Archive

from The Human Impact:

Men a key weapon in women’s battle for top jobs

By Maria Caspani

I recently went to the launch of the Women’s Empowerment Principles, hosted by the UK chapter of the United Nations women’s agency (UN Women) in London.

The principles - signed by over 400 CEOs worldwide - provide companies with a framework to improve women’s empowerment and promote gender equality in the workplace.

It was thrilling to be in the same room eating canapés and sipping white wine with 85 top executives of UK and global companies—particularly because they were practically all women.

And, being a woman myself, I couldn’t help but feel…well, proud.

Some inspiring panelists highlighted the progress made toward gender equality in global companies as well as in small businesses. But they also drew attention to the long path ahead before a well-balanced and inclusive work environment is achieved in Britain.

from The Great Debate UK:

Democracy vs. austerity

By Kathleen Brooks. The opinions expressed are her own.

Throughout history it has always been difficult to take something away from someone once you have given it to them. Europe is finding that it is extremely difficult to reign in public finances once they start to go out of control. Democracies don’t like to vote for austerity, which is why Sarkozy lost the Presidency in France, why a radical left party came second in the Greek elections and why the Conservatives got a drubbing at last week’s local elections in the UK.

This tells us something about democracy in the western world. Governments have to manage the public finances directly – they have to sell the debt, do the sums and present budgets. However, the people who vote them into (and out of) power are the public, who rightly in most cases, believe they have worked hard, paid  taxes and deserve the services and retirement promises made to them.

So here we have the problem: some governments in the West have unsustainable debt loads and deficit levels and yet they don’t have the popular mandate to try and bring that under control. That isn’t the story all over the west. The Germans and the Dutch agree that the government books should be balanced. But if you asked the rest of Europe if they wanted to reduce public debt levels to make country finances more sustainable at the expense of public services and jobs, the recent election results suggest that you would get a resounding no.

So there isn’t one unified way of thinking about austerity in the West. Some people see it as a virtue, others as a type of hell. So what to do? Europe’s one-type fits all model that is largely designed by Germany could lead to social disorder and radical political parties grabbing the reins of power in Greece. However, the more people fight against austerity the more unlikely it is that their governments can attract enough investors to buy their debt to fund their public spending needs.

So where does this vicious circle end? The answer is that no one knows. Now that the true state of public finances in Europe has been revealed it can’t be brushed under the carpet and the Greeks et al can’t go back to the pre-2007 ways of living and spending. However, the opposite – harsh austerity designed to reign in public finances at half the time it took to amass the debt in the first place - isn’t working either.

A more sensible plan is for Europe to reach some sort of compromise. Germany and Greece (as the two extremes) need to realise there are multiple views about what a democracy should provide and how public finances should be controlled. The next step is to plan a fiscal pact that allows countries to reign in public spending at the same pace as it amassed it in the first place – and fiscal targets should be spread out over 10 years rather than the current demands to bring down deficits to 3 percent of GDP by the next fiscal year. The UK could probably follow suit and realise that the debts took two parliaments to accumulate, thus it should take two parliaments to rein them in.

from Breakingviews:

Let News Corp keep BSkyB

By Chris Hughes

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

News Corporation should be allowed to keep its 39 percent stake in UK pay-TV group BSkyB. British MPs may be right when they say founder Rupert Murdoch isn’t “fit” to run News Corp and turned a blind eye to wrongdoing in its UK operations. But a regulatory review of BSkyB’s fitness to broadcast isn’t the place to remedy these failings.

The proven and alleged wrongdoings in News Corp’s UK newspaper business - ranging from phone hacking to bribing public officials - are grave. The immediate response should be criminal prosecution and dismissal of the individuals concerned. It doesn’t follow that media watchdog Ofcom should kick News Corp out of UK television.

True, News Corp’s handling of the newspaper scandal can’t be ignored. The company admits there was a local cover-up. For years, group management didn’t probe the UK subsidiary’s activities in spite of worrying evidence pouring into the public domain. This serious controls failure merits a response too. Shareholders, already sick at Rupert Murdoch’s cavalier approach to their strategic concerns, have rightly pushed News Corp to tighten its systems and change its culture. Securities regulators may also have an enforcement role: assurances that phone hacking was confined to one rogue reporter were misleading.

Ofcom’s specific task is to consider whether “any relevant misconduct” by the individuals who control BSkyB’s broadcasting licence means they are not “fit and proper” to do so. That test would be applied to Rupert and James Murdoch as News Corp chief executive and deputy chief operating officer. Ofcom might consider that their supervisory failings meant misdeeds at BSkyB could be covered up as easily as they were at News International. But history shows that its primary concern is, rightly, whether a News Corp-controlled BSkyB would continue to respect UK media regulation. It’s hard to say BSkyB wouldn’t.

The political noise in the UK surrounding News Corp may make it harder for Ofcom to be impartial. But the watchdog is supposed to be independent. However much one may dislike the Murdochs, that’s no reason to undermine the integrity of a regulatory framework which makes Britain a good place to do business. Ofcom must think straight - and do what’s best for viewers.

from Breakingviews:

Murdochs’ UK political friendships backfire on all

By Chris Hughes 

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

The Murdochs’ UK political friendships are backfiring on all concerned. Fresh revelations about the media moguls’ relationships have created new uncertainty over News Corp’s part ownership of UK satellite broadcaster BSkyB. They also have the potential to throw the UK’s coalition government into a full-blown crisis.

James Murdoch’s appearance before the UK’s Leveson enquiry into media standards on April 24 was his first grilling by an experienced lawyer on phone hacking, and it showed. But while there were some awkward moments, the questioning did not reveal any telling new evidence that Murdoch knew more about phone hacking at the News of the World than he has previously admitted.

The shocks came when the lid was lifted on contacts between the government and News Corp after the media group bid to buy out BSkyB. It’s hardly surprising that a large corporation might seek to influence the approval process for a big deal. But the reams of detail, mainly email correspondence, appear to go far beyond procedural enquiries and routine advocacy.

To re-cap, in 2010 News Corp launched a bid for the 61 percent of BSkyB it did not already own, just after the UK election. A government minister was meant to rule in a “quasi-judicial” capacity whether the move would damage media choice in the UK. Evidence heard on April 24 clearly indicates that the process was politicised from the outset. News Corp seems to have been aware of government thinking on the bid, and was getting favourable nods about the bid’s chances of success. Add in the context that Murdoch papers switched their political allegiances to support the Conservative party before the 2010 election, and the smell gets worse.

The developments make it harder to see News Corp making a successful second bid for full control of BSkyB - which is almost certainly still a long-term ambition. Moreover, they may make it easier for Ofcom, the media regulator, to conclude that News Corp no longer satisfies the “fit and proper” test than must be passed to be a major shareholder in a broadcaster - ultimately triggering a sale of its existing holding.

from Breakingviews:

UK cuts pensions and workers — without a fight

By Ian Campbell

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

The compromise between the UK government and public-sector workers over pensions looks like an important breakthrough. The unions have given most ground. The government will save billions of pounds on retirement benefits over coming decades. An ugly repeat of the clashes and strikes of the Thatcher years now looks unlikely. But if David Cameron is emerging as a consensual politician, it is with a very hard edge.

Prior to the Dec. 20 agreement, the government's "final offer" was that the so-called accrual rate -- the annual pace at which a pension accumulates - would be no better than 1/60th of salary. Workers were unhappy. One strike had taken place and more were coming. That would have been a nightmare a government embattled by an economy that is probably already back in recession.

Resolution came when the government budged on accrual rates but with the quid pro quo of less generous revaluations of past accruals to reflect inflation. The deal is complex. For example, the civil service will receive 1/44th of salary each year, revalued annually by the consumer prices index, with nothing extra on top to keep up with earnings. But National Health Service workers will receive 1/54th of salary, each year, revalued annually by the consumer prices index plus 1.5 percent.

The unions have given up more than the government by agreeing in principle to lower accrual rates and to reference retirement benefits to workers' average career earnings rather than their final salary. Public workers know they will still get better deals than in the private sector.

The deal should be seen against the broader backdrop. The government is cutting the public sector hard. In the second quarter, 126,000 public sector jobs disappeared, and a further 67,000 in the third. State employment, at 6 million, is at its lowest since 2003.

from Breakingviews:

UK banks need government to solve funding squeeze

By George Hay The author is a Reuters Breakingviews columnist. The opinions expressed are his own.The Bank of England is tooling itself up. The UK central bank announced on Dec. 6 a new facility to help domestic lenders if the euro zone crisis causes a fully-fledged freeze in short-term funding markets. But banks may still need more help.

The BoE already has two ways to combat liquidity squeezes. It allows banks to borrow against liquid collateral for three or six months through its Indexed Long-Term Repo (ILTR) auctions. And it allows desperate banks to swap illiquid collateral for gilts for up to a year via its Discount Window Facility (DWF) – in return for a fat fee and big haircuts.

In some senses, the new Extended Collateral Term Repo facility (ECTR) is a halfway house. It uses a similar auction structure to the ILTR but allows banks to pledge DWF-style collateral for a minimum fee of 125 basis points over the BoE’s base rate. As such it goes some way to filling the gap left by the now-defunct Special Liquidity Scheme (SLS), the crisis facility which allowed UK banks to swap illiquid mortgage-backed securities for liquid Treasury Bills for a period of up to three years.

However, the ECTR will only last for thirty days at a time. That may help avoid a collapse, but won’t provide much long-term reassurance. Contrast the BoE’s approach with the European Central Bank, which is currently being pressured to offer facilities that last for two or even three years. Even though the UK is not in the euro zone, its banks are suffering from the same long-term funding drought as their rivals on the continent. That’s worrying because, according to the BoE’s own figures, UK lenders have to roll over 140 billion pounds of term funding next year.

But the central bank has rightly judged that providing long-term bank funding is not its job. That is a task for the UK government, which could re-open its Credit Guarantee Scheme, a 250 billion pound programme that allowed banks to weather the 2008 crisis by issuing new long-term debt insured by the state.

Unlike many European countries, a UK sovereign guarantee still carries credibility – 10-year gilts are currently yielding just 2.3 percent. Now that the BoE has donned its fire-fighting kit, HM Treasury should tool up as well.

from Breakingviews:

New London air hub plan needs public money to fly

By Robert Cole The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Heathrow is a jam-packed embarrassment for those who promote London as a global financial centre. A brand new four-runway hub in the Thames estuary east of the UK capital might relieve the squeeze. The idea is favoured by Boris Johnson, the mayor of London. Central government enthusiasm would be greater if all the funding could be raised from the private sector – although the UK government now says it will explore plans to maintain the UK’s aviation hub status.

Second-rate air infrastructure causes economic damage, while the direct and indirect gains of having a first class air hub are substantial. But these things are hard to quantify. Private financiers – wanting a reasonable return on their investments – could only count on receiving part of the extra revenue generated.

Investors in a purely private new airport would have to rely on fees paid by passengers. If the airport took all the additional traffic that some expect could come to London, the cashflow, according to a Breakingviews analysis, would be about 2.1 billion pounds a year – in today’s money.

Work commissioned by the Mayor of London suggests that passenger numbers could climb from the current 140 million to 400 million by 2050. Meanwhile latest numbers from Ferrovial, the owner of Heathrow, suggest a net profit of about 8 pounds per passenger. Discounted in perpetuity at 7 percent, the rough cost of capital used in the current regulatory regime, private financiers might count on about 30 billion pounds of present value from the expected increase in traffic.

That is a rough estimate. The choice of the discount rate makes a big difference. But it is well below the rough estimates of the cost of the airport and the related transport and environmental infrastructure. Foster+Partners, the architectural firm, and Halcrow, the construction consultancy, has put a 50 billion pounds price tag on their plans. And those companies’ estimates may err on the low side.

An enlightened government – with fewer deficit worries – might be willing to make up the difference. For one thing, there would be political gains in making Heathrow less crowded. But without state help, a brand new London airport will struggle to get airborne.

from Global Investing:

Japan fires latest FX wars salvo; other Asians to follow

Emerging central banks that sold billions of dollars over the summer in defence of their currencies might soon be forced to do the opposite. Japan's massive currency intervention on Monday knocked the yen substantially lower not only versus the dollar but also against other Asian currencies.  The action is unlikely to sit well with other central banks struggling to boost economic growth and raises  the prospect of a fresh round of tit-for-tat currency depreciations. Already on Monday, central banks from South Korea and Singapore were suspected of wading into currency markets to buy dollars and push down their currencies which have recovered strongly from September's selloff.  The won for instance is up 6.9 percent in October against the dollar -- its biggest monthly gain since April 2009.  The Singapore dollar is up 4.5 percent, the result of a huge improvement in risk appetite.

Despite the interventions, the yen ended the session more than 2 percent lower against both the won and the Singapore dollar,  and most analysts reckon Japan's latest intervention is by no means its last. That's bad news for companies that compete with Japan on export markets and will keep neighbouring central banks watching for the BOJ's next move. "Asian central banks are likely to play in the same game, and keep currencies competitive via regular interventions," BNP Paribas analysts said.

But the race to the bottom has been underway for some time.  After all central banks in the West have cut rates, as in the euro zone, and embarked on more quantitative easing, as in the UK.  One bank, Switzerland's, has gone as far as to effectively establish a ceiling for its currency.  And in Asia, Indonesia surprised markets with an interest rate cut this month while Singapore eased monetary policy. Many expect South Korea's next move also to be a rate cut even though inflation is running well above target.  Analysts at Credit Agricole predicted this week's G20 meeting to yield no fruitful discussion on what they termed "currency manipulation". "This lack of co-ordinated policy could trigger an escalation in ongoing currency wars," Credit Agricole analyst Adam Myers told clients. That would in turn lead to a renewed acceleration in central banks' dollar reserves, he added.

from The Great Debate UK:

Salvation through inflation: The British way out

By Laurence Copeland. The opinions expressed are his own.

Accusing policymakers of acting out of sheer desperation is a pretty standard jibe by critics trying to put them off their stride.

Unfortunately, the latest round of QE came wrapped in comments from the Governor of the Bank of England which amounted, more or less, to saying: “Look! I’m staying calm – but it’s taking a hell of an effort, believe me!”

As the world economy teeters on the brink of relapse, Mervyn King’s action amounts to saying: “Forget the danger of inflation... we’ll settle for anything rather than a rerun of 2008”. He and his opposite numbers in Frankfurt and Washington are haunted by the fear that the history books may say the 21st century’s Great Depression happened on their watch.

The latest measures are probably not going to work and may make matters worse because the mess we are in is a matter of the distribution of real wealth – positive and negative i.e. net worth – and hence is unlikely to be improved very dramatically by printing money. Specifically, the economy is grinding to a halt because, internationally and domestically, even locally, those who save have accumulated wealth which they would normally feel inclined to lend or invest. But since the majority of would-be borrowers are already indebted to unprecedented levels, and investment opportunities are unattractive given that the output they generate would need to be sold to the same overindebted consumers, wealthowners are opting for the relative safety of Government debt, guaranteed bank deposits, gold and even, it seems, blue-chip real estate and agricultural land.

Like the self-similarity of a fractal, this same pattern is repeated at the largest and the smallest scale.

At the global level, the largest creditors – China and its neighbours, the Gulf Oil producers, Germany  – feel understandably reluctant to keep adding to the trillions of dollars they have already lent to the debtor countries, nor are they overwhelmed by the attractions of direct investment in these countries, especially as the juiciest opportunities are often ruled out by political considerations (imagine a Chinese bid for Intel or Apple, for example).

from The Great Debate UK:

The QE billions should go direct to consumers

By Mark Hillary. The opinions expressed are his own.

In 1998, the Japanese government was ridiculed for giving away almost $6bn (at 1998 value) of shopping vouchers. The plan was that consumers would spend more of this ‘free money’ and help lift Japan out of the seemingly endless malaise it suffered in the nineties – as many other developed economies were enjoying a roaring decade.

One of the major faults in the Japanese plan was that the vouchers could easily replace the need to spend actual money. If my groceries cost me $100 then why would I still spend $100 of cash on groceries and buy a nice meal in a restaurant with my voucher, when I could just use the voucher for those groceries?

But the Japanese may have been onto something by focusing on demand rather than monetary supply, contrary to most received wisdom at present.

The Bank of England’s Monetary Policy Committee has restarted quantitative easing (QE) in the past week, much to the surprise of the markets and leading some commentators to ask what they might know that the media and financial analysts don’t.

Former MPC member David Blanchflower even used his column in the Guardian to say: “The MPC argued that tensions in the world economy ‘threaten’ the UK recovery. I am unaware of the MPC ever using this word before. Given that a lot of care goes into the exact wording of such a statement all nine members would have had to sign off on this, then things must be pretty bad.”

Perhaps I am over-simplifying the complexity of the British economy, but if the man on the street senses that the economy is not improving then he will reduce spending, luxuries are forsaken, and unsecured credit is paid down.