Redundancy notice period cut to 45 days. And?

So, err, there you are then as at 10.38 am the redundancy notice period (for large scale redundancies) has just been cut from 90 to 45 days.

I only found this out by chance via a noticeably bland BBC article. Reading through it I wondered why this wasn't regarded as big news given its a reasonably chunky change to the employment rights of millions of people with obvious, practical financial and employment implications for those being made redundant e.g. 45 days less pay plus 45 days less to find another job. You know, cheeky stuff like that.

At least the TUC has responded, but then you'd hope they would. Labour? Not yet although there is a "fascinating" piece on the latest inflation stats. The Guardian? Nope.  Not yet.

I don't know. What I do know is it makes clear, in economic policy terms, that the ConDem's have a fixation with "supply-side reform" (as in a euphemism for stripping away employment rights)  whereas (1) the UK economy is contending with a crisis of demand and (2) in terms of labour market flexibility the UK (a) already has a competitive advantage compared to much of the EU and (b) simply can't compete with Asia i.e. this is the product of nasty dogma, not reality, and is in keeping with the kind of policies Tory party donors want. Funnily enough it could also be counter-productive given it will encourage more people to save "just in case". Like if your house was on fire, this policy is the equivalent of someone trying to put it out by crapping through your letter box all the while expecting a please and a thank-you.


A 12.49pm update: So the Beeb is padding out its chat about this using articles dating back to May about how yer asset stripping, tax "efficient", debt-addicted, Tory funding, private equity boy Beecroftwas wanting things like this done. What's notable is the gap between then and now i.e. this appears to have sneaked out or been forgotten about, but hey its only employment rights, what do they matter.

 

What does S&P stand for?

Oh no, Standard and Poor’s (S&P) has revised its outlook on long-term UK government debt from “stable” to “negative”, meaning Britain is more likely to lose its “AAA” rating. Oh no!

Why (oh why) I wonder? Well, it’s because they think it more likely that “within the next two years … fiscal performance weakens beyond our current expectations. We believe this could occur in particular as a result of a delayed and uneven economic recovery, or a weakening of political commitment to consolidation.” Ahh, so “fiscal performance” means onsolidating government finances i.e. cutting the deficit. Ahhhh.

But, hang on a mo, isn’t there a tension between fiscal ”consolidation” i.e. cutting government spending/raising taxes and economic growth especially right now as per the following statement; “We continue to believe the government's efforts over the next few years to engineer the planned correction in the U.K.'s fiscal accounts will likely drag on economic growth”.

Ahhhh. So there is a tension, a proufound contradiction even especially when private sector demand is so weak, between fiscal consolidation and economic growth. I wonder who came out with that mad view? Err, that’d be S&P in the same note setting out why they’ve moved the UK to a negative outlook.

Except, further on S&P then say “We could lower the ratings if we conclude that the pace and extent of fiscal consolidation has slowed beyond what we currently expect. This could stem from a reappraisal of our view of the government's willingness and ability to implement its ambitious fiscal strategy.”. So at the same time as S&P is saying fiscal consolidation is a drag on economic growth they’re also saying they’d probably downgrade the UK if consolidation slowed down?

Oh. I guess you could go off on one here about double-think. Personally, it reads to me more like S&P are setting out their “analytical” prejudices (cut spending, cut spending) and reality, then failing to acknowledge let alone reconcile the two. This would be nice if it was a purely academic exercise, except its not. Or is it? 

Before some dicksplash shouts Greece, Greece like a Pink Lady gone wild, we’ve actually now got a meaningful example of what impact a UK downgrade would have; a month after France lost its “AAA”, French long-term borrowing costs “hit a record low at an auction”. So there you then, a one notch downgrade doesn’t matter diddly right now, which makes sense given there aren’t too many practical alternatives to British government debt i.e. there’s only so much “AAA” Finnish debt to go around.

This reality should be a marvellous and liberating thing for government policy. Now, not only can we get a real, counter-cyclical, debt funded government spending programme (social housing, social housing!) we could do so safe in the knowledge that S&P’s incoherent shite (plus whatever leaks out of Fitch’s and Moodys pants) can be safely ignored. 

We should, but as things currently stand we won’t cos S&P aren't the only people to have those same prejudices plus there's the major and therefore probably politically unpalatable u-turn doing so here would involve, Shame & a Pity really. Sad & Pathetic even. Shysters & Poobahs or is it Sock-Wranglers & Pie-chart-interferers? Nah, its Shite & its avoidable Pish.

I was a zombie garden centre

One of the first things I did in banking was assess a credit application for a garden centre. Discussing the business with a more experienced colleague, he pointed out the owners would be better off selling it, paying off their debts and sticking what was left in a savings account judging by how much they actually took out the business to live on. Later, I looked at a credit for a farm. Reading the file I discovered the farmer had been struggling to make it pay for years so every so often had sold off assets to manage his debt; a field here, a tractor there until eventually he moved into a static caravan andm sold his house.

Picking out the general features of these examples provides a reasonable definition of a zombie company, it being one that generates a poor absolute and/or relative return on capital, has negligible prospects as it stands and is barely, if even, able to meet its existing financial obligations without gradually cannibalising itself; zombie companies exist rather than prosper. Moreover, when/if we ever move out of the current low-low interest rate regime many of them will finally expire.

I’m putting this definition forward in response to the growing interest in zombie companies. A recent radio 4 File on 4 on the subject made for interesting listening and included chats with some highly relevant people (and some others as well), but ultimately proved analytically far less than the sum of its parts largely because of its half-arsed "Austrian" capital mis-allocation aspects (much of this being provided by Jon - can the BBC please start calling him the private equity boy that he is and not an entrepreneur - Moulton for some reason). Despite this, the Treasury Select Committee subsequently saw fit to raise the subject, choosing once again to highlight its largely facile nature.  

Here’s why; the concern with zombie companies stems mostly from the Japanese lost decade. Rather than ‘fess up to problem loans, Japanese banks opted to extend them on the basis that a rolling loan gathers no loss. The only problem with this is a bank can only lend so much and if a big chunk of its lending is tied up in companies that aren’t going to grow or are problem loans involving undeclared losses, then more viable businesses get starved of credit, economic growth is impacted, ya de ya de yada.

Fast forward to the here and now and you’ve the Bank of England (BoE) getting all concerned about forbearance, meaning they’re concerned British banks have turned Japanese and opted to roll loans rather than ‘fess up to all the dreck on their books so as to avoid even bigger losses. This concern has taken an aggressive turn with the publication of the BoE’s latest FinancialStability Report, which explicitly goes on (and on) about Forbearance and how “the longer it continues, the more likely it is to be concentrated on weaker companies with less ability to invest and innovate. This might divert credit from potentially more productive companies, for example new business start-ups.”

Unfortunately, dull facts prevent any direct comparison between Britain and Japan being especially meaningful. Drat. One is the Japanese experience was predicted on fundamental differences in the structure of their economy, in particular the prevalence of keiretsus, groupings of companies spanning various industries typically centred on a bank and defined by cross-shareholdings and close familial relationships. Or as a Japanese bloke I knew explained when his family’s firm was invited to join a keiretsu, him marrying a senior banker’s daughter would seal the deal. So when a Japanese bank rolled the loan of a zombie company, there’s a good chance it was a father helping out his son-in-law at a company he part owned. By contrast the structure of the British economy just isn’t like that meaning it lacks the obvious incentives seen in Japan to prop up zombies. Another thing to bear in mind, given preserving Britain's AAA status is a lynchpin of current economic policy, is that when the Japanese banks finally started ‘fessingup to what they were doing, calling up securities and so on, taking the pain and finally declaring the losses that had been sat on their books for years, Japan was downgraded by the rating agencies.

Yet another thing is what the British banks have actually been doing. Here the BoE stability report helps by stating “the non-core disposal plans of LBG and RBS are ahead of schedule and targets for 2012 have been raised. Since 2008, these banks have shed £383 billion of assets”. Now just chew on that for a minute, £383bn. They have already disposed of assets i.e. loans valued at £383 billion and are due to get rid of even more. Fuck me.

To put that in perspective you could compare £383bn to the all new £3bn Green Investment Bank, except that would be to show up the latter's mediocrity. So here’s a better comparison; the total assets of the entire British building society sector as at June 2012 i.e. how much it’s lent, were £325bn. So between them LBG and RBS have already got rid of far more “non-core” assets than the current British building society sector has acquired in over 100 years. And the “non core” bit is important because it includes exactly the dreck the Bank of England is concerned about/Japanese banks once kept on their books.

Except perspective seems to be missing judging by the stability report’s chat about he European Banking Association’s findings on forbearance given this includes the "interesting" Spanish bank experience, which can be summed up as pantalones en el fuego liar liar, when it comes to their annual accounts and the losses they’ve been willing to declare.

Aside from these dull facts there’s the slight issue of monetary policy and the chat about how when interest rates start edging back to more normal levels, all the zombie companies currently being propped up will start keeling over, stifling any recovery. Except, one, the BoE is maintaining interest rates at record lows and two, via the funding for lending scheme, is inventing entirely new ways of cutting credit costs i.e. the institution doing more than any other to actively prop up zombie companies is the same one going on about them being a bad thing.

So  “What is to be done?” Well, this is the bit that needs spelling out very clearly - British banks are now being encouraged to start pulling the plug on thousands of businesses more aggresively than they already are.

This is a fucking stupid notion for all sorts of reasons.Practically, how the fuck does a bank know which business is a Facebook and which a Myspace let alone a FriendsReunited (besides which Facebook has already jumped the shark)? Anyone with that kind of Nostrdamus like insight would already have invested in the winner and retired somewhere lovely.

Politically, just think about it for a mo; zombie companies are servicing their debts, meeting their covenants and getting by doing their thang, then allova sudden a big evil bank pulls the plug cos its decided the customer doesn’t have a business model with exponential growth potential. Uh huh? And how much of a backlash would that generate? Like to get a sense of how cretinous the reporting on bank lending already is ignore the routine bollocks criticising banks that only sell debt for not providing start-ups with equity and read the following monumentally shite article; “Lending from RBS and Lloyds slumps by £117bn in less than three years” i.e. banks are already being criticised for doing what the BoE wants them to do.

Then there’s the economic impact; the main problem facing the British economy right now is a crisis of demand influenced by factors including falling real incomes and a lack of confidence. Now, would banks pulling the plug on thousands of businesses sort that out? Of course it wouldn’t, instead it would aggravate it, a lot, and that's without taking into account the potential impact of an asset fire sale. Like even accepting all these start-ups i.e. tiddlers, are being starved of debt, that’s so existing businesses can keep employing people and buying goods and services. Like see that hand, the one with a bird in it? Cool, that’s what we’ve got right now and its worth a damn sight more than the two that may or may not be in a bush in 5 years time. Oh and then there’s the potential for companies to suddenly shit themselves/rein in spending even more than they already are when they realise banks are more likely to pull the plug.

Finally, there are the examples I started with and what they actually mean. The reason the farmer struggled on was so his eldest son could inherit some land and maintain a family tradition. Similarly, as for the garden centre, who the fuck is the BoE, the current fiscal policy in favour of bunch of cock that it is, to strong-arm anyone, tax payer owned bank or otherwise, into destroying a business a husband and wife had built from scratch and were continuing to make a living from?

Tax americano

http://www.youtube.com/watch?v=3w4tcIsaInE&playnext=1&list=PLCZfzhrOFoIpCxLDFLBOM7OH-c6q9ya97&feature=results_video

I remember listening to some Labour MP a couple of years back arguing against some factory closing. As she wittered on about how the factory was still profitable so shouldn’t be closed I remember “wisely” thinking, that’s as maybe, however, it wasn’t profitable enough what with things like hurdle rates and acceptable returns on equity to consider. What reminded me of this is the chat about Starbucks paying just £8.6m in corporation tax over 14 years on over £3bn in sales or 0.29%. Now THAT is taking the piss.

It doesn’t actually matter what Starbucks or Her Majesty’s Revenue and Customs say, that is taking the piss. If the taxes paid reflect what Starbucks’ actually makes in Britain, then it is a profoundly incompetent business and the CEO and board should have been dismissed years ago for wasting shareholder funds on such a cack venture. If the business is as profitable as Starbucks actually tell investors (or they’re lying and therefore not fit to remain in place) and its all perfectly legal, then the laws governing corporation tax are profoundly flawed and/or Revenue and Customs are either bent or profoundly incompetent.

So there you are then, either:

1)      The Starbucks executive is profoundly incompetent
2)   The Starbucks executive  tells massive porky pies to people it shouldn't

3)      HMRC is bent

4)      HMRC is useless

5)      Corporation tax laws are useless/are easy to game by tax bods

You choose. Personally, I reckon a big dose of 5 most likely applies from which a couple of things flow, like Starbucks ability to game tax laws gives it a major competitive advantage - coffee tastes like shit? Who cares, Starbucks has the best tax experts so that’s what you’re stuck with – which in turn means we as consumers are more likely to be lumbered with it in perpetuity.

But, I reckon there’s an easy response at hand. Looking at how America periodically brings the multi-multi-million fine hammer down on business, as a mate has frequently pointed out, a big factor underpinning its ability to do so is access to its domestic market. Basically, as Standard Chartered recently learned, the American approach is this:

1)      We’ve caught you doing something we reckon is a bit naughty

2)      Because of that we are going to fine you. Big time.

3)      Don’t like that? Is it an ickle bit hurty?

4)      Pay up or we’ll lock you out the US market. Bitch.

By contrast the British approach has been a tad more obsequious as in every time anyone asks a multinational company or just an employer with a mind to outsource stuff, for well anything really, the response has been shut up or we’ll export everything including our head office to Poland, Ireland, Monaco, India, Indonesia etc.,

Except, this doesn’t apply to Starbucks. Or McDonalds. Or KFC. Or Top Shop. Or Tesco etc., Each of these companies – or at least the British bits – are wholly dependent on having “boots on the ground” on a high street near you; until someone invests a 3D printer that does lattes, they simply can’t outsource their outlets.

What this means is straightforward, we have them by the balls, so perhaps, given the extent to which Starbucks has taken the piss, we should start squeezing them.

Now, one option would be to rewrite or add to the existing corporation tax bible. Except doing so would be a mistake. It would be cumbersome, it would take up loads of time and money and, most importantly, it would be gamed. So don’t. Seriously, don’t.

Instead, in this era when the high streets at the heart of every community are becoming increasingly generic, PLC dominated statements of consumerist anonymity, introduce a high street regeneration fund  financed by a levy of say £10,000 paid for each outlet operated by businesses running more than say a 100 in the UK (for the same notion being proposed in a different context, see here).

Would this chase British jobs overseas? Nope, as has already been said you can’t outsource a Starbucks.

Would this penalise Small to Medium sized businesses (SMEs)? More than a 100 branches and you’re claiming you’re an SME? Piss off. Besides the 100 is relatively arbitrary.

But, all these companies already pay council taxes and what not making this unfair - pretty much every business pays council taxes, but, typically, only da big boys can  afford entire tax dodging departments, hence an additional levy targeted at them would make things far fairer than they currently are.

Ahh, but what if Starbucks closed branches as a result? So what, the smaller companies that already pay more tax would quickly fill the gap so we'd still be quids in. Heck they could simply buy up empty Starbucks premises given they were in already proven locations.

Will this push Little Chef over the edge? I guess, but given that’s been aggresively rogered by private equity for years and is cack who cares, plus it would engender more SMEs, more competition and better quality by taking away the competitive advantage big businesses have that stems purely from them being able to afford more tax experts than a much smaller rival that potentially sells much better coffee.

Ahh, but this would see businesses stall at 99 branches whereas we need national champions - nothing is perfect in this life so grow up, plus if you’re that big chances are you’ve got more than a few tax experts on the payroll already.And as I said the 100 is relatively arbitrary.

Besides, given Starbucks currently runs 735 outlets I reckon the additional, annual tax take of £7.4m vs the £8.6m they previously paid over 14 years is worth it. Actually feck £10,000, make it £20,000 or floor space related or something to catch Tesco, but you get the basic drift here – introduce an additional, retail outlet focused charge (i.e. a tax) designed to catch the tax efficient big boys. Above I suggested using some mince about high street regeneration as an excuse/cover, but heck call it the Starbucks levy for all I care. As for what it would pay for, that’s easy, mad stuff like school books.

An October 22nd P.S. You could argue this would penalise big companies that do play fair with their tax returns. You could, I wouldn't because in practice am guessing what playing fair most likely means here is not taking as much piss as Starbucks. Besides, what I'm suggesting would reduce their taxable profits i.e. on a net basis it wouldn't have that much of an impact on them. Anyway, the issue here is the British accountancy profession and Starbucks. Blame them.

Another thing is the suggestion I read today about having Starbucks up in parliament to explain themselves. This would be a distracting waste of time. MPs would huff and puff, senior tax bods would similarly puff and huff and Starbucks would say:

1) Its all perfectly legal and signed off by tax inspectors - which isn't the point. The point is they're taking the piss. That and as current tax law isn't working, then current tax law needs to be bypassed via a more striaghtforward approach - as people say, when you're in a hole, stop digging.

2) Then they'd most likely trot out how much income tax, national insurance, council tax and what not they pay - to which the response is so does every other company AND they pay corporation tax too ya twat. There's presumably also scope here to get really evil and compare/contrast all those things as a % of their turnover with a rival to see if they're gaming those taxes as well.

2) Confronted by that they'd most likely do some corporate social responsibility mince - which highlights how that's used to paper over/legitimise what businesses actually do, isn't compulsory and is besides the point which is Starbucks is taking the piss with their tax returns.

A 12/11/12 P.S. Wow. Now that Amazon, Google and Starbucks have been had up before some MPs the truth will out it seems. So whereas there was me thinking it was the shitness of the UK tax laws and the general ability of tax lawyers and accountants to circumvent them that was the issue, actually, for Starbucks its the fact they don't make money here - despite what they've said to their investors i.e. they are liars and shite at business.

But, MPs showboating does fuck all beyond feed MP egos and give the impression that something is being done. Some practical steps are needed and here, rather than the levy I thought was the thing to do, the former Labour government bod Lord Myners nailed it when he said a sales tax should be introduced, that being a means of catching online bods as well as coffee shops without wasting any time fannying about with HMRC.

Good. Introduce it. Now. And do so bearing in mind the Scottish levy on fag sellers that targets larger businesses e.g. it doesn't appear to be against the law to target specific business types. Heck, the criteria for what type of annual accountsa business needs to get done has made that clear for years.

The Starbucks boy was fun though, him and his bullshite (and of course they've talked up how much tax e.g. VAT, national insurance etc. they pay as if complying with the law was a big deal and as if every other business didn't already do so. Go home ya Ummurkan scum).

Fandabi-pish

PICTURE TO FOLLOW

On reflection mebbe Spod Miliband’s appropriation of rhetoric first popularized by a dead Tory wasn’t that impressive. I mean just the other night you had Mitt-trickle-down-economy-Romney use the makey-uppy term “trickle-down government” pejoratively. Now I’ve no idea what this means, but it does suggest stealing a political opponent’s rhetoric, then using it aggressively enough to distract from the fact doing so renders it gibberish is the thing to do. Heck, even Scottish Labour is in on the act.

The context for this rhetorical, tartan land grab is the downward trajectory seen in the calibre of Scottish Labour party leaders since Donald Dewar where latterly, Wendy Alexander aside, we've seen Iain Gray (who?) give way to the wonder that is Johann Lamont (as in you wonder how she’s ended up where she is). Now to be fair, you’d be a fool to expect much off such a mediocrity, but, the degree of bile dripping off her “something for nothing” chat does merit some attention.

So whereas in the past “something for nothing” was what you’d hear a New Labour or Tory bod say about people living on benefits before trying to cut said benefits, for Johann it's the following who get “something for nothing”:

•  “a banker on more than 100,000 a year benefitting more than a customer on average incomes from the council tax freeze
• a chief executive on more than 100,000 a year not paying for his prescriptions
• judges and lawyers earning more than 100,000 a year, not paying tuition fees for their child to follow in their footsteps at university”

Whit? Add accountants and doctors to this list and you’d have a professional full house, except how do any of the above get “something for nothing” given they all typically pay significantly more in tax than they ever receive in state benefits and services?

The answer is they don't rendering Johann's “something for nothing” inaccurate bollocks. And practically, excluding the above from benefits would require the introduction of means testing, which would mean the following:

• Creating a big, inefficient (think tax credit over/under payments), taxpayer funded bureaucracy to administer it
• Unintended consequences i.e. people not claiming what they’re due en masse and the resultant suffering this would induce
• All sorts of destructive disincentives e.g. why save for old age if it’ll just get taken off me
• A frontal assault on universalism, the encouragement of individualism and the associated ghetto-isation of previously universal benefits with all that entails.

That’s just dull practical stuff though to be simply ignored judging by Johann's repeated references to having patronised care workers in the interviews she's been giving, this seemingly providing a sharp, "werking class" contrast to the "something for nothing" types listed above. Politically, this is a shame because it leaves her chat coming across like a blinkered, us and them alienating, nasty retreat into Labour’s West of Scotland heartland. One nation? Nah, not unless it’s the Kingdom of Strathclyde.

The tragedy here is that an alternative, positive rhetoric is readily available, one that accepts universalism as a positive given that embodies the Scottish electorate’s social-democratic bias. Adopting this alternative would easily shift the focus away from debating who should or shouldn't get a free bus pass towards how to pay for these things. So here goes; you could talk about how we’re all in this together then argue that to avoid introducing tuition fees, you’d need to retain the 50% income tax rate in Scotland and introduce wealth taxes or at least fairer council taxes. 

I’m game for this despite being part of the “something for nothing” class. It’s just doing so would be to effectively argue in favour of independence or at least devo-max. As this appears unthinkable for Labour its instead chosen to have some mealy mouthed joke of a Jimmy Krankie looky-likey talk inaccurate, vitriolic pish.

Get tae Bradford

Setting aside the perfectly poised hand gestures and demographically precise bods sat in the background as backdrop, the Ed Miliband speech was excellent. I mean c'mon it claimed/re-worked a distinctively and impressively British ideology.

That this reworking of a historic political stance followed Eric Hobsbawm's death, a fella with links to Ralph - dad of Ed and Dave - Miliband, again emphasised the sense of a distinctive, yet deep rooted British tradition of (potentially) radical politics.

But ...........the guy's a spod who should FOAD so his brother can take over. That's politics.

Historicism

Whoever said the lesson of history is that there are no lessons was an arse. Mark Twain on the other hand is supposed to have said “The past does not repeat itself, but it rhymes”, which rocks.

To give one example, there’s that Scottish bank run disastrously into the ground by its West of Scotland executives who, speculating on asset values, lent too much to too few people while taking no where near enough security to protect their company’s interests. Obviously, I’m talking about the 1878 failure of the City of Glasgow Bank. Obviously. Since then banking has become a much, much more sophisticated activity and no banker would ever be fuckwitted enough to adopt a similar “business model", give or take the ones that have.

To be fair, the work chat I mind from a couple of years back was that business cycles last 6 years; 4 to learn the lessons of the last disaster and another 2 to forget them. This implies that in banking, greed, arrogance and stupidity are both timeless and recurring. Given that, let’s compare and contrast what happened to the bods who knacked the City of Glasgow Bank with today’s high flying “wealth creators”.

As if to emphasise the difference between then and now, the late historian Sydney Checkland described the City of Glasgow Bank’s board when it failed as “mediocrities and men of straw”. All of them, plus the Bank’s manager, were soon had up before the High Court in Edinburgh, found guilty of various offences and given jail sentences ranging from 8 to 18 months. Thankfully, today’s “wealth creators” are treated with much more respect; when they go a tad awry, the worst they can expect is a fine equal to only a fraction of their personal wealth or the loss of a knighthood, but prison? Heaven forbid.

Another difference between then and now was that the City of Glasgow failure taught the late Victorian bourgeoisie the limitations of unlimited liability; because it was an unlimited concern the Bank's 1,819 shareholders were liable for all of its obligations and after these were met, only 254 of them remained solvent. Funnily enough, the City of Glasgow Bank failure was followed by a new Companies Act in 1879 and with it the widespread adoption of limited liability; unlimited liability, or what a Vince Cable might call shareholder activism, having previously been regarded as a built-in check on management, was suddenly recast as a barrier to investment and as such something to be got rid of pronto for the good of the economy.

Fast forwarding to today, rather than any change sensibilities, I'd argue the structural changes made to the financial obligations of asset owners/shareholders (i.e. the rich) underpin the change in how “wealth creators” now get treated. Then, shareholders got fucked. Now? It’s the taxpayer. Then, the people who ran banks that fucked up and fucked the finances of the rich got the jail. Now? Less so. See the difference?

As for the rhyme, it sounds like Berkshire Hunt(s).