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

Tweet 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.

Red tape and workers' rights

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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.

Saving the £?

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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.

Unionists and separatists

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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.

Trailing Scotland

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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.

Let us collect the money

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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.

The Welsh connection

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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 some ‘fishing’ questions 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.

History, empires, and free publicity

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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.

Not asking the right question

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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.

Overheads and packages

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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.