Meanwhile in Scotland…

Debating chamber in Scottish Parliament building
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The Scottish Parliament

…the march towards independence continues.

The British Government today published a bill to transfer significant tax-raising powers to the Scottish Government. (This time, note the lack of apostrophes around the word “Government”.)

Basically, one third of the grant that Scotland receives from the British government will be removed, but the Scottish government will be given the power to raise part of Scottish income tax itself. In other words, around one third of the tax raising powers for Scotland are being transferred to the Scottish Parliament.

The Scottish government will also, for the first time, have the right to borrow a significant amount of money (£2.7 billion) in its own right.

Along with that, other less significant powers like control over drink driving laws and speed limits, landfill tax and stamp duty, will be transferred.

And finally, the Scottish Government will henceforth be officially called exactly that – rather than the current “Scottish Executive”.

It all adds up to a big step towards full Scottish independence.

Of course, the SNP were not satisfied, calling it a “missed opportunity”. But the Scottish Labour, Liberal Democrat and Conservative parties all are in favour.

Conservatives have traditionally been Unionists, opposed to both Welsh and Scottish independence or even devolution. In the case of Wales, I judge that traditional Conservative approach to be absolutely right – I do not believe there is any real appetite in Wales for independence, and the union between England and Wales seems very comfortable and accepted by both sides. The two countries are heavily intertwined, with a common legal system and very great cultural overlap.

In the case of Scotland, though, I believe it is time for Conservatives to re-assess. Scottish independence would, I believe, really work, for both Scotland and England. Of course the two countries would remain allies and friendly, just as the Czech Republic and Slovakia have following their separation.

Scotland already has its own legal system. It has a Government worthy of the name, and a really significant pro-independence Party. And the cultural and political assumptions of the Scottish people are very different from those of the English.

Scotland and England would both be happier apart, in my judgement.

And it will not have escaped the attention of Conservatives everywhere that removal of the Scottish Labour bloc in the British Parliament would be a setback from which English Labour might never recover.

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The Benefits of Devolution for Wales – Don’t Make Me Laugh

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The Welsh Assembly – Home of Second Rate Would-be Ministers

The Labour-controlled Welsh Assembly “Government” has announced some proposals on tuition fees for university.

While students in England will pay increased fees, of £6,000 or £9,000, “Welsh domiciled” students will continue to pay around £3,000. The difference will be met by the Welsh “Government”.

There are two problems with this, neither of which appear to have occurred to the Tory opposition in the Assembly.

The first is: how do you define a “Welsh-domiciled” student? If my daughter goes to live in a house in Wales for six weeks before starting at an English University, will she get the subsidy? If I move my family just over the Welsh border, so that we are all domiciled in Wales, will she qualify then?

Presumably they will have to introduce some kind of “minimum period” of residency to qualify – say a year.

So if a German citizen goes to live in Wales for a year, and then goes on to Oxford University, he’ll get the subsidy.

In short, a lot of this money is likely to go to people who are not Welsh at all, many of them not studying in Wales either.

The second problem is more serious – and very, very bad for Welsh Universities. The Welsh government is planning to fund the subsidy by “top slicing” the teaching grant that goes to Welsh Universities.

In other words, they plan on taking money from Welsh Universities to pay for Welsh students – wherever they study. And you can bet that most of them choose to study in English Universities.

In effect, then, the subsidy means taking money away from Welsh Universities and giving most of it to Welsh students studying at English Universities.

Leighton Andrews, the Welsh Education “Minister” said:

This is a ‘Made in Wales’ policy which demonstrates the benefits of devolution.

Really, let’s give Scotland its independence but abolish the ridiculous Welsh Assembly. You know it makes sense.

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Andrew Lansley’s Socialist Nudges

The Coalition has come up with its latest Nanny State proposal.

They will give schoolchildren shopping vouchers if they walk to school, rather than taking other less environmentally-friendly transport.

The proposals will apparently be part of a Health White Paper, to be announced tomorrow.

Every school in the country will be offered access to technology which would allow children to use swipe cards to track their journeys, so that points can be swapped for consumer rewards.

This is all part of the government’s famous “nudge theory” approach. Apparently it is completely different from Labour’s Nanny State approach. Labour would lecture people to change their behaviour. The Conservatives will bribe people to change their behaviour – sorry

harness the latest insights into behavioural science … nudging individuals in the right direction and encouraging positive choices

as Andrew Lansley, the Health Secretary, put it.

Whichever way you put it, it’s more Socialist than the USSR ever was.

A recent immigrant from the old USSR shocked me a little last year by saying in passing “of course, the government here is much more powerful than it is in my country”. That was in a completely different context – but it applies here too. The government of the USSR would never have dreamed of interfering in people’s lives to the extent of telling them what transport method they “ought” to take to get to school.

Ordinary people are sick of the government telling them what they should or shouldn’t do – even in matters that are none of the government’s business. And if they want the support of Conservative Party members like me, to tramp the streets during election campaigns, they need to change their approach. I for one have no intention of lending my efforts (not to mention the money from my Conservative Party membership) to keep a government in power that increasingly looks like New Blue Labour.

There’s a simple response that we all ought to give Mr Lansley for this nonsense: MIND YOUR OWN F***ING BUSINESS.

It’s Enough to Drive You to Drink Part 2

Murdo Fraser MSP
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Murdo Fraser, Deputy Leader of the Scottish Tories

- Opposed Minimum Alcohol Prices in the Scottish Parliament

I blogged before about daft proposals from the SNP-led Scottish government for minimum prices for alcohol.

The proposals were subsequently defeated in the Scottish Parliament. So they won’t be happening in Scotland.

But here in England it seems the Coalition government has no more sense than the SNP.

The Daily Telegraph reckons they are about to produce similar proposals for England.

Amazingly, the Scottish Tories led the opposition to the proposals in Scotland. Here is the Telegraph’s report on the debate in the Scottish parliament:

“Opposition from the Conservatives and Lib Dems has been bolstered by contributions from the Labour benches highly sceptical of the SNP’s policy of blanket minimum pricing,” said Murdo Fraser, Scottish Tory deputy leader.

Mr Fraser opened the debate, arguing: “A policy of minimum pricing for alcohol is wrong because it will penalise responsible drinkers, may well be illegal under EU rules and will cost jobs in our vital spirits industry.”


Apart from being fatuous and very unlikely to have any positive impact, the proposals are also morally wrong and indeed un-Conservative. Not to mention illiberal.

You might think Mr Cameron and his colleagues had more important things to worry about anyway. Presumably tackling a record public sector deficit to avoid financial meltdown, electoral reform and a war in Afghanistan are simply not enough to keep such amazingly heroic leaders occupied.

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Nice Work if You Can Get It

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The Local Government Association – Destination of Some of Your Taxes

John Ransford, the Chief Executive of the Local Government Association, has agreed to take a pay cut.

This followed pressure from the government and from local authorities who belong to the LGA. (30 council leaders wrote to a national newspaper criticising his pay.)

Next year, Mr Ransford will be paid less than £100,000, with no pension contributions!

Last year, he got £245,000 basic and £57,000 of pension contributions.

The LGA is apparently pushing through cuts of 30 percent in staffing costs. Which is lucky, because last year they spent more than £10 million on staff.

So who exactly are the LGA? Here is their own description:

In 1997, local government created the Local Government Association to be its voice in the national arena. Based in Westminster, close to the Houses of Parliament and Whitehall, we lobby and campaign for changes in policy, legislation and funding on behalf of our member councils and the people and communities they serve.

Baroness Eaton, the Chairman of the LGA, said

We are determined to represent our sector robustly, effectively and at a reasonable cost to councils at a time of immense financial pressures.

The LGA is one arm of government spending taxpayers’ money to lobby on behalf of another arm of government to a third arm of government. (It’s not alone, of course – there are many such bodies in the public sector.)

Just to really make your blood boil, here are some extracts from the comments that Mr Ransford makes, with blithe lack of self-awareness, in the LGA’s Annual Report for 2010:

‘Doing more for less’ has become the mantra by which the public sector deals with the substantial financial challenges facing our economy and society. For too long local government has been perceived as part of the problem, not the solution. In the past year, the LGA Group has been turning that image around.

…the LGA has been promoting, demonstrating and lobbying on the sustained excellence, efficiency and flexibility of councils and other local government organisations. As a result, there has been greater confidence in the sector and the general public, government and national institutions have been taking notice…

…Our new branding, on display at the annual conference, helps to demonstrate our contribution at national level.

Local councils could make a good start on the cuts they are being forced to make by withdrawing from the LGA.

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Lord Turner’s Foot and Mouth Disease

Main entrance - 25 The North Colonnade (Canary...
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The Financial Services Authority – Abolition Overdue 

Lord Turner, the Chairman of the discredited and soon-to-be-neutered Financial Services Authority, it seems, never opens his mouth without putting his foot in it.

His latest crass remarks are that free banking damages bank customers.

That’s right, he actually thinks we would all be better off if the banks took some cash off us every month to run our accounts.

Here’s his reasoning:

If banks were able to charge, consumers might be better able to understand and compare, so providing a greater incentive for banks to compete.

Eh? If banks were able to charge? But they already are able to charge. All the leading banks offer chargeable accounts that offer extras on top of what you get with a standard current account.

Leaving that silly slip aside, though, let’s suppose that banks did charge for current accounts.

At the moment the costs of running current accounts are funded by:

– the fact that they pay little or no interest
– cross-subsidy from other services, which are sold by the banks to current account customers
– charges to customers who go into unauthorised overdraft.

The FSA, of course, wanted to protect those unauthorised borrowers by stopping the large fees they get charged, until the courts stopped them by ruling the charges were not illegal.

So which other part does Lord Turner want to stop? The “little or no interest” part? That would benefit people with lots of money in the bank at the expense of people with a small balance.

Or maybe he wants to stop the cross-subsidy. Which would presumably mean a very detailed audit of the bank’s costs to ensure it wasn’t naughtily moving costs from the current accounts department to other departments. A moment’s thought, of course, would tell Lord Turner that any such separation of costs is completely artificial anyway. How do you apportion the costs of running a bank branch, for example, between the current accounts and the other services that it sells?

But no doubt Lord Turner could attempt to write some rules for doing it, given a few thousand civil servants and lots (and lots…and lots) of time.

The potential benefit of having charges that “customers can understand and compare” just might lead to increased competition, which just might…er…what? Lead to reductions in those charges? Which are currently nil?

More fatuous remarks came from Hector Sants, the Chief Executive of the FSA, who attacked the Bank of England for being “slow on the uptake” during the financial crisis.

Probably a fair comment. Except that the FSA itself was even slower, being apparently fast asleep while the crisis brewed and then broke. Indeed, that is why the Tories promised to take its banking supervision powers away and give them to the Bank of England. Roll on.

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The Irish Government Must Not Make the Mistakes Brown Made in Britain

A present from Irish taxpayers

The Irish government is in talks to obtain a loan of up to 90 billion Euros from the IMF and the EU. Britain will be contributing £7 billion of this.

When the current British government took office, it made some immediate spending cuts and tax increases amounting to £6 billion. So in a sense all the good work so far in tackling Britain’s own huge deficit has been undone at a stroke.

John Redwood and others have argued that this is not our problem, and we shouldn’t be helping out with these loans.

The government says it hopes to get the loan paid back in due course by the Irish. And I have no reason to doubt that. Ireland is, despite everything, very far from being a basket case, and the promises and contracts made by the Irish government can be relied upon more than most. Therefore lending that £7 billion is not the same as spending it.

Our £7 billion will of course be borrowed from creditors of our own. The British government is simply lending its AAA credit rating to the Irish – acting rather like a parent who acts as guarantor for their child’s mortgage. We will get our money back, and therefore be able to repay our own creditors in turn.

However, that is not really the point. Wolfgang Schauble, Germany’s Finance Minister, let the cat out of the bag by saying

We are not just defending a member state but our common currency.

This Irish deal is not about saving Ireland. It is about saving the Euro. And that, of course, is why John Redwood is so much against it.

The main losers in this deal, obviously, are Irish taxpayers who will ultimately foot the bill for all this borrowing. They should be very angry this morning.

To my mind, what is really bad about this deal is not that it involves Britain in supporting the Euro. What is bad is that it also may be about subsidising the owners of the Irish banks – among them our own basket case bank, Royal Bank of Scotland.

We need to be clear about the difference between insolvency and lack of liquidity. Insolvency means your liabilities exceed your assets – effectively your business has negative capital. If your business is insolvent, then its shares are worthless.

Illiquidity means you can’t find the cash to keep your operations going – even though you may have assets that are easily enough to cover all your liabilities. In that case, if your company can obtain temporary loans to keep it going, it may very well have real value.

If the Irish banks are insolvent, and it appears that they are, then the money Irish taxpayers provide to those banks is a subsidy to the banks’ owners, not a loan or an investment. The true value of those banks’ shares is, right now, nil. But if they are propped up and the shareholders don’t lose everything, then the value of the shares becomes not nil – and the value of the shares will have come directly from the government / taxpayer support.

That represents a real cost to Irish taxpayers. They will be paying the cost in full – all 90 billion Euros of it.

What about the shareholders in the Irish banks, never mind the bondholders? The details of the bailout are not yet clear. But one thing that is crystal clear to me is that if the banks are insolvent then the shareholders, at least, should lose every penny of their investments as part of the deal.

If the Irish banks are insolvent, in other words their liabilities exceed their assets, then the first losses should fall on the shareholders. That’s how share markets work. (I’ve been a victim of that myself in a small way, having owned a small shareholding in a company that went bust – I lost the lot, which is fair enough and a risk you should accept if you buy shares.)

If the Irish bank shareholders don’t lose their investments, then this deal won’t be a deal to save the Irish banks. It will in fact be a direct subsidy from the Irish taxpayers to the shareholders in the Irish banks.

All the world’s politicians are scared witless by the idea of banks going bust. They should try and learn the difference between allowing a bank to go bust as in cease operations, and allowing the bank shareholders to lose everything.

The same kind of thing happened in Britain, after all. Royal Bank of Scotland was propped up by taxpayers – but the shareholders still own 16 percent of it. Perhaps they would argue that their company was lacking liquidity rather than insolvent. In that case, the government should have provided liquidity, through the Bank of England, not almost fully nationalised the bank.

The public probably think that the government getting shares in RBS was the least taxpayers could expect in exchange for the support the government gave. In fact it was a bad deal because shareholders stand in the queue behind lenders in terms of calls on a company’s assets. If RBS was insolvent, it should have been fully 100 percent nationalised and the shareholders should have lost the lot.

The right course of action is clear, depending on the circumstances in each bank:

  • If the bank is solvent but is having trouble borrowing the money to fund its operations, then the relevant central bank should provide the funds to keep it afloat in its capacity as lender of last resort.
  • If the bank is insolvent then a deal should be done in which the bank shareholders lose everything but the bank stays in operation at least temporarily so that depositors are protected.

Let’s hope the Irish are more canny than Gordon Brown and Alistair Darling were in Britain.