Archive for the ‘Regulation’ Category

Energy market fail – the case for ordoliberalism

For once David Cameron has done the roughly right thing in restricting the energy companies to only four tariffs although I would have liked to see even fewer.

For years the received wisdom has been that competition – not just in energy, but generally – is a Good Thing; any evidence of that a market isn’t working properly is routinely greeted with calls for more competition.  It’s become so ingrained that almost no-one stops to question why it don’t always work as it’s supposed to.

Unfortunately for market fundamentalists, a growing pile of evidence suggests that their economic theory is wrong because it’s simply not an accurate description of how the real world works and ‘free market’ competition isn’t delivering the goods.  How this has been working (or rather, not working) was discussed on last week’s edition of ‘This Week’  with  guest Martin Lewis of Money Saving Expert (starts at 5:15).  His site has done a survey of its 14 million users and found that 80% don’t want the present system so this is political dynamite.

Martin Lewis pointed out that the energy market works as a regressive tax; affluent, middle class internet users pay the least while those in fuel poverty, disproportionately the poorest and oldest pay more, often substantially more.  He said that, whether or not Cameron really meant to say what he said on the subject recently, what he actually said is exactly what the public want, namely regulated prices.  For consumers competition has failed.

Michael Portillo reflected the uncertainty of many politicians.

“I think politicians reaching the point where they are beginning to lose faith in the ability of competition to produce the best deal for consumers but I think that is a big psychological and, kind of, philosophical moment if that’s what you actually conclude because, you know, for the last 20 years it’s been based on the idea that competition was going to give people a deal and in most things in life that’s exactly what happens. If you go to shops, telephones, if you fly on airlines, competition has brought down prices”

Note the positively baroque construction of his opening,“reaching the point where they are beginning to lose faith …“.  You can almost hear the gears shifting.  Whether he realises it or not he is calling the end of the era of neoliberal belief in the infallibility of free markets which Thatcher ushered in with her general election victory of 1979.   The old paradigm still rules by default in the absence of a better replacement but it’s mortally wounded and can’t stagger on much longer.

Portillo still clings to faith that competition reliably delivers in sectors other than energy.   However, here too evidence is piling up that not all is well with the received wisdom although, inevitably, the picture is complicated so no simple statement suffices.  I see at least three main problems (there are others but that would involve a book, not a blog post).

The first is the problem of ‘market failures’ including that markets don’t factor in externalities and that they reflect short-term supply and demand which makes them terrible where the long-term is important like planning for transport infrastructure or energy.  Market fundamentalists typically claim that market failure is rare and exceptional.  Indeed the whole basis of their faith is that ‘free’ markets (i.e. free of any government regulation) deliver optimal outcomes.

In reality, market failure is the norm.  To result in anything like a good outcome that is stable over time requires a long list of tightly specified preconditions which never, or almost never, occur in the real world.  For instance, any business sector with economies of scale (i.e. almost all) will tend towards concentration and oligopoly until the point is reached where competition is no longer effective.  The board game of Monopoly is a familiar example of how an early advantage drives growing concentration of power and inequality until it’s game over.

The second problem is that ‘free’ markets rarely exist – and then only briefly.  It doesn’t take long for oligopolistic businesses to work out how to influence the levers of power.  It helps the influencers that too many politicians are horribly star-struck and easily succumb to the glamour of money.  It can be revolving doors between companies and government, informal understandings with senior regulators and politicians, participation in standards-setting or even writing legislation.  The ways commercial power wins are limited only by human imagination – which is to say almost unlimited.  The result is the emergence of an interconnected elite.

Moreover, power abhors a vacuum so when government is weak the private sector quickly seizes an opportunity to fill the void.  If government decides not to regulate as a matter of either policy or weakness someone else will step in and the ‘law’ becomes whatever the new Mr Big says it is.   The law ran thin on the frontier of 19th century America so the theme of many westerns is the story of a big rancher employing a gang of thugs to enforce his own self-serving version of the law.  Much the same is true of Wall Street today thanks to the gutting of effective regulation as a policy choice.

The third problem is that real full-blooded competition is simply TOO effective for firms to survive it.  They must find ways of reducing the pressure on them.  The easiest way to do this is to merge with or take over rivals until the market is an oligopoly.  Hence the small numbers of serious players (typically 4 – 6) in a whole range of sectors from banking to supermarkets to energy.

It’s not that I’m against competition, far from it, but left to their own devices markets aren’t stable and won’t deliver the public policy goods.  Like advanced fighter planes the trade-off for high performance is that they are unstable.  The solution for planes is fly-by-wire systems that react faster than any human pilot ever could.

The solution for markets is the equivalent.  It’s a constant battle to keep them ‘open’ (subject to challenge) and keep them working for the public good.  This is a very different from what neoliberals advocate.

Equally, because full-blooded competition is ruinous it means that government should arrange things so that it is muted, so that there is a gentle pressure to improve and to innovate but not the imperative to eat the seed-corn to survive until next week.  That in turn means limiting pricing ‘freedom’ (aka anarchy) in sectors like energy.  And that is why I think Cameron, for once, is on the right track except I would like it to be even simpler – allow only one fixed and one variable tariff for each company with premiums and discounts for dual fuel or direct debit etc. expressed as a percentage.

This is ordoliberalsim and is the approach of most German liberals.  It’s worked rather well for them.

Nuclear power: renaissance or nightmare?

The thing with nuclear power is that while the risk of a serious accident may be small the consequences are monumental. Is this something we just have to live with or are there things we can do to minimise the risk of accidents and/or their severity if they happen? I think there are.

The physics involved is well understood and is NOT a problem, not even the disposal of high level waste (although antis like to pretend it is). What IS a problem is the regulation – by which I mean regulation in the widest sense covering design and operation plus the entire supervisory system from formal government agencies to the management company.

My introduction to this came in the late 1980s when I attended a series of conferences for my then employer (we sold into the civil nuclear business). At the first of these conferences a paper was delivered by someone developing an advanced reactor design. Among the advantages claimed for the new design was that it was failsafe.

What! That’s an advantage? You mean existing designs AREN’T failsafe?

That, unfortunately, turned out to be precisely what he meant. And that in turn precisely explains my thesis. It is and always was possible to design better, safer reactors but somehow no one involved in design or regulatory approval thought to insist on that. Nuclear safety is not about difficult physics; it’s about about managing people and organizations and priorities to eliminate, or at any rate minimise, risk.

On another occasion, conference delegates went on a visit to a reactor – Heysham near Morecombe in Lancashire. A senior manager from a continental utility asked about planning for the evacuation of people in the area in the event of an accident as mandated by international guidelines. He was puzzled how it could be done given the large population in the area. After some embarrassed foot-shuffling the locals admitted that there was no plan because it wouldn’t be possible to evacuate so many people.

Heysham is one of the sites where a new reactor is planned.

On yet another occasion, a few of us stayed behind to chat informally after one of the formal sessions. One of those present, the highly respected technical director of a major European nuclear utility, opined that some western countries shouldn’t host reactors. Someone asked who and why. He replied, “Oh! Britain. There isn’t a culture of engineering integrity and in any case Britain’s regulatory apparatus just isn’t up to the job”.

He was spot on about regulation as subsequent event have proven in many sectors – from the abysmal performance of the FSA prior to and after the financial crisis, to hospitals, to the examination boards and many more. He was also right about engineering integrity; it is the ultimate backstop for regulatory failures. Where it exists, a mid level engineer who spots a problem can expect to be taken seriously and not brushed off. In Britain the corporate and/or political context dominates and he will be told not to rock the boat. Everyone has someone higher up the chain on their backs wanting solutions, not problems. Messages pass down the line but not nearly so well up it so the engineering voice is not reliably heard in the boardroom.

Good luck and happy job hunting to anyone brave enough to suggest that, just perhaps, Heysham isn’t a suitable location for a new reactor. And by the way, tsunamis do happen in Britain but just not as often and not from the same causes as at places near subduction zones.

Our culture of confining engineers (and other technical disciplines) to the engine room below decks is part of the reason that engineers and the like don’t punch their weight in Britain. In all the years I worked in large companies I never came across a senior engineer (or whatever) right up to board level who told the accountants what management reports he wanted. Invariably, it was the accountants who decided – even when the accountants concerned were emphatically in the wet-behind-the-ears category.

Another part of the problem is the hostile framing and bad-mouthing of ALL regulation in some political circles. Propagandists for this view may never have intended it to be applied to reactor safety but the chances are that it will be sooner or later. Not every regulator at the coal (or reactor) face is as adept at getting the context right as the agenda-driven politicians who spout this nonsense so it’s a racing certainty that some will imagine that what they are supposed to do is deliver regulation-lite. After all that’s happened in banking, there are many regulators who still don’t understand (or don’t want to understand) that they should be enforcing the law (itself a type of regulation).

Then there is the question of the operating company’s ultimate objective. Is it ‘to keep the lights on’ or is it ‘to make a profit and keep the lights on’? Introducing a single additional objective can completely transform the outcome as anyone who saw last week’s Dispatches about Branson’s Virgin Care will know. Despite all the safeguards and regulations many patients of Virgin Care now find it very difficult to see a doctor despite a blizzard of justification from the company. I’m sure it’s not what Branson (or Andrew Lansley who drew up the enabling legislation) intended to happen but, like the fable of the scorpion and the frog, it’s in the nature of things that it does. Lansley and his fellow travellers put the health of the nation at risk by ignoring that simple fact. We must not make the same mistakes with nuclear.

In conclusion then, we can have safe nuclear power but only if we get the regulation right. That will require swimming against the current of established UK practice which is going to be immensely difficult for government to deliver. But we must try.

Retail rip-off – what the milk market should teach us about regulating the marketplace

Dairy farmers are back in the news; the processors who buy their production to sell on to supermarkets and food manufacturers want to push through a substantial price reduction that will see most farmers getting paid well below their cost of production.   Clearly this is not sustainable; if the processors succeed many farmers will be forced out of business, inter alia increasing our trade deficit in dairy products despite our having one of the world’s best climates for it.

To the extent that imports are involved I would bet a substantial amount that they are driven by lower welfare standards overseas and/or devious transfer pricing schemes whereby most of the profit ‘just happens’ (/sarc) to arise in subsidiary companies based in tax havens that provide a ‘service’ but never actually handle the milk at all.   Clearly, this is enormously beneficial to those involved but, equally clearly, it’s not in the public interest.

The problem is not that milk is ‘too cheap’.  Rather it is because well over 100% of the profit in the industry that should be equitably spread through the supply chain has been appropriated by the buyers.  (It’s over 100% since the farmers’ loss adds to the buyers’ profits).   They are able to do this because the supermarkets at the top of the food chain have the power to dictate terms so forming an effective oligopsony as described in an earlier post.   This has enabled them to pump up gross margins year by year; they rip off consumers while pretending to be their friend.

On the figures provided by the BBC adjusted to a single litre (and which are consistent with the time series included in my earlier post – see above link) supermarket make a gross profit of around 15 pence/litre which is nearly 30% of the selling price.   The BBC lamely ducks the issue of how much of this makes it to the bottom line as net profit but we can make a reasonable guess.  Logistics, store overheads etc. will all be minimal as it’s handled in bulk and sales are predictable.  Also we know (earlier post) that in the mid 1990s supermarkets got by on gross margins of only 1 or 2 pence.  So we can be very sure that the vast majority of the gross profit translates into net profit meaning that the supermarkets are achieving a ‘economic rent’ (roughly the excess profit above what they would get in a genuinely free market) of at least 12 pence per litre or around 25% of the selling price.

That is HUGE; if the margins on other goods are broadly similar (and I think many are) then this is a big part of the cost of living – especially for those on limited incomes.

So what is to be done?  If you are a plutocrat then nothing; for everyone else reducing prices raised by oligopoly is an even bigger prize than increasing personal allowances for the low paid.   Getting retail right also has a very direct bearing on other issues including Clone Towns and Mary Portas’ Review of the future of high streets.  But what can be done?

Any solution must start from the fact that the core issue is an imbalance of power.  So, for instance, suggestions that producers should differentiate their product miss the point – some limited differentiation around the edges may be possible but milk is fundamentally a commodity product.  Ditto an ombudsman or Food Market Regulator: having someone looking over the supermarkets shoulder, so to speak, may lead to limited interventions but it leaves the bad dynamics in place.

The first thing to say is that size is a problem in itself.  Retailing is a complex and demanding business but not exactly rocket science.  Nor does it require global companies with the resources required to design a new jetliner or get a new drug to market.   But it does benefit from economies of scale – largely (though not entirely) because the bigger you are the easier it is to bully producers – which means that the big get bigger and the small go extinct unless they can hang on in some niche.   Therefore left to its own devices a retail sector will evolve into an oligopoly where a small handful of large firms, all with similar cost structures, dominates the market.  In effect, regulation of the marketplace becomes privatised for the benefit of the biggest participants and freedom to evolve without limit in response to the market’s internal dynamics eventually ends in a market that is neither free nor fair.

So, the first conclusion is that the size of retailers should be limited.  This could be done in several ways, for instance by legislating that retailers must divest operations above a market share of, say, 20% in any one local authority area or 5% nationally.

The other way that retailing has traditionally been regulated is by mandating an equal price at either the wholesale level (US practice) or the retail level (UK practice).

The US Robinson-Patman Act  (and see also here) prohibited price discrimination by, in simple terms, requiring that the same price and other terms be given to all purchasers of goods for resale except insofar as the cost of supply is genuinely different.  The effect is to put all retailers on a level playing field with respect to their purchases.   The most obvious consequence is that large and small retailers can coexist which means that they are all kept honest by competitive pressure; many corner stores would think themselves in heaven to get ADSA’s margins and would gladly undercut them to increase sales – provided they could buy competitively!  A less obvious consequence is that producers who depend in large part on selling to retailers are not under the bully pressure that has characterised the UK in recent years; there is no particular advantage for a strong retailer to beat them into the ground as the retailer gets no advantage from so doing – any lower cost they negotiate has to be given equally to other retailers.  Another result is that it helps maintain a reservoir of small firms – and small firms are almost always the most innovative.

One of Reagan’s first actions on becoming President was to eviscerate enforcement of antitrust (i.e. anti monopoly) legislation to allow brute force to rule in the marketplace.   The fallout from this has been one of the biggest drivers in the subsequent growth of inequality.

In the UK regulation was accomplished by Retail Price Maintenance (RPM) until the 1964 Resale Prices Act which made most such agreements illegal.  (Libertarians ought to – but mostly don’t as far as I know – object to the RPA’s  flouting of privity of contract.)   RPM put the onus on producers to set competitive prices vis-a-vis their rivals while helping preserve a diverse retail scene but large retailers can still get better terms.  Absent RPM producers have no control over price which compromises their marketing and puts most on the back foot.   Interestingly, RPM survived for books until 1995 since when its demise has helped drive a huge concentration in retailing matched by a corresponding defensive concentration in publishing despite which most publishers are over a barrel, held to ransom by the few surviving retailers.

So, we face a stark choice; if we want a competitive market in goods we have to legislate to create and maintain a competitive marketplace.  If we don’t restore effective competition in the marketplace we can’t have a properly functioning market in goods.

 

Crime decriminalised

What have the Occupy protesters got to complain about?  Why don’t they just go home and leave things to the properly elected politicians?

Well, it turns out that they have a point.  As a new report shows, despite an epidemic of financial crime federal prosecutions in the US have fallen to under half their level of a decade ago.   The downward trend became firmly established in the presidency of G W Bush and has continued under Obama. The chart shows federal prosecutions each year for the last two decades and four presidents.

The FBI warned as long ago as 2002 that an epidemic of financial fraud was building yet nothing was done in the face of willful blindness on the part of bank executives, regulators and politicians.    Policing and regulation (which in this context are much the same thing) completely failed leading to the wave of subprime fraud which eventually broke in 2007 precipitating the world into Depression.

But the subprime meltdown would not have been nearly as serious as it was unless the system was already in a fragile state because so many banks and other institutions had long been exploiting the near absence of any regulation to make hay in ways that history shows inevitably lead to a meltdown.  So subprime was only the trigger.  Dozy regulators are one thing; remaining fast asleep after 2007 is quite another yet, as the chart shows, that’s exactly what has happened; prosecutions have fallen because, whatever the law say (and it says plenty) there had been a de facto decision to decriminalise … well, crime.

Obama came to power amid much hope that he would take control and sort things out.  But nothing; he reappointed Bush’s economic team and did nothing to prosecute offenders despite abundant evidence.  Which is to say that he, and his appointees like Attorney General Eric Holder have made being blind a matter of deliberate policy.   Obama might have chosen to clean out the frauds saying of the inevitable reaction, “I welcome their hatred” as FDR, who understood the score, said when faced with epidemic levels of fraud in the Great Depression.  Instead he chose to try to reconstruct the economy with the criminals in place – a policy that has failed.

Not surprisingly the country is seething and Occupy is the response.

Fortunately the situation is nowhere near as bad in the UK  but there is no room for complacency either.  Almost all the bailout has gone to the bankers and very little to the real economy – a point which last night’s Question Time audience clearly understood.  With the bankers likely to need another bailout very soon, the politics of this are going to get interesting; any party on the wrong side of events is going to be history.

HSE: stealth tax and bad regulation coming (and forget the promised moratorium)

Few government agencies are as necessary as the HSE – and few create so much annoyance with fatuous interventions.  Clearly, there is a tricky balance to be struck but unfortunately the government’s latest proposal is heading in the wrong direction.  A “fee for intervention” proposal is currently out for consultation which closes on the 14th October.  (I was unaware of it until I read a press report).

Basically, the proposal is to reduce the number of health and safety inspections by about a third – 11,000 per annum – as “part of a package of measures to change the culture…” and it will also start recovering its costs where it intervenes.  The justification for all this seems perfectly reasonable at first sight.  In the words of the consultation document,

… it is reasonable that duty holders that are found to be in serious material breach in standards – rather than the taxpayer – should bear the related costs incurred by the regulator in helping them put things right. A cost recovery principle will provide a deterrent to those who would otherwise fail to meet their obligations and provide a level playing field for those who do.

In reality it is riddled with problems.  For a start it’s not at all clear how these proposals will “change the culture”.  They say they are going to target higher risk industries and through the better use of “intelligence”.   These are admirable aims but are about better management, not changing culture.  What it’s really about is part funding the HSE through a swingeing increase in fines described in true Orwellian terms as “fees”.

Then there’s the question of the moratorium on new domestic regulations for small businesses announced only this last spring?   This is easily dealt with,

“Ministers have confirmed that the moratorium will not apply to these proposals …”

So, they were just kidding about the moratorium then; I’m glad they told us.

And there is the trigger for and level of fines fees involved.  Where any “material” (as opposed to merely “technical”) breach of health and safety law is found and followed up with a letter (or email)  the fees will apply, the amount depending on the complexity of the investigation.  The current hourly rate is £133 and it is estimated that a letter will typically result in a charge of £750 and an enforcement notice £1,500.  More complex cases will cost much more.

A “material” breach, the consultation document helpfully explains is, “When, in the opinion of the inspector, there has been a breach … which requires them to make a formal intervention [i.e. a letter].”  A “technical” breach is one where again, in the opinion of the inspector, a formal intervention is not required.

This really is a jobsworth’s charter.  Inspectors will be able to hit any arbitrary targets then might be set for the number of interventions or the amount of revenue raised simply by adjusting their opinion.  Or maybe it will depend which side of bed they got out of in the morning.  Either way the strong temptation will be to pick off low hanging fruit, meaning in practice smaller businesses that are unlikely to have the management or financial resources to challenge an inspector’s opinion.

Or to put it another way, this is just setting up a system that creates potential for conflicts of interest in the HSE.  We need to know that action is taken when, and only when, there is genuine risk and not just because the HSE budget is under pressure.

(For the avoidance of doubt let me say clearly that I’m sure that 95% of inspectors are thoroughly professional in their approach but no-one should be put in a position where they face contradictory directives from their management.)

From the point of view of small business this represents yet another regulatory minefield – exactly the sort of thing that is so unpopular and with just cause.  The HSE only has to be expert in one field, the business in every field.

If the government were serious about changing the culture, especially among harder-to-reach small companies, it would use inspectors more as consultants, going into firms to help and advise and resorting to formal interventions only when the management is clearly dodging its responsibilities.  For the majority of companies that want to improve their health and safety this would be a practical and cost-effective way to to so.  However, under the “fee for intervention” system a company would have to be mad to ask the HSE for advice.

Government should be helping British firms cut their costs and improve their efficiency while doing the same for its own direct responsibilities (which have the same relationship to the economy as a whole as do head office costs to an individual firm).  Unfortunately, this proposal doesn’t do so; it merely shuffles costs off the government’s books and onto the private sector’s books; it is an HSE stealth tax that rearranges the financial deck chairs but achieves no net benefit for the economy.  In fact it will almost certainly increase costs for the economy as a whole.

And it won’t do anything for the standing of the HSE which is a pity because it has an important role to play.

What’s your narrative?

George Osborne got quite an ear bashing from Sarah Montague on Radio 4’s Today programme yesterday (starts at 2:10:00).   He had to stick to his guns to insist that getting the deficit under control must take priority while she repeatedly asked why the government did not have a more activist growth strategy – saying, “You have got to stimulate the economy somehow, you have got to get the economy growing“.   She seemed fixated on the importance of tax cuts to do this coming back to the point again and again, at one point asking, “As a Conservative, who must believe that tax cuts boost growth – and I presume you do …?”   The question tailed off into silence and, tellingly Osborne did not say “yes, of course” although he later went on to affirm, although in a rather theological way, his belief in low taxes as a long run goal.

So, amazingly, it was the presenter pushing a particular policy while the Chancellor was more guarded and nuanced.

Sarah Montague’s simple faith that tax cuts will get the economy growing is shared by many Conservatives so maybe the Today programme has simply forgotten it’s duty to be impartial but I suspect that something a little more complicated is going on.   Perhaps, along with much of the rest of the population, some BBC presenters have unwittingly swallowed the neoliberal narrative that says that we should unshackle the market.  We should, they say, go easy on regulation and give firms and their bosses everything they want – including lower taxes.  And with it goes a threat; that if we don’t cut regulations and taxes, firms will flee the country for more benign locations taking their jobs with them.

As a narrative this works quite well; it offers a sufficiently joined up account of how things work to be credible at first sight and neatly sidesteps some problems.  Like, for example, that governments have worked hard to make it a self-fulfilling prophecy by making capital as elusive and globalised as possible by promoting London and various island outposts of Empire as tax havens while steadily shifting the tax burden from capital onto labour.

As a way of running the country it has been a disaster; given the huge pools of capital accumulated in recent years, the neoliberal narrative implies that there should by now be a tidal wave of money pouring into productive investments in the real economy but there isn’t.  Money stays in the financial casino or is cashed out into high living and country estates.  Neoliberals might argue that this is because we haven’t gone far enough down their road, but just how bad does it have to get for the majority before they’re satisfied?  What they are actually promoting is a race to the bottom.

We need an alternative narrative, a different story of how things work.  I suggest it might go as follows.

Companies are just like people; they have great potential but must live within a framework of rules to realise their potential and these rules must reward good behaviour and punish bad behaviour.  With good rules they will become responsible (corporate) citizens.  With bad or poor rules they are at great individual risk of going off the rails.  Some will certainly do just that; the bad will then drive out the good.  In particular, and again just like real people, companies tend to bunk off and take the easiest course – the path of least resistance – so the rules must work to keep them on the straight and narrow, focussed on activities that support public and community goals.

Note that this is very different from the regime we have had in recent years.  Then “light touch” regulation (meaning usually none) meant that firms could and did take the easiest route and in practice that meant financial speculation, casino capitalism, asset stripping and, increasingly, outright criminality.   In short, the neoliberal narrative is largely responsible for the mess the real economy is in and it’s time we changed it for a better one.

Hackgate: In partial defence of the Police

The Hackgate affair has exposed some sordid goings on at the heart of the establishment with the Murdoch press, politicians and police all guilty of, at best, some very poor judgements.

As far as I am concerned News Corp richly deserves the opprobrium heaped on it.  Companies invariably reflect the values of their leadership – as the saying goes “a fish rots from the head”.  Those values have clearly been sadly lacking and the crisis in which they find themselves is simply karma.   Rupert Murdoch may be a media visionary with talent far beyond his contemporaries or he may be merely a slick operator who discovered early in his career that the way to get ahead in media was to go relentlessly down-market and to have as many politicians in his pay as possible and to terrorise the rest.

But I do have some sympathy for the position the police find themselves in.   Some of the things they investigate are clearly priorities even in a world of limited resources.  Murder is the obvious example.  But what about the grey areas?   What happens when it’s not clear that what has happened is actually a crime or where the evidence is lacking or where it is undoubtedly a crime but is too trivial to prosecute?

The answer is, of course, that someone has to make a judgement call but this doesn’t happen in a vacuum.   It must depend on what the boss thinks is/is not important – and for a senior policeman than means key politicians, people like the Mayor of London (given that this is the Met), the Prime Minister and the House of Commons generally.

Well, we know what the mayor thought about hacking; his view was unequivocally that it was “politically motivated codswallop”.  And the PM?  Well, he was having Murdoch senior round for tea, visiting with Rebekah Brooks and employing Andy Coulson despite his having left News of the World under a cloud and multiple warnings.   Rebekah Brooks told the House of Commons Media Committee in 2003 that payments had been made to the police which is illegal and they chose not to follow it up.  Only when the whole affair blew up did they sanctimoniously ask Murdoch why he hadn’t pursued it.  Presumably only the fact that he was in “humble” mode prevented them getting the same question flung back at them.

So, with the whole political establishment lined up to support News Corp even when it strayed a bit (and perhaps a lot) over the line into illegality, what can a policeman to do?   Probably not a lot is the honest answer but don’t expect the Media Committee to agree with that view.  They look pretty foolish themselves and a fall-guy is needed.

My defence of the police is, however, limited by the fact that senior officers who should have known better were far too ready to take the Murdoch shilling as columnists, to dine with editors supposedly under investigation and to be willfully blind when reviewing evidence.

The politicians should redeem themselves by breaking up the News Corp empire in Britain.