Uncharted Territory

March 30, 2009

Cambridge Traffic Planning, or, The Definition of “Incoherent”

Filed under: Cambridge, Economics, Inefficiencies, Transport — Tim Joslin @ 6:26 pm

I recently commented on and suggested solutions to the traffic problems in my little corner of Cambridge. I was moved last week to attend a public meeting on the issue. I’ll report on that shortly.

First, though, I wanted to give a brief update on one area of lunacy I’ve previously mentioned, namely the taxi-rank in St Andrew’s Street. I can now report that absolutely nothing has changed. Rules clearly don’t apply to the St Andrew’s Street taxi-drivers. Most of the times I’ve looked, the taxis are “over-ranking” by as many as 6 vehicles, forcing buses leaving stops behind the rank to pull out further than necessary into a narrow road, where there are cyclists and pedestrians all over the place.

Worse, behind the taxi-rank there is a natural crossing-point, between Lion’s Yard and the city centre shops and a pedestrian walkway to the Drummer Street bus station and the Grafton Centre. Because a line of taxis now crosses this point, people have to do exactly what you’re taught not to in primary school, that is, cross the road between parked cars. This is dangerous. Especially if you’re in a wheelchair. And that’s what I saw this week – a woman in a wheelchair trying to see over a line of taxis parked on double-yellow lines. On this occasion she didn’t end up under a double-decker bus, but one did come thundering past as she was trying to cross.

But salvation is at hand! A Cambridgeshire Transport Commission has been established. Public meetings are being held. I went to the Cambridge Guildhall on Thursday 19th March, when Cambridge City Council, South Cambridgeshire District Council and the Cambridge Preservation Society gave evidence. I’m not going to give a blow-by-blow account of the meeting, partly because Richard Taylor has already done so (I don’t know Richard, I just came across his blog last week, somehow).

But I’m also restricting myself to a few observations because I rapidly developed a severe headache, not entirely unrelated to what I was listening to. I couldn’t help thinking that, as ever, our decision-making capability is hopelessly compromised by a failure to recognise those two great contradictions in terms: local democracy and the rural economy. We fail to realise that the more local the influence on decision-making, the less democratic it is. And the more economic activity in an area the less rural it is – you can’t have both, you have to make decisions.

So here are my considered reflections on the politicial process to resolve the chronic traffic problems in Cambridge:

1. What public debate?
About the first thing I discovered at the meeting was that the deadline for responses from the public had passed on 13th March. A questionnaire has even been completed, already (see the Transport Commission website).

Interesting. I’d only just heard about the public meetings, yet I missed out on having my say. I know these “public consultation” processes always work like this, but wouldn’t it be better to have some discussion to help people formulate their ideas and then ask them about their views?

By conducting the questionnaire and asking for submissions as a first step the Commission has ensured that it has only gathered data based on uninformed views. OK, the Commission is tasked with a problem that has been around for years, but by taking evidence only before the public meetings, it minimises the amount of fresh thinking it can tap into. And ensured that most influence is wielded by insiders in the political process who are most aware of the timetable. Engagement with members of the general public interested in just this one issue has become a very one-way process.

If I were to make a submission, I’d rather not look totally ignorant, so would have liked to have heard the City Council’s and others’ views before putting finger to keyboard. Tricky when the submission deadline was 13th March and the public meeting 19th March.

2. Cambridge City Council priorities
I say I would have liked to hear Cambridge City Council’s views, but when I did I was shocked. Truly shocked.

Get this: the top priority of Cambridge City Council is climate change, expressed as “reducing carbon emissions”. Now, if I was to decide who should get the contract to solve climate change I wouldn’t award it to Cambridge City Council. It’s the wrong level of government. Are my local councillors going to invent the electric car? Build a Supergrid to bring to the UK renewable electricity generated from Atlantic wind and Sahara sunlight?

So one minute we’re talking about traffic congestion and the next about emission targets. Some exchanges were surreal. Sian Reid, the Transport person on the City Council, tried to convince the head of the Commission, Sir Brian Briscoe, that transport plans should take account of the effect on carbon emissions in the whole region, not just Cambridge City. She was right. It’s daft for Sir Brian to tell everyone just to worry about their own little bit. That is the trap of local democracy, and we’d never get anywhere.

Or rather, Sian Reid would have been right, if we were talking about carbon emissions. But we’re not. We can only include such a discussion in a limited way, as otherwise we have to make sweeping unjustified assumptions. We would not, for example, propose to create a railway running coal-fired steam-trains. But to equate the level of traffic in the city with carbon emissions is absurd. What if people start using electric cars?

My head started hurting at the meeting and it’s hurting again now when I read on Richard Taylor’s blog that:

“The hypothetical question of why not close the city centre car parks to discourage people driving in was raised. It was pointed out this could be ‘done tomorrow’. [Good idea!] Cllr Reid who is responsible for car parks defended them pointing to the new emission based car park charging system which she said would be accepted as people were used to paying their vehicle excise duty on the basis of emissions.”

What on Earth is Sian Reid on about?

The amount of traffic coming into the centre of Cambridge already is a massive problem. And it doesn’t scale. The roads are clogged and we’re expecting more people to want to travel in the region.

Forget carbon emissions. In fact, strike this from the Council’s objectives altogether. Just sort out the transport system.

3. Who’s in charge?
Ah, but we can’t “just sort out the transport system”, because we haven’t yet answered the question “who for?”.

Because we haven’t identified who the transport system is meant to serve, progress is hamstrung.

Human nature being what it is, everyone focuses on the congestion charge proposed as part of any transport improvement. Central government has apparently made the £500m for transport improvements conditional on a congestion charge.

But the purpose of the congestion charge (cc) is unclear. Here are two views:
1. The aim of the cc is to reduce the inconvenience to Cambridge City residents from outsiders coming into the town or driving through it.
2. The aim of the cc is to reduce delays on roads in a crowded part of the county.

The first perspective implies the City Council would have “sovereignty”. They would take responsibility for the commercial success of their constituency. Accordingly, one would expect the congestion charge to cover a zone, requiring payment on entry, with those living inside exempt from payment. If high charges deter shoppers, then so be it. It might actually be better for everyone if there were fewer shops in Cambridge and more in the surrounding area.

The second perspective implies that the transport problems of Cambridge are just a subset of those affecting a larger area. The County Council has “sovereignty”. But then it has to take a broader perspective than just Cambridge. The whole idea of a single congestion charge zone makes little sense.

Instead we have a farcical situation where the County Council has appointed a Transport Commission who are consulting local councils. That was the purpose of the meeting I went to. South Cambridgeshire District Council (SCDC) were able to announce that they oppose the congestion charge. Indeed, the head of that council explained that, because the buses were so slow, his 17 year old kids had been allowed to drive to Hills Road 6th Form College in Cambridge. Unbelievable. Cambridge University undergraduates aren’t allowed to run cars, but 17 year olds can. Someone should have a word with Hills Road College.

It is lunacy for SCDC to “oppose” the congestion charge or to give them a platform to do so – this statement should have been ruled out of order. SCDC were at the meeting purely to provide a perspective on transport in the Cambridge region, not to take a position on anything. As I’ve explained, the congestion charge must either be the responsibility of Cambridge – at least the majority Lib Dems in favour – or Cambridgeshire – all parties in favour. I know this, because someone wrote to the local paper asking who he was supposed to vote for. Maybe he shouldn’t bother. Maybe he should take the time to ask himself why he thinks he knows better than everyone who’s looked into the issue properly.

SCDC residents can only influence transport in Cambridge through their County Councillors, not their local Councillors. It is ludicrous for SCDC to have a “position” on the congestion charge (unless it extrends into South Cambs of course).

Personally I think it would be far preferable if Cambridge City Council took decisions on transport in Cambridge. Because the wider constituency represented by the County Council has the final say, we are drifting towards a vision of Cambridge as there to provide a service to the surrounding area. It is turning into a giant shopping centre. It would be preferable to tweak the political system to shift the balance so that transport and other planning in Cambridge reflects the needs of residents of the city rather more and the needs of those living elsewhere in the county a little less.

4. Strategy, what strategy?
Because we haven’t decided who the transport system is for, we have no clearly defined objectives.

One might have expected the Transport Commission to start out by identifying objectives. Every project I’ve ever been involved with has started with some kind of high-level statement of requirements. But when it comes to the future of Cambridge’s transport system, we go straight to arguing about the – at this stage hypothetical – congestion charge and who would be exempt from it.

What Sir Brian and Professor Tony might more profitably have done was:
1. Identify the objectives of the exercise.
2. Validate these with the public.
3. Produce some (internally consistent) options for meeting the objectives, based on something resembling logical reasoning.
4. Consult the now better informed public again.
5. Select one of the options.

Instead we have had uninformed public comment – many saying “no congestion charge” rather than addressing a complete solution – and will no doubt end up with an incoherent strategy.

Let me suggest what some of the objectives might have been, reconciling the interests of Cambridge residents and those from the surrounding area:
1. Reduce the usage of Cambridge City Centre (inside the inner ring road) by motor vehicles.
2. Ensure inexpensive, efficient transport options exist to support the needs of an increasing population in the Greater Cambridge area.
3. Minimise delays to traffic using designated through-routes.

A strategy could then be devised to meet these objectives. This stage should be the province of professionals. It requires objective reasoning, not subjective opinion. For example, the Commission might use the concepts of “limiting factors”, “efficiency” and “incentives”.

They might conclude that cost is not the limiting factor determining whether people drive into Cambridge or not. Any congestion charge would therefore likely have to be very high to be effective. No, the limiting factor for many journeys is surely the availability of parking. So, to meet objective no. 1, reduce traffic coming into the centre of Cambridge, we could close the Grand Arcade car-park. We could convert some of the railway station car-park into cycle parking. And we could tell Hills Road 6th Form College it is not acceptable for their students to drive into Cambridge.

The limiting factor for many journeys across Cambridge is very likely the existence of routes. If we don’t allow people to take short-cuts by leaving designated through-routes, then people will have to stick to the main roads.

Another limiting factor affecting cyclists (and even pedestrians) is the available space. There are too few cycle lanes and even pavements are congested in some parts of Cambridge! To achieve a modal shift away from cars, more cycle lanes and wider pavements are required.

Once some of the limiting factors have been addressed, the Commission should start to look at the efficiency of the system.

This will likely mean far more one-way streets. It is ludicrous, for example, that buses travel both ways, not only along Regent Street, but also along Emmanuel Road into the Drummer Street bus station.

But ultimately the Commission needs to consider the geography of Cambridge, with a busy centre confined on 3 sides by the river Cam and historic buildings. The obvious solution is for the main transport interchange to be located at the railway station (perhaps with a similar arrangement at Chesterton), with a high-capacity, high-frequency shuttle service – preferably a metro train in a tunnel, an elevated monorail or even the dreaded pods – between there and the town centre. We need to be prepared to invest in such a scheme. The Commission should not rely on vested interests, such as the bus company, but on its own reasoning.

Closing car-parks, closing minor roads to through-traffic and improving the design of the system will all help, but to meet objective 3, to minimise delays, we have to look at incentives. And now, finally, we have to consider a congestion charge. But what we’re left with are the busy routes around Cambridge and elsewhere in the county. Surely, rather than a zone, the charge should be levied purely on those using particular roads that are exceeding their capacity, causing delays for everyone? For example, a charge on the inner ring road would push some through traffic onto trunk routes. If some of these roads are too busy, a lower charge could be levied on them, moving some traffic onto public transport, or to travel at less busy times.

To sell a congestion charge to the public it must be presented as precisely targeted on busy routes. People need to be very clear what they’re buying. Rather than a zone, it would be far better to charge a fee for each busy road used – Gonville Place, East Road, Newmarket Road say – with a daily cap. And any talk of carbon emissions should be taken out of the discussion. Global warming is a different issue to traffic congestion.

5. Joined up thinking
It is impossible to separate traffic policy from housing and other planning policy. The head of SCDC pointed out at the meeting that Cambridge residents are on average 400 metres from their nearest bus-stop, but that this rises to 1000 metres in South Cambs. Look, the greater the housing density, the more customers there are for public transport (and for specialist local shops and small supermarkets!). It was refreshing to read today that someone is actually spelling this out. Here’s what Centre for Cities have to say:

“All cities are different. However, denser cities can be more efficient and more sustainable. Research has shown that denser cities around the world have a lower private transport energy use per capita. Private transport energy use in Boston, for example, which has an average urban density of 12.5 persons per hectare, was 50,000 per capita in 1990; while in Hamburg it was 20,000 per capita (37.5 persons per hectare) and around 3,000 per capita in Hong Kong (300 persons per hectare).

Growing through densification rather than urban sprawl therefore has the potential to make transport in Cambridge more sustainable, as more residents are able to walk or cycle to work.” (my stress)


March 27, 2009

Supermarkets Revisited: The Locomotive, Sky, Sainsbury’s, Self-Checkout and Plastic Bags

Filed under: Cambridge, Economics, Inefficiencies, Undercover — Tim Joslin @ 9:40 am

I commented a few days ago on the Cambridge Supermarket Wars and later on my own shopping habits. Since then the battle has intensified on the Mill Road front, and a fundamental change has been made to the shopping environment!

First, the bad news. Sadly, the Locomotive on Mill Road is up for sale. The physical reminder of those karaoke nights may soon be no more.

But the good news is that a new convenience store could open on the Locomotive site.

But the other bad news is that (as usual) the politicians are meddling. According to the Cambridge Evening News report:

“…there were calls yesterday for [The Locomotive] to be retained as [a] community pub…

Cambridge city councillor Ben Bradnack, who represents the Petersfield ward in which The Locomotive lies, said: ‘We already have two convenience stores on this side of the Mill Road bridge and they must be finding it difficult anyway.

‘I am not in favour of pubs closing in principle and these stores are for the daytime economy when we really need to think about the nighttime economy.’ “

I’m as concerned as anyone about the loss of our traditional watering-holes. This is often put down to a change in our habits – we drink more at home. But why? We are such social creatures, after all. The reasons are undoubtedly complex, but what surprises me is that Sky TV’s subscription policy is so rarely mentioned as a problem for smaller pubs. We now take it for granted that live televised sport is the right accompaniment for a beer (pork scratchings out, English Premier League in). Smaller pubs tell me that they can’t afford a Sky TV subscription. Custom is drifting away to larger pubs, or, since large crammed bars are not everyone’s cup of tea, people are simply staying at home.

It should not be up to the Council to decide whether the Locomotive site should become a store or whether it should reopen under new management as a pub. At the end of the day, someone has to decide that it is worth investing their money in a business on the site. That’s the system.

And, as I’ve argued before, it is not sensible for the Council to decide how many supermarkets we need. Far better to provide people with a choice. No-one is forced to shop at the Mill Road Tesco. Nor would they be at a new convenience store on the Locomotive site.

The dangers of pretending it is possible to all agree whether or not a Tesco store should be allowed on Mill Road is well illustrated by the emotions that have now been unleashed. Apparently, a pro-Tesco campaigner has been attacked. In front of the local MP!

How local councils (I’m sure Cambridge is not unique) have drifted into the sort of planning micromanagement we now see is a story that should be told. I suspect the problem is that local government has been so emasculated over the years that elected representatives are now trying too hard to find something to justify their own existence.

And, second, the really bad news. The reason I am revisiting the food shopping topic today is that Sainsbury’s have messed with their operation. To my horror, I found yesterday that they have only gone and replaced the multi-queue tills with a self-checkout system.

Remember, as someone following a life-style I thought society was trying to encourage, that is, not running a car, I have little choice as to where I buy my groceries.

I’m especially vulnerable, because Sainsbury’s is a de facto monopoly. They’d therefore have to screw-up big-time before enough customers took their business elsewhere for them to realise they’d made mistakes.

Today was fairly quiet in Sainsbury’s, I presume because the students are away. I dread to think how long the queues will get when they return.

In principle I support the idea of self-checkout. It will eventually reduce the amount of work that has to be done by society as a whole, moving us one step closer to a utopian world of leisure. But the technology is not yet customer-ready.

I noticed yesterday that Sainsbury’s staff were already running around between customers struggling with the new check-out machines. I dread to think how long the queues will be when the students return. Especially as staff approval will be necessary whenever anyone buys alcohol. Some of the students look quite young so we’ll all have to wait while they produce their id. When I was about 12 one of my mates was in the local paper after having had his stomach pumped to remove the whisky from another friend’s father’s drinks cabinet (hey, why wasn’t I invited?). But now we seem to think we’ll keep kids off alcohol by putting the onus on shop-keepers. They can get in serious trouble if they sell liquor to minors.

Obviously Sainsbury’s need to change the system elsewhere in their store. I’ll check sometime, but I didn’t notice that they’d done anything to anticipate this problem. The “obvious” thing to do is to monitor cutsomers’ ages on entrance to the booze section of the store. This would make their wine offers near the entrance to the store rather problematic, but then they should have thought all this through before they brought the new machines in.

Similarly, the delays at the checkout caused by the need to weigh fruit and veg could easily be avoided by having this done in the fruit and veg section. As is the case in many other countries. You simply print out a label with a bar-code which is later scanned at the checkout.

But my really big issue with the automatic checkout system (which is identical to that I’ve used a few times at Asda) is that it (moreorless) forces you to take disposable plastic bags. Yeap, the bags for life system – for which you even get an extra Nectar point on each use – is out the window. That campaign a year or two ago to use fewer plastic bags is clearly no longer a priority. Now, I don’t think cutting out plastic bags in itself is going to save the planet, but I abhor waste. If I end up bringing home plastic bags I refuse to throw them out – they’re bound to come in useful, I think – so they pile up in the corner. I am psychologically incapable of using the new checkout process.

And the reason Sainsbury’s force you to use new plastic bags? Well, it’s because they are dispensed over a weighing panel. And why do you have to weigh all items? Because they don’t trust you, that’s why. They reckon that people would deliberately or accidentally slip a few unscanned items into their bag if they didn’t have the weighing check.

You can skip weighing on the screen, but you have to do this for every item. As the queue builds up behind you. And (at least when I tried it at Asda) after you’ve skipped a few items the machine makes you wait for a member of staff to check your not a thief. You could put all the items in disposable bags, I suppose, and take them out again after completing the transaction. But then you’d look like a complete nutter.

There is a way round this problem though. We could achieve a nirvana of efficient self-checkout and reusable shopping bags. What Sainsbury’s could do is put RFID tags rather than – or perhaps as well as – barcodes on their products. These can be detected within, say, a metre (depending on the set-up). As a first step, Sainsbury’s could tell when you had put a tagged item into your bag without scanning it. Heck, they could even detect you leaving the store with an item you hadn’t paid for. Ultimately, though, you could simply pass your bag in front of an RFID reader and it would register everything.

I really resent being inconvenienced by the introduction to the busiest Sainsbury’s in the country of a system that isn’t the finished article. Especially when I have no alternative supermarket to go to.

March 24, 2009

Confessions of a Cambridge Shopper

Filed under: Cambridge, Economics, Inefficiencies, Markets — Tim Joslin @ 11:17 am

I wrote yesterday about campaigns to block a new Tesco on Mill Road and a new supermarket of provenance as yet unrevealed (at least to me) on a site in West Cambridge. I’ve also commented on some of the shortcomings of the supermarkets that do exist in Cambridge.

It’s my proposition that – from the perspective of a no-car household – there are not too many supermarkets and food stores in general in Cambridge, but too few. To substantiate this argument, I am prepared to reveal to the world some of my secret shopping habits.

As I mentioned in a previous rant, I do most of my shopping at Sainsbury’s in Sidney Street, the only general mid-market supermarket in the City Centre. Because this Sainsbury’s is essentially a monopoly I have no choice but to put up with the length of queue that the Sainsbury’s management deem reasonable (they have the power to allocate more or less space, and/or more or fewer staff, to tills). Luckily for the customer, perhaps, there is little room to waste on queues in the store, so their length is limited even if – because of the lack of alternatives – the market would stand a longer wait.

But the main problem is that shelf-space is severely limited in the Sidney Street store. Sainsbury’s sometimes run out of particular lines – often as a result of their rather annoying BOGOF policy – and have an irritating habit of phasing out branded products from time to time and replacing them with their – in my opinion – inferior own-brand products. When Sainsbury’s lets me down, I either have to lump it and buy an alternative, or find the product I want at another store.

So here’s the confession part. Where else do I shop? And why?

There’s the market of course, but I’ve never really developed a rapport with any of the stall-holders. Perhaps because my father ran a fruit and veg shop for some years, I have a strong preference for choosing my own individual items, which is rarely allowed in a market. I remember once in Croydon I was “accidentally” given a bag of rotten avocados. I made sure that, while I was getting my money back, my loud complaints cleared the area of customers. Maybe it’s my suspicious mind, but I always suspect that market-traders think they see me coming, little suspecting my professional experience. I occasionally buy fresh herbs (in absurdly large quantities), an apple, or, on an impulse, some strawbs, in the market, but not much else. I just kind of feel the prices should be lower and I worry that, distracted by the melee around the stalls, I’ll end up with dodgy goods.

Occasionally I visit Asda on Newmarket Road. Unlike Sainsbury’s, this store is entirely geared up for drivers doing their weekly shop. For me Asda is a pain to get to, and queuing behind even a couple of overloaded trolleys is a tedious process. So why do I go there? Mainly because it stocks Kellogg’s Sultana Bran. Sainsbury’s used to sell KSB, but now have an own-bran alternative which a) to my palate is made of cardboard and b) comes in a taller box which doesn’t fit in my cupboard. Of course, whilst in Asda I pick up a few other items which Sainsbury’s doesn’t stock (or at least didn’t when I got in the habit of buying these things at Asda): usually Whole Earth sparkling organic lemonade and ginger beer, and Mexicana cheese (warning: contains peppers).

I even more rarely visit Tesco on Newmarket Road, which is even further than Asda. I can only remember going there a couple of times on emergency missions. The giant stores on Newmarket Road are unsatisfactory alternatives to city centre Asda, Tesco or other mid-market alternatives to Sainsbury’s.

Then, Cambridge being one of the country’s more affluent cities, we have no less than three M&S outlets: at the railway station, in the Grafton Centre and in Market Square.

Now, I’m a bit of a traditionalist when it comes to supermarkets. In my opinion they are shops, not food producers. We’d all be better off if they kept it simple and just offered as wide a choice as possible of branded products. Then we’d get the benefits of sensible competition. You’d choose your store on the basis of location and shopping experience factors, such as stock-control effectiveness, queue-length and ambience, and you’d choose your product based on what you actually want, not what the only convenient store in your area wants to sell you.

Why, for example, M&S does own-brand wine and beer is beyond me. Do not touch this stuff! My experience suggests money spent on M&S booze would be better used by making an offer to the guys in the park for whatever they’re drinking.

But life is rarely as simple as own-brand bad, branded-brand good. In particular I can heartily recommend M&S’s soups, particularly the spicy red lentil. They are superior, in my opinion, to the tired Covent Garden brand stocked by Sainsbury’s. Of course, everyone has the canned varieties from Campbell’s and Heinz, but few new recipes have been introduced by these companies since the coronation. Of Queen Victoria. The best soup I’ve ever bought in Cambridge was borsch at the International Food Store on Mill Road, but sadly supplies of this delicacy are sporadic, to say the least.

It’s convenient to pick up some M&S soup at their busy little store at the Railway Station, but that outlet doesn’t stock the most important product I buy at M&S: their Unsweetened Fruit and Bran Muesli. As I’m allergic to nuts, it’s a big deal to identify a satisfactory nut-free muesli product (I used to buy some Jordan’s lines). Now, the Grafton Centre M&S food-hall is about to close and relocate to Newmarket Road, so to avoid a trek, I now rely on the Market Square M&S for my muesli supplies. Let’s hope Sir Stuart Rose doesn’t decide the Market Square space would be more profitable if stocked with bras and knickers.

And, while we’re upmarket, there is a Waitrose in Cambridge, but I’d need to drive to it. The John Lewis store, disappointingly, has no food-hall. As I said, there are not enough supermarkets in Cambridge, not too many.

I shouldn’t forget the farm shop that has recently opened at the junction of Lensfield Road and Regent Street. Handy, and I regularly pop in for a treat. But I couldn’t afford to do all my shopping there.

It’s a curious little area, because mere yards from the farm shop, along Hills Road (there’s a map in one of my previous posts) we head what I can only call down-market. It’s convenience-store land. On one side of the road is a One-Stop. Handy for picking up a paper on the way to the railway station, where the WH Smith’s cannot be relied on to be queue-free (funnily enough, they have a monopoly on the station – anyone spotting a pattern, here?) – the managers who decided it would be a good idea to scan newspaper bar-codes and vetoed an honesty box for payment in the Cambridge Station WHS should be fired, and their pensions confiscated. Occasionally I’ve picked up a snack, a stale dough-nut perhaps, in the One Stop, but not much else, though I have noticed it would be an excellent place to pick up that really tacky card, for when you want something so bad that it’s good.

For emergency purchases, I prefer to cross Hills Road to the Co-op. It’s good for fresh cream and, when I spilt a glass of red wine, the internet recommended diluting it with white. It took a whole bottle, but did the trick. I defy anyone to locate the original spill. Thanks to Co-op for that bottle of cheap white wine! Judging by those ahead of me in the queue – and on the my few visits to the store I’ve had plenty of time to ponder – some use the Co-op as their main shop. This seems a bit of a stretch to me.

Mill Road is good for more than just borsch. All kinds of delicacies are on offer, from Polish sausages to caviar! Arjuna is good for spices and lentils. And there are plenty of convenience stores – Nip-In is good – though I most often pick up milk if I’m short from my newsagent on Regent Street, which is nearer.

But the general picture must now be clear. I actually have only one practical choice for my main supermarket shopping – Sainsbury’s. I’d say Cambridge has too few supermarkets, not too many.

It seems to me that the planning system is not the right mechanism for determining how many supermarkets we actually need. Surely if someone thinks a new store is viable – that they could run it profitably – then the default position should be that they are allowed to do so. Then we can all choose whether or not to use it.

The major public concern seems to be that a chain (Tesco most likely) succeeds in executing the Starbuck’s business strategy of dominating an area by monopolising all the available outlets. But, assuming that at least some people would choose another coffee-shop or supermarket in preference to Starb’s or Tesco, this strategy can only work if the number of outlets is limited. It’s much better for competition, then, if planning permission is easier to obtain than if it’s more difficult. Commercial rents will tend to be lower, and some business models – such as independent coffee shops and specialist food stores – will be more viable. And we might all spend somewhat less of our lives queuing.

March 23, 2009

Tescos and Taxis: Sanity in Cambridge Shock!

Filed under: Cambridge, Economics, Inefficiencies, Transport — Tim Joslin @ 4:19 pm

Supermarket sensation!

I had no idea local politics could be so interesting. It seems like only a fortnight ago that I mentioned the campaign against the Mill Road Tesco store:

“…the anti-Mill Road Tesco campaign … will be counter-productive as the specialist food-stores, cafes and so on on Mill Road – which does have character – would gain more from passing trade to and from Tesco than they would lose to the new competition.”

Imagine my surprise to read in the Cambridge Evening News (CEN) a couple of days ago of “traders coming out in favour of the store”. CEN reports that:

“The fight against the Say No to Mill Road Tesco campaign will see a petition launched today by traders supporting the supermarket giant.

Joyce Charles, one of the petition organisers, who owns Rollers hair salon in the Broadway, Mill Road, criticised the anti-Tesco campaigners.

Mrs Charles, who has owned the shop for 23 years and has the backing of other traders, said a growing number had had enough of the campaigners.

Other shops with petitions include Cambridge Resale, Greg’s Cycles, Halls Locksmith and the RSPCA shop.

Mrs Charles said: ‘We need Tesco to bring a bit of life to the street. In just a few hours we have had 23 signatures in our shop. …

‘These protesters are killing business in the street and putting people off setting up shop here. I have started to see more empty shops appearing and the protest has just made things worse.

‘As a hairdresser, I talk to many people and have found that those who actually live and work around here want Tesco. Why shouldn’t we have a choice? Many of these protesters are just against Tesco.

‘They are not thinking of Mill Road. They have painted the empty store and it looks awful.

‘Businesses won’t come here now because they are afraid they could be targeted next.’ “

I’ll be rushing down there to sign the petition!

And the excitement doesn’t stop there! There’s yet another plan for a supermarket in Cambridge. I’d be very interested to find out which chain this is – we should probably have a Lidl, Aldi or Morrison’s before another Tesco, on competition grounds. Otherwise, though, I’m afraid to say it seems to me that the local politicians are trying to outdo each other in objecting to these schemes – it’s very easy to say “we don’t need another supermarket”. CEN quotes Belinda Brooks-Gordon as saying about the proposed supermarket:

“It would bring with it giant delivery lorries travelling through our streets.

It could also attract hundreds of shoppers from the north and west of Cambridge, who could converge on this area.

The extra traffic it could generate would be disastrous.

It is imperative that we act now to stop these plans getting the go-ahead.

I would urge everyone to get behind this campaign.”

I can see downsides to a supermarket off Madingley Road, but I can also see benefits. The concern, of course, is indeed traffic. I’m sceptical though that a new supermarket would generate “extra traffic” – the potential customers must be buying their food somewhere already! And surely traffic is minimised by having as many supermarkets as possible so that journeys to supermarkets are as short as possible. The “hundreds of shoppers from the north and west of Cambridge, who could converge on this area” must be buying their food somewhere at the moment, many non-drivers likely at the dreaded City Centre Sainsbury’s, so will have another choice, which may require less travel. Those who drive to the supermarket may have less of a journey than to the Newmarket Road Asda and Tesco.

Similarly, a new store in itself can’t generate more delivery traffic. Unless the residents of Cambridge eat more because of the new store, the same amount of food must be being transported.

I’m a little more concerned that the store is envisaged to be the “biggest supermarket in the city”. Perhaps the proposed store represents another step towards Cambridge turning into a massive shopping centre for the surrounding area. But if this creates traffic problems these should be managed by traffic solutions. Otherwise, if we are making a value judgement, we should be asking whether it is a valid one. Surely if people want to shop in a huge supermarket, they should be given that choice. Maybe it’s efficient. If people don’t have time to do more than one weekly shop by car (I’m thinking of the thousands of families I see with trolleys piled high at Asda or Tesco when I occasionally venture a trip to Newmarket Road of a weekend), should we really be making life more difficult for them? Especially if we simply nudge them into driving further to another supermarket on the already clogged streets of Cambridge and the surrounding area.

On the other hand, there are clearly systemic reasons why large edge-of-town stores are so dominant. But some of these are under the control of local councils. Because it is even more difficult to get planning permission for local stores than for out of town supermarkets, the market allows landlords to charge much higher rents in town centres and residential areas. Sure, scale economies – which are a fact of life – and buyer power – which should be constrained – give large supermarkets an advantage, but I suspect a major competitive disadvantage for local, specialist food stores is the high cost of commercial property. And councils could reduce these by being more willing to give planning permission. In other words, in trying to stop massive edge-of-town supermarkets, councils are addressing a problem they themselves are responsible for creating!

It seems to me that using the planning system to constrain shopping choices is the wrong way to address the problem – if, indeed, there is one – and that it would be far better to grant planning permission much more readily, bringing shop-keepers’ costs down and allowing people more choice in where to shop. If people don’t want to use large out-of-town supermarkets, they’ll simply lose money and close down.

Taxi trauma!

But that’s not it for the excitement in Cambridge just now!! In a sensational move, the police actually arrested a taxi-driver! CEN writes:

“The driver was parked at the end of a row of six cabs on Thursday on a six-space rank in [St Andrew’s] street, which has become a flashpoint for the battle.”

But the story actually seems to be that if the driver had simply obeyed a police officer the arrest would never have occurred. Though I suppose – since, amazingly enough, it’s not just me, and according to the CEN, there have been “calls from the public” about the rank – the police would have had to take some action eventually, since, as I observed, taxis have simply been returning to the rank as soon as the coast was clear.

I’ve nothing against taxi-drivers. I have a lot of sympathy, since it’s obvious what’s happening. The problem is that taxis are the coal-mine canaries of the recession. There’s an incredible (and often remarked upon) feedback loop. People are less willing to drop a tenner on a taxi-fare, more taxis end up waiting at the ranks, meaning drivers have to work longer for the same return, leading to even longer queues… And that’s before even factoring in those drivers who have lost another source of income because of the recession, so need more income from fares anyway.

But as I’ve already pointed out, the taxi-drivers at the St Andrew’s Street rank are simply taking the piss. It’s not clear from the picture in the CEN article, but there are a number of bus-stops behind the taxis waiting on double-yellows. Quiet apart from clogging the street up, buses have to manoeuvre awkwardly round the taxis at the back of the queue. I’ve even seen taxis blocking bus-stops!

So now a situation has developed:

“Pc Steve Hinks, who is carrying out the sweep on taxis after calls from the public, says he and his officers have had abuse hurled at them by angry cabbies.

But cabbies criticised the ‘overzealous’ officers, saying the row was ‘the beginning of the end of a good relationship’. [what, one where the police don’t do their job?]

Now furious cabbies are threatening to turn Friday and Saturday nights in the city centre into mayhem by refusing to take drunks away from trouble hotspots.

And some are even talking about strike action or a blockade of the city.”

To be honest, the drivers need to calm down a bit. Threatening to create mayhem when it exists already seems more than a little hollow. Besides, I suspect they make a lot of their money on Friday and Saturday nights since there’s no public transport to take people out of the City Centre. They probably get a fair few £25 fares to villages and small towns all over Cambridgeshire, and are no doubt earning all the time, because they don’t have to queue for fares. Otherwise, given they choose their own hours, drivers simply wouldn’t work the party-shift.

The solution, of course, as I pointed out before is for the St Andrew’s Street taxi rank to be closed. People should walk – sorry, I know this is a novel concept for many – 100 metres to the Drummer Street rank, which appears to be redundant at the moment. There simply isn’t space for 6 taxis in St Andrew’s Street, let alone the 12 who are often there.

March 17, 2009

Lex Share Quantitative Easing Misconceptions

Filed under: Concepts, Credit crisis, Economics — Tim Joslin @ 8:55 pm

Lex, let’s – get it? Oh, never mind.

It’s one thing when the Guardian, BBC and Indy worry about quantitative easing funds “leaking” abroad, it’s another when the FT’s Lex does it. Here’s what they’ve written today:

“…the most subtle and perhaps most pernicious leak comes from monetary policy. This is most evident in the UK’s quantitative easing policy, which involves chucking some £75bn at the gilt market to bring down yields. This will supposedly push investors to look for returns further along the risk spectrum, first by buying top-rated corporate debt, then even riskier loans. But QE might just as well push pension fund managers, constrained by mandates, to buy highly-rated foreign corporate bonds where yields have not been compressed by QE. This is more than an intellectual leak in the UK’s policy framework. It’s a hole.”

But, by engaging in quantitative easing, the Bank of England isn’t increasing the UK’s money supply, it is increasing the supply of sterling. And sterling can’t possibly “leak”. A country’s currency and the economy within its territorial borders are different, usually closely overlapping, things. Quantitive easing affects the currency, not the economy directly. Any transactions – investments or tourist spending – undertaken in dollars or euros will be entirely unaffected by QE until a conversion is made to sterling (which will be worth less than would otherwise be the case because there’s more of it).

How can I explain this? Maybe we should consider the example of physically printing more dollars. This will increase the supply of dollars everywhere in the world, not just in the US, but also, for example, to Ecuador (which uses the dollar rather than its own currency), to Zimbabwe (which has started to use the dollar), to middle-class Russians distrustful of the rouble, to a million tourists around the world carrying dollars rather than their own currency, and, for that matter, to Colombian drug-dealers.

Lex says “QE might … push pension fund managers … to buy highly-rated foreign corporate bonds.” Sure, but to buy those bonds, the pension fund will have to sell pounds to someone else (assuming the corporate bonds are denominated in a foreign currency) who will then have to do something with the sterling. It’s impossible to control what is bought, but certain that more sterling will be circulating. Worst case, it will be left on deposit in a bank, but this will support lending and spending that way.

It’s entirely erroneous to imagine that pounds created by the Bank of England can “leak” away.

Btw, the misconception that QE can “leak” is similar to that behind the under-estimation of the problem of trade imbalances. It arises from a misunderstanding of the nature of money. It’s now (mostly) not gold, not even paper, and can no longer be passively stored. It is always put to use.

The Age of Stupid Planning Processes

Filed under: Economics, Energy policy, Film, Global warming, Housing market, Politics — Tim Joslin @ 7:49 pm

Back in 1998, McKinsey published a famous report: Driving Productivity and Growth in the UK economy (pdf, free registration required), which noted the detrimental effect of inflexible and onerous (my words) land use regulations on UK productivity. They note, for example, that:

“land and property regulations … constrain the hotel and software industries… [T]heir effects can be seen in industries as diverse as airlines, banking and general merchandise retailing. By contrast, the combined effect of deregulation in capital markets and a liberal approach to the use of land in London’s Docklands during the 1980s fostered dramatic growth in investment banking and securities, a field in which the London market now leads the world.”

Whilst the McKinsey consultants were writing their report, a team of film-makers on a shoestring were working on McLibel, eventually released in 2005. A decade on, the same team have released The Age of Stupid, which I found most notable for demonstrating that onshore wind-power generation should be added to the list of industries throttled by the UK planning process.


The film is based around a future Pete Postlethwaite looking back on the current era from 50 years hence, when global warming has left London flooded and the world in anarchy. Postlethwaite views video footage which includes the stories of 3 particular characters. One was a New Orleans resident oil industry worker and hero of Hurricane Katrina. The point of continuing the reportage into the character’s retirement was lost on me. I was expecting him to denounce the oil business, but that never happened.

The other two stories were much more effective. At times the film achieved what I call “cringe humour”, as perfected by Alan Partidge, David Brent and Borat. The founder of an Indian budget airline created his own episode of The Office when he berated and threatened to fire his staff.

But the film is worth seeing most for the battle of David Cameron, sorry, Piers from Cornwall, a caricature of the upper-middle-class eco-nut – and I mean that in the nicest possible way – with a family to match. Piers’ partnership with a farmer was straight out of The Fast Show. The team wanted to build a wind-farm. But Piers was reduced nearly to tears (on the phone to his mum) by the nimby country-folk – some even more upper-class than Piers himself – who block his plans.

As The Age of Stupid demonstrates so eloquently, the UK planning process is completely dysfunctional. It effectively gives people – local residents with a vested interest and time on their hands – the power to make decisions on matters of which they know next to nothing. There is only one possible decision they can make, which is to reject plans, so the process is obviously skewed towards this outcome. The critical concept in this charade is power. As The Age of Stupid shows, the reasons for rejecting plans are often irrational, bordering on the ludicrous. Since the majority of us who would benefit from a development, such as of a wind-farm, have no say in the process, there is no other way those involved can demonstrate their power than by turning planning applications down. It is utter, utter madness.

I pointed out the same problem with housing a while ago. It is entirely illogical for local residents to be given the right of veto over housing developments that benefit (among others) prospective purchasers of the houses, who have no say whatsoever in the decision as to whether or not they are built. Where did this right come from? Some of the objections to the wind-farm in Stupid were on (largely unfounded) grounds of noise nuisance. But someone could quite legally create a similar noise, say by driving up and down a country road. Quite apart from the failure of the planning process to weigh general benefit to society against cost to individuals, it gives more weight to those nuisances (or imagined anticipated nuisances, or psychologically constructed imaginary possible nuisances) that arise from construction activity than arise in other ways.

Here are 3 possible responses to this situation:
1. Confront the problem head-on: tell people they do not have the right they think they have. Take planning decisions at a higher level, weighing the general interest of the population against that of those near a development and achieving objectivity by excluding (either explicitly or by modifying the electoral process, i.e. introducing PR) directly elected representatives for the locale affected. Tightly constrain the grounds for objection, explicitly challenging, for example, the “right” to a particular view, the value of which before and after a development is purely subjective and subject to irrational fears. To put it simply, people get used to, and even appreciate, new features in their environment.

2. Spineless, self-serving politicians are unlikely to take sufficiently drastic action in removing the rights local residents have somehow acquired, so another tactic is to buy off the opposition. Simply pay people compensation, according to a formula, for the inconvenience of – say – being within a certain distance of a new wind-turbine.

3. Developers need to get wise. A lot of objections are entirely irrational. They arise, in part, because people want to feel they have power and are not helplessly subject to developers’ whims. It is essential to engage in the right way with the Residents’ Associations, local councillors and unaffiliated busy-bodies who are likely to block developments. They have to be involved in the process, so that they feel they have power over the shape of the development. I expect there are consultants specialising in this sort of exercise. We probably need more.

A full solution will involve aspects of all three of my proposed responses. Some changes to the UK’s planning regulations have taken place for large projects since McKinsey’s report. But much more needs to be done if we are not to become a nation of ever-poorer people, living in increasingly expensive houses, heated by energy that is both unnecessarily polluting and in shorter supply than necessary. Perhaps The Age of Stupid will provide a little more impetus for change. Go see this movie.

March 13, 2009

The Park Terrace Rat-Run (and Other Stories)

Filed under: Cambridge, Cycling, Road, Transport, Walking — Tim Joslin @ 11:57 pm

Transport is a big topic in Cambridge these days. The County Council (don’t ask why transport in the City is not the responsibility of the City Council) is pondering whether or not to agree to introduce a congestion charge in return for £500m from central government for transport improvements. A no-brainer if you ask me.

Even with half a billion, though, the problems aren’t easy to solve, as rather too many people think they have a right to drive on the cramped medieval streets in the centre of Cambridge. Weird and wacky ideas are therefore being floated.

I don’t think the principal problem is a lack of money, nor that cutting-edge technology is the whole solution. What’s lacking is a clear strategy. Joined-up thinking has clearly been continually thwarted over the years by a political system (first past the post in small council wards) that favours those who pander most effectively to local interest groups; by bizarre and unclear divisions of responsibility between different levels of government; perhaps by a lack of political courage; but above all by an electorate with an astonishing belief in its own entitlement to do exactly what it wants whenever it feels like it, regardless of the effect on everyone else.

Before spending £500m, what is needed is simply determination to minimise traffic in the centre of Cambridge. Without this, the money will make no difference.

Consider the area which I use as a pedestrian on a daily basis, as shown in the map below:

1. Close the Lion Yard car-park

Top left is Lion Yard, a covered shopping mall, recently extended in a project known as the Grand Arcade. There are a lot of shops in the centre of Cambridge now, a few hundred yards from one of the nation’s most historic buildings, King’s College Chapel. It is no longer practical for all shoppers to drive right into the centre, so Cambridge is ringed by Park’n’Ride carparks, subsidised by those of us who never use them, incidentally. So why, oh why, are some shoppers allowed to park in the new multi-story Lion Yard carpark?

I was showing someone around Cambridge last weekend, as I often do. We walked along Downing Street and Pembroke Street (not labelled on the map, but below Lion Yard, where the legend “University of Cambridge” appears), towards the Fitzwilliam Museum on Trumpington Street, looking around the area where DNA was discovered, not to mention the electron. But, spoiling the ambience and spewing fumes in this historic part of Cambridge was a slow-moving line of traffic heading north along Trumpington Street, turning right to head west along Pembroke Street, into and later out of the Lion Yard car-park, emerging to continue west along Downing Street, before causing a nuisance turning right at the newly installed traffic lights into St Andrew’s Street.

In our new mood of determination, the Lion Yard carpark should simply be closed. Build some flats instead. The shoppers and others using the Lion Yard car-park would then have to use the Park’n’Ride car-parks instead, improving the economics of the Park’n’Ride service.

But let’s see how much further we can get with our new mood of determination.

2. Close Park Terrace

Look again at the map. Just right of centre 4 roads form a tilted square: Gonville Place, Regent Street, Park Terrace and Parkside. Inside this square is Parker’s Piece, which I walk across or around (depending on the weather) nearly every day, from the end of Gresham Road (where there’s an infamous pedestrian and cycle crossing – more about that another time).

One reason for writing this post was to play around a bit with Google Maps! (Anyone know how to get rid of the annoying drawing-pin symbol, by the way?). What I’ve learnt is that there’s resistance somewhere to embedding two maps in one post. I therefore urge readers to switch between satellite mode and map mode to follow my description – the map simplifies matters a little too much.

The mess is in the north-west corner (top left) of Parker’s Piece. Heading north into town, you first encounter cyclists heading in all directions: crossing Parker’s Piece diagonally; turning left and right from Regent Street where there is a cramped dual-use crossing – that is, one for both cyclists and pedestrians, who trip over each other trying to reach the other side of the road before the lights change; heading both ways down the road on the left (Regent Terrace) behind the row of shops, restaurants and pubs fronting onto Regent Street; and – remember this point – heading east-north-east along the side of Parker’s Piece. These cyclists are not, as may be clearer in the satellite photo than the map, cycling along Park Terrace, which is actually the other side of the University Arms hotel.

At this point too, the pedestrian flow crossing Parker’s piece becomes a mere tributary. On Regent Street, you join a mass of often large groups, many from overseas, for you are now on the main route from Cambridge Railway Station into town.

After negotiating the melee at the corner of Parker’s Piece, the intrepid pedestrian has to keep their wits about them. The next hazard is the University Arms hotel car-park, which for reasons lost in the mists of time spews Sunday drivers up [23/3 CORRECTION: down, doesn’t memory play tricks on you?] a steep ramp across the busy Regent Street pavement. A lack of clutch control, or any other sign of the driver being fully in control of their vehicle, is often evident, so the wise pedestrian stays alert.

Barring major engineering works, the exit to the University Arms hotel is likely to remain in Regent Street. But this is a minor inconvenience compared to the next hazard – the dreaded Park Terrace.

As you cross Park Terrace, both cars and buses swing into the road, from both directions along Regent Street (Park Terrace itself is one-way). None appear to realise that they should be giving way to pedestrians.

Today I had the temerity to glare at a driver who swung round the corner as I was already crossing the road. What drivers fail to realise is that pedestrians do not share their knowledge of the precise trajectory their car will follow as it turns, nor indeed the same faith in the grip of their tyres, nor knowledge of the state of their brakes, nor, it has to be said, the same confidence in the skill and concentration of the person at the wheel. What the pedestrian experiences is a threat of serious harm if they should slow – or speed up, depending on where the car passes – their pace crossing the road, or, in the worst cases, if they fail to slow or speed up their pace. In short, the driver may know he’s not going to hit the pedestrian, but the pedestrian doesn’t know this. The pedestrian’s experience is simply of being on the receiving end of a form of intimidation. Hence the glare.

Believe it or not, today the driver actually stopped to discuss the issue! I should have studied sociology – hey, what am I saying?, I did study sociology! – because I felt this was a great opportunity to find something out. So when he pulled up I went and had a chat. And, sure enough, the driver, if I interpret his words correctly, felt he could not possibly be in the wrong, as he was on a road, and I was not another vehicle!

Now, later this afternoon, I pondered the Park Terrace phenomenon. I don’t drive with such aggression – well, only to other drivers, who of course deserve it, not to pedestrians – and am treated on average far more politely at other junctions. In fact, the buses using Park Terrace are noticeably more considerate than the cars, even allowing for the fact that sudden stops are not quite so easy for them. Heck, some of the buses even signal! Of course, I’m more considerate to the buses too – more prepared to step back onto the pavement to allow them to turn – not just because they are even more intimidating than cars, but also because I feel a few seconds of my time is outweighed by that of 20 passengers and a driver.

Pondering away, I developed a hypothesis – it’s Cambridge, after all. My hypothesis is this: the users of Park Terrace are mostly taking a short-cut.

The driver who didn’t care enough, for my liking, whether or not he took me out while I was crossing Park Terrace, was turning left. At the other end of Park Terrace (see map), most cars, I’ve noticed, turn right onto Parkside, and then likely left into East Road or straight on into Mill Road. One point is that there are few other places to go: straight on leads to a residential area with no exit (theoretically – it seems some anti-social drivers ignore various no thru road signs, weave through back-streets and emerge on East Road at Dover Street, no doubt very pleased at saving themselves time at the expense of other drivers and local residents). So drivers turning left into Park Terrace are mostly avoiding the traffic jam (and two pedestrian crossings) along Gonville Place. They are in the rush, rush, rush state of mind. They are not those who, I’ve read, treat car journeys, such as the daily commute, as quality time, an opportunity to relax between the stresses of work and the pressures of family life.

[23/3 NOTE: It turns out to my surprise that drivers can also turn left at the end of Park Terrace, drive round into Emmanuel Street, right into the pedestrian zone of St Andrew’s Street and then to King Street and Jesus Lane via Hobson Street. [26/3 CORRECTION: Sorry, this traffic doesn’t enter the formal pedestrian zone, rather it bears right into Hobson Street just before where a gate blocks St Andrew’s Street at some times of day, but it does add to the buses and taxis congesting an area where there are a lot of pedestrians, many crossing St Andrews Street where there is a passage leading to the bus station and the Grafton Centre.] I suspect traffic is entering Regent Street at the Lensfield Road/Gonville Place junction in order to take this route, avoiding having to use East Road and Maid’s Causeway. The same argument applies: if we want a pleasant city centre for the benefit of a large number of people, we should simply stop being so kind to a small number of motorists!].

No, the reason Park Terrace is such a pain to cross is that its being used selectively by those who are trying to save their own precious minutes. Close it, I say. We have designated which are the main roads. Why should a few avoid the queues on them, in the process slowing people down when they slot back in to the traffic procession in advance of where they left it?

If Park Terrace were closed to traffic at the Regent Street end it could be used as a two-way cycle route, though minimal residents’ traffic would still have to be permitted, thereby relieving the Parker’s Piece melee 20 metres south along Regent Street.

Potentially, too, a new exit from the University Arms underground car-park could be constructed into Park Terrace (to exit to the east). This would add little to the residents’ traffic along Park Terrace.

3. Close Regent Terrace

If you think Park Terrace is a joke, you won’t believe Regent Terrace. Regent Terrace is on the west side of Parker’s Piece, a cul de sac behind the buildings on that side of the park. Like Park Terrace, Regent Terrace is an access road that just happens to be there. It wasn’t created for the purpose to which it is being put.

And Regent Terrace – no more than 150 yards from the Queen Anne multi-story on Gonville Place – is being used for parking. Completely unsegregated cyclists and pedestrians (especially when Parker’s Piece is muddy) compete for road space with cars cruising the narrow street looking for a parking space. Ludicrously, cars have to turn round at Melee Corner. And, for much of Regent Terrace’s length, there is no room for two cars to pass. I’ve seen arguments break out over who should reverse – once with a woman (sorry, I’m afraid it simply was a woman, saying “person” would seem a little odd) nearly in tears, refusing to reverse, despite several cars in front of her coming the other way, for fear of scraping her car.

Regent Terrace should simply be closed to all except residents. The parking places are more trouble than they’re worth and should all be removed, allowing a pedestrian path and cycle lanes to be marked.

4. On the buses

Where are the buses going to go, I hear you ask, now that I’ve closed Park Terrace?

Why are the buses using Park Terrace in the first place? I retort.

At this point it might be worth listing some of the interacting traffic problems in the centre of Cambridge:
– too many private cars;
– too many buses;
– too many taxis;
– lack of cycle lanes;
– cyclists using the pavement endangering pedestrians and themselves;
– dangers to pedestrians who risk being hit by traffic when spilling off narrow, overcrowded pavements and from bus wing mirrors even whilst on the pavements.

So far we’ve addressed the private cars and provided new quiet routes for cyclists along the north (Park Terrace) and west (Regent Terrace) sides of Parker’s Piece.

What we really need to do with the buses is keep most of them out of centre of Cambridge, which is too cramped for London-style double-deckers. We could do this simply by creating a decent bus terminus at the railway station (not just a few more stops), in place of some of the acres of car-parking there, and building a high-capacity transport link from the station to the centre of town – a monorail, an underground rail link, or even the Heathrow-style pods that have been proposed.

But, even without such major improvements we can make a big difference in one fell swoop. Why don’t we simply create a one-way route for buses (and all other motorised vehicles)? The bus station, such as it is, is in Drummer Street (at the east end of Emmanuel Street, see map), and, controversially, National Express coaches wait on Parkside (space should be made for them at the central railway station, which would then operate as a more effective transport interchange). A one-way loop, (either way) could be created from Emmanuel Street, along St Andrew’s Street, Regent Street, Gonville Place, Parkside and Drummer Street, back to Emmanuel Street. Simple.

The advantage of creating a one-way loop for buses and all other vehicles would be to create space for cycle lanes in both directions, and wider pavements, on all these roads – but especially Regent Street.

People will object to making Gonville Place one-way, because it is part of a major east-west route, but I say: bite the bullet! Traffic is stationary in Gonville Place much of the time, simply waiting for the lights at either end (often blocking the pedestrian crossing at the end of Gresham Road – but it’s hardly news that so few these days know how to drive with the courtesies laid down in the Highway Code, is it?). Simplifying the traffic sequence at these junctions would speed up the traffic flow. OK, traffic in one direction would have be diverted some way round, but remember what we’re trying to do. We’re determined to minimise traffic in the centre of Cambridge.

5. Taxi, taxi

There have always been a lot of taxis in Cambridge, but now that there’s a recession on it’s like Moscow in the early 1990s, except that the Cambridge taxis don’t double as currency bureaux and kiosks for black-market goods.

Now, I’ve nothing against taxis, but they should be for the occasional difficult trip. They are not an alternative to buses. They are an incredibly inefficient form of transport, using more fuel and road space per journey than private cars – because the vehicle is empty when it returns to a rank or goes to the next pick-up. Why then, are taxis given such privileges?

In Cambridge, taxis can go everywhere buses go, not just to make pick-ups or drop-offs that would be impossible otherwise, but en route. There are certain roads – for example, Sidney Street and St John’s Street (scroll up on the map and, because these streets are so small, zoom in) – where people walk in the road and have to jump back onto the pavement when a taxi wants to pass through. This is madness. Inconveniencing dozens for one passenger makes no sense. Unless picking up or dropping off where private cars can’t go, taxis should have no more rights to drive through Cambridge than you or I.

And the siting of taxi ranks is hilarious. There’s one for 6 vehicles in St Andrew’s Street in the absolute busiest part of town, where space is at a huge premium. Today I noticed about a dozen taxis queuing back past the rank and a couple of community police officers moving them on. As soon as the police left, the queue was back, of course, causing a nuisance. Yet round the corner in Drummer Street, the rank next to the bus station was empty. Totally unused space. Just get rid of the rank in St Andrew’s Street and put a sign up pointing to where taxis can be found.

Incidentally, I once read that pollution levels along Regent Street and St Andrew’s Street are extraordinarily high. Funny, that.

6. Take pedestrians seriously

If we are determined to give cyclists and pedestrians priority over cars – and remember, this is our policy – then give cyclists and pedestrians priority over cars. I must have spent hours waiting, for example, to cross Gonville Place at the crossing at the end of Gresham Road. I stand there watching cars either edging along in a jam (often stopping on the crossing – please, please send a traffic cop to book them, even if it’s just the once!) in one or (better, because you can sometimes nip across) both directions. Now, if the lights have been green to traffic for even 10 seconds, switch immediately to pedestrians and cyclists. The same no-brainers occur all over town.

So, various tiers of government, if we’re going to have a transport strategy for Cambridge, let’s have one that makes sense. We want to use the space as efficiently as possible. That means minimising the traffic in the centre of town. And if we want to minimise traffic in the centre of Cambridge, then that’s what has to be done. Don’t fudge the policy by sticking car-parks where some people would like you to do that; don’t leave sneaky little short-cuts and parking places for drivers in the know; create a sensible traffic circulation even if people whinge; don’t kow-tow to lobbies, such as the taxi-drivers; don’t try to cater to a minority at the expense of anyone else (even bus users – take those stupid stops outside John Lewis, you know, where the queues block the pavement, and put them in Drummer Street); and, above all, make life as easy as possible for pedestrians and cyclists, because they’re exhibiting the behaviour you’re trying to encourage.

You can’t keep everyone happy all the time. And if you keep trying to do so, you’ll end up making someone very unhappy indeed. For example, in this small part of Cambridge I’ve focused on, which I know intimately, cyclists have taken to using the pavements – because space hasn’t been allocated to them in the form of cycle lanes (or they can’t be bothered to sort lights). Cyclists often travel at high-speed on the pavement. It’s only a matter of time someone – likely frail and elderly – is seriously injured. Or worse.

March 10, 2009

Flogging the Black Horse: How Bad is it for Lloyds Shareholders?

Filed under: Credit crisis, Economics, Media, Rights issues — Tim Joslin @ 3:32 pm

CORRECTION (01:00 11/3): I made an assumption in this post (mentioned in section 5) that the Government would not have an entitlement to new ordinary shares at 38.43p each. In fact, they have stated that they DO have such an entitlement and intend to take it up. This point has been discussed on FT Alphaville, which notes that the minimum holding the Government will end up with in Lloyds is 62%, not the 51% I (and some others) arrived at. They will retain at least 43% of the ordinary shares, not the 26% I (and some others) arrived at, before the B shares are converted. I haven’t yet corrected this error in the text of this post. The discussion remains valid.

(10:00 11/3): Made corrections to some calculations in the text (in italics).


It’s been incredibly frustrating over the last couple of days trying to determine exactly what the effect of the latest dodgy UK Government wheeze (its Asset Protection Scheme, APS) has been on the value of my modest Lloyds Group shareholding. On Sunday I complained, inter alia, about how the bank is being forced to lend not for business reasons, but because the UK Government seems to think this is a good idea. I have no idea whether or not such enforced lending will benefit the economy – it seems like just the latest fashionable economic thinking to me – but I presume that, if it turns out to be a big mistake, Brown, Darling and King will be disgraced and stripped of their pensions.

Nevertheless, I’m not too worried about the lending stipulation on Lloyds. After all, we’re a bank – that’s what we do!

I become a little more concerned (meaning my blood boils) when I read articles suggesting that the latest intervention – a “toxic asset” insurance scheme – may not in itself be entirely necessary (after all, we were told the UK banks were stress-tested last October – they are now just realising anticipated losses), but is being implemented in order to gain control of the banks in order to force them to implement ad hoc lending policies devised by politicians seeking re-election within 15 months.

I become very concerned (my blood curdles) when I subsequently discover that the UK Government appears to be making up the rules as it goes along, for example on capital adequacy, in order, it seems, to force the banks to participate in the APS, in order to force them to implement ad hoc government policies that may not be in their shareholders’ interests.

I am extremely concerned (blood clots block my veins) to read this morning that one of the few remaining independent UK banks – Barclays – may also be forced to become a tool of UK Government policy.

But none of the articles I’ve read clearly explain the precise impact on Lloyds shareholders. I’ve had to download a PDF from Lloyds own website. Sack the journos. And take away their pensions!

Let me try to explain the deal:

1. Cost for participation in the APS
I wrote on Sunday that this would be £10bn (plus a £25bn excess). I’m not sure where I got this figure – TV or radio speculation, probably – because news sources were quoting £15.6bn.

But neither figure is really correct. The £15.6bn is an entirely notional amount. It is intrinsic to the deal that this is paid in new Lloyds B shares:

“…carrying a dividend of the greater of 7 per cent per annum and 125 per cent of the dividend on ordinary shares.”

The B shares will cost 42p each, the approximate closing price last Friday, the last trading day before the announcement.

Now, call me naive, but even if we say that Lloyds shares are “worth” 42p, the B shares are worth somewhat more than my ordinary shares. They have first call on dividends (so in the worst case for ordinary shareholders could receive 2.94p each – 7% of the notional £15.6bn, i.e. £1.092bn! – in a year when ordinary shareholders receive nothing!).

But even if the ordinary dividend exceeds 2.94p * 1.25, i.e. 3.675p per share, the B shares will receive 1.25 times the ordinary share dividend.

It seems to me the B shares are worth north of 1.25 times the ordinary shares, that is, at least 52.5p each or £19.5bn in total.

But there’s a twist in the tail.

2. Conversion of B shares
The B shares can be converted into ordinary shares, but only at a cost of 115p, i.e. about 2.74 B shares would be converted into one ordinary.

Furthermore, the government must convert the B shares if the ordinary share price rises above 150p.

This would result in the government increasing its holding by at least an additional 12% of the bank (the figure depends on how many shares the Government already holds, since it dilutes its own existing holding by taking new shares) of Lloyds (see below for explanation), in terms of both economic and voting interest (but see below).

This is very curious, since, before conversion (strictly, if never converted), the B shares increase the economic interest of the Government in Lloyds by (at least) 3.42 (1.25 times 115 pence/42 pence) times as much, that is 41.07%!!! [Actually, the calculation is not quite so simple – perhaps its easier to say that before conversion the B shares number more than the ordinaries, and get a higher dividend per share, so on their own represent an economic interest of well over half the bank!! And the Government owns 43% of the ordinaries already, and could own as much as 65%. It’s total economic interest, i.e. share in dividends, before conversion of the B shares – which could be calculated exactly, maybe I will later – could be as much as around 90%].

Astonishing! As an ordinary shareholder, the Board of Lloyds will only be acting in my interests if it refuses to pay any dividends until the B shares have been converted into ordinaries. They will then have “merely” exchanged (approx.) 12% of the bank for the APS insurance. If the B shares are never converted, the insurance will have cost (approx.) 41% of the bank!!

3. APS insurance excess
I mentioned that the excess charge for the protected assets is £25bn. But this is on the assets after “historic impairments and writedowns”. So the cover is for £250bn of £260bn of loans. Maybe the excess should really be stated at £35bn, since it’s not clear that Lloyds would benefit were any individual loans that have been written down already to recover. This matters, as Lloyds has just declared a huge loss on the HBoS book. I understood at the time that this was done in order to get the bad news, or at least the worst of the bad news, out of the way.

If the £260bn of loans don’t make a further £25bn of losses, then Lloyds will have given the UK Government another 12% (or perhaps 41%) of the bank for nothing.

In fact, if the extra lending Lloyds is to undertake is given a value – say, several £bn – then, worst case, Lloyds will have given the Government 12% of the bank and several £bn, for nothing!!

4. Conversion of preference shares
I’m trying to be objective, here, so perhaps should cut out the exclamation marks and italic emphasis.

Even if Lloyds doesn’t lose another £25bn on the loan book, there is something in the deal for Lloyds shareholders. The Government is offering to underwrite a conversion of the 12% preference shares – albeit that these were outrageously expensive in the first place.

The £4bn of prefs are going to be converted at 38.43p per share, creating an additional 10.41bn shares.

There are currently about 16.34bn in circulation (calculated from Yahoo! data), so the new shares are 10.41/(16.34+10.41) or 38.92% of the increased pool of shares, or 63.71% of the shares already in circulation.

Now, if the shareholders end up with all these 10.41bn new shares, the Government’s existing 43% in the bank will be diluted down to only about 43/1.6371 or 26.27%.
[An alternative way of carrying out the same calculation is to note that, in this scenario, the Government would end up owning 7.03bn of a total 26.75bn shares, that is 7.03/26.75 or 26.28% of the shares – obviously small rounding errors are creeping in].
CORRECTION (10:00 11/3): This won’t happen, as the Treasury will take up its 43% or 4.48bn of these shares, maintaining its minimum holding at 43% or a total of 11.50bn shares (actually the Treasury has 43.5%, but forgive me if I don’t go back and correct this everywhere).

It’s quite possible that the shareholders will take up their entitlement to new shares at 38.43p, since the Lloyds share price at this very moment is somewhat higher at 48.8p (i.e. I could subscribe for my shares and sell them immediately at a 10.37p profit per share, but, of course, this will tend to lower the share price, so not everyone can do it).

On the other hand, if the Government as underwriter ends up with the new shares instead of its prefs, it will own (43% of 16.34 bn) + 10.41bn of the total 26.75bn shares in Lloyds, that is (7.03 + 10.41)/26.75 = 17.44/26.75 = 65.20% of the shares, as quoted in the Press.

5. Conversion of B shares revisited
As I mentioned above, if and when the Government converts its B shares to ordinary shares, it will increase its holding by at least an additional 12% of the share base.

As detailed in section 4, above, when it converts the B shares, the Government may have as many as 17.44bn shares out of the total share base of 26.75bn ordinary shares.

The £15.6bn of B shares will convert at 115p per share, that is, into 15.56/1.15 = 13.53bn new shares.

Treating the B shares separately after conversion, they give an economic interest of 13.53/(26.75 + 13.53), that is 33.59% of the bank.

Before conversion, the B shares receive dividends equivalent to at least 1.25*13.53*115/42 = 46.31bn shares, that is 46.31/(26.75 + 46.31) or 63.21% of the dividends.

But the B shares dilute the Government’s own ordinary share holding, so it’s also interesting to see their effect on the Government’s total holding after conversion.

If the shareholders subscribe to no new shares at 38.43p, the Government would end up owning (17.44 +13.53)bn of (26.75 + 13.53)bn ordinary shares, i.e. 30.97/40.28 or 76.89% of the bank as quoted in the Press.

Note that the Government’s voting rights are capped at 75%, which may explain why this number has sometimes been reported for the Government’s Lloyds’ share.

On the other hand, if the shareholders take up all their rights to the new ordinary shares being exchanged for the preference shares, then, after converting the B shares, the Government would only hold (7.03 + 13.53)bn of 40.28bn shares, that is, 51.04%.
CORRECTION (10:00 11/3): Since the Treasury will take up its 43% or 4.48bn of the preference replacement ordinary shares, as noted in section 4, its minimum eventual holding is in fact (11.50 +13.53)bn of 40.28bn shares, that is 62.14%.

Since this is a bare majority, I am ashamed to say that I am inclined to wonder whether the numbers have been stacked to ensure that the Government will always be capable of becoming a majority shareholder in Lloyds (since it can convert its B shares at will).
CORRECTION (10:00 11/3): OK, it’s not a “bare majority”, but I still wonder whether the whole process has been, in part, designed to ensure the Treasury gains a controlling stake in Lloyds.

I note, also, that that there appears to be no provision for Lloyds to pay for the APS by raising more than the £4bn needed to redeem the preference shares when it offers existing shareholders (and new investors) new shares at 38.43p. [On the other hand, I’ve assumed the Government will not participate in this share offer, even pro rata to its existing 43%, given that it is under-writing it anyway, and that the full £4bn worth of shares will be available to outside investors].
CORRECTION (10:00 11/3): I was in fact mistaken to make assumption indicated in the square brackets.

But, of course, if the numbers have been stacked, this would be tantamount to expropriating Lloyds’ shareholders assets – seizing them without adequate compensation – and of course that would be against the European Convention on Human Rights. And, of course, the Government is always careful to respect the rights of its citizens!

And, after all, according to Lloyds:

“HM Treasury has confirmed to the Board that its objective in increasing its potential holding of ordinary shares in the Group is to provide financial support. In the event that HM Treasury increases its ownership of the ordinary shares, it does not envisage any change to the constructive relationship it currently enjoys with the Board.”

So that’s all right, then.

After all, now that they’re in the position of having to sell the deal to shareholders, the Lloyds Board are not exactly free to speak their minds. I’m sure there’s nothing in the various stories that have appeared claiming they are unhappy.

Note: 22:23 10/3 Corrected an embarrassing slip in this post – the minimum B share dividend is 7% (2.94p), not 7p which appeared in a couple of places!

March 9, 2009

Dear Sainsbury’s. Just. Put. The Price. Of Warburton’s Seeded Batch. Back. Up.

Filed under: Cambridge, Economics, Inefficiencies, Markets, Undercover — Tim Joslin @ 9:09 pm

Maybe I should start Twittering, as perhaps I’ve already said what I want to say – and I was able to use the letter format again. Nevertheless, I’ll explain, since I consider myself a trainee Undercover Economist, although I prefer to point out failures rather than successes. I’m just a monitor evaluator kind of guy!

A little earlier on – before I was distracted into a short riposte in order to save capitalism – I stopped by Sainsbury’s in the centre of Cambridge.

One of the key items I wanted to purchase was a loaf of Warburton’s Seeded Batch (WSB) bread. I don’t consider myself overly fussy, but, after a long period of trial and error, I have established a clear preference for this particular loaf.  A slice toasted and with marmalade goes nicely with a cup of tea in the morning.  I recommend WSB, though it may not be the right bread for everyone. A while ago I was mildly concerned when a report suggested that WSB contains more than the average amount of salt compared to other loaves.  But in the end I found myself laughing in the face of excess dietary electrolytes.

It was around the time of the sodium chloride exposé that Sainsbury’s started a promotion: £1 rather than £1.51 for a loaf of WSB. Over several months when this offer has been in place much of the time, I have never once succeeded in profiting from it. The casual observer might notice that Cambridge is full of students, for whom the chance to save 51p is an opportunity not to be passed up. Loyal customers end up suffering. If there is a logical, Undercover explanation for this pricing policy I have not yet identified it. Today the inferior and more expensive (£1.59) product I ended up with is a Hovis Granary Original. Original in the sense that it was apparently unevenly sliced by hand.

Does the manager of Sainsbury’s in Cambridge city centre understand supply and demand? The idea surely is to find the highest price at which the day’s supplies of WSB sell out just before the shop closes, disppointing the minimum number of customers who may choose to shop elsewhere next time. Or, perhaps the price should be that at which profit is maximised, although, given the cost of clearing unsold product and, again, the risk of losing customers, this may be at the same point. Reducing the price to £1 and selling out by lunch-time on many days over a period of months does not seem to me the most intelligent promotion. What about giving free sample slices instead?

The Cambridge Sainsbury’s manager is obviously a bit of a keenie. Today he was also offering lemons at a special price of 10p each! What is this, the Soviet Union? Don’t we import citrus fruits from around the world in order to provide a constant supply? Is a promotion really necessary? Cambridge is an international kind of place. Are there perhaps potential lemon customers who’ve never tried one, and may baulk at 30p for a strange subtropical fruit? I suspect the true explanation is a glut of lemons in the store-room after over-enthusiastic marketing of the ingredients for pancakes with lemon and sugar for Shrove Tuesday a couple of weeks ago.

But that doesn’t explain the pile of cross-cut shredders (for paper, I presume, rather than lemons) at £10, reduced from £29.99, that I nearly stumbled into on my way out of the store. What is this? A recession warehouse clearance outlet or a supermarket?

One wonders what the manager of the Cambridge Sainsbury’s does understand, as the store can’t be accessed by car, so those shopping there arrive by bicycle or on foot. Many customers are students who, by and large, do not have access to a freezer, or at least a secure one. Why, oh why, then, all the BOGOFs and other offers on heavy, bulky items? Tomato juice is my “favourite” of the “offers” – I say it is an “offer” as this one has been in place for years, it seems. I enjoy a slurp with lemon juice (am I lucky today!) and Worcester sauce before dinner. But there is a significant saving – relative to the price of industrially squeezed tomatoes, that is – if you buy 3 cartons at once. Is there a car-park outside the Cambridge city-centre Sainsbury’s full of SUVs owned by the purchasers of these cartons? No, they have to lug them home on foot or bicycle. Smart. But this is less an offer by Sainsbury’s than a payment to the customer for tomato-juice storage.

The Director of my MBA programme was fond of pointing out that, on more than one measure, the Cambridge city centre Sainsbury’s is the busiest in the country. Part of the reason, I reckon, is that rents in the centre of Cambridge are so high that only a small number of competing food stores would be profitable.

Because it has a de facto monopoly, there’s no way to tell whether or not the bizarre pricing policies at the city centre Sainsbury’s are what the market wants. True, there’s an M&S foodhall, but that serves the sort of people – of which there are quite a few in Cambridge – who don’t go to Sainsbury’s. And vice versa.

True also, there are a couple of other food stores near where I live, a little way from the centre, but I always feel I’m in a movie when I go to them. The sort of movie where men with guns walk in and shoot the place up.

Competition would be somewhat improved, I suspect, if campaigners hadn’t objected to Tescos plans for its store on Mill Road (the store will open, I understand, but without some of the facilities Tesco wanted). At least some people would have a practical choice between the new Tesco and Sainsburys.

Denying people a choice of shop hardly seems democratic to me. Where is the need to apply the political process? – shops are not mutually exclusive.

The idea seems to be to preserve “independent” stores in Mill Road. Why the locals want to pay over the odds for milk is beyond me. And isn’t it possible that the specialist food stores on Mill Road would benefit from freeing space up from staples for higher value-add specialist products?

The concern is that Tesco would be too strong a competitor – as I pointed out en passant to my MP, if we bar Tesco from the location are we saying that we’ll close down the nearby Co-op if it sharpens up its act?

But the way to level the playing-field is to eliminate distortions of the market for – say – milk due to supermarket chains’ buyer power. If smaller retailers are at a disadvantage this should be addressed by the competition authorities, not through the planning process – as I noted in another context earlier today, the planning process is overused – arguably abused – in the UK.

I expect, insofar as the anti-Mill Road Tesco campaign has achieved its objectives, it will be counter-productive as the specialist food-stores, cafes and so on on Mill Road – which does have character – would gain more from passing trade to and from Tesco than they would lose to the new competition.

Cambridge is clogged with traffic, and it is also part of the environmental agenda to get people out of their cars.  Blocking companies’ plans for local food stores seems a perverse way to achieve a transport modal shift in the town. Green revolutionaries needs to be a bit smarter than this.

March 8, 2009

Who Watches the Watchmen?: A Letter from a Lloyds Shareholder

Filed under: Credit crisis, Economics, Media, Politics — Tim Joslin @ 7:58 pm

Dear David Howarth MP,

I am writing to you not only as a stunned longstanding Lloyds Group shareholder and former employee in Lloyds Bank, but also as a potential Lib Dem voter in the next General Election, in which I presume you will be hoping to win a second term as the MP for Cambridge.

Over the last fortnight it has gradually become apparent that shareholders in Lloyds are, for the second time, about to lose a large part of their stake in the future earnings of the Group. Details had still not emerged by Friday evening, when I realised I needed a little film therapy. I found myself in a packed cinema watching the tremendous Watchmen. Maybe you won’t have a chance to see it, so I’ll explain where the title comes from – though you may be able to guess. It’s the ancient philosophical problem, of course, dating back to Plato, Socrates and Juvenal: “Who watches the watchmen? Who guards the guards?”

I’ve grown up with the understanding that the UK government is accountable to the House of Commons. Furthermore, in our system, the role of the Opposition in the House is to hold the Government to account. The question I therefore want to ask you, as the British state assumes more control of its banking system than any other country, in the process expropriating shareholders’ assets, is simply: “Why is the Government not being held to account?”

I see the Labour Government exercising blanket powers – foolishly granted to it by Parliament at the time of the Northern Rock fiasco – to progressively seize control of the banking system, it seems as a specific goal in pursuit of a strategy to pull the UK out of recession. One hardly needs to be even a mild cynic to conclude that the electoral timetable motivates many of the drastic measures being taken – a recovery by early next year could yet keep Gordon Brown in Downing Street. Of course, it would only be right that he does now secure a mandate, albeit somewhat belatedly, since the context in which Labour won the 2005 General Election was that Tony Blair had given an explicit undertaking to “serve a full term”. You’d think the Opposition parties would be pointing this fact out on a daily basis. But no, they no longer care to oppose. A new consensus has arisen – partly, perhaps as a result of the UK’s ridiculous first past the post system – it is, I suggest, now seen as reckless for parties to go around opposing policies, or even presenting their own solutions to the issues of the day. Instead they minimise risks by manoeuvring and attempting to outflank the others. It’s far safer to blame the Government for “not going far enough” than to question the direction they are leading us all in. So we see the Conservatives unable to present a clear plan, and the Lib Dems outdoing Labour in calls for nationalisation of the banks.

Let me make a few suggestions as to what the Opposition parties should be saying. I’ll start by quoting the Lib Dems lead spokesman on business issues, Vince Cable, who, like John McFall, the Chair of the Treasury Select Committee, is presented in the media as an expert only because fellow MPs are even more ignorant. As they used to say: in the land of the blind, the one-eyed man is king. Here’s what the Lib Dems one-eyed man had to say to the BBC this weekend:

“The government can’t now just sit back as it has with the other banks that it’s taken over and just watch them – it has to make sure that they are run in the national interest.”

The article in which Cable’s quote appeared had begun:

“The deal giving taxpayers a 65% controlling share of Lloyds Banking Group is a ‘vital step’ to get banks lending more, the chancellor [Alistair Darling] has said.”

Here are some questions Cable might have asked instead:

1. Why should the banks “lend more”? The problem we have is a result of an unsustainable asset boom, principally in residential property. Surely, if prices fall, less lending will be required in that sector, yet the Government is demanding that the banks increase lending. This does not compute. Surely, too, the commercial property sector needs to retrench, and, in many other business sectors, businesses need to reduce their borrowings to a level where they can be profitable over the entire business cycle. Some businesses may need to fail. What are the precise objectives of the renewed lending the banks are being ordered to make? Is it wise to insist they throw good money after bad?

2. Is the state really best placed to make lending decisions? Surely the system that has developed over the centuries is that those lending money must judge how much to lend in total and to whom, on the basis that such lending is likely to be profitable. Why would we want the state to control the banks? How does this support the principle of lending only to those likely to pay it back?

3. The implication of Alistair Darling’s celebration of having achieved control of Lloyds Group (as well as RBS and Northern Rock), in particular, is that the process of insuring potentially bad loans on the books of Lloyds Group has been manipulated to produce just this outcome. If so, this would be an abuse of power of the highest order: not only is it against British tradition to seize property, in this case shares, without adequate compensation, it is also contrary to international undertakings the UK has given, for example, in ratifying the European Convention on Human Rights. There appears to be a motive, as well as a wealth of prima facie evidence. Has there been a crime?

4. The nightmare for Lloyds shareholders has arisen in large part from the decision to take-over HBoS last October. After this, and Bank of America’s rescue of Merrill Lynch, I can tell you now that no bank will ever again support a government in the sort of cosy backroom deal that the insufferably smug Mervyn King bemoaned was not organised at the time of the Northern Rock fiasco. “Why”, Vince Cable should perhaps be asking, “was Lloyds not given adequate time to perform due diligence?”

5. And, given that Lloyds did step up to the plate, why have draconian terms been imposed on them for participation in the Asset Protection Scheme? As a shareholder, I understood that the banks had been stress-tested in October 2008, and capitalised to withstand the worst of downturns. I simply do not understand why further action is necessary to save Lloyds. If it is the economy (or Government) that is being saved this time (which is what Gordon Brown keeps saying), why should Lloyds’ shareholders pay for it?

6. There are many agendas at play in the Government’s handing of the banks. Two of these are to:
(a) Ensure the banks “resume lending”;
(b) Minimise the risk to and maximise the profit for the taxpayer.
Why is (a) the concern of individual banks? Where does the obligation to behave in a way that may be expedient to the Government come from? Especially as much of the “problem” is a result of foreign banks exiting the UK. And if a bank such as Lloyds is required to lend more than its management might otherwise judge is in the best interests of its shareholders, then surely they should be compensated, not pay for the privilege.
As regards (b), how do I know that paying something around £10bn for insuring £260bn of loans is a good deal? Especially as the excess on the insurance is no less than £25bn! I understand that the loans would have to be worth on average less than 86p in the pound for this deal to be of any value to the bank – that is, before the excess and the fee are covered.

7. But the bank is being forced to pay for the insurance in shares issued at around 40p each (compared to more than 10x that much before the credit crunch). The bank is legally obliged to act in the general shareholder interest, a principle which the Government appears to be riding roughshod over, and any company would only dilute its shareholders in such a way as a last resort. This is on top of the simultaneous dilution caused by the conversion of the extortionate prefs the shareholders were forced to take in October. The purpose of the insurance is to ensure the bank survives and that the shares are worth more in future. But the majority of this benefit will accrue, not to the existing shareholders, but to the Government. “Why”, perhaps Vince should be asking, “is the Government penalising shareholders because it is having to support the financial system?” Surely the Government should be ensuring the smooth operation of the banking system anyway, not charging for the privilege?

After Tony Blair’s honeymoon period, there was a huge reaction against New Labour spin. Now the self-serving scape-goating of the banks by the political classes has gone unchallenged, not just by the Opposition parties, but also by the media. It is the government and regulators who are responsible for the oversight of the UK’s financial system. They are not being held to account.

Who’s watching the watchmen?

I await your response. Please confirm that you agree that I may make it public, in part or in its entirety,

Yours sincerely,

Tim Joslin

Older Posts »

Create a free website or blog at WordPress.com.