Prof. Tim CONGDON: CONDON

Sunday, 10 October 2010

Tony SCHOFIELD's OPEN LETTER Supporting Tim CONGDON & Gerard BATTEN

Dear Gerard,

I thank you for your letter of 24th September, announcing that you have decided to stand down in the UKIP leadership election and support Tim Congdon. Your action reflects credit on yourself.

I believe that the view expressed by yourself, and also by Tim Congdon, that the leadership of UKIP must be in the UK is correct. The MEP wing of UKIP has its own sphere of activity and can be useful as similar parties to UKIP are growing in other EU countries, but it must be incorporated into and directed by the national party in the UK.

As you know, up to 2001 the party was based either in my offices in London or in offices funded by myself when I was Party Secretary. I was also a substantial contributor to the risk-capital of UKIP to get the party started in its early years. However, after the election of UKIP MEPs in 1999, I immediately became aware that some of the new MEPs had different and unconstitutional ideas of the role of the MEPs in the party.

At this point I ceased any funding to the national party, but continued to contribute to your own and other campaigns in London and elsewhere.

If Tim Congdon is elected Leader and in accordance with the published agreement between you and him carries out 'a commitment for the party to abide by its own Constitution, with a fair and impartial application of the rules', I look forward to rejoining, and to injecting some funding into the national party. I would expect to see commitment and action by the MEPs to make substantial financial contributions to the national party.

The current political situation in the UK and the rest of the EU offers immense opportunities to UKIP with a wide field of action. However, the turnover of members and activists has been far too high over the last few years and is linked in most cases to lack of confidence in the constitutional behaviour of the party, its officers and executives. For progress to be made, this confidence must be restored.

Regards,

Anthony Scholefield

Monday, 27 September 2010

Bank-bashing politicians could severely damage the City

September 27th, 2010 by Tim Congdon

Bank-bashing has become commonplace, as we saw at the Liberal Democrats’ conference last week. But the bank-bashers’ credibility is waning as one of their standard allegations is being refuted by the evidence. This allegation is that the financial crisis would have a huge cost to the taxpayer.

The truth is that the government has spent no money on the banks. Loans have been extended by the Bank of England and the Treasury to some banks at penal rates of interest, and these loans have been almost entirely repaid. Guarantees were provided by the Treasury on certain bank liabilities, but the banks’ creditors have not had to call the guarantees. Instead the banks have honoured their liabilities and paid the guarantee fees. Finally, the British state acquired equity stakes on favourable terms in the Royal Bank of Scotland and Lloyds Banking Group, while snaffling the shareholders’ funds of Northern Rock and Bradford & Bingley. These investments are likely to be sold over the next few years at a profit running into tens of billions of pounds.

The likelihood of an immense taxpayer profit may puzzle the bank-bashers. Moreover, the large salaries paid in the British banking industry owe nothing to government subsidies. They are instead due to receipts of various kinds (interest margins on loans, commissions, underwriting fees, trading profits, management and advisory fees) on transactions with customers. The bank-bashers assert that large personal incomes have depended on hidden official support. In fact, the large incomes were and are justified in the marketplace. They have been and remain attributable to high productivity in the financial industries.

Official data show that, in 2007, average hourly pay in the City of London was £28.77, whereas in Great Britain as a whole it was £12.69. Moreover, the differential between City incomes and the national average has been widening since the mid-1980s, a 25-year period in which the notion of a state-subsidised financial system was obvious poppycock. The 25 years were actually characterised by enormous tax payments on profits and incomes earned in the City.

Why did productivity in international financial services grow so rapidly? Two forces were dominant. First, computerisation and advances in information technology enabled a multiplication in the volume of transactions that could be processed and recorded, and so dramatically reduced the “cost per unit of output”.

The second dominant influence is the relentless tendency towards the globalisation of trade and finance in the post-war era. In the 1950s a US company would finance its operations almost exclusively in dollars from securities sold in the USA or by loans from US-owned banks operating only in the USA. The same would apply for British companies, German companies and so on. But nowadays a US company can finance its operations by a yen- or euro-denominated loan or securities issue, arranged in London by a syndicate of European, Asian and Arab banks, possibly with some US participation. Financial markets have ceased to be national. Instead they are global and cosmopolitan.

The main centre for the value added and created is London. Computerisation and globalisation, not implicit government subsidies, are responsible for the personal incomes in the UK’s financial services industries. But will the high-productivity, high-income people in the financial sector want to stay in the banker-bashing UK in the long run? Perhaps not.

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