economics

China is reinventing the equity markets – and Britain’s aspirations are shrinking

/ παρακοιμώμενος / Leave a comment

First, the exposition:

  1. Exuberance for equity as a class of investment reflects how confident a given society is in their future; preference for fixed income indicates the opposite
  2. China has been reinventing the equity markets for some time now, becoming the first country since the rise of the US to really have the risk appetite for it
  3. In doing so it is breaking the convention of maturing countries in the region (Japan, Korea, Taiwan) as well as ageing civilisations such as Europe
  4. As with so much else, China is the new America

The above can be seen in a number of ways. Consider this: despite the scare stories about rising Chinese debt, it is in fact equity (both institutional and private capital) which has mostly funded fixed asset investment in recent years – averaging 66% over the last decade versus just 52% over the decade before. Anecdotally too, we know that all around us in China new startups have no problems accessing micro-equity from friends and family for the most spurious of businesses.

Self-raised funding as a % of fixed asset investment in China, 1995 – 2016

Self-raised funds.png

Source: National Bureau of Statistics

Note: the NBS splits out five categories of funding for FAI, namely Government Budgetary Funds, Domestic Loans, Foreign Investment, Self-Raising Funds and Other Funds. It is reasonable to assume that Self-Raising Funds constitutes equity investment, and that a portion of Foreign Investment may also do.

Likewise, institutional equity and equity linked investments account for a higher proportion of Chinese asset allocation than their East Asian peers – and are more reminiscent of the US in approaching 60% of allocations. Conservative Japan and Korea are the reverse. Small wonder then, that annual stock turnover in China is far higher than other markets (around 5.0x compared to c. 1.5x in the US, Korea and Japan) given the limited supply of listed equity.

Equity proportion of total non-cash household financial assets, 2016

China vs peers portfolio allocation.png

Source: Goldman Sachs Investment Research, 2016

Again, this reflects the fundamentals of not only an economy, but the society on which it sits. Buoyant equity markets reflect confidence not just in business, but in the system and the role of a country in the world. This is especially true when we think about equity provided by the retail markets, either through stock markets, or its proxies, or through earlier stage funding such as seed and venture funding where China is now the world’s second largest market. The basic principle is that when tomorrow seems like it will be better than today, people will gamble.

China still has a long way to go, of course. Its stock market capitalization per capita at c. US$6,000, still lags its peers and is just one thirteenth that of the US (and no, PPP is not appropriate here). Its private equity market, though already Asia’s largest, still has some way to catch up also at only one-third of North America. Nonetheless, China seems to be well placed to pick up the baton from the US of driving the whole culture of equity and all its attendant benefits.

And it matters. The point about equity is not just that it is one source of funding, but rather that it is a source of long-term funding and seeding for growth. A country that begins preferring fixed income to equity is giving up on its future, but also giving up on the idea of being a leader in innovation and technology. It is no coincidence that America has been the world’s great equity proponent for the last century and the cradle of  most technology; or that China is following in its footsteps. These are the hallmarks of “big countries” that make their own rules and are a force in the world.

On the other hand, a country like the UK should be very worried indeed: equity in portfolio allocations has declined alarmingly from well before the 2008 crisis. This reflects some ageing – but the ageing profile is less severe than many of its neighbours. Rather, I believe it reflects a psychological retreat from aspiration.

Changes in broad strategic asset allocation for UK plans, 2003 – 2017

UK asset allocations

Source: Mercer European Asset Allocation Survey 2017

This, much more than Brexit or the reduction of blue water navy capacity, indicates the decline of British aspirations. On a recent podcast, someone asked “but how close is China to really producing an Apple?”; the curt reply came, “how close is Britain?”, alluding to the even greater absurdity of such a prospect. If this continues, Britain will certainly no longer be a “big country”.

Private equity with Chinese characteristics

/ παρακοιμώμενος / Leave a comment

Elsewhere, I intend to reflect on my pet theme that China is reinventing – and indeed single-handedly resurrecting – equity as an asset class. In my opinion, this reflects an underlying self-confidence and correlates with the emergence of other equity cultures such as the Netherlands in the 18th century, England / Britain in the 19th and America in the 20th century, in contrast to the contemporary Japans, Koreas and Taiwans of this world.

In the meantime, developments in Chinese private equity are also worth noting. For a start, when we talk about private equity in Asia ex-Japan, we are effectively talking about just one country: the PE market in Greater China reached US$222bn in 2016, whereas SE Asia combined only managed US$37bn. The ASEAN region has not yet emerged as a market of material scale.

However the prevailing orthodoxies of PE in China are also showing that the market will not come to simply resemble OECD behavior. As many observers will know, Chinese funds operate in a grey area between classic private equity and venture capital, and sometimes throw in an element of special situations or even hedge funds to boot. This comes through in the types of deals that are done – whereas conventional buyouts still account for almost 80% of the N American market, in China this is just 20%. Instead, growth capital and PIPEs account for a much larger chunk, itself revealing that PE funds typically take smaller stakes in Chinese targets and rarely buy the whole company.

Asian private equity deals by type (2012 – 2016)

PE by type

Source: AVCJ and Prequin via Bain Asia Pacific Private Equity Report 2017

Why is this? There are a number of reasons which play a part:

  1. Stage of development – the simple point that in a high growth market, sellers may be younger and in any case desire to have a greater piece of the future upside that a company might yet deliver. It also means that there is less appetite for use of debt in the transaction.
  2. Exit liquidity – by far the biggest problem PE funds have had in emerging markets is a clear pathway to exit. Recent turmoil in the Chinese stock markets for instance cause a lower risk appetite for funds, who may find it easier to sell a stake than to shepherd the company to IPO.
  3. Control issues – perhaps the most important matter, PE funds do not always have the confidence to take a company over completely since they will be susceptible to the vagaries of China country risk. A partner of some sort often seems necessary to keep a company functioning the way it has been historically.
  4. LP involvement – this leads neatly to the preponderance of strategic investors who exist in the market, and who it is better to work with than against. LP involvement in deals stands at 29% in APAC and an enormous 57% of deals over US$1bn, compared to a global average of just 17%.

LP involvement in transactions

LP involvement

Source: Bain Asia Pacific Private Equity Report 2017

So where does all this leave us? In my mind, there are a range of different players in the Chinese PE market, and they fulfill a range of roles. On the one hand, there are the classic international players, but often these are not capable of realistically doing a deal on their own without some sort of local partner angle. On the other end of the scale, you have the very Chinese funds who retain many of the classic characteristics of Chinese business ambiguity in their dealings – at times almost seemingly linked to the state. In between you have the good stuff – the international firms who have really localized and look and smell like Chinese funds; and the few local funds who have really made an effort to westernize in their business practices, if not their focus.

Here, purely subjectively based on my own experience, is an overview of the landscape of funds in and around China:

Chinese PE.png

This will cause many an argument, I am sure. But I have tried think about ways of reflecting the degree of “localisation” too. The best I could come up with involving an excel spreadsheet was to analyse where these funds were keeping their staff – the more onshore, the more localised they might be supposed. The results were interesting if not conclusive:

PE by office.png

Source: company websites

Warburg Pincus and Blackstone represent good counterpoints. Warburg is by common consensus one of the most successful foreign funds in China, and its staffing reflects this since more than half of the Asia employees are based in Beijing and Shanghai. This reflects the 26 Greater China deals they have done against the 4 in ASEAN. Blackstone on the other hand, prefer to hub-and-spoke out of Hong Kong (a business model which has had its day, as I have written before). Their deal count is correspondingly lower. It need not be added that sheer numbers of staff can help, but only if they are the right staff in the right places.

The lesson of all this is simple: China will be a very large, profitable private equity market, but it will do so on its own terms. As with much else, assuming that China will develop along the lines of its OECD counterparts is a recipe for disaster. Whilst it has some of the framework for creating a functioning market, the behavior will be totally different. Foreign participants will have a role, but they will have to adapt. This will be, as Deng Xiaoping said, private equity “with Chinese characteristics”; but perhaps we can also add, it does not matter if it is a local cat or a foreign cat, as long as it catches deals?

Why Barcelona are still not learning their lesson

/ παρακοιμώμενος / Leave a comment

Messi sad

Ousmane Dembele has just arrived at Barcelona for a “club record fee” of €105m plus add-ons which could take the total paid to around €140m, far eclipsing even the official updated €86m paid for Neymar that the club had to admit to two years afterwards (although the real cost may still be somewhat higher, and we may never know). Whether Dembele can emulate his predecessor in footballing terms is anyone’s guess; but more intriguing is the fact that he may emulate the superstar as a future exit – curiously, Barcelona seem not to have learned their lesson and set a buyout clause of only €400m.

€400m may seem a lot, but this summer has shown that numbers we could barely believe have a habit of becoming reality; if TV revenues increase, the figure will not seem excessive. But in any case, and more importantly, it is already not very high in the world of preventative buyout clauses. If any proof be needed that Real Madrid are better run than Barça at the moment, it can be seen in the buyout clauses currently in place. Not only is Dembele’s price, their newest signing, still way below the sums set by their arch-rivals, but so are all the rest of the squad – by some distance, too. Eight of Real’s stars have clauses higher than Lionel Messi, the best player in the world. Suarez and Busquets look at snip at just €200m.

Real Barca transfers

Source: Gab Marcotti via ESPNFC.com, updated for Asensio, Isco and Dembele

Why have Barça been so remiss and what explains this imbalance? Well first, to be fair, the Barça squad is just that much worse than Real’s. Other than the MSN, most of the others have passed their Pique (lol) and their clauses were signed in another era. Having said that, Cristiano Ronaldo’s €1bn clause was set as long ago as 2015, a full year before Neymar (Barcelona’s youngest and most marketable star) was set at only €200m rising to €250m over three years. Is it perhaps that Barcelona do not have the pull to get players to agree to prohibitive buyout numbers? Or is the board still arrogant enough to believe that players go to Barcelona for its “philosophy”? Either way, it is a failing of their fiduciary duties which would be prosecutable under UK company law.

Furthermore, Barcelona really have encountered a perfect storm. The inflation in this year’s transfer window has hit them just as an irreplaceable star has gone. To be clear, buyout clauses work very differently from normal transfer fees in terms of distorting the market. This is because a normal fee is, these days, usually paid out over a number of years; so that a transfer fee of €222m might only be about €55m per year. The rest of the market (though not the idiot fans) will “know” that the extra money available to the club who has just sold their star asset is only €55m at that point. But with a buyout, the money arrives instantly, meaning that the market is aware of both an entire €222m overhang, as well as the necessity to frantically spend most of it on a replacement. Furthermore, buyout clauses are by their very nature “supernormal”, higher than market valuations. This means that in turn they are causing inflation above normal market values when the money is spent in turn. In other words, it is not just usual “football inflation” (see my previous) but a buyout-driven super inflation. Barcelona this summer have become a footballing version of Mansa Musa I.

Of course in today’s world, only a few clubs are true “buyers”: Real Madrid, who do so from their own resources, and then PSG and Man City, who do not. Barcelona have ultimately been left on the heap as just another “selling club”, the dreadful epithet that even Man Utd had to understand when they lost Ronaldo to Real all those years ago. Barça just have not learned their lesson.

Why Chinese firms have a succession problem

/ παρακοιμώμενος / Leave a comment

Chinese society has long produced family business empires. A quick glance at any list of Asian tycoon families show them to be omnipresent, whether in Hong Kong and Taiwan or the further flung diaspora in SE Asia – including in Thailand and Indonesia where Chinese surnames have become so mutated as to be almost unrecognizable. It is not just Kwoks, Kweks and Lees, but the Hartonos and the Chearavanonts who are furthering traditional Chinese family values.

Everywhere that is, except China. It is fascinating to consider what is likely to happen on the Mainland over the next two decades, when the first generation of post-Deng businessmen finally start to retire. Many have noted the succession crisis facing these companies for some time; empirically, I have yet to meet a single 富二代 who has any intention at all of managing their parents’ business after their retirement. It is not just personal experience, either: a recent PwC survey showed some startling numbers contrasting modern China with its overseas counterparts.

Picture1

Source: PwC Family Business Survey (2016)

Fewer than one in five Chinese entrepreneurs surveyed indicated that they intended to pass down the business. This compares with somewhat higher numbers in Singapore, higher again in Malaysia and Hong Kong (c. 40%) and far less than in the most directly comparable jurisdiction, Taiwan. Here, almost three fifths of families want their children to take over – and indeed, they have already gone through one or more generational handover.

Why is this? The obvious point to make is that, as with so many other aspects, China will not be following any known development paths. But there are probably a few more specific reasons too.

First, there is the entire structure of the economy and the perceived pathway towards exit. Speaking to SMEs, many will tell you that their end game is to list the company, which is true as far as it goes. But the more important point is that they see the government as the likely ultimate inheritors of any important business, either officially or unofficially. In this sense, the incentive for dynasticism is limited and becomes less relevant the more successful a venture becomes. Instead, monetization remains the key aspiration.

Secondly, there is the creeping issue of inheritance laws. Again, we have yet to see the first real fortunes and large scale asset inheritances being tested in the Chinese legal system and anecdotally, it is notable that increasingly numbers of the Chinese middle classes have ceased to give birth abroad, fearing what the implications might be when largely domestic legacies come to be divided up under Chinese law. For companies which have now been successfully “domesticated” through policies such as a stringent foreign exchange regime, this becomes the same question writ large.

Most intriguingly of all though is the prospect of meaningful cultural change. Overseas Chinese families have an unbending sense of filial piety even today, with many younger generations taking over family businesses despite not wanting to. Modern China, post the Cultural Revolution and factoring in the One Child Policy, much less so. Furthermore, children educated in western business schools clash with their parents over management style. And for many, the rapid change in the Chinese economy means that their parents’ businesses are just too damned unsexy, as one observer notes:

The transition is particularly evident in the manufacturing industry; many children who are educated abroad shun the manufacturing sector and prefer to seek opportunities in finance and other ‘cool’ areas. Fortune Generation estimates more than 65 per cent of children whose parents own manufacturing businesses don’t want to be involved in the industry.

Why put the hours in, when you could use your parents money for funding the latest absurd tech startup?

However whilst this is all bad news for champions of Chinese traditions and parents who want to see more of their children, this does mean an impending surge of opportunities for  investors. It seems those PE funds really ought to be speaking first and foremost to the sprawling private wealth arms of the investment banks, rather than their corporate finance people.

The Handover Hangover – Britain and Hong Kong in the age of the New Normal

/ παρακοιμώμενος / 2 Comments

HK handover

The British media, between the endless coverage of the debacle that is Brexit, the May government and the spectre of Jeremy Corbyn, recently managed to find a little time for soul-searching over Hong Kong, on the twentieth anniversary of the 1997 handover. The hand-wringing tone over whether Britain had let the people of Hong Kong led the Guardian for instance to note that:

“Theresa May’s government faces a choice between upholding legal principle and democratic values, and its chronic post-Brexit need for Chinese trade and business at any price. No prizes, or yellow umbrellas, for predicting which way May and Johnson will jump.”

The torturous link to contemporary politics aside, these op-eds convey a tone of unfulfilled potential. Chris Patten weighed in with his own personal laments over what has slowly occurred since , self-flagellating over Chinese encroachment of the former colony.

Yet much of this seems rooted in misconceptions that still seem to pervade the British establishment. For a start, the very act of suggesting that Britain should “do something” about still hints, however much denied, that she is in a position to do so. This is unrealistic not only because of the relative imbalance but also the distance and relevance of the two countries, notwithstanding the occasional bravura peeks through, wishfully claiming that “China needs Britain more than Britain needs China“. This mismatch is true politically, culturally, socially and above all, economically.

In cold economic terms, it is not only the the imbalance that demonstrates relative strength – China incurred a US$37.6bn trade surplus in 2016 for instance – but also mutual insignificance. According to data, Britain is only China’s 9th largest trading partner, accounting for just 2.7% of Chinese exports, far from enough to move the psychological needle. Compare this with Germany, for whom the UK constitutes 7.1% of exports, or even the US at 3.8%. Britain and China are simply not that relevant to each other. China matters slightly more to the UK than vice versa, accounting for 4.4% of her exports (and arguably Chinese consumption of British goods such as high end cars is less easily replicable than in the other direction), but it is still not much of a basis for negotiations or threats.

Moreover, there appears to be a parochial misunderstanding about Hong Kong’s destiny as “just another Chinese city”. Critics will say that social and political life are not the same as economic life; to that I would say one necessarily follows the other. Consider a recent piece in the Financial Times about how the Hong Kong has changed since 1997. Two visuals stand out:

Hong Kong is increasingly no longer a regional hub but more of a China port. Yet this is not just a function of being on China’s doorstep, or even of China’s desire to integrate Hong Kong as some might imagine; it is rather a consequence of the fact that the old colonial entrepot model of corporate imperialism in Asia is gone. China is a self-sustaining economy of critical mass. The days of being able to “do” China from offshore, are as absurd as believing one can cover the US from London or Toronto. This is beginning to apply to other countries too, particularly Indonesia but also Thailand and increasingly, Malaysia. The concept of largely expat financiers and traders sitting in the comfort of the Victoria harbourfront whilst servicing these jurisdictions is faintly ridiculous; and this is a global emerging markets trend.

Asia has changed. The era when its leadership still had links with their former colonial rulers, such as the Cambridge-educated Lee Kwan Yew to Britain, is over. A telling moment was the closing in 2009 of the much-loved Far Eastern Economic Review, a deeply socio-political publication inhabiting a world where Asian leaders and western discourse still understood each other. Today, nothing could be further from the truth – as countries like China pass the “peak export” phase of their development cycle, their economies and leadership are inevitably more introspective. Each country must be engaged from a truly domestic perspective and cities like Hong Kong, and to an extent Singapore, are less relevant. There is nothing Britain can or should do about this.

At least Hong Kong, despite its comparative decline, still has a future bound up with a single large power. Singapore will soon come to find that its position as a safe haven for Indonesian and Malaysian investment and private wealth is under a more serious threat – which has led to their driving ambition behind ASEAN. London, in the end, will probably feel these winds of change too.

 

Labour’s unique “peacetime deficits” and why they really do always run out of other people’s money

/ παρακοιμώμενος / Leave a comment

Lots gets said on the campaign trail of course, much of which never surfaces again. Amongst the most pernicious claims by Labour recently are the implication that the police would be safer under Jeremy Corbyn – a man who almost certainly spent his youth referring to them as “pigs” and for all we know, throwing bricks at them – than a Tory administration. That one doesn’t really pass the smell test, though the Tories seem to have had a tough time batting it away.

However another meme has featured of late, attempting to reverse the traditional narrative of Labour being poor managers of the country’s finances  – or as Thatcher famously put it, that “they always run out of other people’s money“. Corbyn himself took aim at the the Tories’ admittedly poor record during this last Parliament on fiscal hawkishness; and meanwhile social media has been awash with this pair of pieces, claiming that “the Conservatives have been the biggest borrowers over the last 70 years“, a feisty assertion indeed.

But let us examine what is actually being said here. In his post, Richard Murphy concludes his analysis with these two lessons:

“First, Labour invariably borrows less than the Conservatives. The data always shows that. And second, Labour has always repaid debt more often than the Conservatives, and has always repaid more debt, on average. The trend does not vary however you do the data.

Or, to put it another way, the Conservatives are the party of high UK borrowing and low debt repayment contrary to all popular belief, including that of most radio presenters. Which means that the next time I am presented with that nonsense I will be very firmly rebutting it.“

This is technically true, looking at his figures. What it does not tell us however, is the real narrative, which is that once we strip aside natural deficits which were ramped up to obviously combat recession, the story is one of clear Labour profligacy. Below, I have charted GDP growth vs the budget deficit as a % of GDP at the time to demonstrate what the real macro-economic picture is.

Picture6

Far from Tom Kibasi’s recent claim that “the Conservatives remain stubbornly allergic to – or ignorant of – Keynesian macroeconomics“, the Tories have in fact been very mainstream in their use of the a cyclical deficit to offset the worst excesses of a downturn. These we might call “war deficits”. The most obvious case of this has been the deficits and increased debt incurred in the wake of the global financial crisis.

On the hand, Labour have had no problem with running up a deficit even when the economy is doing fine – in other words, refusing to make hay when the sun is shining. In particular, Gordon Brown’s second term as Chancellor saw a unique explosion of what we might call a “peacetime deficits”. This electoral extravagance was unprecedented in scale and duration, compared with previous dalliances with the same. And sure enough, when the crash came, the deficit left us with less room to manouvre than we might otherwise have had.

As an aside, Brown’s deficits also went on to limit the ability of the first Cameron administration to reduce the deficit as rapidly as they would have liked. Austerity is, after all, not merely a petty ideological point but a practical one – since the dry powder had been used up, the Coalition government could not borrow the amounts needed whilst preserving a reasonable credit rating. The whole sorry mess has been drawn out for much longer than anyone wanted or envisaged.

To be sure, the Conservative’s track record since 2010 has been nothing to write home about; but as with police funding, however bad you might think they are, it is difficult to imagine Corbyn’s to be anything other than significantly worse.

Not all imbalances are created equal

/ παρακοιμώμενος / Leave a comment

Trump Merkel

Finally, an opportunity to get my teeth into something classically “asymmetric”: trade.

A piece recently crossed my path, dripping with the complacency of either ivory-towered elites not thinking through the real world; or worse, a Koch-sponsored lobbyist who knows perfectly well the costs of globalisation but wants to hide it in the sophistry of undergrad economics in order to shift the conversation amongst those who do not know better.

It turned out, of course, to be by Dan Hannan, friend of a friend but also the kind of writer who has something of the over-enthusiastic undergrad about him, and is a paid up neo-con – hence the telltale signs above. It was misleading on a number of accounts, and I would go as far as to say, was quite mischievous.

First, the article starts by making fun of Trump’s complaint over German trade policy. Of course, broadly speaking the Germans are exporting a lot because they make great stuff. That’s fine. But the problem is that a good chunk of their competitiveness has nothing to do with their quality of manufacturing and everything to do with a form of currency manipulation, in the shape of the Eurozone. In this regard Trump is perfectly correct to say that they are “selling too much stuff” – just as many would accuse China of the same in recent years. I hope the author was not attempting to criticise the use of simple language for simple people.

Secondly, Hannan goes on to make this statement:

“Incidentally, there is nothing wrong with having a trade deficit with Germany, or with anyone else. Germans can do only two things with the American dollars that they get for their goods. Either they can import American products, or they can invest those dollars back in the United States. At the moment, they are doing a lot of the latter – to everyone’s benefit. The trade deficit is matched, down to the last dime, by the investment surplus. That is why we talk of a trade “balance.”“

This is not entirely correct. The fact is that because it is dollars and not any other currency, the Germans (or anyone else) can directly take those dollars and invest them elsewhere without the US being involved. This is the burden one bears for owning the currency of international trade, the “exorbitant privilege” of being the world’s only real currency. Of course this brings benefits to the US too, principally the ability to print as many dollars as they want and continue to borrow in it, without causing inflation or lowering their credit rating. Nonetheless, America does suffer uniquely.

Last is the issue that has been exercising Trump, Sanders, Corbyn et al (though sadly not Theresa May), namely that not all imbalances are created equal. It is all very well having a capital surplus to match your trade deficit; but the beneficiaries of a capital surplus – financial and real estate investors for instance – are not the same people losing out from the trade deficit. Capital inflows hugely benefit landowners and bankers, but don’t do so much for others.

For most large countries, it would be a pretty sad and politically unsustainable situation to rely only on capital inflows (though small entrepôts like Hong Kong or Singapore might fare better). It would almost certainly lead to unemployment and inflated asset prices – just as it has done in the US. And it won’t be the homes of unemployed steelworker in Bethlehem whose prices go through the roof either; it’s going to be the flats of white collar urbanites in Manhattan.

Herein lies the limitations of much classic economic theory. This is even before we get onto the issues of Europeans freeloading off American defense spending and so on. Really, the question is how on earth do we expect most electorates to digest enough of these nuances to make rational voting choices? With the likes of Hannan doing the talking, in all likelihood they never will.

The short term memory loss of the Keynesians

/ παρακοιμώμενος / Leave a comment

To kick on with this electoral theme, a first quick point on economics. In light of Corbyn’s now overtly socialist manifesto, and the accusations that “the Conservatives remain stubbornly allergic to – or ignorant of – Keynesian macroeconomics“, it is perhaps opportune for people to remember what the basis of Keynesianism – often in recent years confused with socialism – actually involves:

  1. Repayment of debt – after borrowing in the low interest rate part of the cycle, it is imperative to rebalance this by repaying this when interest rates rise in the upcycle;
  2. Crowding in, not crowding out – the purpose of government spending is only to pay for things that would not otherwise be paid for by the market; not to provide the same things at a subsidised rate;
  3. Tax cuts – Keynes made it very clear that the best and most efficient way to stimulate demand was not through public spending, but by returning money to consumers.

I wonder if elements of this can now be reclaimed by a responsible government, Tory or otherwise …