Pyramid or Ponzi?

Someone called Kevin Foster has been convicted of a range of offences of dishonesty arising out of his business activities. It is reported by the BBC to have been a Pyramid scheme and referred to by the head of the Serious Fraud Office as a Ponzi scheme. Why the different descriptions?

The classic Ponzi scheme was devised and operated by a chap called Ponzi. Who'd have thought it. He persuaded people to pay him money by representing that large profits were to be expected from the investments he made. The principle behind it is very simple.

In Year 1 he gets, say, £1,000 each from 100 different investors, a total income of £100,000. He spends £60,000 to fund his lifestyle and puts the other £40,000 on deposit at the bank earning a little interest. At the end of Year 1 he announces a profit of 20% on the Year 1 investments and pays £200 each to the original 1,000 investors. This costs him £20,000 but he held back £40,000 so he can cover it. They are told they have the option of withdrawing their original investment or leaving it in place and receiving further huge profits in Year 2. Some cash-out but the vast majority like the thought of easy money so they leave it in place. Meanwhile further investors are putting in £1,000 each because they have heard of the success of the scheme.

Year 2 rolls on with the organiser living an even more comfortable life because far more mugs are throwing money at him than in Year 1, but still he holds some back to pay the Year 2 profit and to reimburse anyone who wishes to withdraw. Part of the trick is to minimise pay-outs by persuading punters to leave their annual dividend in the scheme so that it too can earn profits. In Year 2 the fraudster will have to make some payments but he is receiving so much from eager investors that it can be afforded easily.

And so it rolls on. For as long as there is enough coming in from new customers to cover the cost of withdrawals and fund the fraudsters lifestyle he continues the operation.

Of course eventually the day comes when there are too many calls for repayment and the scam is exposed. This is usually caused by a combination of two factors, (i) the fraudster getting too greedy and taking too much for himself and (ii) some external event, such as a recession, that causes people to liquidate investments.

A Pyramid scheme is similar but not identical to a Ponzi scheme. The classic Pyramid scheme does not promise a profit from anything the originator of the scheme does, instead the profit comes introducing new business to the originator. The originator elicits "investments" of, say, £1,000 on condition that a return will only result from introducing further investors. The promise is along the lines of "once you have introduced people making £10,000 of further investment you will receive a commission of £100". So Mr A pays over £1,000 and finds ten gullible friends to do the same. He is then repaid his original £1,000 plus £100 commission. If he wants to, he can make a further £1,000 investment and introduce a further 10 foolish chums in order to make another £100 profit. In order to entice people into the scheme representations are usually made that the funds are invested and the £100 commission can be described in various ways; but always the ability to withdraw your cash and profit is dependent on you introducing a minimum number of further "investors".

As in a Ponzi scheme the originator of the Pyramid scam receives money but doesn't do anything to make a profit for anyone other than himself. Both types of scam last for so long as new people pay-in and few people cash-out. The most professionally organised examples involve bogus accounts for fictitious overseas corporations so that there is fine looking paperwork to deflect attention when some awkward bugger asks questions. These schemes can operate for many years but they always eventually collapse because something happens to cause more people to ask for their money back than there is money to pay them.

Although both types of fraud involve taking money from new "investors" to pay profits to existing "investors", under a Ponzi scheme the alleged profit is triggered by the brilliant investments made by the fraudster whereas profits in Pyramid schemes are triggered by conditions about investors introducing new people to the game. Whether Mr Foster operated a Ponzi or a Pyramid scheme, the result is the same - chokey.

We must avoid the Japanese problem

Anatole Kaletsky wrote an interesting piece in the Times today highlighting the Japanese problem. In an attempt to stimulate its way out of recession in the early 1990s Japan increased government spending and borrowed to pay for it. This went on for several years and now, almost twenty years later, the cost of servicing the borrowing is so high there is no additional money available to repay the principal sums borrowed. Japan's economy has, as a result, seen virtually no growth in GDP.

In effect the "spare" money that could have fuelled growth has been used paying interest on the massive sums borrowed. There should be no surprise in this because growth comes from the bottom up it is not created by government. It comes from individuals and businesses exploiting new ideas and new processes, almost always that requires an initial injection of capital and weekly costs of production. Reduce the amount of available capital and/or add to the costs of production and even a half-wit can see that new ideas and processes will not get off the ground to the extent they could. It doesn't actually make any difference whether the factor reducing available cash is taxes or any other alternative use of the money. A business owner who takes a massive salary and spends it on expensive booze and cheap women, or cheap booze and expensive women, reduces his ability to invest in the business in just the same way that a government taking the same sum in tax reduces the ability of the frugal factory owner to expand. The difference, of course, is that the spendthrift owner can console himself with happy memories and a trip to the clap clinic.

It by no means follows that every government that borrows vast sums in a vain attempt to prop up its national economy will find itself trapped in the long term as Japan is trapped today. However, the trap will always arise if there is no political will to reduce borrowings. That is where we have a real problem in the UK. Decades of brainwashing the masses into believing government has a magic money tree combined with a decade of making as many people as possible directly dependent on the state for their ability to put food on the table, results in upwards of one third of those polled saying they plan to vote Labour in the coming election. More than that, it makes the Conservatives too scared to tell the truth about the need to slash government spending because their focus groups tell them it will be a vote loser.

Poor Gordon and the hapless Mr Darling tell us government spending should not be cut this year because it will have an adverse effect on demand and will upset prospects of recovery from recession. Occasionally they say reductions can be made from 2011 onwards, but if their current reasoning is sound it will apply until a strong recovery is underway and there is absolutely no guarantee that that will happen next year or the year after or the year after that.

The one thing that is an absolute certainty is that we either follow Japan or we pay back some or all of the borrowings. Actually something else is certain. Whether we retain the debt and pay buckets of interest or reduce the debt by paying a combination of interest and principal, the money used cannot be used for anything else. Debt is a millstone around the neck of a national economy just as it is a millstone around the neck of individuals, indeed it is a millstone around the neck of a national economy precisely because it is a millstone around the neck of individuals. That is because, in reality, there is no such thing as a national economy. There are millions of individual little economies comprising each separate business and household and the combined value of them all is what we call the national economy. It is actually no more realistic a notion than the economy of Sussex or the economy of Acacia Avenue, it is simply a statistical construct. The real economy is the millions of businesses and households.

Mr Ordinary with a disposable income of £20,000 can spend £20,000 or he can save some and spend the rest, or he can invest some in a business venture and spend the rest or he can split his money three ways with some spending some saving and some investment. Whatever he does he can only dispose of £20,000 because that is all he has. Take £3,000 from him to repay debt and his choices are the same but with an overall limit of £17,000 rather than £20,000. There are knock-on effects of his choices which operate in much the same way as fractional reserve banking. If he spends £20,000 at Mr Patel's Merrymart, Mr Patel makes £5,000 profit which he then spends at Mr Khan's Kurdish Kasbah, Mr Khan makes £1,000 profit which he spends at Madame Fifi's Sauna and Hanky Panky Parlour, in turn Madame Fifi and the girls receive money they spend elsewhere. When the amount entering Mr Patel's till falls from £20,000 to £17,000 so Mr Khan receives less and one of Madame Fifi's girls misses out on business. The national economy is depressed because the individual economies of Mr Patel, Mr Khan, Madame Fifi and Tiffany the trainee tart are depressed, as are those of all the suppliers to Mr Patel, Mr Khan and Madame Fifi.

In other words, debt depresses the economy. It also boosts the economy for so long as the principal sum borrowed is sloshing round the system. Thus, Mr Ordinary could borrow £5,000 at 10% and have £24,500 to spent at the Merrymart thereby increasing Mr Patel's profit, and Mr Khan's and Madam Fifi's and that of the manufacturers of intimate rubber items. But that can only happen once. The key question is whether the boost provided by an injection of borrowed money outweighs the depressive effect of reduced disposable income in future years.

Japan illustrates that too much borrowing can lead to a long-term depressive effect far in excess of any short-term benefit. It is a self-perpetuating problem because the only way out is to increase GDP but that requires "spare" money and there is no spare money because of the need to pay interest. There is only one way out of this spiral of stagnation, it is to reduce taxes and other costs that government imposes on business. No other course has the potential to raise GDP because GDP can only increase through profitable business activity. In the short term that might lead to a need for further government borrowing to cover the reduction in tax receipts, although that can be ameliorated by paring back government activities. Even that short-term problem is by no means a certainty because marginal businesses will become profitable instantly, already profitable businesses will become more profitable and new ventures will pay tax from their first day.

Given the choice between (i) cutting government costs and taxes now and taking my chance on it producing a quick benefit and (ii) maintaining taxes and state spending in the hope that GDP will expand to pay for it, I would go for the first option every time. It involves uncertainty but to that I say "so what?" Just look at the track record of private business for expanding, creating jobs and making taxable profits. You don't need to be able to identify exactly what businesses will make what profit to know that reducing overheads will make business more profitable and create new jobs. None of it will be by direction of the government, it will all be the result of government getting out of the way.

It is the only certain method of avoiding the Japanese problem.

We must shed the public sector of pointless managers

When I read a headline proclaiming an impending strike by civil servants I had no idea what it was all about. On reading the article I discovered it is all about redundancy pay. My chubby little heart was lifted by reading that five of the six trade unions representing civil servants had agreed to a change to the redundancy pay scale and only one was holding out against the plan. Under the new proposal civil servants will be entitled to far more than the statutory minimum, albeit less than their previous contractual entitlement. It looks like most of the unions have recognised the reality of an empty governmental purse.

It might be a different matter once the need to reduce government spending substantially becomes policy rather than a plan for some undefined time in the future. There are all sorts of ways one can look at the figures. I prefer a simple approach to match my lack of depth. Government spending, c£600billion; government income c£450billion; answer = reduce spending by c£150billion. There, nice and simple.

I doubt that anyone sees throwing people out of work as a good in itself save, perhaps, when the people concerned are politicians. Some of us are very keen to see every five-a-day advisor, carbon footprint assessor and street football consultants to be out of a job, but it has nothing to do with wanting to see the individuals on the dole. Instead it is all about the jobs they do. They are non-jobs, they suck money from the productive side of the economy and deliver nothing of value; they represent spending for the sake of spending. The need for redundancies is far from clear, however.

The public sector has a large turnover of staff each year. One way to reduce staffing costs without sacking anyone is to use staff currently in non-jobs to fill vacancies as they arise in the parts of the public sector which actually do something useful. This will take careful and sensitive management but there is no reason in principle why an administrative assistant in a five-a-day advisory department could not use their skills in a court office or a hospital office or a tax office when an existing member of staff leaves. Of course it is unlikely that a satisfactory position can be found for everyone working in the non-value-added areas of the government machine, but there is no reason to believe that vast numbers cannot be transferred happily from one department to another. After all, if someone leaves a court office to take a job in the private sector they are simply transferring their skills from one work place to another; there is no difference in principle between that happening and someone else moving from one government office to another.

The "natural wastage" that arises every year through retirement and resignation does not always require new people to be brought into the fold. Identifying the areas of the public sector that are mere political fripperies allows the people currently employed there to be available to fill other vacancies.

That is not to say there will not be an adverse consequence on overall levels of employment. By definition, abolishing one role and using the person who filled that role to fill a vacancy elsewhere that would otherwise have been filled by taking someone off the dole leads to one fewer person being employed overall. But given the need to save £150billion (on my simple figures) the overall number of state employees will have to fall considerably.

Transferability of state employees is almost certainly easiest where the job is not technical, particularly where it is purely administrative. The greatest risk of redundancy is probably not in the paper-pushing side of things but in wholly unnecessary management roles. The management of departments often requires knowledge and skills that are particular to that department and are not easily transferable. Where the department is a waste of space the manager cannot expect to find another position in the civil service as easily as his secretary and the army of people who deal with mundane paperwork. The time has come, however, when the pointlessness of their department must be acknowledged and they will go the way of countless people in the past who had skills and knowledge that was no longer of any use. If they can be used elsewhere, so be it. If they cannot then it must be "thank you and goodbye". I hate to think how many people are employed in these positions at salaries of £40,000 and above (plus pension, plus car plus this plus that). A huge saving is possible if only someone finds the guts to say "sorry, your job achieves nothing".

It is worth noting that almost all non-jobs have always been non-jobs. I am not talking about the modern day equivalent of the brick maker whose skills were made redundant by mechanisation of the brick-making process. I am talking about the man with the flag walking in front of early cars to warn people that a motor vehicle was approaching. That was a non-job, created out of an abundance of caution about a risk that never existed. So it is with every public sector job concerning so-called "climate change" or haranguing people about what they should or should not consume, and so it is also with the countless talking-shop Quangos including those with "Regional Development" in their title.

Such of their staff who have skills useful elsewhere should be redeployed. It will save money without causing them to lose a day's pay. A big saving will be made by disposing of the highly paid but utterly pointless managers.

I did a rough calculation earlier today. It concerned a local shop that is suffering badly despite being run extremely well. There are two owners who both work there, three other full-time staff and five part-timers. Assuming all the employees are on £7 an hour and the owners draw £30,000 each (if takings permit that much), the income tax and National Insurance produced by that business in a year is roughly £25,000. Five full-time and three part-time workers work all year to pay the cost of half a senior climate change manager.

If the unions oppose such redundancies they should be shot.

Good judgment need not be rational

I have commented before that juries might reach a unanimous verdict for a range of different reasons. Of the twelve people on the jury perhaps two think the defendant really is innocent, two think he is probably guilty but that his guilt has not been proved beyond reasonable doubt, two think him guilty but don't like the way the police investigated the matter, two think him guilty but don't want him to become a martyr for a cause they detest, two know he would be sent to prison if convicted and think that would be too harsh and two simply don't care so they go with the flow. We have a strict law against investigating or disclosing the workings of the jury room (although the occasional study is allowed). The cynical might suggest the law exists to prevent the lack of rational thought of the average jury being exposed to public knowledge, I prefer to look at it rather differently.

People are not entirely rational. Some are wholly irrational under all circumstances. All have personal opinions and emotions that affect their judgments. People come in all levels of analytical ability and all levels of balance between the weight they give their emotional and rational reactions to situations. Everyone who thinks about it for a second will understand that juries must always comprise a mix of people of differing intelligence, attitudes to the police, opinions about the type of offence the defendant is accused of committing and dozens of other qualities that will affect the decision they reach.

One reason we have juries to decide the guilt or otherwise of someone charged with a serious offence is because someone has to decide and it is thought better that it should be a random-ish cross-section of the public rather than a middle aged bloke in a wig. In the early 1990s I was involved in a series of trials concerning an organised fraud. It shed interesting light on the weight that should be given to a jury's verdict.

A property developer was building a load of new flats and houses just as the property market started to fall in 1989. Many developments are undertaken without sufficient capital to pay for the building of every unit. What you do is get some units finished as quickly as possible on one part of the site and market them. Some purchasers might have bought "off-plan" even before the places were built and the other units are marketed in the conventional way. This brings in money which is then used to complete the next tranche and so on until the whole development is completed. The developer will have spent a lot of money up-front buying the land, engaging architects, securing planning permission, arranging for the supply of utilities and paying for the creation of new road junctions so that the site can be entered and exited safely. The properties themselves also cost money to build. These costs can only be recovered by selling the new properties and it takes a lot of sales to cover them. The developer only makes a profit on the last tranche of properties, the first 75% or more just reimburse costs he has incurred.

The difficulty for the developer in my case was that the crash in the market meant he simply could not sell enough units for a high enough price to cover his costs. There were buyers at a price, but the price was not high enough. What he did was to find friends and relatives to act as bogus buyers. They applied for loans from finance companies that asked for few if any checks of their ability to pay. In order for the scam to work he not only needed helpful bogus buyers, he also needed the help of a mortgage broker who wouldn't ask any questions and a surveyor who would give generous valuations in a falling market. Once a sale was made the developer received the cash and the bogus buyers never repaid a penny. In due course numerous properties were repossessed and sold for a fraction of their purchase price just a year or so earlier.

The developer and several of his cohorts were prosecuted for conspiracy to defraud. They were also sued in the civil courts for the money they had extracted from the finance companies. The criminal trial came first. Some of the accused were convicted but not all. When the civil trial came to be heard the judge was faced with claims being made against alleged conspirators who had been acquitted after a lengthy criminal trial. On the first morning he asked how he could find against those who had been acquitted by a jury. The answer given was technically correct - the jury had to be satisfied beyond reasonable doubt whereas the judge in the civil claim only had to be satisfied on the balance of probabilities. Then the judge threw in the killer blow. He asked how he could know that the jury was satisfied of guilt on the balance of probabilities and acquitted only because the higher standard of proof required in a criminal court had not been met. Of course there was no answer to that. He took the view that it would be perverse of him to find, on the balance of probabilities, that someone had acted fraudulently if a jury had not been satisfied of that fact to that standard. Since acquittal did not establish that the jury was satisfied on the balance of probabilities he was not prepared to second-guess their judgment.

Interestingly, that judge had never been involved in a jury trial either in his years in practice at the Bar or in his time on the bench but that did not leave him with a sense that his judgment on issues of fact that will affect a person's whole life was better than that of twelve people picked off the electoral roll. He actually said that he saw no reason why his judgment on issues of fact should be any more accurate or any more just than one reached by a jury. In my experience that is a view held also by judges who deal only with criminal cases, indeed many have told me exactly that.

There is nothing to balance the emotions and opinions of a judge sitting alone other than his ability to leave such matters to one side and seek to be objective. All sorts of balancing factors apply to a jury of twelve people seeking to establish a unanimous verdict. And more, you might have identical jury trials a decade apart resulting in different verdicts because the general sway of public opinion has changed on a matter.

The danger with trial by judge alone is not just that it is only one person reaching an important decision but also that reaching just decisions almost always requires value judgments to be made and values in a dynamic society are never set in stone. It is more difficult for one person, who is obliged to give reasons for his or her decision, to reflect current values than it is for a dozen whose reasoning is not open to scrutiny.

Luck prevents equality

It's not easy to know whether some people are lucky and some unlucky. I can point to examples of people I have met who seem always to land on their feet and others who get the rough end of the deal more than half the time. In fact I once met someone who had won both the jackpot and the second prize on the national lottery, albeit not on the same day. One might be inclined to think that person extraordinarily lucky. On the other hand an old friend of mine bought his first flat just before the massive property price crash of 1989-1992 and managed to lock himself into a fixed-rate mortgage just as variable rates started to plummet. One might be inclined to think him blighted.

If truth be told, these things are bound to happen some time so these people are statistical proof rather than statistical freaks. Good luck and bad luck happen to us all at different times of our lives and I am sure it is a matter of pure chance whether our overall score in the luck casino is positive or negative. That is not to say that you cannot affect your chance of good things happening. For example, working hard and being polite both bring rewards that are not received by the indolent and rude, but that is nothing to do with luck it is a matter of cause and effect. Luck is a very different thing. It is all about factors that are beyond your control.

I am sure I have been very lucky in my life. Three examples spring to mind.

When I was first called to the Bar I couldn't afford to go into pupillage (the year-long apprenticeship you have to undertake in order to be able to practice as a barrister) because it was unpaid in those days and I had no money. I was taking a medicinal beverage one evening and overheard someone say that a particular private law college regularly recruited new lecturers at that time of year. I applied and was given a chance to prove myself. Had I not been at that particular watering hole on that particular evening and had I not been within earshot of that particular conversation, it doubt that I would have even thought of applying for the job.

After three years teaching full-time I went into pupillage and, after serving my year, applied for a place at the same set of chambers. I had one serious competitor whose support was much diminished by his strongest supporter dying just a few weeks before the decision was made whether he or I should become the junior practitioner. Had that man not died I suppose I might have been chosen anyway but my passage was eased by an event entirely outside my control.

In 1993 the London property market was at rock bottom. Two of my best friends owned the property that is now FatBigot Towers and needed something larger. They found the perfect place not far away so I helped them by buying their old shack. Since then the market has shot up to a level that is, to my mind, utterly absurd. Nonetheless, by being in the right place at the right time I have a capital asset with a current market value far above what it would otherwise be. And, to add a further twist, the government's desperate desire to chase the homeowner vote means policies have been targeted at maintaining artificially high prices. Were I to scale-down now, as I might, I would make a nice profit. Not so had I bought, say, twenty years earlier and faced the 1989 recession rather than the 2009 recession.

These three examples of personal good fortune highlight three different aspects of luck. The first was entirely a matter of being in the right place at the right time - the opportunity I enjoyed would simply never have appeared otherwise. The second was a matter of enjoying an advantage due to an external event that disadvantaged someone else. The third is a matter of government policy happening to benefit someone in my position whilst causing problems for others (particularly younger people who cannot afford to buy their own home). The common theme is that the events from which I benefited were outside my control.

One of the most serious flaws in egalitarian political theories is that they can only work if they negate luck. How can they do that? One or two obvious steps can be taken such as abolishing the national lottery, the football pools and all other forms of gaming and gambling. It doesn't take a genius to work out that betting will just go underground if that were done. But that covers only one aspect of the effect of luck, namely businesses that trade on people seeking luck.

Nothing can be done to prevent someone being in the right place at the right time such that he enjoys a benefit that others might be better qualified for but never hear about. Nothing can be done to combat the good fortune of a competitor suffering a blow through an external event that is no fault of his.

Everything can be done about government policies that provide a benefit to some but not others, however nothing will be done about them for so long as there are votes in that benefit. Current policies to maintain house prices at artificially high levels suit me to a tee despite being implemented without the intention to deliver any benefit to me at all. Maintaining house prices is not aimed at me, it is aimed at the potential Labour voter who bought at the height of the market and will be very angry and disillusioned to find himself with a home worth less than the amount he borrowed to buy it. Nonetheless it is not the man who borrowed £125,000 to buy a house now valued at £125,000 who gains, it is a crusty old fart like me who bought many years before, saw the nominal value of his home rocket because of the false credit boom and now sits on lots of equity because the government is scared of losing the vote of the other chap.

Policies aimed at combatting luck will always have consequences. They might prevent the chap with the £125,000 house suffering a capital loss today. That's fair enough, I wish him no ill-will. But they will maintain my windfall profit and will make no difference to the youngsters for whom a £125,000 house is a fanciful dream. Would it be fairer for Mr £125,000 to face a 25% fall in capital value while he has 20 years to pay it off or hope for an up-turn, me to face a 25% fall in capital value and the youngsters have a sporting chance to own their own home? I don't know. Maybe it would, maybe it wouldn't, I'm inclined to think it would.

Very much the same point applies to other policy areas. Combatting discrimination on the grounds of pigmentation or gender is one thing. That seeks to achieve equality of opportunity. True equality of opportunity can never be achieved because there will always be someone who overhears a job opportunity while someone better qualified does not. And there will always be someone who cannot put forward their most important reference because the referee fell under a number 23 bus just before putting pen to paper. What can be done is to level the playing field in other ways.

When you go one step further and seek to achieve equality of outcome you are doomed to failure. Not only can it never happen because different people have different abilities, but you simply cannot legislate against good or bad luck. Some idealists think you can. They think decisions should be taken by an elite group of the super-wise or be delegated to a body charged with applying the criteria laid down by the super-wise. The problem? It's obvious, those who propose the plan appoint themselves to be the super-wise - it can't be anyone else because it was their idea. They might start out with the very best of intentions but they do not and cannot have minds unimpeded by personal preferences and consciences unable too resist temptations wrapped in flattery.

Far better to face reality and accept that some people win the lottery and some don't, some make good bargains and some don't, some are in the right place at the right time and some never are. That's life.

Goodbye Michael Foot

So, Michael Foot is no more, gone at the age of 96. Proof that the old saying "the good die young" gives only half the story.

Reports of his death contain gushing tributes to a "man of principle" who was "true to his beliefs" and a "magnificent orator". I can't read stuff like that without wanting to bring up my dinner. Nick Griffin is a man of principle, David Koresh was true to his beliefs and Mussolini was great at stirring up a crowd, yet they are or were despicable pieces of filth who deserve nothing but condemnation for the dire effects of their principles, beliefs and oratory on other people.

Having misguided principles is not something to be lauded, sticking with them when they have been exposed to be not just flawed but dangerous is the sign of a stubborn bigot and being good about proclaiming them to the world is nothing other than the ability to show yourself to be an idiot to a wide audience.

Foot not only supported but fought for all the things that brought the UK to its knees by 1979. A fervent advocate of nationalisation, massively high taxes, limitless unions power and the destruction of our ability to defend ourselves, he epitomised the recipe for bankruptcy that our current government has fought so hard to emulate. The man's judgment could not have been more flawed. When the failure of socialist economies was brought to his attention he stood his ground like a religious zealot and argued that they hadn't done it properly ... none of them, even though every one had his support. It was like listening to a particularly stupid student union politico. He supported every major pro-soviet and anti-British movement, relentless in his pursuit of socialist dictatorship. Facts never got in the way, they never do with those who can't see beyond the hem of their donkey jacket.

Perhaps it is a little unfair of me to compare him to Griffin, Koresh and Mussolini. Support for the BNP has increased under Griffin's leadership, Labour's support was never lower than under Foot. Koresh's charisma seemed to keep the women happy, Foot kept no one happy. As for Mussolini? Well, there was absolutely no chance of the trains running on time under a Foot government.

Michael Foot was a naive failure.

Don't tune into the BBC

I hum along merrily to a jaunty tune, tap my feet at a pleasing rhythm and occasionally inflict My Way on drunken friends who are too polite to object to the use of notes unknown to musical science. That aside, I really don't do music. Others seem to take a different view, their ears permanently full of pea pods or whatever they're called. Fair enough. I don't like cauliflower but love runner beans, and others have opposite tastes. That's all part of the fun of life. If you want music constantly blaring in the background while you try to do things, be my guest, it's none of my business provided you don't either force it on me or expect me to pay for it.

Time was, not so long ago, that radio choice in music was between poppy stuff on Radio 1, slushy stuff on Radio 2 and pretentious stuff on Radio 3 with the occasional independent broadcaster trying to muscle into the Radio 1 audience. Now there seems to be an endless choice for your listening pleasure care of commercial stations catering for particular demands. Not all commercial stations pay their way and the occasional one drops off the airways because it can't attract enough advertising. No one ever seems to object because everyone knows the rules of the game - they broadcast for so long as they have enough money coming in and they stop when the money runs out. Anyone launching a petition to keep alive a loss making commercial station would be met with a simple response - "OK, you pay for it then".

It has been confirmed that last week's rumours about the BBC planning to close two of its radio stations are true, the BBC Asian Network and BBC 6 Music are for the chopping block. The BBC needs to save some money so it is cutting back on the services it offers. All very sensible, one might think. Unless you are one of the people employed on those stations or an avid listener, in which case you seem to feel obliged to howl with outrage. I know nothing about the BBC Asian Network and little more about 6 Music, although my understanding is that the latter plays music that is liked by some young people.

Why is it a loss to national culture for radio stations run by the BBC to close when it is just business reality for unfunded stations to go off the air? Of course it isn't anything of the sort. Life existed before those stations were started just a few years ago and it will continue once they are silent. This evening I heard a multi-millionaire singer bleating about the unfairness of 6Music disappearing. It was the usual guff we get from the vacuous world of pop music ... "damaging to modern culture" ... "no other way for new bands to break into the market" ... "loss of talent" ... blah blah blah. What utter tosh.

Let's get one thing straight here. The vast majority of pop music is simplistic pap. It might be nice sounding simplistic pap that will get my foot tapping, but it is still simplistic pap. The music itself requires no great musical skill to compose or play however jolly it might be on the ear. And the lyrics are fourth or fifth rate poetry if they have any meaning at all. Indeed almost all lyrics are just noise, you don't need to hear the words because they add nothing to the sound produced by the singer - which is why recordings of songs sell regularly to those who don't speak the language allegedly used by the singer and when you can't make out the words at all.

One can test this theory quite easily. How many lyrics would command attention if written as poems? What level of musical skill is required to play the tunes? Perhaps one only needs to know that a lot of it is produced by barely pubescent bands to understand that it has no sophistication. If one group of spotty youths doesn't find an audience another will and there won't be a fag-paper's thickness to distinguish between the noises they make.

If 6 Music really provides a valuable service, let someone buy the brand and see if they can get enough advertisers to make a go of it. If they can, fine; if they can't, equally fine. But it really doesn't matter one way or the other. The world will no more stop turning when 6 Music closes than it did when Dave Dee Dozy Beaky Mick and Tich broke up.

The real question is not whether BBC 6 Music should close but why the BBC spends money on music stations at all. Commercial radio covers every genre the BBC covers today and there is no reason to believe that that would cease to be the case if BBC music radio simply shut up shop tomorrow. In fact the opposite is likely to happen because it would free up further audiences for commercial radio and would increase their chances of securing advertising revenue.

There is nothing in the "it launches new talent" guff. Leaving aside the debatable use of "talent", if people make noises the gullible want to buy we can be sure as eggs is ova that the record companies will find a way to promote them. You don't need "free" advertising at the taxpayers' expense to sell a saleable product. At the moment the BBC is providing unknown millions of pounds worth of free advertising to a business that is perfectly capable of standing on its own feet.

What we are seeing in the absurd reaction to 6 Music's closure is the same belief in the tooth fairy that imbues all public-sector spending with magical powers in the view of the brainless. An "official" body is doing something, therefore it must need doing, therefore it would be harmful to stop doing it. Rubbish on stilts. Pop music is a commercial enterprise. It makes its successful exponents hugely wealthy regardless of their talent. It extorts money from the young by falsely claiming to be important, in much the same way that football does for middle aged men and cosmetics for middle aged women. Fine, let them pay if they think it's important. Let them believe it's important if that makes them happy. But don't claim it is anything other than what it is - a branch of commercial entertainment just like any other.