Neil Collins’ Notebook – We’re paying for his mistakes
Yep, here’s another cost to stick onto the taxpayer. This one is labelled London Capital & Finance, and comes to a mere £120m, trivial in the scheme of things, but another depressing precedent in the game of compensation for everything. LCF promised high returns for no risk to savers. It was authorised by the Financial Services Authority, but sold savings products which were not. Through this loophole poured £237m from 11,600 investors who couldn’t tell the difference.
Their confusion is understandable, even if their lack of common sense was not. LCF’s “simple and transparent investment for individuals” promised returns that no risk-free savings could possibly match, and while the investment looked simple and transparent, the reality behind it was anything but. The money went into complex and opaque property-based schemes and companies, enriching the boss and, in the words of the liquidators of the failed business, leaving “a number of highly suspicious transactions.” Arrests have followed, although the money is mostly beyond reach.
The call, inevitably, is for more regulation, but small-scale scams are a baleful feature of modern life. Dodgy ads at the top of Google searches are a perennial hazard, and more rules would merely impose further costs on legitimate enterprises. The real failure here is of the Financial Conduct Authority to fail to spot this one when it was first alerted, or even when the alerts poured in, long before LCF had raked in hundreds of millions from gullible investors. As the devastating report from Elizabeth Gloster last year pointed out, there were more red flags than a Russian march-past even when LCF was small enough to stop so much savers’ money being lost.
The FCA boss then was, of course, the man who has since been promoted to governor of the Bank of England, Andrew Bailey. He apologised for the agency’s failure, yet his promotion still looks more than a little odd. It looked even odder when he denied asking Dame Liz to remove his name from her report, provoking a furious response: “It is difficult to see why individuals’ willingness to take on challenging tasks in public bodies should absolve them from accountability.”
Bailey is a lucky man, which is perhaps one important qualification to run the Bank of England. He will have time to prove whether he can deal with other crises, but the early departure of Andy Haldane, one of the true independent spirits in the Bank, is not a good sign. Perhaps his is a case of reculer pour mieux sauter. Still, the next savings scandal will not be Bailey’s fault. The taxpayers can only hope the FCA has learned how to stop it before it breaks the £237m record that LCF has set.
How to waste £1tn (£1,000,000,000,000)
Of all the green fantasies which are needed to hit the government’s spanking new targets on CO2 emissions, the domestic heat pump is surely the silliest. These things work as reverse refrigerators, sucking warmth out of the ground (or air) and cycling it into your green home. They are also ruinously expensive. The most optimistic estimate is a capital outlay of £7,000 per house, which probably fits the builder’s definition of an estimate as a sum of money equal to approximately half the final cost.
Even if you can find space in or under your urban home to install one, the contraption is far from maintenance free. You will also notice that your fridge needs to work harder in hot weather; when it’s cold, there is less warmth in the ground or air, just when you want more heat in your home. Of course, your home will be better insulated, at an average cost of over £10,000 a time, which should help. Adair Turner, former chairman of the Committee on Climate Change, reckons “higher income people” can “just write the cheque”, while everyone else can get help from, well, everyone else. Philip Dunne, chairman of parliament’s Environmental Audit Committee, puts the figure at £20,000 per home, excluding the cost of disruption while the builders are in.
That soon adds up. There are 22 million dwellings in the UK – so £380bn on the Turner scale, or closer to £1tn on any set of realistic assumptions. That’s just domestic buildings. Forcing us into electric cars is another multi-billion pound destruction of living standards. National Grid is warning that reconfiguring the nation’s electricity system is also a £1tn problem. No surprise then, that the Johnson government has carefully avoided publishing any credible estimate of the cost of his magnificent greening gestures, preferring instead to make wild claims about providing employment and becoming “the Saudi Arabia of wind”. Windbag, more like.
Of course, won’t all this sacrifice – there is no meaningful economic gain from these disruptive measures – help save the planet? Well, up to a point. If the UK stopped net carbon dioxide emissions tomorrow, it would cut the global total by about 1 per cent. China and the US, meanwhile, are still increasing their coal burn. We may be holier than the rest of them, but we will be a great deal poorer, and probably colder, too.
Not so superfast
We want superfast broadband to our homes, so the whole family can use the internet at once, download a feature film in the blink of an eye and bring us yet undiscovered electronic riches. BT is promising to spend billions on replacing copper wire with optical cable to give us access to this modern magic. It will cost us more, of course, but we’re willing to pay.
Or are we? From across the Atlantic, home of internet innovation, comes a cautionary tale. Verizon, which is pushing its 5G mobile offering as “rocket fuel” for the company’s growth, has reported a fall in subscriber numbers in the first quarter of 2021. Now mobile 5G is not the same as super-broadband, but this fall was not expected, and may signal increasing reluctance to pay more. Businesses have demonstrated that they can always use more speed and/or capacity. Consumers, though, may be starting to feel that superfast is a supercost we can do without.