How about Performance-Related Pay for MPs ?

MPs are due to get an 11% pay rise after the next election.

Many voters aren’t in favour.

Personally, I think they should be given a process they’re applying to other public servants. Performance -related pay.

So how would this work ? How do we tell if our representatives are doing a good job ?

I’d say the pay award should be given if :

• The MP is re-elected with a turnout of 75% of the electorate, or an increase of 15% on the previous vote.

or

• (for safe seats) They submit to an open primary process, with at least three candidates. The whole of the electorate (not just party members or “supporters”) would be entitled to vote. It seems to have worked in electing Sarah Wollaston  (which is probably why we won’t see it happen very often in future).

 

Privacy, the NSA and GCHQ

The Edward Snowden revelations mean that governments are (mostly reluctantly) having to put their electronic surveillance processes under the microscope.

Firstly, As a UK citizen, I must admit I’m a bit miffed that the US is only concerned about the rights of its own citizens being infringed.

But there are implications which – although touched on- haven’t really been discussed in depth.

And there are other areas where single headlines aren’t joined up to produce the big picture implications.

Critically, while Snowden has revealed this information through the press, we don’t know whether any other employees (or contractors) have disclosed this information to other interested third parties.

Although that, of course, wouldn’t have resulted in the same degree of embarrassment. As with Chelsea Manning, I suspect that Snowden’s true offence would appear to have been “Embarrassing Important People”.

The honeypot

The huge amount of information being captured isn’t just useful to the NSA, of course.

Lots of commercial organisations, for example, would find this an attractive resource.

And there are reportedly 850k people authorised for access, each of whom is liable to be “leveraged” in one way or another for access.

It has also been reported that, on more than one occasion, users have accessed information for personal (mostly romantic) interests.

What we don’t know whether users have accessed the information for personal gain.
For example, reading (and possibly decrypting) emails to gain market sensitive information.

Breaking the Internet

Reports claim that a number of mechanisms have been employed to build backdoors into devices, or to compromise encryption tools – and even standards

Well, of course, “if you’ve nothing to hide, you’ve nothing to fear”.

Except that once the doors are unlocked, you can’t control who walks through them.

Now we know that there are probably backdoors in tablets, phones, networks and computers, there are probably a whole stack of people trying to open them up.

They may be nation states, or organised crime outfits, unethical corporations.

The ones we read about – and the ones who get locked up – will be the adolescent hackers who aren’t able to cover their tracks.

However, if those backdoors exist, then access isn’t limited to security services servers. A person with the skills to penetrate these devices can do it without touching the NSA/GCHQ servers.

Contractor skills

Having trained all these contractors to access these backdoors, they’ve created some people with a very marketable skillset.

Snowden’s revelations are, ironically, a very effective advertising campaign for those abilities.

Many of these contractors are (as was Snowden) working for consultancies who are adept at pitching business opportunities to large organisations.

Anyone following the Leveson enquiry can understand that a large corporation can be corrupted to the point where illegal surveillance becomes routine, particularly if the barriers to entry becomes low enough, and the risk of detection is minimal.

“What’s Good for General Motors …“

There have always been strong links between the US government and its corporate partners.

Could those partners be using data passed by the UK government to disadvantage British or European competitors ?

Data Protection Act

The UK passed the Data Protection Act in 1986. It was reworked in 1998.
The eighth principle is intended to ensure that personal data should not be exported (http://www.legislation.gov.uk/ukpga/1998/29/schedule/1).

Personal data shall not be transferred to a country or territory outside the European Economic Area unless that country or territory ensures an adequate level of protection for the rights and freedoms of data subjects in relation to the processing of personal data.

There are, of course, exemptions for National Security.

Here’s the section (from http://www.legislation.gov.uk/ukpga/1998/29/section/28)

Personal data are exempt from any of the provisions of—

(a)the data protection principles,

[snip]

if the exemption from that provision is required for the purpose of safeguarding national security.

(2)Subject to subsection (4), a certificate signed by a Minister of the Crown certifying that exemption from all or any of the provisions mentioned in subsection (1) is or at any time was required for the purpose there mentioned in respect of any personal data shall be conclusive evidence of that fact.

However, was it necessary for the UK national security to pass all that personal information to a foreign government ?

What safeguards were applied to its storage and use ?

GCHQ Funding

Is it reasonable to extrapolate “safeguarding national security” to include £100m funding for GCHQ programmes by the NSA (as has been reported by The Guardian) – effectively paying for GCHQ’s budget by selling our (and our European Partners’) citizens’ personal data to a foreign government (and, possibly, its economic interests) ?

And while I’m on this subject, when did the government decide that I wasn’t a citizen, but a product ?

Publication

The Guardian newspaper’s been taking a lot of stick for revealing a subset of the Snowden revelations.

But, really, if 850k people have access to this data, then, let’s face it, it will leak. The Guardian hasn’t (so far) been shown to lost control of our information. The respective intelligence agencies have.

And, as I’ve implied above, just because we haven’t heard of any other leaks doesn’t mean they haven’t happened.

For me, the key point of the Snowden revelations was not that the data was being stored by the security agencies (bad enough in itself), but that it could be removed without their knowledge.

To that extent, they have failed in their duty to their citizens.

How many others of the 850,000 people who apparently have had access to that data have used it to less principled ends ?

Snowden and the Guardian are being accused of treason, of “aiding the enemy”.

The risk is that, if those enemies had already been aided by others, then we probably just wouldn’t have heard about it.

Parents, Pensions and Mortgages …

Well, the latest news is that Nick Clegg – our deputy PM – has come up with a scheme for parents and grandparents to guarantee the deposits for their children to buy a home.

This could be a really bad idea for so many reasons.

I’m going to leave aside the obvious – that this excludes everyone without a nice big lump sum stacked up in their pension fund (a whole different – moral – issue) and just address this for the housing market impacts.

I’m also only going to touch on the suspicion that accountants and lawyers will already be working on complex, “tax-efficient” schemes to let the 1% save for their little darlings pied-a-terre using their (tax relieved) pension schemes. I’d guess these may supplement the 12,500 who the Beeb report says could “potentially benefit”.
(Oh, OK then, here’s an idea how that would work – pay £60k into AVC’s, claim back the 40% tax to gross up the fund to £100k and secure as a deposit).

The Problem …

For decades, UK families have pumped any increase in disposable income into buying a new home. This has inflated housing prices (sustaining the problem), and means that people are working harder just to stand still.

Recent globalisation changes, however, mean that middle class incomes have been squeezed, and that there’s little real prospect of income (or – as a result – house price) growth in the foreseeable future. And price inflation is still positive, so we expect a fall in disposable income.

And a number of sources seem to support the idea that the UK housing market is overvalued. The IMF estimates that this could be by up to 30% !

So why aren’t prices falling ? Well, interest rates are ridiculously low, partly as a result of quantitative easing. The liquidity intended to boost the economy is keeping this – admittedly important – sector of the economy afloat.

Foreclosure and repossession – as we learned shortly after 1990 – means properties sold at distress values, which drives the market down. So – while the interest cost isn’t causing pain, the banks will be content to not kick off another round of negative headlines by evicting large numbers of their customers.
Of course, that may change if they have to start declaring losses …

“Doing the Math”

House prices move to reflect the disposable income available to meet mortgage payments (I’m ignoring the effect of the private rented sector, here, for simplicity).

So if  I have £800/month available, and interest rates are 4%pa, then I can afford a mortgage of £800*12/.04 = £240k.

If interest rates go up to 6%pa, however, those repayments will go up to £1,200/month – and I’ll have to find another £400 at a time when salary levels are static.

And in this case, a household with the same disposable income of £800 will only be able to afford a mortgage of £160,000 (£800*12/.06).

So there would be a lot less people able to buy my house (it takes more than one buyer to create market competition), and prices will fall – as people either need to move, or as banks eventually start repossessing. The move to fixed rate mortgages – not such a component in the 90’s crash – may spread this over time, but supply-and-demand means that prices will fall (especially in a thin market).
Interest rate increases may still be a year or two away, but they will come. And they’ll come as a shock to those who’ve made long-term decisions.

For those who weren’t around at the time, take a look at the Nationwide graph of the House Price Crash. 1986-1990 saw the “real” price increase by 56% – from £88k to £129k. Then interest rates went up. A lot.
And repossessions started.
By 1992 prices had dropped all the way back to £81k.
Of course, they’ve been trending down again since 2007, but when the banks think we’ve hit the bottom of the market, then deposit percentages will come down.

Trying to get a mortgage …

… has become difficult for first-time buyers, as the banks are asking for 20% deposits – over £30k for an average property, more in London. The narrative tends to be that the banks are being overly cautious, but, in reality, they’re probably being not unreasonable in reflecting the increased medium-term risk in the overstated market.

Buy to Let …

… on the other hand, is doing very nicely. If you already have properties, then you can buy more (being selective, at the right price) by leveraging the (over-valued) equity in your existing portfolio.

Interest rates are low, and – as more and more people need to rent – residential rental rates are going up.

There’s still that capital risk down the line, however…

Pester Power ….

You’ll be using your pension, ffs, to guarantee a house price in an overvalued market. So if/when prices do get more realistic, then that Round-the World trip you’d got planned for your lump-sum payout ain’t going to happen. Even if prices don’t fall, the mortgage is still likely to be running …

Then there’s all the acrimony with your children, when they can’t afford the repayments any more, and can only sell at a price that covers the mortgage.

Even for those with reservations about this scheme, it can be difficult to say “No” to those you love. But this scheme could mean “Pester Power” endures until your beloved offspring are in well into their 30’s.

I’m a Homeowner …

… and I’m in favour of people buying their own homes. Although I like the idea I’ve an asset, my home is somewhere to live.
I dont have children, or a lump sum to claim, so I don’t really have a direct interest.

But – as with any market – you should buy when prices are low and sell when they’re high.
Remember house prices don’t always go up.
Remember that early in life, you’re likely to move more often – crystallising any losses.
Remember and that buying / selling property costs money (stamp duty, estate agents, solicitors just to start with).

History suggests that using schemes like this to distort the market in the medium term have historically been liable to end in tears.
Like the 120% mortgages once offered by Northern Rock – which could never be covered by the sale of the house in a “flat” market.

And I include the government’s “NewBuy” scheme in these distortions. This offers a 95% mortgage to people buying newbuild properties. But, of course, once you move in, it’s not a newbuild anymore.
So if you need to sell, then your buyer can only get an 80% mortgage. Alternatively, they can still get a 95% mortgage on a “real” newbuild. Probably even for an identical house on the same estate. The payments may be higher, but the deposit isn’t the constraint.
And that’s without recovering the premium charged for newbuilds – together with the carpets, kitchens etc. that often go with the deal.
So this may be good for the construction industry, but it’s not necessarily a good idea for their customers.

The UK housing market over the last 30 years is littered with examples of housing equity wealth being stripped – from endowment mis-selling to HIPS. Now, with all the equity stripped out of housing, a new scheme turns up to pump more money into this mostly non-productive sector – by stripping out pension provisions (which are, apparently, already inadequate).

This may be suitable for some, but if you go for this scheme, make sure your eyes are open.

I’m not a financial adviser, and you shouldn’t make personal financial decisions based on this article. Seek independent qualified advice before making important financial or life decisions.

Mickey Mouse extraditions …

Sorry about the downtime … busy life … this one couldn’t wait though.

The BBC has reported that a UK student is to be extradited to the US. http://www.bbc.co.uk/news/uk-england-south-yorkshire-16544335

Apparently the “crime” he committed isn’t actually a crime in the UK.
Nobody in the UK has voted for this law. Not Parliament. Not the electorate.

We were sold the extradition treaty on the basis that it would prevent terrorism. Not that it would be used to enforce Micky’s commercial interests.

I’ve written to my MP (through http://www.theyworkforyou.com/).

Here’s the text (I’ve added some bolding). Maybe a bit more formal than my normal style, but I think it speaks for itself

I’m writing to express my disquiet at the decision to extradite Richard O’Dwyer.
I do not know Mr. O’Dwyer, and I’m not writing this letter as part of any organised campaign.
I’ve had serious concerns over the process to extradite others under this arrangement, but then, at least, there was the excuse of the national interest – for example, with a threat on Pentagon security.

Let me also say that I do not endorse copyright theft. You may remember from my letter in February 2010 that I am in favour of enforcing copyright.
I have been generally cheered by the government’s intention to adopt the proposals in the Hargreaves Report, which I believe will introduce a reasonable balance between rightsholders and citizens.
As a consequence, I believe it that there are (or shortly will be) proportionate civil remedies under UK law.

As I understand it, Mr. O’Dwyer’s actions do not contravene UK law.

Britons have had no say in the election of the US representatives who passed the legislation.
To paraphrase the cry of the American Revolutionaries, I would say “No extradition without representation“.

At a time when so many parliamentarians are complaining of the loss of UK sovereignty to the EU, it would appear that we’ve just handed the liberty of our citizens to the whims of an extreme US legislature.
Where was our referendum on this surrender of these powers ?

It is totally unreasonable to expect UK citizens to have a detailed knowledge of the laws of all countries with whom we have an extradition agreement – particularly when those laws extend beyond their own territories.

And it’s a completely draconian, disproportionate measure to remove the liberty of a British citizen to the jeopardy of a trial under a foreign legal system (with all the costs and disruption that causes in itself), because he has upset the entertainment industry and its (very effective) lobbyists.

You may be aware of reports of the US threatening other EU nations with trade sanctions if they didn’t pass laws reflecting its own interpretation of copyright – irrespective of the wishes of the electorate (http://boingboing.net/2012/01/06/leaked-memo-usa-blackmailed-s.html).
The general disquiet over the proposed SOPA legislation shows that this is a very active area of concern.

I’m aware that Parliament has recently debated the extradition arrangements with the US, and the consensus seemed to be that a “forum bar” needed to be introduced (I’m not a legal expert, so I don’t know if this is indeed the case).
I feel that Parliament now needs to resolve this as a matter of urgency.

Just Give Us Your Money And Die ….

“The InterGenerational Foundation” has been talking tosh, with their headline grabbing “25 million empty bedrooms” line.

I’ll declare an interest. I’ve lived alone, quite happily, in my own house for many years. I use the bedrooms. I’m middle-aged (born just after the baby boom).

But this current headline-grabbing scheme seems intent more on wealth-shifting – in line with their unsubstantiated statement that “British policy-makers have given undue advantages to the older generation at the expense of younger and future generations” – rather than actually freeing up bedrooms.

What all of these arguments conveniently choose to ignore is that although house prices were lower in the 1980s, that’s because interest rates were around 14%.
We didn’t have mobile phones, broadband, Sky rental, or X-boxes to maintain, though.
We had to save for a deposit, and hope that we were saving with a Building Society (yes, we had them in those days) who could free up some quota for us.

So … if you think you should have a mortgage at the moment, what are you going to do when the payments on it treble in a year ?

In many cases, we had to rent, or live with our parents, until we had enough deposit saved. And yes, that meant we had to actually get on with them.

But this is really why it’s tosh …

Don’t assume that if all these pensioners’ homes come on to the market, then you’ll be able to buy them. The banks will still want the same deposits, because you’re risky. So the houses will end up with buy-to-let landlords. Who will let them according to who can afford to pay the rent, rather than who will make best use of the bedrooms.

I will agree that stamp duty is a major drag on the market. not just for pensioners, but it does make buying a house a long-term commitment. As do all the other costs, such as Agents’ fees and solicitors’ costs, as well as the cost and sheer aggravation of moving.
All if these factors affect the ability of the buyer and the seller to agree an acceptable value.

But for many people, as well, their house represents their most significant asset. Ultimately it may be the way that they’ll pay for their care – as that covenant with the state seems to be broken. And now they’re being asked to sell that asset at the bottom of the market.

And if you think that the old people are being favourably treated, you haven’t been reading the news about (amongst others) Southern Cross.

I’d be amazed that the press give these bozos space, except that stirring up arguments sells copies.

And it reinforces my previous question – Why can nobody in Think Tanks actually Think ?