Tuesday, 19 September 2017

The Financial Conduct Authority Continues Its Focus on Credit Dependency: A Fundamentally Limited Response Based on a Regressive Culture

In today’s post, the focus will be on the debt bubble that continues to grow by the day. We have looked at the personal debt bubble on a number of occasions here in Financial Regulation Matters, so in this post we will look at the recent comments made by the head of the Financial Conduct Authority (FCA) – Andrew Bailey – and assess whether his views are a. appropriate and b. sufficient enough to garner any sort of change. One of the issues that we see over and over again is that the focus of people’s attention is so narrow that only very limited changes can be affected, and ultimately it is then likely that the underlying causes of the issues will remain and effect society at some point in the future.

We have discussed this issue of the debt bubble a number of times before in Financial Regulation Matters, ranging from analyses regarding those deemed to be ‘financially excluded’ which often leads to credit dependency, to the rapid increase of credit dependency in certain sectors like car purchases and also more systemic warnings moreover. Therefore, it is probably best that instead of returning to those analyses we assess the latest data that suggests the bubble is not only growing but disproportionately affecting certain sectors of society. As The Guardian begins a series of reports into the debt bubble, its first report contains comments from Andrew Bailey who has ‘visited debt charities across the UK’ in order to gain a sense of the plight of those affected by the systemic issues causing the bubble. In visiting these debt charities, Bailey states that he is concerned with the sheer number of people accessing credit to live, and also the insecurity often felt by those that do. In relation to the insecurity felt by those in debt, Bailey discusses how those working in the so-called ‘gig-economy’ are more likely to be affected by credit dependency, with the news that the number of people on ‘zero-hour’ contracts has fallen to a three-year low of 1.4 million people being welcomed as just one component of the solution. Bailey speaks quite openly about the issue of those with ‘erratic incomes’ being unable to meet their financial obligations to a number of lenders, with only ‘frontline debt’ like council tax and utility payments being collected consistently thanks to the use of bailiffs, court orders and repossessions. However, is this focus on the ‘gig economy’ either correct or at least helpful?

The recent breaching of the £200 billion mark for outstanding personal debt has raised concerns, particularly when it is adjoined to the understanding that overall indebtedness is increasing steadily, with the U.K.’s total personal indebtedness standing at £1.6 trillion (the majority of which is mortgage debt at £1.3 trillion). However, whilst some of the statistics do support Bailey’s focusing upon those in the ‘gig-economy’, others allude to a much bigger problem. StepChange have stated that the average of those in arrears with their council tax has risen by over £250 in the last year alone (to £1,012), whilst average utility bill arrears has also risen by £147 (to £668). Yet, the FCA’s research also states that one-in-six of those with personal debt are in ‘financial distress’, with those in that category more likely to be younger, have children, be unemployed and less educated than others. According to the Money Advice Service, there are now 8.3 million people in the U.K. who suffer debt-related problems, with the U.K. now only ranking behind Canada as the most personally indebted nation in the G8. Interestingly, onlookers recently stated that ‘it wasn’t supposed to be this way. The Government’s official forecaster… once predicted that the U.K.’s economic revival would be built on the foundations of business investment, higher exports and an improvement in productivity that would lead to higher wages. It didn’t materialise. Instead a mix of low wages growth, government cutbacks on welfare and public services… have forced millions of households to borrow to buy essentials’. This is precisely the right sentiment, and forces the issue away from this sector or that sector and towards a more holistic assessment; therefore, Bailey’s piecemeal approach based on the sentiment of ‘no one body might solve [the debt crisis] on its own’ is potentially an abdication of duty. For example, focusing on the ‘gig-economy’ downplays reports that household debt, which is incurred to buy essentials, is skyrocketing in areas in which the poor are simply being priced out, like in the larger cities of London, Birmingham, and Cardiff. Whilst the actions of the FCA do help to minimise some of the hurt being felt by those affected, it is not enough. But, is Bailey correct in thinking that the FCA simply cannot tackle the problem alone?

On the one hand he is absolutely correct because the FCA are not tasked with charting the systemic course for the U.K. However, an argument against this is that, as the head of the FCA, Bailey holds considerable influence and could be more proactive in challenging some of the larger issues. Yet, in truth, this may be unfair, because Bailey and the FCA are simply just one small cog in a much larger machine that is predicated upon the concept of ‘wealth extraction’. For some this concept may be controversial, but in reality the demonstration of it is revealed every day. The quote earlier regarding the Government’s forecasting of revival via increased wages, more jobs, and exports, relies on the notion of there being a solid base upon which to build, but that base has gone; Britain alone, since the onset of the Crisis, has pumped almost half a trillion pounds of taxpayer money into the financial system, a move which came after financial elites had been systematically increasing risk in the system for short-term bonuses, awards, and pension packages that made the hundreds of millions sound like hundreds of pounds. Instead of those people being prosecuted for their crimes they have, en masse, avoided punishment, or even a public dressing down and, what’s more, the responsibility for cleaning up their mess has not even been taken on by responsible leaders. Instead of a. punishing offenders harshly to set a deterrent and then b. developing sustainable plans to lift the economy and set it on a safe path, our leaders have shifted to a debt economy whereby those at the bottom (and now the middle) must turn to high-cost debt providers to purchase essentials. This situation represents a systemic abdication of responsibility, and the increase in poverty, indebtedness, physical and mental illness, and a general degradation in society is a testament to disregard that the elite have for the majority of society. Ultimately, the debt bubble will collapse and the likely outcome is that the majority will have to pay for it, but with what is the ultimate question… there is not much left! What is left is this country’s cherished welfare system that has been fought for since its inception, and it is crucial that removing the cost of this societal good is not seen as a way of ‘reducing the burden’ upon those who have pummelled by the financial elite. The only way to stop such behaviour is to align blue-collar and white-collar crime into a combined concept of ‘crime’ – unfortunately, many will read this last statement and dismiss it as wishful thinking which, in reality, demonstrates the extent of the problem we face.


Keywords – debt, personal debt, FCA, poverty, capitalism, elite, white-collar crime, debt bubble, financial regulation, consumer protection, politics, @finregmatters

Saturday, 16 September 2017

RBS and its Global Restructuring Group: An Indicator of the FCA's Focus

RBS has been the subject of a number of posts here in Financial Regulation Matters (ten), with posts concentrating on their incredibly poor performance over the last two decades. Posts have looked at aspects such as the increasingly poor financial results being disclosed by the bank and Fred Goodwin’s close-call when he narrowly avoided having his day in court regarding his performance in the run up to the Financial Crisis. However, in today’s post, the focus will be on the so-called ‘Global Restructuring Group’ (GRG) and the sentiment that its problems are causing; we have looked at the issue before with regards to a leaked document that partially detailed the abuse of power demonstrated by the group, but the reaction to that leaked report has been incredibly revealing, and will form the focus of this piece.

We heard last time how the GRG, a division within RBS which was tasked with assisting SMEs navigate troubled periods, was in fact doing the opposite and was actively creating an environment from within which many SMEs did not recover. The division, which according to the BBC who had obtained a copy of a leaked report from the Financial Conduct Authority (FCA) resembled more of an ‘undertaker’ division, was subject to an investigation by the FCA with RBS, apparently, not even providing full assistance with the FCA’s efforts (RBS subsequently denied these claims). However, the leaked report was not the complete report, which understandably led to calls for the full publication in light of the scandal. Chief amongst those calling for the leaked report to be published in full was Nicky Morgan, the new Chair of the Treasury Select Committee, who had stated that ‘nearly four years since the report was commissioned, we are still waiting for answers… the report itself is now in the hands of an unknown number of third parties. The FCA has no control over the timing or content of further public disclosures from it. The balance has tipped firmly in favour of full publication. I have written to Mr Bailey (head of the FCA) to urge him to secure the approval of RBS to do so, without delay’. Yet, this stern language did not garner the required response, with Andrew Bailey responding that full publication could contravene the Financial Services and Marketing Act, and that he would not publish the full investigation because to do so would undermine the regulators’ ability to supervise firms because the reviews are entered into on the understanding that findings will remain private. Furthermore, the head of the FCA demonstrated his belief in the ethical and moral underpinnings of the regulated when he stated that the promise of privacy meant that regulated firms would not try to withhold information and that he was ‘very keen that this situation should continue and that it would not be in the public interest to limit the effectiveness of this process’. The potential legal recourse for this issue is that the Select Committee can compel the FCA to release the full investigative report to them (something which they can then choose to make public if they see fit), but the general feeling is that this drastic course of action will not take place. As this situation will undoubtedly continue to develop, for us the effect of this news is worth focusing on.

There are calls at the moment for Andrew bailey to resign from his position in the wake of his refusal to publish the full report, which is entirely unsurprising given his siding with the firm who have devastated a number of SMEs in apparently the very same manner which the division within HBOS did. Comparisons between the two cases will be naturally made, but one side issue which will be of interest is whether the leaders of the GRG will be subjected to, even in some limited form, to the same Criminal law procedures that led to Lyndon Scourfield being jailed alongside the other perpetrators. To return the FCA, this period of scandal is the latest in a long line of questions regarding its ability to effectively regulate, with previous ranging from its regulation of insurers to simply how it responds to criticism; two years ago the regulator narrowly avoided the dreaded vote of no confidence from Parliament, highlighting the scale of concern regarding the Authority’s ability to regulate. This latest episode will do Andrew Bailey’s tenure as head no favours, and moreover the future of the FCA depends on how it handles situations like this; on that score, the future for the FCA is worrying.

The Financial Services Authority (FSA), the regulator which was disbanded after the Crisis and whose role the FCA, in part, acquired, was disbanded by George Osborne on the basis that it has become too ‘narrow’ and focused only on rules-based regulation, something which he suggested was at the cause of the FSA’s failure to spot the impending financial crisis. However, the FCA is in danger of heading the same way but for different reasons, with the result being, potentially, catastrophic given the recent reformation of the British financial regulatory framework. RBS is undoubtedly the U.K.’s ‘problem child’, and its consistent poor performance and attitude towards the British marketplace (at first instance) is forcing regulators into a corner. Not only is the bank caught up in this latest scandal which represents, in effect, an attack on the heart of the modern Western capitalist structure – SMEs -, but it has also just announced that its planned strategy to move hundreds upon hundreds of British jobs abroad is picking up pace. RBS, with its failing performance, continued transgressions and disregard for the taxpayer who holds over 70% of its stock, is making its position clear to the marketplace, which is the reason for the increasing number of headlines containing its name – the question now is what will regulators do to tackle the problem?

Ultimately, Andrew Bailey’s response to Nicky Morgan’s request is the clearest indicator, if one were needed, that regulators are more concerned with the regulated entities than the public who pay their salaries and budgets. Andrew Bailey’s faith in the market’s moral compass, particularly of those like RBS who it knows have been systematically destroying SMEs, is not misguided as many have intimated; his response is indicative of a captured regulator, and on that basis and with respect to the current climate, the FCA is operating in particularly dangerous territory. Since the Crisis the public have become more aware of the workings of the financial system, and although the attention of vast swathes of the public can be diverted to other issues, the understanding that regulators are complicit in protecting those who cause serious and widespread social harm is ever-growing and represents a new force that regulators and politicians must be aware of. The risk of public confidence plummeting to such levels that the regulator would be disbanded is a serious one, because a disbanding of the FCA so soon after its creation would bring forth the question of whether any regulator can protect the public against the venal – it is suggested here that politicians and regulators consider this question, because if the public realise the real answer, then there is little that could be done to remedy the situation.


Keywords – Financial Conduct Authority, Andrew Bailey, Nicky Morgan, RBS, fraud, SMEs, politics, financial regulation, business, capitalism, #finregmatters

Thursday, 14 September 2017

Jacob Rees-Mogg and the Conservative Party: A Reality Which Is Protected by Financial Cycles

Usually, here in Financial Regulation Matters, posts will start with a quick introduction to the subject at hand, and then will dive straight into the analysis. However, in today’s piece, it is important that we depart from this format and spell out, precisely, the sentiment of the following piece. Firstly, regular readers of Financial Regulation Matters will know that the posts often confront political issues, as is necessary given the interconnectedness of politics, financial regulation, the economy, and society moreover, but it is rarely from a biased angle; the posts are not on the ‘left’ of the political spectrum, because they are pro-business, and they are not on the ‘right’ of the spectrum because they do not subscribe to the pro-market sentiments that are often, and correctly associated with the political ‘right’. However, this post will be focusing on the political ‘right’ and the Conservative party in particular. Additionally, the posts attempt to offer a (somewhat) balanced assessment before concluding as the author sees fit, but in this post the assessment will be unapologetically critical of the Conservative Party and particularly of its increasingly-infamous back-bencher Jacob Rees-Mogg, who today was quoted as saying that the increased usage of food-banks since the Financial Crisis is ‘uplifting’ because, rather incredibly, the Tory party have made people aware of their existence in opposition to the Labour Government that went before: ‘to have charitable support given by people voluntarily to support their fellow citizens, I think is rather uplifting and shows what a good, compassionate country we are’. This sentiment, based upon previous posts here in Financial Regulation Matters, will be challenged and in the strongest possible terms – such a sentiment serves only one purpose, and that is to confirm the brutality of the Conservative ideology, and the fundamental requirement of financial ruin to be present for that ideology to prevail.

The usage of food-banks, particularly since the onset of the Crisis, has been covered before here in Financial Regulation Matters. We first saw how 40% of the working population in Britain have savings of less than £100, with 2.6 million struggling with severe debt problems and 8.8 million struggling financially; the majority of these struggling people subsequently turned to pay-day loan companies, with 77% of those in 2013 alone doing so to pay for food. Then, in another post, we saw how even University students are being negatively affected by the economic environment, with the establishment of University food-banks for their students now coming into effect, just as investors flock to the student accommodation sector which has resulted in marked increases in rental costs for all students, including those who are financially disadvantaged. Yet, there are more aspects which have been alluded to along the way, because the focus on the systemic causes of these problems dictates that different pieces of evidence will be used at different times. Now that we are looking directly at this problem, because of Rees-Mogg’s comments, we can discuss how over the last year the Trussell Trust provided for over 1.1 million ‘three day emergency food supplies’, of which nearly half a million were provided for Children; the most prominent reason for the usage of Trussell Trust food-banks was ‘low income’. On the one hand it will hardly be a surprise that the brutal changes to the benefit system, which includes the widespread usage of ‘sanctions’ for benefit claimants, has resulted in a marked increase in food bank usage from those sanctioned claimants, although that situation is not just reserved for those that have been sanctioned, with an increased usage of food banks being the result of botched benefit decisions, the changing to ‘Universal Credit’, and also the associated effects of the increased testing of disabled-related benefits, which have seen a record number of people put through the reassessment/appeal/tribunal processes. Readers in Britain, and those familiar with the British system, will not be surprised by this; it is almost commonly accepted that the poor and vulnerable will be the first to be negatively affected by Conservative policies, which is a remarkable statement to make but should not garner much opposition. Yet, it is the post-Crisis development of working families attending food banks which has differentiated this latest onslaught against the general public, with a number of people from across the working spectrum being affected. Although obtaining any precise figure of the usage of food banks by those in employment is extremely difficult owing to the disjointed nature of the food bank network (the Trussell Trust represents a large proportion, but there are hundreds of independent endeavours assisting those in need), and also that defining the nature of ‘in employment’ is problematic because of the effects that seasonal or DWP-enforced work can have, there is evidence to suggest that those in employment which is classified as part-time, or ‘insecure employment’, are increasingly turning to food banks, with a sample taken in Glasgow revealing that 20% of food bank usage came from those in steady, but low-paying employment; it seems the BBC’s statement that ‘the best inoculation against needing a food bank seems to be a full-time permanent job’ is correct, but the decrease in the availability of those jobs since the Crisis puts that comment into perspective. All of this addresses the visible issues associated with food bank usage, but there are other issues that will not be addressed in this short piece that are important to remember, such as the increased mental health-related problems that are associated with such levels of poverty, the impact upon the social mobility of the adults and children trapped in this particular system, and many more. However, apologetically moving on from such concerns, a look at the actual comments of Rees-Mogg before we conclude will be revealing.

Speaking on the LBC radio station, Jacob Rees-Mogg suggested that ‘I think there is good within food banks and the real reason for the rise in numbers is that people know that they’re there’, after which he stated that ‘I don’t think the state can do everything… it tries to provide a base of welfare that should allow people to make ends meet during the course of the week, but on some occasions that will not work’. This latest demonstration of his, and his parties’ sentiments came just days after his interview on early-morning television on which he declared his opposition to abortion in all circumstances including pregnancy as the result of rape, and also his absolute opposition to same-sex marriages. These incredible clarifications of his views are all overshadowed by the potential for his leadership bid for the Conservative Party, which is something he denies but is becoming an almost consistent suggestion. However, in relation to Rees-Mogg’s views on food bank usage, the analysis above is clear that the development and increased usage of these food banks is not something to be praised, in fact it is quite the opposite.

If we look at historical and economic patterns, there are trends which can be identified. Quite often in British politics, it will be the Conservative Party that is elected to oversee periods of economic recovery, with their ruthless approach to economic cuts and pro-business strategies perceived as being required to correct the imbalances that cause economic crises/downturns. We can see this in the recent past, with the Conservative-majority Coalition elected in the wake of the Crisis embarking upon a regime of savage cuts across the board, but particularly against the poorest in society. The benefits of this approach, in relation to the ideologies associated with the Labour Party as the main opposition (in whatever guise that party may be representing itself) is not the point of this piece. The point is that the sentiment put forward by Rees-Mogg is indicative of his and his party’s culture – one must look after themselves, often through such absurd defining factors like ‘hard work’. This sentiment is particularly absurd and cruel because its fundamentally discounts the effects of external forces upon a person’s development, and Rees-Mogg and his multi-million pound investment fund business can never experience those forces. Is it Rees-Mogg’s fault that he was born into wealth? Obviously not. Is it Rees-Mogg’s fault that he is a white male given an array of privileges that many in society will never experience? Obviously not. But, is it Rees-Mogg’s fault that he turns the discussion regarding food bank usage away from the causes of its increase and towards the issue of making vulnerable people aware of their existence? Absolutely. People like Rees-Mogg, whether they accept or not, have been blessed with tremendous wealth, opportunity and influence, and it is their duty to advance the collective wellbeing; yet, what he does, repeatedly, is advance his wellbeing and the wellbeing of what he knows. Some may argue that this is not his fault, that he cannot know how people at the other end of society live, but this is no argument. There have been many men and women who have been afforded great wealth but committed themselves to utilising that privilege to the benefit of others; this is simply not the case here. Rees-Mogg’s approach to dealing with the effects of venality within society is to ignore it and tell those affected that a. it is not the job of others to help them and b. that they should be grateful that organisations like the Trussell Trust are helping them. In reality, this portion of society has been abused by the venal, and charged for their actions. In reality, this portion of society have been attacked, are now being told by a representative of that attack that any help they get to deal with the consequences should be gratefully received. This is Rees-Mogg’s right to say these things, but it is also this author’s right to say that if Jacob Rees-Mogg is a. not challenged properly on his horrendous and regressive beliefs and moreover b. elevated to anywhere near the leadership of the Conservative Party, this country will no doubt experience one of the darkest periods in its modern history – the level of Rees-Mogg’s regressive attitude is that serious.



Keywords – Jacob Rees-Mogg, Conservative Party, Politics, Poverty, Food Banks, Economic Cycles, Wealth. 

Monday, 11 September 2017

Revisiting the Regressive Sale of the Green Investment Bank to the Macquarie Group: More Evidence of the British Government’s Adherence to Short-Termism

In June of this year, this author wrote of the sale of the Green Investment Bank (GIB) to the Macquarie Group for £2.3 billion, something which had Conservative politicians rejoicing at the £160 million profit the sale generated for the public purse. However, the piece and the associated commentary was adamant that the sale represented the lengths to which the Conservative Government’s regressive commitment to short-termism could go, with the assertion being that Macquarie could not be relied upon to continue the positive work of the GIB or not bleed the organisation dry before it moved on. Although there are many instances of the Macquarie group portraying this negative aspect to capitalism, in this post we will focus on the latest example and revisit the decision of Theresa May’s government upon that basis.

Before we revisit the sale of the GIB, assessing the latest example of the culture at the Macquarie Group will reveal for us the care and attention that the Conservative Government took when selling the GIB. In March of this year, Macquarie had sold its final stake in Britain’s largest water supplier Thames Water for £1.35 billion, subsequently bringing its 11-year investment in the company to a close. Macquarie initially bought the company for around £8 billion, with the FT suggesting that the sale fits in with the common trend of Macquarie with regards to its penchant for 10-year investment strategies. However, assessing that 11-year period, rather than the financial outcome, reveals quite a story and demonstrates the culture at Macquarie and those it invests in. The company itself was this year handed a record £20 million fine for a series of pollution incidents within its networks, with six separate cases of what the Environment Agency labelled ‘widespread, repeated, sustained and avoidable pollution’ affecting local wildlife and the local public; the company had taken to discharging ‘millions of litres of untreated sewage’ directly into the rivers. Rather predictably, this is unlikely to be an accident, and the former head of OFWAT (The Water Services Regulation Authority) suggests this when he stated that the corporate structure at Thames Water, and other utility companies, was simply not appropriate and encouraged such behaviour in the hunt for profits. Yet, that structure is the one that exists since Margaret Thatcher privatised the water industry in 1989, and in keeping with her legacy Macquarie saw fit to treat Thames Water purely as a vehicle for profit extraction.

Reporting earlier this month, the BBC described how Macquarie had saddled Thames Water with over £2 billion of debt, the bulk of which was not used to strengthen the company but to divert funds towards Company Executives and investors. In analysing financial records, the report states that total returns for Macquarie’s investors from Thames Water averaged between 15.5 and 19% a year, almost double what could be expected from this particular industry. Furthermore, the FT found that between 2006 and 2016, Macquarie had paid itself and associated investors £1.6 billion in dividends, all whilst the company was loaded with £10.6 billion in debt – the company currently owes over £11 billion with a £260 million pension deficit. This approach to business with respects to infrastructure is well-known, and is what Solomon refers to as the ‘Macquarie model’ – ‘One of the biggest drivers of the firm’s business is its securitisation of infrastructure assets’.

Whilst those on the right may be adamant that privatisation works and is of benefit, the reality of the situation is that the strict adherence to ‘profit first’ leads to social hazards, particularly within such a field like social infrastructure. Not only can this be seen when we look at residents paying the company to treat their water, only then having to deal with their water supply being contaminated, but also the wider Macquarie group is no stranger to controversy with its financial planning scandal and a whole host of other scandals looming large in its recent history. Yet, it was to this venal entity that the British Government gleefully ‘offloaded’ the GIB earlier this year, proclaiming in the process that the move allowed the bank ‘more freedom to borrow, remove state aid restrictions, and allow it to attract more capital’, which in light of the above reads like methods with which the Macquarie group can bring the now-titled ‘Green Investment Group’ to its knees, rather than helping it expand and create Green opportunities that may benefit society. As a side-note, the GIB is now called the Green Investment Group so that it can ‘expand internationally’ and avoid regulations that are attributed to banks, particularly in Asia - £2 billion may in the end represent a bargain for what is, in the hands of the Macquarie group, a profit machine masquerading as a social benefit.

Ultimately, the sale of GIB was not a surprise, and nor should the parasitic story of the Macquarie Group’s tenure as Thames Water’s owner be a surprise either. Privatisation of often pilloried as being the cause of social destruction, and that may be true, but another question needs to be asked: is it really the case that privatisation has to be like this? Is it the concept of privatisation that is the problem, or the incredibly venal, short-term and selfish culture that those in power demonstrate that is really the problem? It is suggested here that it is the latter, and the only remedy for that social infection is a criminal justice system that punishes white-collar crime like it punishes blue-collar crime – however, this idealist view does not take account the socially-destructive effect that aspects like the Public Relations and Lobbying industries have upon preserving that system. The real fear is that the response to one of the greatest financial crises, one which has seen environmental and sustainability concerns pushed closer to the forefront of financial movements more than ever before, is being eroded by that culture that created the Crisis in the first place. The sale of the GIB to the Macquarie group is just one microscopic juncture in a much larger story, and it is that story that we need to talk about as much as possible.


Keywords – Green Investment Bank, Macquarie Group, Environment, Sustainable Finance, Capitalism, Public Hazard, Public Infrastructure, White-collar Crime, @finregmatters

Monday, 4 September 2017

Guest Post: The Boom of Autonomous Transportation

Today's post is a guest post by Jake Richardson, an LL.B. student from Aston University's Law School. On many occasions here in Financial Regulation Matters we have discussed the increase in certain technological fields and the impact that it may have upon wider society. In today's post, Jake discusses the relatively recent rise in the testing and implementation of autonomous vehicles and examines the potential impact that this may have - in relating the increase to social considerations like safety and costs, the post makes a very good point that a societal shift may need to take place for such technological advances to really take hold.

The Boom of Autonomous Transportation

The idea of autonomous transportation may not have yet hit the minds of many people in the United Kingdom, nor in fact the world. Yet, many manufactures have already teamed up, such as the likes of Bosch and Mercedes, with many more companies committing plans to mass produce driverless cars on a global basis by 2025; and with an estimated market to be worth over £1 trillion, fiction is set to become reality. However, there are a number of issues that need to be raised and addressed before then.

From a purely social perspective, autonomous vehicles have the capacity to reduce death and injury caused by driver error. The World Health Organisation published statistics indicating that 1.25 million people die from car related incidents, and 90% of that figure occur in low to middle income countries. If cars were to be autonomous, then perhaps driver error, which would encapsulate drink-driving, fatigue, speeding, careless and reckless driving would be eliminated. However, are we ready for this technological change? Even if we are not ready on a global basis, the facts given by the Eno Centre for Transportation in the United States tells us that if all cars were autonomous, then incidents would fall be 80%.

On the other hand, in the light of recent events with Joshua Brown, who was killed when the autopilot system in a Tesla S failed to notice a truck blocking its path will certainly cast a seed of doubt in many minds. Indeed, this was the first incident to occur with a driverless vehicle in 130 million miles of autonomous driving, and such technology is still within the testing phase. In turn, autonomous transportation will significantly reduce the number of car related incidents because it is removes driver human error completely, although it will not eradicate incidents completely because faults do exist within technology and mistakes still do occur either if they are foreseen or unforeseen.

Unexpectedly, with 3.7 million commuters in the United Kingdom spending on average 2 hours a day to travel to work, and with those who cannot travel or find it difficult to do so because of a disability; autonomous transportation yields strong support as it increases the quality of life and work for many. But with many commuters paying high fares to get to work, as rail fares account for 14% of salary earnings, autonomous transportation is not a cost effective alternative either. With Google releasing its own autonomous car at a starting price of $75,000 and cars manufactured by Tesla starting at $101,500 it seems to be that affordability is still a long way off in the future. However, Tesla may sway buyers with its new model, the Tesla 3, as prices do start at $35,000 and therefore act as a game changer to autonomous transportation industry.

There are, of course, many legal issues to be resolved. Current civil law requires a driver to be competent and demonstrate the same care of a reasonable person; yet, how can this law apply when there is no driver to be assessed? Additionally, a person can also be criminally liable if driving a car dangerously under Section 2 of the Road Traffic Act 1988. In turn, the United Kingdom, as with many other nations, will have to revise their current laws. Perhaps the burden of responsibility should be shifted onto the manufactures themselves, with the law stating that reasonable care should be imposed on companies who do not comply with new Health and Safety laws. If this were to happen, then our understanding of cars would change, and we would view cars as technological items that have similar characteristics of say an Apple iPad, in the sense that manufacturers have liability for defective products. Additionally, the driving license could effectively be replaced with a competent training certificate which would, therefore, allow everyone to understand how autonomous technology works so that they are better equipped in dealing with problems that may arise.

Autonomous driving does bring many advantages, but this also equally brings disadvantages both from a social and legal perspective. If autonomous transportation is to become a commercial success, then companies will have to start taking reliability for the quality of technology that will inevitably safeguard a human being. If this were to happen, then governments would be able to legislate accordingly and set new Health and Safety laws that regulate companies and protect the consumer. Yet, the biggest challenge facing manufacturers will be the social acceptance of this new technology. As an example, technology is used to regulate the operational use of gated level-crossings on British railways. However, when Network Rail wanted to upgrade a level crossing next to Plumpton station, which is on a branch line off the main London to Brighton route, fierce opposition was met because residents were not confident in a system which monitored the level crossing remotely 20 miles away. Therefore, acceptance of technology comes with time. We, as a population need to consider when we have allowed other human beings to safe guard our lives when using transportation. When pondering that thought, we do it when we hail for a taxi, catch the bus, commute on a train and fly on our holiday. We all take the risk of entrusting and relying on these individuals to drive or fly safely, sober and have a level of reasonable care - can this be the same for autonomous transportation?

Mr Jake Richardson is an LL.B. student in Aston University. Jake can be contacted via LinkedIn here.



Keywords – Electric Cars, Tesla, Road Safety, Automobiles, autonomous driving, @finregmatters

Friday, 1 September 2017

British McDonald’s Workers To Go On Strike: The Enduring Legacy of Corporate Greed and Political Irresponsibility

Today’s post reacts to the news that next week, in the UK, workers will make history by staging a strike at two McDonald’s restaurants – one in London and one in Cambridge. The first strike of its kind in McDonald’s British history is a result of poor working conditions, the use of the infamous ‘zero-hour’ contracts, and a demand for an increase in the minimum wage paid to McDonald’s employees. In this post this particular story will be used a vehicle to cover an aspect that has almost become accepted in the mainstream media, unfortunately, and that is the concept of austerity and its repulsive effects. Whilst onlookers hope that the strike will see a revolution-of-sorts amongst the fast-food industry with regards to working conditions, the reality it is that the underlying causes of the grievances aired by the staff will remain whatever the outcome of the strike, as the problem is a systemic problem.

The proposed strike, which is scheduled to take place on Monday 4th September, has been coordinated by the Bakers Food and Allied Workers Union (BFAWU), who argue that ‘McDonald’s has had countless opportunities to resolve grievances by offering workers a fair wage and acceptable working conditions… instead, they have chosen to ignore their workers by tightening their purse strings [and] filling their CEO’s pockets’. McDonald’s, in response to the forthcoming strike, stated that workers would be offered contracts that guaranteed them a minimum number of hours per week (although this was stated in April of this year) and that they have increased their average hourly rate by 15%. Nevertheless, the strike in the UK is being billed as just one component of a global effort to enforce change in the sector, with the strikers’ actions being linked to the ‘Fight for 15’ movement in the US, which is also endeavouring to usher in a new minimum hourly wage of $15 for employees in the McDonald’s’ home country. News stories in the media today have been quick to highlight the plight of workers in this sector, making the point clear that workers are often drafted in quickly and as young as possible, owing to the lower wage demands for those under 18 and under 21. Additionally, at least one commentator has described how this ‘McStrike’ can be the catalyst for change if the right strategies are engaged, with the hope that, eventually, the country will fall in line with the recent developments in New Zealand where zero-hour contracts have thankfully been banned. However, at the same time, the BBC reported today, via a survey, that ‘four in five British adults are “proud” of the work they do’ – clearly something is amiss, and the BBC’s timing could not have been worse.

These strikes, and the general underlying sentiment of workers battling against the system for some variant of equality (which, in itself, is an incredible sentiment), are the direct consequence of the population being punished by the blight that is austerity, with one of the key aspects to that assault – uncertainty – coming to the fore on each and every instance; however, once we realise that uncertainty is the precursor for much more serious problems, the effects of the Crisis become unmistakable and undeniable. Uncertainty is a common factor faced by the poor across the world, with that dynamic being increased substantially since the Crisis and the resultant extraction of wealth took place; whilst it has been argued that ‘uncertainty is inextricably enmeshed with human existence’, uncertainty is often a precursor to stress as a concept, which then has an overwhelming tendency to form the onset of ‘physically illness and psychiatric disorders in individuals of all age groups’. Accepting these admittedly cursory statements for just one moment, it is clear to see that ‘zero-hour’ contracts are the absolute demonstration of the corporate creation of individual uncertainty, with the ensuing consequences being of no great surprises whatsoever. University College London found earlier this year that 25 year-olds on zero-hour contracts were 41% less likely to report having good physical health, with those workers being one-and-a-half times more likely to report having a mental health problem (with the concept of one even being able to report a mental health problem being another issue entirely). Despite calls for managers and bosses to be more sensitive and vigilant to this increasing rise in mental health deterioration, the problem is a persistent one, and there is a simple reason for that.

Zero-hour contracts and low pay are symptoms of the wider assault of austerity, and that assault has claimed many victims. It is no exaggeration to support the notion that what we witness today is akin to a ‘mental health crisis’, with a 20% increase in demand for mental health services recently being met with cuts for those services across the board, including the redirection of funds that were so proudly affirmed by the Prime Minister, only then to be crudely taken away. The increase of these problems in relation to the biting reality of austerity is incredibly charted by The Independent who describe how over 17,000 children were admitted to Accident & Emergency in 2013-14 alone, compared to just over 8,ooo in 2010, with what is labelled as ‘psychiatric conditions’. Additionally, the Psychologists for Social Change initiative, working under the ‘Psychologists Against Austerity’ banner suggest that there are 5 specific ways in which austerity impacts upon mental health, with those being: humiliation and shame (linked to the disgraceful treatment of benefit claimants, particularly since the Crisis); fear and distrust (the initiative discusses how the DWP have been reprimanded for their manipulation of statistics to promote negative views about benefit claimants); instability and insecurity (almost 700,000 workers are on zero-hour contracts); isolation and loneliness (cuts to services have alienated the elderly and vulnerable within society); and finally the feeling of being ‘trapped and powerless’ against the incessant waves of governmentally-created policies designed to force the public to pay for the crimes of the powerful. This onslaught has resulted in the largest annual spike in mortality rates in over 50 years in the U.K. – the correlation between statistics like these and the onset of austerity is clear to see.

Yet, there is one particular element which deserves attention in light of the forthcoming strikes in McDonald’s, and that is the ‘workfare’ initiative. Whilst ‘workfare’ as a concept and, dare one say an ideal has a long history, its re-emergence in the post-Crisis era was to be expected. The Conservative-inspired version is based on the concept of encouraging people into work by developing a small carrot and large stick regime, with the small carrot being unsatisfactory and low-paying jobs, and the large stick being a marked increase in the use of ‘sanctions’, as well as a revolution in how job-seeking benefits are administered and monitored. The reason this is raised is because the government have struck deals with employers across the country to be part of the workfare regime, although they have attempted to make that register secret. Yet, we know that McDonald’s is a member of the regime, which stands as just one example of the government creating a narrow avenue for the vulnerable and those in need to be funnelled into a system that simply has no consideration for their plight. Not only is this system inhuman, the government are actively allocating psychologists to jobcentres to rate the claimant’s ‘attitude to work’, with poorer attitudes becoming the basis for deciding whether one should be entitled to benefits or sanctioned – a study by Durham University found that unemployment is being ‘repackaged as a psychological problem’, which results in a diversion of attention from the underlying causes of the job market’s malaise and ‘any subsequent insecurities and inequalities it produces’. The study argues that the focus on the psychological effect of sanctions ignores the unfairness and inappropriateness of sanctions, which is correct, but we must also then state that those in receipt of job-seekers allowance or another variant, who may then fail the requirements for that particular benefit, will then be funnelled into disability-based benefits, if they are lucky, which as a system has become systematically punitive since the Crisis. The attribution by some of the concept of a ‘workfare state’ is, unfortunately, an accurate representation today.

Ultimately, the justified strike that will take place in the two McDonald’s restaurants next week are just a miniscule consequence of one of the largest assaults in society that has been witnessed, and one that continues. Seemingly, because we inhabit this era, this post-Crisis era is often downplayed or contextualised in a certain manner in a way in which an era like the one that hosted the Great Depression is not. Yet, if we really reflect on what we are witnessing today, then this era is no better, and in all likelihood will be remembered by history as being worse. This is because of factors like in 2017, with the technological advances and apparent increase in the distribution of wealth – which, although seems obvious has been debated and critiqued greatly – we are still seeing excessive increases in the rates of poverty, homelessness, mental health problems and mortality, and that is just in the Western World. Whilst the era of austerity will forever be a blight on the reputation of all those who developed and support it (the Conservative party have rightly had their reputations cemented for this), the Labour party’s (‘New’ or otherwise) facilitation of the Crisis must never be forgotten – there is one important element to take from this understanding, and that is to focus on the division between the political parties is simply too narrow a focus. The division between the powerful and everyone else is perhaps the ultimate focus, and it is sorely lacking in modern discourse.


Keywords – McDonald’s, ‘McStrike’, Worker’s rights, austerity, politics, striking, zero-hour contracts, welfare, mental health, disability, equality, @finregmatters

Wednesday, 30 August 2017

The Scourge of the “Private Finance Initiative”: An Ideological Assault

Today’s post looks at the news that companies that have built NHS hospitals and associated services over the past six years have recorded pre-tax profits of £831 million, with a further £1 billion expected to be made in the next five years. These companies operate under what is known as the ‘private finance initiative’ (PFI), which can be directly traced back to John Major’s Conservative Government in 1992, and indirectly associated with the socially-defining period of Margaret Thatcher’s reign in the 1980s, a reign which is synonymous with the concept of privatisation. This almost absolute transference of service provision to the private sector, will be the focus of this post as we look at the effect that the initiative is having upon the service that the NHS can provide – assessing where the money that can go to the NHS actually ends up will be revealing, and perhaps is what should have been paraded on the side of that infamous bus.

The issue of providing certain services to the public, and crucially how best to provide them, has long since been debated and theorised within a number of academic fields. One of the key approaches that has been adopted is that of the ‘public private partnership’ (PPP), which seeks to combine public and private endeavours to make the provision of a public service, or a ‘public good’, as efficient as possible. Furthermore, where a service is required but it is extremely inefficient for the State to provide it, they will often incentivise private companies to meet that demand – this author has discussed this at length with regards to Credit Rating Agencies. Yet, it is extremely important that we define these different endeavours correctly, because PPP and PFI are not the same thing (arguably, they are not even close). PFI describes a process whereby a certain service requirement is put out to tender for private companies, and a local authority will then enter into a long-term contract with that private company, or collection of companies through a ‘Special Purpose Vehicle’ (a special legal subsidiary that has its own legal status or ‘personality’); those contracts will usually see the local authority commit to a certain number of years for a certain amount, which is theoretically paid based on the performance of the provision of services etc. The PFI and the PPP are not the same, despite what the British Government say, because PPPs are usually designed to increase the provision of public goods without directly drawing from public funds (although this is not an exclusive characteristic, admittedly), whereas PFI have the ability to draw from public funds intrinsically interwoven within their creation, which is where the destructive and disgusting element of this mode of finance can be seen.

The best example of this is the NHS, and the recent news stories have brought this to the fore. However, they are a persistent problem, and one that we must acknowledge is of Conservative creation but was expanded by the policies of New Labour in the late 1990s; the then Chancellor Gordon Brown expanded their usage greatly as New Labour cemented the incredibly short-term philosophies that see the country in the mess that it is in now – the Chancellor was attracted to the ability to ‘buy now and pay later’, pushing the debt burden onto future generations and off the governmental balance sheet. It was reported in 2011 that the British Taxpayer owed a staggering £121 billion on projects worth only £52 billion, demonstrated the extraordinary profit to be made from the pockets of the taxpayer. In 2011 there were a number of scandalous reports concerning PFIs and the NHS, including jobs worth £750 being charged at £52,000, hospitals costing ten times what they are worth, and hospitals and schools still recording six-figure revenues for SPVs despite them being closed. Therefore, it should come as no surprise that reports today suggest that ‘large sums that could have been used for patient care have instead gone into the pockets of a handful of PFI companies’, with analysis from the Centre for Health and the Public Interest suggesting that not paying the pre-tax profits between 2010 and 2015 would reduce the massive NHS deficit by a quarter. The analysis continues by surmising that the capital value of assets built for health-related PFI initiatives stands at £12.4 billion, although the NHS will ultimately pay over £80 billion for their use; this incredible scheme, supposedly, will end up costing the taxpayer over £300 billion, or £10 billion a year, which is an extraordinary understanding to comprehend.

Labour MP Stella Creasy has been making the point loud and clear that there needs to be an urgent competition enquiry into this particular market, which comes in addition to her view that there should be an increased tax on their profits. However, this viewpoint has been excellently critiqued by one commentator, Joel Benjamin, to show that her particular understanding does not take into account the fact that rate-rigging (the LIBOR scandal) directly affects the value of the PFIs and that the physical construction of these services by the PFIs have questionable and concerning public-safety records, with the Fire Brigades Union warning that it is extremely concerned ‘about the risks posed by poor fire safety in hospitals and schools built for profit’ – the comparison with the incredible tragedy at Grenfell Tower needs no introduction here, but the comparison is absolutely correct. In essence, we have a system that is designed to siphon money from the public fisc, one that is not rigorously monitored, and one that is continuously expanding.

Ultimately, the stories of NHS trusts being left without any option other than to commit to more debt to offer the services the public require, and stories of the families of the poorly being charged exorbitant rates to visit their relatives and/or friends will continue to be commonplace. Only a small number of people can read this news and not see the scandal and the tragedy, but unfortunately those people likely wield considerable power or have plenty to gain from this incredible arrangement. However, the situation reveals a more depressing situation. The birth of the NHS is a defining and extraordinarily positive moment in British history, and should be protected at all costs; yet, news stories like the PFI scandal will be replaced with something else once the news cycle turns, with very little action being taken other than the continuation of the scandal. Rather than focusing on instances such as Brexit, or the intra-party squabbles in the Conservative, Labour, SNP or Liberal Democrat parties, there needs to be a sea-change in what the public react to. This particular news story demonstrates, without doubt, that both leading political parties are complicit in creating a scheme that is designed to remove funds from the public into private hands – it is traditional to blame the Conservative party, but this is a political problem, not a Conservative problem. This story is the realisation that the State is captured by private interests, and that the public only serve (under this system) to fulfil their duty of providing resources to be siphoned off to the few – whether that is ever truly realised on a large enough scale is the most important question to ask.


Keywords – Private Finance Initiative, Public Private Partnership, NHS, Health, Finance, Politics, Business, Ideology, State, Public, @finregmatters