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Earl Howe’s position on advisory committee under threat as doctors claim he ‘mis-sold’ health reforms
A health minister is facing the humiliation of being ousted from a prestigious role within the Royal College of Physicians over claims that he falsely reassured doctors who feared the coalition would privatise of the NHS.
Earl Howe’s position on an advisory committee is being reviewed following a complaint. Six influential members of the professional body that represents doctors wrote to its president, Sir Richard Thompson, claiming that the minister was “not a fit person to fulfil this important role”. Thompson has launched an investigation by the College’s trustees into Howe’s probity.
The senior doctors claim that Howe, a former banker, falsely advised them that reforms under the health and social care bill would not force doctors to use market mechanisms to choose where patients will be treated.
According to the doctors, the regulations will mean that clinical commissioning groups – the bodies to be set up by GPs to organise patients’ care – will have to put services out to tender if there is more than one provider capable of offering particular treatments. This means NHS hospitals and services will have to compete with private health firms for business.
Andy Burnham, the shadow health secretary, said there had been a breakdown in trust between health professionals and government, adding: “This whole issue has become a crisis of trust for the department of health. There would be a straight forward breach of trust given that statements ministers have given have not been honoured.
“The medical profession feels the government has mis-sold its NHS reforms. It was sold on the principle that doctors would be in control but in fact it will be the market that will decide.”
A spokeswoman confirmed that Thompson, and “in the interest of probity”, had “referred the issue to the board of trustees and would report back in June”.
She said the Friends of the RCP, the committee on which Howe serves, is an informal advisory group, including past presidents and officers, and figures from finance, industry, and other charities, that plays no role in the governance or management of the RCP but offers advice in areas such as effective fundraising.
The coalition denies the regulations will force doctors to put services out to tender, believing it will give GPs the ability to select a variety of providers and will improve standards.
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George Osborne also faces a jump in unemployment, another ratings downgrade and the IMF’s criticisms on austerity
George Osborne faces a fresh onslaught on his economic credibility this weekend, as the influential Treasury select committee publishes a damning report on his flagship budget housing policy, hours after Fitch became the latest credit ratings agency to strip the UK of its coveted AAA rating.
Capping a grim week for the chancellor, in which the International Monetary Fund urged him to rethink his austerity plans and the latest official figures showed a jump in unemployment, MPs accuse him of failing to answer 19 key questions about the Help to Buy scheme, aimed at helping first-time buyers.
“It is by no means clear that a scheme whose primary outcome may be to support house prices will ultimately be in the interests of first-time buyers,” the MPs say.
They warn that the chancellor’s package of measures to boost the property market could instead stoke a housing bubble and leave taxpayers exposed to a future downturn in prices.
Andrew Tyrie, the Tory MP who chairs the committee, said: “The government’s Help to Buy scheme is very much work in progress. It may have a number of unintended consequences.”
The committee’s report, published on Saturday, is a fresh blow for Osborne, after Fitch followed rival agency Moody’s in reducing the UK’s credit rating to AA+.
The chancellor had made retaining the coveted AAA badge a key gauge of his credibility, but Fitch said that its decision reflected sickly growth and the worse than expected state of the public finances.
“The downgrade of the UK’s sovereign ratings primarily reflects a weaker economic and fiscal outlook and hence the upward revision to Fitch’s medium-term projections for UK budget deficits and government debt,” it said.
Of the major ratings agencies, only Standard & Poors now describes the UK as an AAA country.
Speaking in Washington, the chancellor adopted a defiant tone, signalling his determination to face down calls from the IMF to soften his deficit reduction strategy and insisting that his approach to putting the public finances in order was both “credible and flexible”.
Asked whether he would accept the advice of the report that will be published by the IMF after a team visits the UK next month, Osborne said: “It depends whether I agree with the advice.”
The chancellor’s bold attempt to get the housing market moving, by offering interest-free loans worth up to 20% of the price of a property and taxpayer-backed mortgage guarantees, was the centrepiece of last month’s budget.
But Saturday’s report from the Treasury select committee cautions that the new measures give the Treasury “a financial interest in maintaining house prices to limit the losses to the taxpayer”, which could make the housing support measures permanent.
If mortgage lenders got tough on borrowers, the report adds, repossessions could rise, leading to a sharp fall in prices, so that “the Treasury could end up facing large losses on those mortgages it has guaranteed”.
The MPs’ strongly worded report will stir memories at the Treasury of last year’s “omnishambles” budget, when the chancellor was forced to reverse a series of key policies, including the controversial “pasty tax” and a cap on tax relief for charitable donations, after vocal public criticism.
Cathy Jamieson, the shadow Treasury minister, said: “At the end of a week when unemployment rose and the IMF warned Britain needs a plan B, this damning report is another damaging blow to George Osborne.
“We will only tackle the housing crisis and help first-time buyers if we have a major programme of affordable house building.”
The select committee finds there is no evidence that Osborne’s housing plans would help to boost the construction of much-needed new homes. “If the government’s priority was housing supply, its housing measures should have concentrated there,” the report says.
Several City economists have also expressed scepticism about the chancellor’s mortgage measures. Danny Gabay, of consultancy Fathom, accused the chancellor of encouraging households to take on even more debt, exposing them to the risk of a housing downturn.
“Square the circle: ‘excessive government debt, bad; excessive private sector debt, good,’” he said, calling Osborne’s policies “the most naked, cynical attempt to engender a housing-based boom, built on yet more debt”.
Asked whether his housing subsidies risked inflating a new bubble, the chancellor said: “I don’t agree. This is a period of real weakness in the housing market. The risks of a housing bubble are pretty nonexistent.”
He insisted he was trying to tackle the “abnormally high cost of mortgages and the very high deposits being asked of people”.
The chancellor said the Bank of England would have the power to end the scheme if it had concerns that it might create a housing boom.
“This is a time-limited scheme and I have given the key to its continued operation to the Bank of England financial policy committee. It can turn the key off in the next parliament,” he said.
But the select committee expressed concerns that exercising this power would be “a distraction or burdensome” for the fledgling body, which could face intense pressure from hard-pressed homebuyers to continue taxpayer support.
Instead, MPs argued, there was a strong case for the final decision on ending the scheme to rest with politicians.
Despite two years in which the economy has moved sideways, the chancellor said he did not feel under threat politically.
“I don’t see anybody coming up with a political alternative,” he said. “I remain focused on delivering what I said I
Unemployment reaches 2.56 million as another 20,000 under-25s add their names to the register
Unemployment jumped by 70,000 in the three months to the end of February, amid the lowest growth in pay rises since 2001, as pressure mounts on George Osborne to adopt a more aggressive growth strategy.
The number of unemployed people reached 2.56 million, with 20,000 under 25-year-olds joining the jobless ranks, pushing the unemployment rate up from 7.8% to 7.9%. It was the third consecutive increase and the highest level since July. Britain’s working population is also suffering from an austerity squeeze, with the average pay rise slipping to 1%, the lowest since records began in 2001 and well short of the 2.8% inflation rate.
The figures, which reflect a reversal of last year’s trend of falling unemployment, come after the International Monetary Fund this week urged the chancellor to ease his austerity plans and deploy more aggressive measures to spur growth.
The Bank of England’s decision to freeze its policy of injecting funds into the economy, known as quantitative easing, is also adding to the pressure on Osborne to switch to a more active economic stance. Minutes of the central bank’s April monetary policy committee, released on Wednesday revealed a six-three majority in favour of maintaining interest rates at 0.5% and keeping the level of QE at £375bn.
The MPC has remained split for several months despite the governor, Sir Mervyn King, regularly voting for a £25bn boost to QE. King has lost the vote an unprecedented three times since February when he sided with Bank director, Paul Fisher, and external committee member David Miles, a former City economist, in calling for an injection of funds into the economy to boost lending and stagnant growth.
Consumer spending in the economy has picked up in recent months, but analysts worry that it will peter out if the gap between pay rises and inflation continues to erode disposable incomes – a trend underlined by the latest data.
The unemployment rate for 16 to 24-year-olds also remained a concern after it edged back towards 1 million. In the three months to February the number of young people out of work reached 979,000, pushing the youth unemployment rate to 21.1%, up 0.6 percentage points from September to November 2012. The number of people claiming jobseeker’s allowance fell by 7,000 to 1.53 million provided a semblance of a silver lining, indicating a fall in government costs.
However, a steep fall in manufacturing and construction output this year has undermined hopes of a strong resurgence in growth. Vicky Redwood, chief UK economist at the consultancy Capital Economics, said it was likely that further aggressive moves by the Bank of England would be delayed until after the new governor, Mark Carney, arrives in July.
The calls for further action are expected to grow when estimates for first quarter GDP are released next week, with the UK just one quarter of negative growth away from a triple-dip recession.
“More QE in May is still possible, especially if the Q1 GDP figure is worse than expected. But it may be that we have to wait until Carney arrives before the MPC will take more action. Note, though, that even those voting against QE this month still seem open to further action to boost bank lending, with the committee seeing merit in possible extensions to Funding for Lending.”
Howard Archer, chief UK economist at IHS Global Insight, said: “Despite a 7,000 drop in claimant count unemployment in March, the labour market data are clearly softer overall compared to a couple of months ago.
“Overall, the data fuels concern that the labour market’s recent strength is fraying as the economy continues to struggle for even modest sustained growth. Meanwhile, earnings growth remained very weak in February. While weak earnings growth is clearly helping to keep unemployment down, the flip-side of this is that it continues to limit consumers’ purchasing power.
“Indeed, with total earnings growth limited to 0.8% in February itself, pressure on people’s purchasing power has intensified recently given that consumer price inflation has risen back up to 2.8% in March and could well hover around 3% for much of 2013.”
When one male-dominated company tackled gender diversity head on, they saw some interesting results and began to let go of the ‘myth’ of meritocracy
Taking advantage of workplace diversity is one of the critical challenges of leadership. Organisations with a track record of developing leaders from a particular background are likely to be suffering from diversity, inclusion and leadership problems at the same time.
Because of this, women continue to be under-represented at senior levels of most global corporations. Even when women do “all the right things” to advance their careers, Catalyst research shows they’re offered fewer of the “hot jobs” and sponsorship opportunities that can lead to promotion. Old-fashioned sexism and gender biases unintentionally embedded in talent management systems are largely to blame.
This isn’t a problem women can or should solve alone. It’s up to today’s business leaders – mostly men – to devise and implement effective strategies for tapping a labour pool comprising 50% women. With trends such as board diversity quotas and women outperforming men in the classroom, the cost of doing nothing will only increase.
The secret is the ability to create a sense of belonging and cohesion among all people in a business or organisation, without glossing over the differences in their experiences, values and skills. Finding commonalities while also understanding and leveraging our differences can yield big rewards.
Rockwell Automation, a global engineering company, is finding this out first-hand. The company wanted to increase the gender and ethnic diversity of its North American sales division, which was historically dominated by white men. But rather than embarking on a diversity recruitment initiative, it focused on changing its culture first.
Working with White Men as Full Diversity Partners, a leadership development organisation based in Oregon, Rockwell began from the premise that, like it or not, group identities matter.
Central to effectively leading people “like us” and people “different from us” is first understanding how our own group affiliations affect us and the ways in which others react to us. For the mostly white male leaders of Rockwell’s North American sales division, this meant grappling with something most white men don’t think of: what it means to be a white man.
Programme participants examined white male culture and experiences, and also practised skills such as critical thinking about how colleagues’ group memberships affect their work experiences, addressing rather than avoiding difficult points of difference among colleagues and actively seeking out perspectives of colleagues from different backgrounds.
A follow-up study by Catalyst on the impact of this program found early evidence of a cultural shift, including an increase in workplace civility and a decline in negative gossip. In addition, participants began letting go of the myth of meritocracy – that the best talent naturally rises to the top of organisations – and started to accept that group-based inequities exist. Importantly, managers also began to understand how they play an integral role in creating an inclusive work environment where all talent can be tapped and valued equally.
For Rockwell managers, recognising that staff were affected by and responsive to their identities as white males was a breakthrough that made them more inclusive and effective leaders. This is a critical lesson for other organisations: rather than feeling responsible for group-based inequities that they did not create, white male managers should feel empowered and equipped to lead the creation of an inclusive workplace.
The results at Rockwell are a testament to the power of turning old ideas about leadership upside-down and the importance of understanding and managing group identities through honest dialogue. Empowerment and skill-building, not shaming and blaming, are key to engaging men as advocates for change.
Jeanine Prime is vice president for research at Catalyst
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Shinzo Abe is doing what many economists have been calling for in the US and Europe: a comprehensive programme entailing monetary, fiscal, and structural policie
Japanese prime minister Shinzo Abe’s programme for his country’s economic recovery has led to a surge in domestic confidence. But to what extent can “Abenomics” claim credit?
Interestingly, a closer look at Japan’s performance over the past decade suggests little reason for persistent bearish sentiment. Indeed, in terms of growth of output per employed worker, Japan has done quite well since the turn of the century. With a shrinking labour force, the standard estimate for Japan in 2012 – that is, before Abenomics – had output per employed worker growing by 3.08% year on year. That is considerably more robust than in the United States, where output per worker grew by just 0.37% last year, and much stronger than in Germany, where it shrank by 0.25%.
Nonetheless, as many Japanese rightly sense, Abenomics can only help the country’s recovery. Abe is doing what many economists (including me) have been calling for in the US and Europe: a comprehensive programme entailing monetary, fiscal, and structural policies. Abe likens this approach to holding three arrows – taken alone, each can be bent; taken together, none can.
The new governor of the Bank of Japan, Haruhiko Kuroda, comes with a wealth of experience gained in the finance ministry, and then as president of the Asian Development Bank. During the East Asia crisis of the late 1990s, he saw firsthand the failure of the conventional wisdom pushed by the US Treasury and the International Monetary Fund. Not wedded to central bankers’ obsolete doctrines, he has made a commitment to reverse Japan’s chronic deflation, setting an inflation target of 2%.
Deflation increases the real (inflation-adjusted) debt burden, as well as the real interest rate. Though there is little evidence of the importance of small changes in real interest rates, the effect of even mild deflation on real debt, year after year, can be significant.
Kuroda’s stance has already weakened the yen’s exchange rate, making Japanese goods more competitive. This simply reflects the reality of monetary policy interdependence: if the US Federal Reserve’s policy of so-called quantitative easing weakens the dollar, others have to respond to prevent undue appreciation of their currencies. Someday, we might achieve closer global monetary-policy coordination; for now, however, it made sense for Japan to respond, albeit belatedly, to developments elsewhere.
Monetary policy would have been more effective in the US had more attention been devoted to credit blockages – for example, many homeowners’ refinancing problems, even at lower interest rates, or small and medium-size enterprises’ lack of access to financing. Japan’s monetary policy, one hopes, will focus on such critical issues.
But Abe has two more arrows in his policy quiver. Critics who argue that fiscal stimulus in Japan failed in the past – leading only to squandered investment in useless infrastructure – make two mistakes. First, there is the counterfactual case: how would Japan’s economy have performed in the absence of fiscal stimulus? Given the magnitude of the contraction in credit supply following the financial crisis of the late 1990s, it is no surprise that government spending failed to restore growth. Matters would have been much worse without the spending; as it was, unemployment never surpassed 5.8%, and, in throes of the global financial crisis, it peaked at 5.5%. Second, anyone visiting Japan recognises the benefits of its infrastructure investments (America could learn a valuable lesson here).
The real challenge will be in designing the third arrow, what Abe refers to as “growth”. This includes policies aimed at restructuring the economy, improving productivity, and increasing labour-force participation, especially by women.
Some talk about “deregulation” – a word that has rightly fallen into disrepute following the global financial crisis. In fact, it would be a mistake for Japan to roll back its environmental regulations, or its health and safety regulations.
What is needed is the right regulation. In some areas, more active government involvement will be needed to ensure more effective competition. But many areas in which reform is needed, such as hiring practices, require change in private-sector conventions, not government regulations. Abe can only set the tone, not dictate outcomes. For example, he has asked firms to increase their workers’ wages, and many firms are planning to provide a larger bonus than usual at the end of the fiscal year in March.
Government efforts to increase productivity in the service sector probably will be particularly important. For example, Japan is in a good position to exploit synergies between an improved healthcare sector and its world-class manufacturing capabilities, in the development of medical instrumentation.
Family policies, together with changes in corporate labour practices, can reinforce changing mores, leading to greater (and more effective) female workforce participation. While Japanese students rank high in international comparisons, a widespread lack of command of English, the lingua franca of international commerce and science, puts Japan at a disadvantage in the global marketplace. Further investments in research and education are likely to pay high dividends.
There is every reason to believe that Japan’s strategy for rejuvenating its economy will succeed: the country benefits from strong institutions, has a well-educated labour force with superb technical skills and design sensibilities, and is located in the world’s most (only?) dynamic region. It suffers from less inequality than many advanced industrial countries (though more than Canada and the northern European countries), and it has had a longer-standing commitment to environment preservation.
If the comprehensive agenda that Abe has laid out is executed well, today’s growing confidence will be vindicated. Indeed, Japan could become one of the few rays of light in an otherwise gloomy advanced-country landscape.
The Bank of Japan says it will dramatically expand money supply in a key policy shift, as it tries to stimulate growth in the world’s third-largest economy.
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Breakup of Financial Services Authorities puts Bank in charge of regulation and crisis avoidance in biggest shakeup since 1997
The Bank of England will become one of the most powerful central banks in the world on Monday after the biggest overhaul of financial regulation since 1997.
As part of sweeping changes that will undo the system set up by former chancellor Gordon Brown, the Financial Services Authority (FSA) has been replaced with three new bodies – the Financial Policy Committee (FPC), the Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA).
Slammed for being “asleep at the wheel” during the financial crisis, the so-called tripartite structure – comprising the FSA, the Treasury and the Bank of England – has made way for a new system to regulate the financial sector and ward off future crises.
With the FPC and the PRA sitting within the Bank, it has taken on vast powers and responsibility not just for regulating lenders, but also spotting and preventing possible financial shocks. It marks a return of regulatory powers to the Bank, which were taken away when it was given independence in 1997. George Osborne is hoping the shakeup will plug the gap in the tripartite system that left no one taking responsibility to monitor risks to the financial system as a whole, such as in the pre-2007 lending boom.
He criticised the structure for being “incoherent” and “without clear lines of accountability”.
The lack of oversight led to the excessive lending that sparked a sub-prime mortgage crisis and in turn the credit crunch and banking meltdown. Regulators worldwide have now accepted the need to have macro responsibilities to avoid a repeat of the financial crisis.
There were also specific faults within Britain’s financial regulations that the new system aims to iron out. With its self-proclaimed “light touch” regulation, the FSA failed to rein in banks. It later admitted mistakes were made before the collapse of Northern Rock, while it appeared woefully inept in preventing the banking scandals that have emerged in recent years – such as the Libor interbank rate-rigging affair and mis-selling of payment protection insurance (PPI) and interest rate swaps to small businesses.
There are hopes the new system will have more teeth.
With the FPC acting as the pillar of the new regime, it will take the broadest overview of financial regulation. The PRA will ensure banks and insurers have enough capital and liquidity, while the FCA will protect consumers by promoting effective competition and regulating financial services companies.
PRA chief Andrew Bailey has already promised a more intrusive approach to regulation of the 1,700 financial institutions under his remit.
His counterpart at the FCA, Martin Wheatley, has also pledged to clean up the sector with new powers to suspend or ban products.
The FCA, which will sit outside the Bank, will also be able to fine firms.
But there are concerns the Bank will become too powerful, given that it also has responsibility for monetary policy in the UK.
In a stark warning, the former head of Germany’s central bank said recently it risked impacting its independence.
Ex-Bundesbank boss Axel Weber, who currently chairs Swiss group UBS, said he “flatly refused” to take on a regulatory remit when he was head of the bank due to concerns over independence.
However, the new structure heralds a new era for UK financial regulation after the banking crisis.
There will also be a change at the top of the Bank, with Canadian Mark Carney taking over as governor from Sir Mervyn King in July.