Mervyn King - Quarterbridge

In April this year the shiny new CMA (Competition and Markets Authority) emerged from a union of the former Office of Fair Trading and the Competition Commission. People are watching it closely: Initial shock revelations include someone has been price-fixing galvanised steel water tanks and online review websites are not trustworthy. Well there’s a surprise. Whether or not the CMA gets around to reviewing something worthwhile such as supermarket tactics to bankrupt independent retailing remains to be seen.

Review websites often ‘lose’ poor feedback in return for sponsorship

According to the CMA some 25 million shoppers use review websites such as Amazon and TripAdvisor to ‘inform’ their purchases but many of the reviews are rigged. Review websites often ‘lose’ poor feedback in return for sponsorship, whilst manufacturers offer rewards for favourable reviews and post criticism of competitors. None of this comes as a surprise to anyone over 8 years old but encourages genuine shoppers to post outrageous comments about some products. I recommend Amazon’s eye-wateringly funny review of ‘Veet for Men Hair Removal Gel Cream’ at www.amazon.co.uk/Veet-Men-Hair-Removal-Cream/dp/B000KKNQBK

Someone who does believe in frankness and honesty is the (Canadian) Governor of the Bank of England, Mark Carney

Someone who does believe in frankness and honesty is the (Canadian) Governor of the Bank of England, Mark Carney. Last month he gave a highly critical after-dinner speech to city bankers to coincide with publication of the ‘Fair and Effective Markets’ review by HM Treasury. His speech left the audience squirming uncomfortably on their well-padded behinds as they remembered how the (now disbanded) Financial Services Authority failed to reign them in prior to the financial crisis. Carney was not averse to a bit of self-criticism either, describing how the Bank of England allowed the crisis to develop. ‘The Bank’s contribution fell short…and neither identified the scale of risks in the system nor spotted gaps in the regulatory architecture’ he said. Arcane governance had blurred accountability and more would now be done to strengthen control. He added: ‘and that includes 10 years in Wormwood Scrubs for any of you guys with your hand in the till’ - or something like that. Former Governor of the Bank of England Mervyn King, former FSA boss Hector Sants and former Chancellor of the Exchequer Gordon Brown chose not to comment.

The Treasury review proposes extending criminal sanctions from investment bankers to foreign exchange traders

Chancellor George Osborne also spoke at the dinner. He publicly supported Carney with: ‘The public rightly asks: Why is it after so many scandals so few individuals face punishment in the courts? Individuals who fraudulently manipulate markets and commit financial crime should be treated like the criminals they are.’ The Treasury review proposes extending criminal sanctions from investment bankers to foreign exchange traders plus harsher penalties, something shareholders in RBS and Lloyds would doubtless like applied to reckless executives. City of London Lord Mayor, Alan Yarrow said upholding professional standards should be the norm. ‘It’s like a supermarket with no security cameras – if someone takes something without paying, it’s still theft. There is no escape. People should uphold professional standards irrespective of whether the regulators are there or not.’ Well, actions speak louder than words Alan. We’re waiting.

Pickles made few friends amongst local councils whilst spearheading local government spending cuts

Meanwhile, having won a clear majority in the general election the Prime Minister reshuffled his cabinet without needing to consult his coalition partners. Eric Pickles, plain-speaking head of the Department of Communities and Local Government was promoted to the House of Lords with a Knighthood and an ‘anti-corruption role’ which sounds a bit South American. To replace him David Cameron promoted Greg Clark (47) to become Secretary of State for Communities and Local Government. Described as a ‘soggy left’ Conservative from Middlesborough, the former Financial Secretary to the Treasury has a hard act to follow. Pickles made few friends amongst local councils whilst spearheading local government spending cuts and the 2011 Localism Act which gave community groups the right to take over council-provided services. His enthusiasm for the ‘Big Society’ agenda bolstered a reputation as a vocal critic of local government, particularly after the child sexual exploitation scandal in Rotherham and local governments’ ineffectual response to the 2014 floods. Greg Clark faces an equally tough time at the DCLG as he now has to implement a second round of even deeper cuts to reduce the governments spending deficit.

Canadian lobsters are now in the front line thanks to Smartphone technology

And finally: Another Canadian product has also been in the news – Lobsters. In the struggle to attract consumer spending Canadian lobsters are now in the front line thanks to Smartphone technology. Shoppers in Newfoundland can now use smartphones to scan live lobsters in fishmongers tanks to discover where their seafood is from and who caught it and when.

Tracing food back to source is not a new idea but using QR code tags to provide customers with this level of detail is

The traceable lobster program is part of thisfish.info, an initiative of Ecotrust Canada, an environmental charity. Each lobster caught by a participating member is tagged with a unique QR code which customers scan for information about the catch – when and where it was caught and by what method, plus a biography of the fisherman. Tracing food back to source is not a new idea but using QR code tags to provide customers with this level of detail is. Some Newfoundland restaurants have been serving QR-coded seafood for a couple of years and boosting sales by linking into wider consumer trends. A spokesperson said: ‘Customers love a glimpse into the lifestyle of the person who provided their supper that night. Where they live, how old they are and how long they’ve been fishing. Consumers are focusing more on where their food comes from, if it is sustainable and healthy and whether the people who catch it are paid fairly’.

No lobsters were available for comment.

After July’s unwelcome hike in inflation the Bank of England relaxed a bit in August as the inflation rate slid back a point or so to 2.5% – still well above the 2% p.a. target but blameable on a worldwide hike in commodity and oil prices. For once it was someone else who had caused the problem.

Droughts in the USA and a wet summer in the UK hit food production and pushed up wholesale prices, whilst the price of a barrel of Brent crude, the benchmark for light oil prices hit a four-month high at $116/barrel. Sadly though, high oil prices didn’t benefit the UK much as North Sea production continued to fall off as wells dried-up – a reminder of how successive governments have relied on revenue from the North Sea since the 1970’s. The hoped-for “Olympic effect” never materialized and demand from consumers flat-lined, confirming the Bank of England’s forecast of zero growth in 2012. One of the few bright spots was an increase in demand for European airline tickets. Why, no-one knows.

The continuing relaxation of Sunday trading laws would benefit no-one.

‘Boo hoo’ said the hotel, leisure and fashion operators, as did Justin King – Chief Executive of Sainsburys. He also made the surprising announcement that in his opinion the continuing relaxation of Sunday trading laws would benefit no-one. His message seemed to be ‘Why incur extra operating costs when shoppers are keeping their wallets shut?’ which is logical enough when consumer demand is flat. But be prepared for one of his speedy U-turns when demand picks up again – as speedy as his 2008 U-turn when he finally admitted involvement in the dairy produce price-fixing scandal.

Another £17 billion of government spending cuts would be needed in 2017-18 to reduce national debt from a record high of 66% of GDP.

In his first budget in 2010 Chancellor George Osborne set himself two targets to strengthen both public finances and overseas confidence in the UK. Without them the country’s credit rating would be downgraded and the government not able to borrow money at low-enough interest rates to finance it’s expenditure. The first target was to slash the level of national debt as a proportion of GDP by 2016 and the second was to eliminate the “structural defect” of borrowing too much in relation to anticipated taxes. But two reports last month confirmed both commitments are unlikely to be met. The Office for Budget Responsibility announced another £17 billion of government spending cuts would be needed in 2017-18 to reduce national debt from a record high of 66% of GDP. Then the Office of National Statistics confirmed that without significant growth in the economy future tax receipts would not repay existing borrowings. The borrowings would then have to be refinanced on far less advantageous terms.

With economic growth and tax receipts as flat as ink was it time for the Chancellor to do a Justin King-style U-turn? Sir Mervyn King (no relation to Justin, thank God), the Governor of the Bank of England, seemed to think so. He started a warm-up act on the financial rating agencies whose advice to overseas investors is critical in setting the interest rate at which governments can borrow money. He started by suggesting the UK government would be justified in breaking it’s promise to reduce national debt if outside factors frustrated it’s efforts. His message was one of reassurance – overseas investors should continue to buy UK government bonds as Sterling is far safer place than the Euro.

It can’t have been easy for Mervyn to say this as he had helped set the Chancellors targets in the first place, but the Prime Minister left him little choice – David Cameron refused in Parliament to recommit to the debt goal. Mervyn showed he was serious by using his first ever live TV interview to tell Channel 4 News breaking the pledge would be acceptable ‘if it’s because the world economy is growing more slowly’ but not acceptable ‘if there was no excuse for it.’ He stuck in the knife by highlighting continuing problems within the eurozone which ‘hovered like a black cloud of uncertainty’ over the UK economy. He then twisted it good and proper by saying that a break-up of the eurozone was still possible and would be ‘awkward’ for investors. I should coco. That was polite bankerspeak for ‘lend us your dosh – the euro is stuffed’.

Supermarkets would be obliged to hike the cost of a £9.00 bottle of own-label vodka to about £13.00.

In the meantime there was an enjoyable diversion from economic troubles when the Health Select Committee published a report into pricing policy for alcoholic beverages. A minimum price of 50p per unit of alcohol is already on the cards in Scotland so to reduce the threat of vast numbers of plastered Jocks staggering home across the border the committee recommended a similar minimum price in England. This would help counter the ‘scourge of binge drinking’ as identified by our Dave and also make HM Treasury happy. Supermarkets would be obliged to hike the cost of a £9.00 bottle of own-label vodka to about £13.00 which according to research by the drink manufacturers, would hand the ‘Big Four’ supermarkets another £2 billion of profits per year whilst doing precious little to counter abuse.

Minimum pricing might be welcomed by HM Treasury (Corporation tax + duty + vat) and the politicians (a nice diversion – just like the fox-hunting ban) but I can’t see it becoming law. Even MP’s know about online ordering and booze cruises to Calais.

Most economists agree that imposing new tax rises will kill the prospect of economic growth stone dead. It seems increasingly likely that Mervyn is going to print more money and inject it into the economy through so-called quantitative easing. The sooner we can get our hands on all that Falklands oil the better.