Testing time for Blair's government soon

The Hutton report into the death of Dr David Kelly is due to be issued next week. The Penrose report into the Equitable Life problems is undergoing scrutiny for legal clearance and will be made public (no doubt with parts censored) soon. The law suit concerning Railtrack's demise engineered by Byers has also started but won't reach court until near the next election.

A common factor in all these is the way politicians try everything to avoid telling the truth. President Clinton said categorically that he had never "had sex with that woman". I agree that sex should mean full penetration, what he did was sexual playing, but he never admitted that and just played with words. Tony Blair and his government have been doing a lot of that.

I had thought in the early days of his government that they had done most things right. They had got rid of the working class/union image and become middle of the road social democrats or left wing Tory, appealing to the vast middle class. A lot of that class are disgusted with his government now.

It has been shown that Tony Blair chaired a meeting at which the procedure for leaking David Kelly's name was discussed. It was agreed that his name would not be volunteered, but admitted if anyone asked correctly. So journalists just asked lots of names. One asked over twenty until he mentioned Kelly, which was immediately confirmed. Tony Blair may be technically correct that he did not authorise the leaking of David Kelly's name, but he has never admitted publicly that he agreed to confirmation if someone asked.

The government are trying hard to avoid any liability for the Equitable Life fiasco. The Parliamentary Ombudsman has said that the Financial Services Authority could only regulate life companies "with a light touch". Various departments are ignoring the fact that evidence of imprudent policies and misrepresentation by the Equitable Life board was deliberately ignored. I hope Penrose mentions this strongly although he has no brief to blame anyone.

In late 1998 the regulators allowed themselves to be brow-beaten by the board into doing nothing. That was just one occasion when they had facts showing the dire state of Equitable Life's finances. A hard line then would no doubt have brought Equitable Life to its knees, but there was more in the kitty then. An orderly exit for policyholders could have been arranged. In doing nothing and allowing the company to advertise more heavily and continue selling policies the regulators must have been hoping the company could trade its way into a better financial state. In the event there has been a collapse and several misrepresentations since.

The main misrepresentation being the "compromise agreement" which got rid of guaranteed annuities and took away policyholders' right to claim any sort of compensation. It has come to light that a huge black hole in the accounts was not made known, nor was the fact that policies with guaranteed interest (or bonus rates) of 3.5% would make a mockery of future policy growth. Some policies are having the 3.5% added to guaranteed fund values, others have it added to non-guaranteed fund values and see it taken back immediately by cuts in total policy values. This is fraud according to many and the government departments (Treasury, FSA, PO, SFO and others) continue to avoid the main issues.


Income tax for Council Tax

The proposal to fund most or all of Council Tax by income tax is probably a good idea in principle. Pensioners are finding the increases in Council Tax far higher than the increases in their pensions and they are often the poorer section of the community.

However, how would it work? At present the Council Tax is levied on property values. These do not change much except for a few new properties coming into the equation and a very few being revalued. Consequently the Council knows the total property value fairly precisely and when setting a rate can predict the revenue with a fair degree of accuracy, apart from non-payers.

If the tax is to be an income tax most people will have an income adjustment during the year and people will leave or enter the Council area, so how will the council be able to predict its revenue?

One answer would be to fix the date at say April 5th if it is considered appropriate to tie it in with tax returns. Each person would therefore pay Council Tax based on their tax return and their residence at the time, even if they moved to a different Council area on April 6th. There would still be difficulties though as it takes months for the Inland Revenue to work out the tax payable and most people only pay tax at six monthly intervals on account, some not paying the full amount for years. So the ability of a Council to set a rate might have to be on a person's tax return for the previous year, making it always out of date regarding income and address.


Radiation from overhead power lines

I read that an artist had set up fluorescent tubes vertically in the ground under high voltage power cables and they all lit up! There was no cabling, they were just stuck in the ground. The photo showed them all lit up at night, quite a sight. It makes you realise how overhead power cables could be affecting our brains or bodies.


Penrose Report into Equitable Life

The Penrose Report has been published recently. He only had a brief to find out who did what and make recommendations; he was not allowed to apportion blame.

The various government departments and regulatory authorities have been busy denying all responsibility for the problems that caused Equitable Life to over-bonus and under-reserve for the guarantees in some policies.

However, Penrose reports that the government regulators during the early 1990s were aware of the lack of reserves and had meetings with Equitable Life's chief executive (who was also their appointed actuary). He was an aggressive character and basically told them to shove off. They stayed silent and probably hoped that everything would turn out alright as equities rose during a bull market. Over-bonusing meant that the society was building up a black hole in the early 1990s, long before two problems made everyone aware of the problems.

The first blow was the House of Lords decision that Equitable Life could not pay a low final bonus to a person who chose to take the guaranteed annuity or a normal one (the same as for policies without a guaranteed annuity) if he decided not to take the guaranteed annuity (many people did choose not to as the guaranteed annuity was usually only for the policyholder, if he wanted a spouse's annuity he had to forego the guarantee and take a current annuity). They had to pay the same bonus whether or not a person chose to take the guarantee.

As interest rates fell the guarantee suddenly made annuities two or three times more valuable than the current market annuity so a lower final bonus if the guarantee was chosen was designed to equalise the guaranteed and current annuity available to a policyholder.

The society might have been able to set a much lower bonus for all guaranteed annuity policies and a higher one for non-guaranteed annuity policies but this would have meant lower guaranteed annuities for important policyholders such as barristers, judges and other professional people who were Equitable's main clients and who were coming up to retirement. It would have been a loss of face and would have looked bad in the performance statistics so the society decided to carry on regardless and hope that income from new policies would keep them solvent. The regulator knew this and allowed the society to continue to trade.

The next blow was the equity market downturn in 2001.

The Parliamentary Ombudsman has said that the regulation was only supposed to be "light touch" regulation. Many policyholders assumed that regulation meant that life assurance companies were under careful scrutiny and told in no uncertain terms to get their house in order and are appalled at the attempt to avoid responsibility.

One policyholder group, Equitable Members Action Group, is requesting 2 million of assistance from the society to see whether a claim against the government for misfeasance is possible. The society's new board of directors does not think there is much chance of a successful action against the government and suggests that individuals or groups complain again to the Financial Ombudsman Service which has not been any help so far.



Whistleblowers have been much in the news over the last few years, often working in government departments and exposing wrongdoing there.

One recent example was a man who said employees had been told to short-circuit immigration checks on people coming from east European countries and to let them all in so that the backlog of applications that was an embarrassment to the government could be reduced.

Advice for potential whistleblowers is to discuss the matter with superiors to see whether it can be resolved without becoming public. This won't work of course if the superiors are guilty of something.

It would seem that a whistleblower should ensure that something is illegal before going public, possibly getting confidential advice from a solicitor first. Whistleblowing when something might happen or relating to something that is not illegal is risky for the whistleblower as his job would probably be at risk and he could not justify his action so easily.


Tendering one's salary

One of the constant problems in our society has been inflation, boosted by wage and salary increases, often assisted by trade unions threatening or taking strike action.

A really right-wing solution would be to pass a law requiring everyone to tender their salary each year. Some sections of society are well insulated from the cold winds of market forces, notably the civil service. Many people running small businesses such as building sub-contractors have to tender their work. Their income depends on winning work and making a profit. Why not extend this principle to everyone?

In practice everyone would have guaranteed continuity of employment at the same salary. They would only need to tender if they wanted an increase. This would cause employees to consider their worth to their employer. If they asked for too much he might get someone else from the job market. From the employer's point of view he would have to consider the disruption caused by employing someone new against the benefits of accepting the tender from an existing employee.

No doubt negotiation would take place but the risk would be more with the employee and inflation reduced. More employees would be prepared to continue at the same salary or a small increase if they thought their employer might get new employees.

There's no chance of such a law at present of course, it wouldn't be a vote-winner. However, if inflation returned in force it might have to be considered.


Bring back colonial powers

There's so much fighting in the world today. Perhaps colonial power should be reinstated. Most regions where fighting is endemic had a colonial power in charge until some form of independence was achieved and usually links have been retained culturally or by trade. Colonialism wouldn't be the same as a hundred years ago. It could be formally approved by the UN with firm guidelines.

There would be benefits to both parties as there were a hundred years ago. The poorer country with the fighting would have the benefit of a police force backed up by soldiers from the rich colonial power but under the control of the poorer country's government. Trade would be safer, the soldiers would spend some of their income, tourism could improve.

Most poor countries experiencing fighting have their agriculture totally wrecked by populations moving about to avoid bloodshed, returning later to ruined farms.

The richer country providing the security would of course expect some payment. At present I believe they get paid by the UN if they provide troops, but of course they are contributing to the UN too. The alternative would be access to resources such as crops and minerals as it was a hundred years ago, but with UN guidelines to ensure fair payment.

At present when fighting occurs somewhere, there is often a long delay before the UN manages to persuade some country to provide troops to quell the problem. The countries providing the troops have no long term interest in the area, they come in late, get substituted by troops from another country and probably leave too early so that fighting erupts a few years later.

A continual association with the previous colonial power might be advantageous for both parties provided they could forgive the heavy-handed colonialism of the past.


England won the cricket series against the West Indies

The fourth test finished yesterday as a draw, but England won the first three tests convincingly thanks to their bowlers. Stephen Harmison was player of the series as he was our most successful bowler though he only got one wicket in the fourth test. Matthew Hoggard got a hat trick in one test.

In the fourth test Brian Lara got 400 not out and Ridley Jacobs got a century in their total of 751 for 5 wickets, leaving England an impossible task. Lara had failed to get many runs up to that point. Michael Vaughan, England's captain, had also failed with the bat but he got 140 in the second innings of the fourth test, better late than never.

Lara ended up with a test average of 83.33, Jacobs 46.17, Smith 43.00, Sarwan 27.43, Gayle 26.00 and Hinds 25.60.

Our batsmen also had high averages: Graham Thorpe had a return to form with a series average of 91.33 thanks to three not-outs, Mark Butcher 59.20, Flintoff 50.00, Jones 48.00, Hussain 32.83, Vaughan 35.00, Giles 25.00 although Trescothick with 23.57 was a disappointment.


Violence in Iraq has reached a new level recently

A year after the invasion the resistance groups are fighting harder than ever and Falluja, where many fighters are based, is under siege by the Americans. Both Sunni (loyal to Saddam) and Shiite (anti-Saddam) groups are fed up with the American regime and want the soldiers to leave now, even though the Americans plan to hand over power to an Iraqi government in June.

A radical cleric Moqtada al-Sadr has holed up in the holy city of Najaf after setting up a militia and inciting violence. The Americans want him dead or alive.

Civilian hostages from about twelve countries have been taken by various groups. Some hostages have been released after persuasion by moderate religious clerics, but only civilians from countries that have played no part in the invasion or the occupation. An Italian hostage has been killed after the Italian government said it had no intention of withdrawing troops.

Several countries, notably Russia, are airlifting out all their civilian workers, so the reconstruction process will be severely interrupted. The violence is counter-productive as the Americans want to spend their money on setting up a new regime and handing over power but these resistance groups don't want any help from western countries.

Tony Blair has flown over to talk to Kofi Annan of the UN and President Bush today. He seems to want the UN to have more influence but George Bush so far has wanted to keep the UN at arm's length.

The UN has been remarkable for its lack of effort or instigation of any policy. It has just waited for various countries to put up resolutions for debate. This approach has pros and cons I suppose. It means that as an organisation it has not antagonised the muslim countries or the Iraqi resistance groups and so any UN action now might be acceptable to them.

The Americans only have one solution to any problem which is to go in with guns blazing. The British who are controlling the south of Iraq around Basra have been more diplomatic and have had less trouble, but have also been lucky that it was an area largely hostile to Saddam.