Happy new year

Yesterday we had the final poll of the year – the fortnightly Opinium poll for the Observer, which showed topline figures of CON 29%(nc), LAB 39%(nc), LDEM 8%(nc), UKIP 15%(+1). I’m normally somewhat wary about polls conducted over holiday periods due to the potential of getting skewy samples. In this case the poll was conducted between the 21st and 27th of December, so right over the Christmas period itself, but the results don’t seem to be out of line, in fact they are almost unchanged from a fortnight ago.

With that out of the way I was intending to write a nice end of year round up, but time has gotten away from me, so instead I’ll put together some looks forward to the year ahead over the next week or two. Until then, have a happy new year.

243 Responses to “Happy new year”

1 3 4 5
  1. Others – please stop the silly partisan arguments and point scoring off each other, Amber is not the Labour party, so whether they have a good policy or not is entirely unconnected to Amber’s answer to the question.

  2. AMBER

    Thank you.

    Yes..I do understand “debits, credits & balance sheets”.

    Your post makes little if any sense to me at all.

    I don’t buy the idea that the crisis has made real estate assets more valuable .To the contrary.

    It is the fall in this collateral value which has caused global banks to write down loan book values, which in turn has squeezed their liquidity. And it is this which has dragged Central Banks into the fray with their desperate attempts to pump liquidity back in.

    QE is, in effect, replacing the illusory asset values which disappeared overnight .

    The sovereign debt problems in Spain & RoI have resulted almost entirely from this scenario-excess lending against ballooning asset values, followed by collapse of the latter, bank liquidity crises, government bank bailouts , sovereign debt & unemployment.

  3. NICKP

    @”nterest on those assets already used to reduce deficit.”


    This has allowed GO to reduce annual deficits by around £10bn to £12 bn -a total of £35bn in this Parliament.

    The only virtue in this Mickey Mouse Accounting is that ONS show the effect seperately.

    I am not persuaded by the argument that Japan & US Central Banks did this. INdeed that makes me even more concerned that this is not the result of an exercise in academic monetary thinking-but something much more simple & obvious-another grab at anything which helps get the Sovereign’s Debt down.

    I presume that if/when BoE return their QE assets to the market , they will do so in an environment of sustainable economic growth & interest rates rising to more “normal” levels. Such an environment will depress Gilt prices & BoE may sell at a book loss. Those Gilt coupons would have helped fund that loss.
    Now , the TReasury will just have to make it good come the day.

    It’s ( another) exercise in kicking cans down the road.

    I don’t like it.

    And I accept the inference in your reminder of it, that this blurs the all important distinction between monetary ( BoE) Policy & Fiscal ( Treasury) Policy , and so makes it that little bit harder to reject claims of money printing.

  4. Good start for Labour.

    Cons have it all to do.

  5. Interesting to see former LD care minister speak this morning about pensioner benefits and the need for these to be addressed in spending cuts.

    This is an issue where Tories are in a complete philosophical meltdown, and where I can foresee some electoral difficulties for them in the future. The treatment of pensioner benefits and working age benefits is diametrically opposite. Basic state pension has increased above inflation, there is to be no means testing of winter fuel allowances, and no one has suggested that OAPs get their fuel allowance in the form of heating vouchers to prevent them slipping into dependency on chablis and winter holidays in Spanish time shares.

    This divergence of approach is entirely based on an electoral pledge – but it’s OK for the Lib Dems to destroy themselves by ripping up a pledge that affects students, but Tories can’t be allowed to sacrifice their pledge to the elderly.

    We obviously know why this is – no party really wants to makes waves with the firmest voter group out their. But I suspect that as the welfare cuts bite elsewhere, this will increasingly become a double edged sword.

    There are 100,000 over 65’s with incomes of £100,000+. That’s £20m of completely unjustified expenditure for the winter fuel payments alone. There are already campaigns out there asking well off pensioners to donate these payments to food banks – but why are other benefit claimants (in work and out of work) treated as ‘scroungers’ and not politely asked to consider donating payments they don’t need to good causes?

    As welfare cuts kick in, we are likely to see a swathe of impacts, some minor, some major, and some, like homelessness, devastating. We don’t yet know how widespread or severe these impacts are going to be, but if the worst fears that some people have are realised, there is going to be a backlash against unjustifiably soft treatment of pensioner benefits.

    Apart from being politically difficult for the government, my fear is that this becomes socially divisive. The very last thing the country needs now is to fall into the trap of inter generational warfare. It’s about haves and have nots – age is irrelevant. However, Cameron is now making age an issue by his philosophically incoherent approach to benefits at different points on the age spectrum. If we do descend into generational conflict, he will be the one to blame.

  6. @”If we do descend into generational conflict”

    Blimey-must dig out the old pith helmet & Brown Bess !

  7. @ Colin

    It is the fall in this collateral value which has caused global banks to write down loan book values, which in turn has squeezed their liquidity.
    That wasn’t what happened to UK banks. UK banks over-traded by expanding too quickly &/or lending too much. They ran out of cash to cover salaries & withdrawals. Their expansion investments were written down but their other assets were not significantly marked down; their UK property assets were not marked down nor was the value of their secured lending against UK properties marked down.

  8. @Epochery – “…so in effect taking into acount inflation, will reduce in real terms year on year…”

    One issue with inflation and debt expenditure is that recent bond sales have in many cases been variable rates. I’m not expert in this area, so I could well be wrong, but my impression has been that due to the historically very low rates at present, the government has had to sell more index linked bonds than normal. Therefore, inflation will have an immediate impact on interest payments, possibly more so than in the past. Of course, the redemption value will fall, helping in the long term, as has always been the case with government bonds, which is one of the arguments in favour of government borrowing and against the logically incoherent balanced budget concept.

    I’ve occasionally posted that I see this principle being useful as a potential way out of the entire debt crisis, in particular for the heavily indebted Eurozone countries. If governments effectively defaulted by replacing current debt with new, long dated bonds (30 years or so), banks would still be able to show these as capital assets. I’ve pondered whether these should be zero interest rates, meaning they degrade in value relatively rapidly over time.

    I’ve also wondered whether there could be an interest ‘holiday’, when no interest is payable for 5 years, or staged interest, where the rate starts at a nominal 1% and then goes up every 5 years to a normal rate. This allows countries to adjust the speed of austerity and pursue more growth orientated policies now, while offering bond holders some return in future.

    Perhaps there could also be some form of scheme where if banks agree to write off some of the bonds, an equivalent amount of bonds would become liable for full interest payments – encouraging the banks to write off bad debt in exchange for immediate earnings on remaining holdings.

    The principle is for losses to be crystalized slowly, over time, rather than in a big shock event, and for this time to be used by governments to refocus their own spending and economies to be more sustainable.

    It’s probably a nonsense idea that is hopelessly ill thought through, but I don’t really see any other viable ways that would be less painful.

  9. @Amberstar – “their UK property assets were not marked down…”

    But surely it should have been? There are some pretty dire figures out there showing UK banks sitting on hopelessly overvalued property loans that they have declined to call in, as they know that once they do this they will be forced to book the losses. So they have maintained the fiction that their asset sheets look OK, knowing this to be false.

  10. @ Colin

    QE is, in effect, replacing the illusory asset values which disappeared overnight .
    It isn’t, or the markets simply wouldn’t wear it. AAA would’ve been out the window ages ago, if that were the case.

  11. http://yougov.co.uk/news/2013/01/02/david-camerons-happy-new-year/

    Someone should tell Peter not to write these articles while under the influence of alcohol.

    Over the next few years, I suspect that the Lib Dems will recover a fair bit and won’t do as badly in 2015 as Peter and others may predict. There have been a number of recent by-elections where the Lib Dems have done pretty well against the Tories.

  12. @ Alec

    I’m writing about UK property values. They are solid. Here’s an example.


  13. @ Peter Cairns

    Darling is capable but has three drawbacks.

    He is Scots and that will not go down that well in the Tory South if the Tories portray him successfully as Brown MK2.
    Alistair Darling was born in London.


    Also is a ridiculous (and offensive) generalisation of us Southerners by both Peter and oldnat.

    There has often been substantial support for Scottish politicians in the past and there is zero evidence to back up such claims that support here is ever motivated by a candidate’s nationality.

    The hypocrisy that such accusations are coming from supporters of the SNP is beyond measure.

  14. @ R Huckle

    “There have been a number of recent by-elections where the Lib Dems have done pretty well against the Tories.”

    I was going to reply but it would be deemed as partisan, so I refrained and settled for a good old chortle instead.

    Happy New Year everyone!

  15. @Alec

    |“…100,000 over 65?s with incomes of £100,000+…”

    Hold on, plausibility check. I forget the numbers, so let’s assume there are 10million over 65’s (I figure that’s a big overestimate). So “100,000 over 65?s with incomes of £100,000+” equates to 1% of over65s. That’s as good as the rate for the whole population (which includes retirees, children, and nonsalaried spouses). Given that the over65s would have a larger proportion of women and retirees, it becomes even more impressive. So on the face of it that number is implausible, even considering the poor die earlier. Do you have a source? Conversely, did you mean “100,000 over 65?s with *assets* of £100,000+”? That would be more plausible.


  16. @ Steve

    Yes, it was really only the Jeremy Clarkson types who made anything of Gordon Brown being Scottish. For the most part, the complaints were about Labour swapping leader mid-term without immediately calling an election.

    The funny thing is, if Gordon Brown had been leader in 2005, it’s my understanding that polling showed Labour would still have won. And had Labour called an election straight away after Brown replaced Blair, Labour would probably have won with their Scottish leader & their London born, Scottish Chancellor.

    So I agree with you; the UK had few issues with having a Scottish PM or Chancellor. If anything has changed, it could be because of the SNP’s railing against Scotland being ruled from Westminster. This invites the riposte that Westminster is being ‘ruled’ from Scotland when the PM &/or Chancellor has been elected in a Scottish seat.

  17. AMBER

    UK banks have been hit very badly by loan impairment charges. And these most certainly included both commercial & domestic real estate lending :-


    THe UK banking crisis was triggered, as it was in Spain, by the over-reliance on wholesale funding streams. Certainly , both Northern Rock -the first domino-and RBS had expanded too quickly-and had done so under the unwatchful eye of BoE /FSA.

    However the over reliance on short term, wholesale funding , and maturity mismatch triggered the collapse when the UK inter-bank lending market froze on 9th August 2007-frozen in fear at who held US mortgage backed securities in their Balance Sheets & to what extent.

    h ttp://www.princeton.edu/~hsshin/www/nr.pdf

    And so the process was three stage I think :-

    * Rapid expansion of lending into a real estate asset bubble with over-reliance on non-retail, inter-bank funding with maturities mismatched to cash inflows.

    * Freezing of Wholesale inter-bank lending market , resulting in liquidity crisis & State bailout.

    * Post Credit Freeze recession bursts real estate asset bubble, further damaging bank balance sheets with impairment write downs, and triggering further liquidity -& even solvency-problems.

  18. @ Colin

    The analysis you link to in the Telegraph was provided by Barclays Capital which is currently buying up UK properties & property loans.


  19. @ Colin

    Yes, property speculation in US, Spain, Ireland, Dubai.

    UK property & mortgages = solid.

  20. @Martyn – “Do you have a source?”


    Pages 32 & 33. Written by Paul Burstow, former health minister, actual figure referenced from Policy Exchange, Cold Comfort: Fuel Poverty and the Winter Fuel Payment, p.16, March 2010

    I can’t vouch personally for the figure, but I don’t find it surprising. What would be absolutely astonishing would be if only 100,000 pensioners had assets of over £100,000. Pretty much anyone who owns a house would beat this, so the idea that only 1% of pensioners would be in this category is not remotely plausible.

  21. Amber

    I’m not sure how your Barclays link demonstrates that real estate values are solid.

    The article describes the headlong rush to dispose of impaired property exposure on a massive scale-taking huge impairmant chages in the process.

    Your link mentions an impairment charge for Barclays of £1 bn-a reduction from prior year of £1.5bn.

    Here is another article in the same vein :-


  22. AMBER

    I’m getting the slight impression that you are resisting any suggestion that UK property prices fell & UK banks suffered loan asset impairment as a result.

    Have you not heard of NRAM -what used to be Northern Rock’s & Bradford & Bingley’s residential mortgage book.?

    The last I heard, this “bad bank” bit of NR/B&B was owned by the UK taxpayers.

  23. Ah, gottit. Page 32 says “100,000 households with an income over £100,000 that recieve this payment”, which is similar (but different) to your “100,000 over 65?s with incomes of £100,000+”.

    Your source refer to households with an over-65 in it. Since there are ~25million households in UK, that’s not implausible. However, it’s subtly different from your original formulation (the over-65 may not be the person(s) in the household with the >£100K income).

    So your original point is still valid although the phrasing will need to be more precise (apols to be so picky)


  24. AMBER

    @”he analysis you link to in the Telegraph was provided by Barclays Capital which is currently buying up UK properties & property loans.”

    But who has suggested they don’t lend currently?

    Presumably they do so on the basis of current values………having taken huge losses on their pre-crisis lending.

    If you are saying UK proprty values are “stable” NOW-well all I can say is -I bloody well hope so , but I aint confident.

    But then-I,m not a banker!

  25. @ Colin

    None of the write downs which you refer to are on UK property. Barclays have written back provisions against UK property as unnecessary & increased lending on UK property by £2.5Bn.

  26. @ Colin

    This NRAM

    NRAM’s interim financial results for the 6 months to June 2012 show a statutory profit before taxation of £305m, and NRAM is expected to remain profitable in 2012.
    The NRAM problems were related to issues of mortgage title, PPI liabilities & unsecured lending not the property values.

  27. AW:

    You are right that Amber is NOT the labour party [I said that myself] She is our resident bank and mortgages adviser – and can probably sort out additional loans if anyone needs one after the expense of mince pies at xmas.

  28. @ Paul C

    LOL. I would never give anybody banking or mortgage advice. That’s real money! But QE, I am an expert. ;-)

  29. @martyn – understood, and thanks for the correction. s you say – the point still stands. In an age of austerity, it’s vaguely criminal that we are giving an extra £200 pa to households with huge incomes.

  30. Steve

    Happy New Year.

    My post was nothing to do with “Southerners”. As far as I know, those here in Carolina, don’t have a view on Scottish/UK politics.

    There is a difficult political balancing act to be done in simultaneously persuading those in Scotland that they are economically dependent on the union with England, while persuading those in England that Scotland doesn’t cost them a penny.

    No insult to any was intended to any Southerner – SoCal included.

  31. AMBER

    Fair enough then-all UK mortgage collateral as at the crisis supported their loan values -& still do .

    You wonder what all the fuss was about don’t you.



  33. Alec

    Indeed, comments made by the libdems after the tuition fees farce suggested that there was a deal that the dems would break their student pledge in return for the Tories breaking their oap bus pass and winterfuel payments pledge

  34. ON

    “subsidy junkies sucking on the Engish teat”

    Yes, you could have hardly expressed yoursef more mildly could you?

  35. @ Colin

    You wonder what all the fuss was about don’t you.
    I do, actually.

    When the government can whistle up £375Bn of QE & ‘the markets’ don’t bat an eyelash, doesn’t it make you wonder what all the fuss was about?

  36. AMBER

    Yep-just been reading about RBS/NR/Barclays UK Mortgage impairment charges.

    And PIRC suggesting they still have £40bn of impairment unrecognised in their accounts.

    Honestly-some people eh?

  37. Amber

    ” When the government can whistle up £375Bn of QE & ‘the markets’ don’t bat an eyelash, doesn’t it make you wonder what all the fuss was about?”

    That’s not true, the markets did more than bat their eyelids, Everytime more QE has been announced either here or in the US/EU/Japan/China the markets have raised their skirts showed off their knickers(those that were wearing any) and done a jig. Everytime the central banks have even entertained the possibility of stopping QE the markets have reacted by threatening to cut their wrists and on at least two occasions done so in a very sloppy way

  38. @ John B. Dick

    “Berwickshire, Roxburgh and Selkirk ? I remember the general election David Steel nearly won. 4000 Labour voting anti-Cons shifted at the bye election a few months later. Nowadays the anti-cons vote SNP 2:1

    Caithness, Sutherland and Easter Ross ? Cathness went SNP in 2011 with loss of high personal vote and high profile strong local SNP list MSP.”

    I think you’re falling into the same trap that Labour did in 2011, in thinking that votes for a particular party in one election will automatically transfer into votes for the same party at a different election.

    For starters, theres over 250,000 people who voted in 2010 who didnt turn out to vote in 2011.

  39. @ Colin

    Yep-just been reading about RBS/NR/Barclays UK Mortgage impairment charges.
    What, no links?

    And PIRC suggesting they still have £40bn of impairment unrecognised in their accounts.
    £40Bn; Hmmm, you’d think they’d do something about that rather than just bandying a number around.

    Honestly-some people eh?
    Yes, the rubbish about the financial crisis which you can find on the internet (if go back far enough & look hard enough) is simply amazing.

  40. @ RIN

    Exactly, ‘the markets’ know that governments are not monetizing debt, they are monetizing wealth. There is risk free fees & interest to be had for the taking because the QE is not debt, it is wealth which has already been created as debt but not as money & they are just getting a free chunk of wealth for converting it into cash.

  41. I have just read the Dan Hodges article in yesterday’s Daily Telegraph – utter psephological gibberish!

  42. AMBER

    @”Yes, the rubbish about the financial crisis which you can find”

    Yeah !!

  43. For all my friends here on the left, there is a program called Is Britain overcrowded? on ITV

    You might want to give it a look.

1 3 4 5