The Conservatives Fiddle while the world burns

George Osborn, Shadow Chancellor of the Exchequer, spoke today at the Tory Party Conference. Falsely.

He said a lot of things that on closer study are weasel words that do not mean what they lead you to believe you think they mean, and which you want them to mean. In other words, it was a carefully crafted PR speech fitting the role of the leader of a large PR company. Oh, that’s what David Cameron really is, was and always will be, isn’t it?

He specifically warned people that if they paid large dividends instead of rebuilding their capital base, those people would suffer. This was followed by a comment about not allowing taxes paid by lower end taxpayers to be used for the benefit of those earning millionaire bonuses. But that means they will do practically nothing at all! Let me explain.

The people who the average man in the street feel most badly about are the city traders getting multi-million pound bonuses each year. The problem is, these traders are employees, or partners (most stockbroking firms have been partnerships not Limited Companies. And if they are companies, each bonus earner is a small part in the whole so gets salary plus bonus. Salaries and bonuses are taken out of a company’s accounts before the dividends, so by making the bonuses big enough you can minimise the dividends to avoid any Tory inspired wrist slapping. Result? Tories can claim to be hitting the people most voters now want to be hit, but without actually having anything more than a feather duster to do it with.

Then there’s the matter of party funding. David Cameron has been attacking Labour for some time about being funded by the Unions and cozying up to big business, while at the same time they themselves have raised £50 million in 30 months. Well, nothing wrong with that you think. But just look how they’ve been doing it. Two examples.

First off, the Leader’s Group. This is an exclusive club that costs £50,000 a year to join but which gives you the right to evenings with David Cameron – special privileges for the privileged. If you can’t afford the fee, well, you can’t influence his thinking. 

Secondly, expatriate Lord Ashcroft and the £4 million donation that became £3 million for the Tories. According to a recent Channel 4 documentary, “Cameron’s Money Men” Ashcroft is not on the voters roll, is therefore not eligible to vote, and by law cannot contribute to a UK political party. So how did the Tories receive his money? A chain of companies starting with one in Belize where he is allegedly tax resident and has considerable interests with the last link in the chain being a company in Southampton. Not only is this not allowed, it may even be criminal, according to one of the experts on the Channel 4 program.

The Tories then used £2 million of his donation to fund publicity campaigns in key marginals across the country. Although there is a limit to how much money political parties can spend on an election campaign once one has been called, there is no limit to how much can be spent in the crucially influential two years preceding an election.

Channel 4 programs do not have the reputation for accuracy that perhaps the BBC might offer (remember The Great Global Warming Swindle?) but they did have some pretty well placed people making comments.

First US Presidential Debate: Obama 61% McCain 39% (Poll)

I just watched the first US Presidential Debate between McCain and Obama on CNN and McCain did not win. Considering Foreign Policy was supposed to be McCain’s strong suit in which he would “wipe the floor” with Obama, McCain was shaky and weak, stumbling at times, and was slaughtered by Obama on the economy as well as on Iraq. On the other hand, Obama came across as a strong, knowledgable, informed, choice with sensible strategies in tune with the voters. McCain certainly knew a few names though, quoting World War Two leaders, Alexander the Great, and Henry Kissinger (who was in Nixon’s administration) as well as a few world leaders. Shame McCain got the names he dropped wrong a couple of times though.

Along the bottom of the screen was a sensor line that indicated how the focus group audience felt about each candidate on a minute by minute basis. The line indicating the feelings of registered Republicans and Democrats went up when their candidate was speaking, but what was most interesting was how the independents reacted. Here, they clearly went more times with Obama than they did with McCain. And it’s the independents that are the swing voters whose opinions are the most important here. Win the independents over, and you win the election.

CNN of course gave a lot of impetus in their post-mortem of the event to Republican pundits and so called “experts” from the media, and were clearly pro-Republican. That’s a shame because they had a great opportunity to prove the mainstream media are independent, but I think everyone knows they aren’t.

Polls conducted immediately after the debate were all saying Obama won by a huge margin overall, by a huge margin on the economy – and even on the Foreign Policy issues that McCain holds up as his USP. McCain should really have done better here. Obama nailed him on tax – McCain wants to give tax breaks to the rich, Obama wants to give tax cuts to 95% of working Americans, and says nobody earning less than $250,000 will pay any extra tax on his plan. He also made the point that the money McCain wants to give to the rich will not be available to give to ordinary working people.

McCain has been slipping in the polls for some days now, and his risky choice of Sarah Palin as running mate is looking like an own goal if accounts of her performance in a CBS interview is anything to go by when even pro-Republican CNN said she was awful.

There’s still a long way to go of course, and next Thursday we’ll get to see the Vice-Presidential candidates debating for an hour and a half. Now that will be interesting!

Some interesting post debate polling stats can be found here.

Reforming Bonus Pay for long termism

Currently the financial system is under pressure as it hasn’t felt for decades, and a lot of the blame is being laid on the culture of massive annual bonuses based on short term performance. It clearly cannot be right that a bank such as Lehman Brothers is now in Bankruptcy Protection mode just 9 months after paying multi-million dollar bonuses to staff who created the conditions which led to its failure. And those bonuses, once paid, can never be claimed back! Now how short sighted is that?

The system clearly needs changing. Short termism was a problem that I heard first mentioned by then Chancellor of the Exchequer, Nigel Lawson who was fighting against it in the 1980s. You can even argue that the practice has undermined the growth of real value in companies that you and I deal with on a daily basis by encouraging CEOs to always opt for the cheapest solution rather than the best solution over the long term.

How can it be right for a CEO to retire with a multi-million pound severance package, even if he has been sacked, after just three years in the job? Managing companies today seem more to do with pushing problems into the future, or passing them on to someone else, than with making the business stronger.

This process is driven by the need for ever increasing rates of share price increases to fund the mega-million bonuses of twenty-something city-kid traders who seldom have any real life experience.

All of the above we know and recognise, as it has been commonplace to read about it in the Financial pages for many years. But what can be done about it?

I propose that the system of bonuses be completely changed. The means by which they are taxed is one way governments can exert control over the system without introducing excessive regulation, but on its own is a blunt instrument that needs refining. Here is my idea:

1. Tax all bonuses that are greater than 25% of base salary at the rate of 90%
2. Add this money into a fund to be used to stabilise financial markets in times of turmoil
3. Unitise this fund, so that everyone who has paid into it is allocated a share of the total that is proportional to the size of their bonus, just like savers in a Unit Trust
4. Each year, deduct the costs of any “reclaims” when deals that earned bonuses cause severe financial problems
5. After a long enough period that represents the sought-after long-termism, say five to ten years, start paying back the remaining fund units to the bonus earners on a monthly basis, spread over a further five to ten years
6. Tax the eventual bonuses paid at a flat rate of tax so that over the fund term the scheme is fiscally neutral for each participant – they end up paying exactly the same amount of tax they would have paid had the bonus been given to them in one go
7. The bonus fund would have to be ring-fenced from normal government spending as it is supposed to act as a “reserve capital” for use in times of crisis.

This scheme has many advantages. It moves the qualification for the earning of large city bonuses away from frothy, short-termism towards long term value but still allows normal bonuses for ordinary corporate employees who seldom have bonus schemes that award them more than 25% of basic pay; it allows for bonuses to be reclaimed back; it reduces the effect of selling a rubbish investment to another party because your bonus would be affected in the same way no matter whether the trader passes the risk on to someone else or not and therefore keeps the trader “honest”; city mistakes would no longer be paid for by the taxpayer, but by those traders who created the problems in the first place; the scheme would reduce appetite for risk, and increase self monitoring within the city – words such as those uttered by the oft-quoted Goldman Sachs trader as he closed a deal “I ripped his face off!” would be less common; the public would like it.

A similar scheme could run for the banks themselves.

Fantastic Vettel Finishes First, Hamilton stays ahead

Sebastian Vettel (pronounced “Fettle”) was today in fine fettle and form (sorry about the pun – couldn’t resist it!) and led from pole into the record books. He’s the youngest driver ever to win a GP, removing Alonso from that position. Not only did he get that record, but he’s the first driver to win a GP for Dietrich Mateschitz, boss of Red Bull, and the first driver to win for Minardi (OK, not Minardi anymore, but that’s what Seb’s team used to be called). He’s also the first driver to win a GP for ex-GP driver and 10 times GP winner Gerhard Berger. On top of that, he’s the first driver to win at Monza in the Italian GP with a Ferrari customer engine!

Aussies turn into whingeing softies at Paralympics

What a wuss. Second placed Kurt Fearnley in the 800m T54 Wheelchair race at the Beijing Paralympics had a boohoo today. He complained that because he was in Lane 2 he got boxed in and couldn’t win so BooHooed to his team who then BooHooed to the committee – who then, amazingly, said the race would be rerun on Tuesday!

Sebastian Schumacher?

Nice one, Seb! Pole position in Italy at Monza – in the wet, too. OK, the wet gave you an advantage, but you still had to go faster than the Ferraris, McLarens, BMWs and Red Bulls – oh, and cash-strapped Renault too.  But nobody can take it away from you – you got the pole. Shame you don’t get a point for pole and fastest lap in F1, but that’s for the future, perhaps. You’d certainly deserve it for getting pole in a Toro Rosso – but it is Adrian Newey designed…

Well done that man! Sebastian Vettel, all around nice guy and new young talent for F1. Let’s hope he isn’t destroyed in the same way the authorities are trying to destroy Lewis Hamilton.

Who is the McLaren Tyre Muppet?

After a fantastic win that wasn’t in Belgium, McLaren made a right mess at Monza. Who was the muppet that put Hamilton on intermediates in Q2? Who was it that held him in the pit lane for many minutes of the session when other drivers were making their fastest laps – couldn’t they make their minds up?

F1 authorities ban overtaking

No wonder F1 is so boring. The F1 authorities insist on blocking drivers from racing each other! The latest ruling on chicanes is just crazy and not at all thought through. It’s a knee-jerk reaction to last week’s farcical attempt to deprive Lewis Hamilton, McLaren and Ron Dennis of any chance of a fair crack at this year’s F1 World Championship.

In the pre-Schumacher days, weaving in front of a driver to prevent them overtaking was illegal. Then Schumacher came along, weaved often, and got away with it every time – as he got away with so many questionable things. When questioned about what was allowed, the authorities decided that making one move before positioning for a corner was allowed – ie you could block an overtaking attempt. Now we see drivers at every level of the sport doing the same, and racing has become even more boring.

Fast forward to the 2008 Belgian GP. Lewis Hamilton is closing fast on Raikkonnen in the rain. While fast in the dry, this year’s Ferrari is abysmal when the tyres are cold, and rain cools the Ferrari’s tyres faster than anything. The McLaren on the other hand gets lots of heat into its tyres pretty easily and is great on cool tyres. In the rain, the McLaren still has oodles of grip when the Ferrari has next to none at all. Of course, this means the McLaren wears its tyres out faster as we have seen, but the advantage in the rain means Lewis can brake far later than either Massa or Kimi which is why this year McLaren has done so well in wet races, and the Ferrari so poorly.

Just before the bus stop chicane, Lewis catches Kimi, Kimi brakes very, very early, Lewis’ momentum helps him scythe past, but in the middle of the chicane Kimi is trying not to be overtaken while at the same time dealing with much less grip, and his car runs wide, right in Lewis’ way. Lewis can allow the two cars to hit one another, or he can cut the chicane. He chose the latter, but this we already know. We also know that up until last week, the standard procedure to follow when you cut a chicane is to allow the person you just overtook to repass you. There was no “neutral” territory, you just had to let them past you.

So, Hamilton allowed Raikkonnen to pass him again, but suddenly the cars reached the approach to La Source. Raikkonnen had to brake earlier than Hamilton due to the lower grip he was getting from the Ferrari’s tyres. Hamilton was so close he nearly went into the back of Kimi, but swerved to the inside and braked later, passing him. The McLaren team asked FIA Race Control if Lewis needed to let Kimi past again, but twice they said no.

McLaren appealed, so to “write the rulebook after the event” so they had something to hit McLaren over the head with the FIA have come now out with a new rule – that a driver who cuts a chicane must allow the driver he has just passed to retake his position, and the chasing driver must not overtake until after the next corner. That’s daft. Although it is very convenient for Ferrari, it seems designed primarily to save face for the F1 stewards who have been villified since their unsupportable decision.

Why is it daft? Well, look at the circuit diagram of Monza for instance. Possibly the best overtaking part of the circuit is at the Rettifilio at the end of the main straight. But it’s a corner at which so many drivers regularly have to go off, either because they had no room, were forced off in the heat of the moment, or just out-braked themselves trying to avoid being overtaken. The start of the Italian GP is almost always like this. With the new rule any driver cutting this chicane will not be allowed to overtake the car in front until the Roggia. Cut here and they won’t be able to overtake until after the Lesmos, which basically means they will have to wait until the entry to the Parabolica since there is no real possibility to get past at the Ascari chicane. And we certainly won’t have those marvellous images we’ve had from previous years of cars going two abreast around the Curva Biassono.

You also of course get drivers who cut the corner to stay in front. Now, with this new rule do they have to give up their position? Or is nobody allowed to attack them for a whole straight and the next corner? What about a fit car trying to get past a mis-firing or mechanically challenged car – will they have to travel behind the sick leader at reduced speed just so as to not “gain an advantage” by overtaking them? Does this mean that the third placed car can then overtake both the sick leader and the regulation encumbered challenger?

What about the driver who doesn’t mind pushing a rival off-line, or even off-track? If they do this at a chicane and the other driver has to cut to avoid an accident, it won’t be his fault he went off-piste, but he will be penalised for having perhaps the better car or for driving better. Whatever, the FIA have now introduced another weapon into the arsenal of the unsporting race driver to stop a rival overtaking them: block at the non-chicanes, and force wide at the chicanes. That way, even if an enterprising and exciting driver can overtake you, they won’t be able to or be allowed to! I do wish rule-makers would remember the power of precedent.

What a stupid situation this latest rule adjustment brings. I thought the promoters of F1 (ie Bernie) wanted more excitement, not less… putting obstacles in the way of those wishing to overtake won’t help “the show” at all.

I may have said this before, but the lunatics are definitely running the F1 asylum.

F1: the pathetic joke that calls itself a sport

There is a rule in Formula One that the drivers are very afraid of. They really should never break this. Just so they know exactly what this rule is, there is another (unwritten) rule for the officials that insists they repeatedly demonstrate to the drivers exactly what it is the drivers should not do.

It’s called “Bringing the sport into disrepute” and while drivers are not allowed ever to break this rule, the officials can and do do this on a regular basis. From sex scandals at the very top of the governing body, to questionable actions and repeated favouritism on the behalf of the FIA Stewards when it comes to applying the laws that are written down.

At Monaco, Kimi Raikkonnen skidded on a damp track at the chicane just after exiting the tunnel, and ploughed into fourth placed Adrian Sutil in the Force India, knocking the talented young driver out of a points scoring position. Did the FIA stewards penalise Raikkonen? No. At the time, Mike Gascoyne, the Force India Technical Director, said that if it were the other way around Sutil would probably have received a two race ban.

The FIA officials explanation? They said that because Sutil overtook three cars under yellow flags he would have got a drive through penalty worth 25 seconds so he wouldn’t have finished in the points anyway. Pardon? That’s a bit like saying you’re allowed to rob the bank if the bank made an accounting error on someone else’s account! Surely they should both have been given penalties – Sutil’s infringement should not mean Raikonnen’s need no penalty. That’s crazy.

At Valencia, right on camera, Felipe Massa broke a law in the pits which at the least should have given him a drive through penalty – GP2 drivers breaking the same law the same weekend at the same track were actually disqualified. But Felipe drives a Ferrari, the FIA’s favourite car. They didn’t disqualify him, they didn’t give him a Stop and Go, they didn’t even give him a drive through. For the first time ever, they decided to “investigate the matter at the end of the race”.

Well, at the end of the race Felipe won by 5.6 seconds from Lewis Hamilton. The FIA Stewards decided Massa had done something wrong, but did not apply a post facto drive through penalty by adding 20 to 30 seconds to his race time. No, they said he should pay a fine so small in comparison to his salary (and one probably picked up by his team anyway) that it in reality is not a penalty at all.

Move on to the next race, the Belgian Grand Prix at the famous Spa-Francorchamps circuit in the hills and forest of the Ardennes and a day of mixed weather. Ferraris are renowned for not being able to get heat into their tyres as quickly as the McLarens which also perform better on cold rubber, so when the race started with half the track damp and half dry an interesting prospect for all was in sight.

The last five to ten laps or so were the most interesting, because that’s when it rained. Up until this point Kimi Raikkonnen had done a great job in holding Lewis Hamilton off and had a pretty stable 5.8 seconds advantage. Felipe Massa was nowhere to be seen in third. There had only been one incident involving the stewards when they gave a drive through penalty to Heikki Kovalainen when he was hesitant about overtaking Mark Webber and then slid into him on the greasy track at the chicane on the run up to Les Combes.

So, down came the rain. The race woke up. So did the audience.

In the space of about 4 laps, Lewis Hamilton closed the 5.8 lap gap between him and Kimi until he was right behind him, breaking later for every corner, travelling faster at every apex. There was no way that in the 2 laps of the race that remained Kimi was going to be able to resist being overtaken with such a differential between the cars.

At what used to be known as the “bus stop chicane” Lewis went past Kimi on the outside. Kimi kept it tight on entry, then squeezed Lewis on the exit on the greasy track so there were only two possibilities for the British driver: hit Raikkonnen, or go off the track and cut the corner. Not wishing to be accused of “causing an avoidable accident” (as Raikonnen had not been at Monaco) Hamilton opted to cut the corner, then allowed Raikkonnen to move back into first place.

Raikkonnen started weaving to prevent the man from Stevenage from getting past. In the space of less than a La Source second, Raikkonnen weaved, Hamilton dodged, Hamilton passed. This was racing, one of the best passing moves in racing history, taking me back to that superb move of Mansell on Senna when he passed the great Brazilian at the Hungaroring in in the flash of an eye in 1987 or the move of Hakkinnen on Schumacher at Les Combes in 1999. Yes, it was that good.

Apparently the FIA Stewards (Frances’s Nicholas Deschaux, Surinder Thatthi of Kenya and Belgian Yves Bacquelaine) believe that remaining in second after cutting a corner at a chicane to avoid an accident gave Lewis an advantage he wouldn’t otherwise have had. Therefore they gave him a penalty. Not a fine, a 25 second penalty – not enough to let Alonso finish on the podium of course, but not so much that would mean Hamilton only lost one place. So, the odd 25 second penalty was applied. McLaren have announced they will appeal. So they should.

So now we have yet another means by which the FIA bring their own sport into disrepute. Man, have they got a thing against McLaren! And do they looooove Ferrari… but they certainly don’t apply justice.

Why is that? Answers on a post card please not including bent stewards, bribery, gambling scandals, institutional corruption, or blackmail. Pettiness of individuals I can accept. Incompetence I can certainly accept. Jealousy, meanness, and racism too. What do you think?

Incidentally, the BBC website hit a record for the number of people posting complaints about this injustice. Next year, the BBC take over the contract for F1 TV coverage. Will they have any audience left? At this rate, the FIA will have killed off interest in their own Championship.

Gustav: The Political Storm

Hurricane Gustav is approaching the southern US State of Louisiana. And my, are they making a fuss about it. New Orleans has been evacuated. The Mayor is calling it the “Storm of the Century” and the BBC have described it repeatedly as the “Mother of all Storms”. George Bush and Dick Cheney have both cancelled their speeches for today, trying to show that, unlike 3 years ago when Federal authorities made a complete mess out of things this time they are ready and prepared. Shame they still haven’t put right what needed to be done after Katrina hit…

Of course, today is the first day of the Republican Convention which has formed to nominate John McCain as George W Bush’s successor and to give him a political boost. That was a big ask after the success of last week’s Democratic Party convention when Barack Obama was lauded by 84,000 attendees, something McCain is struggling to match.

When you consider that the two main speeches of today would have come from George W Bush and Dick Cheney, it could be argued that ramping up the Hurricane was good politics.

Why? Apart from the ill-advised invasion of Iraq and the dire state of the US economy, the debacle of George Bush’s response to the Category Five Hurricane Katrina which caused over 1,800 deaths is yet another black mark on the reputation of the Republican Party they would love to remove.

So, hype up what is only a Category 2 storm into something more powerful than Katrina, have nothing untoward happen, and then claim they have “fixed all the problems from Katrina” while removing the speeches of Bush and Cheney, so as to distance McCain from them. At least, that’s their hope, I’m sure.

Last week, the Democrat’s really nailed McCain to the Bush mast. Not only was it disclosed that he voted with Bush 90% of the time, he also is now supporting policies he himself was previously against. So, the only change he is likely to offer – is away from those qualities his supporters supported him for.

So, was it right to hype Gustav so much? Well, I’ll leave that for you to decide. All I’ll say is that Hurricane Katrina was Category Five, Hurricane Gustav Category Two.