Westminster: February 2009 Archives

He thinks the pension deficit is a reason to privatise the company and a sign of incompetence: actually the proceeds from the massive pensions holiday Royal Mail took was just slushed straight into the Treasury. So they gave Government their money and weakened their business? Of course Ministers can't pay it back! For contrast, the banks threw their own money away, but they then get bailed out with ours.

What's more, the £3.4bn deficit, built up thanks purely and directly to Government mismanagement, is less than 15% of the RBS one-year loss announced today. It's not a bail-out they should be doing, they should just be paying back their debts.

The idea that an entirely private company will become more profitable to us, the taxpayers, if a private company takes a stake, is profoundly absurd as well as a category mistake. The private company will demand a rate of return on their investment which can only be disproportionate, and the costs will be borne by staff and users. 

It's a category mistake because it misunderstands what the Royal Mail is for, as noted here before. We don't expect it to make a profit. We expect it to deliver our mail, which is rightly regarded as a vital public service even by those of us who know how the internet works, and we'd like it to do it cheaply for us. 

We value the staff, we value the universality, and even we anti-monarchists think Royal Mail sounds better than Consignia. We don't expect the NHS or the police force to turn a nifty profit, and despite the deployment of Mandelson's famed dark arts, we don't expect Royal Mail to do so either.

The political logic behind this is incomprehensible. I'd love to see the polling numbers, but I'm certain it's driven entirely by ideological fervour and hatred of the public sector, not some response to public opinion. I couldn't be more angry - I wish, yet again, that there was some way I could cancel my subscription to the Westminster cavalcade of horrors.

And where's the Westminster opposition on this? There's some on the benches behind where Peter Mandelson would be standing were he even accountable to a vaguely democratic chamber, and there's the odd Tory with principles on the issue. However, no Labour rebellion can succeed, because Mandelson can, if he needs to, "rely on Conservative and Liberal Democrat votes to get it through". 

The Tories are no surprise on this, although it helps illustrate the extent to which they've not changed one bit. But the Liberals? While Labour wants to start with a 30% sell-off, they actually proposed starting at 49% last year. I wonder if all those poor local residents who worried about losing their post office know that those strange but friendly people in yellow tights and hats with the petitions who're trying to help are, in their day jobs, plotting the privatisation and certain demise of the whole enterprise, seven years before its five hundredth anniversary?

Such a question may be more complicated, for sure, but the outlines seem clear. Banks should provide a safe place for depositors to put their money, and that act should be rewarded. The first of those objectives has only been met over the last year because of government intervention, and the latter is hardly true now interest rates have nearly reached Japanese-style rock bottom.

They should also lend to responsible businesses, enabling them to provide appropriate jobs, products and services, and to responsible individuals, helping them manage their lives better. Instead they used over-leveraged deposits to buy, repackage and resell speculative absurdities, and now they're hardly lending to anyone despite the massive brown envelopes they've received on a regular basis since September 2007.

Clearly, these simple objectives are not met by the existing system, despite the public props under it. Nor were they even properly met in the pre-crash supposedly happy days when only the prescient (yes, Nouriel Roubini has a blog), the permanently pessimistic and the ideologically opposed foresaw any problems coming.

So what should we do instead? The clearest progressive alternative would instead see Government backing individuals, not the banks they've borrowed from, taking shares in people's houses to protect them from repossession and so on. The Treasury should be directly reducing the risks to sensible customers, not hoping the bailout will trickle down to borrowers and depositors.

The rest of the next multi-billion tranche of money destined for the bottomless pit in the city could then be diverted to capitalising a series of new regional banks, and perhaps other specialist financial institutions. Their constitutions could resemble those of the old trustee savings banks, the loss of which has been bemoaned here before. Others could be set up as mutuals, credit unions, et cetera.

These new institutions could be established to put their communities' interests first, be required to lend with a due diligence eye on the long term, to focus on true sustainability, and they could be obliged to account for themselves transparently. Bonuses could be paid for genuine successes and responsible innovations, rather than automatically to the boards who oversee failure.

Before anyone suggests this is mere nationalisation fervour, it would also allow a proper application of market principles. Shares in these new banks could be given per-capita to local residents, a minority stake initially, then the rest could be issued on the same basis. Some of the old banks would be likely to fail, just as they are already, but their staff and their customers would have alternatives to turn to for work, for loans, and for savings accounts. 

The primary losers would be the existing banks' shareholders, and there would be pain to get through, but at least it would ensure that that suffering was for a purpose. The bailout is hardly meeting their needs right now anyway, given that we appear to be trying to pour water into a series of sieves to fill them up.

We need a financial system, true, but it doesn't have to be a replica of the irresponsible system praised by all the other parties in the good times. With this much capital being expended, we could instead lay the ground for a new set of players. Good banks, in short. Doesn't that sound better than taxpayers paying for a "bad bank" and assuming the risk that properly belongs to shareholders?

"Alex Salmond's predictions are simply wrong. Even with optimistic assumptions about future North Sea oil production, and even if Scotland was allocated all of that production, an independent Scotland would be likely to be a net importer of oil by 2015 or 2016. By that stage, given the global decline in output which has already begun, we will have to buy oil on the open market for two or three times the current price. It's completely fraudulent to suggest that Scotland can just live off its oil wealth now."

An even more pessimistic prognosis was provided by Keith Kohl of Energy & Capital in 2007, who observed that "the expected rate of decline could virtually eliminate oil production in the North Sea over the next five years!", just after the next Scottish election.

The argument about whose oil it is, or whose oil it was, is therefore irrelevant as well as dull. Whether we become independent or not, our future lies in those abundant renewables Scotland has been blessed with. The same would have been true by now even if devolution had been established in the 1970s.

Every minute the SNP spend attacking Whitehall over oil is a waste of time that could be spent making ourselves independent from oil, as is every minute the Labour Party spends defending itself. Get over it and get on with the job.