Banks Bow to Pressure on PPI

Finally, the Great PPI Robbery is over. The news from various high street banks effectively concedes it was too difficult for them to sell this little-used insurance policy in a compliant manner to enough customers to make a fast buck.

It was a long overdue concession, only wrung out of them after years and years of expensive market reviews, inquiries, regulation, more inquiries, and heavy fines - culiminating in the record £7m fine imposed on Alliance & Leicester last October.

Will they capitulate on bank charges next?

Government to End Bank Charges Litigation?

With the government now such a significant shareholder in so many UK current account providers, it could save taxpayer's money and boost the (alleged) victims' finances by requiring an end to the expensive saga of bank charges litigation, and the refund of fees that the OFT alleges are excessive.

Note the finding by Mr Justice Smith (at para 415) that "information provided by the Banks suggests that in 2006 [alone] the Banks between them received £2.5 billion from Relevant Charges on an average daily unarranged overdraft balance of £0.6 billion."

Another judgment in the saga is due tomorrow morning (21 January 2009) at 10 a.m.

Update: the 21 January judgment held that only certain NatWest terms are capable of being a penalty. Whether or not they do constitute a penalty is phase two of the saga, and phase one is yet to conclude.

Phase one is held up because the banks appealed the first instance decision that both their current terms and their historic terms are capable of being assessed for fairness under the Unfair Terms in Consumer Contract Regulations. Judgment on the current terms is expected soon, whereupon the banks' appeal in relation to the historic terms will begin.

Of course, the Court of Appeal's decision on both sets of terms could go to the House of Lords, meaning several years' further delay.

Meanwhile, the lower courts won't hear cases pending the outcome of the higher court proceedings. And the Financial Services Authority is also preventing anyone getting their money back via the banks' own complaints procedures. Similarly, the Financial Ombudsman Service (where complaints to the banks utlimately go) won't process complaints until the court proceedings are over.

This is no way to treat the nation's consumers, especially when the consumers' own watchdog is involved.

If the banks won't act fairly on their own initiative, then it must be part of the government's "fiscal stimulus" package, to insist that all banks that took bail-out money immediately refund the element of bank charges which the OFT has complained are excessive.

Bleeding Edge No Place For Bleeding Hearts

You may have seen some of the bleating about Google's decision to retire some of its services that never hit the mainstream. Such whinging must be ignored, as to heed it only risks making the difficult process of innovation harder still.

Having been involved with internet start-ups since 1996, of course I subscribe to Geoffrey Moore's variation of the "Technology Adoption Life-cycle", that there's a "Chasm" between innovators/early adopters using a disruptive product, and successfully selling it to the early majority.

As an innovator or early adopter, you are out to get new stuff for free (or pay for it to be exclusive to you - thanks KM), and be ahead of the crowd. You love to show off the latest stuff and brag about how you were there at the beginning. And you definitely earn those bragging rights for putting up with the pain of participating in alpha- and beta-testing, the inevitable crashes and other technological mayhem. You understand that if you aren't protecting yourself against the failure of new technology you only have yourself to blame. Either you never let on there's a problem, or you wear the latest outage like a badge of honour. But if you whinge about it, then you aren't really an innovator or an early adopter, and you lose your bragging rights. You've become a member of the early majority - where new products with bugs or in beta-test (as opposed to new releases/upgrades) are not tolerated, and ongoing support is expected.

Similarly, if you're eager to sell your business to Google or some other behemoth in the hope that it will magically transport your "baby" across the chasm, then you're setting yourself up for intense disappointment. Even the big guys struggle to cross the chasm (which is why Microsoft waits patiently on the majority side). Until you've crossed there's still a ton of work to do, which is why they'll call one of the clauses in your sale and purchase agreement an "Earn Out".

The bleeding edge is no place for bleeding hearts.

Rant ends ;-)

OK, OK. But Absolutely No Fifth Runway

As Gordon Brown's wasteful, intrusive juggernaut grinds the blood and bones of yet another protest line into the political landscape, so the survivors must rush to the next defensive position.

But in the absence of any effective political opposition, it is wise to choose something that Gordon and his goons would be truly looney tunes to set their sights on. Something so inherently dangerous that New Labour will spontaneously combust in the attempt to achieve it. Because we all know now that as soon as the good citizens gather to defend their interests, New Labour acquires another target, and the Cavalry stays away.

Iraq turned out to be just another rut in the road for these automatons. And I'm sure they can squeeze in a fourth runway at Heathrow, if we don't mind the odd plane landing on the M4 by mistake.

But I reckon a fifth runway at Heathrow would put New Labour on collision course with the M25. Nothing could survive that.

Low Cost Government

Well, here we are in '09, the last of the Noughties: a fitting epithet for a decade of both reckless abandon and total collapse on the fiscal and financial front.

There's a lot of soul-searching going on, as well as a search for inspiration and leadership. While the US President-elect seems to have risen to the challenge, in the UK the search continues.

Bereft of vision, we look to the past, and it's a sign of the times that I was given Speeches That Changed the World for Christmas. Of course it includes Franklin D Roosevelt's First Inaugural Address, heralding the "New Deal", which has often been referred to in the news lately. It can also be read here.

While FDR's speech and the New Deal must be seen in the context of a more parlous economic situation than today's, and many of FDR's tactics are being deployed today, I was struck by one that's yet to be honoured in the UK:

"... insistence that the Federal, State, and local governments act forthwith on the demand that their cost be drastically reduced."

I mention it not just because UK civil servants were promised a 2% pay increase in a time of rising unemployment (public sector teachers will get 2.3% extra this year and next, while the Daily Mail shrieks that private schools are closing). I also raise it because New Labour might just mistake the need for fiscal stimulus as a wheeze for saddling us with more civil servants in the long term, who'll generate further cost in terms of random policy initiatives and bureaucracy to justify their existence. See the Taxpayers' Alliance "non-jobs" for examples.

Of course, hiring more public sector workers flies in the face of last September's promise to cut jobs, as reported in the Guardian:

"Separate ONS figures on public sector employment showed the number of people employed by the government fell 44,000 in the second quarter to 5.8 million, the lowest total since the second quarter of 2004. The government has pledged to cut 84,000 jobs by next April as a result of a review conducted by Sir Peter Gershon in 2005."

But as Chancellor, Gordon Brown approved a 13% increase in the public sector workforce from 5.1 in 1997 to 5.8m in 2006, according to the Institute for Fiscal Studies. So, Sir Peter's 2005 review was merely borne on the rising tide.

The IFS also says that public sector pay has caught up with private sector pay, yet about 76% of public sector workers have final salary schemes, versus 17% in the private sector. And public sector pensions are worth 25% of salary versus 20% in the private sector. With pay the same, there's no reason for that gap - if there ever really was one.

But take heart! Perhaps it's a sign the trend is about to reverse that certain people in the public sector are bizarrely receiving their Honours now - it's to reward them before they can be accused of selling out their colleagues.

On that basis, we really should have welcomed the news that, for overseeing massive public sector expansion and bail outs at the taxpayer's expense, the Permanent Secretary of HM Treasury gets a knighthood, while the captains of private sector finance get hunted out of office for their part in Brown's Boom and Bust.

The last of the Naughties?

Let's hope so.

Enjoy the year as best you can!