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Gordon Brown at Chilcot inquiry – live
Minute-by-minute coverage as prime minister gives evidence to investigation into Iraq war
8.56am: Today will be an uncomfortable day for Gordon Brown. He will be forced to spend three and a half hours talking about a subject, Iraq, that he would rather ignore. When Tony Blair was prime minister Brown did defend the war – both before it started, and afterwards – but he did so very sparingly, and in a way that failed to dispel reports that privately he was deeply sceptical about the whole thing. Since 2007 he has been frequently criticised for failing, as chancellor, to fund the wars in Iraq and Afghanistan properly. When Brown set up the Iraq inquiry, he originally wanted it to take evidence in private. To his credit, Sir John Chilcot rejected that approach and today the nation will be able to watch the prime minister in the hot seat.
It’s traditional for papers on these occasions to publish lists of “key questions he must answer”. In a novel twist, the Daily Mail has got William Hague – who has got plenty of questions of his own that he should be answering (about Lord Ashcroft) – to come up with four. In the Guardian we’ve got five. The Times has gone even further. They’ve got 10, and they’ve put them in a leader.
The Times has also put what may be the key question on its front page. It’s from Lord Guthrie, a former chief of the defence staff, who has often criticised Brown before for not properly funding the Ministry of Defence. Guthrie told the paper:
Not fully funding the army in the way they had asked … undoubtedly cost the lives of soldiers. [Brown] should be asked why he was so unsympathetic towards defence and so sympathetic to other departments.
The hearing starts at 10am and the morning session is due to finish at midday. The afternoon session is scheduled to run from 1.30pm until 3.30pm. Later, from 4.30pm until 6pm, Douglas Alexander, the international development secretary, will be giving evidence about his department’s work in Iraq since 2007.
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More money makes society miserable, warns report
about 6 months ago - No comments
Economics experts argue that Britain’s thirst for status symbols harms our well-being
The national belt-tightening expected to follow next month’s budget could prove to be of more benefit to the nation’s sense of well-being than if wealth levels were to soar, according to a new study.
Complex economic formulas developed by two professors of economics, Curtis Eaton and Mukesh Eswaran, and published in the current edition of the Economic Journal, suggest that greater affluence can seriously damage a nation’s health. Based on their mathematical modelling, the economists advance the theory that once a country reaches a reasonable standard of living there is little further benefit to be had from increasing the wealth of its population. Indeed, it could make people feel worse off.
They believe their work shows that, as a nation becomes wealthier, consumption shifts increasingly to buying status symbols with no intrinsic value – such as lavish jewellery, designer clothes and luxury cars. But they warn: “These goods represent a ‘zero-sum game’ for society: they satisfy the owners, making them appear wealthy, but everyone else is left feeling worse off.”
Their work owes much to the economist Thorstein Veblen, who in 1899 coined the term “conspicuous consumption” in his book The Theory of the Leisure Class. Veblen argued that people seek status through conspicuous consumption, which derives its value not from the intrinsic worth of what is consumed but from the fact that it permits people to attempt to set themselves apart from others. As the economy grows, people increasingly choose status symbols or “Veblen goods” over other goods.
“Those with above-average wealth consume Veblen goods with a positive impact on their happiness,” the authors write. “But those with below-average wealth simply cannot afford these goods, so they have a negative impact on their happiness. This is known as ‘Veblen competition’. As average wealth rises, people grow richer but not happier.”
The pair believe their research helps to explain why empirical studies show that levels of happiness and feelings of community in affluent countries have stagnated, despite growth in real incomes.
There is another downside. As people yearn for more status symbols they have less time or inclination for helping others. This, the authors argue, damages “community and trust”, which are vital to an economy because they ensure the smooth running of society. They conclude: “Conspicuous consumption can have an impact not only on people’s well-being but also on the growth prospects of the economy.” The theory may go some way to explaining the public backlash against the louche lifestyles of the UK’s footballers, bankers and politicians.
It fits into a debate within economics about how to measure a nation’s true wealth. Many economists believe they need to focus more on measuring happiness. The belief that a focus on individual wealth creation can be divisive has spread around the worlds of politics, psychology and science. Clinical psychologist Oliver James has argued that there is an epidemic of “affluenza” throughout the developed world, with attempts “to keep up with the Joneses” triggering huge increases in depression and anxiety.
Last year a bestselling book by two epidemiologists, Richard Wilkinson and Kate Pickett, called The Spirit Level: Why More Equal Societies Almost Always Do Better, suggested that Britain and America were the countries with the widest gulfs between rich and poor in the developed world, and as a result had the most health and social problems.
Nevertheless, Eaton and Eswaran, from the universities of Calgary and British Columbia respectively, do not believe the developed world’s obsession with wealth shows any signs of abating. The pair predict that “it is likely that conspicuous consumption will become worse as time progresses”.
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Catherine Bennett | Talk to us about politics, not your lovely home life
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The Cameron and Brown personality parade misses the point that voters care about issues, not character
Recently, on a day when no cameras were looking and he was surrounded by political nonentities, mainly mothers, an off-duty David Cameron was amazingly haughty to a friend of mine. Maybe it was just an off-day. Or maybe, what with all the nation’s mums to think about over, a stressy Mr Cameron had important political things on his mind. What do mums feel about Lily Allen? Would they like him to drink Guinness or bitter? Enjoy gardening or football? Shopping-wise, which out of Primark and Marks & Spencer do mums think more appropriate for a national leader? Examined by Titchmarsh, he came out for the latter.
Lucky Gordon Brown: though pressed on his retail experience by an insistent Piers Morgan, he was never forced to admit to a supermarket preference. But the prime minister confessed, and a cutaway to smiling Sarah Brown confirmed that this was a positive anecdote, that he once accompanied his wife to a supermarket, but stayed in the car.
Admittedly, it’s unlikely she would have stood up and added that they were not, at the time, on speaking terms. We just have to take Brown’s uxoriousness on trust, like his grumpiness-denial and a claim that he once drank “half-a-dozen” pints a night. Are there any witnesses to this excess? The more political parties urge us to go out and vote on the basis of their leader’s characters, the more, if they want to avoid complicity, broadcasters might want to think about testing these auto-eulogies for accuracy.
Does Cameron really play darts? Does Brown, yet more implausibly, never throw anything more substantial than newspapers, and “wake up in the morning thinking what I can do to help people looking for jobs”? Stringent investigation of these claims could provide fabulous light entertainment. Although, inexplicably, waterboarding has yet to feature on daytime television, Jeremy Kyle routinely uses a lie detector to expose disingenuousness, even though all that is generally at stake, for survivors, is not a position at the helm of government, but a chance to “save your relationship”. Once Brown and Cameron were wired up they could even be asked a few supplementaries, about banking regulation, or the size of coming cuts.
Last week, invoking the more urgent electoral issue of himself, Brown gave voters a few tips for personality assessment. “It is for other people to judge,” he said, “but I believe that character is not about telling people what they want to hear but about telling them what they need to know.” And another hint, to help the public succeed where generations of divorcees have failed: “For better or for worse, with me what you see is what you get.” But like a Cretan, who thinks it worth adding, “just ask my wife” to the line “all Cretans are liars”, Brown accepts that the public might, occasionally, feel the need for corroboration.
Over to Sarah Brown. “What you see is what you get with him,” she said, in response to the bullying stories. A comment which only confirms, like an earlier line, “I know he wakes up every morning thinking…”, that here is a couple so close that their “mirroring” has reached the exemplary, automatic stage.
Even so, it’s worth noting Mrs Brown was not speaking under oath. Here is a loyal spouse who stands to be evicted, if she is disbelieved, then rehoused in Kirkcaldy; albeit with support from Naomi Campbell. Nor, perhaps, should the cautious voter believe in Samantha Cameron’s purported diffidence about Number 10, on the basis that she is already a rich baronet’s daughter and a big name in the world of handbags. She still wants to win enough to deploy her children and, in tonight’s profile of Cameron by Trevor McDonald, to throw down this gauntlet about her own Mr Wonderful: “He’s always been incredibly strong, and kind, and supportive.” How do we know this is true? Because the rules of all-political Mr and Mrs now require that candidates provide character references for the wives, as well as themselves.
Dave guarantees, in Samantha, “an amazing woman, a working mum, a very successful career woman” – so a leetle bit more modern, maybe, than Gordon’s “beautiful, elegant, compassionate, dignified” Sarah. Whom he proposed to on a beach. And loves ever so, Piers: it “just grows and grows”. Will he be sure to tell us if it stops? “I’m an open book as far as people are concerned,” Brown says. “Anything they want to know, I’m happy.” Actually, politics aside, it’s hard to think of anything he’s left out. Most of us probably know more about Sarah Brown’s proposal of marriage than we do about our own mother’s.
Presumably, given there has never been disclosure on this level, that the media did not demand it and that no one in their right mind would volunteer such intimacies, Brown and Cameron’s advisers believe that a public hardened by tales of Prescottian bulimia and Mrs Blair’s neglected Dutch cap will respond only to enhanced levels of authenticity stimulus. Heath’s yacht, Mrs Thatcher’s larder and Kinnock’s Welsh idyll have given way to a televised account of his baby’s final moments by Brown, a father who thereby enters an almost obscene contest for public sympathy with his rival, another bereaved father.
On each side, the strategy looks as risky as it is undignified. Their particular brands of insincerity – agonising awkwardness in Brown’s case, supreme smarm in Cameron’s, phony WAG stuff from both – could easily be the strongest impressions created by protracted exposure. More important, this belief in the electoral power of character may be misplaced.
Evidently Brown and his manipulators have evidence, or instincts, that tell them the contrary, but there are doubts about the significance of leaders’ characters in elections, even in an age when it is common to argue that presidential politics and a celebrity-obsessed media have increased their impact. And it is not, anyway, as if charismatic politicians are new. Winston Churchill was a celebrity, and he was rejected. So was Neil Kinnock, even though he was more appealing than John Major. Look at Berlusconi’s behaviour, and you could even argue that voters don’t pay as much attention to character as they should.
Concluding a 2002 study, Leaders’ Personalities and the Outcomes of Democratic Elections, the psephologist Prof Anthony King said the conventional political wisdom on character is wrong. Research, he wrote, “indicates that relatively few voters are swayed by candidates’ personal characteristics”. So Brown musn’t worry about being snubbed by Match of the Day.
“Far more important,” King writes, “are voters’ long-standing party loyalties, their views on issues, and their judgments of how well or badly presidents and parties have performed – or will perform – in office.” Ah. Maybe, given the economic tumult Mr Brown has just prophesied, it is a bit early to give up on football. Any port in a storm.
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Waitrose launches UK brand expansion and plans more foreign outlets
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Managing director Mark Price aims to keep fast-growing upmarket grocer ahead of rival M&S
Waitrose boss Mark Price is drawing up plans to transform the upmarket food chain into a consumer brand available in thousands of non-Waitrose shops in the UK and overseas. He believes the Waitrose label has the potential to be a big “fmcg” – fast moving consumer goods – name like Heinz or Kellogg’s, which he can sell to other retail businesses, rather than just direct to shoppers.
He has similar ambitions for the Duchy Originals brand, founded in 1990 by the Prince of Wales. Waitrose signed a licensing deal with the struggling royal label last autumn, which gives the John Lewis-owned grocer the right to manufacture, distribute and sell all Duchy goods in the UK. Price said there would be more than 300 Duchy products by the end of the year and there was potential for many more.
He said: “What we are trying to do is give access to the brand and it is not just about owning shops. It is about taking a creative approach and making products available to as many people as possible. We are looking to work with partners.”
The plan to sell Waitrose goods in other stores will be kickstarted this month when Price unveils details of a deal that could eventually see Waitrose food sold in more than 700 Boots outlets. Sections of Boots’ stores will be transformed into mini-Waitroses, with the grocer’s own fixtures, fittings and signage. In return, Waitrose will sell a range of Boots health and beauty goods in its own stores.
Last year Waitrose defied predictions it would be battered by the recession and emerged as the fastest-growing big grocer, chalking up a sales increase of more than 11% to in excess of £4.5bn, trouncing upmarket rival Marks & Spencer. “We expect to be the fastest growing again this year,” Price said.
Sales to overseas supermarkets are also to be ramped up. “Waitrose is seen as a really premium brand outside the UK,” said Price. The grocer has already more than doubled business-to-business overseas sales to more than £100m over the past two year, exporting to 25 countries including Thailand, the Bahamas, India and China. But Price said there was much more potential.
The grocer is also keen to open more franchised outlets overseas, especially in the Middle East. Two stores in Dubai are chalking up 60% annual sales growth and franchises have been awarded for Bahrain, Oman and Abu Dhabi. Price said there would soon be 20-23 Middle East outlets.
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Embarrassment for David Cameron over Tory hopefuls’ lobbying links
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Conservative drive to ‘clean up politics’ faces test over failure by several candidates to fully declare their work for lobby firms, says Nick Mathiason
David Cameron’s drive to clean up politics is facing an embarrassing public test after it emerged that a number of prospective Conservative MPs have failed fully to declare in their campaign literature that they work for lobby firms representing powerful business interests.
The revelation threatens to destabilise Tory hopefuls in the upcoming election as voters in constituencies where alleged “secret lobbyist candidates” are running will be the subject of a targeted online advertising blitz on Google and Facebook orchestrated by 38 Degrees, an innovative online campaign group.
Only last month, Cameron warned that lobbying “was the next big scandal waiting to happen”. But campaigners claim that while secret lobby links extend across all parties, the Conservatives are the worst offenders.
Last night, the Tories hit back saying they “are committed to shining the light of openness onto the lobbying world” and suggested Labour candidates’ links to lobby firms were far more extensive. But several Tory candidates seem to have kept back details of their work for lobbying firms, including:
■ Priti Patel, the Tory candidate for Witham, a new seat in Essex. On her website, Patel says she is a director of a company providing “business and communication strategy” advice but fails to clarify that she works for one of the world’s most powerful lobby firms, Weber Shandwick, personally advising Microsoft and bank lobby group, International Financial Services London.
■ Penny Mordaunt, the Conservative candidate for Labour-held Portsmouth North, who is a 15% shareholder in lobby firm Media Intelligence Partners, which boasts among its clients Sony, Orange, and DHL. Mordaunt is also listed as the firm’s director in Companies House. Mordaunt also worked for 10 months last year at leading public PR firm Hanover.
■ George Eustice, Cameron’s former press secretary, fighting the three-way marginal in Camborne and Redruth, Cornwall, has failed to disclose on his campaign site that he works for powerful Westminster lobby firm Portland, which acts for Google, Tesco and McDonald’s.
■ Prospective Labour MP Emma Reynolds on Friday hurriedly updated her biography on her campaign website to include details of her work for lobby outfit Cogitamus, which advises the biggest names in the construction industry on government relations.
The Observer is aware of a significant number of parliamentary candidates who will be unmasked in coming days as part of a co-ordinated campaign by Spinwatch and 38 Degrees aimed at introducing a statutory register of interests. This would force lobby firms and parliamentary candidates to clarify who they represent and work for.
David Babbs, 38 Degrees executive director, said: “The election is a chance to clean up parliament, which is why it’s time for all PPCs to come clean about their links to lobbying. 38 Degrees members are going to work together to make sure that those people who want to be our MPs promise to put their voters first, not their friends in big business. 38 Degrees is a 100,000-strong, people-powered movement, and during this election we plan to work together to cut through the spin and make sure politicians answer to us. We’ll be challenging PPCs on their lobbying links, and if they refuse to draw a line under their past business interests we’ll be raising money for ads in local papers to make sure local voters hear the facts.”
Tamasin Cave, from the Alliance for Lobbying Transparency, said: “The public is calling for – and deserves – a new type of politics, so it’s vital that prospective MPs are fully transparent about their links to lobbying. If they are helping powerful companies get privileged access to key politicians in the runup to the election, we have a right to know who they are lobbying for and which policies or contracts are being discussed. Covert lobbying harms public trust. Lobbying firms clearly hire these parliamentary hopefuls to both open the door to politics now and to secure a direct line to any future government. If you want to influence politics, it pays to employ political insiders.”
Eustice defended the lack of information about his work for Portland, saying his campaign website was intended to set out his beliefs. The one-time Cameron spin doctor also said there was a welter of publicity when he left Cameron to join Portland. In addition, he had been a tireless campaigner for more transparency in the public relations arena.
Mordaunt said her role at both Media Intelligence Partners and Hanover was centred on communications work rather than public affairs. She explicitly denied she was a lobbyist and said she supported the campaign for a statutory register of lobbying interests.
Patel did not comment on her links with Weber Shandwick. But the firm’s corporate communications and public affairs chairman, Jon McLeod, confirmed that Patel advised Microsoft and the International Financial Services London. He stated: “Weber Shandwick is clearly an agency with a political dimension. We would not be good at our job if we weren’t.” McLeod confirmed he was a vocal supporter of legislation to create a statutory register of lobby firms.
Last night, the Tories said they would introduce new rules to stop central government bodies using public money to hire lobbyists and “push for the lobbying industry to ensure greater transparency of their operations through self-regulation, and we would be prepared to legislate if this fails”.
Cave said: “As David Cameron said just last month, this isn’t a minor issue with minor consequences. It’s not just public policy that’s affected by lobbying – government contracts worth billions are potentially at stake. Cameron has spoken about the urgent need to shine the light of transparency on lobbying. But words alone won’t bring public scrutiny: we need new rules that force lobbyists to come clean about their activities.”
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Brown draws flak over role in handling military budget
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Cameron uses prime minister’s questions to challenge Brown over military funding claims made to the Chilcot inquiry
It was possibly the most supercharged prime minister’s questions of the year so far. At 12:09pm last Wednesday the ritual jousting turned toxic as David Cameron challenged Gordon Brown’s testimony at the Iraq inquiry days earlier.
Brown had told the Chilcot inquiry that he never refused urgent requests for more military funding. Cameron did not believe him, citing two former chiefs of the defence staff who had criticised the prime minister for offering the inquiry evidence that was “disingenuous” and “dissembling”.
Several Labour backbenchers could not hold their tongues. But, they roared, Lord Guthrie and Admiral Lord Boyce were “Tories”. The implication was damning; these men might once have been characters of honour whose duty was to serve the nation but now their criticism could be dismissed as readily as, well, Cameron’s.
It was a poisonous putdown. In their view, the opinions of two of the most powerful figures in modern military history had become corrupted to the extent they were no longer impartial.
Some blamed Sir Richard Dannatt, the former army chief, for politicising the military. After all, Dannatt’s consistent criticism of defence spending in Afghanistan had preceded reports that he would become a defence adviser to the Conservatives. Beyond the hullabaloo over political bias weighed against genuine concern over soldiers’ welfare, the debate boils down to whether Guthrie and Co have a point? Did Brown starve the military of funding when he was chancellor, leaving the forces short of vital equipment?
The answer may depend on whose side you are on. Guthrie and Boyd remain adamant that Brown mishandled the defence budget when chancellor and that his prudence meant, for instance, fewer troop-carrying helicopters in Afghanistan, one of the most vexing issues facing commanders in Helmand province. Their critique was bolstered by an inquest verdict hours before Wednesday’s Commons exchange. Four soldiers were unlawfully killed after troops were given “inadequate” training, according to Wiltshire coroner David Masters.
Brown, too, remains unmoved. He told Cameron that “every request” made by defence officials for “urgent operational requirements” was met. In fact, said the prime minister, £18bn had been invested in Afghanistan and Iraq on top of the military budget. In real terms, spending was up. The Tories, claimed the prime minister, cut it by 30% in the 1990s. But the truth, as so often, is somewhere in between.
Analysts point out that the MoD has a long-term core budget while the additional cost of fighting wars comes from the Treasury reserve. Many believe this dynamic fuelled disagreement between Brown and the military men.
However, the future for defence spending appears less ambiguous. Swingeing cuts are a certainty. Days before last week’s PMQ, the defence select committee bemoaned a £21bn funding gap for scheduled military projects. If they win the election, the Tories will have to preside over huge cuts in military spending. The question is, will Guthrie and Boyd sit quietly on the sidelines when that happens?
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Conservative defector condemns party’s ‘vile letter’ and hostility towards Europe
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MEP Edward McMillan-Scott accuses Tories of euro-scepticism and ‘double standards’ for expelling him while only suspending Lord Archer
The former leader of the Tories in Europe launches a scathing attack on David Cameron’s Conservatives today, accusing them of “visceral euroscepticism”, “twisted” thinking and bullying tactics that forced him out of the party.
Edward McMillan-Scott, who defected to the Liberal Democrats on Friday, has also accused the Tories of “extraordinary double standards” for expelling him permanently, having only suspended Lord Archer, who was sentenced to four years in prison for perjury in 2001.
Writing in today’s Observer, McMillan-Scott, who remains a vice-president of the European parliament, says the Tories unleashed a “campaign of vilification” against him after he claimed that Michal Kaminski, the Polish MEP who now leads their centre-right group in the EU, had an antisemitic, homophobic and racist track record.
A strong pro-European and member of the Tory party for 43 years, McMillan-Scott gives voice to years of frustration at the party’s hostile attitudes to the EU under present and past leaders, including William Hague.
In his outspoken attack on the party over its handling of his expulsion, McMillan-Scott says he has been smeared by Tory press officers who have tried to claim he is the one who holds antisemitic views.
He adds that they have distorted facts about his defection and claims that the party produced no documents to support its case when he appealed against expulsion. “I am not bitter, but they are twisted. It is not a nice party now,” he writes.
He accuses Cameron of tolerating eurosceptics who depart from the party line while persecuting him, a pro-European, for daring to express sincerely held doubts about the leadership credentials of a controversial fellow MEP.
“David Cameron shields his europhobes,” he writes. “No murmur was made when last weekend Lord Tebbit in effect encouraged Conservatives to vote Ukip in the general election against the Speaker, John Bercow. The dog whistle is really at a lower pitch: that Ukip supporters know that there is a real home for them, back in the Conservative party.”
Last night, speaking from the Liberal Democrat spring conference in Birmingham, McMillan-Scott said the party had shown “massive double standards” by expelling him while suspending Jeffrey Archer for five years.
When the Liberal Democrat leader, Nick Clegg, mentioned McMillan-Scott’s name at a rally on Friday night there was a huge roar from activists. Yesterday he was seated in the front row for a question-and-answer session, so Clegg could welcome him.
The row over McMillan-Scott blew up last year when he stood as vice-president of the European parliament against Kaminski, who was Hague’s choice. Following McMillan-Scott’s stand, Timothy Kirkhope, leader of the Conservative MEPs, withdrew the party whip.
On 15 September, without any prior notification, McMillan-Scott was expelled from the Conservative party after 25 years as an MEP, four years as leader of the MEPs and three years on the party’s board.
• Hague is also likely to come under fire if he declines an invitation to appear this Thursday before a parliamentary committee investigating the granting of a peerage to Lord Ashcroft .
The three Tory members of the public administration committee – David Burrowes, Ian Liddell-Grainger and Charles Walker – have already said that they will not attend the one-off meeting, at which confidential Cabinet Office records relating to the decision to grant Ashcroft a peerage in 2000 will be discussed.
But the event is now in danger of running into farce. Ashcroft, a “non-dom” who does not pay UK tax on his overseas earnings, is unlikely to appear in person and Hague, too, looks doubtful.
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Recovery yields Alistair Darling a £12bn budget windfall
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Chancellor will cite state investment in jobs as key to lower-than-expected unemployment
Alistair Darling will claim next week that government action to protect jobs has saved around £12bn, as Labour uses the pre-election budget to spell out key economic dividing lines with the Tories.
In what is expected to be the most political budget in decades, the chancellor will cite government investment in jobs programmes as a major reason why unemployment has turned out to be dramatically lower than economists predicted. Last year’s budget anticipated that the level of unemployment, based on National Audit Office assessments of independent forecasts, would be 2.09 million people in the fourth quarter of 2009 and 2.44 million in the fourth quarter of 2010. By December’s pre-budget report (PBR), however, the government had revised the forecasts to 1.72 million for 2009 and 1.91 million for 2010, saying that this would save up to £10bn over five years from lower unemployment benefits alone.
Since then, the Observer has established that Darling’s officials have cut the forecasts still further. The latest projections for unemployment are for it to hit 1.72 million in the final quarter of this year and 1.75 million in the fourth quarter of 2011 – a further 200,000 lower than in the PBR plans, potentially freeing up an extra £1bn-£2bn.
The work and pensions secretary, Yvette Cooper, said: “In the 80s and 90s unemployment continued to rise even after the recession ended, because the government failed to put the necessary support and training in place and keep it there as the economy returned to growth.” She claimed that the Conservatives would cut back investment in jobs programmes and “put the economy at risk, even though the clear evidence shows helping people back to work saves money for the future too”.
This week Cooper is expected to announce that the government will subsidise another 7,000 jobs for young people, bringing the total created under the Future Jobs Fund to 117,000. The funding will pay for work at the national minimum wage, targeted at under-25s and people living in unemployment hotspots.
Last night Treasury sources insisted that most of the windfall savings from lower-than-expected unemployment would be used to cut the deficit, rather than for pre-election giveaways.
Darling believes the budget could spark a sell-off in government markets unless he stands by his pledge to halve the deficit within four years. Ministers believe that they have a credible plan to put the public finances back in order, through targeted investment in the economy, which they say will speed progress towards sustained growth; the introduction of tax rises such as the 50p rate for top earners (from this April) and national insurance rises from next April; and efficiency savings across government. But Darling is not expected to spell out any more details of specific departmental spending cuts so close to polling day.
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Auditors face inquiry call after Lehman revelations
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MPs and financial experts demand regulators reform industry in effort to eliminate risky practices, writes Phillip Inman
Pressure was mounting this weekend for a root-and-branch review of the role played by auditors in the credit crunch, following the revelation that Lehman Brothers was able to hide $50bn (£32bn) of debts from regulators despite checks by accountancy firm Ernst & Young.
MPs and financial experts called on regulators to clean up the audit industry as part of a clampdown on reckless and risky practices in the financial sector.
Liberal Democrat treasury spokesman Lord Oakeshott urged the government to commission a fundamental review, while Tory MP Michael Fallon, who is deputy chairman of the influential treasury select committee, said: “Too much is being concealed. We need a fresh approach that gives a more realistic picture of bank finances and not one that disguises risky practices.”
Oakeshott said the treasury select committee’s investigation of Northern Rock’s collapse had already revealed that accountants should be banned from accepting additional consultancy work for the firms they audit; but, he added, “that is just a starting point to cleaning up the whole profession”.
Prem Sikka, a professor of accounting at Essex University and a leading critic of the accounting profession, warned that without deep-rooted reform the crisis could repeat itself. “The report into the collapse of Lehmans is indicative of a deeper malaise,” he said. “We rely on the discretion of eminent firms of auditors and lawyers that are paid millions of pounds for their efforts, but that discretion is too often abused.”
A damning 2,200-page report commissioned by the US bankruptcy courts into the collapse of Lehman said that Ernst & Young’s failure to act over off-balance sheet accounting practices which allowed the bank to hide $50bn of debts, and failing to investigate the concerns of a whistleblower, amounted to “professional negligence”.
Ernst & Young, which earned fees of $31m from auditing Lehman Brothers in 2007, has insisted that a thorough internal review showed it did nothing wrong.
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Can Katy Perry stop EMI going to America for a song?
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Billions of pounds of debt, the internet and piracy are crippling one of Britain’s most iconic firms
It is a tale of sex, debt and rock’n'roll that is unlikely to have a happy ending. When Guy Hands, a City financier with a penchant for fast food and an insatiable appetite for deal-making, came up with a plan to buy EMI, Britain’s flagship music company, using billions of pounds of borrowed money, many wondered how he could possibly make a decent return on his investment. As it has turned out, he couldn’t.
This weekend EMI’s new chairman Charles Allen, the former ITV chief executive hired by Hands last week to run the music arm of the company, is battling to ensure its independence, assembling a rescue plan for the company that signed the Beatles and became synonymous with the golden age of British pop.
Sources close to the company say Allen, a former accountant whose eclectic musical tastes encompass Lily Allen and Edith Piaf, is “rolling up his sleeves” and working to ensure the company does not breach the terms of its bank loans, but there is no doubt EMI is in peril. “It is a very, very big moment,” according to Claire Enders, founder of media consultancy Enders Analysis. “The next two or three months are critical for the future of EMI.”
Allen’s predecessor, Elio Leoni-Sceti, left suddenly last week just as the final touches were being put on a rescue package, prompting fears over the company’s future. The business is effectively being propped up by its past, surviving on the revenues generated by artists signed during a 30-year period when British music dominated the world.
The list of talent on EMI’s books reads like a roll call of rock royalty: David Bowie, Queen, Lennon and McCartney, the Sex Pistols and Pink Floyd. As an incubator of home-grown musical talent, the company is without equal and its position as one of the “big four” global record labels is a source of national pride; it exists to make money but EMI also safeguards the country’s status as a place where music that matters is made.
If EMI disappears or falls into foreign hands, many music industry figures worry that future generations of British acts may find it more difficult to find a worldwide audience. Jazz Summers, who manages former Verve vocalist Richard Ashcroft, who is signed to EMI, said: “If you look at their track record, they have broken more British acts in America than anyone else, and the same is true in other countries.”
EMI is in crisis because it is burdened with what sources close to the company describe as a “ludicrous” amount of debt, racked up after it was bought in 2007 by Hands’s private equity company Terra Firma. EMI Music currently has three artists in the top 15 of the album chart for the first time this century, including Blur vocalist Damon Albarn’s Gorillaz, and it is on course to make a profit of £200m this year, but a staggering three quarters of that will go on interest payments.
Hands borrowed heavily to fund the deal, using money provided by Terra Firma’s investors, and EMI’s valuable back catalogue, as collateral, but even then some questioned whether he was right to pay the amount he did for a business that was struggling to come to terms with downloads and a dramatic decline in physical music sales. The industry has lost between 30% and 50% of its revenues in the last five years, but the irony is that EMI is currently outperforming its peers, which include Sony BMG and Warner Music.
It had the biggest-selling album of 2008, Coldplay’s Viva La Vida, and reissued the Beatles digitally remastered back catalogue last year. Acts including Lily Allen and Katy Perry are selling well, but the way the company is structured means it cannot trade its way out of trouble.
Before the credit crunch, loans could be refinanced cheaply, but now EMI is struggling to meet its debt repayments in the wake of the severe economic downturn. It has been forced to cut costs dramatically, laying off close to 20% of its workforce. The company is now worth £450m, around a tenth of what Hands paid for it. Some big acts, including Radiohead, have already left, muttering that the money men simply didn’t understand the music business.
Last week one of EMI’s biggest-selling groups, Pink Floyd, won a court action preventing the company from making tracks from their 1970s album Dark Side of the Moon available to download individually. That was widely portrayed as a victory for artistic integrity – the group want their masterpiece to be consumed from start to finish, as they originally intended – but it also illustrates the challenges the music industry faces in an era of huge upheaval, when illegal downloading is costing it dear and making money from talent discovered and developed at huge cost is more difficult than ever.
If Allen cannot persuade Terra Firma’s investors to stump up another £120m, EMI will be in breach of its loan terms, and its main creditor – US bank Citigroup – could seize control of the company. If it does so, Citigroup is likely to sell it to Warner Music, an American rival which was outbid by Hands for EMI three years ago. The situation is complicated by Terra Firma’s decision to sue Citigroup in New York, accusing it of forcing EMI towards administration so it can take possession of the company and make a profit from a quick sale, allegations that the bank denies.
Hands is a larger-than-life tax exile, a hero in the Square Mile whose reputation has been badly tarnished by the EMI debacle. He now concedes he overpaid for EMI, but his miscalculation means he could be about to hand a much-loved cultural institution into the keeping of the Americans.
At the end of last year Cadbury’s city shareholders agreed to sell the nation’s favourite chocolate company to Illinois-based Kraft. The prospect of another household name passing into foreign ownership, particularly a national champion in one of the few industries in which Britain still excels, is an unsettling one.
One senior music industry executive explained: “For British music, the fact that there was a very successful British company to sign for was hugely significant.” However, others say the temptation to indulge in flag-waving should be resisted. Enders said: “Britain is one of the places people come looking for talent and that won’t change. There are a lot of players in the market and advances paid to acts such as Florence and The Machine have gone up.”
If EMI does fall into the hands of an American rival, she added, it might ultimately safeguard its future. “It would be better for EMI to have less indebtedness. It will have much more firepower.”
EMI could survive. It is still lining up the sale of some prized assets. It was reported last month that the Abbey Road studios in London could be sold off. The company later insisted the studios should stay under its ownership and was working with “third parties” about funding a “revitalisation project”.
Raising the possibility that a part of the nation’s cultural heritage could be sold provides a graphic reminder of how the company’s huge debt is forcing it to make unpopular decisions.
It may not matter if British acts are no longer championed by a UK company as long as the country continues to produce talent and A&R men from overseas arrive here in search of the next Lily Allen or Amy Winehouse. “In the end the music business is the same as it ever was,” Enders said. “It’s about hits.”
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Edward McMillan-Scott: Standing up to extremism in Europe cost me my place with Tories
about 6 months ago - No comments
What the Conservatives say publicly about Europe is not what they really think, says the MEP for Yorkshire and the Humber
William Hague has been using positive words to describe the Conservative party’s future relations in government with our EU partners. I have been around the higher circles of the party for long enough to know that a visceral euroscepticism has been growing there since John Major’s day. I had a stand-up row with Hague when, while leader of the Tory MEPs, he tried to get me to back his “Never to the Euro” ticket.
It was chilling to hear the then party leader say to one very senior spokesman at an EU meeting some years ago: “We can say what we like here, but it will be different when we are in government.” I should have left then, instead of carrying on the pro-European fight from within.
David Cameron shields his europhobes. No murmur was made when last weekend Lord Tebbit in effect encouraged Conservatives to vote Ukip against the Speaker, John Bercow, in the general election. The dog whistle is really at a lower pitch: that Ukip supporters know that there is a real home for them, back in the Conservative party. Dan Hannan MEP plays the same game, even declaring that he had resigned his spokesmanship in Europe to campaign full-time for a referendum on EU in-or-out. No slapdown there, either; certainly no expulsion. But then he is a chum of Sam Cameron’s; they were at Marlborough College together.
My decision to join the Liberal Democrats this weekend was made easier by the vile letter the lawyers conducting my appeal against expulsion last year from the Conservative party received last weekend. They described it to me as “intemperate”, and advised me that, since the party refused to supply any documents about my expulsion, there was no hope of a fair final hearing next Thursday at Tory HQ. So I withdrew from the appeal and thereby resigned from the Conservative party I have served more or less faithfully for 43 years.
No doubt my successful stand for re-election last July as European parliament vice-president against the “official” candidate from Poland’s Law and Justice party, Michal Kaminski, put forward by Cameron’s controversial new group, caused him some discomfiture. But the campaign of vilification against me when I explained my reasons – that Kaminski had a recent antisemitic, homophobic and racist past – was so bizarre that it began to attract attention.
Indeed, Toby Helm in this newspaper was the most attentive. He had been present at the national commemoration in July 2001 of one of the most notorious massacres of the second world war in Nazi-occupied Poland. At Jedwabne in July 1941, more than 400 Jews were rounded up by their Polish neighbours and herded into a barn where they were burned.
At the time of the apology, Kaminski was the local MP and he made it his business to organise opposition to the commemoration. He denies this now, as he denies so much else of his easily discovered past, using the Nick Griffin defence: “If I said it then, I would not say it today.”
Last week Cameron was interviewed by the Jewish Chronicle and assured its readers that he would bear down hard on extremism in Britain. This sits uneasily with a man who propitiates it in Europe.
Conservative press officers hounded Labour over Damian McBride. The same pack have been repeatedly reported to me by journalists as using heavy tactics. One hapless Yorkshire Post journalist was called one week by six Tory boys demanding a right of reply for Kaminski. He coolly and properly said that, if he accepted that, he would also have to give space to Nick Griffin. The same team put it about that I was antisemitic because I once met Hamas – actually to tell them to stand for election. They are out again this weekend distorting the facts about my defection to the Lib Dems. I am not bitter, but they are twisted. It is not a nice party now.
A move to the Lib Dems is easier because I have known, liked and respected Nick Clegg for some years, whether as a key negotiator on trade while Sir Leon Brittan was EU commissioner or later as an MEP.
Most of my family are liberals and I am comfortable joining the Liberal family. From being a liberal Conservative I have become a conservative Liberal. And it is not a nasty party.
Edward McMillan-Scott is MEP for Yorkshire and the Humber and continues to sit as an independent vice-president of the European parliament
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