Christmas Reflections

Whilst Christmas is considered a Christian festival, it is thought to have been a festival (Yule) to celebrate the winter solstice. But later this became ‘Christianised’.

Most of the readings at Christmas are from the ‘Old Testament’ - Torah and the Nebiim. Some passages that are not widely read interest me particularly.

The first is Genesis God putting Adam and Eve in the Garden of Eden:

"And the Lord God planted a garden eastward in Eden; and there he put the man whom he had formed.

And out of the ground made the Lord God to grow every tree that is pleasant to the sight, and good for food; the tree of life also in the midst of the garden, and the tree of knowledge of good and evil."

He forbade Adam and Eve to eat from the tree of knowledge. Genesis 2:

¹⁶ And the Lord God commanded the man, saying, Of every tree of the garden thou mayest freely eat:

¹⁷ But of the tree of the knowledge of good and evil, thou shalt not eat of it: for in the day that thou eatest thereof thou shalt surely die.

At the instigation of the Serpent, Adam ate from the Tree of Knowledge. God rebuked Adam. When rebuking the Serpent, He said:

And I will put enmity between thee and the woman, and between thy seed and her seed; it shall bruise thy head, and thou shalt bruise his heel.

It could be argued that the use of the phrase ‘her seed’ looks forward to Jesus who did not have an earthly father, so all the genetic information would have come from Mary. Hence her seed bruising the Serpents head.

One of Jesus’ Jewish companions, John writes: In the beginning was the Word, and the Word was with God, and the Word was God.

And in documenting the revelation he believes God gave him, John refers to Jesus as saying of Himself:  I am Alpha and Omega, the beginning and the ending, saith the Lord, which is, and which was, and which is to come, the Almighty.

Also, Revelation 3:11 - I am coming soon. Hold fast what you have, so that no one may seize your crown.

Outsourced Britain

Outsourcing has many advantages. Economies of scale perhaps as the outsourcer provides similar services to a variety of similar customers. The latter could include central or local state institutions. Also the need for capital investment required were the services to be provided in-house would be borne by the outsourcer.

Companies providing outsourced services would argue that they take on a variety of hidden costs – recruitment, insurance and capital investment to provide outsourced services at a competitive price.

A question that some believe is not asked often enough is whether the outsourced service really is necessary. Clearly the barriers to setting up and running a service in-house are considerable. One of the benefits of outsourcing is that this lead time / initial investment in expertise as well as capital investment is not there. But it can also lead to buying an outsourced service on the basis of ‘it seemed like a good idea at the time’. Also there is the temptation for the person commissioning the outsourcing, to succumb to pressure / inducements.

Whilst I may be mistaken, I feel often that much of the work I come across may not have been absolutely essential; some examples are below[1].

Between 2007 and 2010 I noticed that the pavement on Shaftsbury Avenue was changed three times. From the tar surface to large square paving stones; then to small bricks.  The final change was changing the straight edge of the pavement into curves. What were the benefits of these changes in quick succession? Were they really necessary?

At my local Network Rail station, I’ve noticed many changes. I wonder whether all of them were necessary. For example ticket machines were installed in the centre of the ticket area. In a few years, these were then removed and moved a few feet to other locations in the ticket area. Now they are installed against the walls. For over thirty years passengers went between platforms via ramps which lead, at one end of the platform, to a tunnel and at the other end to a walk-way which lead to the ticket gates and the ticket area. These tunnels were closed and replaced by a bridge which had steps and lifts. Also the ticket barriers were moved a few inches nearer to the ticket area – requiring a considerable amount of work. In addition short pillars (supporting nothing)  have been put on the walkway facing the car park Were these changes really necessary?

Staying with Network Rail, at other stations I see sometimes contractors in high-visibility jackets in groups of three or four not doing anything actually. Perhaps I am missing something?

An aspect of outsourcing that may not be widely appreciated is its consequences for migration. Many staff members of outsourcing companies may be willing to work for low wages because once five years have elapsed, one can apply for permanent residence in the UK.

Moving some outsourced activities into the state can have beneficial effects: continuity, local employment, retention of expertise and intellectual capital.

But outsourcing can be right in many situations – for example when smaller companies or state enterprises wish to benefit from wider expertise and economies of scale and scope that the service provider brings. For these benefits to be realised, it must be managed properly.

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[1] Other examples: Leadenhall Street – repeated resurfacing between 2011 and 2014; Croydon - Streetlights: silver lampposts replaced by black lampposts. Then some silver lampposts restored again.  But finally black lampposts working.

Reflections on Brexit

Reasons the British Public voted for Brexit include: the UK’s contributions to the EU; regulation that British businesses have to comply with; and most importantly, the influx of migrants.

The British Public, understandably, react unfavourably to: hearing languages other than English being spoken widely; foreign styles of dress, e.g. headscarves and burkas; and behaviour not aligned with British cultural norms.

But, much of the migration that evokes unfavourable reaction, originates from sources other than the EU. ‘Outsourcing’, which has increased greatly, partly as a result of privatisation of formerly state-owned industries, is an important source of immigration.

Outsourcing companies can offer competitive pricing on the basis of employees on low pay recruited from India, Pakistan, and African countries. Such employees are allowed visas almost as a matter of course. These employees are prepared to work on very low pay for five years because at the end of the five-year period, they can apply for ‘Permanent Residence’. After they receive permanent residence, they leave their low paying employers (who provide the outsourced service) and get a job at normal pay. The outsourcing companies then replace them with further low paid employees.

Outsourcing of visa application handling in British Embassies and High Commissions overseas is another source migration. There are stories that, whilst applications directly via the High Commission / Embassy, who sends the documents to an outsourcing company (sometimes in a different country) can result in a long delay and possibly refusal, going via a travel agent and paying say 10 to 20 times the standard fee, results in visas (and it is said even British Passports) being issued rapidly. The explanation for this is thought to be that the travel agent offers inducements to the visa application outsourcing company which results in their ignoring normal procedures / checks. Moreover, where the visa application goes directly to the outsourcing company, the company tends to be overly punctilious and delays responding (in the hope that applicants will go via a travel agent who will offer inducements).

An important benefit of being in the EU is that financial firms located in the UK can ‘passport’ i.e. offer their services in the EU without the need for regulatory authorisation (which can be a costly and lengthy process) in those countries. Will this survive Brexit? Moreover, by being in the EU we can influence regulation to take account of the different structure and wider range and scope of financial services in the UK. Hitherto this has encouraged overseas financial firms wishing to trade in Europe, to locate in London to take advantage of: the trained workforce: presence of the world’s leading banks, investment firms and insurance companies; and the infrastructure that provides a full range of services and facilitates financial innovation; and then passport into other EU countries.

To ensure that as many of the benefits remain, perhaps we should make some technical advisors available to the European Commission, so that proposals reaching the Parliament / officials will take account of the UK’s needs including the of nature businesses such as financial services. When I was an advisor to the European Commission, I was able to explain the practical aspects of the greater range and scope of financial services in the UK and ensure that Directives took account of this. Subsequent lack of engagement has resulted in EU regulation such as CoREP which requires even three-man proprietary trading firms to fill in the same 27 spreadsheets worth of data (about 25000 items) that the major banks have to and send the returns to the European Banking Authority.

Ideally though, have a second, fully informed vote and continue as a member of the EU.

The City of London - after Brexit

City of London - Post Brexit

At present the City of London is the world's leading financial centre. Its origins date back to the Roman conquest of Britain in AD 43 and the settlement of Londinium. The Roman historian Tacitus described London as 'a town of the highest repute and busy emporium for trade and traders'. 

London's development in the Middle Ages as a port resulted in it becoming populated by merchants who became increasingly wealthy. The merchants used their wealth to provide finance. Following the advent of the joint stock company in the 17th Century, the City became a burgeoning financial financial and commodity market place. Names of City streets such as Bread Street, Milk Street and Fish Street indicate the nature of the markets in those areas. The markets today trade commodities, shares, bonds, derivatives on exchanges (usually electronically) as well as a very large range of instruments over the counter. 

Some reasons for the continuing success of the City are:

location between the Far Eastern and American time zones

highly developed infrastructure 

pool of skills 

the ability to adapt and innovate

trading culture

Banks, insurance companies, brokers, market makers and dealers in financial instruments choose to locate in London becuse of the above reasons on the one hand and because, under current EU rules, having located in the UK, they can 'Passport' i.e. offer services in Europe without the need to get regulatory approval from the EU countries they wish to operate in. Therefore it is important that 'Passporting' continues if possible after Brexit.

But Frankfurt, Luxembourg, Paris and Dublin would like to migrate the financial services business that takes place in London to their own centres and will seek to stop Passporting after Brexit. 

Arrangements to mutual advantage of London and the other (hitherto competing) European financial centres will have to be developed.

The UK Prime Minister or senior civil servants speaking to their counterparts in Europe is unlikely to yield sufficent sustainable benefits to London / the UK.

If the UK were to send the European Commission, say five technical advisors, free of charge, the options that would reach senior officials / members are likely to have been constructed with sufficient ingenuity and flexibility to be of mutual benefit.

When the Investment Services Directive was being drafted, I was the sole technical advisor on financial services to the Commission. I was able to help drafting to take account of the greater range and scope and different structure of financial services in the UK.

Subsequently that degree of technical involvement doesn't seem to have taken place. For example the CoREP directive requires even three man proprietary trading firms to fill in the same 27 spreadsheets worth of returns that a major bank does. Moreover the returns have to be converted to XBRL and sent to the European Banking Authority. For Europe, this makes sense because in Europe, banks undertake the business undertaken by brokers, market makers and small proprietary trading firms in the UK. But it does not make sense for the UK. 

Appropriate action does need to be taken quickly to preserve the pre-eminent position of the City post Brexit.

European Union – In or Out?

The reasons for out seem to be: EU regulation that is harmful to the UK’s interests; migration; and the UK’s contribution the EU budget. The principal reason for staying seems to be access to EU markets.

Regulation that is potentially harmful to British interests can be handled effectively. For example: in the 1990s I was seconded (1 to 2 days per week) as the sole technical advisor to the European Commission on financial services. By explaining the nature of financial services in the UK, when proposals came up from the Commission, I was able to ensure that no regulation inimical to British interests emerged in the first Investment Services Directive.

Regrettably that technical engagement was not there for subsequent financial services directives / regulation from the EU and much unsuitable (for the UK) regulation has emerged. This is avoidable. All HM Government (in particular HM Treasury) has to do is to provide technical experts to the Commission who will be effective. The language in most of the committees is English which makes it easier for Brits to influence the regulation for the wider benefit in general and in particular the benefit of the UK.

Potential EU Migration is thought to be an issue. But migration from countries outside the EU seems to have been forgotten. As a migrant myself (from 1922 members of my family have spent time in the UK – most returned to Ceylon though) I have bought into British values. All migrants should be encouraged to do this. Perhaps then migration will not be seen to be such an issue.

The EU budget can be seen on the one hand as a cost, but on the other as providing an opportunity. First for trade but also for the UK to benefit from the various grants and incentives available. To take full benefit, the UK needs to study the regulation and assist British enterprise and the wider community to benefit from these grants.

About half the world is English speaking. Also Britain has historical trading and wider links with many countries. The UK can be the bridge between the EU and the English speaking world and more widely. Trading with EU countries on the one hand and the rest of the world with the other could be of benefit to the UK.

Moreover, the UK is the world’s pre-eminent centre for financial services. Located between the Far-Eastern and American time-zones it is possible to trade with the Far-East in the morning and the US in the afternoon acting as a bridge between these time-zones and also the EU.

All significant participants in the financial markets have a presence in the UK. Historically this developed from London as a port where commodities were traded as they were unloaded from / reloaded onto ships. Financing of business and trading of futures grew also from the position of London as a port and the links with the empire and more widely.

The market participants in London and UK financial infrastructure are valuable national assets. I note here as an aside, ownership of the infrastructure, which are national assets, should remain in British hands. But if the UK left the EU the market participants could leave for other centres. It would be very difficult to bring them back once they are established elsewhere.

I believe the UK has much to gain by remaining in the EU.  

Migrating to the UK

Migrating to the United Kingdom

Ranil Perera

There has been much debate recently about migration. Some of it in connection with the vote on EU membership. As a migrant I thought it might be helpful if I contributed to the discussion.

As migrants my wife and I have bought in to British Values. We judge that we have integrated into the local community also. Given our colonial origins – Ceylon – now known as Sri Lanka it wasn’t difficult. She and I communicated with our parents, grandparents, relations and friends, principally in English. We were both educated entirely in Sinhalese but understood English culture from parents.

When I arrived in the UK to attend university and quoted English dramatists, poets and authors, e.g.

·        (when bored) from Shakespeare - Macbeth’s soliloquy–

‘Tomorrow and Tomorrow and Tomorrow,

Creeps in this petty pace from day-to-day

To the last syllabus of recorded time’

·        (when impatient) Andrew Marvell[1]-

‘Had we but world enough and time

This coyness lady, were no crime’

I was surprised to find that I had a better grasp of English literature than some my British born, English fellow students. I note here I studied science at ‘A’ level and then engineering. I acquired the grasp of English literature and British values from my parents their friends and my classmates.

I heard on BBC Radio’s ‘Today’ programme (19^th June 2016) someone advocating that migrants ‘interact’ with their local communities but remain as separate communities: I wonder whether the emphasis should be more on integrating rather interacting? Perhaps we migrants should see ourselves as citizens of the UK first and then as members of the local community rather than members of a separate migrant community? If migrants keep themselves separate, all will be the poorer for it – and this approach may foster inter-communal tensions and strife even. As migrants we should be committed to the country we are in, and perhaps more widely to Europe, and even more widely the world community – but first to the country we live in and have allegiance to.

The first member of my family to migrate was my maternal grandfather, Thomas David Jayasuriya MBE, OBE. He came to the UK in 1922 to study at the University of London and returned to Ceylon when he had completed his studies.  

My father came to the UK with his mother in the later 1940s and studied law at Chart’s Chambers, Lincolns Inn. Jeremy Thorpe, the Liberal politician was a fellow pupil. My mother who had graduated from the University of Ceylon and was private secretary to the Minister of education (Mr Eddie Nugawela), gave up her job, migrated to the UK and married my father at St Barnabas Church, Kensington, in January 1950.

I was born however in Ceylon. But later lived in the UK between the ages of two and four years. Then we all migrated back to Ceylon. But my father returned to the UK and worked for J H Vavasseur and Co in the City[2] before returning to Ceylon at the end of the 1950s.

My paternal grandfather T D Perera CMG retired to a flat he had bought in Hammersmith. But after many years, returned to his wife in Ceylon.

My wife Romie’s forbears are more interesting than mine. Some of her father’s ancestors were migrants from Cornwall to Ceylon. Other members of her father’s people had Dutch origins – and perhaps may have been part of the Jewish exodus from Europe. Her maternal great-grandmother Amy was presented at Court in 1897 – but on the way to London, during her European travels, married Eduardo Roversi in Rome in 1894. My wife’s grandmother Elena, great-aunt Hilda and great-uncle Neville were all born in Rome but educated in England. In 1922 (perhaps because of the rise of Mussolini) Amy returned to Ceylon with her three children who were now aged around 20.

I came to University (Downing College, Cambridge) in the 1970s. My mother migrated to Cambridge at the same time – parents were not getting on. She became a civil servant. I did do some rowing at Cambridge, representing my college at the Henley Royal Regatta.

Having worked in banking and financial services (asset management, insurance and for financial infrastructure) as a consultant or employee, I found myself seconded (1 to 2 days per week) as the sole technical advisor to the European Commission (in the early 1990s) on financial services. By explaining the nature of financial services in the UK and the rest to the EU, I was able to ensure that no regulation inimical to British interests emerged in the first Investment Services Directive. Regrettably that technical engagement was not there for subsequent financial services directives / regulation from the EU, and, consequently, much unsuitable (for the UK) regulation has emerged.

I believe that proper technical engagement with the European Commission can ensure that EU regulation inimical to the UK can be avoided. Even post-Brexit.

My wife and I were married at St Margaret Lothbury, in the City of London. The vicar, Tom Farrell, had been a hurdler. Duncan White[3] a Ceylonese hurdler, known to my father and father-in-law was known to Tom, as Duncan had trained with the British team. I had met Duncan when I was a boy, at the Ceylon University sports grounds.

As mentioned at the start, my wife and I have both bought in to British values and seek to contribute either through voluntary work (my wife teaches English to migrants, I have worked voluntarily on projects / articles to promote the UK as the world’s leading financial centre) or in other ways to the benefit of society as a whole. We do not seek to impose other values on British society but are ready to share our experience where we judge that it would be helpful.

I believe that migrants to the UK should be encouraged to buy-in to British values. Also integrate into and contribute to British society. After all, as migrants we have a choice. If we choose to stay in the UK we should buy-in to British values. Also contribute to British society as a whole. This could be done by making suitable voluntary activities / service available to migrants.

Noting that English is spoken by about half the world, I believe that the UK could still play a leading role in Europe on the one hand and the world community on the other. Perhaps acting as a bridge between the EU and the English speaking world.

The UK is the world’s leading centre for financial services. It must continue as such.

Whilst manufacturing in the UK can and should revive (there was a time when Austin and Rover were considered high quality cars and ‘continental cars’ mass produced) perhaps current emphasis should be on the high technology industries? 

Britain’s position in the world community must be pre-eminent. Migrants can contribute to this.

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[1] ‘To his Coy Mistress’

[2] I had the privilege of meeting the son (Dr David Hay) of my father’s boss (Andrew Mackenzie – Hay) at the City University Club in the early 1990s.

[3] Silver medallist in the 1948 Olympics.

FT article 30 Dec 2015 noting end of 'Banker Bashing’

Perhaps a question that should have been addressed is should 'banker bashing' have started at all? The UK arrangements for regulating financial services,as it happens put in place by the Labour Party, seemed to be excellent: combining prudential, conduct of business and anti-financial-crime regulation in a single regulatory authority. Also there was monitoring of banks and building societies (deposit taking institutions) via the FSA Financial Risk Analysis and Monitoring unit – FRAM, to identify individual institutions at risk, groups of institutions that could be vulnerable and threats to the system as a whole. 

The US system of bank regulation, on the other hand, was flawed. Its 'on-balance-sheet' leverage ratio focus encouraged securitisation. The rating agencies, perhaps relying on models whose parameters were based on benign financial conditions, gave the securities containing the securitised loans a rating that did not hold up in times of financial stress. This exacerbated the potential for problems.

There was a failure of execution rather than design in the UK. The balance sheet return the BSD3 (launched by the FSA in 1999) would have shown that RBS (whose accounts showed a reduction in bad debts of around £1 billion in 2002) and HBoS were both potentially short of capital. In 2002/3 these two should have been asked to freeze their balance sheets until they shored up their capital.  Equally returns from Northern Rock and others would have shown a reliance on wholesale funding although having more than enough capital. The lender of last resort, the Bank of England, should have provided liquidity to these. Whilst it did not provide liquidity for Northern Rock, it must have done so for the others.

London, located between the Far-Eastern and American time zones is geographically in the right place to be the world’s leading financial centre. Financial services grew out of its role as a port: first the commodities that were unloaded were traded (initially in coffee houses); then financing and related services evolved. The evolution of London as the world’s leading financial centre resulted in a trained workforce for financial services and until recently a regulatory framework that balanced risk management and consumer protection on the one hand with fostering financial innovation and financial business on the other. 

The changes to the regulatory arrangements following the crisis which include increasing capital and liquidity requirements for banks, are addressing a failure of execution via a redesign of the system. If the regulators focus on identifying assessing, monitoring and managing risk, the redesign of the system in the UK to the extent it has been done, would be unnecessary. This redesign probably is being viewed with glee by other financial centres - who want to business to migrate from London to their own centres.

Potential consequences of the increased capital and liquidity requirements could be on the one hand a reduction in available finance to foster Britain’s prosperity and an encouragement of shadow banking’ i.e. non-bank lending, with possible threats to financial stability, on the other.

Many with the interests of the UK at heart, are hoping that HM Government and in particular HM Treasury and the Bank of England would restore a regulatory framework that balances stability and consumer protection on the one hand with the continued success of the UK as the world’s leading financial centre on the other.