Lies, damned lies and ..... what's the point?

Anyone pointing out that the data released by the Treasury showing pay is actually increasing in real terms is a crock of &*£" is missing the point. The reality is that average pay growth has and continues to lag inflation. The latest (as at 22/1/14) available ONS data shows the average weekly wage (including bonuses) grew at 0.9% per annum (1.2% private sector, 0.2% public sector) vs consumer price inflation of c.2% i.e. real pay, after taking the average increase in the cost of things into account, is continuing to fall, this time by 1%. That is the reality; pay growth continues to lag prices ergo yer average punter is worse off today than he was a year ago (and the year before that and the year before that one). 

But, that's beside the point. Googling over to the Daily Telegraph/Torygraph, Express and and Mail to see what they had to say about the special Treasury release given they’re quite the ones for supporting the current austerity regieme, as of 18.54, Friday, today, none of them were saying anything.

Now, chew on that for a second. And a few seconds more. So the claims and data taxpayer funded government departments are making and issuing currently appear too implausible, too readily contradicted by easily available facts for even the Tory press to actually run with. By contrast, they're not too implausible for the BBC i.e. the BBC now appears less sane/more right wing than the Daily Mail when it comes to the economy.

But, that's still besides the point, which is this; Labour have been scoring political points by going on about the cost of living crisis. This Treasury release muddies the waters, handing every Tory guest on Newsnight, the Today programme etc., for the next however long a time-wasting peg on which to hang their prejudices about the consequences of the current ConDem lot’s economic policies for the majority of people in Britain. FTSE 100 executive pay packages growing at 14% per annum? Ahh, but the Treasury release says its actually only the top 10% that have seen their pay lag inflation. The number of food banks is up? Ahhh, but pay is now growing in real terms according to the latest Treasury figures. And so on.

This release is all about turning the grinding, real terms pay cuts millions of people continue to contend with into a distracting he-said, she-said political debate. Oh and factually its also just wrong, but due to the BBC approach to avoiding charges of bias - see climate change reporting fer instance - of presenting opposing views even when one is garbage, it could well continue to be presented as being in some way credible.

P.S.  Click here for a neat demolition of the claims and here for someone pointing out its actually quite hard to get hold of the Treasury release to check the methodology and numbers. Funnily enough, the story - and associated headline - is suddenly getting a lot less prominence on the BBC website. The whole thing feels increasingly like something out of "The Thick of It"; bright young thing twists numbers into supporting the party line, party press officer gets the BBC to do a big splash, a growing number of people say WTF? and allova sudden - move along now nothing to see here - the actual story is the Prime Minister's Davos speech.

Banker bonus bollocks balls

It's banker bonus time again, which means there’s the usual political point scoring drivel. My personal favourite so far has been the BBC asking a recruitment consultant for an opinion*; as you’d expect, given his fees are a % of the wages of the people he introduces to new employers, the consultant argued against any pay restrictions. Go figure.

I’ve yet to see the point made about how the total sums due to get quoted include the bonuses paid to the 10s of thousands of relatively low paid bank staff (e.g. a bank cashier starts on 8-11 grand a year and might eventually reach the giddy heights of 24 grand p.a.), but am sure its coming soon. And there’s been no discussion - I’ve seen - as yet of the actual changes to how bonuses are paid and the various clawback terms and access restrictions that have been introduced.

Here though I reckon I’ll query the superstar argument getting made yet again  to justify the big, big, biggie bonuses. According to this bankers are like top footballers, game changing individuals whose world class acumen and expertise generate far more in taxes and profits than they ever get paid. Plus, if they don’t get what they want, they’ll emigrate to Singapore or New York and we’ll all lose out as a result.

Bollocks. Lets take the superstar analogy at face value then only in relation to baseball where the book, then film Moneyball set out how in baseball teams regularly overpaid for underperforming superstars, this being the natural result of whole squads of experts and insiders all buying into a common sense that happened to use the wrong metrics to assess player performance. Now a couple of things follow on from this:

• Don’t take what “experts” say at face value, especially if they’ve a vested interest in saving the value of their own faces (and bank balances, see recruitment consultant quoted above).
• Conventional wisdom about what superstar performance looks like or derives from can be wrong in systematic and sustained ways
• The “Sabremetrics” documented in Moneyball showed up – because it enabled teams to exploit - sustained and systematic market failures when it came to setting baseball salaries.
• The “Sabremetrics” methodology that eventually challenged conventional baseball wisdom used dozens of metrics to measure how individuals performed over their careers. 

By contrast "Superstar” bankers are never, ever subject to the same degree of scrutiny, not even close (because there simply aren’t the metrics available, plus there would be confidentiality and data protection issues etc.,). So potentially then arguments made in favour of paying superstar bonuses to bankers are largely, make that primarily grounded in prejudice and vested interests.

Except, there have been some studies only these don't make for especially superstar reading. These have looked at how “top” financiers perform over time and when they move between employers. In both cases it transpires many move randomly from having good years to bad years i.e. luck is a big factor (though some private equity firms are a notable exception here when it comes to the ability to outperform on a sustained basis). And that rather than individual star performers, you're actually looking at strong teams in a positive environment, neither of which being especially transferable across the road to a different bank's Canary Wharf office let alone over the sea to Singapore or New York

And then there's the wee cheeky bit of fiddling that appears to have gone on in recent years. Like if they’re all so good why do so many appear to have (allegedly) committed fraud to make money what with the growing number of enquiries into  foreign exchange trading, libor, euribor etc., i.e. whole swathes of bank trading activity appears to have been utterly bent. Thankfully, every cloud has a silver lining;  those banks that have sacked, resigned, put on leave etc., traders provide a lovely experimental opportunity to test to what extent (a) the irreplaceable staff who have been replaced are actually perfectly replaceable and (b) whether overall trading profits derive from gaming the various systems, luck or actual expertise (this, by the way, would not be hard to do, there are oodles of microeconomists who would do this sort of assessment for the price of a PhD i.e. for a damn sight less than the fees the regulator would otherwise pay to the consultancy arm of a big accountancy firm)

In the meantime, the "superstar" rhetoric needs put on hold., now. It's nastily insidious, because it taps into notions of natural talent, and for the most part is based more on prejudice than fact. So sure, sure, pay “superstar” bankers “superstar” bonuses if you want, only subject them to “superstar” scrutiny as well, if only to drown out the annual chorus of bonus bollocks we now get inflicted on us at this time of year (and save shareholder funds).

* This whole BBC notion of balance whereby people with opposing views are asked about the same thing doesn't achieve balance, it simply exposes double the volume of prejudice.

Will lightning strike twice?

Pop quiz: The BBC has kindly handed the Barclays CEO a special platform to use to convince us all that banking has learned the lessons of the past and is committed to changing its ways. Is this a reference to:

a)      Bob Diamond (as was) giving the inaugural Today programme business lecture in 2011 about how banks needed to be good citizens and restore public trust?

b)      Antony Jenkins guest editing the Today programme today on R4 after giving a speech organised by Robert Peston on rebuilding trust in banks?

You decide. In the meantime, Robert Peston’s latest blog was interesting but only because of what it left out. It didn’t mention how so many banks were run into the ground by the sheer incompetence of executives handed mega pay packages for being competent right up until it turned out they weren’t. Saying that, it did quickly run thru the litany of crimes, institutionalised frauds, industrialised miss-selling scandals and so on that the bulk of the banking industry has perpetrated in recent years. But, it failed to mention how many people had actually gone to prison as a result. 

Oh hang on, no one has and as long as that's the case i.e. as long as bankers remain above the law regardless of what they do to customers, it's difficult to see, regardless of how lovely the BBC is towards it, how the industry can rebuild public trust (moreover the threat of going to prison AND having pay and bonuses stripped as a result of their being the proceeds of crime would also function as a pretty nifty deterrent).

A bit of "fun"

John Kerry's recent chat about the protests in Ukraine reminded me of how the US authorities responded to the Occupy protests: "The United States expresses its disgust with the decision of Ukrainian authorities to meet the peaceful protest in Kyiv’s Maidan Square with riot police, bulldozers, and batons, rather than with respect for democratic rights and human dignity. This response is neither acceptable nor does it befit a democracy"

HS2 is No.4

Paragraph 28 in the Commons Transport Committee new report on HS2 is well worth a read, it makes clear that never in the field of British history have so few people been so willing to waste so much of other people’s money on so little (re: Number 4 here).

The BBC, in its bestest Pravda voice, summarised the report as follows: “The MPs heard from bosses of consultants KPMG, who said in a report that by 2037 HS2 would boost the UK economy by £15bn a year. Some economists who gave evidence cast doubt on this figure”

Actually, this isn't quite right. Professor Dan Graham of Imperial College, London, said "I do not think the statistical work is reliable" while Professor Henry Overman of the London School of Economics described KPMG's approach as "essentially made up". And lets be clear, an academic calling something “essentially made up” is more than casting doubt, he is saying it's garbage to an extent where this isn't actually a debate.

So what did KPMG have to say in response to being told their expert assessment, their professional competency even was "essentially made up"? Not much. When questioned they emphasised that their results were provisional and conceded that their methodology "does not have a firm statistical foundation”.

This second bit is worth repeating; the people paid to produce an economic analysis of the benefits of HS2 used an approach even they think “does not have a firm statistical foundation” and according to independent experts is "essentially made up" i.e. KPMG think the benefits will be £15bn, they admit they've no solid evidence to support this let alone a credible methodology for making such forecasts, but they still think the benefits will be £15bn a year. Or more. Or much more. Or perhaps less. How much do you want them to be?

Except we already knew this if only because the whole notion of a £50bn project delivering a £15bn i.e. a 30% return per annum in an age when you do well to get 2% on your savings is inherently ridiculous. We also already know that if it does go ahead HS2, like the olympics, will cost far more than all the early estimates and deliver a lot less because that's just what big government projects do. Tarting this up by wasting money on consultants to construct makey-uppy numbers using a makey-uppy methodology to suit HS2's political supporters is simply an expensive charade gone thru not so much to give the process any credibility – it doesn’t - but to distractingly fill up air time until too many contracts have been signed for this train wreck of a waste to be stopped, which is a shame really given the opportunity cost here i.e. the other things the money could be spent on e.g. say 10 x £5bn projects more fairly dispersed across Britain that would also have spread the risk and start generating benefits within years rather than decades (as opposed to one big super-duper project) isn't even being considered.

As to why, well I guess making massively subsidising a marginally quicker London commute the lynchpin of Britain's transport and infrastructure policies for the next few decades will eventually confer some benefits, but ultimately its because politicians don’t like being seen to be wrong and that’s kind of it really, their egos being apparently worth tens of billions of our pounds.

Scottish independence vs food vs a fair corporation tax

Another day, another piece of garbage anti-Scottish indpendence chat, except this time one with broader ramifications; it turns out that besides causing the four horsemen of the apocalypse to rise up and grind the very earth into cinder, Scottish independence would also make your weekly supermarket shop more expensive. Crivens. The “argument” presented for this is as follows:

“in today's FT, which reports that bosses of three of the four biggest supermarket chains are warning that food prices in an independent Scotland might well be higher than in the rest of the UK. ….Scotland has a large dispersed population, so transport costs - logistics - tend to be higher in Scotland than in England.
Scottish people eat relatively less fresh food than the English, and fresh food is much more expensive to transport and store (the logistics of supplying fresh food are highest). So it is relatively more costly to provide fresh food in Scotland….

….. at the moment, the big four supermarket groups - Tesco, Sainsbury, Asda, Wm Morrison - absorb these differential costs in a pan-UK pricing policy. They take on the chin that the intrinsic profitability of doing business in Scotland is less than for England.”

So there. Or not. First off, I don’t know about you, but last time I went anywhere noticeably dispersed in Scotland I didn’t encounter a single major supermarket outlet whatsoever (check what Yell has to say about supermarkets on Arran fer instance). Rather, what I encountered were corner shops that already were charging plenty extra for basic goods.

Second, well lets go to some of Scotland’s more distant locales that aren’t so dispersed then, Inverness for example, the capital of the highlands or as it's also known “Tesco Town” i.e. a far north location with a ridiculous concentration of major supermarket outlets where logistical scale economies are already being achieved to the point where the notion that yer average Inverness punter’s weekly shop is being subsidised is a joke (alternatively and in the interests of fairness try Stonehaven instead give or take what you’d discover there are the joys of living somewhere where the only supermarket on offer is the Co-op what that means in terms of crap fruit and veg).

Dull facts mean I’m not too convinced by the “argument” being made allova sudden. But, what the hey, lets take them at their word regardless, except (a) if transport costs really are all that, then presumably this creates a greater incentive to source local produce i.e. taking away the supposed English food price subsidy could benefit Scottish food producers and/or (b) as supermarkets depend on price and convenience to out-compete smaller, local rivals, if price was less of an option, then Scottish independence could benefit local retailers. Oh and (c) so howcome a pint costs more in London, especially London City-bastard-Airport than anywhere in Scotland then eh? Eh?

Besides not being especially convinced by the anti-independence argument being made, what really struck me was the associated chat about the limited appeal of the SNP’s proposed competitive corporation tax rate; “the supermarket groups tell me that the Scottish government's promise to cut the headline rate of corporation tax by up to three percentage points would be of little benefit to them. The boss of one says the health increment on the rates currently costs them more than four times what that cut in corporation tax would shave off their tax bills….. The biggest Scottish supermarkets, those with a rateable value of more than £300,000, and which sell both cigarettes and alcohol, pay a 28% "health" increment on business rates - which costs them collectively around £30m a year.”

Now just chew on that for a second. And another. And then some more. Yup, that’s right, cutting corporation tax wouldn’t actually matter because these feckers already do so much to avoid it cutting it would be largely immaterial.

Now this strikes me as being what’s actually important here, which is as follows; Scotland already provides a practical example of how big, global PLCs can be more fairly taxed than is currently the case because it operates a tax that uses the rateable value of premises to exclusively target big retailers rather than whatever profits supermarket accountants claim they make in whatever country they happen to be operating in. And have any major supermarkets left Scotland as a result because they’re not subject to this tax in England? No, they haven’t and no they won’t either, because they, like KFC, amazon, google, Multinational-Tax-Dodging Incorporated etc.,  need boots on the ground to ensure they can actually reach consumers as this droog refers to here and here.

So really whether food would cost more in an independent Scotland is besides the point not least because the arguments presented as to why are pants and potentially favour independence. But, do existing Scottish tax arrangements – hit ‘em in their cost base regardless of the declared profits - provide a practical example of how to quickly and easily tax multinational PLCs more fairly without this having any adverse effects whatsoever let alone requiring any grand international agreements to be made that will never actually happen? You utterly betcha.

No wonder the article I’ve heavily quoted from referred to supermarkets being afraid of going on record about what they think, its just the reasons why appear a lot less to do with a supposed fear of Alex Salmond saying nasty things about them and a lot more to do with people actually having a  think about how they're currently taxed.

Hmmmm, flip flops. Nice.

For reasons I’ll spare you I found myself in Edinburgh’s Hollister shop recently. What struck me about the place was that the poor sods getting paid to fold stuff were wearing flip flops. In Edinburgh. In winter. Given company policy is to keep the place as dimly lit as possible I felt genuinely sorry for the shop assistants’ toes as all the shoppers crunched past in their winter footwear.

Then I discovered the CEO of the US parent company, the 69 year old plastic-fantastic freakzoid pictured above, has a 40 page plus manual detailing what the male models hired to attend to him (and his dogs) on his private jet have to wear, from  pants, to cologne to flip flops i.e. the poor sods with bruised toes folding jumpers down George Street are actually the embodiment of one pensioner’s sexualised fantasies.  

This is profoundly liberating I guess in that it relegates men to the same eye candy standards traditionally imposed on women so engenders an equality of a sort.  However, rather than gender issues, I reckon it provides a useful warning as to the future direction of British society and British culture. No seriously, it does.

This is because it’s an example of what the super-rich, the ruling class, the 1% even, does when it's free to dictate how others have to behave. Want a job? Getting hassled by the broo to do so? Then put on some flip flops. Why flip flops? Because a very rich old age pensioner thinks attractive young men look cute in flip flops that’s why. And no you’re not a shop assistant (yes you are, you're not even a visual merchandiser) you’re a brand ambassador. So how does that make you feel when you put on the company flip flops, eh?

In Hollister-land the super rich clearly have no sense of let alone concern for the personal dignity of anyone other than themselves and their own. In fact, they don't just lack empathy, they blithely shred the dignity of those they employ on low wages whenever it gets in the way of their personal whims and sexual proclivities. And if challenged, they will readily draw upon free market rhetoric about how making people wear flip flops in winter is good for shareholder value, creates jobs (that would be there regardless cos we all need jumpers, its simply whose jumpers we choose to buy) and confers a competitive advantage in a globalized economy, etc..

The reality of course is more complicated than this; the super rich dodge taxes the rest of us pay and benefit from government policies focused on boosting asset values i.e. wealth and subsidising the low pay that ensures the rich continue to get an even bigger slice of the cake. Except, this would be to imply the super rich aren't 100% wholly responsible for their great fortunes and we apparently can't have that.

This all matters because if there’s one country in the world that’s gallavanting as fast as it can towards the American model of super rich, super poor and fuck all those in between, its Britain. So bring on the flip flops and lets hope - as per Abercrombie & Fitch/Hollister company policy - our photos are judged pretty enough at their monthly review for us to keep our jobs.