Tory win - great news for state-backed and monopoly businesses!

From The Guardian:

FTSE 250 rockets to record high as banks, housebuilders and utilities surge

City AM has lucid moment - shock.

City AM is normally a cheerleader for rent seekers everywhere, so today's editorial (second page of pdf) on Persimmon being "stripped of its right to participate in Help To Buy" is a remarkable turnaround:

However, the case of Fairburn was always uncomfortable - an executive compensation scheme imposed without a sensible cap, the folly of which was exposed when housebuilders' shares soared thank to a government policy that doped up the sector in a flawed bid to fix an affordability crisis. 

The aftermath appears even worse - a mega-rich boss whose company is accused of profiting from unfair leaseholds and shoddy workmanship. This is more like corporate cronyism than capitalism, and proponents of free, fair markets should call it out.

Money for nothing...

From the BBC:

Rudi Klein, head of Specialist Engineering Contractor, an umbrella group representing suppliers to the construction industry, said Carillion outsourced virtually all its work.

He said the government knew of Carillion's reliance on sub-contractors, but continued to award the company lucrative work despite growing concerns about its finances.

"It's that supply chain who is going to bear the massive loss," he said. "There could be a large number of firms that will experience substantial financial distress."

... and presumably their chicks for free, although that is not expressly stated.

Carillion: Winners and Losers

City AM have listed the winners to save me the bother:

... Amid the chaos, however, lurk some cunning opportunists – most of whom can be found in Mayfair.

In many ways, Carillion has been the story of the short sellers. The most bet-against stock in Europe will see hedge funds share profits of around £300m between them. Marshall Wace took the biggest piece of this as shares plunged in the autumn. After it exited stage left, the fund was quickly replaced by rivals, steadfast in the belief worse was to come. Blackrock, the world’s biggest asset manager, has stuck around and still holds a chunky bet against the contractor.

Then there is a raft of advisers picking up hefty fees. The jewel in the crown would be the administrator mandate. EY is reportedly in the box seat, but pension scheme adviser PwC may cry foul, arguing its rival has a conflict given EY’s six-month role helping the company right-size operations.

But never mind the winners, back to the many losers from Carillion's decline – including, of course, the government. A decade on from the financial crisis it is incredible the state yet again finds itself under pressure to consider a taxpayer bailout of a private company, this time during a period of economic growth. Such situations imperil public faith in business and the very principles of a market-led economy, and remind us that regulators – in the financial sector and beyond – have some way to go before we can be confident that the spectre of bailouts has been consigned to the past.

As to paying hundreds of millions for "administration", sod that. All the government needs to do is send somebody round to each site where Carillion operates and tell everybody "You're working for us now, here's your new employment contract". Those people will then get onto their own suppliers and tell them to send future invoices to the Department of [whatever] and everything continues as was. It'll save the government taxpayer a fortune.

This is also another argument for deposit funded corporations - like building societies, co-operatives or partnerships, they don't have a share price, so speculators will have to find something better to do.

All right then, fuck off.

Continuing our occasional series of flimsy arguments for remaining a Member State of the EU which on closer inspection are arguments for leaving, from the Evening Standard:

A vote to quit the European Union would trigger a flood of up to 100,000 banking jobs out of London, senior City figures have warned.

One board-level banker told the Standard that “Brexit” would force dozens of banks that have their European headquarters in London to relocate highly-paid professionals to rival EU financial centres such as Frankfurt, Luxembourg and Dublin.

He estimated that staffing levels at some investment banks in London could fall by as much as half, with a huge knock-on effect for the broader economy and property prices.

What conclusions can we draw from this?

1. The banks, being the most corporatist of corporatists love the EU. So the EU is guilty by association and we should vote to leave.

2. If you want shot of a few bankers, vote to leave.

3. If you would like London housing to be a bit less unaffordable for ordinary people, vote to leave.

While I'm on the topic, other world financial centres like New York, Switzerland, Hong Kong, Singapore and Tokyo - remind me, are they in the EU or not?

Douglas Carswell on top form.

From City AM:

“They’re on the back foot, momentum is with us, and I think we’re going to win,” Carswell says.

“[The CBI] are not neutral players in this. They tend to favour big corporate lobbying because they are a big corporate lobbying organisation. They produced a poll that even the British Polling Council admitted was questionable,” he adds, using a recent corporate scandal to land another punch on the business group.

“The CBI is to measuring what British business thinks about EU membership what Volkswagen is to carbon emissions tests. They’re methodologically rather suspect.”

Some businesses want to stay in the European Union, Carswell concedes. But that’s because “those businesses – big corporations and banks in particular, but also lobby groups – that have a clear vested interest in a commercial system based on lobbying and the granting of permission, who are going to love the EU.”

“But they are not representative of the broad bulk of business in this country, who can’t afford to rig the rules. I also happen to think there is something unethical about gaining market share by fixing the rules by hiring lobbyists.”

“I believe in the free market, and the corporatist vested interest in Brussels who are rigging the system to their advantage are not helping us be competitive. Competitiveness, like red tape and all problems in the EU, has been a problem all Prime Ministers have said they’ll address, but nothing ever changes.”

Which is what I have been saying for years. The Outers should not be just attacking the EU from 'the right' by focusing on immigration (even though in the light of recent events, that's becoming ever easier), they should be attacking the EU from 'the left' as well.

I was at a UKIP event in London a few years ago, and when it was finished, I told the others that I was off to the Occupy London thing at St Paul's. That took some of them by surprise, but I explained that as far as I was concerned, in some ways, UKIP and the Occupy people are fighting for the same thing, they just don't realise it.

"Pro-Europe CBI poll was rigged, claims ‘no’ lobby"

MBK emailed in this from The Times:

The row centres on the sample used by YouGov, which Vote Leave claims was “wholly unrepresentative” of Britain’s 5.2 million companies.

For example, only 20.5 per cent of the respondents had fewer than 50 employees, despite the fact that 99.2 per cent of British businesses employ fewer than 50 people. Vote Leave also claims that only 22 per cent of the businesses surveyed had a turnover of less than £5 million. The average turnover of private businesses is £673,000.

The CBI is understood to have selected the sample for YouGov from its membership list. In total, 451 of the members selected responded.

All of which seems very likely to me, if you pay attention to these things, you'll find that the larger the corporation, the more pre-EU it is and vice versa. The CBI is the worst of the lot.

They own land, give them money!

Via Duncan Stott on Twitter:

Communities Secretary launches £26 million fund for housebuilders to demonstrate the range of high quality homes for first-time buyers

Cronyism Rules OK?

From here:

I quote:

1. Pick a field where you can establish a monopoly – such as Mexican billionaire Carlos Slim who from 2010-2013 was ranked the richest person in the world after taking control of the country’s entire telecommunications market.

2. Expand as quickly as possible – Amazon has eschewed early profitability to becoming the “everything shop” and as a result investors have poured money in.

3. The worst place to do business is really the best – it is easier to dominate emerging markets due to the lack of competition and potential for growth.

4. Take risks with other people’s money – do all you can to encourage investors and then gamble their money rather than your own.

5. To get rich you need to own your own business and property rights – Bill Gates’s Microsoft at one point had a 95 per cent share of the operating systems market, protected by intellectual property rights.

6. Spin complex laws into gold – set up in industries bound by such convoluted regulation – for example agricultural subsidies and banking regulation - that it is easy to bend the rules as nobody understands [them] anyway.

7. Establish business networks – telecoms networks and shipping networks have created a lot of billionaires’ fortunes as they can squeeze out all competition.

No. 6 is my favourite...

Generally that's all about Private Enterprise, not Free Enterprise.

Please sir, may we have some more?

From City AM:

The Bank of England (BoE) made an unprecedented move yesterday as it allowed certain non-bank organisations to access its account facilities – expanding its so called lender-of-last-resort access.

For at least a century, only commercial banks and building societies had the privilege of keeping accounts with the BoE...  From now on, designated investment firms and central counterparties (CCPs) will be allowed to keep accounts at the bank...

Go on then, what's a CCP? (the old Soviet Union in cyrillic with a letter missing?)

CCPs manage risk by stepping into the middle of a financial transaction between two parties. Instead of dealing with each other, both parties deal with the CCP...

CCPs have been around for a long time but only started playing a larger role in financial markets after regulators made their use mandatory for certain activities.

Good stuff. Get private players using their own money to backstop/insure/underwrite the banking system, keep the taxpayer and government out of it.

Recognising this, the BoE has allowed them access to its account facilities to ensure it can always be rescued should another crisis hit financial markets.

A primary example of a CCP in the UK is LCH.clearnet which “clears” half of the world’s interest rate swap market ­– a transaction where a fixed rate is swapped for a variable one.

Jolly good.

So the UK government is now underwriting the underwriters? That was the whole point of making the underwriting mandatory so that the UK government wouldn't have to underwrite them.

And we're underwriting interest rate swaps even though most people don't even know what they are, and most swaps are purely speculative (gambling on interest rate and currency movements).

The EU is corporatist (part 94)

As I said a month ago, based on the utterings of small and large business lobby groups, Big Business likes the EU and small businesses/businessmen don't.

Opinium Research have done this a bit more thoroughly and come to the same conclusion, as summarised in City AM:

BRITAIN’S smallest companies are more likely to believe the EU is bad than good, a study showed yesterday.

The study from Opinium Research showed 40 per cent of firms with fewer than nine employees think the EU membership is bad, more than the 38 per cent who favour it. That compares with big businesses, where 57 per cent like membership against 16 per cent who say it is bad.

The general public is also more sceptical than big businesses.

Swiss to take on excessive executive pay at polls, again

From Expatica

In comparison to the UK, Switzerland is terrifyingly democratic, you cannot move for gigantic political posters, broadly all of which demand that the Federal Government does not interfere with the business of the various Cantons, adorning bus shelters and railway platforms. Getting a referendum requires only 100,000 signatures, something a few people might not mind having in good old Blighty.

So on 24 November  a radical proposal, dubbed 1:12 after the ratio it seeks to set between the highest and lowest salaries in a company, will be put up for a referendum. It was originally put forth two years ago, and received more than the 100,000 signatures needed to put any issue to a popular vote as part of the aforementioned ferocious direct democratic system. Unsurprisingly the initiative has also received widespread support from Swiss unions.

Although the Confederation Helvetica has largely dodged the implosion of various EU economies (just don't mention the UBS!) public anger has risen over what is considered abusive levels of pay and bonuses for top bosses.

Last March, nearly 70 percent of voters came out in support of a new law flat-out banning golden parachutes and excessive executive bonuses.

That vote came amid national outrage over a 72-million-Swiss-franc ($79-million, 58-million-euro) golden parachute deal for Daniel Vasella when he stepped down as chairman of pharmaceutical giant Novartis in February.

While top executives in the country on average made just six times the salaries of their lowest-paid employees in 1984, the gap swelled to 13 times more by 1998 and 43 times more in 2011, according to the Swiss transport union.

At food giant Nestle, for instance the top executive was reportedly making 73 times the salary of the person on the bottom rung two years ago, while the lowest-paid employee at Novartis in 2011 would have to work 266 years to make the highest earner's annual salary.

Last month polls were suggesting the vote on 1:12 rule could be close, but in recent days the no campaign – backed by the government and parliament – appears to have turned the tide. A survey for Swiss television released on Wednesday pointed to a 54% to 36% defeat for the proposal, with 10% so far undecided.

So where's the money going?

Is it just me, or is there a bit of a mismatch between these two stories?

From the BBC:

BAE Systems is to cut 1,775 jobs at its yards in Scotland and England and end shipbuilding altogether at Portsmouth. The firm said 940 staff posts and 170 agency workers will go at the Portsmouth site, which will retain repairs and maintenance work.

Some 835 jobs will be lost at yards in Govan and Scotstoun on the River Clyde in Glasgow, Rosyth in Fife and Filton, South Gloucestershire, near Bristol.

The cuts follow a drop in work after the end of aircraft carriers work. BAE Systems said it had made the cuts because of a "significant" drop in demand.

From the BBC:

The cost of two new aircraft carriers being built for the Royal Navy is expected to be almost twice the original estimate, the government is expected to confirm this week.

In the latest budget, the Ministry of Defence is set to estimate the cost of the two ships at £6.2bn. The department says it is renegotiating the contract to avoid further significant rises. Six years ago, when the contract was approved, costs were put at £3.65bn…

Of the latest cost rises, the Ministry of Defence said: "Negotiations between the MoD and the Aircraft Carrier Alliance [the ship-builders] regarding the re-baselining of the Queen Elizabeth carrier programme are at an advanced stage…

HMS Queen Elizabeth, which will not be finished until 2016 at the earliest, will be delivered before HMS Prince of Wales.

The Aircraft Carrier Alliance is of course primarily the self-same BAE Systems.

But it's not about "road safety", is it?

There's a good summary at Sky News about the pro's and con's of the EU's proposal for automatic speed limiters i.e. they are a load of nonsense.

Before they start lecturing us about "road safety" they might like to think about learning from us how to get road deaths down to half the current European average (one of the things of which we in the UK can be rightly proud, I think).

But the article misses out the most fundamental point, which is behind two-thirds of EU proposals, and that is that some lobbying body somewhere has spotted a gap in the market.

If they can persuade the EU to pass such a crackpot Regulation or Directive, then some large corporate somewhere will be able to earn itself silly retro-fitting 250 million motor vehicles with these gadgets.

Even if they can only charge €10 a pop, and it will probably be more like €100, that is still a shed load of money, with no chance of a refund as and when it turns out they cause more accidents than they prevent.

Europe: Extra Virgin Edition

From The Telegraph:

David Cameron has attacked a Brussels ban on the use of olive oil jugs in restaurants as "exactly the sort of area that the European Union needs to get right out of".

The Prime Minister criticised the ban as a caricature of unnecessary EU interference and a piece of red tape that should never have been proposed, let alone agreed. In a press conference at the EU summit, Mr Cameron declined to explain how Britain had ended up giving the green light to the ban.
"Our argument was bound up in a whole set of arguments we were having about rules of origin and all the rest of it and I won't go into the tedious complexities," he said.

So, this is something the EU shouldn't be doing it, but we're utterly powerless to change it. We can't get something as silly as olive oil in bottles overturned, but we're expected to believe that this man can renegotiate Britain's position in Europe?

Corporate Welfare

Taken from HM Treasury's Public Expenditure Statistical Analysis, Table 5.3.

"Current grants to persons and non-profit making bodies" is mainly old age pensions and welfare payments plus a chunk for fake charities; "Pay" means public sector pay, 7 million people @ £25,000 each. And then they spend as much again on corporate welfare.

A special mention must go to the £28 billion "accounting adjustments":

The interesting part about this isn't "the heckling" but ...

Another one from the desk of Bob E:

Smith was about to deliver a speech on welfare and pensions reform when campaigner Willie Black began haranguing the MP, calling him a "parasite" and a "ratbag" for pursuing social security cuts that would leave "millions" of people homeless.

After Black, who had booked in for an overnight stay at the George Hotel to get into the event hosted by Capita, was escorted from the room, two disability rights campaigners also barracked Smith.  Protesters also gathered outside the hotel.

That would be the Capita who this week announced...

Capita acquires justice software firm STL

Capita plc has acquired STL Technologies Limited, which provides software and ICT to the criminal justice system, including courts and the police, and to asylum and immigration tribunals.

In fact things are so cosy between Capita and the MOJ that the MOJ has provided a glowing puff piece for the Capita website* and who knows Capita may do so well out of "changes to the justice system and devising new ways of monitoring and rehabilitating offenders" that MOJ  HQ gets renamed as CAPITA - Home of the Ministry of Justice

* http://www.capitasecureinformationsolutions.co.uk/products-and-services/pages/successstory-mojnoms.aspx (and do check out the "benefits" listing at the end - marvellous tack on item for the last benefit...)

Also this week Capita announced "event hosting" coming soon...

Capita announces one-day national conference "Developing Commercialism in Local Government"
Wednesday 19 June 2013 – Central London

Benefits of attending:

• hear from the parliamentary under secretary of state, Department for Communities and Local Government about driving local growth and entrepreneurialism throughout local government

[Indian Bicycle Marketing] That was then, this is now

Thanks to Bob E for the links:

1. Wikipedia:

Atos HealthcareAtos Healthcare, a division of Atos providing consulting in the UK health sector, employs over 3,000 people.... Its most prominent business process outsourcing contract is with the Department for Work and Pensions, under which it "conduct[s] disability assessments for people claiming a range of disability benefits including Employment Support Allowance, Incapacity Benefit, Disability Living Allowance and Industrial Injuries Disablement Benefit."

Initially awarded to Schlumberger's Sema Group (subsequently purchased by Atos) in 1998, the contract was renewed for a further five years in March 2005. The contract with the DWP was believed to be worth £400 million to Atos.

NB. The Labour Party was in government from 1997 to 2010.

2. National Audit Office report The Medical Assessment of Incapacity and Disability Benefits of 9 March 2001:

Recommendation (gg): The Committee has not been convinced that there has been an improvement in the quality of examinations and reports since contractorisation. Some efficiency improvements have been made: the challenge now must be to improve the quality of reports and the treatment of claimants. Given that there is pressure on doctors to see more patients more quickly it is difficult to see how this can be achieved.

Ministers should ask themselves whether one of the goals of contractorisation - improved service to the public - has really been achieved. If they conclude, as we do, that it has not, they should take steps to renegotiate the contract, or otherwise influence performance to ensure that this goal is met.

3. Hansard, 13 March 2008:

James Purnell [Labour MP, then in government]: I said that this was a contract, and so it is. As my hon. Friend the Member for Regent's Park and Kensington, North (Ms Buck) quite rightly said, for those who can work, there is no option not to do so. We have already announced—much to the Opposition’s chagrin—that there will be work for the dole for young people who are not working or learning and for the long-term unemployed: a much wider programme than the one that they had previously announced...

Last month, we announced payment by results. Now, we can announce that everyone on incapacity benefit will be put through the work capability assessment to find out whether they are capable of work.

4. PM's welfare speech, 25 June 2012:

[David Cameron, now Conservative Prime Minister] The [welfare] system we inherited was not only unaffordable. It also trapped people in poverty and encouraged irresponsibility. So we set to work.

In two years, Iain Duncan Smith has driven forward welfare reform... And he is delivering remarkable results:

Over 400,000 more people in work than in 2010. Tens of thousands of claimants of incapacity benefits re-assessed, and found ready for work. We’ve established the biggest-ever Work Programme – and we’re well on our way to getting 100,000 people into jobs. We’ve helped tens of thousands of young people find real work experience.

5. Guardian, 7 February 2013:

Margaret Hodge [Labour Party MP, now in opposition], chair of the public accounts committee, said the Department for Work and Pensions was getting far too many decisions wrong on claimants' ability to work.

The government should accept much of the blame for distressing and expensive fitness-to-work tests that have caused "misery and hardship" to thousands of benefit claimants, according to a report by MPs released on Friday.

The public accounts committee said there had been much criticism of Atos, the firm contracted to conduct so-called work capability assessments (WCA), but it warned that most of the problems lay with the Department for Work and Pensions.

The tests on claimants were introduced in 2008 to assess entitlement to employment and support allowance. Atos was paid £112.4m to carry out 738,000 assessments in 2011-12.

Wake up and smell the revolving door

Apparently random snippets compiled by Bob E.

Office of Tax Simplification 17 January 2013:

The OTS is looking to recruit experienced tax professionals on short term [unpaid] secondments for its review into employee benefits and expenses. Further details of the role can be found in the job specification below. The closing date for applications is 15 February 2013. Please refer to the employee benefits and expenses page for full terms of reference for the review.

Daily Mail 30 January 2013:

Britain's top taxman – who stepped down after he was accused by MPs of lying – has been hired by HSBC to advise it on honesty, it emerged last night. In an explosive move, the bank has appointed Dave Hartnett, the former head of HM Revenue and Customs, as an adviser to ‘enforce the highest standards’ at the firm.

Daily Mail 1 February 2013:

It also emerged that the companies all send senior tax partners to HMRC or the Treasury to help draft new legislation. When they return to their firms, the companies use the new-found knowledge of loopholes to devise new ways for corporations to avoid paying full dues to the taxman.

HM Revenue and Customs, Corporate Governance:

HM Revenue and Customs' (HMRC) Non-Executive Directors are senior business figures from outside the department who bring a diverse mix of expertise and skills from across both public and private sector...

Their "non-executive directors" include:

Ian Barlow, who spent 37 years with KPMG
Colin Cobain, who was formerly Chief Information Officer of Tesco
Philippa Hird, who was until recently Group Human Resources Director of ITV
Volker Beckers, who has been Group Chief Executive of RWE Npower since January 2010
Norman Pickavance, who was most recently Group HR and Communications Director of WM Morrisons Supermarkets Plc*
John Whiting, who was a tax partner at PricewaterhouseCoopers for 25 years

* Why do they give the full name of this company, but not for the others?

Fun Online Polls: Rock'n'roll births and UK government spending

The top 'unlikely circumstances of your own births celebrated in music', as chosen in last week's Fun Online Poll are as follows:

I was born...

to be wild - 18%
in a crossfire hurricane - 10%
under a bad sign - 8%
slippy - 7%
to lose - 7%
to make you happy - 6%
to run - 5%
in the USA - 4%
In November 1963, the day that Aldous Huxley died - 4%
under the wrong sign - 2%
in a gasoline alley - 1%
Other, please specify - 28%

Blogging points go to...

Graeme: "in a trunk, in the Princess theatre in Pocatello Idaho"
Chuckles: "on the Bayou"; "to Boogie"
Wigner's Friend: "with a plastic spoon in my mouth"
Jesus Green: "under a wandering star"
Kevin B: "in the wagon of a travelling show"

Bragging rights go to...

DBC Reed, who was born twice within a single song: one time the sun didn't shine; the other time drizzling with rain.
------------------------------------
In these times of "austerity", you'd assume that the government would be looking at the largest items of government spending first to see where it can find savings. For some reason, they think that can make significant savings by freezing working age and child benefit payments and in popular myth, this is the largest item of spending

IMHO, the most sensible way of splitting up government spending is not into things like "health", "defence" and "welfare" and so on, but to look at who gets the cash:
1. Cash given to welfare claimants and OAPs;
2. Cash given to public sector workers and pensioners; and
3. Cash given to nominally private sector businesses, be that procurement of goods and services or subsidies, or some mish-mash of the two like bank bail outs, PFI deals, agricultural subsidies, Housing Benefit etc).

I'm ignoring non-cash subsidies (like bank guarantees, protection of monopoly rights etc) and a nurse's salary is in category 2 (instead of including the value of "free healthcare" as a benefit in category 1) for these purposes.

On which of these three areas does the government spend most actual hard cash?

No further clues. Guess here or use the widget in the side bar.