Book Review: The Storm - Vince Cable

On the cover of this book Vince Cable is described by Rory Bremner as “the man who gives politics a good name”. He is one of the few people, politicians and others, to come out of the credit crunch with his reputation not just intact but enhanced.

You’d think therefore that this book would tell you everything you need to know about the credit crunch, written as it is by the one of the few people to recognise the warning signals from excessive borrowing by consumers and governments.

Readers expecting that story will be disappointed. The book starts off reasonably well describing Trouble on the Tyne and the Northern Rock affair, and moves on to discuss the growth in credit in the UK and the factors behind it. As you’d expect from a seasoned economist, the author writes as he speaks in a very clear style.

However, from the third chapter the book turns to covering general macro economic factors including the significance of oil in the global economy, food shortages and prices, international trade and the emergence of China and India as powerful economies. Surprisingly for a text on macroeconomics it’s very readable and very interesting but it’s not actually about the credit crunch.

Unfortunately, it looks as if the author was already writing a book about macroeconomic conditions and has then hurriedly tacked on some chapters about the credit crunch in a rather unconvincing manner. The grammar is poor on occasions, assumptions are made when names of people are used without detailing who they are or their significance, and the various factual errors such as referring to the notorious Sir Fred Goodwin of RBS as Frank Godwin detract from the overall reading experience.

All in all this is a surprising book for a number of reasons. Surprising that the author would allow such a hurried text to be approved by him, surprising that it’s not about what it claims to be about, and surprising in that the content is actually quite a good read.

Ash Mehta

A way out from multi-employer pension schemes

For a small organisation, to have a separate pension scheme has always seemed an uneconomic option given the need for so much expensive advice. Some organisations have got round this by joining multi-employer schemes, prime examples being the various local government pension schemes. These have a multiplicity of employers, including some from outside the public sector. In the past, participation has clearly made sense for any employer taking over a service with employees previously in local government.

There is a catch however. Employers remaining in a multi-employer scheme do not like other employers leaving, as the remaining employers have a residual liability for all the scheme’s pension liabilities including those of the departing employers. To protect themselves they therefore insist that the departing employers secure their pension liabilities left in the scheme by making a massive extra payment based on discounting those liabilities at a very low, risk-free government bond rate.

I recently went to a very useful seminar at Shoosmiths in Birmingham on the Social Housing Pension Scheme, the multi-employer defined benefit scheme used by most housing associations and run by the Pensions Trust. Like all defined benefit schemes, this is proving costly and some housing associations are looking at capping their costs by switching to a defined contribution scheme, also run by the Pensions Trust. Apparently some way has been found whereby those housing associations that do so can leave their existing pension liabilities in the defined benefit scheme without having to make a massive extra payment.

Has anyone heard of this with any other multi-employer pension schemes? Is it being considered for the local government pension scheme?

All thoughts welcome to davidr@orchardgrowth.com .

David Rimington