Banking on European Stupidity

There are various reasons behind the EU's decision to limit bankers' bonuses. It's just that none of them is any good. There is the populist angle where politicians in search of votes wish to tap into the envy and vitriolic revenge that are so prevalent in today's society - both at home and abroad; the EU dreamt this horsecrap up but damned if the Libs and Labs don't want to hitch a ride on the bandwagon. Then there is the anti-UK angle, one that the UK-based Libs and Labs have overlooked in their fervent approval of the first approach; we stand the most to lose from our financial sector losing competitiveness. Then there is the 'throwing a dead cat on the table' angle that the Mayor of London mentioned here, disctracting the public with something irrelevant; in Europe from the catastrophe of the Euro and in the UK from the Government who fashioned the economic disaster now seemingly totally pinned on 'the bankers'.

First, it plays well in a recession to bash the rich. It's a shame, but it's true. When people aren't doing so well, it's far easier to look to blame others and demand more from them than to introspect and to do something for oneself to improve one's own position. This is the default setting for much of the country it appears. It plays nicely to the lower financial layers of society mockingly sympathising with those with £1,000,000 wages being restricted to just £2,000,000 bonuses.

The reality, naturally (not a concept Ed Milliwho is too familiar with) is vastly different. What both Eds frame as a great new law to stop high pay does exactly the opposite. All the bank bonus limit does is mean banks will have to increase base salaries. It won't really affect gross pay. It will just mean that their baseline costs, those which they are contractually obliged to pay out every year are higher. The bit they have discretion over, will be lower. So even in the poor years when they could severely restrict bonuses, they will still find themselves vastly overcommitted to their payroll. They will be less flexible, more cautious and have to hold onto more of their funds. Thus not only will they not be able to be as competitive, but thy will likely decrease lending too. It's very, very simple. You can't claw back salary like you can bonus, you can't link it as easily to long term performance, and you can't incentivise working harder as easily.

The problem is as usual, the policy goes after the easy headline win rather than the issue. Nobody is doubting there was a lack of restraint with pay and a failure to link pay to long- not short-term gain. This has been taken in hand though; it was the area needing revision and it has more than received it. Despite the banks having done what we asked, we are now to cut off our nose to spite our face. This is a foolish populist policy that will only do damage when the real problem it pretends to be solving has actually long been addressed.

Second, the production of virulent anti-UK policy at a time when we are rightly making noises about the actual worth of being in the shady underworld that is the EU is blatantly punitive. London is by far the financial centre of Europe, and at the same time, a vitally important contributor to our GDP. This policy will do nothing but undermine all European banks and thus hit us hardest. If you were looking for any current examples of being ruled by moronic people you never did or would vote for in a way that is totally contrary to the interests of the UK, one can only say thank you to the EU for providing one so obviously.

The third reason, which Boris elucidates in his article, is to distract everyone from something more important. As he discusses, the EU is desperate for everyone to focus on these evil bankers and how they ruined everything, when it is increasingly clear the central tenet of a common currency for vastly uncommon economies (size, type, development etc) is completely and fatally flawed. Yes 'the bankers' deserve some of the blame, but nobody should be fooled (yet many are) by this clear distraction act. In the UK, Labour pounced upon this intervention like manna from heaven.

"The Tories are going to have to defend the bankers - number 10 here we come" - you can almost hear Labour's delight. It presented another opportunity to pretend that their tax and spend election buying hadn't placed the economy in such a perilous position that when the bust came, there was no money to deal with it. That and to gloss over their complicit part in lax ragulation and the encouragement of the housing boom that was so important to the crash.

All in all a pretty unedifying affair. A terrible law with petty political motivations and no grounding in financial common sense. It is as disappointing as it is unsurprising that it finds support from the usual suspects like Balls and Milliband, as like most of their previous policies (I don't think they have any current or future ones) it will be nothing but economically damaging.

Horses for Courses

There has been a lot of water under the bridge since my last outburst, and I have felt the rage building at story after story until I could no longer hold back, despite my new, joyous 4 hours of daily commuting rather depleting my hours available to blog. Like a hardened con waiting for his 'basic human right' of a conjugal visit, there's rather a lot stored up.

So where to start? Well we should probably go with the story that had the most direct and dire consequences for the public at large - likely widespread criminal behaviour in one of the most important sectors. A vile underbelly of corruption masquerading in a great illusion of quality forced on the unknowing British public. I speak, of course, of the HORSE MEAT SCANDAL! You'd be forgiven for thinking I meant the appalling NHS Mid-Staffs affair - the report detailing the horrific standards of care and indeed lack of basic human compassion reported that led to at least 1,200 deaths. You see, whilst that seems important, it appears we don't care very much about that, based on the column inches. No, we care much more that unscrupulous people have been selling Shergar in place of Daisy the cow.

Not to belittle the affair, but nobody is dead. Horse meat in general is perfectly edible. Clearly the issue is with mis-selling (and making a profit from selling a cheaper meat as a dearer one) and quality (if you don't know what is in it, you don't know how good it is or if it is safe/organic/volunteer beef). Fair enough there's been a bit of a hoo-hah about this, but the perspective is very wrong.

We don't mind eating chicken nuggets (some of us), and having carved a chicken up last Sunday, I certainly didn't find any naturally occuring ones. We knowingly put in our mouths things which are labelled one thing because of a sometimes rather loose connection with one of the ingredients - think turkey twizzlers, beef kebabs and value pork chipolatas. There are all sorts of filler put in cheap meats the world around - to use my favourite quote that I crowbarred into every history A level essay I wrote; "laws are like sausages, it's best not seeing one made".

Otto von Bismarck's erudite point is certainly true of the (no pun intended) ghastly horse trading that today sees 1/2 a Lib dem policy and 1/2 a Tory policy put together to ensure the alienation of both sets of supporters in conjunction with an utterly useless piece of legislation. It is no less true of cheap meats, and has ever been thus. That someone has found that they can pass off selling horse is no surprise considering how much water-blasted shin gristle, 'reclaimed' scampi and sawdust-based fillers we've probably eaten in our time.

Surely there is a suitable legal chain whereby shops have a certain requirement for due diligence in confirming what they are being told they are receiving really is just that (they cannot personally monitor every animal from cradle to gravy, so it has to only be a reasonable level of diligence). If they have done that (as dictated no doubt by the FSA (not the banking one)), they're in the clear and can then sue their suppliers for reputational damage, whilst the courts can prosecute those who intentionally deceived them. If not, they're in hot water too. No matter how many people in the chain, the process works the same. Not surprising, not terribly important in the grand scheme of things and already perfectly well catered for in law. Move on shall we?

The actual big story though, is the elephant in the room. The Tories are so concerned by their lazy but extrmemely adhesive image of the nasty poor-bashing party that they dare not do the right thing over Mid-Staffs. It seems you simply cannot say that there are some useless people in the NHS. You also cannot say there are some nasty people in the NHS. No, every worker in the NHS goes to work wanting to do good.

Quite how everyone is content that every single one of the 0.5 million banking sector employees in this country go to work with greed and class-based hatred in their hearts, yet cannot countenance even one of the 1.5 million NHS employees not being 'an angel' is beyond me. We are a nation of morons, intent on buying into themes, not listening to facts and making sound judgements. It's how Labour are ahead in the polls where everyone thinks the economy is the most important thing but cannot see Labour have not produced a single economic policy in 3 years of Opposition since they totally ruined the country's finances for generations to come.

The Tories refuse to point out that whilst Sir David Nicholson certainly is accountable over all the deaths to a degree, what is far more important is that at least several hundred medical professionals are vastly more culpable in individual cases. No, the "system" and the "culture" wasn't right in many ways, and top management (and all the levels in between) have to take responsibility for that. However, to allow someone to dehydrate to death in bed, to give someone a vase of flowers to drink from, to allow someone to not be moved for days at a time causing fatal bed sores, to fail to monitor properly the care of over a thousand people (and they're only the ones who died - I dread to think how many suffered and survived), that is cold-hearted, even evil, certainly sackable, definitely culpable and probably criminal behaviour. And it must have been perpetrated by hundreds of nurses, doctors, ward sisters, health workers, care assitants etc.

Sod the "we don't learn by blaming" - I don't remember such restraint (still ongoing) regarding 'the bankers' (catch-all for every single person in the financial services, all misanthropic, all went to Eton (they must have big classrooms), all earn £1,000,000 a year, all eat babies and love Jimmy Savile). There are people in this "envy of the world" health system of ours that deserve to go to prison, not just fired and never again allowed to work in healthcare. But no, the Tories don't want to give the Grauniad et al the "nasty Tories turn on the NHS" headline they are dying to print. Which of course is why DC still won't cut their bloated budget despite the damage it is doing to other departments.

And the other reason we are quiet over the hundreds of awful and culpable workers? Because if we convince ourselves only the chief exec who will never have even set eyes on a single one of the victims is to blame, then as he wasn't also the chief exec of all the other hospital trusts, there's no chance this exact behaviour isn't mirrored in all parts of the country. If, however, we admit the NHS is a very sodding long way from perfect and throwing money at it doesn't cure it any more than applying a soothing balm constituted of £50 notes cures cancer, we might have to look under a lot more stones and find a lot more willful neglect and in some cases, outright abuse. And more dead people, naturally. And we wouldn't want that - we'd rather moan about pony arrabiata.

A Timely Ketchup on Recent Events

So it has been rather a while since I put pen to paper. I suppose it is not really that I could find nothing interesting to blog about in the political nanosphere, it is that too much of it falls into the category of 'same shit, different day' and it tires me to drag out a new example of the same argument I (and many others) have already made. I now realise that the hard thing about journalism isn't making current affairs interesting to the public, it is making them seem different to the current affairs you've been spewing out forever.

I could write about banker bashing, but we've been there before. Bottom line we need a thorough look at the regulatory system because it allows far too much shenanigans, but we must realise that the sector as a whole is one of the few areas of world politics and commerce (as if they were that different) where we are still at the top table. Indiscriminately attacking everyone and everything in the sector will only hurt us, especially with the British public's new-found hatred of money and anyone who has it or produces it.

Which I suppose brings me nicely onto the subject of the court of public opinion and its apparent role in people accepting bonuses. I think Stephen Hester (way back) and Bob Diamond (more recently) should have told the Government and the British people to go take a long walk off a short cliff. Their pay packets are none of our business. They are also none of the shareholders' business once they've had their say in agreeing remuneration packets. Ultimately, if Boards fail to include penalty clauses like "If you mismanage the bank so wildly the Government will have to rescue us by buying 80% of our shares, which incidentally will plummet to a tiny fraction of their original worth" then more fool them. Clearly Big Steve came in after the RBS crash and didn't preside over it, but you get the idea.

If they fail to add the clause "If you preside over an illegal rate-fixing PR disaster that you might not technically be incriminated in, but is sufficiently bad for you and for the company that you resign following a huge share price drop", then the CEO is perfectly entitled to walk away with whatever gains he/she can, ill-gotten or otherwise. This is because…wait for it... THEY HAVE A FUCKING CONTRACT. I wrote that in caps so nobody missed the point. The answer to the issue of massive payoffs for failure is not guilting people in the court of public opinion into waiving bonuses or pay to which they are legally entitled. It is getting people to write contracts properly so if the nuclear power plant blows up, the Board can contractually remove the bonus from the outgoing chief exec of Chernobyl.

But I'm not going to go on about that again.

Nor am I going to bang on about Trades Unions striking at the time most likely to screw everyone over despite their already comfortable pay arrangements and constant underperformance. Today, I would clearly be talking about the Public and Commercial Services Union, to whom the UK Border Farce belong. Obviously you know what I think of them, and what I think should happen to them. Not quite Clarkson style execution in front of family members, but not far off. They have no leg to stand on. They are a joke. And they're trying to ruin the Olympics. But I'm not going to bang on about that.

Nor am I going to make yet another comparison between that dark side of the public sector who blackmail the country into paying them bonuses just to go to work, or not even to go to work over the Olympics (as they are contractually obliged to), and the military, who are yet again filling the gap, not just without extra pay, but in many cases, instead of holiday. That would be going over ground we already well know. So I won't bother.

I could express my dismay at the continuation of our farcical judicial system that places the rights of immigrant terrorists and criminals ahead of British, law-abiding taxpayers, with their deference to the most ill thought out piece of legislation ever, the ECHR, but we've been there before.

I could bang on about the Lib Dems with a massive 8% hold on the UK's votes demanding what are, considering the current climate, irrelevant (and poorly thought out) bits of legislation be pushed through, or else they will bring the whole house down as if they were equal partners. Big Dave knows the Lib Dems can't afford to split because from now until 2015 is the last influence on power they are likely to have for a generation, because nobody will ever vote for them now they've had to deal with the realities of actually being in Government. Problem is, Cleggo knows that the 10 point deficit the Tories lag behind Labour also means a snap election would be bad news for them too. They need the next couple of mini-giveaway budgets and they need their European luck to turn.

Who really deeply cares about Lords reform, or realistically when there is only a limited amount of political capital around, about gay marriage? They are both on a list of things that we'd like to do after we stop the world falling apart. This doesn't mean we are evil Lord-loving, gay-hating Tories, it means we understand priorities. As ever, pollsters will be able to tell you that x and y % of the population are on either side of both arguments. What they fail to point out is that neither topic would make the 'top 10 issues that will influence the way you vote' index for more than a handful of people. But we've done that one to death too.

There are a few more things I cannot bring to mind right now, but which I have got very close to writing about before realising I would simply be nudging you, the solitary reader, to a hyperlink to some crap I wrote last year (which I've helpfully done with the hyperlinks above, in case you're really bored). So I'm going to write about a point of minimal political significance but one which has roused me into action after over 2 months off. Yup, it's time to go to town on condiments as you may have guessed from my genuinely brilliant title…

My quarrel is not actually with condiments, but with when I am in restaurants the timing of their appearance on my table of late in comparison to that of my food. Ditto cutlery. It is totally beyond me why when someone takes an order of fish and chips, they wait until they have put the plate in front of you, hot, steamy and asking to be devoured, before asking if you'd like any of the normal accompaniments or even some fighting irons with which to eat. Amazing.

These are people who earn much of their annual wage from tips. And they don't have the foresight to put knives and forks out, or preposition a likely array of condiments before bringing the food out, piping hot. I can imagine how a competent server might deal with this…

Server: "Chef, how long for table 2's fish and chips?"
Chef: "About 5 minutes"
Server: "Right, I may as well bring them their ketchup, vinegar and cutlery now so I stand an outside chance of a tip."

Alas, they instead deliver your food and ask if you would like ketchup with your chips as if they had asked if you would like a toasted sandwich comprising a walnut whip and a paperback copy of the Homer's Iliad. Dumbstruck at your adherence to nutritional form, they wander slowly back to the kitchen to return with some of your requests just after your food has gone cold.

The blame is owned jointly between the serving staff and the manager. And our current educational standards. Oh, looks like we've been here before too..

Life in the Slow Lane

An easy Saturday blog to try to ease myself back into the blogosphere. Having been silent for a month or so, there's a fair bit on which to catch up. I suppose I could probably launch into a spiel about welfare in general. We might talk about the underlying issues with our system. There were two things that used to encourage people not to live on benefits. The first was the stigma attached to permanently living off the state. The second was that welfare payments were generous enough to keep your head above water but not generous enough for anyone to consider it a good enough life to choose not to try to make even a few more pounds, even if it meant seeing their kids less of having to get out of bed before The Jeremy Kyle Show.

The fact that people choose not to work tells us both these previous factors now no longer apply. People are happy to not work and be seen not to work. Life is clearly comfortable enough without having to work. There is too a disgustingly large proportion of society who believe these handouts are 'owed' to them (read 'entitlements' rather than 'benefits'). The reality is they are the largess of a generous state doling out hard-earned taxpayer pounds. But that would get me too angry to enjoy my weekend, so we'll move on.

We could talk about housing benefit and the cap, or the most often relevant factor, the biological ability to have children and the apparently God-given right this gives people to have them housed wherever they wish by the state. But not only have we already 'discussed' this here, here and here, and nothing has changed since (except finding out the £26,000 cap is actually post-tax, meaning one can 'earn' the equivalent of a £35,000 wage under the cap by doing diddly squat), but it will also make me too angry to enjoy my weekend.

Incidentally note how when there is public vitriol directed towards someone rich, say Stephen Hester, all the media talk about his pre-tax bonus (£963,000), but when discussing the evil Tories' plans to bankrupt hard-not-working families, they talk about the post-tax amount (£26,000). Probably a mistake - they couldn't have meant to compare like to unlike and present it as inequality. Definitely not intentionally misleading to suit the sensationalist headlines. They wouldn't do that. Dicks.

Or I could talk about the obsession with relating the average wage to what a man earns who controls an enormous, multi-billion pound company with tens of thousands of employees. Now you can argue all you like about whether or not the bonus recently awarded to the RBS chief executive is a reward for failure (though remember he came in after the balls up to sort it out). What is certainly true is that he has a right to whatever the remuneration committee decide to award. They set the criteria. They decide. Shareholders, even those approaching 90% shareholders don't get a vote. So less willy waving please, Ed Milliwho, with your farcical "If I was Prime Minister, I'd bally well stop them paying that capitalist pig etc..." daydream.

As it is, the Government suggested it shouldn't be over £1 million, and it wasn't. Do remember though, that in finance, a bonus is a part of the wage structure. I think few people outside this industry understand this. They imagine that their basic pay forms the same part of their remuneration package as the basic pay of someone in the financial industry, when that is far from the truth. Therefore they struggle to understand bonuses being paid almost as a standard.

It is a better comparison to think of those in financial services as similar to car salesman who get a basic plus a commission-based bonus rather than it be equivalent to just handing a bonus to a guy who earns a set salary at the Home Office, the NHS or B&Q. The salesman still gets a 'bonus' from his commissions in a crap year of selling cars where he was massively under target. It's just less, and added to his basic is essentially his wage. It is just a different way of paying people. So if people could stop demanding individuals give up what is part of their pay when they have nothing but a share price in a company they do not begin to understand to go on as evidence, that'd be super.

Now concern over whether the total remuneration across the sector is a bit high, or a lot high, I can certainly understand. I just don't get going after one man. Incidentally, what did the no.2 at RBS get? It seems you don't suffer public scrutiny unless you're the CEO. It all just seems a little childish, and smacks of the politics of envy. By all means talk about boardroom pay, but go about it like envious hordes and you lose all credibility. So we definitely won't discuss that today either.

Or we could talk about the crackpots at anti-monarchist organisation, Republic, who think it is illegal to get school children to cook for the Queen. In their eyes, one can only do this if you also have an equal amount of time devoted to anti-Monarchical study. Celebrating a 60 year reign of a Monarch by cooking her chicken á la turkey twizzlers is clearly too political. We wouldn't like to nail our colours to the mast and say this is what we as a country are and believe in lest you upset a minority of window lickers. By similar thinking you should also teach as much guerrilla- and anarchist-based politics as democracy in any discussions about Government. And probably give equal lesson time for learning about Satanists as for learning about the baby Jee. What a bunch of cocks. So we shan't discuss that either.

No, after that brief introduction, covering several of the topics I will not be covering today, I shall move onto the small Saturday nag. Wouldn't it be nice if caravans (or anyone who chooses to travel at 10-20 mph below all speed limits) pulled over every once in a while and stopped wasting our lives? Or even just stopped flashing you when you legally overtake them as if you have just emasculated them by  shagging their wife and weeing in their favourite slippers? It's just whilst I know the speed limit is a limit and not a target, you'd think it'd be nice if they peeked in their wing mirrors from time to time. If you're reading this and you're one of them, the 35 car tailback behind you is not a bunch of like-minded people queueing up to read your hilarious real ale-based humorous bumper sticker. They're just people whose lives you are holding up.

Perhaps we could have a rule: If you're a caravan, you have to go round all roundabouts twice to allow people behind to overtake. Or maybe we could have enforced lay-bys. Or we could just be allowed to mount missiles to our bonnets like James Bond. I shall be honest, I haven't thought these policies through totally to the finish, but I think there's enough to form a working group. Maybe we could get Republic to come up with some ideas - they clearly have a lot of spare time on their hands.

Money For Nothing

Today we are going to talk economics. Not Keynesian, nowhere near that level, we're going down to the Daily Hate Mail level. There is a section of society that is disgustingly privileged. They earn disproportionate amounts of money in relation to society and probably to their talent. They do this in a very short time. They then retire early to their various chalets and villas around the world in their Ferraris and Astons funded by you and me, John and Jane Q. Taxpayer. What did they do for this money? It's often very hard to say. They get headhunted from rival firms for vast quantities and get paid enormous amounts of cash. If that firm goes under because of their underperformance, they then move on for another astonishing fee to earn yet more money. They hide most of their money away from the taxman, despite apparently being a proud constituent part of this country, and pay less to HMRC than Wee Jock Poo Pong McPlop, of Scottish loo cleaning fame. Every now and again for a bit of good publicity they do a little charity work which equates to the third Monday in December's pay, but we all suspect it's probably a tax break. Despite ultimately failing on a regular basis, Britain somehow keeps them employed.

You're thinking bankers aren't you? Nope. Perhaps you're thinking rock stars from the picture, but you'd be wrong again. On a side note, Dire Straits are possibly the best ever product of the UK. I just used them because the title of their 1988 Greatest Hits Album worked wonderfully for this evening's post. Anyway, I'm not actually talking about any of those lot. No, the introduction was a cunning draw, to get you full of the fervent 'let's string the bankers up' vitriol that we in Britain love so much. This evening's short (it's all relative) post is about footballers.

Examine the first paragraph again and have a think if Premiership footballers do not fall under every category I mentioned. There are a couple of major differences. Firstly, we apparently love footballers, but hate bankers. Footballers are great. Brilliant role models (as discussed here); cheating on wives, generally with the partners of their friends, gambling away millions, taking drugs and disrespecting every possible position of authority. And getting paid 4 times the national yearly wage every week for it. Luckily, they pump so much of it back into society. Yup, the mean streets of Liverpool, Manchester and London are so much better off for the money paid back (because it is back, the money all comes from them through tickets, shirts and tv deals) by the likes of Gerrard, Rooney and Cole. Oh sorry, my mistake, they didn't actually give any of it back really, did they? If not to their towns, at least to English football? Nope, just cruises, foreign cars, tattoos and fat old hookers (every little helps eh, Wayne?)

Forgive me for going off on my tangent, but talking about this lot leave a rather sour taste in my mouth. There are a couple of Premiership footballer group sex jokes in there somewhere but I think I'll rise above it. The second way they differ is that they didn't 'cause' the international recession of 2008-10 and onwards like the bankers did. Now on that one, you have me. I'm not going to go into the parts about how Governments could perhaps have been better prepared for the bad times (cf. Aesop's Fable 'The Ant and the Grasshopper'). My point is on the remunerative scales of bankers and footballers.

Let's just, for argument's sake, agree that they both fit in the first paragraph. That is, they both apparently are good, we can't do without them, but sometimes they are totally crap. Bankers seem to have at least worked some of this into their remuneration packages. You get a basic salary, and a bonus which is performance-related. Now some argue these bonuses are too short-termist, rewarding short term profit that may in the long run prove a terrible loss for the company. They have a point, but at least there is some kind of performance-related pay system. If you are rubbish, you get at most your basic with no bonus, and possibly the sack.

In football, you get bought for eleventy million pounds from one club by another (probably backed as a pet project by a rich foreigner these days). You sign a multi-year contract worth, let us say £60,000 a week. In this example, we only play for England A, or are a promising young prospect, so we get paid a pittance. Relatively speaking. If we get injured, we get £60,000 a week. If we smash 5 own goals past our goalkeeper to send us tumbling out of the multi-million pound earning Champions' League, we get £60,000 that week too.

Now I know we're talking about two terribly different businesses, but you must admit there are a lot of similarities. There are issues within the banking industry, but if nothing else, know that in this country we need a banking industry, and a strong one, as we need water and air. It was never more true than now with the industrial capacities of the emerging nations eclipsing our manufacturing or service sectors. For all the ills of the banking industry, the utterly morally corrupt football business in this country could at least learn to move towards balanced books by adopting one of their policies; performance-related pay. Then at least when England crash out in the quarter finals of the next tournament to Luxembourg, you know they only got a paltry £10,000 for that week. These small victories...