Monthly Archives: February 2009

Boris avoids the transport select committee

February 26, 2009 6:22 pm by Jim Pickard

The jolly japester (sic) who runs London has been asked to appear in front of the transport select committe to explain why the city ground to a halt during recent snowfalls.

Boris Johnson was asked if he could come in before the committee of MPs in the next week or two. Sadly, his diary is far too busy for the next three months, according to one committee source. Problem is, he’ll have to appear, sooner or later; that’s the way the system works.

This apparent reluctance may or may not have anything to do with his last, uncomfortable appearance before a select committee.

Posted in UK politics | Permalink

The RBS director (not Fred) with the $24m pension pot

February 26, 2009 3:03 pm by Jim Pickard

I’m sure there’s a mixed metaphor to be had here re a big fish across the pond.

But the RBS director with an equally impressive pension – according to RBS’s 2007 accounts – is one Larry (Lawrence) Fish, chair of the bank’s US operations. His pension pot was $24m at that point.

Fish was previously chief executive of Citizens, an RBS subsidiary in the US. Now a non-executive, he is set to quit the company before April.

Incidentally his pay in 2006 (£6.59m) was more than Fred the Shred (£3.99m).

Tags: Alistair Darling, Bank of England, Banks
Posted in Uncategorized | Permalink

Is Fred’s pot actually £25m?

February 26, 2009 11:37 am by Alex Barker

Has Pesto got his sums right? He reported that Sir Fred Goodwin is drawing a pension of £650,000 a year from a pot of about £16m. But if you take account of Goodwin “retiring” at 50, the maths doesn’t seem right.

The FSA’s handy pension calculator shows his total pension pot is closer to £25m. Yes, there’s even more cash for Alistair Darling to claw back.

The extra £9m was spotted by John Ralfe, the pensions consultant, who never seems to tire of fighting pension excess. For those who are interested, these are his workings:

I have used the FSA annuity website to calculate the cost of Sir Fred’s pension.

Age 50. Married spouse age 47, with 50% pension. Non smoker. Increasing with RPI. The best quote is to receive £2,580 a year for a £100,000 lump sum, ie a multiple of 38x.

To receive a £650,000 start pension, age 50, spouse age 47, with 50% pension, increasing with RPI costs £24.7m.

Tags: Alistair Darling, Banks
Posted in Uncategorized | Permalink

11 junior government members sign the Royal Mail EDM

February 25, 2009 6:01 pm by Jim Pickard

I have just been tipped off that no fewer than 11 ministerial aides have signed the motion opposing Lord Mandelson’s part-privatisation of the Royal Mail.

Given that parliamentary private secretaries (PPSs) tend not to sign early day motions under Parliamentary convention, this is a striking facet of the rebellion. The EDM has now hit 132 Labour signatures.

Perhaps most interesting is that Laura Moffatt, PPS to Alan Johnson, is one of the 11. Johnson, as a former head of the Communication Workers Union, has denied having concerns about Mandelson’s plans. Is this his way of sending out a covert signal?

Here are the 11:

David Wright (PPS to John Hutton), Laura Moffatt (Alan Johnson), David Anderson (Bill Rammell), Claire Curtis-Thomas (Baroness Scotland of Asthal), David Hamilton (Ed Miliband), Mark Hendrick (Jack Straw), Stephen Hesford (Vera Baird), Sharon Hodgson (Dawn Primarolo), Ashok Kumar (Hilary Benn), John Mann (Tessa Jowell), Stephen Pound (Stephen Timms)

But here is the big question: Do any of them care enough to resign from their jobs (sic)?

CORRECTION:

Moffatt hasn’t been PPS to Johnson since October (though presumably they are still allies). Also (apparently) no longer in post are Claire Curtis-Thomas, David Wright and John Mann. Apologies if true.

Posted in Labour | Permalink

Slipping risks past the taxpayer

February 25, 2009 1:12 pm by Alex Barker

A slew of private finance initiative deals are likely to be rescued with state support in coming months. But if you were expecting the government to properly tell taxpayers about the extra risk they are taking on, think again.

Yesterday eagle-eyed Mark Pritchard, a Tory MP, was tipped off about a significant announcement in an “unnumbered command paper”. It announced that ministers had offered contractors bigger state-guarantees to save the largest PFI deal in Britain. But it was laid before the House in such a way as to be all but hidden. Can this be right?

The Ministry of Defence was responsible for the sneaky move. Officials need to present parliament with a “minute” in order to sign off a contingent liability of more than £250,000. In this case, the MoD offered to underwrite £32m in order to rescue the £12bn PFI project to centralise the military’s training.

Pritchard attacked the move as the MoD “once again” turning to the Treasury to “save face” and rescue a “deeply flawed project”. You can read more here.

Posted in Labour | Permalink

The letter from the chair of the Royal Mail Pensions Trustees

February 24, 2009 12:39 pm by Jim Pickard

We predicted a month ago that Lord Mandelson would shortly use the pensions threat “to cow the unions into submission” over part-privatisation.

Last night saw the release of a letter from the chair of the pension fund trustees warning that - without radical reform - pensioners could lose half their benefits. The timing is striking at best given that the bill is set to enter the Lords this Thursday.

Here was our news story this morning – which includes a private sector estimate of £10bn-plus for the deficit, far worse than the £5.9bn envisaged by Richard Hooper in his December report.

If you want to see the letter here it is.

Continue reading: “The letter from the chair of the Royal Mail Pensions Trustees”

Tags: Lord Mandelson
Posted in Uncategorized | Permalink

Gordon Brown and his enthusiasm for a 100 per cent mortgage

February 23, 2009 12:09 pm by Jim Pickard

The prime minister won favourable coverage over the weekend for his claim that he would abolish 100 per cent mortgages.

Forget the fact that he was Chancellor during the decade when such products grew 10-fold without any intervention from the government. Forget the point that the horse has already bolted; most of the 150-odd products letting people take out a mortgage with no deposit have now been killed off by newly cautious banks.

The real proof that Gordon Brown never understood the risks attached to these loans lies in the fact that his own government introduced a new product – well after the crash began – letting poor people buy homes with zero equity.

Under the new “HomeBuy Direct” scheme introduced last September, first-time buyers can borrow up to 30 per cent of the value of a new-build home – interest-free for five years – co-funded by both the government and housebuilders. The other 70 per cent would come from a conventional mortgage.

In case you need a link to my original story it’s here.

UPDATE:

Guido has some more interesting thoughts on the issue here.

Tags: Banks, Gordon Brown, Housing
Posted in Uncategorized | Permalink

Is it G20 or G22?

February 20, 2009 1:52 pm by Alex Barker

This is a real puzzle. Gordon Brown has just sent out his invite list for the G20, which, once Britain is included, runs to 22 countries. I think it is because Spain and the Netherlands have been invited this time. Even so, you have to wonder why it is still called the G20. So far the UK bumpf has promoted it as the “London Summit”, which may be a cover for the arithmetic issues. It would be easy enough to rename it the G22 — after all we there have been G22 and even G33 meetings in the past. But G22 does sound a bit like a fighter plane. And if you put G22 into google, it comes up with this rather scary looking gun. Probably best to leave things as they are. Long live the 22 members of the G20.

Here is the full Downing Street statement.

The Prime Minister has now issued formal invitations to world leaders to attend the London Summit on stability, growth and jobs taking place on 2 April.

Reflecting the participation at the Washington Summit, the Prime Minister has invited the Heads of State from Argentina, Australia, Brazil, Canada, China, Czech Republic (EU Presidency), France, Germany, India, Indonesia, Italy, Japan, Mexico, The Netherlands, Republic of Korea, Russia, Saudi Arabia, South Africa, Spain, Turkey, United States. To ensure balanced regional representation the Chair of The New Partnership for Africa’s Development (NEPAD), the Chair of the Association of South East Asian Nations (ASEAN) and the President of the EU Commission are also invited. The Chairman of the African Union Commission will also attend.

In addition, the Prime Minister is also inviting the heads of a number of global institutions to contribute to specific parts of the agenda.

The Prime Minister said:
“The global economic challenges we face need to be met with decisive action if we are to secure jobs, restore confidence and reinvigorate growth. To be effective in addressing this global crisis we have to bring in partners from across the world. For that reason I have issued invitations to the leaders of G20 countries and the Chairs of NEPAD and ASEAN, as well as other international organisations. Having the world’s poorest countries represented by NEPAD, ASEAN and the African Union will ensure their interests are not forgotten and their voices are heard. Having this mix of countries and international organisations present not only reflects the new reality of the global economy but will also make any action we take more effective.”

Tags: Gordon Brown
Posted in Uncategorized | Permalink

Blast against the monstrous McDonalds canard

February 20, 2009 11:53 am by Alex Barker

One of our readers is clearly upset. I’ve just been sent a diatribe against the (Tory) claim that it is cheaper to insure the debt of McDonalds than Britain. Here’s the sanitised version:

I’ve been gnashing my teeth over one oft-repeated claim because it’s made me repeatedly angry – and sadly won’t die. I refer to the moronic argument (pushed by George Osborne) that McDonald’s has a better credit rating than the UK government. It is now repeated endlessly by Guido Fawkes and Fraser Nelson.

The UK has a higher CDS spread than McDonald’s – true. 160 for the UK vs 55 for McDonalds at 5 years. Then again, the US government is at 90 points. This shouldn’t survive a knock test.

- McDonald’s latest bond issuance was only rated at A by Fitch and the latest McDonald’s bond issuance traded at 270 bp over US treasuries, it doesn’t suggest these prices reflect real expectations of risk.

- It’s also not clear how these CDSs would pay out unless the UK or US opted into an Ecuador-style default. We can print our own money, lots of taxable capacity and – in any case – have a load of ways to renege on previous commitments which would not trigger CDSs (cutting pensions or infrastructure spending, for example).

- Finally, would the bond insurers survive a UK or US default? Would they actually offer any protection

It’s not really clear why they exist at all. There’s a neat Alphaville post on it. Bah.

Tags: Credit Crunch
Posted in Conservatives | Permalink

Capitalists fight back: the Chicago tea party

February 19, 2009 11:02 pm by Alex Barker

America’s pit traders revolt…

Posted in UK politics | Permalink

Will Obama miss the G20?

February 19, 2009 7:09 pm by Alex Barker

The London summit is in the first week of April — which happens to coincide with US banks putting out first quarter results. It could be messy. Nationalisation is rising up the Washington agenda. There is a chance — albeit small — that Obama will have to seize the banks around the time he’s due to hob-nob at the G20.

Here’s some background from Ed Luce:

The time for biting the bullet may also be fast approaching.

In early April, big institutions will publish their first-quarter results. If the intervening Treasury stress tests have not by then revealed the true state of their balance sheets, then their first-quarter results may do so.

“The first week in April – that’s when the children’s party is over,” says Chris Whalen, co-founder of Institutional Risk Analytics. “That is when the obvious will become apparent.”

It is a long shot. But one or two observers in London have already noted the tricky timing. The shock to the US psyche of its president nationalising big banks will be considerable. Could he pull the trigger from London? Or at the Nato summit after that? Probably not. He would need to be in Washington. It is unlikely, I know, but there’s a outside chance that Gordon Brown’s big summit could be missing its star attraction.

Tags: Credit Crunch, Gordon Brown
Posted in Uncategorized | Permalink

The court case to end academies

February 19, 2009 4:48 pm by Alex Barker

Last Friday some parents lost their legal challenge to stop a proposed academy in Camden. The press reports mainly covered it as a blow to plucky campaigners. But this was a story of national significance. One Whitehall academy champion told me this case was the single thing he “worried about most”. Had the ruling gone the other way, it would have devastated both Labour and Conservative plans to reform education.

Why? The parents demanded that academy sponsors should be selected through a European Union procurement process, rather than being chosen by ministers. A competitive tender would take months longer and cost much more, for both the government and the sponsor. The sponsor in Camden was UCL. Had the judge told them to make their bid via Brussels, the university would have almost certainly walked away. Why bother with the cost?

Ministers genuinely thought this would be the death knell for plans to open hundreds of academies. The decision would have been even more damaging for the Tories, who want to open up the system to give state funding to anyone who wants to open a school. Fighting this case was taken very seriously — just look at the senior silk hired to argue the government’s case.

Justice Forbes lifted the threat to the academy programme. But the judgement also puts limits on the programme’s evolution. He found that the sponsors did not need to go through cumbersome procurement process because they were not seeking to make a profit. The flipside to this is the risk that any for-profit sponsor looking to run independent state funded schools will need to go through a competitive tender.

The profit motive in education remains taboo in Westminster, and such reforms have been ruled out by all three parties. But attitudes were changing. There was a small but growing chance that opposition to profit-making could soften in years to come. It may no longer matter. Justice Forbes appears to have saved academies but closed the door to profit.

Posted in Conservatives, Labour | Permalink