Stepping back

Lots of comments about how exchange rates and equity-price movements show that the UK is (a) doomed or (b) well-placed post-Brexit. Movements and values over a few days tell us nothing except the climate of hope or fear in those few days. How do things stand on a broader perspective? Let's compare:

A. Currencies: USD vs GBP vs EUR

B. Markets: FTSE100 vs FTSE250 vs Dow vs DAX

Promote industry. Bag a banker.

Boris Johnson is quoted in MoneyWeek as having said to Management Today:

"To the banker bashers I say, what's your economic model? We can't ignore and hate the bankers. What would that achieve? Show me how reducing financial services boosts manufacturing."


For years, the UK ran a massive balance of trade deficit, i.e. as a nation we bought and consumed more than we produced and sold. It is no more sustainable for a nation's income to exceed its outgoing than for an individual.

A business unlike any other

According to Angela Knight, Chief Executive of the British Bankers' Association:

"A bank is like any other business - if its fixed operating costs go up then so does the price of its product."

Angela has provided a nice illustration of how (a) banks are not like any other business, and (b) she has the same grasp of business and economics as most other politicians.

Banking on the taxpayer

Third in the list of this week's bad policy ideas* is the revival of talk of a state-owned or -backed infrastructure bank. The FT wrote approvingly of how both major UK parties are considering this option:

By reducing the risk to investors, it could bring down the cost of capital for the industry and hence the ultimate cost to consumers... 

The bank could fund projects such as nuclear plants and wind farms, spreading the risk over a range of investments and issuing bonds that could carry tax advantages and possibly a state guarantee...

In return for the cheaper funding, the industry would have to accept tighter regulation, moving away from the UK's free market for energy towards a framework of returns agreed between companies and the regulator.

The Conservatives' New Economic Model, launched on Tuesday, promises:

We will create Britain’s first Green Investment Bank, which will draw together money currently divided across existing government initiatives, leverage private sector capital to finance new green technology start-ups and back the bright ideas of the future. Lord Stern has agreed to advise us in the creation of this Bank. 

It turned out that Lord Stern had agreed no such thing, thank goodness (haven't the Tories noticed that fewer and fewer people think the Stern Review's approach to carbon valuation holds water?). But that's just a sideshow. The point is that, with or without Stern, the Tories are quite committed to the concept.

Meanwhile, Labour (according to the FT) is:

considering such a bank as a way to raise funds from long-term investors such as pension funds

It looks like most of our intellectual class thinks we need goverrnment-managed lending to deal with the difficulties of long-term investment in infrastructure. They are wrong. We need to deal with the reasons that businesses judge there to be insufficient reward to justify the risk of investment in infrastructure, not preserve those inefficiencies by hiving off a chunk of the risk to taxpayers, pension-fund beneficiaries and the like. The following is an attempt to explain how and why.

The biter bit

In this week's MoneyWeek (best economic journal out there at the moment), an article by Simon Wilson on the risk of a "City exodus", prompted by Darling's special bankers' bonus levy, included the following sentence:

"The confusion over whether certain businesses will end up paying this tax is symptomatic of the wider problem faced by the City of London - increased uncertainty and political risk."

Good! It's called "sovereign risk", and I hope they choke on it. The rest of us have been swimming in it for years, thanks to the micro-managing, targeted mechanisms that successive governments have deployed and repeatedly modified, in order to encourage preferred technologies and outcomes (i.e. "pick winners"). And which group of organisations were most instrumental in advising the government about which winners to pick and how to incentivise them? That's right: their corporate pals, and in particular the financiers and consultants in the City. The banding of the RO, and the EU-ETS farrago are classic examples, but there are many others in the energy sector alone.

It's tempting to hope that this might be a salutary lesson that teaches them to oppose targeted intervention, but there's as much chance of corporates, consultants and pin-stripes renouncing rent-seeking and admitting the limits to their knowledge and intelligence, as there is of Gordon Brown admitting he screwed up.

Corpulent Antisocial Irresponsibility

The latest Economic Affairs (the quarterly journal of the Institute of Economic Affairs) arrived today. Its leading topic - Corporate Social Responsibility (CSR) - reminded me that I never published the short talk I gave at an EU "stakeholder" workshop on CSR (or Environmental Social and Governance [ESG] disclosure, as they have re-named that rancid and decaying rose) in Brussels a few months ago. I thought it might be of some interest: (I didn't choose the title.)

Why do some enterprises choose not to disclose ESG information? 

Let me be clear first about two reasons why I am not opposed to ESG Disclosure.

  1. I am not opposed to companies taking account of environmental and social issues. We do, to a greater extent (relative to our size) than most companies who are enthusiasts for CSR.
  2. I do not argue that small companies should be treated differently to big companies. A sign of a bad system is one where it is necessary to treat small companies differently to big ones.

Indeed, I am not opposed to companies choosing to promote their environmental and social activities in any way they choose, including ESG Disclosure if they want.

What I oppose is any attempt to make it mandatory, or to give preference to companies who do it, or to make it a condition of doing business, or indeed to portray it as somehow virtuous or effective.

Running a business is not easy. Businessmen have large amounts of information to digest, possibilities to consider, and responsibilities to uphold. They must be good at predicting the future course of events, and at reacting quickly to changes they didn't foresee. They must be able to tell the difference between conventional wisdom and fundamental truth. Failing to do so can be catastrophic, as we have had to learn yet again.

Anything that distracts them from this focus - that complicates their judgments or clouds the information available to them - can be detrimental not just to their business, but to society at large. CSR does exactly that.

Accounts and prices are ways of condensing a lot of information into an easily-comprehensible, commensurable form. Commensurability is key to business information, and it is absent from the many CSR standards. What does it mean when we quote an “employee engagement score”? How do we weigh a change in that score against a change in our “business practices measure”? Can we compare our “business practices measure” against other companies' “business practices measure”? And where these scores are achieved through surveys, what are we really measuring – fundamental performance, or how we have influenced people's perceptions on the issue?

Even where you think you have something objective, like a firm's carbon footprint, it often turns out to be illusory. For example, BT (a firm with a strong reputation for CSR) claimed to have cut their carbon footprint dramatically by buying "green electricity", when in reality their contribution to the carbon savings was negligible. Despite an unfavourable decision by the energy regulator, BT maintain this fiction in their latest CSR report.

Where you have a material externality, the right approach is to create an appropriate institutional framework to internalize it. Businessmen and other leaders will then be able to take account of it through their conventional business tools and will have sufficient incentive to act where appropriate. Investors will be able to measure a business's success in acting on the externality through their single bottom line.

What drives real change is not fine words and woolly numbers in glossy reports, but incentives of sufficient value that they justify action. One danger of CSR is that, by creating greenwash for companies to pretend that their minimal and often illusory contributions are somehow significant, it provides cover for those companies to oppose measures that would have real effect.

We must judge, promote and reward businessmen according to their entrepreneurial ability, not their ability to direct or present their company's activities in a way that accords with some prescriptive attitudes to certain social and environmental issues. Otherwise, we will end up with the wrong type of people leading homogenised businesses, undermining the diversity that is vital to the effective functioning of markets.

All of the following businesses were strong proponents of CSR: ABN Amro, ING, Bradford & Bingley, Northern Rock, HBOS, RBS, Woolworths, Anglo Irish Bank, AIG, Bear Sterns, Lehman Bros, Merrill Lynch, Morgan Stanley, Washington Mutual, Fannie Mae, Freddie Mac, SachsenLB, Hypo Bank, Kaupthing, Martinsa Fadesa, General Motors, Chrysler, Nortel, and of course Enron before that.

I don't intend to be that type of businessman running that type of business.

Mandelson's latest "winner" in pension fraud?

I can't beat the beautiful job Richard Tyler did in yesterday's Telegraph on a classic example of winner-picking under our Lord and master's revived industrial policy, so I'll just quote bits of it. Click the links to read the articles - they are well-worth reading.

Staff at a company whose parent group was rescued by Lord Mandelson's taxpayer-funded venture fund have discovered that their pension payments have gone missing.

Chris Allner, head of private equity at Octopus Capital, one of two fund managers appointed by the Business Department to invest the £75m fund, said: "In respect of us investing taxpayer and bank money, we are comfortable that we did as much as we could to uncover all the potential and actual liabilities of the [KeTech] group."  

A spokesman for the Department for Business declined to comment on the investigation into the missing pension money but said the investment in KeTech would "help secure the future of more than 130 jobs which were at risk".

As some readers have commented on my blog, imagine owning and running a successful business, which still has bank support. Then you discover that your poorly run rival has not only been bailed out with public funds but it can now undercut you on price because they have been incentivised with cheap/free money to retain more staff than they actually need.

Lord Mandelson champions active government. He sees political mileage and economic benefit to be had from the state doing more. His "industrial activism" has industry excited. It likes the sound of central planning, certainty and government subsidies. But it wants to see how the strategy is to be implemented in practice.

Lord Mandelson tells me that his department can conduct surgical strikes that will ripple out and benefit the wider economy. "Our investments may be small but they can be disproportionately economically significant if those investments are taking place in the right, innovative, fast growing companies. That's how I would justify our activism," he says.

So I asked him if this meant heading back to a 1970s style of industrial policy where government tried to pick winning companies? He hesitated. "It's not picking winners. It's backing some winners but inevitably not all. Most will not need our help but those that do need our help, we should."

That's a "yes", then.

Sign of The Times

A couple of small stories on the property market recently have illustrated the extent to which the media seem to have given themselves the job of talking up the market. For a brief while, The Express stood alone in its determination to see every oncoming train as the light at the end of the tunnel. But now most of the media seem to have joined the corporations and the politicians in the determination to see the good news in every story. It is as though they all looked into the economic abyss around March, decided that the psychological theory of the business cycle was the only hope, and thenceforth have treated stories of optimistic surveys, positive projections and "smaller than expected" losses and declines, as more important than hard statistics of economic decline, stagnation, deficit and devaluation.

The first example was from last week. Persimmon announced a pre-tax profit of £9.8 million. Compared with expectations of a loss, this was treated as good news. Nevermind that this headline figure was one-third of last year's figure, which itself was a feeble profit for a company of Persimmon's supposed size and valuation. But even that modest amount was a fiction. This "profit" was only achieved by writing up (increasing the book value of) Persimmon's landbank. Without this write-up, they would indeed have made a spanking loss. But this was treated as the second piece of good news in the story. Let's not question whether it was reasonable for Persimmon to write up the value of their landbank when they and their competitors are making losses in a stagnant market where prices are down further from the level when they wrote down the value of their landbank. To the media, this convenient fiction must unquestionably be a sign that property values are heading upwards. So a real loss against a background of minimal activity and falling values is converted into a profit and rising values. Hallelujah!

The second example is from a snippet in today's Times, which was short enough to quote in full:

"Signs of life returned to the office sector yesterday as Land Securities announced that it had let offices at Thomas More Square, on the edge of the Square Mile in London, to News International, parent company of The Times, for £4.2 million a year for ten years, with an 18-month rent-free period. The deal, for 192,000 sq ft, was one of the biggest lettings so far this year and would provide a boost to the London office market, where vacancy rates had risen by 4 per cent, according to CB Richard Ellis."

Well, that is good news. Presumably, News International employees had previously been homeless: hot-benching in the park, networking on street corners, posting their reports at Internet Cafes. They must have been, because if they had been at another office, there would be no net gain to report, and no boost to the market in general, just a benefit to the new landlords and a loss to the old. In a slump, it wouldn't be surprising to find companies moving offices, as they are able to trade up (moving to a more salubrious neighbourhood) at reduced costs (for example, 18 months rent-free, though in this case, that is just a coincidence, nothing to do with a weak market, nay, an indication of its strength). In other circumstances than the current benign climate, it could be seen as part of the downwards pressure on prices in a market with excess capacity due to reduced economic activity. A cynic might even call a movement to more upmarket premises at reduced costs a sign of bad times. But that can't be it in this case, because this was not just a nice change of venue for News International and a convenient rent-holiday, but a general boost to the office property market. Apparently...

I'm glad we're in such good shape. As the wishing-well approach is working so well, let's close our eyes and wish really hard for victory in Afghanistan by Christmas, a return to balanced government budgets next year, and an end to poverty within the decade.

Liquidating reality

Can we get one thing straight? Administration and liquidation do not destroy productive assets or viable jobs. If the assets can be put to profitable use based on any valuation down to a penny, they will be put to that use, unencumbered by the debt that had weighed down on them, as the company emerges from administration or the assets are offered for sale at liquidation. If they are not even worth a penny in that process, then the value had been destroyed before the company went into administration or was liquidated – either because the market changed (i.e. people no longer valued the products to whose production the assets contributed enough to justify the ongoing cost of the asset), or because the managers who invested in the asset made a bad judgment in the first place. Either way, administration and liquidation offer the best way of discovering whether someone with better judgment than the existing management thinks they can make profitable use of them.

Likewise for jobs. If someone believes that they can make a profit out of the use of an insolvent company's assets, they will need employees to operate the assets. If the best use is the original use, the existing employees will be able to carry on as before (although possibly with reduced remuneration that reflects the economic realities). If the best use is a change of use, some employees may be able to retrain, and others will lose their jobs, but still others will gain jobs created by the change of use. If no profitable use can be found, the jobs, like the value of the assets, had been destroyed by the market and the management before the company went into administration.

Subsidising an insolvent company to maintain the existing jobs destroys jobs in the round, it does not conserve them. The subsidised business is continuing to do something unprofitable, requiring taxpayers' money to keep it doing that. It is destroying wealth by continuing to use the assets for a loss-making purpose, when we could be creating wealth (if a profitable alternative could be found by an administrator or purchaser) or at least not destroying more of it, by spending good money after bad (if the best that we can do with the assets is send them to the knacker's yard). The amount of taxpayers' money needed to keep the thing afloat exceeds the value that it adds to the economy (otherwise it could raise the money by other means than relying on the taxpayer). At the margins, those unnecessarily-high taxes are destroying jobs, and because the cost exceeds the benefit, more jobs are being destroyed elsewhere than are being conserved by the subsidy. Unfortunately, politicians, the commentariat, and the public can see the direct effect of the jobs being conserved, whereas they cannot easily spot the indirect effect of the jobs being destroyed, though if they stopped to think about the levels of unemployment in the circumstances where governments prop up bad businesses (usually a downturn), it might occur to them that taxes to subsidise bad businesses do not appear to be helping at a wider level.

Finishing the job

Staying to "finish the job" has become the favourite excuse for failures clinging limpet-like to their jobs. Alistair Darling and Gordon Brown have both used the excuse in the last couple of days. And many of our failed bankers and other business leaders have used it before that.

At what point is the job of a politician or business-leader finished? Will Gordon, at some point, say: "OK. Job done. No need for a Prime Minister any more"? Does Alistair hope at some point to put the economy into such a steady state that we can do away with the role of Chancellor?

Or are they just cringe-worthy, lying bastards who will use any form of words to justify clinging on to power and privilege, believing (probably rightly) that a big enough proportion of the media and public are sufficiently gullible or apathetic that they won't challenge them on what a load of balls they are talking?

I suggest that anyone using this as an excuse for why they should continue in their job should be dismissed instantly for evident stupidity or insincerity.

The Department for Picking Winners

The press seem determined to ignore a crucial aspect of Peter Mandelson's accumulation of power. They are very interested in the symbolic and honorary aspects, such as the award of the titles of First Secretary of State and Lord President of the Council. But most of them are reporting that he remains in charge of BERR. He does not. BERR no longer exists.

The Department for Innovation, Universities and Skills has been merged into the Department for Business, Enterprise and Regulatory Reform to form the Department for Business, Innovation and Skills. I am all for reducing the number of departments. But the nature of the merged departments indicates something more important: the revival of industrial policy continues apace, and this department will be its powerhouse.

This government knows nothing about entrepreneurial innovation. Its only contribution to the field is the negative one of providing perpetual competitive advantage to corporate incumbents, who have vested interests in maintaining the status quo and disadvantaging innovative new entrants. This government couldn't distinguish a real entrepreneur (not the fiction-peddlers in the City, nor the publicity-hunting media-darlings, but the iconoclasts who try to build real, innovative businesses) from a trades-unionist.

Hence the appointment of Suralan (soon to be Lordsugar) as Enterprise Czar. This was presumably inspired by the huge success of Lorddigby (most recently seen marching in support of protectionism for our car industry). If the Government and Suralan understood entrepreneurialism, they would know that entrepreneurs do not want or need a Czar to represent them in government. They need the Government to stop meddling, micro-managing and picking winners, so we can have genuine competitive markets in which innovative ideas thrive or fail according to their merits, and not according to how well they fit with the Government's latest ideas of what the outcome of the market should be.

A department that combines responsibility for businesses with responsibility for the least commercial group in the world (academics), run by people (ministers and civil servants) who have absolutely no commercial experience themselves, will end up rewarding those who try to implement academic cloud-cuckoo schemes and punishing those who are more interested in commercial reality. This has been the effect of the various grant schemes in the energy sector (and probably elsewhere) since time immemorial, and yet these efforts to sponsor white elephants are about to be re-doubled, at a time when we can afford them even less than usual. The new department will throw money at grandiose schemes dreamed up by academics who promise the earth without the responsibility of having to put their money and reputations where their mouths are. And because these grandiose schemes will require enormous amounts of finance, the big corporations will be invited to participate, in exchange for providing that part of the funding that is not provided by taxpayers. The commercial advantage this will provide to big businesses, and ideas that would be uncompetitive without the public funding, will crowd out private efforts, genuine innovation, and the smaller businesses that have usually been responsible for real innovation.

On the other side of the equation, industrial policy will appear to create jobs, and profits for those businesses favoured by involvement in government-approved enterprises. It will create the illusion of economic recovery, which is exactly what the government is reckoning on, whilst embedding uncompetitiveness and corporate influence further into our economy. Eventually, many years down the line, we will discover that we have created our own General Motors, just as we did with our nationalized industries.

Economic development is only sustainable and real where it allows genuine competition undistorted by government intervention, favour and planning. But a lot of people can be fooled otherwise for a long time, especially when they have forgotten or misunderstood their history. It wasn't public ownership that was the big problem in the seventies, but the protected position of favoured, and consequently lazy and ossified, enterprises. There are many ways to achieve that without full public ownership, but with just as negative long-term implications for innovation, competitiveness and the economy. The Government has been driving in this direction for many years in the energy sector, and probably many others. It is about to get worse.

The opposition parties do not have a significantly different attitude, as Tory policy on STEM (Science, Technology, Engineering and Maths) demonstrates. It is past time for entrepreneurs to get out of the country.

Sir Callamity McCarthy - a real villain of the depression

Photo of Callum McCarthyFingers have been pointed in the direction of many different culprits for the critical condition of our economy. I am surprised that they have not been pointed more frequently at Sir Callum McCarthy. We don't need to swab him for gunshot residue; he is spattered in blood, holding a smoking gun.

Two things in particular have made life particularly difficult for people in the past 18 months: energy prices that shot up as world prices went up and then failed to come down at the same rate, and unavailability of credit because of the failure of our financial systems. Of course, Callamity was not totally responsible for either. But he was at the scene of the crime with blood on his hands for both.

The speed at which energy prices rise and sloth with which they fall is a sign of an uncompetitive market. So is massive profit-expansion when costs are rising.

There is a reason why our energy markets are uncompetitive. When electricity was privatised, the Conservative government deliberately separated the generation businesses from the supply and distribution businesses (the Regional Electricity Companies, or RECs). It was essential to creating a liquid trading market for electricity. If suppliers generate most of their own electricity, only marginal production is traded in the markets. That leaves independent generators selling at a disadvantage, when their customers are also their competitors. And the same goes for independent suppliers, who must buy electricity from their competitors.

Early regulators under the Conservative government recognised this, and protected this separation against pressure from the industry, who would like nothing more than to get back to their cozy, lazy, nationalised ways. But from 1998, the regulator began to allow acquisitions that created combined supply, generation and distribution businesses. By 2004, none of the RECs remained independent. All had been subsumed within one or other of the Big Six - the Vertically-Integrated Large Energy (VILE) companies.

In September 1998, Clare Spottiswoode and Stephen Littlechild stood down from their jobs as regulators of (respectively) gas and electricity. Callamity took over, first at Ofgas, and then at the merged regulator of gas and electricity, Ofgem. The extent of his responsibility (and ego) can be seen in the fact that, from 2000, he was acting as both Chairman and Chief Executive of Ofgem.

Efficiencies drive down costs. Competition drives down prices. The mergers allowed by McCarthy destroyed competition. Little wonder that, by 2003, the National Audit Office (under Sir John Bourne) was reporting that the market changes enacted under Labour (many of them improvements on the original design from privatisation) had driven down wholesale prices, but had had much less effect on retail prices. Through his naivety, Callamity undid the benefits of the market improvements, and created the uncompetitive oligopoly from which we suffer.

Repeated attempts since then by the regulator, the competition authorities and the government to identify collusion between the Big Six have failed, because the problem is not underhand behaviour, but the market-power provided by their vertical-integration, which allows them to lock out competitors and maintain juicy profits, without having to literally sit down in a room and parcel out the market between them. It is obvious there is a problem, but no one dares acknowledge that the only solution is to reverse McCarthy's mistake: disintegrate the VILE companies.

In September 2003, Callamity left Ofgem and became Chairman of the Financial Services Authority (FSA). What happened next is common knowledge. The financial services industry engaged increasingly in imprudent activities, prompted by various government measures, and unconstrained by any regulatory action, even as they moved more and more risk off-balance-sheet. An excellent analysis of the development of the problems - "How Not to Solve a Crisis" has been produced by Bill Stacey of the Lion Rock Institute and Julian Morris of the International Policy Network. When eventually the economy could no longer stand all the systemic imbalances that had been allowed to develop, the necessary correction revealed the extent to which Callamity had allowed short-termism and corporate interests in another industry to take priority over good governance.

Callamity's story gives the lie to Gordon's claim that Britain is a victim of global forces and American failings. Britain led the race to the bottom of regulatory supervision. What does Gordon think drove the American government to repeal Glass-Steagall, other than the inability of Wall Street to compete with the lax conditions in the City of London? Wall Street's shackles having been thus loosened in 1999, it would take a regulator of quite stupendous incompetence and lassitude to keep the City ahead in the race. In Callamity, Gordon had just the man for the job. No wonder Callamity had to be quietly shuffled out of his role, as the consequences of his reign became clearer. His continued presence would be a clearer reminder than Sir Fred Goodwin's pension of who is really to blame for our woes.

In another era, Callamity would have been left in a room with a whisky and a loaded pistol. Earlier still, his neck would be on the block. We ought to find some similar punishment for him. But what do you want to bet, if politicians are now sensible enough to keep him away from any further public-sector work, that Callamity can look forward to some well-remunerated Non-Exec positions from his corporate friends? Or would even they be too embarrassed to be seen around him?

Gordon's Investment Bank

The European Investment Bank (EIB) "has 6 priority objectives for its lending activity":

  • Cohesion and Convergence
  • Support for small and medium-sized enterprises (SMEs)
  • Environmental sustainability
  • Implementation of the Innovation 2010 Initiative (i2i)
  • Development of Trans-European Networks of transport and energy (TENs)
  • Sustainable, competitive and secure energy

Our company (an SME in renewables) recently approached them about funding for a project in a remote part of Scotland to produce sustainable heat and power (including district heating to social housing), and sustainable heating fuel to be distributed from the local port (which needs the business since the decline of the fishing industry) to parts of the UK where resources for sustainable heating are scarcer. This ticks most of the above boxes, but we were told by the EIB that the project is too small. They have a "priority objective" to support SMEs, but a project costing tens of millions of pounds is too small? How big are these SMEs that they hope to support?

Still, no one is guaranteed finance, and perhaps the EIB have more suitable projects elsewhere. Happily, there have been a spate of announcements recently on projects that have received or are in the running for funding from the EIB, so we can see how they are meeting their objectives:

A delightful list of innovative projects by SMEs, promoting cohesion, convergence, sustainability, competitiveness and security in the transport and energy sectors.

The 14th century solution to moral hazard

Just looking something up in Peter Spufford's Money and its Use in Medieval Europe. Came across the following passage, which seems to have relevance to the modern day:

In Barcelona, from 1300, book entries by credit transfer legally ranked equally with original deposits among the liabilities of bankers. Those who failed were forbidden ever to keep a bank again, and were to be detained on bread and water until all the account-holders were satisfied in full. In 1321 the legislation there was greatly increased in severity. Bankers who failed and did not settle up in full within a year were to be beheaded and their property sold for the satisfaction of their account-holders. This was actually enforced. Francesch Castello was beheaded in front of his bank in 1360.

Nowadays, we don't even sack them, we seek their voluntary agreement to leave the failed institution, and pay them hundreds of thousands of pounds a year to do so. I think they had it right in the 14th century, don't you?

McKillop vs Myners

Much too late, but I had to get it off my chest...

Why do all the journalists and opposition politicians seem simply to have accepted Tom McKillop's version of his discussions with Lord Myners about Fred Goodwin's pension? One of them is lying, but the fact that McKillop's letter is the most recent version is hardly a reason to trust it.

Better to look at people's incentives.

What would be Myners' incentive to hear the full details of Goodwin's pension arrangements, sign it off without question, and then pretend that he had been fooled?

Compare that with McKillop's incentives to hand his old pal a parting gift on their way out the door, and stitch up the Government in the process?

And look at their records.

You may not like or agree with Myners, but his record suggests that he has wanted to do his best for what he viewed as the public good. He could have an easier and more profitable life doing other things. It is hard to see how he is in this for the money or popularity.

Compare that with McKillop's record as chairman of RBS...

I know who I believe.

Are those who have swallowed McKillop's line still impressed by the status of a senior banker? Do they somehow imagine that the old honour code is in any way still alive, and that we should simply accept Sir Tom's word as his bond?

DFS next to go bust?

How desperate do you have to be to set "wood pellets" as one of your keyword combinations in Google AdWords, if you are in the business of selling furniture?There is nothing in your product range that is remotely related to wood pellets. There is nothing that might match if this were a mis-spelling. And there is no reason to think that people looking for wood pellets would also be looking for furniture. Smacks of desperation to me.