Who will chair the new DECC committee?
I’m on holiday this week but thought I’d pass on this rumour. Plenty of interest in Westminster in who will chair the new Energy and Climate Change select committee, which will keep tabs on Ed Miliband’s new department.
Lots of MPs are keen to get themselves a seat on the table. Apparently Elliot Morley, a former environment minister, is Labour’s choice to chair the committee.
Would the CML like to explain itself?
The Council of Mortgage Lenders firmly denied reports from the BBC a fortnight ago that its 2009 forecast for repossessions would be 75,000. The CML’s spokeswoman said on the record that this was the wrong figure and the real number was likely to be significantly lower. This is what we said at the time.
Today, lo and behold, the CML has put out its forecast. It is of course 75k. Maybe we shouldn’t expect anything different from the group – which spectacularly failed to spot the crash coming.
The other striking prediction today involves the number of households in arrears increasing at an even more rapid rate:
“By the end of 2008 the CML expects 210,000 households to be more than three months in arrears, and this number is expected to increase to 500,000 by the end of 2009.”
The rebellion has started in earnest. The PPS to the post office minister has just quit his job in protest at the plans to part-privatise the Royal Mail. It is his moment of glory, a brave stand that will see him join the masses of disgruntled MPs on the Labour benches. But there is one question that can’t be avoided: who is he?
Well the Royal Mail Martyr has impeccable Labour credentials. McGovern, who represents Dundee West, was one of two in the 2005 MP intake with a background in manual labour. He’s the son of a Glaswegian felt roofer and a Dundonian jute mill worker. He spent 24 years as a glazier before becoming a GMB organiser. He looks like he means business.
How serious is the rebellion? As the Tories are likely to back the measures, it need not scupper the part privatisation plans. But it will be messy, noisy and a real problem for the Labour whips and Gordon Brown. It could also take the shine off Lord Mandelson’s triumphant return to government.
Here is what McGovern had to say:
I believe a PPS has to be fully supportive of proposals of the department which they serve. In this case, I do not support hat looks to me like partial privatisation of the Royal Mail.
For me, it simply beggars belief that we would employ the services of a
company from abroad to tell the Royal Mail in this country where they are going
wrong.Whilst I have enjoyed my period of a Parliamentary Private Secretary and I regret having to resign, I simply feel that under the circumstance there was no alternative.
It is often wrongly claimed that Gordon Brown failed to spot the housing bubble. In fact, he called the bubble as early as 2005. The trouble was he believed he had addressed it. Brown thought he had successfully managed a boom without a bust.
You can relive the hubris of the time by reading this passage from Brown’s 2005 speech to the Labour conference. No modesty here. But I think it was the one and only time he has used the word “house price bubble” as chancellor or prime minister.
We will have the strength and resolution to take the right long-term economic decisions too.
Why has it been that at every point since 1997 faced with the Asian crisis, the IT collapse, a stock exchange crash, an American recession, last year a house price bubble, this year rising world oil prices, why has it been that at every point since 1997 Britain uniquely has continued to grow?
In any other decade, a house price bubble would have pushed Britain from boom to bust.
In any other decade, a doubling of oil prices would have put Britain first in last out and worst hit by a world downturn.
I tell you, it is because with Bank of England independence, cutting debt, fiscal discipline and the New Deal this Labour government has shown the strength to take the tough long-term decisions, that inflation is low, interest rates are low, growth has been sustained in every year, and we are closer than ever to the goal which drives us forward: the goal of full employment for our generation.
Labour, the natural party for economic strength in our country today.
The full video can been seen here on the BBC site. The bubble section is about 5 minutes and 20 seconds in.
You don’t need to be in Berlin to take a swipe at Gordon Brown’s economic record. Members of the monetary policy committee have started to put the boot in too. Andrew Sentance, one of the MPC’s external members, recently gave a thought provoking speech demolishing the idea of a “bust without a boom”.
While we may not have seen a classic inflationary boom-bust cycle on the 1970s-1990s model, it would equally be wrong to deny that the current bust was preceded by a boom of some sort….We are now appreciating that the earlier years of this decade saw an expansion of various forms of financial market activity which have subsequently proved unsustainable.
His conclusion is that the Brown era is markedly different from other post-war booms because of the remarkable stability in prices. But there was a bubble, he says, and the consequences from it unwinding will be no less severe.
In his piece on the speech, Chris Giles, the FT economics editor, uses Treasury figures to estimate just how unsustainable this bubble was. In the chart below he shows how a change in Treasury’s assumption of “sustainable growth” has flattened out the Brown boom and the Brown bust. How convenient.
Are the Treasury showing a fondness for back of the envelope calculations? While the Tories are wild about tax cuts that pay for themselves, Alistair Darling seems to prefer tax cuts that are cheaper than forecast.
Remember the great fuss over the stamp duty holiday? When Darling unveiled the tax cut in September he said “it would cost a total of £615m”. But take a look at the fine print of the pre-Budget report: the estimate is now down to £280m.
The renewables target is now 14.5 per cent, not 15 per cent
The UK was supposed to generate 15 per cent of its energy from renewables by 2020. That was the received wisdom. The prime minister himself has referred to it on several occasions*.
In fact British officials in Brussels have negotiated a slightly lower figure which equates to about 14.5 per cent.
This is because the EU-wide target – a more ambitious 20 per cent – will now include an element of aviation despite lobbying against this.
(Curiously, the UK sought to exclude planes with the argument that this would be un-environmental, ie “green” air fuel would come from biofuels, which destroy rainforest.)
In return the target is lower for islands which (in theory) must depend on aviation: the UK, Cyprus, Malta, Ireland and (don’t as me why) The Netherlands.
The difference may not look that big – I’m still trying to work out how many wind farms this equates to – but environmentalists say it is significant. That’s because the first 10 percentage points (or so) can be achieved from biomass and onshore wind farms. Getting beyond that requires difficult projects such as offshore wind and wave power.
A government source says that the tweaking of the targets don’t just apply to the UK so it would be wrong to portray this as a retreat.
Robin Webster, climate campaigner for Friends of the Earth, told me that the overall renewable energy deal was a “major leap forward amidst the back-tracking of the EU climate negotiations”.
But she went on….”It’s disappointing that Britain’s renewable energy target has been cut because we have such a large aviation sector. The government must deal with this rogue industry and take urgent steps to limit the threat it poses to our climate.”
* ”We need a massive expansion of renewables. Britain is fully committed to the EU target that 20 per cent of all energy must come from renewable sources by 2020. Last month Britain set out its strategy to meet our own 15 per cent renewable target – a £100 billion investment programme over the next twelve years.
“
More on Mapeley
I wrote here a few days ago about Mapeley’s falling share price. The company came to public attention several years ago when it bought hundreds of HMRC buildings in a deal which was controversial because the group was based offshore.
This month the government announced it would close more than 90 tax offices.
Here is the latest update on the situation – and how it could impact Mapeley – from the Guardian’s David Hencke. The story is entirely confirmed by the department.
The pertinent quote is this: “HMRC benefit from having a very flexible contract with Mapeley…for roughly 80 per cent of its estate across the country. Any risk relating to the property we vacate will rest with our PFI landlord.”
Corus, the GMB and “total bollocks”
I was surprised to see the GMB union describing as “total bollocks” my scoop this morning.
The story revealed talks between Corus and union officials over a possible 10 per cent pay cut for the steel group’s 25,000 workers. It’s interesting because this is the kind of idea which could be followed elsewhere (FT journalists have already been handed a pay freeze for 2009).
JCB agreed a deal a few months ago where it would cut pay and hours in return for savings jobs – although the digger company went ahead and cut hundreds anyway a few weeks later.
I was a touch disappointed by the GMB quote in The Guardian. So I called the union’s spokesman, Steve Pryle.
This is what he had to say: “I have spoken to one official who was not aware of this and another who said there had been talks about going down the JCB route.”
That strikes me as more confirmation than refutation. By the way – the BBC has confirmed the tale on its website today. And Robert Peston, the Beeb’s business editor, has more to say on the subject.
Incidentally, here is the statement from the Community steelworkers union. Again, it’s denying that a deal had been struck; but I only wrote that talks were taking place (this is called a non-denial denial in the news world).
‘The report in the Financial Times is inaccurate. Nothing has been agreed at this time. Community Union has recently met with Corus Management to discuss a response to the current economic situation. These constructive negotiations are on-going and it would be premature to speculate on the outcome. As yet no agreement has been reached and no deal has been done.”
Why would unions deny today’s FT? For starters, members don’t like to hear that their officials are negotiating from such a weak position. Nor might they like the idea that unions have “offered” to take pay cuts in return for preventing job losses. So their line is that Corus suggested the pay cuts.
Here is what Community told the BBC:
“Any proposals which have come forward have done so as consequence of proposals that have been put by the company.” In other words Corus thought of it first. But yes we did agree to take it, and put it back to management.
This is semantics.
VAT cut is “crass Keynesianism”: The latest view from the German government
Peer Steinbrück, Social Democratic finance minister, hardly pulls his punches in a Newsweek interview:
“Our British friends are now cutting their value-added tax. We have no idea how much of that stores will pass on to customers. Are you really going to buy a DVD player because it now costs £39.10 instead of £39.90? All this will do is raise Britain’s debt to a level that will take a whole generation to work off. The same people who would never touch deficit spending are now tossing around billions. The switch from decades of supply-side politics all the way to a crass Keynesianism is breathtaking. When I ask about the origins of the crisis, economists I respect tell me it is the credit-financed growth of recent years and decades. Isn’t this the same mistake everyone is suddenly making again, under all the public pressure?”
UPDATE: A Downing St spokesperson just invoked some of Mrs Merton’s homespun wisdom to laugh off the remarks. “As Mrs Merton might have said, I’m not going to speculate on what would have provoked the German finance minister to make these comments in an election year.”
Here’s a clip of the real thing.
[youtube]http://www.youtube.com/watch?v=Lj-9lSEBBm0[/youtube]
New details (but not many) of the “Mortgage Support Scheme”
The Treasury has just put out details of how its new anti-repossession scheme will work. (The one in which, if you lose your job, the bank will defer part of your interest payments for up to two years.)
They still only have support “in principle” from eight lenders. That means no change from last week’s announcement in the Queen’s Speech.
Here’s the link if you want to know more.
UPDATE: The Council of Mortgage Lenders are still lukewarm. “We still need clarification as to what the costs of the scheme may be for lenders.”
Mapeley’s falling share price and HMRC
The Westminster village should remember Mapeley. The property company is linked inexorably with the purchase of 600 Inland Revenue offices several years ago – controversially, after it emerged that the group was based offshore.
Since then it has floated on the stock market – although US investment group Fortress remains the biggest shareholder.
But the share price has fallen by about 97 per cent since the peak of the property bubble: from about £40 to £1.15.
The group’s interim results, reported in August, showed a £53.8m pre-tax loss for the six months to June 30. Its net asset value per share fell by 13 per cent to £16.17. The group said it had seen a “strong operational performance” over the period and its cash position was healthy. Although it is highly geared, it said it had remained within its banking covenants.
Last Thursday I asked HMRC what would happen to these buildings if – and I emphasize if – Mapeley were to go under.
Here is the statement, just through: “HMRC has wide-ranging rights under the STEPS contract in the event of contractor insolvency. In particular the STEPS contract contains provisions which protect HMRC’s ability to occupy the premises and to secure the delivery of services including the ability to take new leases post-termination, step-in rights and direct agreements with the funder and service providers.”
| About this blog | Blog guide |
Jim Pickard joined the lobby team in January 2008. He has been at the Financial Times since 1999 as a regional correspondent, assistant UK news editor and property correspondent.
Kiran Stacey is an FT political correspondent, having joined the lobby in 2011. He started at the FT as a graduate trainee in 2008, working on desks including UK companies and US equity markets before taking over the FT's Energy Source blog.
Elizabeth Rigby, the FT's chief political correspondent, joined the lobby team in September 2010. Elizabeth has worked at the FT for more than a decade and was most recently its consumer industries editor.
Helen Warrell is the FT's UK reporter, covering home affairs, crime and policing. She joined the FT in 2008 and has spent time as a reporter in the Brussels bureau and more recently, editing the paper's Asia coverage on the world news desk.
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