Bolitics The New Condem Government

[villaajax]

Think Farage is leading this debate. Clegg is looking quite weak and keeps trying to repeat the same points he made last week.

[CarewsEyebrowDesigner]

Immigration hurts white people.

 

And sod global warming.

 

Classic UKIP.

[Kingfisher]

Ahh, OK. As long as the public sector get them, that's alright.

Seems like a bizarre model for an economy. Robbing Peter to pay Paul. Selling national our national assets to hedge fund profiteers on the cheap to help pay for pensions.

[Kingfisher]

Know nothing lefty numpties? It's been reported in The Mail too...

Of course, Lansdowne are raking in huge profits from this, don't be fooled by this rubbish. It's money that should have gone to the treasury not the pockets of Lansdowne partners or their hedge fund investors.

http://www.compassonline.org.uk/wp-content/uploads/2014/02/Revised-Thinkpiece-Postal-Workers.pdf

How much? Give us a number?

http://www.thisismoney.co.uk/money/markets/article-2552113/Hargreaves-Lansdown-welcomes-77-000-new-clients-doors.html

That's a link about Hargreaves Lansdown. I thought we were talking about Lansdowne Partners, where "Osborne's mate" works.

Well I'm sure you can find the correct company figures and share them with us. It's probably all lefty bollocks I read from that famous lefty blogger, The Daily Mail.

[Avfc96]

Even though I don't particularly like either Farage or Clegg, Farage won that debate. 

[villaajax]

Even though I don't particularly like either Farage or Clegg, Farage won that debate. 

 

Farage is a mad man but he believes in what he is saying that's why he can deliver it with conviction. Clegg is weak and doesn't sound like he has even convinced himself.

[donnie]

Immigration hurts white people.

And sod global warming.

Classic UKIP.

He didnt say that though did he.

[Risso]

 

All I've tried to do is inject a bit of realism into the debate, rather than taking the word of frothing-at the-mouth blogs as gospel.  It's almost certainly the case that the Royal Mail was sold off too cheaply, but even with that being the case, you have to consider these facts:

 

The report that suggested injecting private capital into Royal Mail was written under the last Labour government.

Peter Mandelson was a massive advocate of selling Royal Mail.

A hedge fund's holding of shares increasing in value does not mean that that firm has gained that amount of money.  The money invested belongs to other people, eg pension companies.

One director of that hedge fund certainly isn't benefitting to the tune of £36m

One of the biggest holders of shares in Royal Mail is a fund that exists to benefit kids in developing countries

Hedge funds typically take a small percentage of their funds under management as a charge.  The hedge fund in question has BILLIONS of pounds of assets under management.  To think they'd do anything shady for something as relatively paltry as £50m is absurd.

 

It's good to read comments from someone sort of in a related industry.

 

It seems to me that it's inarguable that it was sold off too cheaply, as you say.

It also seems to me that while there's no evidence of anyone doing anything illegal, there's a suspiscion that the Gov't people were somewhat hoodwinked by the financiers. It's clear from the Gov't NAO report that various institutions did not keep their word (selling off shares they were supposed to be keeping, and thus making big bucks from that) It also seems clear that there's more than a hint of the chinese walls that were supposed to seperate their advice to Gov't aspects from their normal roles as working for themselves and their other clients.

It's difficult because Gov't doesn't have the expertise to set the price and should take advice from places that ought to have that expertise.

 

It seems like something stronger needs to be done to seperate advisors from acting with two interests. That should not be permitted.

 

I read the report from the Tory man, and it seems sensible up to the point where he starts talking about selling the Royal Mail. It was profitable, efficient, effective and so on in commercial terms. The comment he made about the RM needing to access private money, rather than compete with hospitals etc for Gov't money has 2 angles - the first is totally political - relating to private or public sector, and the second is kind of "why couldn't a public utility also go to the markets for money - a kind of arms length, but still public owned company?

 

To me it looks like the RM had been sorted out in recent years, was perfectly OK as it was, more than OK, and the selling off of it, for a low price was not done well and was not necessary. The way that institutions were favoured over ordinary investors was inadvertently or deliberately typical of the way the Gov't has been favouring their mates and donors over normal folk.

 

I'm not fussed whether Mandleson was for or against it. Labour manifesto said keep it public (again, presumably on political grounds).

 

Ultimately it's another case of this Gov't messing up everything they touch. Too cheap, the wrong split between the general public and big finance, inadequate safeguards to stop institutions taking advantage.

 

And that's before the political thing of selling it in the first place, which on balance I think was also wrong.

 

 

I don't work in any sort of related industry really, but anyway.

 

Yes, as I said, it can't be argued that the RM wasn't sold off to cheaply.  And as you say, the government themselves wouldn't be experts in setting the price, and appear to have been badly advised by the corporate finance firm who provided that advice.  That however, is a completely different kettle of fish to deciding to set an artificlally low price so that your best man can make a few quid.  The NAO report also reports that there were Chinese walls in place that should have prevented Lazard from benefitting from the sale.  Whether they were breached or not, isn't clear.

 

As for the reasons for the sale, that's one part where I don't agree with you.  I think the government correctly decided that the EU requirement for a universal postal service would be better met by the private sector, especially in a time where what little public money there is is obviously stretched.  As for the allocation favouring big business over retail investors "normal folk", well I dunno.  I think it was something like a 60/40 split.  How that compares to other IPOs, I have no idea.  I suppose though, if you want to have a successful sale, you need certainty that you're going to get a wedge of big investment funds to definitely hand over money.  As I say, I don't work in a related industry at all, so I don't know what a usual split between institutional and retail investment is.  The only "normal folk" who didn't get any shares were those who tried to buy over £10K worth.  If they've got that much money to bung on buying shares, they're probably all called Tarquin and vote Conservative anyway, so who cares anyway, right?

 

And I don't really care what Mandelson said either, it was just a throwaway comment in reply to the "even Thatcher wouldn't sell....." comment.

 

But anyway, nice to have a bit of considered debate that goes beyond repeating daft headlines.

[Risso]

 

Just another point on the trusting institutions thing - The gov't looks like it just kind of took the word of these financiers, there was seemingly no checks,nothing written down contractually prohibiting them taking advantage, it was just sort of accepted that either they'd be honest, or that perhaps it was understood tacitly, that of course they'd make a sharp 10s of millions for no work in no time.

 

That kind of contrasts with how people claiming a paltry sum in benefits are treated - subjected to (appalingly conducted) disability checks, compulsory interviews, that kind of thing.

 

Funny that.

 

Awww, and you were doing so well!

 

Of course there were things written down, and there did seem to be an attempt to do the things you said they didn't.  Whether they worked or not, is another thing entirely of course, but it doesn't appear to be correct to say they weren't in place.  From that NAO report:

 

"The Department’s contract with Lazard & Co. specified correctly that the information barrier between Lazard & Co. and LAM must be complied with in order to prevent the LAM team obtaining confidential information, and considered that it could rely on the general regulatory and legal provisions to protect its interests. Lazard & Co. took additional precautions to manage potential conflicts of interest by ensuring that it did not participate in solicitation of investor feedback from LAM or provide LAM with any non-public information about Royal Mail."

 

"Syndicate members often also have asset management arms and information barriers, legal and physical separation and regulatory and contractual protections are in place to manage potential conflicts between the asset manager and the investment bank."  "This activity is in the ordinary course of business for an investment bank marketing an IPO."

 

So, while it may not be as arms length as you'd like, it doesn't seem that the government did anything different to anybody else trying to float a company.

 

[peterms]

Banks have been fined many times in the last few years for multiple acts of impropriety, collusion, and downright fraud. In many cases they have been allowed to hand over large wedges of (shareholders') money to avoid being prosecuted.

You would need the naivety of a child to trust them not to pass information to their colleagues to make a few million quid.

[donnie]

So on the yougov poll 69% of people thought Farage won the debate today.

Just proves that the MAJORITY of the general public have real concerns regarding immigration and the EU no matter how much the main parties try and sweep it under the carpet.

Hopefully the main parties take note of this and actually tackle real issues the public are actually concerned with.

UKIP are still unvoteable as are all the other main parties at this time. Personally hoping Miliband finds a backbone and comes up with some real polices so we can have Labour back in power.

[dont_do_it_doug.]

It doesn't prove anything except that he won a debate against Nick Clegg.

Edited April 2, 2014 by dont_do_it_doug.

[blandy]

So on the yougov poll 69% of people thought Farage won the debate today.

Just proves that the MAJORITY of the general public have real concerns regarding immigration and the EU no matter how much the main parties try and sweep it under the carpet.

Hopefully the main parties take note of this and actually tackle real issues the public are actually concerned with.

UKIP are still unvoteable as are all the other main parties at this time. Personally hoping Miliband finds a backbone and comes up with some real polices so we can have Labour back in power.

I don't think I've agreed with anything I've seen that you've written previously, but to a degree I accept what you said there. Not the labour bit, they're as disconnected as they've been, so I'm not fussed about them, but you're right that the main parties and politicians generally, for massively different reasons are not in tune with the population as a whole, or the concerns people have.

I don't think any party has the answer, because they're just not connected enough to...people.

I don't think UKIP, BNP, EDL any of them are remotely on the right lines, but Farage does express things that have been kind of hushed over to a degree by the others. We shouldn't ignore that view, even if we think they're nutters.

[Jon]

So on the yougov poll 69% of people thought Farage won the debate today.

Just proves that the MAJORITY of the general public have real concerns regarding immigration and the EU

No, it doesn't, as Douglas has noted. A YouGov Poll indicates that Farage 'won' (performed better than the other guy) a debate about Europe and immigration etc.

 

It DOES NOT 'prove' that the MAJORITY of the general public have real concerns regarding immigration and the EU. Perhaps they do. A great many have such concerns, undoubtedly. A great many would also put the EU and immigration somewhat lower down the importance scale, behind things like Education, the NHS, the economy etc.

[Risso]

 

So on the yougov poll 69% of people thought Farage won the debate today.

Just proves that the MAJORITY of the general public have real concerns regarding immigration and the EU

No, it doesn't, as Douglas has noted. A YouGov Poll indicates that Farage 'won' (performed better than the other guy) a debate about Europe and immigration etc.

 

It DOES NOT 'prove' that the MAJORITY of the general public have real concerns regarding immigration and the EU. Perhaps they do. A great many have such concerns, undoubtedly. A great many would also put the EU and immigration somewhat lower down the importance scale, behind things like Education, the NHS, the economy etc.

 

 

You and the Blandestine one are correct.  Most people, when posed questions about immigration will have some sort of concerns, from minor through to  That doesn't mean they're massively high on most people's list of things to worry about.  Also, the more unpleasant extremist parties like UKIP, the BNP and Labour sticking in some sensible policies to give themselves a veneer of respectability doesn't mean they should be taken seriously.

[Kingfisher]

I didn't watch last nights 'debate' between the euro sceptic wing of the Tory party and the liberal wing of the Tory party.

[blandy]

 

 

Just another point on the trusting institutions thing - The gov't looks like it just kind of took the word of these financiers, there was seemingly no checks,nothing written down contractually prohibiting them taking advantage, it was just sort of accepted that either they'd be honest, or that perhaps it was understood tacitly, that of course they'd make a sharp 10s of millions for no work in no time.

 

That kind of contrasts with how people claiming a paltry sum in benefits are treated - subjected to (appalingly conducted) disability checks, compulsory interviews, that kind of thing.

 

Funny that.

 

Awww, and you were doing so well!

 

Of course there were things written down, and there did seem to be an attempt to do the things you said they didn't.  Whether they worked or not, is another thing entirely of course, but it doesn't appear to be correct to say they weren't in place.  From that NAO report:

 

"The Department’s contract with Lazard & Co. specified correctly that the information barrier between Lazard & Co. and LAM must be complied with in order to prevent the LAM team obtaining confidential information, and considered that it could rely on the general regulatory and legal provisions to protect its interests. Lazard & Co. took additional precautions to manage potential conflicts of interest by ensuring that it did not participate in solicitation of investor feedback from LAM or provide LAM with any non-public information about Royal Mail."

 

"Syndicate members often also have asset management arms and information barriers, legal and physical separation and regulatory and contractual protections are in place to manage potential conflicts between the asset manager and the investment bank."  "This activity is in the ordinary course of business for an investment bank marketing an IPO."

 

So, while it may not be as arms length as you'd like, it doesn't seem that the government did anything different to anybody else trying to float a company.

The last line is the gotcha, really. The NAO report also says

we consider that departments should examine ways to reduce reliance on professional advisers for judgements affecting taxpayer value. When they are appointed departments should ensure that advisers’ responsibilities do not create tensions with the need to obtain value for the taxpayer. In this instance, the Department delegated a wide range of responsibilities to its independent corporate finance adviser and aligned its incentives with the policy objective of achieving a sale. The taxpayer interest was not clearly prioritised within the structure of the independent adviser’s role

and

...an Office of Fair Trading market study published in 2011 identified the potential for conflicting interests in some circumstances between the provision of equity underwriting services and the sales/distribution services. The OFT found a number of features of the equity underwriting market which provided reasonable ground for suspecting that competition for equity underwriting services is prevented, restricted or distorted in the United Kingdom....however, it decided that it was not appropriate to exercise its discretion to make a market investigation reference to the Competition Commission.

and

...of the seven investment banks in the syndicate, we have identified that at least five were allocated shares on behalf of their asset management arms for distribution to their clients...

and

...The Department took the view that excluding advisers linked to asset managers from the competition for the role of independent financial adviser would have constrained the choice of advisers available to it....

which kind of more than hints at "everyone knows there's something a bit ropy, and there's been plenty of formal evidence that says so. But, well, it kind of suits all parties (except the taxpayer in this instance) to kind of carry on as we've always done...yes something should be done, but maybe next time, eh...?" and so it goes on.

So yes, there was something written down, but it didn't actually do the job and wasn't actually rigourous enough that any party could be gone after for doing something a bit naughty. It looks awfully like a fig leaf, covering up the nod and wink that seems so inherent in these kind of IPO/rights issue thingies.

* and about the "working in a sort of related line of work" - I just meant that you seem to review/audit (whatever the word is) various financial accounty things, so would know more about this sort of thing than a lot of folk. I didn't mean to imply you'd be party to any nefarious doings, heaven forfend.

[Risso]

Agree with all that Pete.  However, I would add that the point seems to have been slightly lost that although it's a privatisation of a government company, in reality it's no different in respect of the processes involved to any other flotation.  That means you have to use the firms available to do the job and in reality although everybody would like to reduce the use of "experts" in cases like this, in reality, what are the alternatives?  You couldn't have politicians themselves doing it, on the basis that they a) wouldn't have the required skills and b ) wouldn't be even remotely independent.  Or you have a specialised department of civil servants, but the problem there is that there aren't enough privatisations to make it worthwhile, and people with the skills earn 10 times more in the private sector.  (I suppose the obvious answer is not to privatise anything, but I'll leave that for the hemp-wearers to point out.....)

 

Oh and I wasn't suggesting that you were suggesting anything of the sort, I just didn't want you to think that my mutterings were backed by anything worthwhile.

Edited April 3, 2014 by Risso

[MakemineVanilla]

When it comes to assessing the selling of Royal Mail it is better to just ask who benefits from the sale.

 

The country? Hardly. The sale raised a little under £2bn or 0.2% of what the government spent in 2013, but Royal Mail's pension liabilities of £37.5bn were handed to the tax-payer, so no one would be advised to hold their breath, while they wait for the government's remaining 30% stake to yield enough dividends to pay that little lot off. 

 

Investors? Definitely. They have already benefited substantially, which they expected. They dictated the price of the shares to the government demanded that small investors were excluded and made millions by doing nothing. They also enjoy the protection of limited liability which means even if the company fails, they lose nothing and will be confident that the government will look after them should the company go broke. 

 

Royal Mail workers? Absolutely not. The greater efficiency which is supposed to be the benefit of the private sector, will be squeezed from Royal Mail employees by greater workloads, worse pay and conditions and lousy pensions (for new employees). For every penny invested the workers will be expected to produce at least a 20% return on that capital.

 

Customers? Never! With Royal Mail still holding a virtual monopoly on delivering letters and regulation on pricing has been removed, in a sweetheart deal with investors, customers are going to be paying much more, for a worse service, while they are subsidising Royal Mail through their taxes (paying those pensions).

 

Government? The sale of Royal Mail stands as a ideological milestone for the government, as the sale ends one of the few remaining examples of low status workers enjoying the privileges, pay and pensions, which are reserved to public employees of a higher status. Royal Mail workers' superior pay and conditions stood as an ugly anomaly, in a market economy where wages have been systematically driven down as a matter of policy, for unskilled workers. They will just see the huge loss to the tax-payer as a price worth paying for the political advantages of succeeding in asserting their ideology. It seems certain that the conditions of the sale were deliberately put in place to ensure their political success, while avoiding potential embarrassment. The government will consider the few hundred million it has cost the tax-payer as a price worth paying.

 

So financially trivial in the scheme of things but an essential battle won by a government in its on-going war to reduce the labouring classes to the status of peons, who will provide cheap labour for business and require a subsidy in the form of tax-credits from the rest of us. 

Edited April 3, 2014 by MakemineVanilla

[snowychap]

The country? Hardly. The sale raised a little under £2bn or 0.2% of what the government spent in 2013, but Royal Mail's pension liabilities of £37.5bn were handed to the tax-payer, so no one would be advised to hold their breath, while they wait for the government's remaining 30% stake to yield enough dividends to pay that little lot off.

The assets of the pension scheme were also taken on, weren't they?

The net figure's not £37.5 thousand million but nearer 9.5, isn't it?