Thursday, July 30, 2009

Willis wants new royal commission on higher education

Being a devolved matter, a forthcoming report by the Commons innovation, universities, science and skills committee has no direct effect in Wales.

However, the last report from the committee tracking the former Department for Innovation, Universities and Skills is expected to be highly critical of universities. That in turn is going to have implications for higher education in this country.

Phil Willis, the Liberal Democrat MP for Harrogate and a former headteacher, is the chairman of the committee. In an interview with The Independent's Lucy Hodges, he said he would like a royal commission to investigate higher education. "The whole system needs a radical rethink because it is not sustainable," he said. "We require another Lord Dearing project."

The whole article is here. One impression should be corrected: Phil announced his decision not to stand at the next election well before the series of Telegraph articles on MPs' expenses claims appeared.

Wednesday, July 29, 2009

Vince Cable on allowing banks to fail

The government has yet to grapple with the challenge posed by the Governor of the Bank of England: that if a bank (or other institution) is too big to fail it is too big. One approach is to make it easier for big institutions to fail. Resolution powers could be put in place such that large and complex financial institutions can be wound down in an orderly manner. The key assets required to continue the operation or provision of the ‘public service’ would be easily and quickly extractable from the organisations that currently supply the service. Banks would be required to operate in such a way that this separation is possible. Importantly these plans for orderly wind down and separation must be produced by the institutions themselves and subject to approval by the regulator. This will dramatically strengthen the position of the regulator in the event of failure. Sharing information across borders where the bank is operating internationally is vital to ensure that large cross-border banks could be wound down. This approach is however untested and long term at best.

Another approach is to break up the existing big banks so that large scale systemic risk is removed; banks become small enough to fail; and more competition is restored. One version of this argument is that investment banks should be split off from what is called ‘utility’ banking. Various counter arguments, often self serving, are advanced in reply. It is said that small banks (like Northern Rock) as well as big banks (like RBS) collapsed in the latest crisis: true. Also that risk is not necessarily correlated with structure: some investment banking is low risk; some small business and mortgage lending is high risk. Also true. But size matters; if Barclays Capital continue their ambition to be the world’s largest investment bank the British taxpayer will be left footing the bill for any future collapse. This is wholly unacceptable.

We believe big banks must be split up but are open minded about the mechanisms involved. The essential point is that within a realistic time frame the British taxpayer has to be totally disengaged from the risks involved in global investment banking. For existing publicly owned institutions, RBS and Lloyds they should be broken up before they are returned to private ownership. The European Trade Commissioner has already warned of over concentration in the UK market for - for example - mortgages. The Lloyds-HBOS merger should be unscrambled as part of this process and RBS should also be split with its investment banking operations floated off.

Tuesday, July 28, 2009

Vince Cable on remuneration and bonuses

Just as politicians were very slow to grasp the public reaction to duck islands, moats and house ‘flipping’, the financial community has been extraordinarily obtuse in failing to appreciate why the public is angry about bankers. Without the taxpayer, many bankers would be without a job let alone the huge bonuses that they are enjoying. It could be argued that pay for top footballers is similarly disproportionate but Chelsea and Manchester City do not depend on British taxpayer guarantees. And we know both from experience and economic research that remuneration structures in banking have given incentives to excessive risk taking leading to financial collapse.

What should be done? We can’t do much about Goldman Sachs beyond noting that it was rescued by the American taxpayer a few months ago and is growing fat on the semi-monopoly in investment banking following the collapse it helped to create. But the British authorities can and should do something about financial institutions which are their responsibility. The principles were clearly set out in Lord Turner’s excellent report in March. The problem is that we are getting a lot of talk and no action.

Remuneration policy of regulated financial institutions must be approved by the FSA as a check to ensure that short term risks are not being incentivised that may affect long term stability. The FSA should make publicly available the outcome of assessments made of banks’ remuneration policy and the action taken. Increasing capital requirements could be one tool to enforce this but a fine would send a more powerful message and would provide greater transparency. It should start with the big institutions which incubate systemic risk, not the small fry.

The issue of remuneration in relation to the nationalised or semi-nationalised banks should be more straightforward. The UKFI has direct responsibility and it should exercise it whilst showing an understanding of the need for qualified staff as well as restraint. Despite all of its protestations its role seems largely passive.

Transparency is a minimum requirement. We have argued for highly paid staff, not just Directors, in regulated institutions with a compensation package - say - in excess of the Prime Minister’s £200,000 to publish details of their remuneration. They would also have to confirm that they are normally resident and domiciled in the UK for tax purposes. I see that the Walker Report is adopting a very similar approach to ours, but it is too timid. A voluntary code is pointless. Unless disclosure is mandatory it won’t happen. And we will be back to where we started.

Ultimately, however, regulators can’t and shouldn’t try to manipulate pay like 1970s incomes policy. Progressive taxation has to address the issue of fairness in rewards. The government’s flag waving approach to top tax rates is not a serious approach to this problem. As long as there are huge disparities between top tax rates in earned income and capital gains any half competent tax accountant will arrange for big bonuses to pay 18% on stock rather than 40% or 50% tax on income. Leading tax firms are already drawing up plans to facilitate large scale tax avoidance. We have made it clear that we support a return to the policy of the last Conservative government of taxing income and capital gains at the same rate.

Monday, July 27, 2009

Vince Cable on the FSA

[The Conservatives have proposed abolition of the Tripartite system, one leg of which is the FSA.] This is a secondary issue. But it has dominated the recent news and it needs to be dealt with sensibly. So far it is being dealt with very foolishly in the form of an old fashioned bureaucratic turf-dispute between the Bank of England and the FSA with Mr Darling and Mr Osborne egging on the two sides, like two schoolboys cheering on their heroes in a playground punch-up.

The Chancellor, who has evidently fallen out with the Governor and backs the FSA, appears to have set up a Financial Stability Committee based at the Bank of England in the Banking Act 2009, and then a Financial Stability Committee at the FSA and also a Council for Financial Stability, chaired by the Chancellor, in the White Paper. This is like setting up three Competition Commissions to investigate monopoly. There should be one Financial Stability Committee, led and chaired by the Governor of the Bank of England and with representation from the FSA and from the Bank.

Mr Osborne’s proposal is even more disruptive: moving the bank supervisors back from Canary Wharf to the Bank of England. City institutions which straddle bank and non-bank financial services despair at the idea of going back to separate, competing, regulators and at the prospect of endless office politics as desks are moved and jobs are reallocated after this quango war. Of course the Governor must have overall responsibility for systemic stability but he doesn’t need to oversee the accounts of Little Tidbury Building society. I would leave the FSA as a unitary regulator.

I won’t dwell on the structural issues since they are a side issue: the harness rather than the horse. My worry is that we are being deflected from the substance of what sensible regulation means. My party and I encouraged, indeed anticipated, the creative use of capital adequacy requirements to offset booms and busts and I note that this approach is being extended to manage risk across institutions as well as over time. But there is a danger of regulators becoming one-club golfers, albeit with a very adaptable club. Clever bankers will always be looking for ways round the rules. A number of investment banks have already been reported as engaging in the practice of securitising bank balance sheets in order to evade regulatory capital requirements. This type of innovative side stepping of regulations will have to be penalised heavily, otherwise the promised revolution in regulation will be stillborn.

Sunday, July 26, 2009

Another significant by-election win

We are not only winning from Labour in affluent areas like Kensington & Chelsea, but also in the deprived north-east of England.

Redcar and Cleveland Borough Council (UA), Dormanstown ward
LD 805 (52.3;+27.2),
Lab 515 (33.5;-18.6),
BNP 145 (9.4;+9.4),
Con 73 (4.7;-18.0)
Majority 290.
Turnout 29.88%.
Lib Dem gain from Lab.

This, from last Thursday, is the third by election win in a row for Redcar and Cleveland Liberal Democrats, all wins from Labour.

Friday, July 24, 2009

LibDems good third in Norwich North

Chloe Smith will take over from Jo Swinson as youngest MP. The full result is:

Chloe Smith (Conservative): 13591

Chris Ostrowski (Labour): 6243

April Pond (Liberal Democrat): 4803

Glenn Tingle (UK Independence Party): 4068
Rupert Read (Green): 3350
Craig Murray (Put An Honest Man into Parliament): 953
Robert West (British National Party): 941
Bill Holden (Independent): 566
Laud Howling (The Official Monster Raving Loony Party): 144
Anne Fryatt (None of The Above Party): 59
Thomas Burridge (Libertarian Party): 36
Peter Baggs (Independent): 23

Turnout: 45.8%

The Green Party and UKIP also polled well, which must be worrying for the Conservatives. More satisfying was BNP down in seventh place, beaten by Craig Murray, who stands for the antithesis of racism.

Thursday, July 23, 2009

LibDem by-election gain from Labour

The result in the Colville ward of the London Borough of Kensington & Chelsea was an overwhelming win for Liberal Democrat Carol Caruana. Labour, who originally held the seat, were pushed into third place.

Carol Caruana becomes the sole Lib Dem councillor on a predominantly Conservative council, but hopefully the first of many.

Lib Dem 634 46.9%
Conservative 330 24.4%
Labour 300 22.2%
Green 77 5.7%
Independent 10 0.7%

Tuesday, July 21, 2009

Vince Cable on banking reform

Liberal Democrat Shadow Chancellor, Vince Cable yesterday delivered a speech to the London Stock Exchange.

In the speech, he listed the ways in which the current regulatory model could be improved, and called for:

  • RBS and Lloyds to be broken up before they are returned to private ownership
  • Highly paid bankers to publish details of their remuneration and confirm they are resident and domiciled in the UK
  • The FSA to remain as a unitary regulator
  • A long-term role for state banking, rather than the quick sale of state-owned banks
  • The scrapping of the ‘woefully misconceived’ Asset Protection Scheme

Vince Cable said; "The Government has yet to grapple with the challenge posed by the Governor of the Bank of England: that if a bank is too big to fail it is too big. One approach is to make it easier for big institutions to fail. My approach to the City is not one of hostility, or of obsequiousness. I recognise its importance. But it needs ‘tough love’, not the freedom to run amok."

Tuesday, July 14, 2009

No to a national database

What has happened?

  • On June 30th, Alan Johnson announced that ID cards would be voluntary for British citizens. This meant the ditching of a scheme that would have made it compulsory for airport staff and pilots at Manchester and London City airports to have them, as part of the ID cards trial.
  • Previously, the Govt said they would be compulsory once 80% of the population had them.
  • Johnson was also forced to admit that the Govt had previously wrongly presented ID cards as a ‘panacea’ for terrorism.
  • Johnson did say he remained a supporter of ID cards and that the Govt was accelerating their role out. The pilot scheme currently being rolled out in Manchester (the city, not just the airport) will be extended across the North West next year.
  • However, those applying for a ID card or a passport (after 2011 supposedly, though this keeps moving) will automatically have their details added to the National Identity Register (which is what a lot of people oppose).
  • They are now selling ID cards as a cheaper, more convenient, voluntary alternative to a passport.
  • IBM has contracted to supply technology for ID cards which will last seven years, despite the possibility that a change in government could scupper the scheme.

What did the Tories say?

  • They accused the Govt of “an absurd fudge" and said it was “symbolic of a Government in chaos." They claim Johnson is against ID cards (and would scrap them) but that Brown is making him press ahead.
  • They then called an Opposition Day debate in the Commons on July 6th.
  • They had supported ID cards at the beginning but were now convinced that Labour couldn’t deliver the scheme. They had concerns about data security and said ID cards wouldn’t combat crime, terrorism or illegal immigration.
  • They also confirmed their opposition to the National Identity Register, which we tried to smoke them out on with an amendment to the motion.
  • They do, however, remain in favour of biometric passports.

What do we say?

  • “This is another nail in the coffin for the Government’s illiberal ID cards policy, which will soon be so voluntary that only Home Office mandarins seeking promotion will have them.
  • “Airport workers did not want to be guinea pigs for this deeply unpopular scheme, which has now been reduced to nothing more than a second-rate passport.
  • “These expensive and intrusive plans should be ditched now. The vast amount of money would be far better spent on something that will actually fight crime and terrorism - ten thousand more police on the street.”
  • We also oppose the register as well as ID cards themselves.
  • We have described the cards and register as a “technological solution in search of a problem.” Just because we can do something, doesn’t mean that we should.
  • It is telling that the Govt have ditched all plans for compulsory ID cards for anyone eligible to vote at the next election – we have described them in the past as having the potential to be a “laminated poll tax.”
  • There is also the issue of thin end of the wedge/mission creep/future Govts argument. The Govt claim that only certain information will be held and that ID cards won’t be necessary to access public services. However, it does not take a huge imagination to see Govt one day arguing the need to put medical records, criminal records, financial records etc on your ID card and making you have one to go to the library; access benefits; visit your GP etc. Then to all intense and purposes, they would be compulsory.
  • Our opposition to ID cards has been consistent and principled (unlike the Tories). People should not have to justify their identity to the state when going about their business. We would spend the money on 10,000 police.

What about foreign nationals?

  • ID cards are still mandatory for foreign nationals and are currently being rolled out to that group.
  • We oppose ID cards for foreign nationals. The Tories don’t. We don’t think that guests in our country should be treated differently from British citizens.
  • They are not going to solve terrorism – the Madrid bombers all had valid Spanish identity documents. Neither will it solve the problem of ‘clean skins’ (people without a terrorist record, but with terrorist intentions). Or crime – the police generally have a problem catching criminals, not identifying them.
  • Nor will it sort illegal immigration – employers are already required to do checks on worker’s immigration status but may unscrupulous ones do not. What we need is more spot-checks and prosecutions, not ID cards.

What does this all mean for costs?

  • No one really knows. There is little more murky in public finance terms than the ID card costings.
  • The Govt will charge people £30 for the card and for the cost of taking their biometric information (£28 is the rumour for that).
  • The Govt claim the total cost of ID cards and biometric passports is likely to be £5 billion over 10 years. But they claim that only £1 billion of this is for ID cards. They also claim that this will be claimed back by charging people.
  • However, as soon as the scheme becomes ‘voluntary’, then the cost of recouping the substantial overheads is spread among fewer people. They cannot surely now raise as much money as first thought.
  • We have always maintained that the real costs will be far, far higher – they don’t include any costs incurred outside the Identity and Passport Service (such as for example installing card readers in other locations); the Government’s record with large-scale IT projects is they tend to be far over cost and over time; and no one really knows how much this is going to cost until the Govt get further down the line with it, the LSE estimated in 2005 that costs could be anything up to £19 billion.

Sunday, July 12, 2009

Irene who?

The announcement of Irene James' retirement took many AMs by surprise, as they hadn't realised there was actually a member for Islwyn. Others felt that it was impossible to spend more time with her family and friends than she did already.

Sunday, July 05, 2009

LibDems at Pontardulais & Pontardawe

South Wales West Liberal Democrats will be out in force at the Pontardulais Show and the Pontardawe Craft Fair. Details nearer the dates.

Unfortunately, a clash of diary dates has prevented us showing as we had hoped at Pencoed (the Bridgend County Show) next weekend.

Saturday, July 04, 2009

Transfer of Housing Stock ballot may be delayed

We understand that the proposed ballot of transfer of Neath Port Talbot's council housing to a cooperative mutual has been postponed until the New Year. A special council meeting due to have been held on Friday 3rd July, which may or may not have been connected with the progress of the ballot process, was cancelled at ten days' notice.

On the one hand, this may allow the "No" campaign to build up a head of steam, especially if threats to haul councillors, who back it, up before the Standards Committee are carried out. It may also threaten some grants from the Welsh Assembly Government conditional on a ballot being held before a certain date.

On the other hand, it may push the date for a ballot beyond the next general election, after which a more intelligent and local government savvy Chancellor of the Exchequer will revise the borrowing rules, allowing Neath Port Talbot to hold on to its housing stock and meet the Welsh Housing Quality Standard.