Archive for October, 2010

Airport sale would be a good price but a bad deal

Posted in business with tags , , on October 28, 2010 by Tom Leatherbarrow

The news that Birmingham City Council has a break clause in its airport shareholding and can sell in another two years appears to have set pulses racing across the West Midlands. What should we do with a cool £67 million windfall?

The Council, which has been described as ‘cash-strapped’, denies that it is looking to sell its shareholding, but it is only human to begin to mentally spend the cash. I’m sure there are plenty of roads, buildings and other infrastructure projects which could use the money.

However, we need to think long-term here and that means the Council should resist temptation and hold onto its shareholding. I mentioned in yesterday’s blog how this country had lost control of its ability to build its own nuclear power stations when the previous Government sold its shareholding in British Energy for £4 billion. Was it a bad price? No, but it wasn’t a good deal either because we now have to rely on others to help us meet our target of a four-fold increase in nuclear capacity.

Similarly, the development of the airport, in particular increasing the number of scheduled flights to the United States and the Middle East, will potentially bring riches to the region way beyond the price of the shareholding. The Council must remain in a position to influence that development.

I’ll give you one more reason why the Council shouldn’t sell. I know none of us like to be constantly compared with Manchester, but the growth of Manchester Airport Group is one of the outstanding aviation success stories of the last two decades. It is no coincidence that it remains publicly owned by a consortium of the ten local authorities of Greater Manchester.

Bonjour Monsieur Le President, avez vous un spare nuclear power station?

Posted in business, Politics with tags , , , , , on October 27, 2010 by Tom Leatherbarrow

I attended a fascinating speech last week by Professor David Mackay, Chief Scientific Adviser to the Department of Energy and Climate Change (DECC), who talked about how this country will actually meet its carbon reduction commitments, namely an 80 per cent reduction on 1990 levels by 2050. That’s right, not just another target, but how we might actually do it.

Those who are interested should go to the DECC website and tap in ‘Pathway Alpha calculator’ into the site’s search engine and take a look at this marvel of sustainable thinking in action, which details how much nuclear power, offshore wind, biomass, solar and other technologies we are going to need. Those clever chaps at DECC will even allow you to play with the calculations, so if you decide on moral grounds that nuclear power is not for you then it will calculate how much extra solar and wave power we need to compensate.

Anyway, Pathway Alpha is derived from three basic principles, namely reduced demand, greater energy efficiency and energy security. There was nothing Professor Mackay said which I could really disagree with, but it did strike me that in placing so much emphasis on nuclear power to help generate more electricity we will be relying on foreign countries to build our nuclear power stations for us which, of course, does little for our energy security.

How did we get ourselves into this mess? Well, in fairness we are not alone as only the French and Japanese know how to build nuclear reactors nowadays. That’s assuming Iran and North Korea haven’t stumbled upon the secret in recent weeks.

We, of course, did have the capability to build our own nuclear power stations, but sold off British Energy to the French company EDF three years ago. If anything highlights the total lack of strategic planning in British energy policy over the last few decades surely this is it.

We didn’t even get a binding commitment to help us build our own nuclear reactors when we made the sale. I suspect our future Prime Ministers will be spending a lot of time sweet talking the French President in years to come.

That sound you can hear is a script being torn up!

Posted in economics with tags , , , on October 26, 2010 by Tom Leatherbarrow

Today’s ONS statistics which detail a better than expected 0.8 per cent growth in the UK economy during July, August and September only confirms I suspect what most of us in the private sector have been quietly thinking for some time, namely “things are going quite well aren’t they?”

I’ve had chance to talk to a number of companies in the manufacturing sector (traditionally the poor relation of the British economy behind the financial and service sectors) in the last few weeks and the message has been very positive. Strong order book, good sales pipeline, nobody is getting ahead of themselves, but almost everyone is feeling good about their prospects. All this is confirmed by the ONS today which shows industrial production grew by 0.6 per cent in the third quarter. Now if manufacturing is doing well we must be doing something right!

Of course the elephant in the room is the potential impact of the Comprehensive Spending Review. As a subcontract manufacturer said to me last week “we’re doing well, but it’s fragile”. Like everyone else he is hoping that George’s cost cutting does not damage this upturn.

One last point and it is a topic I am unashamedly returning to, namely the fact that we could talk ourselves into another dip. The media has a negative news bias and I suspect many prepared doom and gloom scripts from correspondents standing outside the Treasury are being ripped up as I write this. Let’s hope they have to keep on ripping in the months ahead!

In praise of … the British Legal System

Posted in Sport with tags , , on October 15, 2010 by Tom Leatherbarrow

Those that think the proceedings of the British legal system are all about grown men wearing funny clothes and wigs were proven terribly wrong yesterday. In a hastily arranged hearing to dismiss the temporary restraining order preventing the sale of Liverpool Football Club, placed on it by the Dallas District Court by its American owners following a decision on Wednesday by the High Court in London, the full force of the British legal system was brought to bear.

The proceedings started slowly with Richard Snowden QC, acting on behalf of RBS. “The Texas court appears to have been told remarkably little about yesterday’s verdict. This is the most outrageous abuse of process.”

Oh Richard, you’re good but you’ve got a lot to learn. Make way for the real star of the show, Lord Grabiner QC (described by Chambers and Partners as “startling talented … an incomparable lawyer of undeniable star presence”).

Grabbo, as he is destined to be known by the KOP, tore into the American owners with the sort of panache not seen on these shores since David Niven passed away.

There was irony: “They want second bite of cherry and if it wasn’t so serious, it would be a joke” he started.

There was sarcasm when describing the Dallas court as: “that world famous jurisdiction.”

There was anger: “It is a grotesque parody, preposterous, unfair, unjust. They are incorrigible.”

Wait, there’s more: “Abusive, vexatious, and oppressive … a grotesque parody of the truth.’

It was left to Mr Justice Floyd however to apply the coup de grace. In words which are destined to adorn a banner on the KOP this weekend for the Merseyside Derby, he declared, with the air of a man who has not undergone the finest legal training in the world only to be frustrated by colonials, “This case has nothing to do with Texas.”

Well said Sir!

A Belated Blog on Child Benefit

Posted in Politics with tags , , on October 12, 2010 by Tom Leatherbarrow

I have only myself to blame for not being up to speed and offering the blogosphere my thoughts on the child benefit fiasco that was unveiled by the Tories last week in Birmingham.  Unfortunately, holidays and yet another bug passed to me by my ever generous 15 month-old son left me unable to get to a computer.

As an aside, what a fantastic advert for Birmingham the whole thing was.  I tuned in one evening to the sight Quentin Letts of the Daily Mail being interviewed by the BBC alongside a Venetian-looking canal, bathed in autumn sunshine, with a jazz band clearly audible in the background!

 Anyway, onto more mundane matters, namely child benefit.  The Government has been accused of being unfair, which is probably true, but it is interesting to try and work out how it got itself into this mess.

The problem with making cuts to child benefit is that the easiest method to do it is via the PAYE system, but the fairest method is to means-test. 

The problem with means-testing is that it involves calculating a combined husband and wife ‘household’ income which cannot be processed through the current PAYE system, which only takes into account individual income.  To properly means-test the Inland Revenue would have to send us all a form, which we would then send back and a calculation would be made upon which our child benefit would be paid. 

However, as we have found with tax credits, circumstances change in that individuals get pay rises or lose their jobs, babies are born, people fall ill or are injured at work and on and on.  This means that on top of the workload to calculate millions of child benefit tax codes, there would also need to be a constant revision of the codes which takes manpower, usually in the form of civil servants and large call centres.

My gut feeling is that Dave and his cronies sat around and came up with this plan but then had to work out how to make it work.  At some point somebody will have pointed out that to means-test would mean hiring thousands of public sector workers which would leave all but a small percentage of the actual saving intact. 

This won’t be the last time the Government comes up against this sort of obstacle.  Cameron has already talked about the possibility of thousands of public sector jobs being lost as we try and rebalance the deficit.  However, those salaries will not flow straight down to the Treasury’s bottom line.  As Sir John Gieve, former deputy governor of the Bank of England, pointed out before the General Election, job losses have to be paid for by unemployment benefit, retraining, increases in other benefits, not to mention beefing up Job Centre Plus.

The Autumn Spending Review may be brutal, we can only hope that the Government has identified real savings not paper ones and it won’t have to come back for a second bite when it finds a few months down the line that it hasn’t saved enough first time around.