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There's more to the City than giant, taxpayer-backed banks

Robert Peston | 08:10 UK time, Wednesday, 2 February 2011

Pfizer's closure of its research centre in the UK is one of those gut-wrenching stories.

Apart from the blow to more than 2,000 employees, many of them highly skilled, it is another setback to the task of rebuilding the British economy on foundations of expertise and competitive advantage in several sectors - and, to over-simplify the perceived British problem, not just on financial services and the City.

Actually, British dependence on the City is typically overstated. It's true that in the decade of boom years to 2007, financial services provided a disproportionate contribution to the growth of GDP - up to a third of growth in individual years.

But the City's share of the total economy or value added is probably not more than 10 to 12% - and the City probably remains smaller than manufacturing (which, of course, is currently performing better than for decades).

People walk across Waterloo Bridge with the City in the background

 

There is another issue. When critics denigrate the City, they often do so because they equate it with the giant banks - because they see these banks as having taken huge risks to generate giant bonuses for their executives, risks that turned out to have been underwritten by taxpayers and risks that went bad at a cost to the entire British economy.

So there is a passionate debate - focussed on the Independent Banking Commission set up by the Treasury - to try to reconfigure banking so that the risks taken by banks rest exclusively with their creditors, investors and employees, and not with the rest of us.

Goodness only knows whether the hope that banks can be turned into ordinary mortal businesses is a hopelessly naive one.

But if you happen to think that giant, too-big-to-fail banks are a bad thing, it is probably as well to point out that they are not the entire City. I have been reminded of that important little fact by brand new research commissioned by a bunch of asset managers, who are gathered together as the New City Initiative and are fed up with being tarred with the mega-bank brush.

The research by IMAS Corporate Advisers trawled through the register of the Financial Services Authority and returns at Companies House. It estimates that small and medium size businesses in financial services, or businesses with up to 250 staff each, employ a minimum of 350,000 people and up to 560,000 people in the UK.

That is a fair number of people. It is equivalent to the number expected to be made redundant by the government's public spending cuts. And it suggests that the SME financial sector contributes more to UK employment than education, than energy and mining, than agriculture, forestry and fishing, inter alia.

While you might not believe that everything that these small financial firms is socially useful (not all of you, I know, are cheerleaders for hedge funds), and while you might think that some innovation by financial firms is fatuous at best, it is as well to recognise that SME financial services represent a rare and important pocket of excellence in the UK economy.

These smaller firms, especially those in asset management, showed far greater resilience since the crash of 2008 than the big banks. And although smaller financial firms are even more dominated by men than bigger firms (the City remains astonishingly long of testosterone), FSA data shows that female employment in these smaller firms has been rising since the downturn, whereas it has been falling in big financial institutions.

So when the New City Initiative pleads that ministers should take care not to crush these smaller firms with new rules and regulations, especially diktats from the European Union, it may well be a voice that deserves attention.

Because here's the big simple point. None of the half a million-odd people in this sector are in firms that - unlike the big banks - are implicitly or explicitly subsidised by taxpayers. None of them are in firms that would need to be rescued by taxpayers if their bets went wrong. They do not represent a direct risk to the stability of the financial system.

So they are probably not a problem that needs to be solved - rather they are a relative success for the UK.

So if they fear that their vitals will be squeezed by new directives and codes designed to sanitise the banks, perhaps we should listen. If the banks are the bathwater, these smaller firms may well be the baby which it would be injudicious to throw out.

Comments

Page 1 of 3

  • Comment number 1.

    "And it suggests that the SME financial sector contributes more to UK employment than education, than energy and mining, than agriculture, forestry and fishing, inter alia"

    Robert I really don't think you get it at all. Financials contribut ZERO added value to the economy. The yare only capable at the bottom line of moving money from account X to account Y. The other businesses you mention do generate real wealth for the country. Thats why Germany is in a boom and we are bordering recession. Its that fundamental that Labour didn't get, and I don't think your column reflects either.

    Try to visit some real companies, not just conferences, summits and bankers lunches and find out about the real economy.

  • Comment number 2.

    If all these small financial service companies are so successful then why haven't they helped create and invested in a UK owned Pfizer?

  • Comment number 3.

    Private sector efficiency?

    Are these half a million people shuffling money about being taken into a account when people claim private sector businesses require less bureaucracy than the 'wasteful' public sector?

  • Comment number 4.

    The more drug companies that close down, the safer the planet will be. The reliance on Pharmaceutical companies for the well being of our health, is like expecting the Tories to look after the NHS.

  • Comment number 5.

    > But the City's share of the total economy or value added is probably not more
    > than 10 to 12%

    That's right - you're begining to see the light. But even that small fraction only benefits a remote corner of our country, nearest France.

    We must always be tough on Londoncentricity and the causes of Londoncentricity. The City will be "distributed" in future, and about time too.

  • Comment number 6.

    #1 - No, you should open your eyes to an industry that does provide value to the British economy. It is good to see Robert (finally!) explaining that the City is a vastly more complex place than just a handful of global megabanks. I work for a small (and profitable) asset management firm that is neither explicitly nor implicitly supported by any government bailout package. During the last 3 years we have continued to grow our business (and our workforce) and our particular financial product - reliant on a very high level of specialist knowledge and technology - continues to win new clients around the globe (we are doing particularly well in Australia at the moment). And if you think we don't add value - well I suspect that the millions of ordinary people around the globe whose pension funds we work to protect might disagree.

  • Comment number 7.

    It is time the UK followed the French exmple of making companies pay if they pull out of their country.

    Surely the NHS and private hospitals could refuse to purchase any more Pfizer products if the closure goes ahead?

    Sadly we still think we are playing cricket and we are not doing too well at that game at present.

  • Comment number 8.

    Fair enough, Robert, but all shops and all factories get tarred with the same brush when things go wrong in their sectors. I have just been listening to Mary Portus about customer service in the large retail stores. Her argument has value.

    I can recall the right knocking British industry got in the Seventies which destroyed confidence in that sector leading to its eventual collapse. Much of that was also publicly funded due to commercial failure. It was the fact of the public funding that led to its eventual withdrawal leading directly to the collapse of many machine tool businesses. The idea that government was not to subsidise industry underpinned this policy. The City I recall was a cheer-leader in that opinion.

    However, the real problem there was that the management of British industry had failed to answer the obvious challenge of international competitiveness and the then British government had also failed to help them to facilitate the necessary changes to become comptetitive. All that had happened was that an idea was invented to justify doing nothing about a problem which could otherwise be solved but with hard work.

    We are now in exactly the same situation with the financial sector. Some businesses in the financial services sector have failed, some have taxpayer support and most are functioning normally.

    However, the entire financial sector is buoyed along by taxpayer guarantees. This is after the public has been tenderised for years from the City about how markets should be free and all that stuff. There is a whiff of hyprocrisy in the air here, but then this is England so we should be used to it.

    I agree that we have to move on as that great statesman, T. Blair would say, but the moving on has to be about changing matters and that change has not happened.

    It is time the big banks were reformed, it is time for retail banks to be split from the betting shops, it is time there was more competition in retail banking, and it is time the taxpayer guarantee was withdrawn from the investment banking sector.

    My questions are:

    Is any of that going to happen?

    Is the taxpayer going to be protected from the consequences of another crash?

    When is government going to do something?

    Are we going to be presented with another load of eyewash as an argument for doing nothing at all?

    How bad do things have to be before anything gets done?

    Complacency is not the answer.

  • Comment number 9.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 10.

    Financial companies shuffle money from A to B.

    They do not generate wealth - they simply skim off some of the money in the process of moving it from A to B. They then declare themselves worthy of huge bonuses.

    The real health of the economy depends on companies who actually create wealth, and we need to create an environment in which they can thrive.

  • Comment number 11.

    Having said all that, I was offered £500 a day to work down in London, just last week. But they're mad if they think I'd move down there from Wales for such chicken feed. The City's a dump. Make it a grand a day and I might think about it, though, I have to admit.

  • Comment number 12.

    I love the way many of the contributors find a single 'easy' sentence/solution to trash Roberts entire blog - if only it were that simple!

    also No: 2 - ''they have'' its called Glaxo!

    Final point on here: Take London out of the UK and I am afraid there is a MASSIVE black hole in the rest of the UK's finances - like it or lump it. Export the Banks to Dubai and the £78bn tax take goes with it - get it now? Robert does!

    ps: I am not a banker and not from London! (Odd as that may seem)

  • Comment number 13.

    6. At 09:31am on 2nd Feb 2011, theordinarycity wrote:

    > And if you think we don't add value - well I suspect that the millions
    > of ordinary people around the globe whose pension funds we work to protect
    > might disagree.

    I'd far prefer it if you weren't helping yourself to a big share of my pension, while you "protect it" - perhaps you're mainly protecting your own income stream?

    My advice: retrain in something socially useful. You'll thank us for it in the end. I need someone to tile my bathroom. It's far more rewarding work than shuffling computer records.

  • Comment number 14.

    "So they are probably not a problem that needs to be solved"

    I can see your point Robert, just keep in mind that our current financial woes are so difficult to solve because of a fundamental issue: we currently make no difference between INVESTOR and SPECULATOR.

    There is a simple way: investor is somebody that put his/her money in some enterprise for a period of time longer than a year sometimes (month, week, day?) - anything more than 1 second! or less.

  • Comment number 15.

    #5 Jacques Cartier wrote

    That's right - you're begining to see the light. But even that small fraction only benefits a remote corner of our country, nearest France.

    ===========================================================

    Couldn't be more wrong. Where do you think a very large chunk of the largesse distributed by Gordon Brown and pals in constituencies mostly north of Watford came from?

  • Comment number 16.

    I am with number 10!
    The support for companies that make something in this country is falling all the time.
    Growth for the country is now a cry along with the private sector 'taking up the slack' when councils and government lays off staff..... with no support how will this occur then?
    As is now being pointed out the present government are 'professional politicians' with theoretical skills of the real world so how are they going to lead us to growth?

  • Comment number 17.

    It would have been valuable to get some forensics on why Pfizer is to pull out rather than meander off onto a variation of the banking theme. Some comment is surely overdue on why the government seem to be so shy about doing a Hesletine - intervening at set meal times!

  • Comment number 18.

    "Because here's the big simple point. None of the half a million-odd people in this sector are in firms that - unlike the big banks - are implicitly or explicitly subsidised by taxpayers."

    Spot on again Robert. I don't think any sane person suggests we don't need a financial sector as part of a successful economy. But in a capitalist economy (which is what we have, for better or worse) then even financial services must abide by the rules that the rest of us are subject to i.e. stand or fall on your own two feet and don't expect the taxpayer to bail you out.

    However, this doesn't change the fact that we are still lumbered with over-sized, over-paid, monopolistic, arrogant, too-big-to-fail, too-big-to-regulate and too-big-to-save banks populated by too-big-for-their-boots bankers. Your point is a red herring in this regard because we still need to address this fact, either by negotiation, legislation or persuasion, gentle or otherwise.

  • Comment number 19.

    There may be more to the city than the giants but the same solution would apply to the tiddlers. The gambling culture persists. Individual liability should be introduced so that so-called pundits are personally liable for their losses. Limited liability is the cause for much that went wrong in the City. If liability is only limited to those whose assets are managed and not to those who do the managing, who get off with their wages and bonuses intact, no lessons will have been learnt from the crisis and the same will happen again.

  • Comment number 20.

    6. At 09:31am on 2nd Feb 2011, theordinarycity wrote:
    And if you think we don't add value - well I suspect that the millions of ordinary people around the globe whose pension funds we work to protect might disagree.

    --------------

    And I think you fail to understand the difference between wealth and value. Which considering your profession is rather damning and tells us quite a lot about why we are in the position we are.

  • Comment number 21.

    Peston dismisses the Pfizer closure in one line. That tells you a lot about the BBC public sector mind set. Not a clue about life on the outside.
    The paucity of comment on this is pathetic. There are many angles to explore.
    The benefits or otherwise of globalisation. The benefits or otherwise of inward investment and ownership of assets. The status of Britain as a going concern. The benefits or otherwise of expensive science courses at Universities.
    Then there is the law of unintended consequences. Year after year the drugs companies have been hounded for a) making profits b) taking the NHS for a ride over pricing c) refusing to give drugs free of charge to the third world d) launching new drugs (costing hundreds of millions) which cause side effects to tiny numbers of patients and so withdrawing them
    So they are cutting back on R&D and going for a low-rish, cash generation business model. Compare the share performance of say Reckittt Benkiser with that of Glaxo, Astra, Pfizer, the latter have been treading water for most of the last 10 years if not going backwards. Well the game is up and we are reaping what we have sown.

    The Sandwich site invented and launched drugs like Viagra, Istin, Lipitor which millions of people take for granted. They were developed at no cost to the taxpayer IN THE PRIVATE SECTOR. So all you who object to change in the NHS on the grounds of greedy private companies wanting to make a buck, WHY ARE YOU TAKING THESE DRUGS? Sheer hypocricy.
    This closure is tragic. Tragic for thousands of talented scientists who will struggle for work. Tragic for the economy. Tragic for the idea of wealth creation and risk taking. Tragic for up-and-coming scientists who will wonder why they are bothering. Why take the risk of working for a drugs company when a nice cosy taxpayer funded public sector job with its guranteed pensions scheme is so much lower in risk and if there are any cuts then there are strikes and demos and political demands? In no-risk, no-value Britain, where will the wealth creation come from? No wonder we are bust.

  • Comment number 22.

    "13. At 09:49am on 2nd Feb 2011, Jacques Cartier wrote:
    6. At 09:31am on 2nd Feb 2011, theordinarycity wrote:

    > And if you think we don't add value - well I suspect that the millions
    > of ordinary people around the globe whose pension funds we work to protect
    > might disagree.

    I'd far prefer it if you weren't helping yourself to a big share of my pension, while you "protect it" - perhaps you're mainly protecting your own income stream?"


    I do not think a fee of 1 to 3% is a big share of your pension.

    _________________________________________________________

    "My advice: retrain in something socially useful. You'll thank us for it in the end. I need someone to tile my bathroom. It's far more rewarding work than shuffling computer records."

    Even if they did it would not protect your pension either.

    Sounds like lose lose to me.

  • Comment number 23.

    "Financial companies shuffle money from A to B.

    They do not generate wealth - they simply skim off some of the money in the process of moving it from A to B. They then declare themselves worthy of huge bonuses.

    The real health of the economy depends on companies who actually create wealth, and we need to create an environment in which they can thrive."
    ============================

    Small pharma and biotech companies currently can not raise money from private equity or banks. They cannot test potential drugs without spending money.

    If a financial services firm manages to raise a couple of million for a pharma company(for example by an EIS fund raising) then whilst you may be correct to say all they have done is move money from Account A to B, by doing so they have enabled a new drug to be properly tested which might cure a major health problem and even it fails testing, the failure may advance medical science. So in my example not only may they create wealth but also do moral good

  • Comment number 24.

    @Jacques Cartier

    Back when Gordon Brown plundered 20bn quid off BT and the other Telcos thus reducing the UK pension pot by 20bn quid overnight I trust you didn't blame the pension fund managers.

  • Comment number 25.

    If the men in grey suits can't tell the difference between "bathwater-bailed-out banks" and "baby-asset management businesses" it's not surprising we have regulatory problems.
    I guess the problem really is that they are all in the same big Financial Bath - and it stinks.

  • Comment number 26.

    its amazing how such a balanced argument showing the merits of small financial service providers has had such a negative backlash at it. you guys need to remember that these companies arent going to take your taxpayer money and are in fact generating Wealth for their clients. most of them make money on performance fees and so they get more money if their client is getting more money therefore it is in everyones interests to do the best they can for their clients.

    dont lump them in with the faceless corporate giants that do take your money.

    PS good work RP, the first blog in a while that has been properly thought out and is good to see you finding merits in our economy rather than stirring the pot regarding bankers/bonuses

  • Comment number 27.

    6. At 09:31am on 2nd Feb 2011, theordinarycity wrote:

    "I work for a small (and profitable) asset management firm"

    ...and yet I bet not once have you deeply considered where that profit comes from and whether your firm actually 'earns' it or merely 'extracts' it from others work.

  • Comment number 28.

    6. At 09:31am on 2nd Feb 2011, theordinarycity wrote:

    "well I suspect that the millions of ordinary people around the globe whose pension funds we work to protect might disagree."

    Protect from who exactly? - your own industries hubris and greed?

    Most pensions don't need protecting, they rely on the wealth being created by the next generation - which shoudl always be more productive than the last. The fund managers are merely middle men who extract fees for collectivising the wealth of many.

    ...bet you didn't think about that either did you?

  • Comment number 29.

    In th elong run it's probably good news about Pfiezer moving on...I mean with the barriers to education being raised which will reduce the number of scientists - we'd probably have to bring in immigrants to do the job anyway.

    ...however it's not all bad news today - I take great delight in seeing one of the private equity scoundrels finally get burnt!

    http://www.bbc.co.uk/news/business-12339299

    What a shame, £1.7bn I believe is the loss endured for terra firma (I mean just the name simply smacks of arrogance) - couldn't happen to a nicer set of people. They were greedy and they got their comeuppence.

    Maybe there is a god.

  • Comment number 30.

    These firms do contribute as little trade would happen without insurance, ship-broking and a number of other financial services.

  • Comment number 31.

    15. At 09:55am on 2nd Feb 2011, desgbea wrote:

    "Couldn't be more wrong. Where do you think a very large chunk of the largesse distributed by Gordon Brown and pals in constituencies mostly north of Watford came from?"

    Oh we have a 'countiest' amongst us, or should it be a 'north-of-watfordist'?

    All the money Gordon distributed (amongst the poor in society generally, not tax breaks for the wealthy remember) came from the hard work of the poor to begin with. The banks merely acted as middlemen and skimmed off some for themselves.

    ...but that will be lost on your because I suspect you think banks 'make money' in the wealth creating sense - maybe it's because you're a londoner, that you are soo daaaaaaawn.

    Fortunately the city is not so prejudice as within 20ft of my desk we have 3 midlanders, 1 north-easterner, 4 from liverpool / manchester 1 welshman, a scotsman and 2 guys from Essex.

    So who's subsidising who in this regionalism you propose occurs? It seems to me Gordon was paying back the 'north of watford' for all the brains they sent down here from which the greedy pigs got rich...

  • Comment number 32.

    Financial services covers a very broad spectrum of activities, it is about as lot more than investment banking.

    Insurance for example involves "shuffling money" from A (policyholders who pay premiums) to B (policyholders who claim) and C (employees and shareholders).

    Is this a worthwhile industry? Of course, because we know that if our house burns down then we will be able to rebuild it or if the breadwinner in a family dies then then there will some money for the family.

  • Comment number 33.

    Pfizer is following on from Glaxo and Astra Zeneca in closing their R&D centres in this country. Most of the employees who work in these places are highly skilled and a large proportion are PhD graduates, what are the chances of these people getting an equivalent job in East Kent ?
    Glaxo recently shut their R&D centre in Tonbridge and are running down their manafacturing plants in Dartford and Crawley, Astra Zeneca have shut their R&D sites in Leicestershire and Cambridge, these closures have all been announced in the past year.
    My son is a recent PhD graduate in organic chemistry he has a short term contract at his university ,after that he has little prospect of finding a job doing what he has been trained in. Their must be many older PhD graduates who have been made redundant from Pfizer, Glaxo and Astra Zeneca who are now looking for work.
    It should be made clear to school students that if they study chemistry at university then there will probably not be a job for them at the end of it.
    And if that was not bad enough my other son has just started a degree in chemistry, I cannot help but think that the best course of action is for him to give it up now and avoid those huge students debts.
    Chemistry science in this country is on a deep and steady decline, prospective science students should be made aware before they take the wrong course.

  • Comment number 34.

    @Jacques Cartier #13, 09:49 - the point is that you need someone to tile your bathroom and you are willing to pay the market rate for someone to do it. You also need someone to look after your pension (which, arguably, is more important to your future well-being than the tiling of your bathroom) so why aren't you willing to pay someone the market rate to do that?

    If you are not willing to pay someone to look after your pension (or object to how much they or their competitors charge), you are entitled to take your pension out and invest it yourself.

    (No, I'm not in asset management).

  • Comment number 35.

    I read that Vince Cable said this decision by Pfizer was 'very disappointing'

    ...get used to it Vince, you're going to have a lot more of those before this crisis is over....

    I also read that the HSBC boss claims that the UK is losing out to singapore in the fight for banking business.

    http://www.cityam.com/news-and-analysis/hsbc-london-losing-asia

    ...but aren't standard charter more focused on Asia anyway and what point would there be in 'Citi-Singapore' not being located in Singapore??

    These bankers - such a wheeze - are they really that dumb or is it just for show?

    However this is nothing compared to the bizarre claim by Andrew Sentance that we're in danger of inflationary pressures (which I don't disagree with) - but because of the 'upward pressure from a strong global economy'.

    http://www.cityam.com/news-and-analysis/sentance-act-now-rates

    Strong global economy? - which planet is Andrew on at the moment? I don't disagree with his conclusion but his reasoning is gibberish - it's easy money that's creating inlfation, not increased production - still I suppose when you measure using GDP - who can tell the difference!!

    Some food for thought - if you saw the programme on BBC 2 last night about the moon, I didn't catch it all but one suggestion to improve our lives and maybe improve the sustainability issue was to build solar powered bases on the moon (which has advantages over earth)
    The cost was half a trillion dollars - which the scientist baulked at - but said it was probably worth it.

    ...but didn't the world commit DOUBLE that figure to prop up the failed system of Capitalism?
    http://www.america.gov/st/peacesec-english/2009/April/20090402133731dmslahrellek0.7246973.html

    Puts it into perspective doesn't it - instead of 'not fixing' capitalism we could all be partying on the moon - even though there is no atmosphere up there!

    How many bankers will take us to the moon I wonder? - none I'm guessing, because even the moon trips were state funded - no private enterprise had any interest.

  • Comment number 36.

    By far the best blog for some considerable time.

    Putting the contribution of the headline banks into context with the wider financial industry and the economy as a whole, is well worthwhile.

    Contextually it also links to the EMI saga, where the private equity group has lost every penny and no problem to the system from that capital destruction - yet the borrowed money has also largely been lost and that was lent by a mega bank implicitly underwritten by taxpayers (US ones).

    So not every sector of the finance industry can be regarded as equally the proverbial baby in the bath water if their activities are leveraged by loans from an implicitly guaranteed sector of the system.

    I also like that it highlights that increasingly we are reliant upon selling each other financial products reliant on returns generated from basic production of goods and services for export.
    This is the imbalance in the economy which has led to the decline and it needs rebalancing, destruction of the financial sector to achieve balance is a daft proposition favoured by the narrow of vision.

  • Comment number 37.

    26. At 10:26am on 2nd Feb 2011, avalanche_invesmtents wrote:

    "these companies arent going to take your taxpayer money and are in fact generating Wealth for their clients."

    How, how, HOW, HOW, HOW????

    How does the allocation of capital 'generate wealth'? - it's not a productive activity, it's merely moving paper around.
    Can't you see that investment by private individuals amounts to 'capital blackmail' as they are preventing production occuring unless they receive a slice in return (interest or earnings)

    They can't even get that right - otherwise they wouldn't have all piled into some of the bubbles they have done (and still are) - creating a mis-allocation of earths resources on a grand scale.

    Investing heavily in oil companies due to the profitability of the short term return rather than investing in renewable energy companies which is beneficial in the long term for society and mankind itself.

    Still, most people working in finance can't see anything outside of their own narrow field of benefit - why would I expect them to consider the future of mankind in their analysis of which activities are worthy of spare capacity and which aren't!

  • Comment number 38.

    "So if they fear that their vitals will be squeezed by new directives and codes designed to sanitise the banks, perhaps we should listen"

    I'm happy to listen and then get on with sanitising (good word).
    Its not much of an argument Robert

  • Comment number 39.

    When the new brush eventually starts to sweep (maybe, if, when, soon I hope) it will unfortunately sweep clean and will effect all in it’s path. Isn’t that what is happening to us now? From the ‘on benefit to the savers’ we are all having to suffer so why should they be exempt?

    As much as politicians would like to be selective this leads to inefficiency and a loss of faith/moral in the system (never stopped them in the past though as it), so cover all has to be the order of the day!

    So what have we heard? (in no particular order)

    We will leave!
    You will loose money!
    You cannot do anything without the G20!
    You cannot tell a private company what to do!
    You will make people unemployed!
    We haven’t had any of your money!?!
    And now – you will effect the good (SME) as well as the bad and the ugly!

    This is all part of the same game

    I would love to know how many are moving their accounts away from the ‘mega’ banks, this statement may speak volumes ‘…continues to win new clients around the globe…’ (6. At 09:31am on 2nd Feb 2011, theordinarycity)

  • Comment number 40.

    All reasonable points regarding the financial sector generally, though your article also illustrates nicely the issues the wider economy and business faces. You comment regarding the number of women employed is not relevant, yet to the BBC and the left leaning media / commentators its very important. In practical terms the fast growing economies of the world are not lumbered with social policies which make business more expensive, eg the potential paternity leave for men being a recent case in point. All very nice things to have, but in practise very expensive, and very awkward to implement if you are a small business owner. Doing business in the UK is costly for MNCs compared to Asia, India, China etc. We have to cut red tape, tax, NI etc to encourage investment. Its not about making the rich richer its about competing with globalisation in our midst....

  • Comment number 41.

    22. At 10:08am on 2nd Feb 2011, Iselworth wrote:

    I do not think a fee of 1 to 3% is a big share of your pension.

    ******

    1 to 3% of what? Of the total value of my pension fund each year? When it probably grows by what - 2 to 6% max? So over the lifetime of the fund you actually take 50% of the growth or so? Sounds outrageous to me. Would be outrageous if it was only 5% for what little you do.

    Pension fund management in this country is simply a skimming operation really, which you attempt to justify by the creative use of percentages and hoping nobody will notice. People in the pensions industry are just as parasitical as the other parts of the financial industry, creating nothing of value, just shuffling money around and skimming sufficient to keep themselves in a good living whilst the majority fail to understand what is going on and slave away in work that really does add value.

  • Comment number 42.

    #5

    "That's right - you're begining to see the light. But even that small fraction only benefits a remote corner of our country, nearest France."

    #31

    "Fortunately the city is not so prejudice as within 20ft of my desk we have 3 midlanders, 1 north-easterner, 4 from liverpool / manchester 1 welshman, a scotsman and 2 guys from Essex."

    ----------------------------------------------------------------------------

    Unusual to see you two contradicting each other - who's right then?!

  • Comment number 43.

    I'm a trader at one of these mentioned SMEs in the city, and you cannot imagine the amount of profit that is extracted from the largesse of the big banks. In effect the whole system depends on it.

    I have always been amazed by the lack of risk awareness and general market discipline by the bank traders, who are well known to be pretty rubbish, in comparison to proprietary owned trading operations like my own.

    The banks punt money around like there is no tomorrow and would take on large trades at prices that make no sense. Even accounting for the assymetrical payoff from punting with other people's money (Banker's option) and knowledge that losses will be bailed out (once known as the Greenspan put in the industry) I could not account for it.

    Now it is clearer, the banks are basically funnelling credit from their finance/trasury departments to their trading desks who punt to the rest of the market it without care of loss. A nice way to build an asset base.

    It's a bit like having a printing press in your bedroom and taking the money to the bookies and betting on every horse in a race. You will return 90 cents per $1 but that money is now kosher and in the system.

    The bookie has also done rather well out of it. And my company, like all these other small trading companies, broker-dealers, asset managemers etc, essentially perform the function for the bank's entering money in the system.
    Luvly Jubly but I wouldn't necessarily consider it economically or socially productive!

  • Comment number 44.

    The financial sector has debt of over £4trln. 12% of the economy is therefore responsible for over 50% of the national debt. I don't hear the Tories screaming "unsustainable" or Bankrupt

  • Comment number 45.

    Seriously Mr. Peston? Sympathy for the City barrow boys?

    Pretty badly timed, in my opinion, given that each new week brings a ghastly new consequence to their appalling failures in vision, competence and honesty.

  • Comment number 46.

    34. At 11:06am on 2nd Feb 2011, AJM wrote:

    "You also need someone to look after your pension (which, arguably, is more important to your future well-being than the tiling of your bathroom) so why aren't you willing to pay someone the market rate to do that?"

    No you don't need someone to look after your pension, despite the exhortations of the financial services industry trying to convince you that you do. And the "Market Rate" is outrageous for what little they do, skimming a huge proportion of the growth. Sadly people don't understand because statements like "only 3% management charges" are bandied about, when people don't realise what that means, 3% of the value of the fund each year, which swallows up an outrageous proportion of the growth.

    "If you are not willing to pay someone to look after your pension (or object to how much they or their competitors charge), you are entitled to take your pension out and invest it yourself."

    And I do.

  • Comment number 47.

    @22 ... "I do not think a fee of 1 to 3% is a big share of your pension."... it definitely is, especially as a % of Funds Under Management (FUM) which is what most are based on. How about you change that to 1 to 3 % of the profits you generate and not simply a skim from the top irrespective of performance? Actually you forgot to mention that... what is your performance bonus? How is that based? Is it added to the 1-3% when the economy grows? AMs are the Tarquin and Rupert brigade... all very cosy with the MMs and analysts (middle "c")... quite a number ex-Army, Sandhurst and the suchlike. Is that you?

    As to poor old Pfizer, well with the UK always for sale to the highest bidder, what would anybody expect? Some countries and companies have a nationalistic bent, I know... unfathomable, so when things get tough, 'foreign' subsidiaries go first, irrespective of the market share they command. Laissez faiiiiiiiirrrrrrrrrrrrreeeeeeeeee.....

  • Comment number 48.


    29. At 10:40am on 2nd Feb 2011, writingsonthewall wrote:
    In th elong run it's probably good news about Pfiezer moving on...I mean with the barriers to education being raised which will reduce the number of scientists - we'd probably have to bring in immigrants to do the job anyway.

    ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++

    Many of the research scientists at 'Pfizers in Sandwich' fall into the Highly Skilled Migrant Person category/ Home Office Grade 1. It is a delightful place fall of many nationalities.

    Yesterday's announced closure falls consequent upon many redundancies last year in the Research Section. Manufacturing was closed down about two years ago, with some buildings being immediately razed to the ground and grassed over. Was the writing not on the wall even then ?

  • Comment number 49.

    21. At 10:07am on 2nd Feb 2011, jacko

    "They were developed at no cost to the taxpayer IN THE PRIVATE SECTOR."

    Really?

    Who do you think pays for the cleanup of things like this?

    http://en.wikipedia.org/wiki/Pfizer#Environmental_record

    "So all you who object to change in the NHS on the grounds of greedy private companies wanting to make a buck, WHY ARE YOU TAKING THESE DRUGS? Sheer hypocricy."

    ....errr maybe because they're ill? - are you saying it's hypocritical to be unwell?

    Hey jacko, you're properly whacko aren't you?

    "In no-risk, no-value Britain, where will the wealth creation come from? No wonder we are bust."

    ...well not from the risk taking WEALTH DESTRUCTIVE financial sector now will it?

    You wouldn't know value if it flew in the window and landed on your nose - you must work in finance to be so clueless (or at least think you do)

  • Comment number 50.

    15. At 09:55am on 2nd Feb 2011, desgbea wrote:

    >> JC: But even that small fraction only benefits a remote corner of our
    >> country, nearest France.

    > Couldn't be more wrong.

    Nonsense. London _is_ in the corner nearest France. Check out a map.

    > Where do you think a very large chunk of the largesse distributed by Gordon
    > Brown and pals in constituencies mostly north of Watford came from?

    Londoncentricity, i.e. selling off the future of the whole country to benefit a tiny corner.

  • Comment number 51.

    22. At 10:08am on 2nd Feb 2011, Iselworth wrote:

    >> I'd far prefer it if you weren't helping yourself to a big share of my pension,
    >> while you "protect it" - perhaps you're mainly protecting your own income stream?"

    > I do not think a fee of 1 to 3% is a big share of your pension.

    Per annum? That would be all of it!

    >> JC: retrain in something socially useful.

    > Even if they did it would not protect your pension either.
    > Sounds like lose lose to me.

    You give up too easy. If they don't take it, I keep it. Is that clear enough for you?


  • Comment number 52.

    23. At 10:13am on 2nd Feb 2011, Justin150 wrote:

    "If a financial services firm manages to raise a couple of million for a pharma company(for example by an EIS fund raising) then whilst you may be correct to say all they have done is move money from Account A to B, by doing so they have enabled a new drug to be properly tested which might cure a major health problem and even it fails testing, the failure may advance medical science. So in my example not only may they create wealth but also do moral good"

    ...that's because you're starting your logical thinking when you're already halfway down the road of the problem.
    The money system has ensured that these financial firms are in the position to make such a decision (allowing the research to happen).

    Try to think of it like this.....we're still living under a Monarchy and the king declares that you may use your land to grow vegetables for profit - you sell your turnips and make some money.

    Did the king 'create wealth' - or did he merely allow you to use something which was technically yours already?
    By your logic the king is creating wealth (for there was no wealth before, and there is after the sale of the vegetables) - but you don't account for how that resource (the land) was acquisitioned in the first place - lets just suppose it was by a Feudal lord and a large sword.

    Banks are now in the place of the King, and they use property ownership laws to ensure that they have their finger on the 'go' button and can ask for a return from what is ultimately the combination of labour and shared natural resources - neither of which they have any real ownership over.

    I'll see you again tomorrow when I re-explain the same issue in a new analagy - for you to ignore and go back to square one and make the same 'wealth generation' claim.

  • Comment number 53.

    30. At 10:46am on 2nd Feb 2011, vic Webb wrote:

    "These firms do contribute as little trade would happen without insurance, ship-broking and a number of other financial services."

    ....all of which can be provided by the state - nobody is denying that financial services have uses, it's the private ownership of them which is the problem - especially when they take the profits as a private enterprise, but then expect the country to bail them out when it all goes wrong (because they're too stupid to realise that long term, in a market based economy, you will always get corporations 'too big to fail' through the economies of scale which is in turn a 'solution' for their diminishing profit margin over time.

  • Comment number 54.

    "The Sandwich site invented and launched drugs like Viagra, Istin, Lipitor which millions of people take for granted. They were developed at no cost to the taxpayer IN THE PRIVATE SECTOR. So all you who object to change in the NHS on the grounds of greedy private companies wanting to make a buck, WHY ARE YOU TAKING THESE DRUGS? Sheer hypocricy."

    One of the weirdest posts I have ever seen. Anyway...

    The problem with Big Pharma is cartels/overcharging - a COLOSSAL charge on the taxpayer - the problem isn't over researching. GPs and other doctors are deluged with expensive advertising and until recently got amazing jollies round the world to conferences to help persuade them to prescribe the 'right drugs'. Maybe they still do, I heard this was being looked at...

    Unless you are suggesting that they should be allowed to gouge the taxpayer in order to finance their R&D? I have seen that sort of thing in action in other industry sectors mind, all part of the blurring of the state and the corporate world that is leading us down a corrupt and scary path (in other words - back to how things were in the mid Victorian era).

    WOTW calls this fascism, and your banging on about how we should all be grateful for getting some of this money back in the form of taxes doesn't change the nature of the basic transaction.

  • Comment number 55.

    Robert,

    IMO a balanced and thoughtful appraisal. But it only serves to bring home, yet again, that what we have all suffered - and continue to suffer - from is the compulsion which is inherent in "big business" (of all descriptions, not just banking) in our capitalist system to grow ever-bigger - and thereby to gain control over any and all external factors which might threaten its dominance and the size of the profits. It's in the nature of the beast.

    The mega-banks epitomise that tendency. But, whilst it's bad enough when industrial giants get too dominant and (especially in the USA) reach a stage where they can influence if not actually mandate their nation's domestic and foreign policy, up to and including making war, mega-banks have gone yet further. They have achieved a position whereby - in alliance with the IMF and the World Bank (arms, effectively of the US government) - they can dominate not just their own business sector in their own country but the entire global economy. Governments have become powerless to oppose them, regardless of the wishes of their peoples. Many of them command greater financial resources than many countries do, whilst having democratic accountability to no one for the uses to which they put those resources, however destructive or anti-social.

    It makes no difference whether the individuals running these institutions are saints or crooks: all alike are immune from personal moral responsibility for the consequences of their corporations' actions. Corporations have no conscience: their sole aim is profit maximisation, regardless. When they get too big to be allowed to fail, their dominance becomes total.

    It's the "bigness" of these corporations that's the problem, combined with the complete absence of moral or societal accountability which goes with it.

    The threat which this poses to democracy was well recognised during the closing decades of the nineteenth century in the USA. That led to the Taft-Hartley Act, giving government draconian powers to break-up "trusts" (as they were then known) judged to have become too dominant within any particular business sector.

    We need the equivalent of that today, in regard to banking and finance. Ideally, we need it internationally but that will never happen because the USA (acting as proxy for the mega-banks and seeing itself as evangelist for neoliberal doctrine) can sabotage it at will. So, in default of that we need it domestically. The alternative is to forget about democracy.

  • Comment number 56.

    24. At 10:15am on 2nd Feb 2011, jgm2 wrote:

    > Back when Gordon Brown plundered 20bn quid off BT and the other
    > Telcos thus reducing the UK pension pot by 20bn quid overnight ...

    Why should I give a hoot - I don't even work for those firms!!

    > ... I trust you didn't blame the pension fund managers.

    When robbed by two cheats, would you forgive the second because he isn't the first? Go away and think about your question to me.

  • Comment number 57.

    32. At 10:55am on 2nd Feb 2011, AS71 wrote:

    "Is this a worthwhile industry? Of course, because we know that if our house burns down then we will be able to rebuild it or if the breadwinner in a family dies then then there will some money for the family."

    ...unless it's an equitable life policy of course....

    There was a time when communities rebuilt burnt houses and looked after each other through bereavement - but sadly some clown thought the individual was the most important thing which leads to the birth of a faceless insurer being relied upon for comfort and support.

  • Comment number 58.

    "22. At 10:08am on 2nd Feb 2011, Iselworth wrote:

    I do not think a fee of 1 to 3% is a big share of your pension."

    Any number of recent stories from the regulators and legislators about the UKs notoriously expensive, inefficient and badly run pensions industry can be ignored then. Thank goodness. Otherwise it might look like the big institutional traders had their snouts in the same trough as the big banks and their hirelings.

    #43 - excellent and illuminating (and scary) post ...

  • Comment number 59.

    52. At 11:40am on 2nd Feb 2011, writingsonthewall wrote:
    I'll see you again tomorrow when I re-explain the same issue in a new analagy - for you to ignore and go back to square one and make the same 'wealth generation' claim.

    Luv Luv Luveddy Dub it !

  • Comment number 60.

    34. At 11:06am on 2nd Feb 2011, AJM wrote:

    "If you are not willing to pay someone to look after your pension (or object to how much they or their competitors charge), you are entitled to take your pension out and invest it yourself."

    I suspect Jacques already pays into a pension - the state pension - it's collected through taxes don't you know?

    You wonderfully point out that there is a market rate for 'managing your pension' - a reward for a good return.

    ....now tell us what the penalty is for below standard performance? mmmmmm?

    I do work in investment management, so I already know what the answer is!

  • Comment number 61.

    34. At 11:06am on 2nd Feb 2011, AJM wrote:

    > you need someone to tile your bathroom and you are willing to pay the
    > market rate for someone to do it. You also need someone to look after
    > your pension (which, arguably, is more important to your future well-being
    > than the tiling of your bathroom)

    You havn't seen the state of my bathroom, chum. Managed funds are far worse than trackers. You don't need to pay anyone to look after money. They are cheats.

    > so why aren't you willing to pay someone the market rate to do that?

    Because they are stupid, wasteful, pampered and egoistic twerps who can't run a bath, let alone a fund.

  • Comment number 62.

    27 WOTW

    ...and yet I bet not once have you deeply considered where that profit comes from and whether your firm actually 'earns' it or merely 'extracts' it from others work.

    >>>>>>>>>>>>>>>>>

    Your usual surplus value of labour mantra, keep chanting it if you find it calming.

  • Comment number 63.

    42. At 11:22am on 2nd Feb 2011, north_view wrote:

    "Unusual to see you two contradicting each other - who's right then?!"

    No contradiction, most people in London spend their money in London (they don't send it back ooop North). The profits also stay here (generally) - my point was the subsidy from the north was 'good labour' - not money.

  • Comment number 64.

    48. At 11:33am on 2nd Feb 2011, Amused2Death wrote:

    "Many of the research scientists at 'Pfizers in Sandwich' fall into the Highly Skilled Migrant Person category/ Home Office Grade 1."

    I genuinely don't know what a home office grade 1 is - sounds like a piano exam.

    "Manufacturing was closed down about two years ago, with some buildings being immediately razed to the ground and grassed over. Was the writing not on the wall even then ?"

    Hey - watch it, that's copyright!....oh wait, I'm not a financial tyrant - it's 'ours' to use as we want.

    The writing has certainly been on the wall for sometime now.

  • Comment number 65.

    As had been said before Financial Services and the associated entourage of accountants, tax specialists and lawyers contribute no real income to the UK unless they are exporting their skills - which some do.

    Unless the UK builds and develops high quality manufacturing and engineering skills that the world wants to buy the current spiral of decline will continue. The best government can do is equip the employees of tomorrow with the tools they need today.

    That means foreign language skills, strong and effective problem solving and an ethos of team work. Unfortunately this will maean many graduates living and working overseas and as a result a black hole in the University Loan pot. Message to parents dont act as guarentor on that loan.

  • Comment number 66.

    #12 Yes, the city funded Glaxo and then forced them to merge with SmithKlineBeecham, one of the most disastrous mergers in history. The money men should stick to what they know, i.e. investing and let successful managers manage their companies for the best. They should not be forcing them to takeover or merge with other unsuitable companies just to consolidate the market or give themselves millions of pounds to 'facilitate' the merger.

  • Comment number 67.

    34. At 11:06am on 2nd Feb 2011, AJM wrote:
    @Jacques Cartier #13, 09:49
    If you are not willing to pay someone to look after your pension (or object to how much they or their competitors charge), you are entitled to take your pension out and invest it yourself.

    --------

    I can't speak for Jacques but I know I certainly couldn't do that. My employer offers to pay a % of my earnings into a pension fund, there is no option to receive that money in cash for me to invest myself. So I have no choice but to either decline those payments (which would be a bit dumb) or see them go into a managed pension fund for which the management take an annual % regardless of performance. It's money for nothing. They have a captive audience and a huge wedge of pension funds to dip into for their annual fee and there is absolutely nothing I can do about it if I want to have an income when I finally retire. What do you have to say about that?


  • Comment number 68.

    59. At 11:50am on 2nd Feb 2011, EconomicsStudent wrote:

    "Luv Luv Luveddy Dub it !"

    I've written an excel macro called 'anser the capitalist' - you simply put in the expected phrase from the capitalist and it gives you the logical response to undermine his argument completely.
    Do you want to borrow it? - I'll make it open source of course because I'm motivated by improvement, not profit.

    To be honest, it's only got about 20 rows of data as this is the sum of the arguments presented by capitalists. It's a bit like the 'science' used by climate change sceptics - turns out it was somewhat cobblers!

    http://www.bbc.co.uk/iplayer/episode/b00y5j3v/Storyville_20102011_Meet_the_Climate_Sceptics/

    It's important to note that most capitalists ae also climate change sceptics - I suppose if you're going to be wrong anyway.....

  • Comment number 69.

    62. At 11:52am on 2nd Feb 2011, AS71 wrote:

    "Your usual surplus value of labour mantra, keep chanting it if you find it calming."

    Sorry...was that an alternative explanation I heard?.....no, I must have been hearing things...

  • Comment number 70.

    49. At 11:33am on 2nd Feb 2011, writingsonthewall wrote: ....errr maybe because they're ill?

    Most probably not. There is no money any more in big pharma companies treating people who are actually sick, so they expend enormous effort persuading people who are perfectly well that they need to take their drugs, claiming it will stop them getting sick. Pfizer's statin drugs being the perfect example.

    Immense marketing has convinced people who are perfectly well to take them. An enormous scam. And just like the pensions industry they use relative percentages to confuse the public to do so, bandying about statements like "a 50% decrease in the likelihood of you having a heart attack" when in reality your risk was probably 1 in 100 and is now 1 in 200, a true reduction of 0.5% (if you even believe that, which I don't, and I'm willing to bet my health on it because I won't take them. People who do take them are of course betting their health on them in other ways because of side effects.).

    Capitalism at it's finest...

  • Comment number 71.

    The thing that bothers me about the Pfizer closure is the loss of well paid jobs. we have seen this over time with the gradual destruction of jobs in our backbone manufacuring industries. I guess that a lot of the Pfizer workers will end up in much lower paid work as desperation sets in.

    The net result of all this is that people have less disposable income to spend (hence the credit problem) and in many cases putting money into pensions goes by the board as the reality of living to-day kicks in as thoughts of the future disappear into denial. I wonder how the statistics are looking as far as the percentage increase in the number of minimum wage earners. We know there is a pensions problem but this gets worse every day due to the low pay issue and stacks up a future bill for the state when peoiple retire with no pension of thier own and have to depend on state handouts.....which in my view amounts to the taxpayer subsidising low wage employers.

  • Comment number 72.

    #62. At 11:52am on 2nd Feb 2011, AS71 wrote:
    27 WOTW

    ...and yet I bet not once have you deeply considered where that profit comes from and whether your firm actually 'earns' it or merely 'extracts' it from others work.

    >>>>>>>>>>>>>>>>>

    Your usual surplus value of labour mantra, keep chanting it if you find it calming.

    ---------------------------------------------------------------------------------

    Labour is the driver for ALL wealth so how come the very rich are very idle.

  • Comment number 73.

    Its alright, what we need according to the government is ‘big society’. Working for nothing to rescue the country, especially all those rich philanthropists, they can spare the time and money right? Oh hang on
    http://www.guardian.co.uk/politics/2011/feb/01/big-society-lord-wei-volunteering
    Oh dear, looks like the cant spare the time or money. Guess there’s no hope for those on the minimum wage then. You couldn’t make it up.

  • Comment number 74.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 75.

    62. At 11:52am on 2nd Feb 2011, AS71 wrote:
    27 WOTW

    ...and yet I bet not once have you deeply considered where that profit comes from and whether your firm actually 'earns' it or merely 'extracts' it from others work.

    >>>>>>>>>>>>>>>>>

    Your usual surplus value of labour mantra, keep chanting it if you find it calming.

    ...................
    As opposed to ignoring an unwinable argument by sticking your fingers in your ears and going, nah nah nah nah nah.

  • Comment number 76.

    Is it just me or does no-one seem to be asking where the money for the bail-out came from because the bit that frustrates me is I think we're being sold a line here and the very same institutions that are recieving the bailout are those supplying the money.

    Let me explain, from what I can understand the government supplied the banks with money to recapatilise, loosely translated the way they recapatilised was to increase their TIER1 capital ratio by buying safe Government bonds.

    So changing order slightly to get around the way the book-keeping will have happened. Institution 1 lends X @ near base rate to Government.. Governement give X @ near Libor (being higher than base rate) to Institution 1 (but not really because money has to be given back later which sounds awfully like a loan).

    Since the loan to the Government is an asset on the accounts (as long as the Government maintains its rating) and the loan from the government isn't a liability magically the banks are better by lending their own money to themselves via the Government because it seems we can actually create money that way.

    And before you all say bailout, share etc. That was in my mind the most amusing bit, instead of making these loans which would have meant the government was making money lending banks their own money (I know it never existed but humor me) the policiticans went one further and instead insisted on changing this loan (that was lent back to them) into shares bought at a rock bottom price meaning the banks effectively paid them to wipe out their shareholders value.

    It just amuses me how we keep focusing on the bailout and don't ask the more difficult question of where the money came from. If we did we'd realise the system is even more broken than we thought (how can bankrupt institutions effectively bail themselves out using the Government as a book keeping mechanism) and more importantly ultimately where is all this new money coming from because I suspect it will still be washing around in the system after all this has played out fueling inflation.

  • Comment number 77.

    57 writingsonthewall

    There was a time when communities rebuilt burnt houses and looked after each other through bereavement - but sadly some clown thought the individual was the most important thing which leads to the birth of a faceless insurer being relied upon for comfort and support.

    >>>>>>>>>>>>>>>>>>>>>>>>

    The UK has moved on a few centuries since then - specialisation and economic efficiency.

    People still look to friends and family for comfort and support but would prefer to appoint a skilled builder of their choice to rebuild their house rather than ask the neighbours if they are handy with a trowel and hope for the best.

  • Comment number 78.

    54. At 11:44am on 2nd Feb 2011, FauxGeordie wrote:

    "WOTW calls this fascism"

    ..and every day this belief is cemented..

    http://www.bbc.co.uk/news/business-12343454

  • Comment number 79.

    #67 david brent wrote "I can't speak for Jacques but I know I certainly couldn't do that. My employer offers to pay a % of my earnings into a pension fund, there is no option to receive that money in cash for me to invest myself."

    Spot on. Only 1 hour ago I had a meeting with my companies pension provided, who expressed severe doubt whether I could sweep my current pot (which is being held in cash) to my SIPP where I can allocate the capital in the equities / ETF's which I want to (and short this scam of a financial system when the time is appropriate), rather than the severely limitied set of managed funds with their fees designed to pillage my pot.

    Instead, my money is effectively being held hostage, and there's very little I can do about it, no matter what that City apologist/wind up merchant was saying in the comment you were replying to.

  • Comment number 80.

    A pension fund is a speculators plaything whereby they shuffle your money around (acquired by your labour) to gain paper profit keep 95% and put the remainder back into your fund for a paltry return if youever manage to retire. If it goes belly up guess what, you pay for ithe losses.

    Tell me who are YOU working for?

  • Comment number 81.

    @ writingsonthewall:

    I am so glad you are creating wealth with the amount of time you spend on this blog, regurgitating the same old rubbish.

    You put people down because of the work and the industry that they are in. What have YOU done lately to make this world a better place or create wealth? Maybe all you do is shuffling electrons around... Not exactly wealth generating is it?

  • Comment number 82.

    Under CITY read ALCHEMY!

    Don't worry the PRIVATE (MANUFACTURING) sector will take up the slack!

    Seriously,these bloggs (some really good) are like shouting at the BOX, a noise is heard but its rarely listened to...............

  • Comment number 83.

    70. At 12:10pm on 2nd Feb 2011, tired_of_the_lies

    What you describe sounds very much like 'create the product then create the demand' - surely not in a market economy???

    It's going to get even worse once GP's find themselves with nice new ferrari's thanks to a friendly pharma co. who is keen for him to push their drugs.

    (doesn't that make GP's drug pushers now?)

  • Comment number 84.

    76. At 12:18pm on 2nd Feb 2011, Stephen-London wrote:
    Is it just me or does no-one seem to be asking where the money for the bail-out came from because the bit that frustrates me is I think we're being sold a line here and the very same institutions that are recieving the bailout are those supplying the money.

    Let me explain, from what I can understand the government supplied the banks with money to recapatilise, loosely translated the way they recapatilised was to increase their TIER1 capital ratio by buying safe Government bonds.

    So changing order slightly to get around the way the book-keeping will have happened. Institution 1 lends X @ near base rate to Government.. Governement give X @ near Libor (being higher than base rate) to Institution 1 (but not really because money has to be given back later which sounds awfully like a loan).

    Since the loan to the Government is an asset on the accounts (as long as the Government maintains its rating) and the loan from the government isn't a liability magically the banks are better by lending their own money to themselves via the Government because it seems we can actually create money that way.

    And before you all say bailout, share etc. That was in my mind the most amusing bit, instead of making these loans which would have meant the government was making money lending banks their own money (I know it never existed but humor me) the policiticans went one further and instead insisted on changing this loan (that was lent back to them) into shares bought at a rock bottom price meaning the banks effectively paid them to wipe out their shareholders value.

    It just amuses me how we keep focusing on the bailout and don't ask the more difficult question of where the money came from. If we did we'd realise the system is even more broken than we thought (how can bankrupt institutions effectively bail themselves out using the Government as a book keeping mechanism) and more importantly ultimately where is all this new money coming from because I suspect it will still be washing around in the system after all this has played out fueling inflation.

    .................
    The whole thing is a giant merry-go-round. And more people like yourself are beginning to see it for what it really is. The government is expecting the people to pay for the mistakes of the bankers, through massive cuts to public services. I urge you to join the marches that take place in due course. The government must think we are stupid to fall for this.

  • Comment number 85.

    WOTW wrote "The money system has ensured that these financial firms are in the position to make such a decision (allowing the research to happen)."

    Really. Financial services firms make no such decision they provide money - most financial services firm are not staffed by qualifyied pharmacologists and therefore would not be in a position to make such a decision.

    Your analogy to kings and vegetable growing is illogical, the correct analogy would be if the king had provided the seeds to the peasant (in modern terminology clearly seed capital) to enable the peasant to grow vegetables in return for a share of any money made when selling it at market.

    But of course there is a simply way of defeating the argument. If you remove the money the medical research will progress to a certain stage and then stop - in fact that is what happens now, lots of medical research gets done in universities and by curious (or sometimes merely very observant) doctors and they often spend 5-10 years developing their idea but then you get to a point where we have laws which require lots of testing firstly on animals and then humans to prove that the drug works, it does not kill or cause unacceptable side effects. Quiet correctly our govt (and virtually every other major govt) insist on high degrees of safety which require rigorous scientific testing which takes many years (upto 10) and a lot of expense.

    Unless money is provided how is that supposed to happen...oh wait I can predict your answer under a centrally planned economy the state would provide. But what is that they provide...resources, volunteers for testing (it is so much easier and cheaper to use political prisoners isn't it, and if they die because the drug does not work well that just eliminates another expense of the state) and, wait for it... money! becuase the scientist need paid to work

    Please try again. I think most people would accept that the financial sector does not create wealth but rather it facilitates others in creation of wealth. Your fixation on labour and natural resources means that you are missing the point that in a mature economy a lot of wealth is created not by exploitation of natural resources but by ideas - intangible intellectual property. We do not need music for example but it certainly brightens the day and dispite the best efforts of Guy Hands and EMI, the music industry has been a wealth creator for many people

  • Comment number 86.

    69 writingsonthewall

    Sorry...was that an alternative explanation I heard?.....no, I must have been hearing things...

    >>>>>>>>>>>>>>>>>>>>>>>>>>>

    You are too busy listening to the sound of your own voice to hear anyone else.

    The Austrian School's explanation seems sensible to me. As value is subjective it cannot be derived from labour, surplus or otherwise.

    The description of value below is Eamonn Butler's.

    "Value is not a quality that resides in objects, and which can be measured,
    like their size or weight. The same good has different value to different people, depending on how much use they have for it. Someone in a rainy country may have very little use for a cup of water, but someone in a desert may value it greatly. And people’s wants and values change: a thirsty person may greatly value a drink, but have no use for more once they have had their fill. Goods, then, do not contain some fixed quantity of usefulness, or ‘utility’. Usefulness is in the mind of the user: utility, and value, are subjective."

  • Comment number 87.

    75. At 12:16pm on 2nd Feb 2011, Averagejoe wrote:

    "As opposed to ignoring an unwinable argument by sticking your fingers in your ears and going, nah nah nah nah nah."

    Don't be so cynical AverageJoe, I'm sure AS71 is about to explain the source of profit for us in a logical fashion which even we 'dumb dumbs' can understand....

  • Comment number 88.

    #77. At 12:18pm on 2nd Feb 2011, AS71 wrote:
    57 writingsonthewall

    There was a time when communities rebuilt burnt houses and looked after each other through bereavement - but sadly some clown thought the individual was the most important thing which leads to the birth of a faceless insurer being relied upon for comfort and support.

    >>>>>>>>>>>>>>>>>>>>>>>>

    The UK has moved on a few centuries since then - specialisation and economic efficiency.

    People still look to friends and family for comfort and support but would prefer to appoint a skilled builder of their choice to rebuild their house rather than ask the neighbours if they are handy with a trowel and hope for the best.

    ----------------------------------------------------------------------------------

    And get ripped off paying architects fees, building fees, inspection fees, surveyors fees, planning fees, registry fees, legal fees. A lot of FEES in there charged by people who do NOWT don't you think.

    It's the system that dictates you have to use appointed tradesmen otherwise we would be quite adept at building our own dwellings, the reason we're not is we're not allowed. Amish build their own property, on their own land, without regulation, it can be done.

  • Comment number 89.

    77. At 12:18pm on 2nd Feb 2011, AS71 wrote:
    57 writingsonthewall

    There was a time when communities rebuilt burnt houses and looked after each other through bereavement - but sadly some clown thought the individual was the most important thing which leads to the birth of a faceless insurer being relied upon for comfort and support.

    >>>>>>>>>>>>>>>>>>>>>>>>

    The UK has moved on a few centuries since then - specialisation and economic efficiency.

    People still look to friends and family for comfort and support but would prefer to appoint a skilled builder of their choice to rebuild their house rather than ask the neighbours if they are handy with a trowel and hope for the best.

    ...............
    Some of those skilled builders would be the ones who do a poor job, take your money and vanish before it falls down. As opposed to a neighbour who would have to live with the consequences if your house fell down next to his, in terms of pride and safety. so much for progress then

  • Comment number 90.

    Lets hope blog comments are one of the victims of bbc cuts. What a bunch of blowhards.

  • Comment number 91.

    The only good banker is an unemployed one - there'll be a surplus of good bankers fairly soon.

  • Comment number 92.

    71. At 12:11pm on 2nd Feb 2011, Rocketman wrote:
    The thing that bothers me about the Pfizer closure is the loss of well paid jobs. we have seen this over time with the gradual destruction of jobs in our backbone manufacuring industries. I guess that a lot of the Pfizer workers will end up in much lower paid work as desperation sets in.

    The net result of all this is that people have less disposable income to spend (hence the credit problem) and in many cases putting money into pensions goes by the board as the reality of living to-day kicks in as thoughts of the future disappear into denial. I wonder how the statistics are looking as far as the percentage increase in the number of minimum wage earners. We know there is a pensions problem but this gets worse every day due to the low pay issue and stacks up a future bill for the state when peoiple retire with no pension of thier own and have to depend on state handouts.....which in my view amounts to the taxpayer subsidising low wage employers.

    ...................
    Very good observation. Business (capitalism) thinks short term, and profit only. It does not recognise the longer term impacts on society. And even more remarkably ignores the fact that its short terms decisions might effect its business and profits in the future. Capitalism, supposedly the best of a bad bunch

  • Comment number 93.

    More and more 'intellectuals' starting to distance themselves from the 'acquisitors' every day. I'm impressed. I think we need an updated list.

  • Comment number 94.

    77. At 12:18pm on 2nd Feb 2011, AS71 wrote:

    "The UK has moved on a few centuries since then - specialisation and economic efficiency."

    Economic efficiency? - are you serious? What like the recent investments banks have made which sort of evapourated in 2007?
    You mean the efficiency of destroying publicly owned and shared resource pools in order to maintain the lifestyles of the rich and infamous (bankers)?

    Classy response - I like the way you claim something is efficient when we're sitting in the mire caused by it's inefficiency - isn't that ironic?

    "People still look to friends and family for comfort and support but would prefer to appoint a skilled builder of their choice to rebuild their house rather than ask the neighbours if they are handy with a trowel and hope for the best."

    Practice makes perfect....I mean look what the division of labour has created. A situation where people are reliant on others to build their own houses (there's no reason if people could in the past why they cannot now) - which means the market can be manipulated in favour of those who find themselves in demand (ever heard the sharp intake of breath from a builder just before he delivers the quote? - it's the sound of the division of labour about to be converted into a financial cost)

    ...and as it happens, my neighbour is an expert bricklayer, and I'm none too bad myself. Together we could build a house in less time than it would take for us to earn the money to buy one - now how's that for merket efficiency. You don't suppose it's a bubble do you?

    I know where michael jackson got the idea from, he too must have thought he would be protected from the world of common sense by living in a man made bubble.

    ...and look how that turned out in the end...

  • Comment number 95.

    76. At 12:18pm on 2nd Feb 2011, Stephen-London wrote:
    Is it just me or does no-one seem to be asking where the money for the bail-out came from because the bit that frustrates me is I think we're being sold a line here and the very same institutions that are recieving the bailout are those supplying the money.

    The investment banks were/are insolvent according to the standard definition, and in a way always have been. By use of the finance/trasury function I outlined in post 43 they have been able to keep above water by creating assets by pushing credit into the market (rapidly increasing money supply) through ever increasing volume of trading. In 2007 to 2008 the entire market dislocated and this was no longer possible to do. The only alternative was the recapitalisation of the worst effected institutions using the means you suggest. Slowly this has led to renewed confidence in the market system (i.e. credit) and has allowed the banks still standing to continue asset expansion by trading on their own created credit.

  • Comment number 96.

    79. At 12:27pm on 2nd Feb 2011, arabstrap303

    let me ask you something - did you pension manager offer to stump up some cash to cover the lost ground with his own money?

    ...I didn't think so - so he gets paid on the way up and there are no penalties for him on the way down - do you think this is where the bailout idea came from?

  • Comment number 97.

    77. At 12:18pm on 2nd Feb 2011, AS71 wrote:

    The UK has moved on a few centuries since then - specialisation and economic efficiency.
    ----------------------------------------------------------------------------

    To high unemployment, low cost to profit ratios, erosion of workers rights, low pay, declining working conditions, high levels of poverty, indebted populace, no NHS, no public service infrastructure, foreign wars, exploited foreign markets.........

    Yes we've come along way.

  • Comment number 98.

    6. At 09:31am on 2nd Feb 2011, theordinarycity wrote:

    And if you think we don't add value - well I suspect that the millions of ordinary people around the globe whose pension funds we work to protect might disagree.

    Problem is though that you use that old excuse to support things like flogging off good UK companies to overseas buyers, insisting companies offshore manufacturing and other services and not investing in start-ups.

    That apart the value of my pension pots don't seem to have benefited greatly from your expertise.

  • Comment number 99.

    81. At 12:31pm on 2nd Feb 2011, pharaoh wrote:

    "I am so glad you are creating wealth with the amount of time you spend on this blog, regurgitating the same old rubbish."

    A sound argument - how can I combat that pure logic?

    "You put people down because of the work and the industry that they are in. What have YOU done lately to make this world a better place or create wealth? Maybe all you do is shuffling electrons around... Not exactly wealth generating is it?"

    No it isn't - but I am calling for an end to the industry I work in - for the common good. What sacrifice are you making to correct the imbalance of the nation? When I am made unemployed then I shall not weep as I will turn my hand to one of the wealth creating skills I have honed in my spare time.

    What did you do in the financial wars daddy?

  • Comment number 100.

    How can I get at my money in my pension fund without having to pay more money to convert it to an annuity (which obviously reduces my pension)? Remember, I have already paid once for my pension to be a pension! Can't afford a financial advisor!

 

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