The upcoming May 5th Referendum on the Alternative Vote was always bound to create major tensions between the Conservative & Liberal Democrat governing Coalition partners, the two parties in fundamental disagreement over the Yes/No referendum issue which leaves no room for compromise. The rather lacklustre campaigns of both sides up to now have suddenly burst into life with each attacking the other, whilst still seemingly not exactly engaging with the possibly even more confused voting public, whose turnout in turn could remain at the normally low levels of the local council elections taking place at the same time.
Certainly the No campaign claim of only Papua New Guinea, Fiji and Australia using the AV system could be considered misleading when at the same time this fails to mention the around 30 countries, including France with its presidential elections, that use the 2-round (run-off) system which is a variant of AV. Also the additional costs associated with electronic counting and validation of the successive rounds of counts required for AV, might only be necessary if final results were still expected on the Friday after the 10pm Thursday closure of polling stations. Otherwise, the current manual counting system could suffice if results were instead declared over the weekend, with additional costs involved only from the increased counting staff hours involved. This of course tends to contradict the assertion of the Chancellor, George Osborne, and which is also disputed by the Energy Secretary, Chris Huhne, that expensive new machines will be needed to count the votes in an election under AV.
However, both sides need to appear to aggressively differentiate themselves from each other within the Coalition, to appease their traditional voters whilst accepting that it is in the interests of neither party for the Coalition to collapse after 5th May. With their tough deficit reduction programme, the Conservatives need the 5 years of a fixed term parliament to allow time for sacrifices now to make way for later benefits in the mind of the electorate. Similarly, the Liberal Democrats know that a general election now would lead to heavy losses and they need a 5-year plan for recovery of their identity, to prove that they are not only distinct from both Labour and the Conservatives but also fit to govern.
Archive for avril, 2011
Alternative Vote (AV): Coalition Tensions
mardi, avril 26th, 2011Banks: Costs versus Benefits.
jeudi, avril 21st, 2011The previous Labour Chancellor, Alistair Darling, having experienced first-hand the recent crisis in the banking sector during his three years in office, agreed that it made sense for the banks to hold more capital (10% tier one capital ratio) and to formally ring-fence off the riskier investment banking operations, as recommended by the Interim Report of the Independent Commission on Banking and Competition (see also Categories/Chairman?s Blog/Interim Report ? Banks in the right-hand index column of this Blog). However, he did not seem convinced that such a rational approach to the problem of protecting the retail operations of the banks, would be sufficient to prevent the collapse in market confidence and resulting irrational sense of panic in the financial markets that occurred last time around or could occur in the future.
There is also the issue raised by the Commission, of the costs versus benefits of having large British banks such as HSBC, Barclays and Royal Bank of Scotland (RBS) based in the UK. The Interim Report claims that such large banks benefit from an implicit state subsidy of more than £10 billion a year by being headquartered in the UK since investors assume that a British government via the taxpayer will always bail them out in a financial crisis. Since the banks dispute this claim, they could decide to move if they find the new banking regulations too onerous and this will impact the British economy.
The Commission, however, views the City of London as representing far more than a few large, British banks and has found no conclusive evidence that they enhance the role of London as a leading international centre for financial services. Indeed, historically the growth of the City has been driven more by its openness to foreign companies and their success in entering the financial markets there. Needless to say, our major banks do not necessarily see it that way!
Our banks contribute to the British economy via tax receipts (to the tune of £53.4 billion in 2009/10) and employment. However, around 60% of this tax paid can be traced to domestic operations such as retail banking, which would still remain in the UK and employ the same people, even if the bank head office was moved offshore, the British-based profits still being taxed in the UK under international tax law.
Even investment banking would apparently not be that much impacted since British banks only account for around 10% of fees earned globally. Tougher regulations applied to British banks would not apply to major players such as Deutsche Bank, UBS, Credit Suisse, Morgan Stanley, JP Morgan or Goldman Sachs. They employ thousands in the City of London and around half of taxes from investment banking come from that paid on bonuses and salaries there. These major foreign banks have also chosen the City of London because it still offers one of the best environments for banking, with its knowhow and cluster of supporting services, the convenient time zone positioning between the USA and Asia, together with traditionally a stable tax regime (which British governments should never forget even with the current budget difficulties).
That said, market sentiment as illustrated in the opening paragraph of this article, can be a most irrational thing and for a major British bank to move its head office to New York or Asia, could have a negative impact on the City of London.
Interim Report:Banks & Competition
mercredi, avril 13th, 2011The interim report on Banks & Competition was issued this week by the Independent Commission set up by the government. It was immediately criticized as not going far enough by some. A comment received here on our Blog (see Chairman?s Blog/Categories/Bankers & Bonuses in the right-hand index column) also called it a complete whitewash! In contrast, the head of this Independent Commission, Sir John Vickers, denied claims that the banks would be driven offshore if his recommendations were implemented. He said that the banking system would instead be made safer and more competition encouraged by e.g. separating into independent subsidiaries a ring-fenced, systemic part which is not allowed to fail i.e. retail banking operations, and the other investment bank part which can fail. The dominant retail market position of Lloyds would also be reduced by their selling off of more high street branches.
A spokesperson for Metro Bank, a recent entrant and independent competitor in the banking market, was not impressed and viewed the recommendation for Lloyds to sell off more branches as pretty limited competition-wise. More was needed to promote competition and the proposals did not go far enough e.g. the regulatory process could be made easier whilst still protecting the consumer of course. Making it easier for customers to switch their accounts between banks would also encourage more competition.
Despite RBS (Royal Bank of Scotland) being said at the time of the banking crisis as 2 hours away from a complete collapse, the ideas of the Commission on how to protect the high street banks stopped short of recommending a complete split-up and they chose ring-fencing of the retail part instead. A commentator then saw the problem as the devil in the detail i.e. in getting the firewall in the right place to ensure nothing in terms of a financial contagion could get through from the more at risk investment subsidiary. In addition, protecting the UK-based retail services part of the banks would not be enough to protect them from their global operations. Metro Bank again saw separating the banks as also bad for business with fire-walls and ring-fencing of independent subsidiaries requiring the holding of more capital e.g. in the investment arm if formerly supported by the retail deposits. However, to completely split the banks apart could itself be a bad thing when taking the example of the HBOS (Halifax & Bank of Scotland) merger which was a bad deal at the time and would remain so despite selling off more branches to encourage competition.
A spokesperson for the CBI (Confederation of British Industry) said that they and Business in general were determined to keep the major banks head-quartered in the UK, noting that HSBC had been talking about moving their HQ abroad for some 30 years now. The challenge for the banks now is that not only are they being asked to up their lending levels to businesses but also to up their capital bases.
It will be interesting to see what results from the next 6 months of consultation now foreseen to take place with all interested parties before the final report is issued and whether the final recommendations are implemented.
Referendum on the Alternative Vote (AV)
mardi, avril 5th, 2011THE ALTERNATIVE VOTE
I don?t believe their argument so why will I still vote no?
As one of the few members of British Conservatives in Paris who is allowed to vote in next month?s referendum, I have looked at all the arguments with attention. The principal one expressed in the Conservative No to AV campaign is that AV is an unfair system that gives some people more votes than others. But does it? Certainly not in my view.
The way the AV system works is that voters rank the candidates in order of their preference. So in the first count, the equivalent to the first round in French elections, everybody?s vote is counted once. If one candidate has more than 50% of the votes, he is elected just as he would be under the current first-past-the post system. If no candidate achieves that, then the candidate with least votes is eliminated and his votes are allocated to the second preference of his voters. Is that unfair, does it mean that that his supporters have voted twice while supporters of the other candidates can only vote once?
I do not think so. In the second round, votes from every elector, except those who voted for the eliminated candidate and did not express any further preferences, are counted. So every elector who wishes votes in the second round and all their votes are counted. The effect is just like the second round of an election in France, where those whose first choice is still in contention vote, presumably, for that candidate again and those who first choice did not get through to the second round have to chose someone else. Is that unfair, does it give the latter voters more votes than the former?
Of course the differences between the proposed AV system and the second round system used here, is that in France there are only two rounds and, in between them, there is a period for further campaigning and for the negotiation of electoral pacts. In the UK under AV the electoral rounds continue, with the lowest scoring candidate being eliminated each time, until one candidate has secured at least 50% of the votes still being cast. It seems to me that one could make out a good case for arguing that the AV system proposed for the UK would be fairer and better than the two round system used here, in that the results would be known more quickly and the electors under AV would get more choice.
What could be regarded as unfair is the fact that, under the present system, unless one votes in a marginal constituency, one?s vote is, effectively, wasted. I could vote Conservative in a constituency like Bolsover, and a Labour supporter could vote where I lived in Esher and Walton, but in either case we might just as well have stayed at home. AV would resolve that.
But I will, even so, vote no. Why?
Well I have to admit that there are other arguments advanced by the no campaign that have more validity than the one discussed above. There is the expense, although one could argue that democracy is above price. There is the delay in obtaining the result; that of course could be obviated by the use of electronic voting terminals, but American voters, at least in the State of Ohio, have learned the disadvantages of that.
I will vote no for a different reason, and one that I am disappointed, although not at all surprised, to find ignored on the No to AV website. Those who vote yes, will be voting for a step into the unknown. We do not know how the AV system would work out in practice. We do not know whether it would result in a more, or a less, proportional election result; I have seen both argued. We do not know which party would benefit, whether it would be the Conservatives, Labour or Lib Dem. We do not know whether it would give us better or worse governments. But were the country to vote yes, it would probably be an irrevocable step. MPs elected under such a new system and owing their seats to it, are most unlikely to agree to revert to the former one even if the country in general thought the results a disaster.
Had we been offered the chance to vote for a change to AV with the assurance that, after two AV general elections, there would be a second referendum giving us the opportunity of returning to first-past-the-post, I would have voted yes. And sometimes I wonder if that is why we were not given that option.
Robin Baker