The bad news is that house prices have fallen for nine months running. The good news is that annual house price inflation is still 1.2 per cent – less than it was, but still positive. Nonsense. Rubbish.
What the figures are telling us is that three months of gains nearly a year ago still more than offset the subsequent nine months of falls. Extrapolate the latest data, whether one month or all nine, and we are clearly in negative territory.
The bad news is that we should not expect much from Alistair Darling’s first Budget; perhaps that is the good news too. He may have had more bad luck than bad judgements since becoming chancellor in June 2007, but the experience has surely shackled his scope for a memorable first Budget on 12 March.
Can two wrongs make a right? Is it acceptable for HM Revenue and Customs to pay money for stolen data if that information reveals details of UK tax evaders?
Britain’s tax collectors have followed their German colleagues in buying a list of UK customers with Liechtenstein bank accounts. The Germans paid more than £3m to an employee of the bank for its list and justifies the bribe by the information it has yielded. It has already produced high-profile resignations of German officials, though so far, no charges.
Few finance directors will be directly affected financially by Standard Chartered’s decision to abandon its structured investment vehicle, but they should start examining just who is behind their debtors – and who isn’t standing behind them.
Nevermind the mechanics of Whistlejacket, Standard’s SIV (not many understand the complexities of these vehicles even after trying): the point is that a large and highly respected bank has allowed it to go into administration after initially seeking to rescue it. If that can happen with a complex financial instrument, it can happen with joint-ventures, private equity, leveraged property purchases, associate companies and a whole range of off-balance-sheet vehicles.
After the politics and finances, it’s the marketing men’s turn to dissect Northern Rock. Is the name so tainted it should be dropped?
Certainly the bank would have to offer brilliant terms before a broker risked his own reputation and recommended a client take a Rock mortgage. And while it is the safest bank on the high street thanks to government guarantees, the fact that it is also having to pay the highest rates suggest the public perceives there is a risk.
Stripped of all the politics, is Northern Rock a business worth saving? The government had to rescue the bank to save the financial system, but what can ministers – or chairman Ron Sandler – do with it now they have ensured its future?
Running businesses has never been a strength of government but running a consumer operation has proved its managerial inadequacies. Look at the Post Office, or the utilities when they were state-owned – even British Airways before it was prepared for privatisation. Northern Rock needs to attract public savings but can we expect to see the sort of high-profile advertising campaigns run by Nationwide or Halifax?
Imagine you are on the independent valuation panel asked to name a price for nationalising Northern Rock. In a nightmare, imagine someone else is assessing the value of your business for such a purpose. What is the company worth?
The range for the Newcastle bank is wide. It goes from zero to the £12 a share people were paying on the stock market a year ago. Between those extremes there are a number of benchmarks.
Has outsourcing running half the economy to the Bank of England failed? Inflation is likely to exceed the target, the UK’s standard of living will fall, recession is highly possible and house prices could be flat for years – thus falling in real terms. And that is the bank’s own forecast, not the pessimists’ view.
Given that the Bank has only one objective – to keep inflation within target – it has failed. But the criticism should not be of the governor or his team but of the concept of handing over monetary matters to one institution while government continues to pull the fiscal levers.
Retail sales fall: interest rate cut expected. Inflation high: rate cut off. Economy slowing: cut back on. Each day we are bombarded with new pieces of data, often contradictory, yet we try to make important decisions based on the information. Perhaps we have too much?
On top of monthly government statistics we now have a wealth of private sector indicators from mobile phone data to weekly shopping trends. Each month, half a dozen agencies publish house-price figures. No sooner has the public read of one 2 per cent fall than they read of another 2 per cent – without realising it is the same fall being reported for a second time. The frequency of the information adds to the gloom that it is reporting.
Here’s the real Société Générale scandal – the rights issue. No, not that the French bank is asking shareholders to subscribe 5.5 billion euros (£4.1bn) when Jerome Kerviel’s rogue trading cost it only 4.9bn euros, but that the share issue is fully underwritten.
The rights issue is priced at a deep discount. It shouldn’t need underwriting at all. The 1-for-4 offer is at 47.50 euros a share, 39 per cent below the market price on the day it was announced, nevermind 70 per cent below the 2007 price.
