November 25 2008



Having bailed out the banks with large dollops of taxpayers' cash, the government is coming under pressure to make them lend us some of our money.
Up to now the government's line has been that they have no intention of running the banks, they just want to tell them what to do.
The original spin was that, in exchange for all his dosh, the government had extracted a promise from the banks that they would maintain lending to small businesses and home buyers at 2007 levels.
When it was pointed out that lending at 2007 levels was what had caused the problem in the first place, this absurd claim was quietly dropped.
Now there is talk that in order to free up the credit system the banks will have to be fully nationalised.
Even the Governor of the Bank of England has hinted that the banks might be forced to lend.
All this assumes that the banking crisis has been fixed.
As the recent troubles at Citigroup indicate, this is far from being the case.
The banks may be out of intensive care but they are in no fit condition to resume normal service.
For one thing, a return to the excessive leverage that led to the credit binge is simply out of the question.
Secondly, even if the banks had the cash to lend, nobody in their right mind would want to take out a mortgage to buy a house that is predicted to lose 15% of its value over the next twelve months.
Of course it suits politicians to heap the blame on the banks in order to direct attention away from the fact that government failure to properly regulate the credit markets also played a major part in the debacle.
And, if the origins of the fiasco can be laid at the door of the sub-prime crisis in the USA, ministers can escape with their reputations unscathed.
As Evan Davies said on the Today programme this morning: banks make their profits from lending money so there must either be some good reason for their reluctance to lend (lack of money, too risky, lack of borrowers) or they are just stupid.
Take your pick!

The tragic case of Baby P has brought forward the usual crop of excuses and special pleading.
One of the arguments most used is that the educational outcomes for children taken into care is much worse than those who are brought up in their natural families.
The figures I heard quoted on the BBC was that 16% of children in care leave school with no qualifications whatsoever, compared to just 1% for the rest.
This is a false comparison because the latter group contains all those normal families that do not attract the attention of social services while the former, by definition, does not.
A much better comparison would be between those children on the at-risk register who are taken into care and those who aren't.


Having come to live in Wales in 1966 and for the next 14 years endured comments like: "If England don't improve, we're going to drop them from the fixture list", I have to dig deep into my well of charitable instincts to feel sorry for the Welsh in any matter concerning rugby.
In any case, after Saturday's debacle at Twickers, you might think I would be fully occupied feeling sorry for myself.
However, despite putting up a good fight, compared to England's abject surrender, I think Wales had much the worse of it, because they had to listen to the incessant witterings of the dreadful Brian Moore.
Thank goodness, England's games are on Sky which is a Moore-free zone.
Whoever in the BBC thought it was a good idea to let 'Motormouth' Moore loose on our screens?
The same person, presumably, who thinks Jonathan Ross's puerile 'jokes' are cutting edge humour worth £6 million a year.
Saturday's disaster is even harder to bear because the England captain was my fellow Cumbrian Steve Borthwick, who I believe may be the first from my native county to lead his country into battle.
Sadly, while Borthwick is undoubtedly a nice fellow and a decent second row forward, he lacks the iron in his soul that distinguished the forwards - mainly miners and farmers - who I encountered in my youth.
It's tough up north and the story was that these fellows chewed nails and spit rust.
It is also very cold in the winter to a degree that people living in tropical Pembrokeshire would find difficult to appreciate.
As my grandmother used to say: "I've broken the ice on the bath, Michael, you'd better get in before it freezes over again".
And I was a soft three quarter.
I suspect that Borthwick, who was born 40 years after me, was probably brought up in a house with central heating and glass in the windows.
Not the ideal preparation for facing those teak-tough fellows from the southern hemisphere.


How I jumped for joy when I heard that Alastair Darling had reduced VAT from 17.5% to 15% bringing down the price of a bottle of the £3.99 to £3.87 - buy 33, get one free - I said to myself, drawing on the expertise in mental arithmetic acquired under the tutelage of the the formidable Fanny Tate.
Unfortunately, almost in the next breath, the Chancellor Alastair Darling had deprived me of the chance to do my bit for the economy by hiking the excise duty on wine, petrol and fags to compensate for the reduction in VAT which I was so looking forward to spending in the shops.
There has been a lot of tosh spoken and written about the effect of the 2.5% decrease in VAT on consumer spending.
Typical was the man I heard on Radio Wales who had bought a new telly last week for £170.
His argument was that the four or five pound reduction in VAT would not have affected his decision.
But that is to look through the wrong end of the telescope.
The point is that if he bought the same TV next week he would still have four or five pound in his pocket to spend on something else.
Theoretically, the 2.5% decrease in VAT will save us, collectively, £12 billion pounds, all of which will be available to purchase other goods, thereby boosting the economy.
The problem is that, rather than being used for the purpose for which it was designed, much of this £12 billion will go to pay off debt and increase shopkeepers' profit margins - not to mention the clawback on the aforementioned booze, fags and gas, and any gains to the economy will be marginal at best.
What is not in doubt is that all the extra public borrowing required to cover these economy-boosting tax cuts and the loss of revenue caused by the slowdown in the housing and labour markets, will somehow have to be paid back.
According to the Chancellor's forecasts, the economy should start to grow again in the second half of 2009 and it will be all downhill from there.
Most pundits think this is far too optimistic and that the economy will continue to shrink well into 2010.
Economic forecasting is an especially tricky business, but, for anyone tempted to believe Mr Darling, I would point out that in his March budget statement he predicted borrowing in the current year as £43 billion (now revised up to £78 billion) and £38 billion next year (now £118 billion).
And, if house price indices are to believed, anyone owning a modest house worth £200,000 this time last year, now finds it worth £170,000 - a loss of just over £82 per day.
It is predicted that similar falls are in store for next year.
Hardly the ideal circumstances for flashing your credit card as if there was no tomorrow, whatever the rate of VAT.

The funniest story of the week involved the leaking of the BNP's membership list by a disgruntled former party activist.
According to the Gruniad's website, 17 of the 10,000 members reside in Pembrokeshire, so there is probably one near you.
Apparently the Pembroke/Pembroke Dock area is a hotbed of right wing political activism with five of the 17.
The full list can be found at

I understand that Cllr Malcolm Calver has been reported to the Ombudsman by one of his colleagues on Manorbier Community Council.
One of the grounds for complaint is Cllr Calver's opposition to the appointment of a permanent clerk on the grounds that the former clerk is suing the council for wrongful dismissal and, if successful, may be reinstated.
That would leave the council in the embarrassing position of having two clerks.
I have no idea whether Cllr Calver's understanding of industrial relations law is correct, but it certainly seems to be a point worth making.
And, even if he's wrong, it hardly seems to qualify as conduct likely to bring the office of councillor into disrepute.
Happily, the Ombudsman seems to agree because he has declined to investigate.
This story has further to run and I will bring you up to date in the next few weeks.
In the meantime an account of the strange goings-on in this sleepy little village can be found at


Following my piece last week on the inconsistency in Plaid Cymru's policy of an independent Wales inside the EU a reader has e-mailed to say that, in this context, independent means independent from England.
I had suspected that that was the case but hesitated to say so in case it was accused of paranoia.

This weeks column