Involve The National Audit Office in Project Planning

So, two weeks have passed since the revelations of the latest (known) public sector IT disaster, and related wasted expenditure. But I'm willing to bet that nothing has changed in the way projects are planned, and we'll see many more juicy stories in future.  

Perhaps some kind of pre-emptive strategy would be in order...? 

Surely the National Audit Office is by now rammed with people who can spot the seeds of doom in just about any public sector IT project it cares to look at. So why not involve them at the start?

Forget all this talk of economic recovery, only the civil servants can save us now.

Cryptocurrencies Crest Capitol Hill

On Tuesday, I had the pleasure of joining a panel on mobile payments at Liquidity, the summit on new finance. I also caught the earlier sessions, but sadly missed the afternoon. It was definitely worthwhile, and I'll include links to the videos when they're published. Well done to Stan and Edie for pulling the summit together.

One development in particular that caught my attention was James Smith's explanation of the wider uses of Bitcoins, and other cryptographic currencies. I actually struggle with the idea that these are really 'currencies' as opposed to commodities that can be bought and sold. That would also explain the volatility in the 'exchange rate'. But the technology definitely opens up some interesting possibilities.

One of the wider uses of cryptocurrencies involves agreeing that a unique string of numbers with a nominal 'value' (say, a sixteenth of a Bitcoin), represents the record of title to a specific asset. This use-case is reflected in colored Bitcoins, for example, where different coloured 'coins' respresent different types of asset. While we already have asset registers for many types of property, such as land, ships, cars and securities, there are many other types of asset for which a similar approach would be too expensive. Some of the challenges confronted by such a project from a technological standpoint are described here.

The proliferation of cryptocurrencies and their possible uses has generated  significant interest from the venture capital community, as well as amongst central banks, monetary authorities and agencies fighting financial crime.

Far from retreating before the threat of a regulatory onslaught, however, cryptocurrency service providers have been lobbying for some time to gain acceptance, (e.g. via the Bitcoin Foundation). Recently, the leading providers and supporters also formed the Digital Assets Transfer Authority, or DATA to concentrate and focus resources more efficiently and provide a forum for resolving appropriate controls for the shared operational and regulatory risks.

The fact that the future of cryptocurrencies have reached this level of official engagement definitely makes it an area worth keeping an eye on.

BS2 and The Planning Fallacy

In his excellent book Thinking, Fast and Slow, Daniel Kahneman explains that governments tend to reward bidders who over-estimate the utility of large-scale projects, while under-estimating the cost. This is known in the trade as "The Planning Fallacy". While Kahneman cited research that demonstrates the fallacy in relation to many railway procurement exercises over many years, we also saw if firsthand recently in the West Coast railway fiasco. Now the government is trying its hand again, with BS2 HS2.

The Planning Fallacy suits all those involved, except commuters and taxpayers. At the time of the West Coast debacle, costs were about 40% higher on Britain’s railways than comparable European networks. And taxpayer subsidies, adjusted for inflation, had reached approximately £7 billion per annum. Approximately 10% of trains didn’t arrive on time. Only 42% of rail customers were satisfied with value for money for the price of their ticket. Only 69% said there was sufficient room for all passengers. And only 80% of rail customers were satisfied with punctuality.

This spring, the figures don't look any better. In fact, only 29% of UK commuters thought they got good value for their rail fares. Adding a fancy new rail project doesn't seem likely to fix their day-to-day experience.

There are numerous hard-headed dismissals of the alleged viability of HS2, including John Kay's piece yesterday. And it wasn't reassuring to learn from a Channel 4 news interview with the Transport Secretary that he has set aside a £14bn 'contingency' in an apparent budget of £40bn. It smells like 'waste' to me.

There must be ways to spend that kind of money to improve the lot of today's commuters, rather than saddling the next generation with a whole load of BS.

Banks Can't Even Be Bothered For The Rich

Oh those poor, poor bankers. Now, we're told by Spear's, that the new 'retail distribution' rules have made their lives so complicated they even have to stop fleecing servicing wealthy customers. Bernie Madoff must be relieved to have got out before the well ran dry.

Ironically, for a magazine that bills itself as "the essential resource for high net worths", Spear's argues the bankers' case. The article seeks to persuade wealthy readers to stop being so demanding if they wish to avoid being 'managed out' by private bankers who find them too costly to serve. In particular, customers must stop expecting services aligned to their needs and behave in a way that suits the banks: 

• agree what the banker will do for you up front, then wait for the quarterly reports and limit any discussion to those times instead of pestering for more frequent advice;

• don't change your instructions (the banks already chew through 3% of your return by making 'adjustments' to your portfolio, so don't make it worse); and

• behave as if you're part of a team - cut your banker some slack when he is slow to realise gains or avert losses and, most importantly, recommend him to your friends (bankers just love the bandwagon effect).

Puzzling, until you realise where Spear's probably gets most of its advertising revenue.

Definitely a sign that yet another area of the financial services market is ripe for innovation by facilitators.

There Is Not A Great Retail Bank In The UK

Ross McEwan's appointment as CEO of RBS roundly endorsed his remark that he has been "quite surprised by how bad this industry is. There is not a great retail bank in the UK." 

This from a banker who's reported to have twice failed an accounting module, been passed over for top dog at Commonwealth Bank of Australia and to be "more comfortable with people than figures." 

It's hardly an insightful comment, given the enormous publicity surrounding the damning testimony to the Parliamentary Banking Standards Commission, but McEwan is the first senior banker to have the self-awareness to actually admit the appalling state of the industry. As such, the remark even topped today's editorial in the FT. I mean, there's only so much the pink propaganda machine can ignore.

Amidst all this, the Information Commissioner's Office finally revealed the miserable little saga of Bank of Scotland's "chronic and repeated" disclosure of sensitive customer information. Apparently it sent faxes from many different machines to wrong numbers from 2009 to 2012, despite alerts and complaints from mistaken recipients, and notification that the ICO had begun to investigate. The fine: a mere £75,000. Another speeding ticket on the road to oblivion.

Add this to the revelations of UK banks' gross misconduct and poor controls over the past few years, and you have to doubt the wisdom of handing shares in these businesses to the general public. 

Unless, of course, you want taxpayers to experience the banks' terminal decline firsthand. A sort of 'scandal to end all scandals'.  That would be nice.

Less From the Pulpit, More From the Pew

The Church of England's terrible muddle over pay day lending shows that it's out of touch with the details in the payday lending market. Just as we've seen in other markets, pontificating from the top down is no substitute from working on problems from the customer's standpoint. So, a little less output from the pulpit's point of view and more from the pew's would be no bad thing.

As mentioned previously, the challenge for borrowers who need or want to borrow short term is finding a combination of speed, convenience and affordability. In March, the OFT's own research revealed that 90% of online customers found the it "quick and convenient" to get a short term loan and 81% said such loans make it easier to manage when money is tight. Customers expressed their satisfaction in terms of decision speed (36%), convenience (35%) and customer service 27%). The majority of payday customers (72%) only borrow for a month. So, the critical issues seem to be how to ensure the other 28% are better able to understand the risks of rolling over short term loans, and how to avoid it; as well as cutting the overall costs for those who use short term financing. 

The root causes of these problems do not lie in the cost of payday loans. Short term borrowers are often working amongst the contractual fine print of late fees, cancellation notices and so on. Allocating money to debts 'just in time' is a high risk occupation. One slip can make life hell in a non-financial sense - maybe the kids won't have school shoes, there will be no heating or the landlord will finally lose patience. Credit cards, debit cards and cheques are useless from this sort of timing perspective, because they don't tell you how much you have left to spend at the time you use them. There can also be an accounting lag between when you pay and when the transaction lands on your account, so you can find yourself 'surprised' by a payment you thought had been accounted for days or even weeks previously. And the amount of interest and other charges is only known when it appears on a monthly statement. We hear a lot of noise about APRs, but not so much about the timing problems or the scale of fees payable when you get on the wrong side of bank products - these are far more relevant to short term borrowers, and why many remain 'unbanked' by choice.

In these circumstances, rather than playing money-lender, it would be better if the Church could foster the development of an application or other means of presenting to a borrower the most affordable short term finance option, based on the analysis of the borrower's own transaction data from existing creditors (including cancellation rights and late fees), and the costs of different finance products (including charges for missing a payment). This really only requires a commitment on the part of all the typical creditors and financial services providers to make their product and pricing data available in machine-readable format, which the government has been pushing them to do as part of the voluntary 'Midata' programme. That data can then be analysed and the results made available either online or physically, via mobile phone, computer or print-out. 

No doubt the Devil is in the detail underlying such a service. But surely the Church isn't bothered by that?

The Reform Of Our Institutions Won't Come From The Top

It's been a difficult month to finish this post. Every day another dollop of decrepitude is revealed amongst our rotting institutions. Systemic slaughter in the NHS. The convenient collapse of a major police corruption trial through 'missing' evidence. Police concealing the misuse of private investigators and spying on victim's families for the chance to undermine public sympathy. Sunlight on vast pay-offs to the departing management of the Savile-stricken BBC. The lengths to which the unions will go to control the Labour Party and use it to enshrine their own power. The Church of England deciding to turn money lender. And, surprise, surprise yet another massive bank fine...because, yes, any bank that relies on a public guarantee of its liabilities and massive tax subsidies through ISAs and so on should regard itself as a public institution.

It's a core theme of this blog to contrast the decline of faith in institutions that have evolved to suit themselves at our expense, with the rise of facilitators who exist to help us solve problems more effectively for ourselves.

Our institutions won't align with the interests of the those who rely on their services while they suppress evidence of their ineptitude, or while trustees and management quibble over their extent of their responsibilities, or while politicians spend their time blaming each other for the mess. These are sure signs that our institutions are stuck in denial and that the MPs and Ministers whose job it is to supervise them are stuck in their own cycle of blame.

Until our institutions understand and accept the need to align with the consumers of their services, rather than the desires of their pompous managers, they will not evolve into efficient, facilitative organisations worthy of our trust and respect.

But I don't believe that our so-called political leaders or the managers of our institutions have either the self-awareness or the skills needed to achieve this evolution. They are merely products of 'the system' that so desparately needs to evolve.

Sustainable reform will only come come from the grassroots rather than the top down. It will only come when each of us takes personal responsibility for turning things around, whether by exposing institutional failings or genuinely working to solve other people's problems rather than merely our own. 

In other words, both the problem and the solution are in our hands.

A Feast Of Anger And Blame

You have to wonder whether the UK's banking crisis will ever end. After months of wrangling, the regulators have finally decided which UK banks are still short of about £26bn in capital (for now). But yesterday's Parliamentary Banking Standards Commission report points to an endless list of more serious problems that won't be solved by simply leeching yet more billions out of the economy.

The members of the BSC must be highly commended for taking on the long overdue job of trying to bring Britain's banks to heel. Volume 2 of the epic report is an invaluable account of their painful journey, made poignant by the fact that, until quite recently, the members of the Commission actually believed in our rotten financial system. The scale of their disillusionment is almost beyond comprehension. What perhaps started as an investigation into fairly specific allegations of corporate malfeasance resulted in one proud British institution turning on another out of a sense of betrayal. 

So, apart from its entertaining descent into the gory details of British banking, the BSC report represents yet another hammer blow to our faith in society's institutions - this time delivered by one of the ringleaders, namely Parliament itself.

Yet the question remains as to just how far along the 'change curve' we have really travelled. Despite the BSC's list of recommendations, we seem to be merely inching our way through anger and blame, rather than understanding and accepting that the world has truly changed and we need to move on.

While the Commission has voiced great support for alternative finance models and eliminating perverse tax incentives, and the Treasury and FCA have made some proposals to improve the regulatory landscape, the rhetoric from the government continues to put banks at the heart of Britain's economic future, rather than a more open, diverse and innovative financial system.

How much more economic mayhem it will take for society to genuinely 'move on' is anyone's guess.

PAC Fiddles While Public Money Burns

This week saw the publication of two reports that highlight the woeful set of priorities that govern the activities of the Public Accounts Committee and the media bandwagon that follows it. 

The first was the repeat of PAC's outrage over Google's international tax affairs. It seems we really are expected to believe that (1) these MPs are unaware of the rules governing where a company is 'permanently established' under OECD/UN Conventions and other tax treaties; (2) that the amount of additional tax that Google might have otherwise paid on about £3bn a year of revenue during 2006-2011 would have saved the UK economy; and (3) the UK does not benefit from the application of these rules to its own firms in other jurisdictions.

The second report came in the form of the lastest Bumper Book of Government Waste (itself hardly 'new'), which highlights yet again the £120bn that the public sector burnt last year for absolutely no benefit whatsoever.

With priorities like these, we should add PAC's own budget to the bonfire.

A Directory of Crowdfunding Directories?

Crowdfunding directories are becoming useful, given the wide variety of potential models, specific geographic and other constraints, and the rapidly increasing numbers of new platforms opening up new niches. 

Each directory seems to take a slightly different tack or favour certain types of platform, so it will be interesting to see which 'prevail' and why, and whether they represent a source of customers. 

For instance, Nesta recently launched Crowdingin.com, which aims to list information on platforms open to fundraising from individuals and businesses in the UK. 

Directories with a broader focus include AllStreet, Crowdfund Insider, and Crowdsourcing. The Canadian NCFA has its own nationally-oriented directory.  

Of course, trade body membership lists are also important, particularly where regulation is still evolving and the trade body has a published set of rules that members have committed to follow, e.g. the P2PFA, UKCFA.

By all means suggest any others you have found useful (and why)... At this rate, we'll need a directory of directories!

Image from gCodeLabs.

Political Lipstick On a Pig

Source: Guardian/Observer

The spin doctors are feverishly applying lipstick to RBS, so it can be 're-privatised' in time for the next election. No matter that the bank is still short of capital after five long years of public ownership, that the Exchequer is sitting on a £19bn loss and that the bank continues to lend less and less to the productive economy while soaking up the subsidies.

Renowned for 'group-think', the IMF also seems to have seized on the election as an opportunity to get the politicians to 'clarify the plan' for continued state ownership. Duly emboldened, the Chancellor has dismissed calls by other departments and members of the Banking Standards Commission for the bank to be broken up as not being achievable within the electoral time frame.

Of course the election won't wave a magic wand over RBS's inability to operate without massive public subsidy, or its failure to align with the interests of its customers. It will always have cheap ISA money to fall back on, and it's obvious by now that no one will force it to lend more to small businesses. It even recently announced heavy overdraft charges, on top of its many previous expressions of contempt for those it is supposed to serve.

Instead, the government sees the 're-privatisation' as a sweet opportunity to enhance its electoral standing, sexing-up its plans to 'give away' some RBS shares as a sign of its commitment to 'protecting' or 'maximising value' for taxpayers. It's as if laying the blame for the astronomical cost of the bailout at Labour's door somehow resets the counter to zero...

Promising RBS shares to every taxpayer is of course a standard political ploy, designed to prey on middle class greed (the rich couldn't care less, and the paper will be slim comfort to those on lower incomes). On this occasion, however, the proximity of the election might also lead some to describe it, rather aptly, as 'porkbarrelling'.

But the very reason the government wants to foist RBS shares on you is the very reason you shouldn't want them. Free of its chains, this porcine monster will be eager to get its snout back amongst the big, speculative assets as quickly as possible, and your shareholding will be taken as a personal vote in its favour. Some might even naively cheer the beast on, dreaming that their stake in the mystical 'upside' from its activities will somehow compensate them for getting fleeced on the bailout in the first place, and all the disasters that have followed.

Meanwhile the rest of us will wait forlornly - along with the inert, beleaguered customers - until the government finally pours another bucket of publicly funded swill into the banking trough.

Only Civil Servants Can Save The British Economy

That's the conclusion I reach from reading Lord Young's report on Growing Micro Businesses. The report makes it clear that government plans to fund small business growth and harness public spending power are still medium term options. Absent substantial growth, all we can do in the short term is make sure our tax revenues aren't wasted on a day-to-day basis. Can our public sector colleagues plug the leaks?

The scenario

Public spending is still roaring away at 44% of UK GDP and tax revenue barely exceeds 35%. This represents a yawning chasm that remains to be filled with higher taxes and/or spending cuts - unless GDP grows substantially faster. This would make public spending less of a drag on the economy (35% is the ideal number) and produce more tax revenue to pay off public debt and narrow the deficit. Unfortunately, the productive economy is limping along, largely due to problems in the UK (and EU) banking systems. This is particularly bad for the UK, as businesses rely on only a few major banks for over 90% of funding.

The growth strategy

Unable to improve the flow of funds to the productive economy via the banks, Lord Young's report reveals that the government's growth strategy depends heavily on educating over 4 million small businesses about alternative ways to finance increased production and employment, and using public sector procurement to buy more from those smaller businesses. Theory has it that, as they grow, the rest of the private sector will also benefit, and away we go...

Awareness of alternative finance

Unfortunately, Lord Young notes that the government is yet to come up with "a robust, evidence-based strategy for communications to all micro, small and medium sized businesses" to explain the alternative funding options available. Some money is being offered via alternative finance platforms, which leverages their private marketing spend, but apparently the government still needs to issue more information on support schemes via Gov.uk (the 3rd attempt at a government portal).

However, educating SMEs about non-bank funding options is only one side of the equation. Success also depends on persuading mainstream savers and investors to put money into alternative channels. This collides with the £400bn ISA programme, which massively subsidises bank deposits and regulated investment funds that don't support the productive economy. Countless people have explained this particularly vicious circle to the government. But the Treasury seems determined not to level the playing field, either by extending the ISA scheme to include alternative financial services or by reducing the size of the incentive that favours only bank deposits and regulated funds.

This is a problem that seems unlikely to be resolved any time soon.

Smarter public procurement

So where are we on the road towards smarter public sector procurement?

Unfortunately, the smarter procurement drive is mired in the need to "simplify and standardise procurement practice across all parts of Local Government, health trusts and the wider public sector".

This seems an enormous challenge. The next step, for example, is to initiate consultations on reforms to public sector procurement standards...

So actually getting the public sector to buy more from SMEs from the top down is likely to be a very long way off.

The last card - plugging the leaks

That leaves only one option in the short term: civil servants spending less and more wisely.

That doesn't mean slashing welfare payments, and so on. It means wasting less money in the context of the £166bn the public sector spends on its own goods and services.

Surely not all of this needs formal consultation. I mean, isn't it partly a mindset? Thriving private sector businesses recognise the need for constant change to remain aligned with their customers' evolving behaviour and changes in the market, and public sector organisations face the same challenge. Yet we hear little about how the public sector evolves to be more customer-aligned and efficient. Do public sector workers realise the scale of the opportunity to help? Surely they aren't resistant to the idea - after all, they must be among the most publicly spirited people in the country...

It's unfortunate that the public focus is preoccupied with the other side of the government balance sheet. It seems such a waste of time and resources to get distracted by the moral panic about how much more tax foreign corporations should pay, when we could be getting so much better value for the crushing amount of tax that each of us already pays personally.

The process of hauling people before the Public Accounts Committee alone costs money. And we have to be mindful that reforming international tax treaties will rest on the shoulders of public sector staff who may well spend, very inefficiently, huge amounts on travel and other services in the negotiation process. 

Ironically, even the argument about extra tax revenue demonstrates why it's critical to fix all the holes in the bucket before pouring more money into it.

BubbleAid

A Conservatory Dream

Last night we were treated to the story of a family who can now achieve their dream of building a conservatory, thanks to a generous donation by UK taxpayers. 

But the story goes way beyond enabling home improvements whose name bears a cunning resemblance to the leading UK political party which spawned the spending programme. 

In fact, even the name "Help to Buy" is misleading, because this scam scheme unlocks plenty of other fantasies at the same time: the home owner couldn't even afford the house, much less an extension; the building company wouldn't otherwise make a profit on building it (and wouldn't build it at all); the bank wouldn't have the mortgage on its books; and the Treasury wouldn't end up with a 20% 'investment' in overpriced residential real estate. 

In short, we simply couldn't have another housing bubble without this scheme. 

So the least we can do is call it "BubbleAid".

While the economic justification of BubbleAid is maybe a little er... soft, it's difficult to question its political brilliance, coming as it does right out of the Fabian Society playbook. I can't think of a single middle class person who wouldn't want to realise their dream of a conservatory at other taxpayers' expense. We're talking a tsunami of greed rolling right across the entire United Kingdom, coast-to-coast.  

And nobody will ever vote it down because they won't believe that killing the programme will ever see a reduction in their taxes. 

Besides, UK taxes will never go down. The UK government will never spend less. Those are pipe dreams. 

Haha. Tax and spend less. Imagine it...

Are you smoking crack?!

When we need more money, we're just going to get those vicious, good-for-nothing global corporations to pay more in UK taxes. Simple. 

I mean, clearly other countries don't need the extra tax revenue, otherwise they'd be making those evil death stars pay more already, right? So it's open season. Britain can charge the bastards whatever the hell it likes. Nobody can stop us.

Don't pay any attention to that lunatic Senator Levin and his mutinous crew. Their demands that the United States should get a fair share of Apple's revenues will never take precedence over every Briton's right to realise the Conservatory dream.

So dream on!

Long live BubbleAid!

Playing The EU Fiddle

You know you're being played like a fiddle when Westiminster erupts over something as nebulous as Britain's membership of the Europe Union.

It doesn't matter what anybody thinks about the sustainability of the EU and whether Britain should be in it or not. The issues are too complex for anyone to be "right" about them. We may as well have a referendum about whether there is life somewhere else in the Universe. One day it might be clear, but not now. Today, in the FT Wolfgang Münchau calmly says that Britain could achieve all the current benefits with bilateral trade treaties, while in the WSJ Simon Nixon argues it's a matter of in or bust. Does either position truly reflects how the whole EU disaster will play out, who will lose and who will gain?

Nobody knows.

But this we do know: Britain's membership of the EU is an ideal topic of argument if you're trying to distract the population from the fact that your party has no idea how to resolve the current economic disaster right here at home. So, rather than fall for a faux controversy generated with the help of has-been Tory grandees, let's lock the current lot in the House of Commons until they get the country back on track.

Image from History.com.

Political Clarse

The term 'political class' is being waved around at the moment like a loaded pistol at a poker game. 

It's not clear whether Ken Clarke started it while pompously woofing about UKippers, or whether Farrago reached into his arsenal when counter-jibing about the "ossified elite".  

Either way, it's alarming. 

Mosca, Weber and other students of the political animal may have used the term in a derogatory sense, but we run the risk that petty politicians struggling under the weight of grandiose delusions will ignore the irony and claim it as a badge of honour. We are talking, after all, about a bunch of cretins who will clutch at any brick they can add to the wall between 'us' and 'them', even if it means building a duck house with a moat. They are desperate, in fact, to ossify any elite they can lay their hands on. 

So let's have no more loose and dangerous references to 'political class'. If it must be written down, then at least spell it in a way that reveals the true meaning. 

Image from BucklesAndTees.

What Happened To 'Class A' Political Journalism?

My appetite whetted by this week's local electoral melodrama, I've been searching for some Class A political journalism to feed my lust for pragmatism. 

There were little flashes of it from a few of the TV people. Michael Crick, who blew the lid off the Andrew Mitchell stitch-up, was rude as hell to Farrago, no doubt furious at having stuck to him like a leech in the hope of discovering anything coherent and coming up empty-handed. That left the usually mild-mannered Gary Gibbon to go after the rest of the gang. Desperation set in after the AutomEtonian responded to every single question with the line that this week was simply about local councils. He genuinely seemed to forget he was the Prime Minister, and I guess it's easy to see why. This seemed to put Gary in such a foul mood that he went after Flash Nick and Millibore like a mortar crew on speed. Each prevarication was interrupted with a fresh round down the tube, and another explosion of disbelief at the factually-twisted response. 

The only problem with the Gibbon assault was the apparent premise of the questions on capital spending: that it's the job of the state to fill every hole in the infrastructural landscape. Creating a whole new mountain range out of UK public debt is strange medicine indeed, whatever the cause. Ironically, Flash Nick went closest to a straight response, saying that while they'd barely invested a bean of new public money, the coalition has done a great job of attracting private capital to public projects. If that's true, then let's hope they've overcome the planning fallacy, and the PFI vultures leave a little flesh on the state carcass for the rest of us. 

As for Ed, well... 

In the end, the howling in my soul could only be quieted by re-reading "Fear and Loathing on the Campaign Trail '72". Forty years on, nothing has changed. The vicious wheels of the party political machines are still flattening the best interests of the citizens into the road in the rush for power and patronage, and Thompson's substance-fuelled take on the political animal is so brutally right that the recognition will make you laugh like a hyena. This, for example, could have been written today:

"This also reinforced my contempt for the waterheads who ran Big Ed's campaign like a gang of junkies trying to send a rocket to the moon to check out rumours that the craters were full of smack."

Now why doesn't anyone write about politics like that anymore?

Is it merely because today's journalists are sober, or have they abandoned hope that we can produce anything different to the current stage-managed pantomime?

A Thumping Pay Rise For Central Bank Non-Execs?

I was bemused to see the call for a giant pay-rise for the Bank of England's non-executive directors earlier this week. Especially given last week's admissions by certain former central bankers that no one is in charge and they don't understand how advanced economies actually work - not to mention last year's independent findings that the Old Lady of Threadneedle Street suffers from undue deference and group-think.

Surprisingly, the argument for the pay-rise is not that inflation has increased above the Bank's own target (a bit close to home), or that the value of their work has shot up dramatically in the light of global economic events (er, it's arguably gone down). 

No, apart from an 'increased workload' (which the FT interprets as a reference to the aforementioned independent reports, prepared by others), the central rationale is that they're underpaid compared to the non-executives in other (failing) banks. Apparently it's a bit unseemly for the non-executive directors of such a grand old institution to be effectively donating their services, and a pay rise will 'boost their prestige', as the FT puts it. One "reformer" is even quoted as saying:

“Continuing to call this body the court and paying people so little conveys the wrong impression externally.” 

Fans of corporate politics might sense that someone is teeing-up the existing non-execs, like so many golf balls, ready for the new Governor to drive them into oblivion. 

Farrago

You've got to hand it to Nigel Farage. I don't know whether it's the cigar, the pint-fuelled interviews, that he survived a plane crash caused by his own campaign banner or the fact that the UK's leading proponent of immigration controls is an elected European official with a German wife. Whatever it is, Nigel Farage has breathed some life into UK politics.

Not that I'm a Ukipper, as it were, or a "clown", "fruitcake", "loony", "closet rascist" or anything else that the Autometonians have surprisingly labelled Nige's new best friends. And I'm no supporter of the other guys either. The Lib Dems are strangely inert, apart from some genuinely helpful peers. And anyone familiar with my take on Nude Labour will certainly gather that I'm no fan of the Two Eds. Old wounds from the Brown Years begin to seep whenever their mugs fill the screen - especially that of Balls. There's a terrifying zeal in those eyes...

Nope, I can't bring myself to support any of the current crop of politicians or their pantomime parties. But that hasn't prevented the rise of a certain grim fascination with their squabbles, especially now that Farage has joined the fray. And recent trips to the Interior have demonstrated that I'm not alone. I reckon it'll be tough to round up a four-ball on polling day.

So Nigel, too, needs a nickname. And a word I learned for a university revue suddenly comes in handy. A "farrago" is a "confused mixture". That will do nicely.

Image from the Guardian.

We Need A Working Party

When Kenneth Clarke starts barking about "fruitcakes" and "loonies" you know the Tories are rattled. He claims to have been referring to supporters of the UK Independence Party, but the attack will have echoed amongst the supporters of all political parties:

"It is very tempting to vote for a collection of clowns or indignant, angry people, who promise that somehow they will allow us to take your [sic] revenge on people who caused it [whatever 'it' is]."

Surely this defines the entire House of Commons?

But YouGov's latest poll shows that only a narrow majority of Labour supporters actually believe politicians can improve our lot (the greatest triumph of Hope over Experience since records began). 

The rest of us tend to be more realistic. After all, the state is a means of facilitating our own personal efforts to solve society's problems, not a means of getting someone else to solve them for us. Hard work from each of us is required, not party politics. Party politics is mere pantomime. Or in Clarkey's case, just so much dogma doodoo. 

So we don't need a UKIP, or an Official Monster Raving Loony Party for that matter. We need a Working Party - a barn-raising, a bee, a 'dugnad', as the Norwegians call it. And we should lock our MPs in the Commons until they figure that out.

Image from Dogster.com.

No One Is In Charge

It's a pity that we only get an insight into the shortcomings of most organisations when people leave them.

Two of the more recent insights have come from John Gieve, a former deputy governer of the Bank of England, who is wringing his hands about who is "in charge" of the UK economy; and Lorenzo Bini Smaghi, a former member of the European Central Bank’s executive board, who has reportedly told the IMF: “We don’t fully understand what is happening in advanced economies.” 

One would have thought it was pretty bloody obvious to anyone who had loitered among the top brass of the economic establishment that no one is in charge. I mean no one is in charge of even understanding how the British economy fits together, let alone actually tasked with managing it as a system. Everyone is organised into silos that barely interrelate. Surely the UK is not alone in this.

It's naive of central bankers to be still anxiously discussing their lack of understanding and leadership, especially given the events of the past decade. Our economies are a fairly loose collection of economic victims, rather than cohesive units that operate together as part of some grand scheme.

So, shouldn't we be facing the fact that events are outside of our control, and breaking open the silos, instead of pretending that the great and the good in our Treasuries or Central Banks have all the answers?

Thatcher Failed To Make It Personal

Whether you loved or loathed her, you have to be impressed that 23 years after she was hunted out of office Margaret Thatcher's funeral is as divisive as a Poll Tax riot.

Clearly Britain has failed to 'move on' from the Thatcher years, which suggests to me that the work she started was on the right track but is seriously incomplete. I mean, if her policies had been just plain wrong-headed or disastrous, Britain would have dropped them like hot coals - or the notion of 'light touch' banking regulation. Instead, we're still trying to balance Thatcher's blast of economic reality with its personal and social impact.

Whatever your politics, it's clear from all the recent commentary that Thatcher was focused solely on improving the way the failing British economy 'works'. She spent her energy arguing relentlessly with people about the nature of the problems, their causes and the improvements that should be made to resolve them. The resulting policies obviously appeared 'right wing', but this was largely by comparison with the dogmatic lunacy espoused by the economic lemmings in charge of the Labour Party and trade unions at the time. Their policies seemed predicated on the private sector operating as a charity for the public sector, rather than economic sustainability. Thatcher's opponents were not arguing either on the same rational terms or with the same rigour. Her disciplined approach ruthlessly exposed dogma, from both left and right, and homed in on the most feasible economic solution. Then she rammed it home...

While Britain's reward was increased productivity and employment, far too many of its people were ill-equipped to cope with this fairly brutal brand of politics. Thatcher is infamous for the quote that "there's no such thing as society" which is often unfairly given without the qualification she gave it. But even the full quote reveals a serious flaw in her approach:

"They are casting their problems at society. And, you know, there's no such thing as society. There are individual men and women and there are families. And no government can do anything except through people, and people must look after themselves first. It is our duty to look after ourselves and then, also, to look after our neighbours."  Women's Own, 1987.

Thatcher's words "and then" raise the issue of when, which we naturally interpret as 'when we have enough for ourselves'. But enough is never enough. Our society is obsessed with personal rights and entitlements, rather than the duties and obligations which must be performed if those entitlements are to be delivered. After all, who ultimately bears the responsibility for delivering everyone's rights and entitlements if not each of us personally? Thatcher was right to the extent that the state cannot perform our personal obligations for us - ultimately, it can only act as a facilitator for our own endeavours - but it was a mistake to assume that society would automatically benefit if each of us looked after ourselves as a first step. Perhaps this was as much a flawed belief in the 'efficient markets hypothesis' as that of Alan Greenspan (and Gordon Brown) a decade later.

At any rate, we are now faced with the fact that, in Thatcher's own terms, we are not looking after a fairly large number of our neighbours. While it's worth noting that Thatcher's governments produced consumer-oriented legislation such as the first Data Protection Act (1984), the Hospital Complaints Procedure Act (1985) and the Consumer Protection Act (1987), it took British society several more decades to establish even a basic sense of 'customer service', and most of the UK's institutions are still not designed around the 'customer'.

In my view, we will continue to struggle with significant social imbalances until we grasp the idea that society and the economy only 'work' if each of us - whether acting as individuals or employees of corporations or the public sector - acts in ways that are sustainable for both ourselves and society at the same time. It's not a matter of looking after ourselves first "and then" our neighbours, as an afterthought. Our activities have to be aligned to be sustainable. And only by focusing on our duties and obligations to everyone else will we secure our own rights and entitlements. That is the fundamental concept behind what I would call “the Personal State”. It's time we built it.

Image from DelhiNewsRecord.

There Must Be Dancing In The Streets

Oblivious to their economic plight, UK citizens are preparing to spend up to £10m celebrating the immortality of former Dear Leader Madge. Much of the cost stems from the involvement of a mass North Korean dance troupe famous for leading their country's Founding Day performances.

While state radio broadcasts were briefly interrupted by dissidents singing hymns to mortality on Sunday, Dear Leader Dave, who will himself be immortalised in due course, defended the move during an 11 hour state television broadcast:

"We respect and admire the North Korean people for their unquestioning loyalty to immortal leaders. It's true that £10m represents a year's salary for the 1200 street performers involved, but feigning joy on a mass scale is something we need to learn from them, even at such a cost. Remember, too, that this was the specific wish of former Dear Leader Madge."

UK worker collectives also expressed their support for the immortality celebrations, with a re-enactment of the Jarrow march. Comrade Leader of the Union for Exported Manufacturing Jobs, Eduardo Millibando, said:

"This may seem a lot of money to my members, who have lost generations of employment opportunities, but they will be grateful that the nation has learned these dance steps for mass adulation when it is the turn of former Dear Leader Tony to be immortalised."

North Korean leader, Kim Jong-un, welcomed the exchange, adding, "we are also especially pleased to have won the contract to build the next generation submarines for Britain's Trident nuclear programme. This realises Britain's foreign aid ambitions, while meeting our own desire to become a nuclear threat to the entire universe." 

The Future Is Not Behind Us, It Lives Locally

For every old saying there's an opposite. Today's conflict lies in the adage that "those who don't know history are destined to repeat it." Yet "our history is not our destiny." This leaves a fine line between useful historical insight into how the world works and steering solely by what we see in the rear-view mirror. The distinction becomes critical as we lurch ever more quickly from one financial crisis to the next.

So what lessons from recent history will help us move foward, and which should go in the scrapbook? Here are 5 that I think are worth taking forward, in no particular order:

1. Clearly, the Internet is not a fad. Consumers are the winners, aided by facilitators in their battle against our creaking institutions. Yet e-commerce is still only 10% of all retail. And we are still in the 'primordial soup' phase in the evolution of our tools for extracting meaning from the great, chaotic swirl of data. So this trend has a lot more mileage in it yet and will sweep across more service sectors - if you can buy it online and have it delivered it won't be sold in high volumes on the high street. In fact, it might even be made locally...

2. In addition to democratising services, the Internet is also returning the means of production to local communities through e-enabled machines. Remote/home-working is replacing central workplaces and 'factories' are getting closer to customers, requiring a rethink of corporate systems, processes and supply chains. Huge production plants and sole-occupancy office towers will gradually become a thing of the past. High streets may well regenerate to support this trend, or as a result of it.

3. Cities with at least 3 private workers for every public sector worker see the most growth. Give that some thought if you live in a city near the bottom of this chart. This chimes with findings that economies (regional and national) whose public spending exceeds 35% of their GDP struggle to grow. You have to feel sorry for Northern Ireland...

4. The public sector is very inefficient and needs to act locally - public institutions are already being relentlessly affected by lessons 1 and 3 above, and 2 should increase  the pressure. Civil servants really have no alternative but to spend public money more wisely. Meanwhile, we'll help drive down the cost of government by dealing with the government online. Big government offices must surely go eventually. Fortunately, the moves to devolve more power to local government coincide here, but I don't think we should be fooled into thinking that's part of any real plan to future-proof the UK...

5. The UK's financial system is seriously inefficient at allocating money to people and businesses. The fact that we all rely heavily on a few major banks for whom lending to small businesses is not a core activity is part of the problem, but innovation and competition are constrained by our outdated and rigid regulatory framework and the related incentives. Crowdfunding, or peer-to-peer finance, platforms are springing up all over the country, and are increasingly focused on specific sectors, activities and locations.

In short, if I were a civil servant (see 4) based outside the south east of England (3), I would start an Internet-based service (1) that efficiently provides low cost finance (5) to help localise the means of producing stuff using e-enabled machines - or buy my own 3D printer and start renting it out (2). Now. 

Image from KC Anderson.

Submarine Welfare

The Tory spin machine was in overdrive today, with the Chancellor linking a fatal house fire to excessive social welfare payments, while the Prime Minister used the recent bout of North Korean toy-throwing as the kind of "extreme threat" that justifies Britain's entire nuclear submarine programme. Hell, why don't we just pay for Trident straight out of the welfare budget and be done with it?

Given the gravity of the UK's economic predicament, you might have thought our political leaders would be sticking to hard facts, rather than inciting moral panic. But you'd be wrong. Party politics is all about cynically exploiting fear and greed:

"while narrowly targeted policies will fail to draw on the strength of middle-class political pressure to defend welfare, policies with wider coverage actively recruit the sharp elbows of the middle class." Source: The Solidarity Society: why we can afford to end poverty, and how to do it with public support. Fabian Society, 2009

That's right, the Tories have been tearing pages out of the Left wing playbook, even if they're trying to work the same trick in reverse. Blame all bad stuff on the welfare state, so most voters will want to spend less on it.

Ironically, the Left seem to think they got this idea from the Right, as explained by Rhiannon Lockley in her “Red Book” essay on "Understanding the Psychology of the Working Class Right Wing": 

 "...the key achievement of propaganda is to make the belief being transmitted internalised to the point where its origin is lost and it is accepted as natural and self-discovered by the individual... The volume and diversity of negative messages about scapegoated groups in the right-wing media today does much to achieve this, and it is also supported by the factual style of reporting which presents arguments as definite rather than exploratory." 

The truth is, they're all at it... endlessly spinning and scapegoating instead of solving the root cause of real problems. And we're paying for it. Big time.

So how do we get these people to focus on the real issues? Where do we start?

I think we need to play them at their own game. And the best place to start is closest to home. We should link all our ills to government waste - not the welfare budget or the healthcare budget, but the £166bn that the public sector wastes on itself - nearly a quarter of the UK's entire annual exenditure. Every time a politician strays from a discussion of the hard facts in any area, we should ask them how he or she is going to spend less on travel or communications costs, or office space or, dare I say it, expenses.

Once they demonstrate an ability to get that basic level of waste under control, they can graduate to discussing how to control state taxation and spending in other areas. But the bizarre rants of North Korean leaders and random criminal acts, however tragic, should be a long way down the list.