Monthly Archives: October 2009

More from Gray. He argues that the “odds are stacked” against anyone in the defence world who wants to balance a budget. It is something “approaching an iron law of nature” for military chiefs to request to spend 25 per cent more than the available budget. Yet there is nothing in the MoD structure to stop the services from satisfying the “powerful urge” to overbid — adding more kit to the shopping list, while cutting nothing from it.

Now just consider the lot of the poor DCDS (Capability) — the officer in charge of controlling these cost pressures. If this ambitious officer was doing his job, he’d be telling his superiors on the Defence Management Board to show some restraint and axe old projects. Yet his superiors, who can make or ruin his career, have an “effective veto” on any recommendation to cut back. Hardly an incentive to speak truth to power. Read more

One of the most clear and well argued sections of the Gray report explains why the Ministry of Defence convinced itself it could buy more kit than it could afford.

During the 1998 strategic defence review, plans were made with little consideration of the price tag. Politicians were then too weak-willed to tackle the “double think” that allowed officials and the armed forces to go on a shopping spree without the money to pay for it. Here is the key passage: Read more

The Bernard Gray review into defence procurement is finally out. It is as damning as billed. Most of the conclusions were leaked over the summer. But seeing the raw findings is shocking. The graph below is a terrifying summary of the financial mess at the Ministry of Defence. What it tells you is that, on a best case scenario, the MoD can’t afford between a quarter and a third of all the equipment it plans to buy over the next decade. In the worst case scenario (which is more realistic given the national debt problems), Britain can’t afford about half of it: in 2020 the MoD would have about £5bn to spend and about £10bn of commitments. To put it in balance would mean dropping or massively scaling back the aircraft carriers, joint strike fighter, most other aircraft programmes, a much less ambitious or delayed Trident.

How did this happen? Well, the story is all in the difference between the purple line (the 2005 equipment plans) and the black line (2009). Officials underestimate costs to get projects signed-off (in four years the planned commitments soared by almost £100bn), then push everything to the right (delay it) when there is no money to pay for it. Something will have to give. But can the Treasury afford to wait for a strategic defence review next year? Read more

George Osborne has taken a lot of flak from the City over his plan to scrap the Financial Services Authority. But, somewhat surprisingly, he’s winning support from the continent. The “twin peaks” regime has been given the blessing of  Jacques de Larosière, the French former central banker and the EU’s guru on financial supervision.

“I really think that in our present world it’s good to have the central bank in charge of supervision.” Read more

Jim Pickard

Within the Westminster world there is a growing feeling that the financial crisis is over. Spring has sprung, daffodils are blooming, the stock market has (partially) recovered, unemployment figures are not as bad as expected – etc.

But many analysts are warning that the current recovery is almost entirely down to the actions of central government (QE, low interest rates) which will at some point have to unwind.

There is also the commercial property crash. The price of offices and shops may sound esoteric if not boring – but so did “sub-prime”, once upon a time.

My colleagues at Alphaville have done a great job of highlighting the risk to banks from the sector. Read more

Jim Pickard

Okay, so this is a political blog. But sometimes we diversify. I’ve been sent a report by the New Economics Foundation (an green-minded outfit) claiming that the world is going further and further into “ecological debt” – meaning it is consuming more resources than ecosystems can produce and absorb. The recession has barely affected the trend.

The report points out that “crazy and wasteful” ways that the UK does business with other countries through ‘boomerang trade’ with almost identical products going backwards and forewards. Read more

Jim Pickard

An interesting exchange in the Commons this afternoon following the Guardian story:

Paul Farrelly told the House of Commons that he had sought to raise a question about Trafigura, which was an international oil trader “at the centre of a controversy concerning toxic waste dumping in the Ivory Coast.” Read more

Jim Pickard

My sources tell me that backbenchers from the Parliamentary Labour Party are to meet their equally angry counterparts from the Tory 1922 Committee to discuss what to do about Sir Thomas Legg. They are all furious about the fact that his criteria are being applied retrospectively. “Why not just go back and decide that Germany won the 1966 World Cup?”, one asked me.

There was a meeting of 40 or 50 Labour MPs with Nick Brown and Harriet Harman this morning in Room 11 in the House of Commons. They were a tad upset, I’m told. Some were moaning that there were clerical errors in Legg’s paperwork (eg dates were wrong), others that papers had been lost. Read more

Jim Pickard

My colleague James Mackintosh has written about the attempt by lawyers Carter-Ruck to silence the British media from reporting a proposed Parliamentary question; ironically, creating much more interest in the story than would have otherwise been the case. Here is his story.

You can find the Guardian’s breaking story here.

Dare we ask for more?

Jim Pickard

a statement from Labour:

Sir Thomas Legg’s Provisional Conclusion on Mr Brown’s Expenses Sir Thomas Legg has assessed Mr Brown’s past expenses from 2004-05 to 2008-09. Read more

Jim Pickard

A House of Commons watchdog today recommended “no further action” against Jacqui Smith after she admitted wrongfully claiming expenses, apologised and paid the money back.

Instead the former home secretary will just have to make an apology to the House later today. There is no fine. Read more

Gordon Brown loves asset sales. The problem is he has been trying to sell the same assets for about 11 years. Today the prime minister put a “for sale” sign over the Tote, Royal Mint, student loans and local government property — the very same assets he has been trying to sell since first becoming chancellor.  Take a look these extracts from a 1998 Treasury press release entitled “Investing in Britain”:

decisions on investments and existing assets will be taken on the basis of what delivers the public interest. What counts is what works. So there will be a programme of asset sales and additional investments financed by PFI arrangements; Read more

One more New Labour guru admits the “third way” could lead to a job with the Tories. Will Hutton, author of The State We’re In, tells Public Servant that he’s willing to serve his country under any colour of government.

“I’m a patriot and I believe in the public interest, and of course I will do things to promote that if asked to. I’m not going to say ‘no, you’re Tories’.” Read more

Jim Pickard

When I woke up this morning I thought I had time travelled back to April; when Alistair Darling promised to raise £16bn from asset sales. But no: the news on the radio was that Gordon Brown would promise to sell assets….and they would be worth £16bn.

So what has changed? I wrote only a week ago that the original Budget target was probably moonshine because it depended on councils volunteering to sell off their homes, offices, playing fields etc (what’s in it for them?). A vast £11bn of the £16bn is meant to come from local authorities. Read more

Jim Pickard

Sheerman, chair of the education select committee, was very critical of Gordon Brown at the time of the June rebellion. He has admitted that he has been considering standing against Tony Lloyd to become chair of the Parliamentary Labour Party at its first meeting of the new political year – ie tomorrow night.

What makes this interesting is that Sheerman made clear that he wanted this to be a proxy vote for or against the prime minister. If enough people voted for him it would be a cunning way to register the depth of frustration, dislike, hatred or apathy towards Mr Brown – without the bloodbath of a real leadership challenge. That was his theory. Read more

Jim Pickard

Stephen Pollard (editor of the Jewish Chronicle) believes Michal Kaminski (leader of the new Conservative grouping in Europe) is not anti-Semitic.

Denis MacShane is still not Kaminski’s biggest fan Read more

George Parker, FT political editor, analyses David Cameron’s last conference speech before the general election.

Follow on the link below: Read more

Brian Groom, FT business editor, assesses the reaction of business to the conference after a year of financial crisis.

Follow the link below: Read more

Jim Pickard

David Cameron said he was horrified by the fact that young mums trying to go back to work only keep 4p in the £1 that they earn because of the withdrawal of benefits and additional taxes.

Labour has just pointed out that in 1998 (a year after the Tories were removed from power) there were 130,000 families facing marginal deduction rates (the technical definition) of over 90 per cent. Read more