue that socialist economic theory can lead to prosperity, yet the vast majority have nothing to say other than there should be no rich people.

I am swiftly coming to the conclusion that they are not really anti-capitalist at all, they are just anti-capital.

Councils and the Icelandic goose

We have now learned that numerous councils, police authorities and other public bodies had money in Icelandic banks and face a combined loss in excess of £1billion. There has been much wailing and gnashing of teeth about this with people asking why these organisations were hoarding money, why they put it with Icelandic banks in the first place and why they did not withdraw it to a more secure location once doubts were expressed about the creditworthiness of our friends in the chilly north.

Surprisingly, the first point has generated a lot of ire but it seems to me this is misguided. Local councils receive most of their funding from central government but still raise very substantial sums through Council Tax. Their income is not received in handy-sized pieces once a month just in time to meet that months' bills, it arrives in large chunks at irregular intervals, much of it at or close to the start of the financial year. When money is received in large amounts and is not all needed for current expenditure the sensible thing to do is put it to use earning interest. If you know a certain amount will not need to be spent for, say, five months you look for the best possible return on a five-month investment; even that which will need to be dipped into in the short term can earn a few quid. This has nothing to do with councils, county police forces or Transport for London hoarding money, it is all about budgeting sensibly by gaining as much additional money as possible while a lump sum remains unused in any other way.

This also answers the second point. Because it is sensible to get the best return possible, the money is deposited in the place offering the best rate of interest. Recently that has been Icelandic banks. That, of course, is not the whole story and that is why the third point arises.

It appears to be the case that many knowledgable commentators expressed concern about the viability of Icelandic banks more than a year ago. Given that the sums deposited in them by some councils and other bodies were very large indeed (I have heard figures of up to £50million from a single county council and £40million from Transport for London) one must wonder why the warnings were not sufficient to cause a change of approach.

In principle the position should be fairly simple. If you are in charge of a fund of other peoples money or, as the case may be, money given to you to use for the benefit of other people, your first obligation should be to keep the fund safe. That is far more important than seeking to increase it by investment. In order to keep the fund safe you have to take into account that inflation will reduce its value, so you must place it in an interest bearing account. Leaving aside issues of taxation and how best to measure inflation, what should be achieved as a bare minimum is to receive the same rate of interest as the rate of inflation. In general terms, if inflation is 2% you need to get 2% interest in order to maintain the starting value. A return above that level enhances the fund, which is beneficial, but a balance must be struck between the amount of profit you try to earn and the risk to the integrity of the fund. Putting it all on a horse at odds of 5-1 against will give you a massive profit if the horse wins but a total loss if the horse loses; so horse racing is not a viable investment vehicle.

A bank which offers, say, 6% when inflation is 2% gives you a good profit, but there is no such thing as a free lunch so you have to be satisfied that the bank is sound. There are internationally recognised standards for banks based on their perceived creditworthiness so you check its rating and find it is "AAA". Great, your money appears to be completely safe because those who monitor these things have said so by their rating. It goes without saying that ratings are reviewed regularly and can change, because you are in charge of a fund which is intended to be used for the benefit of other people you must keep an eye on the ratings and remove the fund if the bank is downgraded. In the absence of an enforceable guarantee that your money is safe, anything less than the top rating is not good enough when you are dealing with other peoples money (unless they are aware of the risk and direct you to keep the fund where it is).

Let me suggest three reasons why numerous public bodies kept substantial sums in Icelandic banks despite clear warnings that they were not good for the money.

The first reason is sheer sloppiness. A good return is received, no one thinks the bank will fold even when its rating falls and no other bank offers as high a rate of interest. The warning is heard but not heeded because it is not perceived to be an immediate problem. Years of good returns build trust in a continuation of the bounty, the golden eggs keep popping out of the goose and it is assumed they will do so forever. In these circumstances there is perceived to be no requirement to change the method of investment other than to move funds if a new goose is found producing 24 rather than 18 carat ovoids.

The second reason is that the high return is built into the accounts for the year. The council's spending plans cannot be put into effect in their entirety unless a minimum of, say, 5.5% interest is earned. So the money goes into an account at 6% when the best alternative gives 5%. Switching to the 5% account means that the council will breach representations it has made to the voters and an election is never far away. The treasurer knows his life will not be worth living if he rocks the boat. He sees himself as the servant of the councillors rather than as the custodian of taxpayers' money so he takes the path of least resistance. Plans were made on the basis that the high rate of interest will be achieved so locking funds into the dodgy bank becomes a political necessity.

Finally there is the belief that central government will come to the rescue if there is a problem.

Underlying all three reasons is the fact that the position of principle I identified above does not pertain in the public sector. The money collected through tax is not seen as belonging to the taxpayer but as belonging to government - most to central government and some to local government. They take risks with it that no one would ever take if employed to look after a fund for someone else and they do so knowing that the taxpayer can always be forced to lay another golden egg.