Smart money, funny money

Mortgage equity withdrawal totalled £53bn in 2003: an all-time British record and the equivalent of the entire GDP of Ireland - which is pretty good going even by the standards of Britain's debt-happy homeowners.

That total equates to £8 out of every £100 of consumer spending and the pace at which equity withdrawal is rising suggests that it will set another record this year.

It is a prospect that is clearly alarming some members of the Bank of England's monetary policy committee. The question of whether consumer borrowing has reached unsustainable levels appears to divide the MPC, but the Bank's target is inflation, not house prices nor consumer debt - as the newly reappointed Kate Barker noted this week.

The Bank's research suggests that consumers are using the extra cash to pay off more expensive borrowing on credit cards or personal loans. That would be an entirely rational, indeed smart, response to the low mortgage borrowing rates.

The big snag is that it assumes consumers have learnt from past bubbles in the housing market - and the rapid acceleration in equity withdrawal suggests they have not. Those on the MPC who argue that another warning shot is required to get consumers to come to their senses have a case, even though inflation is below the Bank target.

Match point


Heinrich von Pierer, Siemens chief executive and occasional tennis partner of Gerhard Schröder, yesterday delivered an unplayable smash to the back of the chancellor's court. He set in train plans to cut up to 5,000 jobs in Germany and relocate them to eastern Europe or Asia - an act Schröder denounced in advance as "unpatriotic".

IG Metall, once Europe's largest union, threatened strikes at what it sees as up to 10,000 job losses and intoned: "The company has a social obligation to retain jobs in Germany."

Arguably, it is this encrusted fixation with the post-war consensus model that has turned Germany from Europe's economic powerhouse into its sick man. His Agenda 2010 programme of labour market and social security reforms stalled, Schröder is staring the fourth successive year of recession or, at best, minimal growth in the face.

A decade ago, the chancellor, then Lower Saxony premier, responded to a crisis at VW by engineering a four-day week - with virtually no loss of pay - to save 30,000 jobs. Now von Pierer is tearing up the old consensus by increasing weekly hours to 40 with no extra pay and cutting bonuses for overtime and holiday work.

This, not Agenda 2010, could mark the end of Germany's Gemütlichkeit and shake it out of its torpor. Where other firms such as BMW have increased their domestic labour force and opened new plants on home soil, Siemens is biting the bullet of globalisation and, in Anglo-American fashion, shifting output and jobs overseas - where labour costs are between 30% and 80% cheaper.

For a nation still digesting more than 4 million permanently unemployed, this is unpalatable fodder. The lumbering giant may need a dose of shock therapy and enforced diet to make it fit for the centre court again.

The big holdup


Network Rail's mildly sinister head office outside Euston station is known in the industry as "the black tower". The machinations within are a matter of myth and conjecture.

A rare glimpse inside was afforded by a Cabinet Office tome published yesterday entitled Making a difference: Reducing burdens on Network Rail.

Much of the study is strictly for enthusiasts only, containing worthy but dull initiatives on management consultancy favourites such as "streamlining reporting" and "enhancing communication processes".

But one staggering statistic leaps off the page. Every day, 300 staff at Network Rail occupy their time determining who is to blame for delays to train services. Every holdup of more than three minutes requires an "attribution" to decide who should stump up a fine.

At the birth of not-for-profit Network Rail in 2002, we were assured that Railtrack's bad old days of intra-industry squabbling were over. The new infrastructure company was set up with a board of 100 members - including representatives from other rail companies to ensure everyone worked as a "team".

Nothing annoys passengers more than self-indulgent finger-pointing between the cornucopia of entities responsible for operating the railways. As the transport select committee remarked yesterday, far too much valuable energy goes into "squabbling and buckpassing".

Network Rail insiders point out that the only way to learn from delays is to understand their cause. Careful analysis can lead to bright ideas to stop things going wrong in the future.

But it surely doesn't require 300 brains to arbitrate whether an incident was caused by track or train.

Let us hope that transport secretary Alistair Darling's review of the rail industry puts paid to this nonsense once and for all. After seven years, the government is still untangling the fiasco of knots left by the Tories. Britain can't afford to get it so badly wrong again.