Archive for May, 2010

Murdoch digs in for final web battle

Posted in Media with tags , , on May 26, 2010 by Tom Leatherbarrow

Yesterday’s details which emerged about the introduction of paywalls for The Times and Sunday Times (£1 per day for The Times and £2 per day for the Sunday Times) in effect leaves two armed camps dug in facing each other ready for the final titanic battle. 

On our left we have the “if it is on the net, it has to be free” brigade who regard paywalls as an intrusion and believe the current newspaper business model is defunct.  On our right is the “internet news is theft” brigade who claim that the web is destroying journalism and we have all got to get used to paying for content.

What is certain is that the News International strategy is high risk.  I had been expecting some sort of limited paywall to be introduced, perhaps ring-fencing higher value areas of the publication, such as the comment section, but instead they have gone the whole hog and are looking to erect a paywall around the whole of both sites.

The million dollar question is: who will win?  Whilst I am loathe to bet against Murdoch I feel he is acting like King Canute here in trying to hold back the inevitable tide.  I don’t think that online will completely replace print, at least in the medium term, but I suspect the relationship will have to undergo profound change. 

What will that change look like?  It’s anybody’s guess but going forward online, with its continuous updates, will probably become the main driver of publications rather than just a digital version of the hard copy.  I would expect the best and least time sensitive writing to be then included in a weekly print version with a much smaller print run.  This time delay will make valuable comment and analysis much more important, with hard breaking ‘news’ likely to become a commodity product, available from multiple sources like the BBC, Reuters and Dow Jones. 

In short, the value will not be in telling me what the Prime Minister has said, but will be in telling me what the implications are of his words.  The best journalists may well become ‘must read’ brands of their own, possibly using their online comments as loss leaders to generate a following in order to sell books to their audiences, which is what already happens on sites such as The Huffington Post. 

This is nothing if not a radical departure, both for the newspaper industry and journalist working practices, and you can see why News International is digging in for a battle.  My fear for them is that the war is already lost.


If you want to speed up homebuying, reform conveyancing!

Posted in business with tags , , on May 25, 2010 by Tom Leatherbarrow

The news that the UK Coalition Government is to abandon sinking HIPs (that’s Home Information Packs for the uninitiated) will be welcomed by all  those wanting to sell their homes and the property industry in general. 

Originally conceived as a way of speeding up the homebuying process (homeowners had to have all manner of documentation ready in advance of getting an offer, including energy performance ratings and local searches) ultimately HIPs achieved little of what it set out to do.  In fact, a persuasive argument could be made that HIPs actually discouraged people from moving home at exactly the time when we should have been trying to refloat  the housing market.

To be fair, the previous Government correctly identified the problem, even if it ultimately came up with the wrong answer.  Moving home can be an interminably slow business, but I would argue this is more often down to conveyancing lawyers rather than homeowners not having their ducks in a row.  The Law Society many years ago, in a review of conveyancing practices, found that the adversarial nature of English law was responsible many of the delays.  In other words lawyers could not get it out of their minds that the other side were trying to pull a fast one when actually, all both vendor and buyer wanted to do was move and get on with their lives.

My own experience is a classic illustration.  We were selling a Victorian terrace in Bedfordshire many years ago and got a buyer on the first morning it was up for sale (oh the heady days of the property boom!).  Of course what should have been wrapped up in a matter of weeks dragged on as the buyer’s solicitor asked all many of extraordinary questions. 

It reached its nadir when my solicitor received a letter one morning expressing some concern that the roof of the property had been rebuilt at some point.  Could we provide details of the contractor who had completed the job and give guarantees about the quality of the materials used?  Bearing in mind that the roof had been replaced in the mid-1950s the answer was ‘no’ and ‘no’.

The French have an entirely different conveyancing system which avoids much of this unnecessary angst.  Under French law one solicitor acts for both parties, acting as an impartial referee during negotiations, suggesting compromises and solutions rather than just throwing up problems.

Of course such a system would halve total conveyancing fees overnight, which is precisely why it won’t happen over here.

How Much Better Can You Eat?

Posted in Media on May 24, 2010 by Tom Leatherbarrow

I naively offered the opinion many years ago that the investigations of the News of the World’s Mazher Mahmood, scourge of celebrities everywhere, would have a certain shelf-life. Surely, there would come a point when the modus operandi of Mazher and his cohorts would become so obvious to the ‘victims’ that he would be unable to continue operating his stings. Apparently not.

The weekend’s revelation that, to use Bernard Ingham’s happy phrase, a “semi-detached” member of the Royal Family was offering cash for access, demonstrates that Mazher is still the King of celebrity entrapment.

The really puzzling thing though, for me, is why celebrities keep putting themselves in this position. Is there not some sort of internal alarm bell that goes off when a gentleman of Middle Eastern or Asiatic origin offers them huge amounts of money in a hotel room in order to do something dodgy? Is it that all reason and common sense goes out of the window when people are offered piles of money?

There is a brilliant exchange from one of my favourite films, Chinatown, when private investigator Jake Gittes asks the already obscenely rich Noah Cross why he is bothering to drive down land prices by restricting water supplies in the Los Angeles valley in order to snap them up for a pittance. “Why are you doing it? How much better can you eat? What could you buy that you can’t already afford?” asks Gittes.

I’d like answers to some of those questions from Mazher’s victims.

The Ghost of Iain Macleod

Posted in economics on May 19, 2010 by Tom Leatherbarrow

The publication of the Bank of England’s quarterly inflation report was sobering reading yesterday. A 3.7% rise in inflation prompted the usual exchange of letters between the Chancellor and the Governor of the Bank. The fear must now be that interest rates, the traditional if blunt instrument way of controlling prices and spending in this country, will have to rise.

My view all along has been that the pump priming of the economy, with historically low interest rates and quantitative easing, was likely to see a return of inflation sooner or later which could lead to an interest rate rise. However, I thought that interest rates were more likely to rise in order to underpin UK Government bonds which are coming under increased pressure. Now I’m not so sure.

Certainly the minutes of the Monetary Policy Committee meeting will be very interesting reading in thirteen days time. Up until now the MPC has been voting as a solid block in favour of holding interest rates at historically low levels in order to help re-inflate the economy, but I wonder whether we will see anyone break rank in turn causing a domino effect on the MPC which could ultimately lead to an interest rate rise.

The danger of course is that in trying to control inflation and support Government bonds we reduce household consumption and send us back into recession by making us all pay more for our mortgages. This is what the late Iain Macleod called a stagflation situation.

I’ll let him describe it in his own words. Speaking in the House of Commons on November 17, 1965, Macleod, later to become Ted Heath’s first Chancellor before his untimely death after only a month in office, said: “We now have the worst of both worlds — not just inflation on the one side or stagnation [of the economy] on the other, but both of them together. We have a sort of ‘stagflation’ situation.”

PS: There was a very interesting interview with Nouriel Roubini the American economist which can be viewed HERE. Roubini’s view is that the crisis is not yet over but has metamorphosed from a private sector debt problem into a sovereign debt (ie. Government debt) problem directly due to the bailout of the banks.

The Age of Austerity

Posted in economics, Politics on May 18, 2010 by Tom Leatherbarrow

At some stage in the next week to ten days I expect George Osborne to emerge from No.11 Downing Street, looking even paler than he usually does, to announce that the nation’s finances are in even worse shape than he feared.

Deep down we all know it is bad, but it is still not clear what our new Coalition Government is going to do about it and, ahead of the late June Emergency Budget, mixed messages abound. I expressed some doubts in this blog during the Election campaign that Cameron & Co could squeeze efficiencies on the scale outlined from public services such as the NHS. I was also sceptical that capping top executive pay in the public sector would bring in more than a pittance. It appears that current estimates suggest such a cap would bring down the debt by a whopping £15 million next year. Yes, million not billion.

The International Monetary Fund (IMF) in its United Kingdom survey last year said this, and bear in mind that this was before the Greek crisis struck. “Should fiscal sustainability come into question, interest rates would rise despite monetary easing efforts, the ability of the government to provide support to the financial sector would be severely limited, and pressures on the currency could emerge. To limit such risks and increase resilience to shocks, there needs to be a credible commitment to reverse the deterioration of the fiscal position in the medium term.”

The key word here is ‘credible’. The international financial markets are looking for a robust plan to reduce UK debt. Tokenism will not cut it, we need clearly identified areas to reduce spending and increase revenue, without damaging the recovery (talk about balancing acts). My own view is that there is now a compelling argument to raise VAT as the UK has one of the lowest rates of VAT in Europe at 17.5% compared to 19% in Germany, 19.6% in France and 25% in Norway and Denmark.

Again however, Cameron, at the weekend, appeared to rule this out. Is there news management going on here? Deny a rise in VAT until the full state of our finances become clear and then say “we had no choice.” I suspect this is the case.

In the background lies the IMF and the secret fear of all Chancellors that they will be forced to do a Denis Healey and have to turn around at Heathrow Airport in full glare of the cameras for emergency meetings with them, as in 1976. Ultimately, it is far better we deal with this ourselves rather than let these slash and burn merchants in the door. Just ask the Greeks.

Triumph of the Wets

Posted in General Election on May 12, 2010 by Tom Leatherbarrow

The full implications of what David Cameron might be attempting may only now be dawning on our professional political classes. At 8pm last night John Prescott, the former Deputy Prime Minister, was sounding positively bullish, calling on Labour to mobilise for another General Election, confident in the fact that a Tory/LibDem coalition could not possibly last. By 8.30pm I suspect Labour was feeling far less sanguine when news began to leak of a fixed-term Parliament which could be a massive game changer.

Cameron and Clegg are now bound in political marriage, for better or worse. There will be no cutting and running here when times get tough or when the polls show that the Conservatives can get a majority in the House if they call another election.

It is possible that familiarity could lead to contempt, but it could also lead to a new long-standing Centrist coalition which could effectively lock the Labour Party out of power for a generation. Of course, in order to be centrist and moderate the Conservative Party will have to move to the centre which brings me to my second point.

Michael Heseltine on BBC News 24 last night used a term which I have not heard in decades, namely ‘One Nation Conservatism’. I suspect this is where Cameron has wanted to be all along, slightly right of centre, following in the footsteps of Rab Butler, Alec Douglas Home, Ian Macleod and, dare I say it, Ted Heath (pictured above) – a political position which dominated the 1950s and 60s for the Conservatives. It has taken political expediency and a lust for power to convince his party to take its first steps to follow him.

One Nation Conservatism is the left wing of the Conservative Party, standing for fairness and consensus in society which Thatcher famously denied existed (“there’s no such thing as society, only individuals”). She famously labeled them “wets”, the only Prime Minister in living memory to give such a derogatory term to members of her own party.

Cameron is now in position to banish, within his own party and crucially in the minds of the electorate the spectre of Thatcherism, confining it to its rightful place in the history of Conservatism as an aberration fuelled by circumstance and three General Election victories brought on by militant trade unionism (1979), a horrendously split Labour Party and a war (1983) and the combination of all three and an artificial economic boom for her last victory (1987).

In many ways Labour was right, the Conservative Party hasn’t changed. The nightmare for them is that Cameron is about to.

Press fails to find spirit of new politics

Posted in General Election on May 10, 2010 by Tom Leatherbarrow

What a fascinating weekend of political manoeuvring despite the fact that we have no idea what is going on within the confines of the Cabinet Office.

Paddy Ashdown being interviewed by Andrew Marr on Sunday morning said he was struck by the new tone that politics has taken on, since Thursday, namely respectful, a willingness to compromise and talk of the ‘national interest’ above party. Michael Gove on the same programme said that he would be willing to give up his Cabinet portfolio (Education) for a LibDem appointment, if asked!

Not everybody feels that way though. Simon Jenkins writing in the Guardian warned voters that this sort of grubby, closed door dealing is what you get with Proportional Representation. I like Jenkins’ stuff but I think he is wrong here. All indications coming from both sides is that substantive discussions of policy in order to find a consensus are taking place, such as how can we find a compromise position on Europe, between the Tory anti-Europe stance and the pro-Europe LibDems. At the moment this does not appear to be just a carving up of Cabinet positions (“You can have the Foreign Office if we can have the DTI”).

Why don’t we recognise consensus building when we see it? Well, it’s been a long time since anybody tried (February 1974 in fact) and a very long time since anyone succeeded. In fact it took the threat of imminent invasion by Nazi Germany to get the last cross-party Government off the ground in this country in 1940.

What is interesting is that the traditional media has so far failed to pick up on this new tone. At opposite ends of the political spectrum both the Guardian and the Telegraph have been stuck in traditional territory with the Guardian still desperately trying to whip up a Lib/Lab deal and warning of knives in the back for Clegg & Co. Meanwhile, the Telegraph commentators barely able to hide their contempt for having to deal with the Liberals.

The intriguing question is whether, if a deal is struck, the newspapers will be forced to temper their scorn for the other side. If they don’t they certainly risk alienating their readerships, because my gut feeling is that the public wants consensus and grown-up politics, not slanging matches and bickering, even if the papers don’t.