Category Archives: Economy

How would Brexit impact UK Mental Health Services?

With the EU referendum coming up in just a few weeks, I thought it would be appropriate as a dedicated mental health activist to outline what impact I predict Brexit would have on mental health services in the UK.
There are three main factors that I think would affect our mental health services if we were to leave the EU, the first of these is the economy.
It is widely accepted that leaving the EU would be detrimental to the UK economy with 9 out of 10 economists saying that leaving the EU will damage our economy. The Chief of NHS England, Simon Stevens has claimed that “When the British economy sneezes, the NHS catches a cold… it would be very dangerous if at precisely the moment the NHS is going to need extra funding, the economy goes into a tailspin”
Much of the current problems with our mental health services come down to a lack of funding and if funding of the NHS is hit by Brexit, this will surely lead to even less funding for mental health services.

The second factor that I believe will affect mental health services is the loss of EU science funding.
British scientists gain huge amounts of funding for research from the EU and freedom of travel within the EU makes it easier to assemble international teams of leading scientists to cooperate on projects. Our knowledge of mental health is far behind our knowledge of physical health and Brexit would be a blow to research of mental illnesses, their treatments and other aspects of mental health that we are yet to learn. This would slow down the progress we are making in learning how to effectively treat mental illness which will hinder the recovery of sufferers of mental illness for generations to come.

Finally, the EU as an institution is committed to improving the mental health of the continent. In 2005, the European Commission published a Green paper -Promoting the Mental Health of the Population. Towards a Mental Health Strategy for the EU. Following this, the European Pact for mental health and well-being was launched in 2008. The pact was then implemented through numerous conferences tackling priorities such as Combating Stigma and Social Exclusion and Prevention of Depression and Suicide.
I already worry for our mental health services. Currently they are over-stretched and under-funded. Waiting times are excruciatingly long and many people are being left to suffer as a result. I can only see these problems becoming intensified were we to leave the EU and this is part of the reason that as soon as I received my postal vote, I sent it straight back with a big cross next to Remain!

On the economy if we leave the EU

A lot of claims have been made on both sides of the argument. They boil down to a hope that, if separated from the EU, the UK economy will boom. Or to a fear that the economy will suffer if it loses access to the Single Market. Individual businessmen have said how they think any change would affect their business. Most seem to believe leaving would be bad for their business.

The evidence we have is that the pound has fallen on two occasions recently. The first was when the date of the referendum was announced. The second was today when opinion polls showed a majority for leave. The most likely reason in each case is because the market fears uncertainty. Calling the referendum created uncertainty as to the outcome. This uncertainty can be resolved by a decision to remain. If the decision is to leave, the terms of the UK’s relationship, if any, with the EU would need to be negotiated. That would cause the uncertainty to last as long as the negotiations do.

A lower pound means prices go up. Those who do not have much money would have even less. They above all cannot afford a leave vote. The majority of businesses prefer to remain, precisely because they can continue trading as they do now. Leaving would mean no more investment until the relationship with Europe becomes clear, which could take years.

The head of the NHS in England has said that a weaker economy would mean less money for the NHS. The leave campaign is ignoring the economic consequences of leaving the EU. It is behaving like a political party in offering a manifesto for what it would do after a leave vote. But if it spends the money currently going to Brussels on putting right our NHS, it cannot spend the same money on our farmers and scientists. It has no credible way of replacing what the EU spends in the UK, when the UK economy is suffering from prolonged uncertainty.

A referendum has to take a decision. The UK will remain in the EU or not. No referendum can elect a government. The UK has just elected a government, and there is no sign that most MPs are looking to elect another. How the present government would respond to a decision to leave is unclear, but more austerity is likely. If it does have to negotiate leaving the EU, it would have the option of using the money currently sent to Brussels to reduce the deficit. It would be entirely consistent with George Osborne’s track record as Chancellor for him to do just that.

Vince shows Labour how to deal with Bankers’ Bonuses

Yesterday, Ed Miliband said the chief executive of Royal Bank of Scotland, Stephen Hester should not receive a bonus this year.

If Labour wanted control of executive pay of state owned banks, then they should have made renegotiation of contracts a condition of the bailout when they were in power.

Labour should have also demanded that all front office investment banking staff in those banks had to re-apply for their jobs, without any guaranteed bonuses.

Labour left the coalition toothless to deal with the issue. Once the banks returned to operational profitability, they lost the legal financial justification for placing investment banking front office staff under consultation to review pay and conditions.

Today, Vince Cable has proposed a series of measures to give shareholders a binding vote on executive pay, and crucially, given Sir Fred Goodwin’s deal at RBS, exit packages.

Vince Cable found himself unable to address high pay at RBS, Lloyds and HBOS, thanks to Labour’s failure to address the issue when it bailed out the banks.

Vince has done what Alistair Darling should have done, and proposed the legislation he needs to get the powers the government needs.

As the largest shareholder in RBS and other banks, the government will now be able to control the executive pay at those institutions, and fix the problems Labour created.

 

Robin Hood or Court Jester?

During the 2010 General Election, a campaign got under way in support of a ‘Robin Hood Tax’.  The suggestion seemed to have fizzled away but has been gaining some steam recently.  In particular, the Archbishop of Canterbury has come out in support of the proposal, in the midst of #Occupy movement’s presence at St Paul’s Cathedral.

The proposal on the face of it, has merit, focussing a tax on high risk speculative casino banking that created the Credit Crisis, the worldwide recession and the continuing troubles in the global economy.

However a deeper analysis shows that the Robin Hood Tax (RHT) is actually counter productive when it comes to reforming the banking sector, preventing a similar crisis in future and getting our economy moving again.

Firstly, a disclaimer.  I spent 10 years working in the IT departments of Investment Banks in the City of London, before leaving 7 years ago.  However there is no love lost between myself and the City.  Whilst I have friends from my time working there, particularly those in IT, I have little sympathy for the poor risk management that led to my former colleagues prompting the credit crisis.

What is the Robin Hood Tax?

The Robin Hood Tax is a type of ‘Tobin Tax’ whereby a tax of 0.05% of the transaction value would be levied on all banking transactions, where the financial institution is speculating with its own funds, as opposed to investing customer’s money.

The arguments in favour are that this could raise £250bn globally, and £20bn in the UK alone.  As the tax is only on trades that banks make with their own money, the tax cannot be passed on to their own customers.  Supporters want the tax to donated to charity and to help banks repay the damage they have done to the global economy.

Criticism has focussed on whether it would drive the Financial Services sector away from the UK, a crucial part of our economy and the need for it to be implemented globally to be effective.

The Court Jester

Objectives for Banking Reform

There are some clear objectives that need to be reached by global banking reform, and any proposal needs to be assessed against them. The objectives must be to:

  • Ensure that a similar crisis cannot happen again by reducing high-risk investment
  • Get Banks lending to sound UK businesses to stimulate growth
  • Recoup the money invested in bailing out the banks
  • Protect our savings from the excesses of high risk banking
  • Address the ‘bonus’ culture within the banking sector

Unfortunately, on examination, the Robin Hood Tax is actually counter productive on the first three of these and unhelpful for the other two.

High Risk Banking

Now, 0.05% does not sound like very much, does it?  Until you realise that the profit margins on low risk transactions are between 0.1 – 0.2%, which means that the Robin Hood Tax would be a 25-50% tax on profits.

Sound implausible?  If you look at the RHT website, it claims that the £20bn raised in the UK will be based on taxable income of £90bn, i.e., a 22% tax on profits.  This would be on top of 20% Corporation Tax.

Crucially, the tax is levied whether the bank makes a profit or not.  Given that the amount of tax raised is based on the amounts traded, rather than the profits, this means that in a bad year for banks, they would pay £20bn in tax, even if they were to make a loss

I am not arguing that we should feel sorry for the banks or that a higher level of tax on profits would be unfair or unjustified (although I do object to major taxes on companies that are not in profit).

The important thing to realise is that this will prompt banks to make more high risk investments, not less.

To understand why, we have to understand the recent history of investment banking.  As banking went global, electronic and hugely profitable through the 80′s and 90′s, the large amounts of money being made led to a lot of healthy competition, that in turn led to profit margins on trades being squeezed right down to 0.1% of transaction value.  Banks were still able to make large profits, because the amounts being traded were so huge.  A single £20m trade could still give a profit of £20,000.  The RHT would then take £10,000 of this.

To maintain profit margins, banks invented new investment products, for which they were able to charge a hefty premium.  When first introduced, products like Swaps, Convertible Bonds and Credit Derivatives were able to command profit margins of up to 2%.  However the cycle always repeated and increased competition squeezed profit margins.

This cycle has led to banks inventing more and more exotic products, that were increasingly risky.

And here is the nub of the issue.  Adding a 50% tax on profits on low risk, well understood, well managed banking transactions will simply drive banks to trade higher risk, higher profit margin products, just as increased competition has led them to do over the last 30 years.

Products like Futures, Options, Swaps, Swaptions and Convertible Bonds, were once high risk, poorly understood, high profit transactions.  They are now the staple of Investment Banking and most banks can trade them perfectly safely.

Credit Derivatives and complex securitisation structures are the high risk, high profit exotics that have brought the world economy to a stand still.  And we should not be encouraging banks to trade them until they are better understood and managed.

So the Robin Hood Tax would prompt banks to trade higher risk investments, not lower.

Liquidity and Volatility

Unfortunately here I need to add in some banking jargon.  Liquidity measures how easy it is to buy or sell in the market.  The more buyers and sellers there are, the easier it is to buy or sell something.

Volatility measures whether prices go up and down smoothly and gently, or jump up and down dramatically.

When a product is liquid, and you need to sell to avoid making a loss, then it is easy to do so and the price does not change dramatically.  If a product is not liquid, and there is a major problems, the market will slump quickly, and you cannot sell easily, leading to major losses.

For example, the current UK housing market has very few buyers and sellers.  The result is that no-one really knows how much houses are worth.  You can put your house on the market for what you think is the right price and end up having to sell for a lot less, potentially losing money.  Try to buy in a good school catchment area, and you can find you have to pay through the nose.  The market currently has low liquidity and high volatility.

Simplistically, liquidity is good, volatility is bad. In fact decreasing liquidity increases the riskiness of a product.

The Robin Hood Tax by definition is intended to stop banks trading as much of their own money.  As a result this will make products that are currently reasonably risk free, less liquid, more volatile and in fact more risky.

There is a knock on effect, in that other, non-banking investors will shy away from investments that they cannot sell out of easily, decreasing liquidity further.

Again, the RHT will prompt increased risk, not decreased.

Get Banks Lending and Investing in Business

As well as retail banks directly lending money to small and medium sized businesses, the investment banks also provide crucial credit and capital to larger businesses through buying shares and buying corporate bonds.

These are not always high profit investments by banks and form the more mundane part of an investment bank’s business operations.

Again, an additional 0.05% tax on the buying and selling of shares and corporate bonds will likely mean less investment into British companies.

And again, there is a knock on effect with other financial institutions.  If banks are not buying when companies either go public and sell shares, or when they try to raise money through corporate bonds, then they price per share will drop or the rate of interest for borrowing will increase, due to the lower demand.

An added knock on effect is that venture capital funds are less likely to support start up businesses, unless they are confident that there is a vibrant market for them to go public.

The Robin Hood Tax, by discouraging banks investing with their own money, particularly in low profit investments, will lead to a decrease in investment and lending to businesses.

Getting Our Money Back

The UK Government borrowed eye watering amounts to bail out and buy a number of UK banks to stop them collapsing.  Given the scale of borrowing, the only way to recoup this money is to sell the banks back into private hands.

Unfortunately, the markets are fully aware of this and know that at some point in the future, the Government will be selling large quantities of bank shares.  The markets know exactly what price the UK government paid for the banks, and the shares in banks have continued to trade under that price since 2008.

The share price of any company is directly linked to its profitability.  Taxing an additional 25-50% of profits will lead to a dramatic fall in the share price of the state owned banks.

Which means that the Government will struggle to sell off the banks and get back the money they have invested.

Frustrating as it sounds, we need our retail banks to be healthy and profitable to help get the country’s finances back on track.

So the Robin Hood Tax would make it harder for the UK government to get back the money it has invested in the banks, and at £20bn per year, it will take years to recover that money through the tax, and that is only if none of it is given to charity.

Protecting our Savings

The Robin Hood Tax does not in any way address the need to protect our savings from speculative trading by banks with their own money.  In this case it does nothing to harm it, beyond encouraging riskier trading.

Investment banks have merged with retail banks to take advantage of the large holdings of the retail arm to borrow more heavily and more cheaply for speculative trading.  The key is to split up the investment and retails arms to stop the investment arms ‘leveraging’ our savings for high risk trading.

Bonus Culture

Again, the Robin Hood Tax does nothing to address the bonus culture within banks. At this point, I should state that I have no objection to bonuses linked to profits, preferably long term profits.  However there is a case, I believe, to end guaranteed bonuses, whereby a trader gets paid a substantial amount, irrespective of their trading performance.

In the next two articles, I will address a couple of key questions.  If the Robin Hood Tax does not address our objectives for banking reform, what will?  I will also look at the causes of the banking crisis, other than the banks, which are increasingly ignored by the ever more emotional coverage of the banks.

 

Noranside Staff Deserve to Know Decision Making Process

I was very disappointed to read of the Scottish Prison Service’s decision not to release information relating to Noranside Open Prions under the Freedom of Information Act, on the pretext that, “it would not be in the public interest”.

It is extremely unfair on the staff at the prison for them to be treated in this way. Staff deserve some certainty and clarity from the SNP government about the future of their jobs. They also deserve to know how the decisions around the prison have been reached.

Not only do they have a right to know how the SNP government came to its decision to close the hugely successful prison, but also why they were assured last year that there were no closure plans, and why the decision has now been delayed until after the election.

The SPS must honour its obligations under the Freedom of Information Act and release details of any documents relating to the decision to close Noranside.

Click here for Robert Brown’s response on The Courier website.

 

Sanjay At Noranside Prison

Ed Milliband risks being linked with deficit deniers

The Economist has a blog post about the timing of Ed Milliband’s speech to the March 26 rally.  Whilst there is an interesting analysis of why Mr Milliband spoke so early, far more interesting is 3 paragraphs that neatly sum up the range of opinion about how and when to get the public finances back under control:

I think Mr Miliband’s problem boils down to this. Most people in this country, including a lot of people I met on the march today, think that Britain faces a period of painful decisions and choices, because the country has been spending too much. Within that majority, there are people who are (for variously selfless and selfish reasons) attracted to a Keynesian argument that deep, front-loaded cuts are counter-productive, and so some painful decisions should be postponed. That is an intellectually respectable argument: this newspaper does not agree with it, but there are people of goodwill on both sides of the debate.

Then there is a hard core of people who simply do not accept that the money has run out. These flat-earthers think that there need not be any cuts, because if you only taxed the banks/bankers/multinationals/tax avoiders/the rich a lot more, you would unearth a hidden money pot filled with so many billions that we could keep spending as before. I don’t think Mr Miliband agrees with them. I don’t think most voters in Britain agree with them. I don’t think even most of the marchers in Hyde Park agree with that hard core.

But that hard core has a firm grip on Labour’s base, as could be seen on Friday in Nottingham. And Mr Miliband, by endorsing the wider anti-cuts movement, risks becoming associated with that hard core and their breathtaking lack of realism. He said again in Hyde Park that he was proud to be addressing the “mainstream majority”. But he did not look proud: his nerves gave him away. “It is so important that this be a peaceful protest,” he said at one point, almost pleadingly. The crowd seemed pretty indifferent to his presence, in return.

Read the blog post “Ed Milliband shunted off television news by anarchists” at The Economist website by clicking here.

Income Tax Cut for Thousands in Angus & Mearns

Liberal Democrat Candidate Sanjay Samani for Angus North and Mearns has revealed that 102,500 in Aberdeenshire and 53,200 people in Angus will pay reduced income tax from April this year, thanks to the Liberal Democrat-led increase in the personal tax allowance.

In addition, over 2,500 people in Aberdeenshire and 1,560 people in the Angus will not pay ANY income tax.

Liberal Democrats in the UK Government will be increasing the personal tax allowance to £10,000, meaning no-one will pay any tax on the first £10,000 they earn.  The allowance will rise by £1,000 this April, with a further £600 rise next April, as just announced in the UK budget.

Commenting, Sanjay Samani, said:

“Thanks to the Liberal Democrats, over 4,000 people across Angus, Mearns and Aberdeenshire will not pay any income tax and more than 155,000 people will pay much less than they did before.”

“Liberal Democrats promised at last year’s General Election to increase the personal allowance.  I am proud that my colleagues in Westminster are delivering on that promise.”

“Labour put an incredible income tax burden on the poorest in society.  It is not fair that people on the lowest incomes paid so much of their income in tax. “

Montrose councillor  David May added,

“Liberal Democrats have put money into the pockets of Montrose families.”

“In just 11 months, 54,760 people in Angus have benefited from Liberal Democrats in Government.  This figure will now increase as the tax system gets fairer under Liberal Democrats.”

Stonehaven councillor Peter Bellarby added,

“Liberal Democrats are delivering on their promise to help residents in Stonehaven, Laurencekirk and Mearns.”

“Over 105,000 people in Aberdeenshire will gain from April thanks to Liberal Democrats in Government.  The number who will benefit will rise again next year with the further increase in the allowance and more, year on year through the lifetime of the Coalition Government.”

Lib Dem Achievements in Government

Over the last few weeks, I have been disappointed to hear fellow Liberal Democrats repeat the accusations of our opposition, and in particular certain portions of the national media who have been desperately trying to portray Lib Dems in a negative light.  There is a continuing misconception that the Liberal Democrats sacrificed too much to the Conservatives during coalition negotiations. Here’s the real story of what we have achieved in Government.

This document is already 3 months old, so the list has grown since then, but it is a good starting point.

Lib Dem Achievements in Government

 

After the first TV debate during the General Election campaign, our opponents recognised that Nick Clegg was our strongest asset.  Since the morning of the second debate, there has been a sustained attack on him personally and on the reputation of the party as a whole.  Even Ed Milliband has resorted to personal attacks on Nick Clegg.  It is disgraceful, gutter politics.  Unfortunately, if you throw enough mud, it will eventually stick.

Nick Clegg is the antithesis of Teflon Tony Blair.  His record, as demonstrated above, is one to be proud of.  I for one, do not think I could cope with excrement posted through my door, my effigy being burnt, being called a traitor and receiving death threats and still come out fighting the way that Nick Clegg did at the Sheffield Lib Dem Conference.

I cannot agree with those in the party that take the attitude that they are in politics to fight Conservatism as a result of Thatcher’s legacy.  Saying that we would only go into a coalition with a discredited, illiberal, economically incompetent Labour Party would doom our party into subservience.

I came into politics and joined the Lib dems to make a difference on issue that I cared about, whether it was the environment, children’s welfare or civil liberties.  I believe in the values of the party, that local people know best about their area, that solutions should last and that everyone deserves a fair chance.

Those values, issues and policies are now being successfully implemented in Government, and it is a record that we should all be proud of.

 

Campaigning on policy, not personal attacks

in a recent article in the Brechin Advertiser about Kevin Hutchens writing to the disbanded City of Brechin and District Community Council, I was reported as being “unavailable” for comment.  I should have stated clearly to Brechin Advertiser reporter Steve Mitchell that even had I not been away on a family break, I would have chosen not to comment in any case.

Whilst Mr Hutchens should really have known about the very disappointing demise of the Community Council, I would not take the opportunity, as my SNP and Conservative opponents, Nigel Don MSP and Alex Johnstone MSP, have done, to stick the knife in to a fellow candidate.

That is because I believe that the Scottish Elections should be about local issues and policy, not about personal attacks.  There are far more pressing concerns for people in Brechin, not least of all the lack of a Community Council.

The town is still reeling from the loss of the Town Centre Regeneration Funding promised by the SNP Government, just as the town had lost its voice through the Community Council. Also, Brechiners will still want to know whether the Scottish Government will help to prevent further flood damage in the town.

I will be focussing, in my campaign, on local issues, not on taking cheap shots at my opponents.

Examing site of Brechin Flooding

Angus Lib Dems back Courier Fight for Fairer Fuel

Senior members of the Lib Dems in Angus are backing The Courier’s drive to put the brakes on crippling fuel prices.

Angus Councillors David May and Alison Andrews are squarely behind the newspaper’s Fight for fairer Fuel .

They praised The Courier’s stand and urged widespread public endorsement for it, a move echoed by Sanjay Samani, Liberal Democrat campaigner for Angus North and Mearns.

Mr Samani explained,

“I have signed the paper’s petition and applaud The Courier for taking this initiative.”

“There is no doubt that a fuel duty stabiliser will reduce the impact of fuel price rises, making a real difference to hard-pressed families and boost businesses in our rural area.”

“I would encourage people in Angus, Tayside and the North East to sign the petition and show their support for this excellent Courier campaign.”

Sign up your support for the campaign by clicking here for the Fight for Fairer Fuel petition on The Courier website.

Montrose member Mr May, Angus Council’s convener of infrastructure services, has added his signature to the petition as a mark of his full support for fairer fuel.

“As Angus is a rural area, our residents and businesses are at the mercy of rocketing fuel costs,” he explained.

“I call on the UK Government to take urgent action to address the rising price of fuel by postponing the scheduled duty increase in April.

“In my view, this would help stimulate the Angus economy as well as that of wider Tayside by protecting motorists, road hauliers and, in particular, our many remote, rural communities from high and volatile fuel costs.”

His colleague Mrs Andrews, who represents Kirriemuir and Dean on the local authority, said a fuel duty stabiliser was essential for fragile communities buckling under soaring prices at the pumps. She commented,

“Where I live in rural Angus, it’s impossible to manage without a private car.  The area I represent has a high proportion of remote communities where petrol and diesel are a necessity, not a luxury. Families and local businesses are all struggling as it is, and rising fuel costs impact painfully on everyone.”

“I would urge the chancellor to apply his imagination to this problem and introduce a fuel duty stabiliser in his budget.”

Sanjay Samani fills up with fuel

Fight For Fairer Fuel