Friday 28 October 2011

Good performance, bad performance - just give me the money...

When large companies are doing well, those at the top feel justified in paying themselves ever higher rewards for achieving that success.  And when they do badly, those at the top feel justified in paying themselves ever larger rewards for taking the tough decisions necessary to reverse the decline. 
Or so it would seem, from the news today that boardroom pay for the UK’s top companies has risen almost 50% over the past year, at a time when those collecting those rewards have been slimming down their companies and telling the shop floor workforce that they’ll have to work longer hours for lower pay.
I was going to look at whether, and to what extent, the performance of the companies is actually down to the performance of the directors in any event, but Chris Dillow has already done that job much better than I could.
Whilst there are always some exceptional individuals around, most of those in boardrooms probably got there by a combination of accident and luck – being in the right place at the right time is one of the key factors.  They wouldn’t agree with that assessment of course; they all have sufficient self-belief to be convinced that they’re all so exceptionally talented as to deserve whatever they can get.
The real questions are why so many others seem to believe that as well; and why we let them get away with it.

Thursday 27 October 2011

Red tape and workers' rights

Politicians love to talk about abolishing this terrible stuff called ‘red tape’ which clogs up the private and public sectors alike and threatens to bring the entire economy to a complete halt.  They usually claim that just by cutting the stuff out they can solve most of the problems faced by businesses.  Some of them are so enthusiastic that one could almost believe that it’s also the solution to world poverty and hunger.
It’s something which strikes a chord with the general populace as well.  We’re all against unnecessary bureaucracy, but as I’ve mentioned before, defining what is, or is not, unnecessary bureaucracy is a lot harder to do.
One of Cameron’s early acts as PM was to appoint Adrian Beecroft to conduct a review of ‘red tape’ and recommend what could be abolished.  I don’t think that I would have selected a venture capitalist to undertake such a rôle, but I suppose it’s the sort of background likely to produce the sort of report which Cameron wanted.
There have been a number of leaks of some of the things he’s going to recommend over recent weeks, in both the Times and the Telegraph.  Jaxxlanders draws attention to this and this in the Telegraph, and both the newspapers referred to another of his proposals a couple of weeks ago as reported here.
(As a complete aside, Nick Clegg’s claim that ‘for every hour someone in a big company spends on paperwork, it takes nine hours in a smaller firm’ looks to me like one of those politician’s statistics.  It’s simply not credible as a generalisation, and I’d be doubtful if it was even true in a specific instance.  The alarming thing is that he probably believes it – worse still, that it’s an assumption underpinning the adoption of policy.
Peter Black claims this whole issue as another example of how "Liberal Democrats are acting as a bulwark against the worst excesses of the Tory right wing".  That depends on quoting Vince Cable's aides and ignoring the fact that the policy was, according to the Telegraph, launched by a certain Nick Clegg...)
Now, I don’t doubt for one moment that enabling employers to sack anyone who they consider to be underperforming, with no comeback beyond statutory minimum redundancy pay, is something that the worst employers would like.  As Beecroft himself admits, it would also allow some people to “be dismissed simply because their employer doesn’t like them”, something which he describes as “sad” but “a price worth paying”
Creating a climate of fear of unemployment in the workplace may even improve the efficiency of some companies, particularly those whose management is incompetent to start with.  As I’ve suggested previously however, if we want to build successful businesses we should be dealing with the incompetence, not condoning and licensing it.
Nor do I doubt that delaying the introduction of auto-enrolment into a new pension scheme would save companies money.  But it would also leave those who would benefit from auto-enrolment in a worse position at retirement – another ‘price worth paying’ presumably.
It’s all of a piece with the general attitude of the UK Government at present.  There’s a price to be paid for economic recovery, it’s a price worth paying, and it will be paid largely by those at the bottom whilst those at the top continue to reap the extra rewards for introducing ‘greater efficiency’.
But what these proposals are most emphatically not about is reducing unnecessary ’red tape’.  Employee protection is not worthless bureaucracy, and only those who see employees as little more than a costly but sadly necessary resource would ever think that it was.  Such as venture capitalists and the hereditary rich, for instance.
This is an ideologically motivated attack on employee rights, and an attempt to further shift the balance of power away from labour and towards capital.  Others who talk glibly about abolishing red tape should be more careful with their words, and spell out their specifics rather than talk in generalities.  Otherwise, there is a danger that they unintentionally legitimise that attack.

Wednesday 26 October 2011

Saving the £?

Tom Bodden’s report on the SNP’s drive for independence refers to one aspect of the SNP’s proposals which I hadn’t previously realised.  An independent Scotland, he says, “would retain the pound as its currency and any decision to join the Euro would be taken in a referendum”.  That surprises me somewhat.
I can understand the political imperative behind it.  It makes the independence option look a little ‘safer’.  And I’ve heard many nationalists in Wales arguing that an independent Wales should retain the pound as well.  But it’s the economic rationale that I don’t understand.
As a part of a unitary state called the UK, with its own currency called the pound, Wales and Scotland send MPs to the Parliament in London, where they have as much (or as little) influence over monetary policy as any other MPs.  As direct members of the European Union and part of the Eurozone, Wales and Scotland would have as much (or, again, as little) influence on monetary policy for that zone as any other states of comparable size.
But to be part of a currency union with another country whilst having completely separate governing arrangements would mean having no influence whatsoever over monetary policy, and being completely at the mercy of decisions taken elsewhere.  I don’t understand why anyone would want to go from ‘not having very much influence’ to ‘having no influence at all’ over one of the main levers of policy affecting their economy.
I sympathise with the desire by some to see an independent Wales (or Scotland) adopting a currency of its own.  It makes a certain sense from a nationalist perspective, and puts the maximum level of power over monetary policy into the hands of the Welsh Government.  But it also seems to me to be attempting to swim against the tide of history.  For all its troubles, I’m still convinced that european currency union is here to stay, and that membership of that union is the least worst option for a newly independent state.
I’d rank an independent currency as the second option though.  But being an independent country and sticking with the pound looks to me like the worst of all worlds option.

Tuesday 25 October 2011

Unionists and separatists

Two short-hand terms for very different political outlooks, but I don’t really like either term.  Neither really conveys what it is that people are about.  The debate and vote in the UK parliament yesterday underlines the limitations of the terms as explanations of the political stance of the respective camps.
In that vote, the ‘unionists’ were those supporting the continued existence of the European Union, whilst the ‘separatists’ were those demanding an immediate vote on exit.  Yet, when it comes to the future of Wales and Scotland, yesterday’s UK ‘separatists’ tend to find themselves in the unionist camp, whilst those of us at whom the term ‘separatist’ is frequently hurled by way of insult tend to be supportive of the European Union (even if we don’t always agree on the form of that union).
Those who seem most keen to tell us that ‘we’re stronger together’ often seem to take quite the opposite view when it comes to that strange place which they call Europe, of which they think that the islands of Britain are somehow not quite a proper part.  The fact that their belief in the value of union and togetherness stops at the white cliffs fatally undermines the integrity of their argument about strength in unity when applied ‘domestically’.
The size of the rebellion yesterday should concern us; it suggests to me that the real level of hostility to the EU within the Conservative Party is much greater.  The tactics of the Government in trying to tell the rebels that they agree with them really, and that it’s just a question of timing, underline that change in mood.  I wasn’t overly impressed with Miliband’s contribution either, telling MPs that Britain could not afford to leave the EU at the moment.  That’s hardly a robust counter-argument.
We’re at a point in history where Scotland seems poised to rejoin the world as a free nation, and there is at least a chance that Wales would follow later; it would be perverse if the UK Government were to decide that this was the time to try and stop the world and get off.  The attitude of the 'separatists' is probably one of the consequences of the imperial past, but the failure to accept and understand that ‘the past’ is where that attitude belongs is one which can only lead to further decline.
I want to see Wales and Scotland taking their places at the European table.  And I hope that, when we get there, England will choose to be there as well.  But I’m less confident about that now than I used to be.

Monday 24 October 2011

Trailing Scotland

The momentum behind the SNP’s drive towards Scottish independence shows no sign of flagging any time soon.  Quite the reverse, it seems to be growing.  And the gulf between what is happening in Scotland and what is happening in Wales is large and increasing.
Wales isn’t Scotland of course.  At times in the 60s and 70s it seemed that the progress of the two nations was on parallel paths, but the reality was that Scotland always started ahead, because of the different nature of the relationship with the rest of the UK, and the continued existence of national institutions north of the border where the equivalent institutions in Wales were organised on an EnglandandWales basis.
And whilst it’s important not to overstate the influence of individual personalities on politics, having a leader who not only believes in the aims of his party but also has the confidence and ability to articulate them with conviction has given the SNP a huge advantage over the other parties in Scottish elections.
I don’t know whether the Scots will actually vote for independence at the end of it, although I have a feeling that it will be a two-stage process – devo-max now, and independence at some point down the line.  The drive towards independence is being ably assisted by a divided opposition, which seems unable to put together any coherent positive argument for the union.  And doesn’t even seem to want to try – but believing that your case is so obvious and overwhelming that it doesn’t even need to be put looks to me like a losing strategy.
In that respect – the lack of a coherent argument for continuing the union – there is still a parallel in Wales.  With support for the independence option languishing at a low level, and the case for independence rarely being made, one could excuse the unionists here for thinking that there is no urgency to fill the gap.  That would be a mistake though; although the support for Scottish independence is now in the ascendant, it’s not that long ago that it, too, was at quite a low level.
Today’s letter in the Western Mail (available by scrolling down here) from David Melding shows that one defender of the union, at least, recognises the danger.  Not for the first time, he proposes a formal federal constitution as a means of preserving the idea of a United Kingdom whilst also strengthening the devolved bodies within the union.  I think he’s probably right; if I wanted to put forward the option most likely to preserve the union at this point, federalism is what I’d push, too.
He also, at least – and unusually for a Conservative – recognises that sovereignty belongs to the people, and if they decide to exercise it, then that is their right.  It puts him ahead of some others, who seem to believe that the people of England and Wales have some sort of a right to a veto on what Scotland decides.
But his plan will only work, as he identifies, if those in favour of the union come together and unite around it.  And that’s where his argument falls down.  His letter was in response to an article last week by Mick Antoniw, which Melding describes as ‘thoughtful’.  That wasn’t exactly my take on it.  I thought that it started out with too much stereotyping, more of an attempt to bash political opponents than engage in the more mature type of political discourse which is typical of Melding himself.  And it was more of a rallying call to the Labour Party than anything else.
The idea that the unionist parties can ever come together to agree a common response to developments seems to me to be unlikely for as long as they believe that they can individually gain more electorally by simply being negative.  David Melding seems to be one of the few who believe that politics ought actually to debate substance rather than merely score points and pursue power.  That makes him something of a lone voice on the unionist side; and the fact that he is so unusual hands the potential to the nationalist side to win the argument.
What Alex Salmond and the SNP have shown is that a political movement which seeks and exercises power can still, if it has the will, the ability, the imagination, and the confidence, articulate a wider vision and win people over to supporting that vision.  Vision and pragmatism don’t have to be alternatives; they can co-exist.  It's a lesson we need to relearn in Wales.

Friday 21 October 2011

Let us collect the money

No surprise at all to see David Cameron suggesting that all Wales’ problems are down to the Assembly Government not following the English lead on policy in education and health.  There is much about Cameron’s arguments which is open to more detailed scrutiny; in particular, the extent to which the change of policy in London since he was elected in May 2010 can have made quite as much difference as he seems to be claiming is surely questionable.
He is, though, being entirely consistent.  He genuinely believes that letting private enterprise and market forces loose in the fields of education and health will improve standards and reduce costs.  Whether that is true or not is another matter; there’s certainly nothing as self-evident about the assumption as its supporters claim.
But the underlying argument he puts today – that Wales would be better off if only we followed England – is one with which most of his party would agree.
Rather more surprising – and much less helpful – is the suggestion from Labour’s Baroness Morgan today that Wales runs the risk of a cut to its funding if it does not fall into line with England on tuition fees and prescription charges.  As reported, it almost seems to be suggesting that devolution is fine as long as Wales doesn’t actually use the powers it has to do anything different.  What, in essence, is the difference between that position and the position of Cameron?
The underlying problem is that the Assembly is still not a proper parliament, however often some might claim that it is.  Yes, it can make laws in a limited range of fields (although as the smacking debate showed earlier this week, the extent of those law-making powers remains shrouded in uncertainty); but without the powers to control and take responsibility for its own income, it will remain at the mercy of London.
The proposed review of taxation powers by the commission led by Paul Silk is hardly going to scratch the surface; allowing the Assembly to vary some elements of some taxes will still leave it overwhelmingly dependent on a block grant from London.  Dependent, in short, on a decision taken in London about what proportion of the tax revenues collected in Wales will be returned to Wales.
Better by far for all tax revenues collected in Wales to go to the Assembly’s coffers first, with an agreement about how much of that must then be passed to London for those services which continue, for the time being at least, to be provided centrally.  That’s far from being a soft option of course; it would force the Assembly Government into some hard decisions in the short term.  It would also, though, destroy any argument about Wales’ right to do things differently within our own resources.

Thursday 20 October 2011

The Welsh connection

The Western Mail reports today on the Welsh connection to the Liam Fox affair, in that one Stephen Crouch is one of those who appears to have been funding Adam Werrity’s little jaunts around the world.  The local MP, Simon Hart, is quoted as describing Mr Crouch as a former chair of the Carmarthen West and South Pembrokeshire Constituency Association.  The MP’s own website, however, still describes him as chairman as of this morning.  (Better get there quick though – I’d expect that to be changed fairly rapidly!  I'm sure it will be archived somewhere, though.).
(In passing, was I the only one to detect ever such a slight whiff of hypocrisy in Peter Hain’s call for Simon Hart to 'come clean'?  Presumably, just like he himself did over the donations to his ‘think tank’ when he was fighting for the deputy leadership of the Labour Party?)
I’ve referred to Mr Crouch previously.  He was the connection which led a rather colourful oil tycoon (and former mercenary boss) to donate £5,000 to the local Tories.  But he’s not a stranger to controversy himself.
In 1995, there were questions raised about his involvement in lobbying for the easing of sanctions against a certain Saddam Hussein, in order to make it easier for British companies to do business with the regime.  Never let anything get in the way of business, I suppose.  (Or perhaps I'm thinking of the Godfather there)
He was also the subject of somefishingquestions in the House of Commons about the extent of his own contacts with UK ministers (the last time the Tories were in power, as it happens).  It's the sort of thing that happens when MPs suspect that all isn't quite as it should be, but don't know exactly what they're looking for.  It’s an interesting parallel with the Werrity affair.  (And, like Mr Werrity, he seems to have had the ability to turn up in the right places on occasions.) 
I quite liked this one – a masterpiece of a non-answer if ever there was one:
Mrs. Clwyd: To ask the President of the Board of Trade when Ministers or officials of his Department last met Mr. Stephen Crouch.
Mr. Ian Taylor: Neither Ministers nor officials of this Department have met Mr. Crouch in his capacity as director general of the Iraqi British Interests Group.
There is, as they say, nothing new under the sun.

Wednesday 19 October 2011

History, empires, and free publicity

The Newsnight presenter, Jeremy Paxman, in a move which I’m sure is completely unconnected with any attempt to gain some free publicity for his latest book (or the BBC series to be based on it next year), has complained that the British Empire has been written out of the school history curriculum, and that that leaves pupils with an incomplete understanding of what has made ‘us’ what we are.
Actually, I think he has a point.  Like it or loathe it, the role which the British Empire played in making the world what it is today is significant; and it is hard to argue either with the idea that the imperial past of these islands continue to have an impact today.  Equally, though, the teaching of the history of Wales has long been deficient in our schools as well.  Knowing where we came from is an important part of understanding what we are, and where we came from necessarily includes both the Welsh and the British experience.
On one specific example, I think that he’s absolutely right to suggest that the readiness of recent British Governments to go to war on a regular basis is at least in part a hangover from the days of Empire.  An understanding of why and how that attitude is so prevalent would in itself not be a bad thing.
That raises, though, the question about what, exactly, should be taught.  Because whether a readiness to go to war is a positive or a negative result of that imperial past is a value judgement, not just a question of understanding history.  And I’m not convinced that there’s any such thing as ‘neutral’ history; the facts and events selected for teaching, and the importance ascribed to them are matters of perspective.
As with all of history’s empires, a rounded assessment of the British Empire would have to say that there were both achievements and brutality; good and bad.  Where the balance lies depends on perspective, not fact.  The empire enriched some and impoverished others; inevitably they will see it rather differently.
Some of his comments (“It’s to the Empire that we owe our sense of ourselves as somehow special, our distrust of continental Europe…”) do not encourage me to think that his history curriculum would bear much similarity to mine.  He has identified an important gap – but filling that gap is far from straightforward.

Tuesday 18 October 2011

Not asking the right question

The meeting between the Prime Minister, the Energy Secretary, and the ‘big six’ energy companies seems to have been a classic case of creating the appearance of action without actually doing anything very much.
That high and rising fuel prices are a problem is indisputable and that they impact disproportionately on the least well-off is equally so.  But exhorting energy companies to make their bills clearer, and to make it easier for consumers to switch supplier, is little more than tinkering on the fringes.  And there’s nothing new in any of it, as one of the more independent suppliers who was present stated after the meeting.
The response of opposition politicians has been little better.  Ed Miliband’s statement that the companies should use their profits to reduce prices is merely the most glaring example of a lack of will to implement real change.
There does seem to be some doubt as to whether the claim that the energy companies are making an average profit of £125 per household per year is true or not.  The companies themselves claim that it’s closer to £15, but I’m not sure how relevant any figure is. 
‘If £125 is too high, what’s the right figure?’ is not a question to which I’m hearing any answers.  And in any event, the percentage figure is more relevant that the absolute figure, and energy companies’ profits do not seem that far out of line with other profit-making businesses.
That goes to the heart of the inadequacy of the political response.  The underlying question – whether we want these services provided by companies whose main aim is profit – is not even being asked.  Suggesting that companies should sacrifice the interests of their shareholders for the benefit of their customers is like criticising the outcomes of the free market without challenging the underlying basis.
Government (or opposition) politicians could propose an alternative ownership model for energy companies, or they could propose legislation to limit profits or enforce lower tariffs, but they do none of those things – because they accept the basic economic model under which the companies operate.
That leaves them nothing to fall back on except pious words and spin, which will do little to alleviate the problems which many will face this winter.

Friday 14 October 2011

Overheads and packages

For decades, pension provision was seen and treated as part of an overall remuneration package.  Employees didn’t just get a salary, they got a package, and people thinking of changing jobs were encouraged to compare the total package, not just the headline salary. 
I’m aware that some employers even implemented flexible arrangements under which employees could, within agreed limits, sacrifice part of their salary for higher employer pension contributions, or even reduce the contributions for an increase in salary.  Such arrangements suited employees, who could vary the elements of the overall package at different points in their lives, and they were generally cost neutral (other than administration costs) for employers.  Above all, they encouraged people to think package rather than salary.
I’m not entirely sure at what point ‘part of the package’ became an ‘unaffordable overhead’ apparently provided by the employers out of the goodness of their hearts, but the perspective certainly changed.  Factors such as increasing longevity come into the equation, but I have a feeling that the crucial event was the raid on pension funds mounted by Gordon Brown when he was Chancellor.
I’ve never felt that he was wrong in principle; the previous tax treatment of pension funds gave disproportionate benefit to the most well-off rather than the least well-off.  But he was wrong, and badly wrong, in practice, by introducing the change without warning and with no transitional period for both employers and employees to adjust to the significantly increased contributions which would be required from both if previous pension provision was to be maintained. 
Overnight, an approach to occupational pension provision which had been so successful over decades was rendered unviable.  The pensions crisis may be coming to the fore under a Conservative-Lib Dem coalition, but the seeds were sown by Gordon Brown and New Labour.
The sleight of hand by which pension contributions have come to be regarded as an ‘overhead’ disguises the fact that employers reducing the benefits or increasing the level of employees' contributions are, in effect, reducing the total remuneration package of their employees as certainly as if they were simply reducing wages.  The wrath of those being hit by this attack is easily understandable.
The surprising thing to me is not that public sector employees are protesting so strongly, but that private sector employees did not protest more when the changes impacted them.  It underlines, perhaps, the extent to which economic power has become increasingly unbalanced in favour of capital and against labour.  However, the mere fact that private sector employees have already had to suffer the closure of final salary schemes and the prospect of reduced income after retirement is no basis at all for arguing that public sector employees should meekly accept the same fate.
It’s also often overlooked that not all public sector pension schemes are the same; some are much more actuarially sound than others, and there really is no need to treat them all on the same basis.  There are some serious problems though, particularly in those services where pensions are paid from current revenue rather than from a properly funded long term savings scheme.  Arguing that all schemes can just continue as they are is as disingenuous as arguing that they all have to change fundamentally.
What is surely clear overall is that we have a choice between reducing the size of pensions after retirement and increasing the amount saved before retirement.  The position we’ve got to seems to be that public sector employers are determined to make that decision unilaterally, just as private sector employers have already done.  It’s a short term decision though; it saves money today at the expense of potentially creating a bigger problem for pensioners in the future.
The government is giving conflicting messages as well.  On the one hand they say – quite rightly – that we need to save more to make provision for retirement, and on the other they seem likely to further postpone auto-enrolment in the new pension scheme because they want us to spend not save in order to boost the economy.  Long term needs conflict with short term ones, and as is usual with politicians, short term considerations are likely to win out.
Seeing pensions as part of a remuneration package rather than as an overhead puts potential industrial action by employees into its proper context.  There will have to be changes to the package in many cases, of course; but change should be negotiated not imposed, and public sector employees are right to insist on that.  That surely is at the heart of what trades unions are about.

Thursday 13 October 2011

Wants and needs

To listen to the voice of the ‘business community’, one might think that one key element on the road to full employment and economic growth is as simple as freeing business from ‘regulation’ – and in particular, allowing them to pay lower wages, have staff work longer hours, and limit employees’ rights as much as possible.  I can see how any individual business would see all of those things as enabling it to produce more for less and thus increase profits. 
At first sight, it’s no surprise therefore that the collective voice of business expresses this sort of view to government.  It should be though, because what individual businesses want, in order to compete against each other, isn’t necessarily what the economy as a whole – and all the businesses in it – really need.
The approach is grounded in looking only at the cost side of the equation, and only from the narrow, micro, point of view.  It’s a natural tendency, because costs are easier to control, but it isn’t the whole picture.
On the income side, businesses actually need customers with money to spend and time to spend it.  I sometimes wonder if every individual business trying to reduce its own labour costs to gain competitive advantage isn’t making the implicit assumption that the consumers of their products and services will be the ‘overpaid and unproductive’ staff of their competitors.  In effect, attacking pay and hours to compete only works as long as everyone else doesn’t do the same thing.
There is another implicit assumption being made as well, which is that as some businesses become more ‘productive’ and thus free up labour, then other businesses will expand, or be started, to take up the slack.  That’s an assumption which underlies the whole economic policy of both government and opposition.  And, albeit with a greater or lesser degree of success at different times, it’s proved a valid assumption, to an extent, over the long term. 
The fact that it doesn’t currently seem to be happening doesn’t necessarily mean that it won’t happen in due course, but it is at least possible that, this time, it won’t.  What happens then?  What’s Plan B?
The government and opposition alike would have us believe that the lack of investment at present is down to a failure of banks to lend.  And I'm no fan of banks, but there's a danger that they're just a soft target.  There is plenty of evidence that a lot of businesses, particularly the larger ones, are sitting on enormous pots of cash.  That would mean that it’s not a lack of cash which is holding back investment, but a lack of opportunities to invest profitably.
The political assumption is that any Plan B would essentially revolve around either public authorities investing in infrastructure, or else cutting taxes to put more money in people’s pockets so that they can go out and spend.  The evidence suggests that, of the two approaches, the former would be more effective, even though any jobs created are likely to be of temporary duration, partly because putting more money in people’s pockets at present is more likely to lead to a paying down of debt than an increase in spending.
However, if we assume for a moment that putting more money in people’s pockets would actually work, why the assumption that the only way to do that is to reduce this tax or that tax?  Paying higher wages by sharing the rewards more equally could potentially have the same effect, as could employing more people to reduce all the unpaid overtime worked by an increasingly stressed labour force.  (That would also give people more leisure time to spend the extra money as well.)
Reducing productivity and paying higher wages is counter-intuitive, of course.  We’ve been brainwashed into thinking that ever increasing productivity and cost reduction are inherently good things, just because they seem to make sense at the micro level.  But at the macro level, they only make sense as long as the assumption that something else will take up the slack remains valid.  Otherwise, those increases in productivity have to pay for the unproductive slack.
In that case, a real and radical Plan B involves a fundamental re-think about the basis on which the economy is run, and a move towards a more co-operative rather than competitive approach.  An economy, in short, which is built around the needs of the whole of society rather than around the wants of the minority.
They used to say that ‘What’s good for General Motors is good for America’, but it seems to me that, in economic terms, ‘What’s good for the whole is good for the parts’ is much more likely to be true in the long run than ‘What’s good for this part is good for the whole’.

Wednesday 12 October 2011

When is a job not a job?

The answer, of course, is when it’s ‘created’ by politicians.  The only ways that governments can directly ‘create’ jobs are by increasing public expenditure and employing people directly, or by establishing profitable state-owned enterprises.  Neither the UK Government nor the Welsh Government seems likely to do either of those things any time soon, so claims that they are creating jobs need to be treated with considerable caution.
That didn’t stop both governments launching schemes yesterday under which they are both claiming to be creating large numbers of jobs.  I wouldn’t seek to deny that both schemes have their merits; but I don’t think that the headline claims stand up to examination.
Perhaps it’s partly down to my definition of what a ‘job’ is.  For me, if a government claims to have created 10,000 jobs over its life, then, all other things being equal, I’d expect there to be 10,000 more people employed at the end of the government’s term than there were at the outset.  For governments, however, creating 10,000 jobs seems to mean that over the government’s life, 10,000 people will have had a job at some time or another, not necessarily concurrently, and not necessarily for any length of time.
So the Welsh Government’s scheme, headlined as creating 12,000 jobs for young people over three years, actually boils down to 12,000 people having a six month placement at some time during the next three years.  There is – and can be – no guarantee that a single one of those people will still have a job at the end of the placement, or that there will be any more people in work in Wales at the end of the three years than there are now.
Then we have the UK Government’s scheme.  The numbers look more impressive but when one compares the size of Wales and England, they really aren’t that different in scale.  And, again, there’s absolutely no guarantee of any jobs at the end of the programme.
One supporter of the UK coalition, Peter Black, gamely tries to draw a distinction between the two schemes under which the UK Government has got it right and the Welsh Government has got it wrong.  But there are more similarities than differences between the schemes; both are based to a significant extent on extended periods of work experience.  The underlying principle, that of making people ready for work and putting them at the front of the queue is the same.  And the underlying failure of both – that they do nothing to ensure that there will be any jobs for which to queue – is the same as well.
Chris Dillow has an interesting piece today when he suggests that, regardless of what governments do, we are in for a lengthy period of sustained high levels of unemployment, based on the fact that the level of economic growth needed to avoid that is simply not attainable.  It’s a depressing analysis, but he makes a good argument for the prediction, even if it isn’t one which he or I would wish to see fulfilled.
I’d even argue that, in trying to get more people into the labour market by encouraging mothers back to work and by forcing older workers to wait longer for their pensions, the government is actually making the task of attaining full employment harder, not easier.  Add to that the continued drive for increased labour productivity, and the availability of ever-larger and cheaper work forces in other countries, and the task starts to look well nigh impossible.
A more radical approach would be to share more evenly both the work available and the rewards for performing it, in a fundamental re-think of the way our economy works.  I’m not expecting to hear either government produce proposals for doing that though.  Much easier to just recycle claims about ‘creating’ jobs and hope people will believe them.

Tuesday 11 October 2011

Lawyers, advice, and politics

There have been a few comments this week about the story which first appeared, according to Dylan J-E, in the Sunday Times.  It was based on an anonymous source who said that the Scottish Government had considered a similar approach to that in Wales for paying fees for Scottish students studying in England, but had rejected the idea on the basis of legal advice received.
The motive for the anonymous source who started this particular hare running is unclear, although the motivation of those who’ve jumped on the issue to attack the Welsh Government is all too clear.  Both the Tories and the Lib Dems are hostile to the way in which Wales is giving its students a better deal than they are receiving from the coalition in London, and are only too willing to undermine the policy in any way they can.  They will be happy only when Welsh students face the same crippling levels of debt as those from England.
But I wonder for how long they can go on demanding the impossible level of assurances which they seem to be seeking.  The initial report was based on ‘legal advice’.  Now I’m no lawyer, but I’ve had enough dealings with those offering ‘legal advice’ to know that it is often no more than an opinion on how the law might be interpreted, and that different lawyers might well come to different conclusions.  And so might judges.
I haven’t a clue how robust the advice given to the Welsh Government was.  It clearly does not draw the same conclusion as the advice given in Scotland, but as is ever the case, it only becomes clear who is right when a ruling has been made.  For the Welsh Government to give the absolute assurance being demanded by the Tories and Lib Dems is unlikely to be possible without a test case being brought.  Up until that point, it’s just a difference of legal opinion, compounded with a whole lot of political bluster.
And, apart from politics, I can’t see any motive for bringing a test case.  If the Welsh Government won, then the current situation could continue; and if they lost, then they’d have no choice but to scrap the current provision as it relates to Welsh students in England.  There’d be no winners, only losers.
And even at a political level, the Tories and Lib Dems might take some satisfaction if they were proved right, but I can’t think that many students or parents of students would share their satisfaction.  It doesn’t even look like good electoral politics.

Monday 10 October 2011

Not all jobs are worth saving

This specific story is a couple of weeks old now, but the question of a tax on financial transactions is one which will be around for a while.  The Sunday Times referred to it again yesterday, but that’s hidden behind their paywall.
The UK Chancellor has already said that the UK will veto the tax unless it is agreed worldwide rather then in Europe alone, although those EU countries keen to see such a tax imposed are already trying to work out how they can find a workaround for any UK veto – perhaps by restricting the tax to the Eurozone.
The UK’s objection is based primarily on the potential job losses which might follow such a tax, amid concern that the activities will simply be relocated elsewhere.  And, if the effect of such a tax were to be solely the relocation of the activities taxed, then such a concern is perhaps understandable; but what do we mean by ‘relocation’?
The FT story said that such a tax would “wipe out or displace up to 90 per cent of derivatives transactions”; and there are two parts to that statement.  That mirrors the fact that those seeking the imposition of such a tax have two objectives, and for me the second, that of discouraging excessive risky behaviour, is the more important. 
As the EU’s impact assessment puts it, the term ‘relocation’ in this context “reflects both the move of activities elsewhere outside of the taxing jurisdiction and the disappearance of some types of activities … Such disappearance could be seen as positive if the activities targeted are considered as harmful”.
Certainly, it is true that some of the jobs would be relocated elsewhere, but many of them would simply disappear if, as the study predicts, “the volume of EU derivatives trades will plummet by 70 to 90 per cent”.  That looks like a good result to me, not the disaster as which those involved paint it.  These trades are part of what causes volatility and instability as speculators and gamblers play the markets; they add nothing to the movement and allocation of real capital.
It comes back to a subject I’ve touched on in other contexts in the past.  There are some forms of economic activity which, overall, do more harm than good, and supporting them because they provide jobs is a short-sighted view.  Those of us who want to rebalance the economy away from damaging activities have to accept that there will be job losses in the process – the challenge is to plan for the alternative future, not to protect the status quo.

Friday 7 October 2011

Politicians and the BBC

And on the subject of cuts and budgets…
One much-loved trick of public bodies when engaged in a struggle to either obtain more funding or else make unpopular cuts to services is to threaten to cut the most high-profile services first.  When the initial proposals are followed by the inevitable outcry, they either end up receiving more money, or else making the cuts elsewhere.  And those alternative cuts may still be unpopular, but will end up being accepted as the lesser of two evils.
I was reminded of this when I saw the proposals from BBC Wales today.  I cannot think of anything more likely to unite politicians across parties than threatening to cut the coverage of what they say and do, and it has, indeed sparked the unsurprising outrage from three of the four Welsh parties (although the Tories for some strange reason seem not to have objected yet – another indication that they don’t really care about Welsh politics, or have they just not cottoned on yet?).
The inevitable question in my mind is this – have the BBC already got a Plan B, and what is it?

Thursday 6 October 2011

Small sums, much fuss

Council and Government budgets are lengthy and complex, and I very much doubt whether more than a handful of those who vote on them can honestly say that they really know exactly what they’re voting for or against.  They have to pretend that they do, of course.  That’s politics.
There’s also a natural human tendency to concentrate on what we can easily grasp.  In one of my first meetings as a new councillor in 1979, I remember sitting in a council Personnel Committee and being stunned at how much debate there was about the expenditure of a few hundred pounds on a course here or there for a member of staff, whilst across the Council, expenditures of millions of pounds were nodded through with no scrutiny at all.
It doesn’t surprise me, therefore, that the political debate on the Assembly’s budget has concentrated on comparatively small sums rather than on the main thrust of the budget (a point which was also made on the Bevan Foundation blog today).
It’s partly down to the difficulty which most of us have with grasping a large and complex set of numbers; but it’s also partly about the difficulty of expressing complex alternatives to the public through the media.  Simple points hit home more readily than complicated debates.
One of the issues which has been thrown to the fore this year has been about the extent to which the Government is right to use its reserves to maintain expenditure.  (I’ll admit that I hadn’t understood until reading the Bevan Foundation article that the use of these reserves was a matter for the UK Treasury rather than the Welsh Government.  Update:  See comment from Peter Black below; this appears to be a misunderstanding by the author of the post at the Bevan Foundation.)
‘Reserves’ are always a thorny issue when budgets are discussed.  Typically, oppositions suggest that they should be used and ruling parties like to sit on them for a rainy day (or, more cynically, an election year).  There isn’t a ‘right’ amount to hold in reserve; whether using them is a ‘prudent way of trying to maintain services’ (or reduce precepts) in difficult times or a ‘raid on the piggy bank’ is a matter of opinion rather than fact.
What parties are trying to do in concentrating on the (comparatively) small, of course, is to use specific comprehensible examples to display their own values and approach.  I can’t help wondering, though, whether there isn’t a parallel with that Personnel Committee all those years ago.  Are the big sums really getting the scrutiny that they deserve?

Wednesday 5 October 2011

Weeding out the incompetent

Most people starting a new job know and understand that there is some sort of ‘probationary’ period, during which their new employer can sack them if they don’t prove themselves.  It’s easy to see why employers want such a condition; judging people on the basis of an application form, cv, and interview is never going to be as effective as judging their actual performance.  And it’s not an unreasonable condition.
But how much more protection than that do competent and effective employers really need?  To listen to some business organisations, the answer is lots.  What they really seem to want is to be able to hire and fire at will, so that they have maximum flexibility with no come-back; the employees are just a resource like any other. 
Sadly, the UK Government has been listening to such views, and has proposed extending the period during which employees are barred from bringing a claim for unfair dismissal from 12 months to 24.
(In passing, it’s interesting to note that the announcement was made by the Chancellor of the Exchequer – since when did he take on the responsibility for employment law?)
In effect, the government are proposing to double the period during which employers can legally sack someone unfairly.  It amounts to condoning unfair action by employers as long as it happens within the first two years of employment.
Why should we tolerate ‘unfair’ dismissal at all?  If the dismissal is fair, then the employer will win any tribunal case.  This proposal bans the reasonable cases as well as the unreasonable ones. 
The argument seems to be that there is a cost to the employer of having to defend any action, and abolishing the right to bring a case will therefore save businesses time and money – but there are surely better ways of weeding out the vexatious cases than simply banning all cases?
I can’t help wondering why anyone would conclude that the way to protect employers from unjustified claims is to abolish the rights of everyone, and simply allow unfair behaviour to go unpunished.  Allowing people to ignore health and safety rules for two years would be a good way of reducing their administration costs as well, but it doesn’t make it a good idea.
It’s another example of the thinking that the way to make business competitive is to give employers more freedom to treat employees as they wish.  Competent managers don’t need that sort of freedom.  We’d be better off ensuring that those running businesses have the competence and skills to do so, and to ensure that they treat employees fairly in the process, rather than simply licensing incompetence.

Tuesday 4 October 2011

Simon Says

With their repeated claims this week that the problem in Wales is that the Welsh Government is not following the same policies as the UK Government, the Tories demonstrate yet again their innate unhappiness about the whole principle of devolution.  The ‘encouragement’ by Cameron for the Welsh Government to follow the English lead in freezing council tax is just the most obvious example.
It leaves the Welsh Government in an uncomfortable position to say the least.  If the government was setting out to put more money back into the economy in order to stimulate growth, then freezing council tax would not be the most effective way to do that - restoring part of the cuts to the capital budget would be a more effective approach.
It’s also the case that the savings to householders will be greater for those in the largest houses in any area.  It’s not true to say that the freeze won’t help the ‘hard-pressed’ families; it’s just that it’s also a way of giving rather more to the wealthier.  It has more to do with seeking electoral popularity for the Tories amongst their target voters than with helping the most hard-pressed.
So, on both counts – boosting the economy and helping those most hard-hit by the economic downturn – the Welsh Government would be right to conclude that freezing council tax might not be the best approach.
But there is no doubt that the Tories have correctly assessed the popularity of the move; and there’s little doubt in my mind that it would prove equally popular in Wales, even if council tax bills are already demonstrably lower here than in England.  And with at least two of the opposition parties in the Assembly only too willing to jump on the populist band wagon on the issue, I suspect that the Welsh Government have very little option but to follow the English lead.
Attempting to bounce the Welsh Government into decisions by making announcements at a party conference with no advance warning to Welsh Ministers is not the way that the devolved administration should be treated.  It clearly demonstrates that the political imperative of party advantage has been given precedence over any idea of co-operation and consultation.
Coupled with the warning from 'RT' that devolution will suffer a real crisis unless the Welsh Government falls into line behind England on a range of policies (I know that wasn’t exactly what he said, but it seems to me to be what he really meant), it does not auger well for the next five years.

Monday 3 October 2011

Make haste slowly

The Government’s proposal to increase the top speed limit to 80mph will no doubt appeal to that section of the population which regards adherence to laws on speeding as being optional.  It tends to be the same group which regards the use of speed cameras as somehow ‘unsporting’, as if the whole thing is a game in which the main object is not to abide by the rules, but simply to avoid getting caught breaking them.
I worked with someone once who was always late for meetings, because he already had nine points on his licence and couldn’t afford to drive fast enough to arrive on time.  ‘Set out earlier’ was the thought that went through my mind; but the view that speed limits are somehow an unfair and unnecessary restriction on normal business is not unlike that being expressed by the current government.
There almost seems to be a sort of collective belief amongst some that speeding – like taking home the office stationery – isn’t a ‘real’ crime.  ‘Proper’ crimes have to have obvious victims, and an apparently ‘victimless’ crime should therefore be treated differently.  In reality, speeding isn’t victimless, and never has been - but it is true that the ratio of crimes to victims is different.  Whilst there is a victim in every single case of robbery, the same is not true for speeding.  Because the overwhelming majority of instances of law-breaking on the motorways do not have a victim at all, the misguided generalisation can gain credence.
The government’s thinking appears to be rather muddled, to say the least.  On the one hand, they argue that there will be huge economic advantages in allowing people to drive that little bit faster; on the other they argue that the law as it stands is unenforceable, since half the drivers are already exceeding the limit anyway.  I find it hard to reconcile those two statements, unless the intention in reality is to increase the effective, enforced speed limit from 80 to 90mph.
I’m not convinced by the argument that so many people break the law anyway, that it’s unenforceable.  It is, again, based on the idea that there are different degrees of crime; it’s certainly not a suggestion that would be made for most other breaches of the law.  Widespread disregard of a law is not, in itself, an argument against the law, particularly if a major part of that disregard is based on an unwillingness by the authorities to enforce the law.
Nor am I convinced by the argument that it will enable people to get to their destination sooner.  Most of the motorway network is so congested that theoretical top speeds are rarely achievable anyway.  Besides, work done by governments over many years has shown that total road capacity can best be increased by maintaining a lower and more consistent average speed – it’s what has led to the variable speed control systems used in places like the M25. 
And paradoxically, increasing the speed at which some travel could have the end effect of reducing the overall average speed of all motorists – leading to an increase in average journey time rather than a decrease.  The best overall average speed for all seems to be achieved when the variation between the speed of different vehicles is reduced, not when the speed of the fastest is increased.
The one thing that no-one seems to dispute is that the fuel and pollution cost of the proposed increase is significant, and will make it harder to achieve agreed emissions targets.  For a government which said it was aiming to be the greenest ever, it’s a major step away from that aim. 
It may also affect the balance of attractiveness between public and private transport.  Although the actual impact on journey times is likely to be minimal, that will not prevent people from believing that they can achieve a journey in a shorter time, and choosing to use their cars as a result.  That belief may not be rational, but that doesn’t stop people taking decisions on the basis of it.
All in all it looks more like an attempt to be populist in order to gain the support of a particular section of the electorate than part of a coherent transport policy.