PMQs review: A muttering idiot of a draw

Jack Blackburn 3.45pm

The last Prime Minister’s Questions for three weeks before a joint Jubilee and Whitsun recess was a distinctly bizarre scoreless draw.

It didn’t so much resemble the two most senior politicians in the land debating matters of policy, as it did two angry siblings who simply weren’t listening to each other. Oh, and there was an irritating cousin thrown into the mix.

Edward Miliband’s tactic today was divide and rule. It is one we can expect to see more of over the coming months. Seeking to exploit the evident antagonism between the Business Secretary and Adrian Beecroft, author of this week’s controversial report on employment reform, the Leader of the Opposition set about asking where the Prime Minister stood.

This strategy is brazen but flawed, not least because all the front bench Lib Dems were strangely absent, thereby not allowing for television shots of awkward Lib Dems.

However, Mr Cameron avoided fulsomely embracing the report, suggesting that some recommendations would be taken and others would not, before the major exchange descended into an unstructured melee.

Edward tried to score points on, well, just about anything: Hunt, Coulson, growth, tax cuts for millionaires -  they were all there, culminating in his claim that “the nasty party is back”. Dave started banging on about the trade unions influence on Labour policy. All of the questions and the answers seem to have been decided quite some time before the session. It was a total damp squib.

The meat of the session actually took place after the Leader of the Opposition had sat down. The Prime Minister was asked about the ECHR’s ruling on voting rights for prisoners. The Prime Minister said he would stand for the sovereignty of Parliament and his belief that going to prison meant you lost certain rights, including the right to vote. This is a story that shall keep on rolling.

However, the headlines were stolen by that irritating cousin, namely Ed Balls. He repeatedly asked the Prime Minister how many glasses of wine he’d had, and needled the Flashman in Dave, as is his desire. Finally, by now having “we’re in recession” chanted at him by Mr Balls, Dave could take no more and Flashman flipped. He described the Shadow Chancellor as a “muttering idiot”, causing uproar in the chamber.

Succumbing to goading as such an easy thing to do. It is also easy to wind someone up. However, both these important public figures should not be doing it. Mr Cameron was forced to withdraw his “unparliamenatry” comment. Mr Balls is not subject to sanction. Speaker Bercow, of the pseudo-Headmasterly air, should perhaps get in touch with that instinct now, because these two schoolboys could use some discipline.

Follow Jack on Twitter @BlackburnJA

Deregulation of small businesses is proceeding quietly but promisingly

Matthew Robertson 6.01am

If you weren’t already up-to-speed with age related allowances, income tax thresholds and VAT on hot baked foodstuffs, the past couple of weeks have put paid to that.

The Chancellor’s recent Budget hit the headlines for many of the wrong reasons. One man, however, has been surprisingly off the radar. Can anyone remember the Business Secretary?

Proposals emanating from the Department for Business, Innovation and Skills (BIS) caught my eye more than anything else in the Budget - and no, that isn’t because BIS is better than the Treasury at stopping leakages.

The Government has repeatedly stated that small businesses are key to the economy recovery. For instance, David Cameron in November 2010:

“I feel very strongly about the need to do everything we can to help and promote small and medium-sized businesses. They provide nearly 60 per cent of our jobs and half of our GDP.”

The thinking is this: deregulate on behalf of these companies and they will invest, grow and hire new employees.

There have been no headline grabbing proposals so far but there has been some quiet progress. In October 2011, BIS released a discussion paper entitled ‘Simpler reporting for the smallest businesses’. It was not a statement of government policy but it did offer ideas and evidence that the Government seems to have taken on board.

The main idea was to reduce reporting requirements for micro entities. These micro entities do not actually exist in this country yet but they were defined by the EU competitive council in February 2012 as any company that matches two of the following three thresholds:

1. Turnover less than €700,000
2. Gross assets less than €350,000 
3. Fewer than 10 employees

This would cover approximately 60 per cent of UK companies registered at Companies House.

The reporting requirements for these companies would be significantly reduced. A profit and loss statement would not need to be filed at Companies House and only an abridged balance sheet would need to be prepared.

In plain English, if these proposals are adopted, a significant amount of work and expense undertaken by small companies to prepare accounts would no longer be necessary.

Meanwhile, the Office of Tax Simplification (OTS) has conducted a review of small businesses, in which it was found:

“Despite devoting time, expense and care to calculating tax and filling in tax  returns, half of small businesses worry about making mistakes in applying the rules. They also found that 20 per cent of small businesses (potentially 700,000 businesses) have difficulty working out how much tax they need to pay, and that half of all small businesses had experienced difficulties identifying what is a deductible expense.”

The OTS goes on to recommend:

“Small, unincorporated businesses should have the option to calculate their taxable income on simpler cash receipts and payments basis.”

It is not certain what impact these proposals would have on small businesses if implemented, but the Government hopes they will provide businesses with more assurance on tax issues, which could lead to more business confidence and a boost to the economy.

These proposals have undoubted benefits. Whether banks would be more or less willing to lend, however, is unknown, but the thinking from BIS is that complex regulation currently impedes small businesses from accessing credit. This lack of access is in turn preventing investment and hiring.

There are many difficulties, such as the concern that these basic accounts would be inferior to those published for other, bigger entities. This could counteract any help small businesses get from reduced complexity in terms of accessing credit.

Above all, these proposals do not seem to consider how useful accounts can be. For instance, a receipts and payment account does not indicated a company’s profitability and would be subject to manipulation (e.g. a company with a cash surplus of £2 million could spend all of that on a new building or a machine just before the end of the tax year, thus giving it a net figure of zero). Users of these accounts would be handicapped by the lack of recorded trading activity, not to mention the effect it would have on the tax chargeable to these companies.

A better approach would be to simplify the tax system itself, in particular by merging PAYE and NIC operations. The contributory idea of NIC has long since disappeared. Furthermore, the result would be more upfront about true total tax rates, which would help to clarify the taxation debate and possibly put pressure on the Government to reduce taxes. The Budget states that the Government is consulting on this change so we will have to wait and see.

Whatever direction we are heading, these proposals could have a great impact on small businesses across the country. What cannot be denied is that the Government is trying to make Britain appear ‘open for business’ by assisting small businesses, the bedrock of the economy.

It might not be the most fashionable or tabloid-friendly sentiment but small businesses are going to determine how quickly Britain grows out of these difficult times - not the 50p top rate, not age related allowances, nor VAT on food.

Matthew Robertson is a trainee accountant. Follow Matthew on Twitter @FlatFootTory

Planning reform: a victory for conservationists, but beware the calm before the storm

Nik Darlington 11.03am

Some (moderately) good news! The Government published the final version of its new National Planning Policy Framework (NPPF) yesterday and it is a paramount improvement on earlier drafts.

What is more, the DCLG has managed to squeeze it in to even fewer pages (a mere 49 compared to 52), proving that as far as planning is concerned, size really isn’t everything.

The Telegraph is tickled pink. The newspaper’s ‘Hands Off Our Land’ campaign, which I have lauded on these pages before, provided a sustained and important outlet for opposition to the Government’s clumsy proposals last summer. The new NPPF, says the paper’s leader, “strikes a far healthier balance between development and the environment.”

Environment correspondent Geoffrey Lean hails the Telegraph readers who “refused to be fazed” during a seven-month “bloody battle” with a Government that “veered from amazement to anger”.

The Chancellor and Eric Pickles, the Communities Secretary, immediately announced: “No one should underestimate our determination to win this battle.” Meanwhile, Vince Cable, the Business Secretary, called objectors “semi-hysterical”, the planning minister Greg Clark accused them of “nihilistic selfishness”, and his junior, Bob Neill, blamed “a carefully choreographed smear campaign by Left-wingers based within the national headquarters of pressure groups”.

In the Times (£), columnist Alice Thompson declares ”the circle has been squared” by the “genial” Greg Clark, the “Clark Kent of politics” who has “achieved the impossible” by reconciling the divergent interests of big property developers and conservationists. She closes by suggesting mischievously that Mr Clark should be considered for the Department of Health, to “see if he can also achieve the impossible there”.

Meanwhile Sir Simon Jenkins, chairman of the National Trust and perhaps the single most vocal critic of the initial proposals, unsurprisingly devotes his Guardian column to declaring victory for conservationists over the “cowboy lobbyists”.

What last summer read like a builder’s manifesto has been replaced with proper planning guidance.

The builders’ lobby customarily seizes on housing shortage to argue for freeing the countryside for construction. But there is no shortage of land - only of land builders can most profitably develop, and that is rural land.

But Sir Simon warns that, of course, “the proof will be in the eating”. There are still fears for what even these vastly improved reforms could unleash if local authorities and communities, given only twelve months to get local plans together, cannot stand up to powerful developers. Localism is only a virtue if you have strong locals.

The Daily Mail is a lone dissenter among the leader columns:

…Those who stand to gain most are get-rich-quick developers…[and] the biggest losers will be the lovers of England’s countryside…

No amount of ministerial bluster can disguise the acute threat to the countryside - a heritage as precious as our language - contained in the order that there must be a ‘presumption in favour of sustainable development’.

I have written elsewhere why there is no such thing as sustainable development. And as Sir Simon Jenkins wrote last summer, “the only sustainable meadow is a meadow”.

But sustainable development will always be a woolly concept. We cannot truly determine sustainability in the present; that task is left to future generations. We make do with best guesses. Therein lies the risk. Yet such an existential risk would have existed whatever the Government had written down in its planning guidance.

As it happens, by making explicit recognition of the coalition’s updated sustainable development strategy, the wording is tighter and less open to abuse.

What other improvements are there in the final draft? I wrote for the Richmond Magazine last month that recognition of the “intrinsic character and beauty” of ordinary landscapes (i.e. the 55 per cent of the countryside not protected by National Parks and the like) would be crucial to any breakthrough.

That recognition has been restored, along with a brownfield-first policy, stronger protection for the Green Belt and playing fields, and the ‘default yes’ to development has been removed.

These are all revisions to be celebrated. Nonetheless, there are many challenges ahead. When he delivered the Budget last week, the Chancellor was very clear that whatever concessions were made in the final NPPF, development would still be easier, not harder. That remains true.

If localism is to have any worth whatsoever, then local communities need to work flat out in the coming months to be ready. The Daily Mail’s negativity (or nihilism) goes too far, certainly. But this could well turn out to be the calm before the storm.

Follow Nik on Twitter @NikDarlington

The Government must not trample over the first shoots of the Green Investment Bank

Alexander Pannett 10.25am

Last Thursday, Vince Cable announced that the Green Investment Bank would be headquartered in Edinburgh after a long running selection campaign involving 19 British cities.

The decision has been criticised as being led by political concerns to tie Scotland to the rest of the UK in advance of the proposed Scottish independence referendum in 2014.

However, this overlooks the extremely strong bid by Edinburgh for hosting the Green Investment Bank. Edinburgh is the largest financial services centre in the UK outside London, it has a huge potential for green energy production, has existing expertise in green energy and oil and gas technology, has world class higher education and R&D facilities nearby and the Scottish Parliament means that it can enjoy more political support than other politically under-represented cities in the UK. 

Which is why British cities need elected mayors to help attract more business to their regions.

This is not to say that there is not a political angle behind the decision and the government should receive credit for concentrating on the needs of the Scottish people and highlighting the huge mutual benefits that the Union brings to all people in the UK.  A unified UK green energy market brings the benefits of large economies of scale to Scotland that further advances the Unionist cause and provides a level of funding that would not be possible under an independent Scotland.

But what will the Green Investment Bank do?

The bank will have an initial capitalisation of £3 billion.

It will be a key component of changing the UK towards a green economy, working with other green policies to help accelerate additional capital into green infrastructure and will be an important tool in addressing market failures that effect green infrastructure projects.

The Green Investment Bank will build the necessary deep expertise in financial markets and green investments, working towards both achieving significant green impact and making financial returns.

However, the government has received criticism from green groups for not allowing the bank to have borrowing powers from the start of its launch.

The leading climate change economist, Lord Stern, has claimed that the bank will be stronger if it is allowed to build up its portfolio, which is necessary if every green technology is to be given a chance to pitch for finance.  Lord Stern insists that the Green Investment Bank’s borrowing powers are needed to tackle the extensive market failures that have not accounted for the global environmental damage that industrialisation has wrought.

The government has declared that the bank will be allowed to borrow money subject to the targets for reduction in the national debt being met and further state aid approval being granted. But George Osborne has already pushed back the date for ending the structural deficit until 2017.  This would mean that the bank may only be allowed to start borrowing in five years time.

The Confederation of British Industry has long called for the bank to be made effective, and have criticised the way the Green Deal and ECO are being set up, saying the Green Deal will not meet its targets as it is currently designed.

If the date by which the Treasury is to permit the bank to have borrowing powers is put off even further, this will severely curtail its already reduced effectiveness.

The issue is that any borrowing that the bank does engage in will be listed as a liability on the government books, worsening the deficit further.  When such severe cuts are being implemented to other departments, it is un-conscionable for the government to be taking on more debt to finance un-proven green initiatives whose failure could lead to further bad debt for the UK taxpayer and even threaten the nation’s vital triple A credit rating.

It therefore seems a pragmatic policy for the government to use the initial 3 billion in funding to evaluate which green projects will be economically feasible and then to allow borrowing powers when the nation’s finances can afford the loans.

Despite the necessity of fiscal caution, it is utterly vital that the government allows the bank to access the markets as soon as it can.  It is estimated by Ernst and Young that the transformation to a low carbon economy will need £450 billion of investment by 2025 and this Keynesian stimulation will create jobs, helping the recovery.

Considering the pressing concerns of climate change and the economy’s need for growth, the government must not wait too long to set the Green Investment Bank free or miss a golden opportunity to make Britain a world leader in a burgeoning, vital and global green industry.

Follow Alex on Twitter @alpannett

Come on chaps, Dr Vince is taking us all for a ride!

Nik Darlington 10.28am

Within moments it dawned on me. Vince Cable’s letter to David Cameron and Nick Clegg is not meant to be taken seriously. The minister with the Dickensian fizzgog has penned a satire of Swiftian proportions.

Because His Vinceship, as Secretary of State for Business, Innovation and Skills and President of the Board of Trade, possesses “overall responsibility for the [business] department strategy and all policies, [and] overall responsibility for BIS budget, particularly focus on business and banking issues”. He is also, rather grandly, the “lead Cabinet Minister for reducing regulatory burdens across Government”.

The letter unearths his unease about the lack of a “connected approach across government”, “a compelling vision…and a clear and confident message”.

Reading it, I was slapping my thigh, tears of mirth streaming in heavy torrents down my face.

It is like a history teacher writing to the school’s board of governors complaining the children’s history exams results aren’t up to scratch.

Or to make a more direct comparison, because I cannot dream to match Dr Cable for subtle irony, it is like Andrew Lansley lambasting colleagues for struggling with the NHS reforms.

So it must all be one big jape, scripted for bored hacks to show just what terrific tomfoolery those old buffers in Cabinet get up to. How instead of being worried about the lack of progress with deregulation, or the lack of even the most threadbare of industrial strategies, we really should just smile a bit more. Because you know what, at least we’ve got each other!

Of course, I could be entirely wrong. Cable’s letter could be serious. In which case he shouldn’t be concerning himself with, as he writes, how Britons “earn our living in the future”. He ought to be more concerned about how he earns his own.

Rejecting crony capitalism

Alexander Pannett 9.45am

With the City bonus season fast approaching, politicians are talking a lot about the need to tackle “crony capitalism”.

Both David Cameron and Ed Miliband have called for executive remuneration to be made fairer and more transparent.

This follows a paper by Jesse Norman, the conservative MP for Hereford & South Herefordshire, published in December that called for the conservative party to tackle the rise of crony capitalism.

Jesse wrote:

“Crony capitalism arises when economic activity escapes the constraints of law, markets and culture. It is marked by the clash of business activity and the wider public interest, and the separation of business merit from business reward. Value creation is replaced by rent seeking and certain groups become enormously wealthy without taking risk. These factors lead to long-term economic underperformance, and sometimes to social unrest.”

 It has been suggested that granting shareholders a veto on remuneration packages and the amount of pay executives receive when they leave a company would produce a fairer system.

However, as Daniel Cowdrill has pointed out on these pages, shareholders in FTSE 100 companies are mostly passive rather than active investors, holding equity for short-term objectives rather than for long term value.  They are unlikely to hold back executive pay even if they are given a determining vote on pay levels.

But I disagree with Daniel that tackling executive pay, while difficult, is a minor issue and not worth the political capital. When household incomes are falling across the UK and unemployment is rising due to mistakes that originated amongst our business elites, it is unacceptable that such elites’ pay continues to rise, despite their actual underlying performance, while everyone else shares the pain of the recession.

Research from the Institute for Public Policy Research (IPPR) has highlighted that chief executives in nearly 90 per cent of the FTSE 100 companies took home an average of £5.1 million in basic pay, bonuses, share incentives and pension contributions in 2010-11. This represents a year-on-year increase of 33 per cent, while the average increase in company value was 24 per cent. Since 1999, the pay of FTSE 100 chief executives rose 13.6 per cent every year until 2010, whereas the FTSE itself rose by an annual average of just 1.7 per cent.

There is clearly a severe disconnect from reality in the boardrooms of the UK’s top companies. While encouraging shareholders to be more active may prove difficult, allowing employee representatives to become members of remuneration committees would give such committees more insight into life outside their corporate bubble and would help in setting pay that was proportionate to the real economy. 

 Greater transparency would also allow for more public pressure and scrutiny to be brought against public companies that encouraged excessive remuneration. Directors should demonstrate that their executive pay does not breach their fiduciary duties to the interests of shareholders. The law could also be changed to give greater power to both creditors and shareholders for clawing back the past pay of executives who caused companies to go insolvent or to suffer periods of particularly poor performance.

 Far from being a minor problem, crony capitalism severely undermines the economic health of the UK.  When capitalism no longer rewards autonomous risk taking, competition and real increases in productivity, it leads to economic inefficiency as companies consolidate and grow, not to improve performance but to gain elusive economies of scale that in reality are little more than an oligopolistic stranglehold over a market.

The prevalence of crony capitalism marks the wider shift in the UK economy away from real capitalism, which brought social value by serving the actual needs of consumers, to the ideology of the free market that values speculation and short term profits over longer term growth and stability.

Markets should not be the panacea of a new business religion but cultural tools that are bound by mutual dependency and tradition and should be used to address both social and economic problems for the benefit of all society.  Rich or poor.

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Vickers report: don’t kill the goose that lays the golden egg!

David Cowan 10.26am

The coalition’s response to the Vickers report was a missed opportunity. A chance to reform Britain’s banking sector for the better has been hijacked by the Liberal Democrats’ yearning for influence. And so George Osborne has accepted the report in full, though it couldn’t be said totally against his own judgement.

The most flawed ‘reform’ is the ring-fencing of banks’ investment and retail arms by legal firewalls. This policy is based on the fallacy that so-called ‘casino banking’ in banks’ investment arms put retail customers at risk. This simply does not add up when one considers the fact that Lehman Brothers did not have a retail arm and Northern Rock did not have an investment arm. Yet both collapsed. Spectacularly so. The truth is that there is always risk in banking, whether you are dealing with CDOs or straightforward home loans.

Large retail banks will be forced to have capital equal to 17 per cent of their assets, which is well above the 7 per cent required in Basel III. While it is certainly desirable that banks recapitalise, this requirement is superfluous. Equity capital is already being over-taxed, in particular at a time when Mr Osborne insists on arbitrarily increasing the bank levy without a moment’s notice. Decreasing the tax burden would be a more effective policy than enforcing new regulations. Remember too that Lehman Brothers and Northern Rock did not have a problem with insufficient capital. Yet still they collapsed.

A compulsory recapitalisation of the banks also does not make sense at a time when the Treasury is putting so much pressure on them to lend more. Project Merlin, QE2 and a bank rate at 0.5 per cent form the bedrock of Mr Osborne’s plan for growth: in other words, cheap credit. The Chancellor has two choices: solvent banks and low inflation, or an inflationary credit bubble. Which to choose? One hopes the former.

The overall effect of these reforms will be damaging. This is widely recognised. PricewaterhouseCoopers (PwC) has estimated that the total cost of these proposals to the banking sector could be as much as £12 billion. With an EU-wide Tobin Tax and new regulations on the way from the European Commission it is now increasingly likely that some banks will move their headquarters eastwards and out of Britain. Boris Johnson has rightly said that the government must not “kill the goose” that created £63 billion in tax revenue last year.

These reforms will create an overly capitalised and retail dominated banking sector that may struggle to compete in the global financial markets. This can only perpetuate the present situation in which our banking sector is dominated by four banks. Instead of trying to make sure banks never fail the coalition should try to ensure that banks are not too big to fail and can fail safely. The way to achieve this is to have greater competition.

In this sense there is some hope in Mr Osborne’s acceptance of a Redirection Service, which would allow bank accounts to follow customers when they switch. The privatisation of the state-owned banks, with the sale of Northern Rock to Virgin Money for £747 million, and the sale of 632 branches of Lloyds Banking Group to the Co-operative Group, will also help to create a more diverse banking sector. It is important that as well as getting a good deal for the taxpayer that George Osborne can use the privatisation of the banks to make the sector more competitive.

Next year’s Financial Services Bill could be the Chancellor’s second chance to reform the banking sector effectively, with the abolition of the Financial Services Authority and the transfer of its powers to three new Bank of England bodies.

The new Financial Policy Committee should be able to focus on establishing a regulatory framework within which it is compulsory for large banks to deliver credible plans - or ‘living wills’ - for rolling up operations in the event of collapse.

The ring-fencing of investment and retail arms of banks and compulsory capital requirements could be used as ‘sanctions’ against banks which fail to provide a credible plan, rather than being a universal regulatory blueprint.

This would ensure that Britain’s banking sector remains a competitive and productive industry and does not pose a severe threat to the rest of the economy or to the taxpayer. It’s about time George Osborne listened to Boris Johnson and not kill the goose that lays the golden egg.

Follow David on Twitter @david_cowan

Central bankers, not politicians, will be the ones guiding the global economy to safety

Matthew Robertson 7.59am

Ever heard of Paul Reid? What about Sir John Parker? John Deacon?

You’ll be forgiven for not knowing who two thirds of the above are but I’m sure a lot of you know what Ben Bernanke, Jean Claude Trichet and Mervyn King do for a living.

They are the fine tuning, careful helmsman of the Western economies. The men, who before 2008, were mostly concerned with raising/decreasing interest rates a percentage point or two so that inflationary pressures would not embed themselves in the economy.

Like now, they were hardly household names and even though their roles were fundamental to the world economy, the measure of their success was determined by the consistency of their approach and the expected headlines they each produced. This was the Guardian in 2006:

‘Interest rates were left at 3.25% but the ECB president, Jean-Claude Trichet, sealed market expectations that rates will rise next month by saying that vigilance was needed on inflation pressures.’

The Economist in 2007:

‘Ben Bernanke talked about “generally favourable financial conditions” and enthused—as much as a Fed chairman is allowed to—about “fairly brisk” financing activity in bonds and business loans. Mr Bernanke also talked about the Fed’s continuing concern over inflation. Nothing new here, really.’

And the FT in 2005:

‘But with money markets now expecting at least one quarter point interest rate cut this year and another early next year, Mr King’s emphasis on the risks of higher inflation appeared designed to correct the recent notion that interest rates would soon be cut.’

Inflation was the key problem and the tool at the disposal of central bankers to tackle it was setting interest rates. Economics had enabled solving the problem of inflation whilst continuing solid growth. Central bank independence removed the threat of politicians manipulating monetary policy to coincide with electoral cycles and by having a credible committee to keep inflation around a certain target, inflationary expectations could be tamed.

This was the job of a central banker, staying behind the scenes ensuring that inflation was kept under control and the economy smoothly elevated. A similar role to that of Paul Reid, Managing Director of National Air Traffic Services (NATS), who ensures the safe and orderly movement of aircraft along our air routes. Every little decision can have a monumental effect, a small deviation can set the course of the economy/aircraft on a cataclysmic path.

Of course the financial crisis of 2008, for which we are still suffering from, dispelled any belief that economics had solved the problems that had dogged it for years. Growth across the Western world is still stagnating and inflation is well above target in most Western economies.

Throughout the conference season you will have heard a lot from Cable, Osborne and Balls on their suggested paths for the UK economy. There is no doubt that the role of fiscal policy is important in negotiating the turbulence ahead but the key to the recovery lies with the controllers, the fine tuning, careful helmsman of the economy. A fiscal stimulus will have little impact if detrimental monetary policies are pursued at the same time.

A cautionary tale comes from Europe. The crisis devouring the Eurozone has various causes, not least the failure of European politicians to tackle the underlying problems, but the rate increase from 1.25% to 1.5% by the ECB on 7th July has not helped. ‘The entire continent would benefit from maintaining price stability and confidence’ exclaimed Trichet but the exact opposite has happened. As a result of the increase, borrowing costs increased for countries such as Spain and Italy, who unlike Greece are suffering from a problem of liquidity not solvency. On the back of the ECB’s decision stock markets fell across Europe and unemployment increased 150,000 to 10% from April to July and has stayed there ever since.

As the West confronts the dilemma of credit and liquidity the central banks will have to assist in every way possible and so the old rule book of maintaining price stability through setting interest rates may have to be altered.

Interest rates must be kept low to ease the pressure on companies and individuals’ cash flows. This is the lifeblood of the economy and maintaining liquidity must be at the top of every central bank’s agenda. A job reminiscent of Sir John Parker, chairman of the National Grid, who ensures that electricity generated anywhere in Great Britain can be used to satisfy demand elsewhere at any given point.

The systems are so interconnected that any break could have devastating effects. This is the exact dilemma central bankers face today. Central banks must maintain liquidity to ensure that money can reach businesses and individuals elsewhere when needed. By keeping interest rates low, central bankers can assist with ever increasing liquidity troubles.

You will have heard a lot about Cable’s fiscal stimulus, Balls’ VAT cut and Osborne’s credit easing over the Conference season. However, as the UK hovers over a possible double dip, America endures increasing unemployment and the Eurozone faces collapse it is the air controllers and energy deliverers of the economy who will have the biggest impact on our lives.

As for John Deacon, he was the solid bass player of Queen whose great hits would not have happened without him, but you already knew that didn’t you?