Riley - thinking aloud

Blog on the move

2010-03-22T19:11:00.003Z

Thanks for following our blog here but we've now moved to a location within our new website. To find us, please go to http://www.rileycom.co.uk and follow the link to our blog.

Hope to see you there!

News about paying VAT

2010-03-08T16:36:00.001Z

While most businesses already submit their VAT returns online, this will be compulsory from 1 April for all VAT registered traders with a turnover of more than £100,000 annually as well as for all newly registered traders.

If you still pay your VAT by cheque, from 1 April HMRC will treat the payment as having been received by them on the day when cleared funds reach their bank account - so if you still pay by cheque you should be mailing it to them at least a week before the due date to avoid becoming liable to a penalty surcharge.

There's more about paying VAT here.

Service?

2010-03-06T07:00:00.008Z

It's happened to me more than once before but I was recently able to confirm that engaging a passing motorist in unintentional destructive mirror duelling is no less annoying on subsequent occasions. As with the previous clashes, I was blameless. Though to be fair, it's likely that the other driver has the same belief.

The mirror itself had disappeared when I arrived home and the rest of the electric mirror housing was flapping uselessly on its hinge, so I called in at the main dealer the next morning. A mechanic was summoned who took a quick look and announced that the whole unit would have to be replaced and paint-matched. He passed me on to the parts department where someone worked out the cost (£286), promised to place an order and call me when it arrived - which should be the following day, a Thursday. No call arrived.

I phoned them on the Monday; there was no record of my order so they ordered another and again promised to call when it arrived. Two days later, after again hearing nothing I rang them once more. The woman in the parts department knew nothing about it but then spotted two boxes with my name on them. Progress! The unit still needed painting - she'd let me know when that was done but it should be the next day. But once again I heard nothing from them.

The following weekend I took a proper look at the car mirror unit and found that after a little manipulation it clicked back into place like a dislocated joint. The electric servo-motors that controlled the angle of the mirror (when I'd had one) and folded the mirror against the car to avoid collisions (ha!) still worked. So last Monday I sent the company's managing director an email expressing my disappointment at his mechanic's inadequate diagnosis and the skilful negligence with which I had been treated by several of his staff - none of which had taken ownership of my problem.

Without contacting me himself the company's MD passed the email on to the parts manager who called me and wanted to know who the mechanic was. I had no idea. What did he look like? Still no idea. OK, he'd investigate and call me back. A week later, I'm still waiting.

Meanwhile I had driven down to Kevin Cooper Motor Factors where someone looked up my car model on their parts database and ordered a mirror for me. She promised to call when it arrived which should be by 8:30 next morning and she did, too. When I turned up to collect it she remembered me so no need for paperwork: 30 seconds later I was driving out of their car park with my new mirror in place. Cost: £20.

So the main dealer failed to call me a total of four times for a £286 repair while Kevin Cooper's did exactly what they had promised for a £20 sale.

Service is fundamental to the success of any enterprise. Most businesses are capable of dealing with the technicalities of what they do but the main differentiator is the way they deal with their customers. Whether you are running a main dealership for a motor manufacturer, a car parts supplier, florist, hospital or an accountancy firm: personal service, the way you deal with each actual or potential customer really does matter. This ethos of personal service has to be led from the top; sadly in some businesses this seems not to happen. When will people learn?

Update: Since I wrote this, the main dealer concerned has gone into administration and been acquired by a rival.

Boom, bust and recovery

2010-03-05T12:49:00.000Z

Boom and bust. Despite the wishes of well intentioned but out-of-their-depth politicians, it will always be with us.

Share prices overreach themselves until the time when the reaction sets in, then the bears turn up and drive stock markets too low. It's the same with property prices, energy costs and all commodities.

A similar cycle affects many businesses.

The sensible reaction when the the current downturn hit was for businesses to cut costs - recruitment & training put on hold, perhaps some thinning of the workforce, advertising and marketing initiatives cut, cash conserved at all costs.

The excess dip in the stock markets in March 2009 has now corrected itself and anyone that had the money and courage to invest in the early part of last year will have seen a huge return on their cash. And all businesses should be planning to take advantage of the upside, too.

There are pretty clear limits on the amount of cost-cutting that businesses can achieve, but there is no limit on the gains they can make in sales - until, I suppose, they have achieved 100 per cent market share. Even then they can broaden their product or service offering.

The economy has done little more than bottom out for now and the recovery may be a long slow climb, but so far in history every recession has ended and there comes a time - different for every business and of course dependent on cash available - but there does come a time to invest for the future. And if you haven't prepared for that in your business yet, it's probably time you did.

Err - about the new Riley website...

2010-02-12T17:22:00.000Z

I've almost run out of ways to say 'our new website will be here soon'. But it will. Promise.

Planning a robbery in the US? Best check with your accountant first

2010-02-12T13:18:00.001Z

OK I have to admit: this may not apply to you.

But in the course of some leisurely reading I found "Publication 525" from the United States Department of the Treasury: Internal Revenue Service. You can find this here; it's a pdf file. It explains what is taxable and non-taxable income for US taxpayers to help them with their 2009 returns.

It's fairly comprehensive. On page 36, for example:

"Stolen property. If you steal property, you must report its fair market value in your income in the year you steal it unless in the same year, you return it to its rightful owner."

There's no indication of whether you can claim a deduction for any expenses incurred in the course of your trade (ammunition, perhaps) but then if too much detail of that nature were given, why would you need an accountant?

Oh, fair market value is defined on page 8.

NewLab legacy?

2010-01-27T17:25:00.000Z

Yesterday brought us the news that the UK has just about crawled out of recession - or rather, out of the technical definition of it, although the output of the UK economy in the final quarter of 2009 was the same as it had been in the third quarter of 2005 - so over four years of growth have evaporated.

Growth in the UK usually averages 2.4 per cent annually so we are now over 10 per cent behind where we would have been if the country had achieved no more than average growth over that period.

What is even more concerning is that since 2005 UK government borrowing has doubled.

In yesterday's Channel 4 News knockabout between Ken Clarke and Peter Mandelson, the NewLab argument was put forward that the government had to keep on spending for now to avoid putting the recovery at risk. Well, it doesn't appear that all that spending over the past four years has achieved much. Borrowing does have to be repaid, but I suppose that is not a problem once you have been voted out of office.

I can't help thinking that every recession brings with it a certain amount of pain and borrowing heavily to ameliorate the suffering simply prolongs it. Is a sharp, deep, painful recession that enables us to return to strong growth quickly better than engineering a shallower but longer lasting one? I'd have thought so. Too late now, though.

Good thinking?

2010-01-07T13:49:00.001Z

Yes, the Riley blog is back after its Christmas and New Year break.

Being away gave me the opportunity to do some reading and one book that I enjoyed and strongly recommend was Irrationality by Stuart Sutherland.

My copy is a 2007 edition of this 1992 book by Sutherland, who was Professor of Psychology at Sussex University. He died in 1998.

Essentially the book is about the many errors of thinking to which we humans are prone; in particular he considers the way we form unshakeable opinions or rush into decisions based on a firm misunderstanding of reality. This is critical stuff for anyone who is in business or, indeed, anyone who isn't.

In his review of the book, Nicholas Lezard wrote in The Guardian:

"The advance of civilisation and the cultivation of the collective mind would be improved if it were this book, rather than the Bible, that were placed in bedside cabinets of hotels throughout the world...There are few books about psychology that can make you laugh out loud; this is one of them. You must buy this book."

The chapter titles give you a vague idea of where Sutherland takes us: The wrong impression; Obedience; Conformity; In-groups and Out-groups; Organisational folly; and so on.

For me - burdened with a training in auditing - the chapter on risk was particularly engaging though perhaps lacking the humour to be found in other chapters. I'd like to quote one section of this.

After pointing out that it is often difficult to foresee all the possible chains through which a risk could develop, the following is related:

"As a further example of a disaster caused by irrationality at all levels consider the sinking of the car ferry, the Herald of Free Enterprise in calm seas outside Zeebrugge with the loss of 180 lives. The immediate cause was water entering the car decks because the ship sailed with the bow doors open. The following factors contributed to the disaster: 1. Although the captain had asked for an automatic signal on the bridge showing the state of the doors, none had been supplied. 2. The assistant bosun who should have closed the doors was fast asleep. 3. The officer who should have checked that they were closed had been called away on other duties, because of a shortage of crew. 4. The Herald had originally been designed to ply between Dover and Calais: since the ramp at Zeebrugge was lower than that at Calais, the ship had to take on ballast water to lower it sufficiently to load the cars at Zeebrugge. Because the captain had been ordered to save twenty minutes on the crossing, there was no time to pump out the ballast before leaving, so that the ship was unduly low in the water. 5. Because of the time pressure, the Captain left at full speed, thus creating a bow wave which swept into the car decks.

"Two points should be made. First, had any one of these factors been absent, the ship might well not have sunk. Second.....the main responsibility must lie with the managers..."

So this was caused by an extraordinary array of coincidences, but led to an accident that led us all to think - how could something so daft have happened? Well, the book explains.

The chapter 'The failure of intuition' points out that intuition is the strange instinct that tells a person he is right, whether he is or not.

If you want to be equipped to take better decisions, read this book.

The pre-Budget Report and Britain's depressing mountain of debt

2009-12-10T14:01:00.001Z

Well.

There's much that could (and has) been said about yesterday's pre-Budget Report and I'm reluctant to join in a review of the details.

It's the sheer, mind-numbing scale of the borrowing that horrifies me. Labour came to power in 1997 full of optimism and confidence. Gordon Brown was not going to be like previous Labour chancellors, all tax and spend. It was he who defined a prudent level of total borrowing for the government as 40 per cent of annual GDP. But as Faisal Islam has pointed out, the UK's debts are now piled so deep that if all goes to the current Chancellor's plan - which given the Treasury's record on forecasting is unlikely - we won't get back down to that borrowing level until 2034.

Of course, many would argue that even that level was too high - and point out that the figures don't include all government liabilities (both future pension liabilities and obligations under the public finance initiative are excluded).

Imagine you are an undergraduate at an English university. If you are an average student, you will graduate with £23,000 of borrowings. You then have to find a job, set about repaying that debt, saving for the deposit on a house, wondering when you should start putting money aside for a pension and on top of that you will be faced with excess tax levels for the next 25 years while future governments struggle to repay the money this lot have borrowed.

Not a pleasing prospect. I wonder how many people at the beginning of their working lives will choose the easy way out and emigrate to a country that is not mired in debt?

Does business need government help?

2009-12-04T16:37:00.002Z

The problem with campaigning organisations - including those that claim to represent business - is that they spend too much time presenting shopping lists to the government. This usually does little but raise their own profile, gives journalists something to write about and furthers the notion that we need to be looking for government assistance in everything we do.

Next week's pre-Budget report has given another opportunity for various groups to send out piles of press releases outlining their demands.

A couple of weeks ago the Global Entrepreneurship Week took place and present at the launch was Peter Jones. During the discussions, as Duane Jackson of KashFlow reports:

"There was one point made that really grabbed my attention. There was a lot of talk about what government can do to encourage startups. There were some valid suggestions such as lowering tax for startups and payroll costs for your first few staff.

"Peter Jones of Dragons’ Den fame got slightly irritated and asked what government has to do with it. The point he was making is that if you’re going to start a business, you’re going to start a business. With or without help from the government. People need to take responsibility for their own lives and not depend on the government. His comments received spontaneous applause from everyone in the audience."

Quite.

The Downing Street authors of the pre-Budget report will, of course, disregard the advice offered and focus on their only objective: boosting their own re-election chances. Another reason why business organisations especially should not be asking government for anything other than to get out of the way.

UPDATE: Or, as Clive James said in 'A Point of View' on BBC Radio 4 on Friday evening (4 December 2009), "The first duty of a government [is] to leave people alone".

Phone lines!

2009-11-30T11:31:00.005Z

Our landlines are currently down due a power failure at Telewest business - they are currently trying to run the system from a generator but struggling due to the size of the area that they cover.

While we struggle to keep in contact via the phone lines, we are all available by e-mail as usual or on our mobile numbers as required:

Jon Stacey 07779 330904

Bernice Constantine 07779 330901

Val Doyle 07779 333460

We hope to speak to you soon but will resort to smoke signals or heliograph this afternoon!

Update: 3.35pm

We're back on phones - one rang a minute ago and sent us all into paroxysms of delight!

Thanks for your patience. We hope to speak to you all soon - it's been very quiet without you.

We apologise for...

2009-11-24T12:58:00.000Z

...the delay in the arrival of our new website. It's on its way, but as always our main focus is on client work rather than generating marketing materials. We know we should do both, but when there's any conflict it's our clients that get our attention.

But the new site will be here before long. No, really.

Planning during uncertain times

2009-11-13T14:49:00.002Z

This week's Inflation Report from the Bank of England was again notable for the wide range of predictions of future GDP and inflation rates (there's a Power Point presentation of this here).

With the Bank of England not knowing where the economy's going, how can businesses plan? By building the uncertainty into their plans, that's how.

An article on this aimed at CFOs (chief finance officers) was published in the US accountancy journal 'AICPA CPA Insider' last week and it's well worth a read:

In terms of market fluctuations, is this recession a “V,” “W” or an “L”? The world’s greatest economic minds cannot seem to agree. It’s time for CFOs to accept these uncertainties and get down to the business of planning
for 2010.

With so much instability in the business environment, every objective you set will take longer to achieve, not to mention to gain consensus on internally. Consider a few: revenue growth, cost cutting continuations, hiring, obtaining financing, attracting new investors and locking in longer-term supplier contracts. Strategies that once worked to reach these goals may no longer be effective. It’s a situation that can paralyze the most confident financial leaders. Despite the speed of change and complexity of the environment, it’s important to look beyond the headlines and consider all of the facts. Look at your liquidity, your industry and your income stream, then take a stand about where you think your business is going and create an operating plan for next year.

Click to read on

Customer service and Royal Mail

2009-11-02T11:48:00.002Z

The current programme of postal strikes is giving many businesses the opportunity to discover that alternatives are available, sometimes at lower cost. This can't be good news for the future of the Post Office or its employees. It's also giving some the chance to demonstrate their commitment to customer service by overcoming problems regardless of how they originate.

I subscribe to 'The Economist' which is mailed to me each week and should arrive on a Saturday. Unsurprisingly, last Saturday it failed to turn up. This could be annoying, but I could hardly blame the magazine.

They had emailed me on Friday to say that 'The Economist' would be distributed on schedule but they could not guarantee when it would arrive. So they reminded me that it's available online to subscribers, that I could also download an audio version or I could buy a copy at a newsagent, let them know and they would extend my subscription by two weeks.

Good to see someone taking advantage of another business's appalling industrial relations to demonstrate their commitment to their own customers.

Today, Britain stands alone!

2009-10-29T14:14:00.003Z

Not for the first time, Britain today stands alone.

With the news that the US economy is out of recession, the UK is the only major economy that is still shrinking. George Osborne, shadow chancellor has suggested that this means that Gordon Brown’s claim that Britain was "best placed" to emerge from recession now "lies in tatters", with the rest of the world moving on and leaving Britain behind. He does seem to have a point.

Blogger Guido Fawkes has today published news that Labour had prepared a campaign against Osborne in the expectation that last Friday's figures would show the UK economy to be back in growth. But the numbers did not oblige.

Even once the magic 'out of recession' headlines can be dusted off, we will have a long way to go to get back to where we were - and worse, there's all that debt, both government and personal, to be repaid. As I blogged here it could take us four years for the economy to climb back to the levels it reached in 2008.

Maybe next time we're promised "no more boom and bust" instead of D:Ream's demonstrably untrue 'Things - can only get better' we'll be humming The Who's 'Won't get fooled again'.

It's all about the people?

2009-10-20T17:55:00.002+01:00

It's been fascinating listening to comments about our new brand visuals. Fascinating because launching new visuals is a bit like a new haircut - except that we had kept the same style for 13 years. So it was a big change - at least it was for us.

It's probably one of the well known afflictions of age that we become too comfortable in our own style and therefore worry unnecessarily when we feel the need for a change. But we all worried about the spectre of change. Would our customers understand the logo? Would referrers of business recognise what we had done and why we had done it? More importantly would they like it?

We were all kind of bored with the design we had and felt that what had seemed elegant, stylish and unexpected in 1996 had become "spidery" and a bit staid in the design led "noughties". We went through a design process which took months and agonised over detail, colour and wording. And the birth was painful; not the blood-letting pain of an injury, more the nagging pain of toothache - a constant reminder that the process hadn't been completed, that we still needed to make the final design decision.

Then it was done, a glorious, cathartic moment. Freedom from the nagging indecision and excitement about the launch. A marvellous chance to redefine what we do and how we do it. Apart, that was, from the "will they all like it question".

But we'd forgotten that this was all about people. The fact that we all wore a new logo T-shirt for the party was largely irrelevant for those that came to chat, network, gossip and drink some wine. It was even more irrelevant for those on the end of a phone call or receiving an e-mail. Yes, there were some comments about letters with "smart new logo's" and "nice signs" but for most, it's been business as usual. Same people, same name, same great attitude of wanting to help, to deliver something outstanding and to leave our customers with progress towards their goals.

The fact that we feel better about how our brand looks means that we feel more positive about what we do. We all have a natural desire to be liked, a yearning to be needed but we need to feel comfortable in our own skin. And we do.

I'm off to get a nice Mohican!

Government admits more regulation bad for business

2009-10-16T05:41:00.002+01:00

In a carefully spun press release issued yesterday the government said:

"A new package of measures cutting the costs of new laws that will benefit businesses both immediately and in the longer term, was announced today by Business Minister Ian Lucas.

"Businesses will benefit by timing the introduction of 26 regulations to take account of current economic circumstances. This will save them £3.5 billion in new costs with a longer term commitment to cut a further £6.5 billion from the ongoing costs of regulation.

So the benefit, in fact, comes from delaying the introduction of these regulations because of the current economic climate.

Costs won't be piled on businesses (and hence consumers) now, but later. Good news, of a sort. But a bonfire of regulations would be better. How about a requirement that every new regulation had to be matched by the withdrawal of an old one and that an old quango had to die before a new one could be born?

Accidental entrepreneurs...

2009-10-08T18:17:00.000+01:00

Recessions lead to a surge in unemployment. The challenge of finding work can lead many to take a chance on self-employment, but the talents needed to succeed with your own business are quite different from those required to hold down a job. Perhaps this is why so many new businesses fail to reach their second birthday.

The following article, published in the USA, provides some insight into how 'accidental entrepreneurship' can happen - and what can follow:

A month after he was laid off in October, 38-year-old Marcus Ronaldi realized he was facing the toughest job market he had ever experienced. “I had been out of work before, but this time I wasn’t getting any calls,” said Ronaldi, a high-tech job recruiter.

In November, as he despaired of landing a full-time job, Ronaldi started taking subcontracts from other recruiters with hard-to-fill vacancies in technical or executive fields.

“At first I did it just to keep busy and to help pay the bills, while I continued looking for a job,” said Ronaldi of Daly City.

But as he got more contracts, Ronaldi began to consider himself self-employed, a conviction that jelled a couple of weeks ago when he got a tip about a full-time job.

“I turned the tip over to a friend because I was happy doing the contingent stuff,” he said

Ronaldi is an example of what Bay Area business analyst Carolyn Ockels calls “necessity-preneurs” – people who become self-employed because regular jobs are so tough to find.

“I think a lot of people are trying to fill the income gap with any skill or service they can find,” said Ockels, managing partner of Emergent Research in Lafayette.”

A July report from the Small Business Administration documents the self-employment surge nationwide. The SBA said the number of self-employed people grows about 2 to 3 percent a year when the economy is good. In 2008, the most recent year on record, the number of people working for themselves jumped 8.1 percent.

click to continue reading

Change is coming

2009-10-07T08:23:00.001+01:00

It's not only Labour and the Conservatives that can borrow Obama-esque soundbites because change is indeed coming, and from all directions.

Later this week we are having a launch party for our 'brand refresh'. Going through the process of preparing for that has led us to some careful thought about just what we do now, how we do it and how that will need to change in the future.

These, of course, are questions that every business manager has to ask herself at regular intervals. But it's all the more important in our present state of economic turbulence.

In our debt-laden country we have just received from George Osborne a glimpse of the pain that we will have to endure in correcting the mess we are in - and repaying the excesses of government borrowing. Just how that will affect us all we can't know. Bad as it will be, failing to tackle the problems head on would be worse.

How will it affect us all? To borrow a thought from Douglas Adams, "it's like trying to explain to the Amazon River, the Mississippi, the Congo and the Nile how the coming of the Atlantic Ocean will affect them. The first thing to understand is that river rules will no longer apply".

Business life? Stressful, worrying, uncertain, carrying the constant risk of failure, always full of surprises. And we love it.

VAT next?

2009-10-02T07:17:00.004+01:00

Next week at the Conservative Party conference it is likely that the Cameron team will reveal some of their plans for tackling the public sector deficit should they win power next year.

There have already been rumours that they would increase the standard VAT rate to 20 per cent.

Alistair Darling cut the rate from 17.5 per cent to 15 per cent in his pre-Budget report in November 2008. This reduction, for a thirteen month period from 1 December 2008, was designed to boost the economy and is due to end on New Year's Day 2010.

After the cut was announced there were rumours that when it ended the rate would rise beyond 17.5 per cent - the Treasury had been considering options for doing so.

Speculation that the Conservatives would raise the VAT rate to 20 per cent should therefore be no surprise.

When VAT was introduced in the UK in 1973 the rate was 10 per cent. It has been 17.5 per cent since 1991; the average standard rate across the EU is currently 19.5 per cent.

One to watch? New accounting software launch

2009-09-29T07:02:00.004+01:00

For many small or medium sized businesses, the choice of accounting software lies between Sage, TAS or Quickbooks. There are others out there, but one of these - and probably Sage - is the common choice.

The narrowness of this range has acted against the interests of the buyer as the dominant market positions held by the main players have kept prices up and fresh ideas out.

Several years ago a relative unknown launched in the UK - Mamut. This is a Norwegian company that has a strong reputation in Scandinavia, the Netherlands and Germany. Within a couple of years it was winning awards including, in the UK, the Accountancy Age Awards for Excellence in the Small Business Software Package category of the Year in 2004, 2005 and 2006. But it has proved difficult for them to make strong market gains here because they are facing the dominant Sage marketing machine.

Now, Mamut have launched a new product - Mamut One. This is not just accounting software but it includes customer relationship management, advanced purchasing, stock control and logistics, web-based access to information within the system and strong support. The system also allows for an integrated e-commerce website including a shopping cart facility.

System data for the core accounting modules is stored locally (within your network) but other data is kept 'within the cloud' - on remote servers for easy backup and remote access. The remote servers adopted are the Microsoft Azure platform.

There's more information from Mamut here and some blog-comments here.

We have not seen this latest offering 'in the flesh' but did play with Mamut at the time of the UK launch. The software then seemed a strong, well thought out product but would at the time have been a risky choice as the company was still new to the UK. Perhaps with this latest version it will start to gain some serious market share.

Riley email changes

2009-09-20T08:31:00.002+01:00

This weekend we have changed our email system.

Our email & diaries have been based on Lotus Notes since 1998. The system has proved very robust and has served us well, but it does need regular (and geeky!) administrative input, has to be backed up each night and we were facing additional costs to offer everyone remote access to their mail and the ability to use it on smart phones.

We looked for alternatives and settled on Google Mail. This comes at a lower cost, should eliminate just about all maintenance effort on our part and is easily accessible by all of us from any computer or smart phone. It's also far easier to add new users and brings with it the ability to use the full range of Google Apps (explained here).

All our existing email addresses will continue to work. Some teething trouble over the next couple of days are expected as we all become familiar with the way the Google system works, but this shouldn't be noticeable to anyone outside the firm. Fingers crossed...

UPDATE 28 September:

The change has proved surprisingly painless though there was a short period when Google's mail system went woozy. We are also now trying our Yammer - a kind of private Twitter service useful for everyone within the firm to keep in touch wherever they are.

Live for today - and plan for tomorrow

2009-09-11T13:13:00.002+01:00

This was posted on YouTube by a group of CPAs (the US equivalent of chartered accountants) a couple of years ago. Still looks like good advice to me. A 401K, by the way, is a pension plan.

Back to work?

2009-09-01T14:19:00.001+01:00

Today has a definite 'back to work' feel about it, which is rather odd for those of us who have not been away.

The impression that the holidays are over is only emphasised by the unexpected sunshine.

Should we feel optimistic about the next few months? There's been plenty of encouraging economic news as well as food for depression over the past few days, emphasisising again that the road out of recession will be messy. Funding remains tight, supplies more difficult to obtain than you may anticipate (example: there's a shortage of certain models of car despite, or perhaps because of the slowdown in sales). And just as we're thinking a recovery may take hold the government has hit us with an increase in fuel duties.

More retailers are expected to fail over the coming months, cash-flow management remains critical and added emphasis on credit control will be needed.

But in slow, uncertain, shuddering steps we will be rebuilding the economy, our businesses, careers and wealth. So let's get to it!

How can we finance the private sector growth that we urgently need?

2009-08-20T12:41:00.000+01:00

There seems to be general agreement that the economy has reached a turning point. Germany, France and Japan are - just about - out of recession; maybe the USA too, if Goldman Sachs are right. The FTSE has seen its largest and fastest boost in decades.

But an end to the technical recession - when it finally reaches the UK as well - does not necessarily mean we will again enjoy the benefits of the level of GDP growth that we had come to expect. Annual growth of 0.1 per cent is not a recession, though it would most certainly feel like one.

For the economy to get back on track we need renewed growth in the private sector. That means fresh projects, fresh investment, more building, more staff, more R & D. That's not likely to happen on a significant scale until the money starts to flow freely to finance good projects. But the money can't go to two places at once.

The Bank of England's wheeze of printing money can't last long without generating inflation. For now, that money is all going to finance the government's growing debts. With demand for finance by the Treasury growing apace, where's the money going to come from to help SMEs make some progress?

Without wishing to be too depressing, I think the answer is that nobody knows.

The government looks set to suck up all available cash for the foreseeable future, perhaps at an even greater rate than forecast. Here's John Redwood's thoughts on the news of government borrowing released this morning:

Today’s borrowing figures are horrendous. July is usually a month when strong revenues exceed monthly spending. Instead the UK government borrowed another £8 billion in the month. In the April-July period last year the government borrowed an extra £16 billion. This year they have borrowed an extra £50 billion. It means we are on course to exceed the eye wateringly large sums they forecast for this year’s total borrowing.

Spending is up a massive £19 billion on last year in the first four months, and revenue is down a predictable £21 billlion thanks to the VAT cuts and the fall in activity. No wonder the Governor thinks we ought to print some more money - who is going to lend us all this? Interest rate increases to get people to buy more governent debt will be the inevitable result of this failure to hit very relaxed targets for spending and borrowing. This will be the mother and father of all crowding outs, as the cash has to go to the public sector to meet these huge bills. The private sector will continue to be squeezed.

It's no use the government putting forward scheme after scheme to help SMEs if the money is just not there because they've swallowed it all themselves.

It's hard to judge yet whether the government genuinely expects their schemes to help, or whether they are just applying Sir Humphrey Appleby's notion of the Law of Inverse Relevance, highlighted recently by Iain Dale:

"The less you intend to do about something the more you have to keep talking about it."

From the point of view of business, I have no doubt that the best thing that could happen would be for us to have an early election to remove the uncertainty and the coming months of campaigning paralysis. But of course, that's not going to happen.

Healthcare: UK good, USA bad?

2009-08-14T13:46:00.002+01:00

The debates in progress in the US around the issue of how best to fund health care have led some there to caricature the NHS ('a Soviet-style system') and that in turn has led to predictable counter attacks from here.

Twitter is full of assertions that 'we love the NHS' and David Cameron for the Conservatives has been quick to say that yes, he loves it too. It seems to matter little whether having health care organised the way we do is the optimum way of arranging things. Twitter offers many stories of the 'I wouldn't be alive today if it wasn't for the NHS' variety. These seem to disregard the fact that it's teams of individual health care professionals that provide treatments regardless of the system within which they operate. But politically, the NHS appears to be beyond criticism.

In reality, the US and UK systems have much to offer and much to criticise. There is wastage in both and the quality and availability of medical care varies within each of them.

I have read a couple of fascinating blog posts on this. One, from an American who spent some years living in the UK mentions an issue that had not occurred to me.

Writing about the UK system, she said:

"Because healthcare is not tied to employment, companies are free to focus on their core business and people are free to make career decisions (and life decisions) based on what is best for them instead of what preserves their healthcare. Brits never worry about keeping their healthcover — they never worry about pre-existing conditions; they never worry about continuity of care if they change jobs; they never get trapped into a bad-fit job because they have to keep their healthcover. They are much freer to be entrepreneurs than Americans, because their only worry is whether their business will succeed, not how they’re going to provide healthcover for their families when they’re self-employed. Companies, particularly small companies, are free to focus on their core-business because they not burdened by the administration of healthcare for their employees — they never have to pay someone in HR to manage health benefits; they don’t have to juggle insurance companies and negotiate lower premiums; they don’t lose employees because their healthplan isn’t as good as some other company; they don’t see their bottom line rocked by a sudden rise in premiums. Decoupling healthcare from employment is hugely freeing to both individuals and employers, and can actually a very good thing for the economy at large".

The full post from Strawberry is here.

Also talking good sense - though not necessarily from the same side - is UK blogger Dizzy, who in a piece called 'Grow up you morons' points out how unproductive it is to have such a black and white argument (ie one where all shades of grey are disregarded). Appropos the NHS he says that:

...we probably wouldn’t have the structure if we built it today, and I say that not because I want to see a system like America currently has, but rather because I see systems in other European countries that are not structured like the NHS but have equal and better outcomes with lower central costs and less centralised bureaucracy. Interestingly, I rarely see anyone over here complaining about the harsh healthcare inequalities of Germany or France, but dare to say Britain might want to examine a route like that and you'll be hounded like a witch in Salem.

Sadly, unlike what’s going on in USA right now, the structure and delivery of healthcare services is not even a matter for discussion in the UK anymore. Instead, the snobbish and arrogant British superiority complex rears its head, and stupidly deems that the structure we have is the best possible. Bland, meaningless and nonsense statements about it being the "envy of the world" are rolled out, and the debate is simplified down to "spending more money is good, spending less is bad".

Whichever system is chosen healthcare is hugely expensive and one way or another we all have to pay for it. It appears that many of those people that contribute to putting the structure of healthcare in the UK - or the US - beyond debate probably do so in support of their own financial or political interests. But that does not necessarily help the rest of us - taxpayers or premium payers - ensure we obtain the best possible care for the money we spend.

Fastnet Race

2009-08-06T12:27:00.006+01:00

It's been suggested that there's more to life than business. I'm not sure that this is the case, but I'm prepared to test the theory.

So...I shall be competing in the Fastnet race starting on Sunday 9 August. We leave to go up to the Solent later today. The race starts from Cowes on the Isle of Wight, follows the south coast of England, heads across the Irish Sea to the Fastnet Rock off the SW corner of Ireland and returns to finish in Plymouth.

I will be sailing (with 4 other crew) on X-Rated, an X332 yacht based in Plymouth and - for boat techies - rated in the IRC 3 fleet. At around 34 feet long, we're on of the smaller yachts in the fleet. The biggest is ICAP Leopard at 100 feet!

The race is 608 miles long and, weather permitting, we would be expecting to finish on Friday 14 August. The biggest, fastest boats will probably finish late Monday or early Tuesday and most of the finished boats will be berthed in Sutton Harbour in the centre of the Barbican where the crews will no doubt be quenching their thirst.

For those that would like to follow the race (and possibly us on X-Rated) there is a race tracker which you can find here. Click the drop down list on the right hand side for IRC 3 and look for boat X-Rated. The tracker will display heading, speed and location as well as showing us on the map and displaying our course. You can replay all the race, the course since last position etc.

Turning the weather option on (right hand icon at the top of the chart) will enable current weather or a positive cornucopia of future weather predictions (or guesses as I think we all know!).

We're going to be posting short human updates on Twitter here where the reception allows us a mobile signal. There are other boat blogs and news on the main Fastnet site .

If you're really interested and would have liked to do the race, try entering the virtual race.

Enjoy! I'm fairly sure that I will ....

50 per cent tax rate will discourage entrepreneurship

2009-07-28T22:17:00.004+01:00

From The Taxpayers' Alliance

The TaxPayers' Alliance is releasing a new report by Dr. Jonathan M. Scott, Teaching Fellow at Queen's University Belfast whose research focuses on entrepreneurship, and Matthew Sinclair, Research Director at the TPA. The report shows that the new 50p tax rate will push the total tax burden on high earnings to crippling levels and argues that will mean fewer entrepreneurs and jobs. To read the full report - including a foreword from Julie Meyer, online "Dragon" and Chief Executive of Ariadne Capital - click here (PDF).

There is rightly increasing political and popular concern about unemployment. In response, parties are putting in place or proposing new schemes to provide specific incentives for employers to take people off the unemployment register or take on new interns and apprentices. The new TPA report, Tax and Entrepreneurship, shows that these policies do little to encourage the new firms that create the vast majority of new jobs. Despite a notional commitment to ‘enterprise for all’ and significant public expenditure on business support services to encourage entrepreneurship, there has been little progress on that measure in recent years with just a 0.3 per cent increase in new business registrations between 1997 and 2006.

The report also covers the effects of the new 50p top rate of income tax, which are highly controversial, some politicians have argued that it will put off entrepreneurs, while others have argued that the low amount of revenue expected from the change means it will make little difference. Tax and Entrepreneurship demonstrates how the tax system affects the decision over whether to become an entrepreneur in two key ways:

click to continue reading

Need to beef up your company board with outside help?

2009-07-27T15:33:00.002+01:00

Ever thought of appointing an outsider to the board of your company? Or have you been asked to join a board?

Non-exective directors can bring a great deal of impartial good sense to help guide the management of any enterprise. But the role carries risks on both sides.

The Institute of Chartered Accountants of Scotland have published a booklet which will assist boards thinking of appointing one or more non-executive directors by outlining what they should expect the chosen individuals to offer.

On the other side of the fence it will help non-execs to fulfil their role and can be used by someone asked to become a non-executive director to help them decide whether to accept the position. It outlines a number of practical measures which would benefit both the company and the directors in their roles and in managing the potential risks.

This is not a definitive legal guide but offers practical points that all parties may wish to consider in order to help manage expectations on both sides.

You can download the free guide as a pdf file here.

"You are going to get slaughtered"

2009-07-24T16:52:00.001+01:00

Today, in the light of the result of the Norwich North by-election, has not been a great day for the government.

Over at The Times, there's an interesting exchange between their man Daniel Finkelstein and Philip Collins, a former speechwriter for Tony Blair (remember him?).

DF: Do people in Labour get it, in your opinion? At Cabinet level, say, or senior adviser level, do they see what is coming?

PC: No, I don't think they get it at all. To help them I am going to write the next bit in capital letters. YOU ARE GOING TO GET SLAUGHTERED.

click here to read more

The best time....could be now

2009-07-21T13:30:00.001+01:00

Doing the job that we do, many of us at Riley spend an inordinate amount of time reading stuff. Mostly technical, business-newsy stuff.

Much of this arrives in blog-form and when we find a writer worth following, we stick with them using Google Reader.

One of the consistently interesting and not-at-all technical blogs is Seth Godin's.

Today, he writes this:

The best time to do great customer service is when a customer is upset. The moment you earn your keep as a public speaker is when the room isn't just right or the plane is late or the projector doesn't work or the audience is tired or distracted. The best time to engage with an employee is when everything falls apart, not when you're hitting every milestone. And everyone now knows that the best time to start a project is when the economy is lousy.

You can read this post in fully if you click here.

When will the recession end?

2009-07-17T13:21:00.003+01:00

Well, it's all a question of definition. And by the traditional definition it could be over by the end of this year. However, the pain will endure rather longer.

A recession is a period when economic output declines; in the UK the precise definition is 'two consecutive quarters of negative economic growth - when real output falls'.

The first quarter that saw a downturn was July to September 2008 when the UK's GDP fell by around 0.5 per cent. There was a further decline in the quarter to December 2008 and during 2009 output is expected to fall by 4.25 per cent (IMF) and then start to pick up in 2010.

We will be declared to be 'out of recession' once we have two successive quarters in which GDP does not decline. That, of course, is a different measure entirely from the one that says we will be back on track once we have made up all the GDP we have lost. That's going to take a while longer.

Just how long is made clear in a graph published by the IMF in the paper they released yesterday (pdf).

This suggests that by mid-2012 UK output will still be around 1 per cent below where it was in June 2008. Now that's a long recession and as you can see from the graph, longer than any that most of us can remember. The damage is all the greater when you consider that our national losses are not only the fall in output but the fact we have missed out on the growth we would in normal times have had in those years - probably another 8 or 9 per cent.

There's plenty more in that IMF paper too: especially notable is the impact that the UK's economic problems have had on other countries (it's untrue that it's all the fault of the USA) and the insistence that government borrowing has to be sorted out - which of course means we need government spending cuts and tax increases.

House prices

2009-07-10T12:35:00.002+01:00

It's been reported today that housebuilder Barratt has seen its average selling price for private homes drop by 19 per cent to £166,000 over the past year. What will happen next?

In the US prices in many areas have dropped by more than 30 per cent and there are expectations that the falls will continue. Some of the statistics are contradictory, but it does seem clear that price reductions in the UK have moderated - but will they now hold steady or fall again?

A continuation of prices downwards here or in the US will damage the banks, with more people sinking into negative equity and more loans turning bad. And of course much of the UK economy is linked to the housing market: builders, furnishers, estate agents, financial services and so on.

Despite the drops we have already seen, there are plenty of commentators who believe we in Britain may still be only half-way down to the likely low point. And in absolute terms, of course, our prices remain far higher than elsewhere. I was discussing this issue with someone in the US earlier this week and was told that in parts of the mid-West you can now find good two bedroom houses with a garage for $80-$90,000 (roughly £50-£55,000). At that price level first time buyers can step into the market easily. That's not quite the case here.

The UK is different, of course, because of scarcity and that makes it all the more difficult to read the future direction of prices. Except that they are unlikely to climb significantly as long as unemployment continues to climb - as it probably will throughout the rest of this year.

Britain is deep in 'a fiscal black hole'

2009-07-01T11:51:00.002+01:00

Economist John Kay has written a piece in today's Financial Times that highlights the problems any future Chancellor will face as a result of the 'obfuscation' of the current government. You can read the article in full here.

Meanwhile over at the Spectator (Speccie to its friends) Fraser Nelson - who yesterday joined in a spat with Ed Balls after accusing him of lying - has commented on John Kay's thoughts:

In the FT, John Kay has written one of those columns that quietly sums up the calamitous cost of Brown/Balls fiscal model. He concludes that we'll have to raise some £70bn of taxes and then inflate our way out of debt—and this is a theme worth looking at in greater detail because I suspect it is what George Osborne will end up doing. "This year, Britain is likely to incur a fiscal deficit of more than 12 per cent of national income," Kay starts. "This figure is completely outside the normal experience of developed countries in peacetime. How did it happen and what are its implications?" How it happened is that Brown and Balls used their verbal tricks to conceal their reckless leveraging up of the British economy. "The British government, ostensibly committed to this principle [of running surplus in the good times], has obfuscated to abuse it so that Britain entered the recession with a large underlying deficit. The downturn turned a substantial gap in public finances into a chasm. This situation was aggravated by the speed and scale of the recession and the realisation that many of the earnings from financial services, which had previously boosted tax receipts, had been illusory. The contribution of financial services to public finances has been not only removed but reversed."

So we're in a mess - and we may have to vandalise the value of sterling to get out of it painlessly.

click to continue reading

It's difficult to see how much longer Gordon Brown and his chums can maintain their present line of 'Labour investment vs Tory cuts'. The extent of the financial hole Brown has created is being hightlighted by more commentators daily.

The end of retirement

2009-06-26T13:00:00.005+01:00

from The Economist

Demography means virtually all of us will have to work longer. That need not be a bad thing

WHEN Otto von Bismarck introduced the first pension for workers over 70 in 1889, the life expectancy of a Prussian was 45. In 1908, when Lloyd George bullied through a payment of five shillings a week for poor men who had reached 70, Britons, especially poor ones, were lucky to survive much past 50. By 1935, when America set up its Social Security system, the official pension age was 65—three years beyond the lifespan of the typical American. State-sponsored retirement was designed to be a brief sunset to life, for a few hardy souls.

Now retirement is for everyone, and often as long as whole lives once were. In some European countries the average retirement lasts more than a quarter of a century. In America the official pension age is 66, but the average American retires at 64 and can then expect to live for another 16 years. Average spending on public pensions across the OECD is now the equivalent of more than 7% of GDP (they cost America just 0.2% back in 1935). In some countries the current figure could double by 2050, to say nothing of the cost of private pensions and extra spending on health and long-term care.

click to continue reading

Note: Denmark has opted to index retirement age to the figure for life expectancy at 60 from 2025. The plan is that with early retirement the period with a public pension will then be around 19 years.

"The dog ate my homework"

2009-06-24T12:17:00.002+01:00

Sorry.

In the computer age, the favoured excuse of yesteryear will no longer suffice. Instead, when the deadline for submitting school/college work arrives and the assignment is still not complete, today's student turns to corruptedfiles.com - a website service where for a modest sum a corrupt computer file can be purchased for submission.

The idea is that by the time the corruption is discovered, the work will be complete and the actual file can be sent.

Of course, such a ploy could never have a place in working life. Could it?

The economic recovery will be messy

2009-06-22T11:59:00.002+01:00

Anecdotal evidence reported this morning suggests that residential property prices are again weakening. This really is no surprise at a time when prices remain at a high historic multiple of earnings and unemployment is set to continue to climb for at least the remainder of this year.

Yet only a week ago there were reports that the recession was over - that GDP may have been growing since April.

Well that may well be so but I'm not sure it really matters much. We are in an economic downturn; for most of us it will feel as though we remain there for many months after growth has resumed at its historic trend rate.

Throughout this unpleasantness there have been businesses that have thrived. Some fail at the best of times. But as we've said before, the recovery is frequently the most dangerous time for many enterprises as a resumption of growth in sales puts a strain on working capital - which means that some businesses will simply run out of money at the very time things are supposed to be improving.

And the risks continue; there are many commentators who believe we may experience a 'double-dip' recession - growth resumes and then we slip back into recession. This happened in the 1930s in the US when policy makers, perhaps unknowingly, put the brakes on too soon in an attempt to choke off the risk of inflation.

All of which means that the need for every business to have up-to-date information about its performance and to actively manage its cash position remains critical. Are your debtor days growing or declining? Which are the high risk customers that owe you money? How are they doing? Should you restrict the amount of credit you offer them?

The recovery from every recession is just as messy as the slide into it. Don't become a victim just as growth resumes.

Green shoots? Strictly for the colour-blind

2009-06-18T07:10:00.002+01:00

By David Blanchflower in the Daily Telegraph

Over the past few weeks, there has been much talk of "green shoots", even of the recession having come to an end. But while recent evidence suggests that things around the world may indeed be getting better, there is plenty of cause for caution.

This was precisely the message contained in two excellent speeches given last week by my former colleagues on the Bank of England's Monetary Policy Committee (MPC). Paul Fisher, the bank's expert on markets, warned that if the banking sector cannot lend enough, it will restrain economic growth – and any recovery – significantly, causing households to save more and spend less. He argued that the domestic and global economies remain vulnerable to further shocks, especially given the low levels of consumer and business confidence.

Similarly,Paul Tucker, the bank's deputy governor, gave warning that "for the moment it is unclear… whether the financial system can generate the expansion of credit that will most likely be necessary to support recovery". They are spot on.

click to continue reading

Glad not to be a Londoner

2009-06-10T07:32:00.004+01:00

I spent the first ten years of my working life in London. It was a great place for a trainee/newly qualified chartered accountant to learn, but travelling around the city amid the strikes of the 1970s made life so miserable that when I married we decided to move to Devon - a move we have never regretted, especially not today.

Because today, the strikers are at it again as the London Underground is shut down for 48 hours by the RMT - a union with its feet firmly placed in the past.

You may think that a five year deal that offers a increases of 1 per cent above inflation in year one, 0.5 per cent above in years two to five was generous in the current economic situation, especially when offered to people not notably underpaid now - drivers start on £40k, station assistants on £29k. Oh, and the union wants a guarantee of no compulsory redundancies as well even though the whole underground system is far from paying its way.

This action, of course, is happening because we have a visibly weakened government. Wat Taylor has more on this over at Burning our Money where he points out that over the past five years, workers in the public sector have been thirty times as likely to strike as those in the private sector.

We could be in for a difficult year.

Banking: another way?

2009-06-04T16:30:00.002+01:00

No, not NatWest and their long running advertising campaign, but Sweden’s Svenska Handelsbanken and their way of doing business.

While most banks here have become more regionalised or centralised, Handelsbanken try to make sure that the lending decisions are taken by the managers in the branches (and there are branches in Plymouth and Exeter). A recent article in The Economist explains all:

Back at the branch

May 14th 2009
From The Economist print edition
More Swedish lessons for the banking industry

IF A bank posts record results during the worst quarter in living memory for financial markets, it could be a quirk. When the same bank has produced higher-than-average returns on equity compared with its peers for a number of years, it deserves a closer look. And when it has a business model that appears to answer some of the main governance concerns afflicting the industry, it repays much wider attention.

The bank is Sweden’s Svenska Handelsbanken, a retail bank with operations in Scandinavia, Britain and elsewhere. Handelsbanken posted a 39% quarter-on-quarter jump in operating profits in the fourth quarter of 2008. It has gobbled up great chunks of market share in deposits and new lending in the past year. The worst of the economic downturn is yet to come in Sweden but the bank has good reason to believe it can navigate stormy waters, since it sailed through the country’s 1990s banking collapse unscathed.

click to continue reading

You just can't trust them

2009-06-03T10:53:00.003+01:00

From www.parliament.uk - a written question:

Mrs. Villiers: To ask the Secretary of State for Transport how much his Department has spent on (a) economy, (b) business and (c) first class flights in each financial year since 2001.

Mr. Hoon: The Department for Transport could provide this information only at disproportionate cost.

Methinks someone has something to hide...

Hattip: Dizzy

Business radio returns

2009-05-29T11:10:00.003+01:00

There's a new series of the Evan Davis radio series 'The Bottom Line' underway on BBC Radio 4.

In the first programme, Evan and his guests discuss how businesses can survive a recession, MPs expenses and the pros and cons of having a positive mental attitude in the workplace.

Well worth a listen - it's on the iPlayer, is available as a podcast or you could even try hearing it on the radio (do people still do that?). More here.

Taxes - even MPs have to follow the rules

2009-05-27T09:15:00.003+01:00

It's a good day for those who agree that the rules that apply to the rest of us should be enforced against MPs as well.

From The Daily Telegraph

An investigation by The Daily Telegraph has discovered nine cabinet ministers and more than 30 junior ministers have claimed back the cost of personal tax advice on their expenses, whereas millions of voters forced to complete self-assessment forms are prevented from writing off the cost of employing an accountant.

Ministers have said their expenses claims for accountancy bills were allowed within parliamentary rules as stipulated by their ''Green Book’’.

However, in an unusual intervention, HMRC told The Daily Telegraph on Tuesday night that MPs were not exempt from tax laws and that tax must be paid on some expenses.

click to continue reading

From John Redwood's blog

The Revenue have made clear that if any MP has paid for personal tax advice, they need to pay tax on any claim they made for public reimbursement. The Ministers concerned have to demonstrate that the advice they bought was advice on the tax position of their employees, not for their own affairs.

If there is any uncertainty about the tax position of employees it would be best for that to be sorted out for all Commons staff by the executives in the Department of Resources. Any cost involved could then be controllled, with all MPs and their staff benefitting from the single piece of advice.

The wider issue is the attitudes towards tax and public spending it reveals. Many Labour MPs have made speeches telling us all that it is good to pay more tax for public purposes. They have said that those on higher incomes , like MPs, should pay more. They have told us the tax system is not over complicated, whilst passing Finance Bills with ever more pages of complex drafting. They have never said we should pay more tax so more MPs can have free tax advice for their offices.

click to continue reading

Guido's opinion: Cabinet of tax evaders

When Gordon Brown introduced the 50p tax rate he said that “it is right that those that earn more should pay more”. Obviously that is except if they sit around his cabinet table. If members of the cabinet paid tax on their perks like the rest of us they would be well inside the £150,000 / 50p tax bracket. In awarding themselves tax-free perks they evade paying the higher tax rate. A cabinet salary package with grace and favour residence thrown in is worth well over £250,000.

click to continue reading

Accounts software: are Sage losing their way?

2009-05-21T06:30:00.001+01:00

Yesterday I had a call from someone at TAS Software. They produce a range of accounting software that was an effective UK rival to Sage, until Sage bought it.

As accountants we support clients that use a range of software products - various versions of Sage, Quickbooks, TAS and Access Accounting included. To be able to offer the best support to users of these we'd like to have copies of them all on our system. That's becoming expensive. At one time the accounts software suppliers would provide accountants with free copies to help ensure their customers made the best of their products, but no longer.

It was Sage that effectively ended that by creating what they called their Accountants Club. Other providers offer similar schemes, under which accountants have to pay an annual fee to have access to the latest version of each company's software.

Yesterday TAS told me that they have decided to increase the annual charge to us for their scheme from £399 to £816. No clear reason was offered for this: perhaps they are failing to sell new systems in the current climate and are trying to plug a hole in their revenue stream. Our reaction is likely to be that we drop them altogether - probably not what they wanted.

Accounts software is generally thought to be undergoing a change as it shifts from the desktop to the 'cloud' - ie, instead of businesses maintaining the software on their own system the programs will be hosted at a remote server and used through the internet. Sage itself is struggling with this concept and has so far failed to make any serious inroads into this growing market.

They will need to do so if they are to maintain their dominance of UK SME business software. Other Sage customers have remarked to us on how they are bombarded with Sage publicity material offering products they don't want as the company tries to maintain its cash flow and growth. But accounts software is now a mature market: something needs to change.

AccMan recently blogged about an interview given by Sage's CEO to website Silicon at the end of last month. It's worth a read.

Accounting superheroes?

2009-05-20T16:58:00.003+01:00

This promotional video from the Association of Accounting Technicians almost manages to stay the right side of embarassing:

Politics still matters

2009-05-20T13:54:00.005+01:00

After the events of the last few weeks at Westminster, it's tempting to dismiss all politicians as a bunch of self-serving troughers who are best ignored. But politics should never be ignored because when it is, disaster can follow.

Right in the middle of the current second-home flipping, expenses-gate circus, last Wednesday former Conservative party leader Iain Duncan Smith went on a one-day trip to Auschwitz. His description of that visit provides a timely reminder of what can happen when politics fails. You can read it here.

MPs expenses

2009-05-19T10:21:00.001+01:00

There's an interesting, clickable map summarising who's claimed what here.

Scrappage scheme blunders

2009-05-18T17:07:00.009+01:00

Today's launch of the car scrappage scheme has not turned into quite the positive story the government needed.

Before the Budget the Society of Motor Manufacturers and Traders were in discussion with the government about the possibility of introducing a scheme of this nature in the UK. Similar schemes are operating in a number of other countries including France, Germany, Austria, Italy and Spain.

The word was that a scheme would be announced in the Budget and £2,000 of government support would be offered for eligible trade-ins. This information was passed on to manufacturers who prepared advertising to run the day after the Budget. But 30 minutes before the Budget was delivered in the House of Commons, the SMMT were told that the scheme would be included but the government's contribution would be £1,000 and the manufacturers would have to offer £1,000 themselves to be eligible for the scheme. All scheduled advertising had to be pulled and the campaigns redesigned.

Full details - the small print - of the final scheme were only sent to motor manufacturers last Thursday night for a scheme due to begin today (Monday). Questions then arose about how VAT was to be dealt with and whether the industry's part of the discount could be divided between the manufacturer and dealer. BERR - the absurdly named Department for Business, Enterprise and Regulatory Reform - insisted that the terms of the arrangement had always been clear; the SMMT says that the original BERR paperwork was ambiguous. The result is that Ford and Honda have delayed introducing the scheme until their queries have been resolved.

With so many other countries having already launched similar schemes, you'd have hoped that HMG would have been a little more on the ball than has proved to be the case. Perhaps they were distracted?

The outstanding issues should be resolved in the next few days. Perhaps we'll then find out if the scheme generates benefits that justify all the costs and energy that are to be invested in it.

UPDATE Tue 19 May 2009: Agreement on the disputed details was announced late this morning and both Ford and Honda have confirmed they will proceed with the scheme.

Another stealth tax?

2009-05-15T10:52:00.002+01:00

The British Chambers of Commerce are promoting a petition to oppose the Workplace Parking Levy - of which the AA has details.

You can sign the petition here.

Just what businesses need: higher taxes

2009-05-13T16:47:00.002+01:00

Parliament has been debating the Finance Bill, and yesterday John Redwood gave a speech warning about the risks to the UK economy of raising corporation tax rates to levels that could push companies to move more of their operations overseas. Redwood said:

"Obviously, if a multinational has footloose business of a high-technology, high-value-added, high-growth kind which will produce a high margin and plenty of profit, it will look very carefully at the effective and, especially, the headline tax rates around the world. All other things being equal, it may then decide to put more of its high-value, high-profit business into the parts of the world that offer the most competitive headline rates.

"I am sure that, in their saner moments, Treasury Ministers agree that that is the case. They know that it happens and that it is a real possibility now, which is one of the additional reasons why I think my hon. Friend the Member for Fareham is right to press them again on whether they are certain that 28 per cent. is a sufficiently competitive rate at a time when the whole world is hungry for jobs and for higher-technology and high-value-added business, and when there is not enough business to go round and there are not enough jobs to go round."

He pointed out that it has frequently been found that higher tax rates generate lower tax revenues and discussed the impact of the 10 per cent rate applied in Ireland for many years.

read the speech in full here

A good argument, but to no avail: the government does not understand the impact of taxes on business - or if they do, it has what it sees as compelling political reasons to press ahead with high taxes regardless.

Hook, line...?

2009-05-12T18:22:00.003+01:00

One activity that usually thrives in a recession is fraud, and there'll be plenty going on now.

Practitioners of the online variety continue to prosper. Even potential victims that are aware of 'phishing' and similar approaches can sometimes be caught offguard. If you receive an email from someone claiming to represent a bank or building society, check it out at Bank Safe Online.

Even as I write this, I've received an email claiming to be from 'Abbey National plc' about my (non-existent) account with them. Nice try, guys.

The reality of recession

2009-05-07T16:46:00.004+01:00

Every employer has to dismiss employees at some point. It's painful to have to tell someone they no longer have a job. It's worse in the middle of a recession when you know how difficult it may be for them to find work elsewhere.

There's an article in today's New York Times that captures the process in uncomfortable detail:

For small employers, shedding workers and tears

GRAFTON, Wis. — In a small, windowless conference room, the nine members of the management team at Ram Tool gathered to consider which employees should be laid off in the company’s latest round of cutbacks. They debated each name and weighed issues like seniority and skills. Could they do multiple jobs? What was their attendance record?

Finally, after three days of discussions, they arrived at a list, and it fell to Shelly Polum, the vice president for administration at this small, family-owned tool-and-die manufacturing company here, to inform four workers they were being let go. She put on what her husband called her “stone-cold face” and walked out onto the shop floor.

When it was over, trying to maintain her composure, she rushed back to her office and shut the door quickly.

Then she sank to the floor and burst into tears.

“It was a rush of emotions,” Mrs. Polum said later...

click to continue reading

A nasty Brown mess

2009-05-01T16:54:00.002+01:00

From 'The Economist'

JEAN-BAPTISTE COLBERT, Louis XIV’s finance minister, famously said that the art of taxation was like plucking a goose; the aim was to get the most feathers with the least hissing. But tax policy should aim to do more than smother protest: it should also seek to raise the most money with the least distortion to economic activity.

By this measure, Britain’s attempts to fill the fiscal gulf created by recession are a dismal failure...

click to continue reading

Selling your business?

2009-04-30T12:33:00.003+01:00

Too many seasons of 'House Doctor' have familiarised us all with the financial benefits of preparing a house for sale. A tastefully decorated, uncluttered property free of structural problems and where everything works will be easier to sell for a good price than a place stuffed full of rubbish with an uncared for look.

Just as you need to prepare your home to be sure to sell it easily and at the right price, a business needs careful preparation - often several years of it - to be in the best shape to sell. There's a good range of books available to give you an idea of how to go about this - see the list here, for example.

But as in any dealmaking, it helps to see the transaction from the point of view of the other party. If you were buying a business, what would you look for?

Well, clearly it would be best to acquire a profitable business that already works. Here's a list from Warren Buffett of what he looks for in a prospective business acquisition with my own comments appended in italics:

1) Large purchases - at least $50m of before tax earnings;

ie find a buyer that is targeting your size of business.

2) Demonstrated consistent earning power (future projections are of little interest to us, nor are 'turnaround' situations);

Projections guarantee nothing - it's much better to be able to show a good track record of earnings than to have run up something on a spreadsheet that has little credibility.

3) Businesses earning good returns on equity while employing little or no debt.

High debt would make the business dependent on the financial markets. And we know about them. Or at least, we do now.

4) Management in place (we can't supply it).

Having a business that can run itself without the buyer having to parachute in managers will always be more attractive - except in a management buy in, of course.

5) Simple businesses (if there's a lot of technology, we won't understand it).

This is a well-known Buffett prejudice - and has worked well for him!

6) An offering price (we don't want to waste our time or that of the seller by talking, even preliminarily, about a transaction when the price is unknown).

It's far better to work out your target price and disclose it than expect the buyer to come up with a valuation (which will inevitably be lower than your own).

The exact requirements in terms of numbers will vary according to the buyer.

There are some Buffett thoughts on selling your business here (scroll down to Appendix B). These are aimed at someone planning on selling to his company, but many of his thoughts apply more widely.

Finally, to emphasise again the value of a good and consistent track record of profits when selling Buffett quotes the story of a man with an ailing horse. Visiting the vet, he says "Can you help me? Sometimes my horse walks just fine and sometimes he limps." The vet's reply was pointed: "No problem - when he's walking fine, sell him".

Finally, if you are selling your business through an agent remember that the agent wants to do a deal regardless of whether it's a good one for the buyer or the seller.

Swine flu - it it all hyped?

2009-04-29T22:54:00.003+01:00

Ben Goldacre - who writes the Bad Science column in the Guardian - has written an interesting piece on the way the media is responding to the flu outbreak.

Because so many medical and technological stories have been overblown in the past, people are pretty sceptical about what they read, hear or view. Bird flu, SARS - even the millennium bug - were coming to get us, but somehow they didn't.

Goldacre, who is both a writer and a doctor, has been asked to appear on a number of radio and TV programmes to say that this story too is just another media scare. But he doesn't think it is. What he says provides a useful insight into the way the media now operate:

"By Tuesday, pundit-seekers from the media were suddenly contacting me, a massive nobody, to say that swine flu is all nonsense and hype, like some kind of blind, automated naysaying device. "Will you come and talk about the media overhyping swine flu?" asked Case Notes on Radio 4. No. "We need someone to say it's all been overhyped," said BBC Wales.

I assumed they were adhering, robotically, to the "balance" template, but no: he kept at it, even when I protested and explained. "Yeah, but you know, it could be like Sars and bird flu, they didn't materialise, they were hype." Simon Jenkins suggested the same thing. It's not true, I said. They were risks, risks that didn't materialise, but they were still risks. That's what a risk is. I've never been hit by a car, but it's not idiotic to think about it. Simon Jenkins won't be right if nobody dies, he'll be lucky, like the rest of us. Do people think this flappily in casinos? The terrible truth is yes.

In the time that I have been writing this piece – no embellishment – I've had similar calls off This Week at the BBC ("Is the coverage misleading?"), Al-Jazeera English ("We wanted to talk to someone on the other side, you know, challenging the fear factor"), the Richard Bacon Show on Five Live ("Is it another media scare like Sars and bird flu?") and many more.

I'm not showing off. I know I'm a D-list public intellectual, but I just think it's interesting: because not only have the public lost all faith in the media; not only do so many people assume, now, that they are being misled; but more than that, the media themselves have lost all confidence in their own ability to give us the facts."

You can read his article in full here.

So yes, this is a risk. If it turns into a pandemic as it could, it will have implications for the way we all run our businesses. The high levels of sickness absence that would follow are not something we really need just at the moment, but they are something we need to prepare for - just in case this really does get serious.

Thanks, Karen!

2009-04-24T16:31:00.001+01:00

In September 1985 Margaret Thatcher was still prime minister, a joint US/French expedition located the wreck of the Titanic, a major earthquake hit Mexico City and the Brixton riots took place in London. And, quite unconnected with all this, Karen Field agreed to join us as a junior office assistant.

Since then Karen has moved on from spending most of her time on a typewriter - word processors were new and we only had one - to handling much of our administration, managing our computer network, writing database and automated spreadsheet applications both for us and for clients and doing much more too.

Not surprisingly, Karen is now the longest serving person here, apart from me. And a little more than a year before her twenty fifth anniversary with us she has accepted an offer that she chose not to refuse from one of our clients and is moving on.

This is a great move for Karen, not because we want her to go - we'll miss her - but because it doesn't seem like a good idea for anyone to spend their whole career with one employer and this change will enable her to apply her skills in a different environment and in new directions.

So - thanks for all you've done, Karen, and our very best wishes for the future.

Alistair on the rocks

2009-04-24T11:30:00.003+01:00

I'm a bit late I know, but I've only just caught up with the interview by Nick Robinson with Alistair Darling yesterday. He asked some searching questions, which the chancellor, clearly a little reluctant to own up to quite how bad things are, failed to answer.

If you missed it too, it's worth a look.

Aftermath

2009-04-23T16:36:00.002+01:00

You only start to grasp the true impact of any New Labour Budget a few days afterwards once the spin has fluttered off and the true meaning of the press releases and other technical papers have been absorbed.

But already it's clear that the real story is not the tax changes that have been announced, but the impact of what will become necessary in a year or two.

Although public spending is still increasing for now, even this government have been forced to plan for real terms cuts from 2011 onwards. But their planned cuts won't be enough.

In fact, the Institute for Fiscal Studies have today pointed out that taking account of the figures in the Budget there will remain a shortfall of £45 billion a year in today's money to be met from taxation or further spending cuts by the end of the next Parliament.

Life is not going to be easy for the next government. At least we'll know who to blame.

Deficits are us

2009-04-22T16:47:00.003+01:00

The story of the Budget is debt, debt and more debt. We knew it was going to be bad, but this? As David Cameron pointed out in his response:

"This Chancellor has just told us he will be doubling the national debt. He’s planning to borrow £348 billion over the next two years. That’s more, over just those two years, than every previous Government put together.

Not just every Government since World War Two, or even since World War One, but every Government since the Bank of England was first founded, more than 300 years ago. This Prime Minister has certainly got himself into the history books."

While the government's figures look bad, the outcome is likely to be worse - because they have assumed that the recovery will be faster than any other forecaster expects. If they are wrong (they usually are) then the debts will be even steeper and more difficult to repay.

There will have to be major cuts in public spending (not merely the £15 billion cuts in planned spending increases announced today - out of a total of more than £600 billion). There will also have to be large tax increases for just about everyone. Taxing high earners will bring in little and is likely to be counter-productive as those with the highest incomes move to Dublin, Dubai or Monaco.

Understandably not wanting to frighten anyone more than necessary ahead of the coming election, the increases in tax and national insurance that will affect most of us will not be announced for a couple of years - by then the election will be safely out of the way. But when they do come those extra taxes will be heavy and will last for years.

Understandably reaction to all this has been sharp and 'Labour have betrayed their own country' (Capitalists@Work) is by no means the most extreme.

Things can only get better? Or Won't get fooled again?

The Budget: due later today

2009-04-22T08:25:00.004+01:00

One of the more curious facts of the government's economic record is the way in which their policies have failed even in their own terms.

Labour MP Frank Field has pointed out that the 10p tax fiasco had one bizarre side effect.

"The Labour Party champions individual taxation believing that it strengthens the position of women in households. The Government has refused to present information on the number of individual losers from the 10p rate’s abolition: it only gives the number of households made worse off by its move.

This statistical sleight of hand minimises the number of losers. Most of those who lost out from this tax change were women for the very simple reason that they are, generally speaking, on lower earnings.

Many of the losers live in households where, again generally speaking, male workers gained from the reduction of 2p in the standard rate. If the total household income showed a plus, the Government excludes it from its official data on those households who lost out - where one member, usually the woman, lost out."

Partly because of this issue, and because the 'solution' the government put forward to deal with this political embarrassment was poorly targeted, the 10p issue is not yet done with More on Frank Field's blog.

John Redwood is a Conservative MP and former minister who remains outside the shadow cabinet but who routinely offers interesting commentaries on the government's economic policies. He has some suggestions for today's Budget ahead of its delivery, but given the record of Gord's economic dabblings he's not optimistic about what will be on offer.

"This will be a fantasy budget and a very political budget. It could turn out to be the McBride memorial budget.This government not only divorced Prudence, but continues to hold a drink and drugs party on her grave. That is bad news for all of us."

More here. We'll find out if he's right later today.

Budget Day minus 1

2009-04-21T15:21:00.002+01:00

The net is awash with speculation about what the Budget may bring. Some of this will have been leaked from the Treasury, though that does not make it true - on the contrary...

I prefer to wait to see what is actually announced - or rather, what appears in the associated press releases and other documents since the speech itself rarely tells us anything useful.

In the meantime it's wise to prepare something to take away the pain - a Pan Galactic Gargle Blaster, perhaps, that cocktail from Douglas Adams' Hitchhikers Guide to the Galaxy that is "like having your brains smashed out by a slice of lemon wrapped around a large gold brick".

It's likely that anything less won't do.

Budget week

2009-04-20T11:35:00.003+01:00

On Wednesday Alistair Darling will tell us how he plans to repay the huge debt the government is currently accumulating. There are only two ways to do this: raise taxes or cut spending. He needs to do both.

In her blog, BBC economics editor Stephanie Flanders points out today that the deficit is not merely a result of the recession - it was there and growing before the downturn took effect. She says:

"On Budget day, the chancellor is likely to announce that he expects the government to borrow around £170bn in 2009-10 and 2010-11.

"That would represent a post-war high of nearly 12% of GDP. Borrowing was only around 6% of GDP in 1976, the year that Britain was forced to go to the IMF to bail-out its economy".

Raising taxes and cutting spending are difficult for any government; spending cuts especially so because for so long Labour has gained political capital from suggesting anyone advocating them wants to see doctors, nurses and teachers sacked. As John Redwood says:

"I am heartily sick of all these hand wringing interviews about how difficult it is to cut public spending. They usually ask people if they want to cut schools or hospitals, the nonsensical Labour spin. The “better” ones do go on to offer the interviewee chance to cut defence or some other public service.

"Businesses regularly have to cut their spending. They do not agonise over whether to cut production or the service they give to customers, as they know they need to sustain both if they are to stay in business. They debate whether they can buy their raw materials cheaper, how many people they really need to produce what they are producing, whether there is a smarter way to make it. They look at cutting what they spend the money on - staff, raw materials,semi manufactures, adverts, transport etc, not at cutting the final output or service".

It's going to be an interesting week.

UPDATE: The IMF now puts the cost of the UK bank bailout at £200bn.

Brown. Nasty.

2009-04-17T13:15:00.003+01:00

I've been pretty well stunned into blog silence over the past week as the exposure of McBride by Guido Fawkes has played out. The picture painted of life at the heart of the Brown machine seems so Richard Nixon.

There's an excellent piece from Frazer Nelson in The Spectator of Gordon Brown, his methods and what they have led to. Nelson notes that

"...smears against Tories and their families — are devastating precisely because they are not, as Number 10 disingenuously claims, the isolated ravings of a lone special adviser. On the contrary: the messages between this senior adviser to Mr Brown and Derek Draper, the Labour blogger, have for the first time revealed in unvarnished detail how Mr Brown has been operating over the years — and the methods he deployed to secure his path to power. As chancellor, he systematically recruited attack dogs and dispatched them to destroy some of the most able people in the Labour party, with exactly this sort of smear and innuendo. And while it worked for him, it has proved fatal for his party....

"The ultra-Brownites have not lost the awesome self-assurance which marked them out at the Treasury. They tore up the Bank of England’s power to regulate banks (to calamitous effect). They devised a disastrous ‘golden rule’ for fiscal stability, which allowed Mr Brown to defy all economic wisdom by borrowing massively in an upturn. They concocted accounting tricks to conceal the extent of the consequent debt. In their own minds, they were masters of the political universe, intellectually superior to and politically tougher than the Blairites."

I could never understand why so many people for so long thought that Gordon Brown was a good chancellor. He was a disaster. And a very nasty political operator too.

As Nelson says:

"Thatcher was seen as a little cruel, but efficient. Blair was seen as well-meaning, if a little ineffectual. ‘Damiangate’ and Wednesday’s budget may combine to leave Gordon Brown’s party with a crushing tag: corrupt and useless."

Should public sector workers share the economic pain?

2009-04-09T07:35:00.002+01:00

Since April 2008, pay in the private sector has fallen by 1 per cent as workers have agreed to pay cuts and bonuses have disappeared. Meanwhile in the public sector pay has risen by 4 per cent.

This differential is not justified by public sector pay catching up - they are already ahead (and even more so if pensions are taken into account).

"Taxpayers should insist on these deals being renegotated. With the public sector pay bill running around £160bn pa, a 2-3% pay uplift costs us £3-5bn. And it's cumulative - after three years, the additional annual cost is running at £10-15bn. Or 3-4 pence on the standard rate of income tax".

You can read the full story over at Burning our money.

Business plan, anyone?

2009-04-06T11:57:00.005+01:00

Business plans are back in fashion.

It's not that business owners have a renewed belief in their value, rather that banks are frequently demanding them before agreeing to loans.

Unfortunately the response of many business owners is to outsource the plan to someone else - their accountant, perhaps a BusinessLink consultant: anyone, in fact, who claims they can produce something to keep the bank happy.

All too often, the managers of the business then have little input to the resulting plan. The consultant asks them a few questions, checks out the business accounts, does a bit of work on a spreadsheet and then completes their business plan template. The outcome may well be that the bank makes the loan (good!) but the plan will have produced no further value (bad!).

Now I'm all in favour of business plans, or rather in business planning. Because the value lies not in the printed plan itself but in the planning process.

There's an old military saying: "no battle plan ever survives contact with the enemy". That applies to business plans, too. But a battle plan, just like a business plan, remains important because of all the thinking and analysis, the 'what-ifs' that will have gone into its preparation.

But when a business farms out the preparation of a plan to a third party, they may well not have been doing that analysis and thinking themselves and so they will not have learned anything to help guide them when reality hits the fan (or should that be, the plan?).

Using outside help to produce a plan can work well. The consultant can act as a sounding board, making suggestions and pointing to issues that may be missed. But the plan must not be theirs; it has to distil the thinking, intentions and wishes of the business managers themselves.

And you don't need to be borrowing money for a plan to be a good idea.

Plans are something we at Riley can help with. But it's probably a good idea for business managers to do a bit of reading of their own on the matter first.

G20 - a genuine triumph?

2009-04-03T09:53:00.002+01:00

Watching much of the coverage of the G20 shindig - especially on the BBC - I was rather left with the impression that something new and wonderful had happened and that we had arrived at the beginning of the end.

A $1 trillion package! Everyone onside! But wait...

Fraser Nelson has the measure of all this in his piece published on The Spectator website last evening:

"Britain has as its Prime Minister a master of political illusion. He may not be much of an orator, but there is no one better at dressing up old money as new. If the G20 nations wanted to fake progress, to spin a $1.1 trillion figure while committing no new money at all, then Gordon Brown is their man. “This is the day that the world came together to fight the global recession, not with words but with a plan,” said our Dear Leader. Well, let’s have a closer look at this supposed plan…"

Sounds like a good plan to me

2009-03-26T12:02:00.002Z

Cash-flow management

2009-03-25T15:47:00.002Z

For a business, as for an individual, you discover just how important cash is when you don't have any.

How good is your business at controlling cash? There's a booklet available from the Chartered Institute of Management Accountants which explains the basics. It's well worth a read to make sure you are not missing anything. You can find it as a pdf file here.

How I wish I'd said that...

2009-03-24T19:17:00.000Z

The joy of cheese

2009-03-24T13:05:00.005Z

In a world dominated by economic news, it does no harm to break off from time to time to reflect on what really matters in life. I speak, of course, of cheese.

And I'm pleased to see that shadow foreign secretary William Hague is backing a campaign to give Wallace & Gromit's favourite, Yorkshire's Wensleydale cheese, protected status.

Though personally I'm more a Sharpham and Cornish Yarg fan.

Yes, it is the Prime Minister's fault. And yes, others did see it coming...

2009-03-21T09:31:00.003Z

It now appears that a growing number of Labour MPs - one notable exception remains - accept the current state of our economy can be largely blamed on Gordon Brown for allowing private and government borrowing to run out of control over the last 12 years.

But there are repeated claims that nobody else foresaw these difficulties.

Well, that's simply untrue as this long excerpt from a speech given in a debate in the House of Commons this week by Michael Howard demonstrates:

"It seems to me that we cannot arrive at the right prescription for the future of our economy unless we gain a clear view of why we are where we are. We cannot expect to be led out of our current crisis by a Prime Minister who puts his head in the sand. Before prescription, however, there must be diagnosis, and it is in that spirit that I offer my remarks this afternoon.

Of course it is true—we can all agree on this—that we are in the throes of an international recession, or something worse. Of course it is true that almost every other country is affected in one way or another, to a greater or lesser extent, but we are almost uniquely vulnerable. We are almost uniquely ill equipped to deal with the calamity that has befallen the world, and we need to consider the reasons for that. They are not too difficult to identify.

My right hon. Friend the Member for Witney (Mr. Cameron), the Leader of the Opposition, was quite right, last Friday, to accept responsibility for the things that we got wrong. We certainly failed to anticipate that the crisis we now face was anything like as serious as it has proved to be, but there are two main reasons for our present plight. Both of them were directly the responsibility of the Prime Minister, and, in respect of both of them, we certainly warned of the consequences. I have looked at the record, and I am in a position to answer the question posed from a sedentary position by the Exchequer Secretary earlier, when she asked, “Where were you?” I shall do my best to answer that question during the course of my observations.

The first of the main reasons for our present plight that I, at least, have identified was the ill-advised decision, taken by the Prime Minister in 1997, to transfer supervision of the banking sector from the Bank of England to the Financial Services Authority. The Bank of England had hundreds of years of experience and expertise in supervising the banking sector of our economy. The Financial Services Authority was new. It had none of that experience and none of that expertise, and, as we know, it has since admitted that it fell down on the job.

It has been suggested that the Conservatives criticised the transfer to the Financial Services Authority only with the benefit of hindsight, but that is simply not the case. When that catastrophic decision was taken, my right hon. Friend the Member for Hitchin and Harpenden (Mr. Lilley) was shadow Chancellor of the Exchequer. In the debate on the Second Reading of the Bank of England Bill on 11 November 1997, he said:

“With the removal of banking control to the Financial Services Authority...it is difficult to see how and whether the Bank remains, as it surely must, responsible for ensuring the liquidity of the banking system and preventing systemic collapse.”

He went on to say:

“The coverage of the FSA will be huge; its objectives will be many, and potentially in conflict with one another. The range of its activities will be so diverse that no one person in it will understand them all.”

That, at least, is one of the answers to the question posed by the hon. Member for Twickenham (Dr. Cable) a few moments ago. My right hon. Friend also said that he feared

“that the Government may, almost casually, have bitten off more than they can chew. The process of setting up the FSA may cause regulators to take their eye off the ball, while spivs and crooks have a field day.”—[ Official Report, 11 November 1997; Vol. 300, c. 731-32.]

That was what my right hon. Friend said in 1997. The warning was there; it was clear; it was on the record; and it has, alas, proved to be absolutely prescient.

The second main reason for our current plight is the level of indebtedness that we as a country, collectively through our Government and as individuals, have incurred. Here, too, there were warnings, and they, too, are on the record; I am afraid that some of them came from me. I drew attention on 9 July 2002 when I was shadow Chancellor to the savings ratio, which was then at an all-time low; it has hit many more all-time lows since. On 30 July 2003, I warned that savings had halved under Labour, that the Government were borrowing more and that families were getting deeper in debt. On 17 March 2004, replying to the Budget, I said that it was

“a credit-card Budget from a credit-card Chancellor”—[ Official Report, 17 March 2004; Vol. 419, c. 337.]

When I proposed at the 2005 election that a Conservative Government would make £12 billion of savings, I said that £8 billion of them would go not to cut taxes but to reduce Government borrowing, which was far too high.

Of course, I was not always thanked—I suppose I did not expect to be—for my pains. Anatole Kaletsky in The Times, for example, complained that throughout my tenure as shadow Chancellor, I had been issuing dire warnings about the economic and financial outlook. I had said, he complained, that Labour economic policies were doomed to failure, that overtaxed consumers were living in a fool’s paradise of unsustainable borrowing and that the British economy and the Government’s popularity were kept afloat artificially by a bubble of house prices and mortgage debt. He said that if the Tories started thinking along those lines, we would be making a big mistake. Well, of course, in terms of the outcome of the 2005 election, he was absolutely right, but was he right in the wider sweep of history? I simply set what I said on the record and leave others to decide who it was that was making the big mistake.

Throughout all this time, of course, the Prime Minister was proclaiming that he had put an end to boom and bust—and you know, Mr. Deputy Speaker, I do not think he was trying to deceive us; I think he genuinely believed it. Perhaps the worst thing he did was deceive himself. It was because he was genuinely convinced that he had ended the economic cycle that he did not fix the roof while the sun was shining. After all, if we think that the sun is never going to stop shining, why on earth would we bother to fix the roof? As we know, the Prime Minister is still in a state of denial. That is not the least of the reasons why he is incapable of leading the country out of the mess we are undoubtedly in. It is, I am afraid, a very big mess indeed.

A good deal of the comment on the current crisis seems to revolve around the question: how long will it last? It seems to me that another question is at least as important: what will come after it? The suggestion that is often implicit in the first of those two questions is that next year or the year after, we shall return to the world that we knew two or three years ago. That notion seems to me to be completely misplaced. We will be in a new world, a different world, with challenges every bit as formidable as those we face at the moment. We will be able to overcome those challenges only if we have leadership that is prepared, in the words of the excellent speech made the week before last by my hon. Friend the shadow Chancellor,

“to confront some uncomfortable truths and tell people what they may not want to hear.”

The mess that my right hon. Friends will have to clear up after the next election will present them with a very difficult task, but I am sure that they will not be daunted. They will, after all, simply be discharging the age-old and historical responsibility of the Conservative party to clear up the mess that Labour has left behind. That is something that we have done before, time after time. It is, in essence, what the Conservative party is for. It is what we exist to do: to clear up the mess that Labour always leaves behind.

The sooner we have that election, and the sooner my right hon. Friends can get on with discharging that historical responsibility, the better it will be for everyone in our country."

Can't really disagree with that final paragraph.

Hattip: ConservativeHome

Why investment is like sex

2009-03-16T08:13:00.004Z

With the unfolding Bernie Madoff investment scandal still making the headlines there was an interesting interview on 'Wake up to money' this morning with Frank Partnoy, author of a book on Ivor Krueger.

Krueger, who died in 1932, built control of two thirds of the world's matches business and ran a huge Ponzi scheme - a concept familiar to the victims of Madoff's investment offering.

Over the years people have repeatedly been conned by various enterprising individuals - Madoff is just the latest - and it does prompt the thought - why do people still fall for it? Partnoy believes he has the answer:

"In many ways finance is more like sex than science - it's the kind of thing everybody has to figure out for themselves the first time around. We don't build knowledge incrementally - you know Newton and then Einstein and so forth. It doesn't work that way - it really does work more like - here's this epiphany - everyone has to get scammed on their own the first time."

A good soundbite but also, apparently, quite true: if I were to give you the names of some of the businesspeople who have spoken to us over the years when about to succumb to the wily ways of obvious fraudsters, you'd be astonished. But we're not telling, of course.

Meanwhile, if you are going to fall for a scam, best make your investment a small one.

Time for training?

2009-03-13T15:45:00.002Z

There's been a bewildering array of government initiatives over the years aimed at encouraging businesses to offer training to their employees. The routine promotion of these can be something of a turn-off.

In the case of the current offering 'Train to Gain' this would be unfortunate. For many small businesses this scheme provides access to government funding to subsidise, or in many cases pay all the costs of training schemes and wage compensation may also available to cover the hours spent training. There's no doubt this offer will be particularly helpful at the present, especially to businesses considering restricting employee working hours.

Courses covering NVQ level 2 (equivalent to GCSE grades A to C) and level 3 (A level equivalent) under the 'Train to Gain' banner are available from the City College, Plymouth and many other establishments around the country. Funding is available for some leadership and management training as well.

The current level of government funding in support of 'Train to Gain' is only expected to last a couple of years, so now would be a good idea to check out what may be available to your business.

Businesses need money

2009-03-12T14:57:00.002Z

In the past two weeks, the CBI and Institute of Directors have each published surveys confirming that it's very difficult for businesses to borrow money from banks. Access to finance has become more difficult in the past few weeks despite regular new initiatives spun by the government. The CBI report showed that most businesses expect conditions to worsen over the next two to three months.

It's entirely understandable that this should be so. The bank manager you deal with will not enhance her career prospects by recommending loans that may not be repaid. And even if she is confident that your business will be able to do so, she has to convince her regional office - and they too won't want to approve a loan that may turn bad.

Yet overall banks are going to want to lend, if only so that they can demonstrate to the government that they are doing so. But what they need is to be persuaded that lending to your business will be a good proposition for them. And for that, there are a number of questions that they need to have answered.

What is the money needed for? Is security available? What is the track record of the business? Will there be sufficient money coming into the business to pay the loan it back - with a comfortable margin for error?

Is the money, in fact, really needed? An odd question, perhaps, but failures in collecting debts or perhaps allowing stock levels to increase to too high a level are not best dealt with by fresh bank facilities.

If the bank were to make the loan, how would the business cope if sales were to fall by another 25 per cent if the recession continues to worsen? What risk is there that the business itself may be hit by bad debts? How good are the directors at managing their cash flow? Can monthly management accounts be provided? Is the management within the business sufficiently resilient to withstand the unexpected - illness, for example?

These questions may be best answered through a business plan; certainly it is likely that financial projections including cash flow, profit & loss and future balance sheets will be required. These may also need to be 'flexed', that is, alternative versions produced to show the impact on profits and cash flow if sales fall short of expectations (or even exceed them).

There's a cost to producing all this information. It will take up a great deal of your time if you try to do it yourself. It will take up far less time, but will cost you money, if you ask someone to do it for you. But if you do this, make sure that the plan offered will actually provide the information the bank need - a surprising number of plans prepared by consultants don't.

We'd be happy to discuss assisting with your plan, should you need help. Just email or give us a call.

Rewarding savers

2009-03-02T10:31:00.003Z

Tony Blair became Prime Minister, and Gordon Brown Chancellor, on 2 May 1997.

The FTSE 100 index opened on that day at 4,430. As I write, nearly twelve years later, it is 3,693 - so it's down nearly 17 per cent.

It has always been said that investments in shares should be for the long term. How long have you got?

Banks, regulation and hindsight

2009-03-01T10:40:00.008Z

Last evening, once again the BBC reported Gordon Brown telling us that the banks need better regulation:

"Gordon Brown has reiterated his call for a clean-up of the financial system to ensure what he called "banking responsibility" in the UK and abroad."

Yet of course he was the artchitect of the regulation scheme that has been in place in the UK since 1997.

Government ministers have objected to those that point this out that "well, neither you nor anyone else saw the problems coming" as if it would have been impossible for anyone to foretell of the banks failures. It's as though the banks were unquestionable rock solid institutions until the shock of Northern Rock in 2007. But this simply is not true.

I've been reading an excellent book that collates the opinions of Warren Buffett taken from the annual reports of his company, Berkshire Hathaway Inc. Buffett is, as you will know, an American investor, businessman and philanthropist. His investment activities have made him the world's richest man. Yet he's achieved that mostly without borrowing to invest and by avoiding what he perceived to be high-risk enterprises. And one area of business that he has generally avoided has been banks.

His annual reports offer a tutorial in both investment and business. While he is not going to tell you which business he intends buying next, he's quite open about his methods, philosophy and understanding of the ways of the business world.

And here are two quotes from his annual reports that struck me as especially interesting.

Firstly, on why business managers frequently do not take decisions on rational grounds:

My most surprising discovery: the overwhelming importance in business of an unseen force that we might call "the institutional imperative". In business school, I was given no hint of the imperative's existence and I did not intuitively understand it when I entered the business world. I thought then that decent, intelligent and experienced managers would automatically make rational decisions. But I learned over time that isn't so. Instead, rationality frequently wilts when the institutional imperative comes into play.

For example: (1) As if governed by Newton's First Law of Motion, an institution will resist any change in its current direction; (2) Just as work expands to fill available time, corporate projects or acquisitions will materialise to soak up available funds; (3) Any business craving of the leader, however foolish, will be quickly supported by detailed rate-of-return and strategic studies prepared by his troops; and (4) The behaviour of peer companies, whether they are expanding, acquiring, setting executive compensation or whatever will be mindlessly imitated.

Institutional dynamics, not venality or stupidity, set businesses on these courses...

So here, Buffett has recognised that business leaders don't always decide issues on rational grounds - they allow themselves to be driven by other forces. And we know that -we've all been witness to some pretty bizarre decisions and many of us have made a few ourselves. But for most of us, the resulting cost affects us, our colleagues and families - not the whole of the world's economy. Mistakes in banks have the potential to do more harm. And so what they do needs watching.

But surely banks have always been considered low-risk investments? Bufett's partner this time:

The banking business is no favourite of ours. When assets are twenty times equity - a common ratio in this industry - mistakes that involve only a small portion of assets can destroy a major part of equity. And mistakes have been the rule rather than the exception at many major banks. Most have resulted from a managerial failing that we described [above] when discussing the "institutional imperative": the tendency of executives to mindlessly imitate the behaviour of their peers, no matter how foolish it may be to do so. In their lending, many bankers played follow-the-leader with lemming-like zeal; now they are experiencing a lemming-like fate.

Now the two quotes here are not recent - the first dates from 1989, the second - which was written by Buffett's partner Charles Munger - from 1990. So risks recognised by Buffett and Munger twenty years ago were apparently ignored by the UK government and its regulator the FSA.

Lloyds Banking Group was formed by the merger of Lloyds TSB and HBOS with the active encouragement of Gordon Brown. I have just received the half-yearly report on the M&G Recovery Fund where I read this:

In terms of disposals, we sold the portfolio's holding in Lloyds TSB because of our loss of faith in the company's management team following the merger proposal with HBOS...

Subsequent events have demostrated the wisdom of that sale and the folly of the merger. Things can only get better?

The passages quoted above come from "The Essays of Warren Buffett' by Lawrence A Cunningham - available from Amazon. The latest Berkshire Hathaway annual report is available from their website.

Binge borrowers

2009-02-27T13:04:00.003Z

Steve Bundred, chief executive of the Audit Commission, has written in today's Times on the subject of government borrowing. He won't have won any friends in Downing Street by what he has said:

Most economists and ministers now believe that a prudent fiscal policy means not allowing public sector debt to exceed 40 per cent of GDP. But the Government is under no obligation to manage the public finances with this target in mind. Indeed, Britain is not even bound by the 60 per cent limit in the Maastricht treaty, as Margaret Thatcher managed to win an opt-out from the relevant article.

This is just as well, given what has happened since last year. With the debts of the nationalised and part-nationalised banks now on the public sector balance sheet, the ratio of public sector debt to GDP in the UK exceeds that of Italy and Japan. And it is set to grow much higher. On the basis of the planned levels of borrowing, it could exceed 65 per cent of GDP in 2010-11.

And at that scale of indebtedness, the Armageddon scenario most feared by the Treasury - that there will be insufficient lenders to match the planned level of borrowing - begins to look a distinct possibility.

That is why tax increases and spending cuts are inevitable immediately after the election, assuming that there are signs of economic recovery by then - and why any managers of a public service who are not planning now on the basis that they will have substantially less money to spend in two years time are living in cloud-cuckoo-land.

Encouraging it isn't. You may think that any Chancellor or Prime Minister who presided over failure on this level should lose his pension.

You can read the full article here.

Help in testing times

2009-02-26T11:24:00.002Z

The current economic difficulties will add to the already large number of people in the UK who are entitled to claim state benefits but fail to do so, or at least miss out on some of the help that is due to them.

If you know anyone that may be in this position, send them along to entitledto.com - an independently run website that has been offering benefits calculators since 2000.

The site may just provide the help one of your friends or relatives needs to make their life easier.

Can bonuses work?

2009-02-23T11:59:00.004Z

Robert Peston has published a thoughtful piece today on the bonus culture for bankers.

The problem with bonuses arises where people are paid hefty sums to reward what initially looks like success - selling bucketloads of new mortgages, for example - but later turns sour, when the mortgage holders can't keep up their payments. By then it's too late: the bankers have pocketed their bonus and the bank's shareholders end up with the losses.

Peston suggests that:

A genuine reform of the bonus-culture, one that would really put the kibosh on bankers taking foolish risks, would re-introduce the concept of the "malus" - or the idea that when a firm does badly, or a deal goes bad, the partners (in this case the de-facto partners, the top executives) take a hit and suffer a permanent diminution of wealth.

An interesting idea, but a difficult one to accomplish. You can read Peston's thoughts in full here.

A bonus scheme for employees or executives is a great idea when it encourages work that generates more profits for the business in the medium to long term. But instead it usually focuses behaviour on actions that generate bonuses for the employee now; that's not necessarily the same thing as bringing long term benefits to the business. In hitting their target they can incur bad debts, service quality could be reduced or other problems may follow.

The way to avoid this with a bonus scheme is to align the interests of the employees with those of the business owners. It appears that this has been achieved with the John Lewis Partnership model, but not many business owners seem to want to adopt that route. Employee share ownership plans may also work - these are best for listed companies - as may payment of a straight profit share. But it's difficult to target them on outstanding contributions by particular individuals rather than paying out across the board to all employees.

BBC Radio 4 has a programme, More or Less - currently off the air - which in its last series looked at a bankers' bonus question. So many listeners challenged the answer that they added the following explanation to their website:

A trader enters a bank where everyone else is doing exactly the same trade and that trade has a 50% chance of making a profit. The trader knows of a trade that has a 75% chance of making a profit.

But in order for the individual trader to get his bonus, two things have to happen: the bank has to make a profit and the individual trader has to make a profit.

If the trader does his good trade, the probability of him getting his bonus is the chance of his trade making a profit - ie 75% - multiplied by the chance of the bank making a profit - ie 50%.

His chance of getting a bonus is therefore 37.5%. However if he does the same as everyone else, his chance of getting a bonus is 50%.

Some listeners asked why the trader's chance of making a profit if he did the same trade as everyone else was not 25% (ie 50% x 50%).

The answer is that the 50 per cent strategy is perfectly correlated with the bank's profitability, while the 75 per cent strategy is perfectly uncorrelated.

When the probabilities are perfectly uncorrelated, 75% x 50% is the right calculation to work out if the trader gets his bonus.

When the strategies are perfectly correlated, either both the trader and the bank make money, or neither the trader nor the bank make money.

Make sense to you? Me neither. It just goes to show how any bonus scheme can have unexpected and unintended consequences. I am sometimes asked to help design bonus schemes for businesses. I think that basic pay linked to performance through regular appraisals works better.

Tax doesn't have to be taxing

2009-02-19T06:57:00.002Z

...or so HMRC's intensely annoying TV commercials tell us.

It is of course; filling in a tax return is a huge imposition. But I thought we had it bad until I read about the US equivalent. The information this demands goes way beyond the reasonable.

For example:

"...the IRS wants to know where I was and what I was doing on every day last year, state by state and country by country."

More about this here. Maybe ours isn't so bad after all.

Oh Mandy...

2009-02-18T11:25:00.003Z

The depth of concerns within the government over perceptions of the UK economy were revealed yesterday when Lord Mandelson spoke out at a diplomatic reception in New York. Diplomatic? Yeah, right.

Responding to a question about comments made by Howard Schultz, the head of Starbucks - who had said he thought Britain was in an economic spiral - Mandelson responded:

"Why should I have this guy running down the country? Who the f**k is he? How the hell are they [Starbucks] doing?"

Full details of the story can be seen in the Guardian and Telegraph.

Have to say, I'm not altogether sure that this sort of outburst helps, even if it does make the Secretary of State feel better.

Regulators, whistle blowers and Gordon Brown

2009-02-17T21:55:00.003Z

The links between the regulators, the banks and the Prime Minister keep emerging.

Today, Nick Drew over at the Capitalists@Work blog has another tale of what, as he says, Nick Robinson has called the City merry-go-round.

Take a look at this.

Messy world, eh?

It's probably not as bad as we think

2009-02-13T13:54:00.003Z

At the end of the week which saw Parliament stage show trials of Britain's bankers and then subject Gordon Brown to polite questioning, it's as well to remember that the current dreadful economic conditions won't last forever.

The first obvious sign of our current problems was the large debt write-off made by HSBC in early 2007 - yes, nearly two years ago. The current recession will probably last until late this year, then business will again start to grow.

It's always in the 'start to grow' stage that life can become particularly painful for businesses who find they need to finance rising working capital after a period in which their cash resources and borrowing capacity have been eroded.

But it is well to remember that, as the Economist says today:

"just as there was too much optimism during the good times, so there can be too much pessimism in the bad times".

Pessimism is certainly not in short supply just at the moment, but most businesses will survive, most workers will retain their jobs and at some point we'll start to feel confident about the future.

There's a lot of shouty columnists and bloggers depressing us all, but today's Economist article, Britain's fallen star does provide a comprehensive and balanced view of where we stand and is worth a read.

Oh and if you're reading this in time, don't forget Valentine's Day, or you could face something far worse than a recession.

New media meets new business?

2009-02-12T22:23:00.003Z

I like the idea of this.

Mark Cuban - an American billionaire entrepreneur - wants business ideas that he can back as a way to help restart the US economy.

Only three days since the idea was put forward, there's already a good number of serious responses - with, no doubt, plenty more to come.

Would you want to publish your business plan online for others to criticise or 'borrow'? Would you do it if there was a realistic chance that someone would back your scheme? There must be many people - especially now - with business ideas for which they cannot get any backing. Maybe this idea should be taken up in the UK, too.

Time to feed the pig?

2009-02-02T11:04:00.002Z

At a time when our government is encouraging us to borrow and spend - which helped put us in this mess in the first place - the major US accountants organisation the AICPA is running a media campaign urging Americans in the key 25-34 age range to 'spend carefully and save for the future'.

“People in this age group are involved in major life changes,” said Carl George, chair of the National CPA Financial Literacy Commission. “They’re launching careers, buying homes, getting married and having children. All these events involve major expenses, which makes saving difficult, especially in a hard economic time like the one we’re now experiencing. But there are simple things they can do, such as paying more attention to how much they spend on discretionary items. Spending within your means is itself a form of saving.”

At a time when half the world - China, Gernamy, the middle East and others - need to spend more while we in the UK and the USA (to name just two) have to scale back their spending and start to save, this is probably good advice. And delivered in a fairly unconventional way.

Take a look at Feedthepig.

The painful reckoning

2009-01-28T10:48:00.002Z

Your tax return may have been filed some time ago (or perhaps yesterday) but if you have tax due on 31 January make sure your payment reaches HMRC by then or they'll charge you interest.

If you are paying online, check that the payment will still arrive by Saturday - the 'faster payment service' is not working for all banks; a third of all internet and phone payments are not made this way and could take several days to reach their destination.

Britain, 2009

2009-01-22T17:50:00.002Z

It really is depressing.

After experiencing the last Labour government in the 1970s - which memorably culminated in the notorious 'winter of discontent' and then watching the economy be rebuilt, albeit in a way that was tough on many in the 80s and 90s it now feels as though it's all unravelling and all the pain was for nothing.

Our prime minister has repeatedly told us that 'Britain is best placed to face the economic crisis', but that's all nonsense.

Never mind what's in the media here, what is being said about us elsewhere? Here's an example:

An island nation that bulked up on debt and lived beyond its means. A plunging currency. And a financial system edging toward nationalization.

With the pound at a multidecade low and British banks requiring ever-larger injections of taxpayer cash, it is no wonder that observers have started to refer to London as “Reykjavik-on-Thames.”

That was the New York Times yesterday.

Anyone seen any good news?

One rule for them...

2009-01-16T11:35:00.002Z

The government has decided that taxpayers should not be given information about MPs expenses. As David Hencke writes in the Guardian:

"You could not make this up. On the day the nation was convulsed by the row over the building of the third runway at Heathrow, the government slipped into parliament one of the most self-serving pieces of legislation in modern times.

"Harriet Harman, the leader of the house, got Jack Straw, the justice secretary, to table a parliamentary order that will exempt all MPs and peers from having to release detailed expenses under the Freedom of Information Act.

"The order, which will come into force 24 hours after being debated next week in parliament, will stop in its tracks all the victories won by campaigners and journalists to bring full transparency to individual MPs' expenditure on travel, equipping their second or constituency homes, staffing, office details and individual travel receipts by air, rail and car".

MPs will also not be required to submit receipts for expenses claimed where the individual items are for less than £25 because "it would be excessively burdensome for Members to have provided receipts for all transactions and that additional costs incurred...would be likely disproportionate".

Try telling that to HMRC when they question your tax return.

Now some MPs have said that they will publish full details of their own expenses. Good. We can draw our own conclusions about those who don't.

The civil service inefficient? Surely not...

2009-01-15T13:23:00.005Z

Being an outsider at the heart of government must be a disorientating experience to anyone fresh from the world of business. It does seem that Digby Jones, a former head of the CBI who recently spent a year working as a trade minister in Gordon Brown's government, found this to be so.

While he recognised the ability of many civil servants, he has explained to a committee of MPs that he was was unimpressed by their productivity.

The BBC are reporting this:

Lord Jones said he applauded the practice of bringing outside specialists into government by making them peers and called it "an excellent idea".

He described the civil service as "honest, stuffed full of decent people who work hard".

But he added: "Frankly the job could be done with half as many, it could be more productive, more efficient, it could deliver a lot more value for money for the taxpayer.

"I was amazed, quite frankly, at how many people deserved the sack and yet that was the one threat that they never ever worked under, because it doesn't exist."

He also described the job of a junior minister as

"one of the most dehumanising and depersonalising experiences a human being can have. The whole system is designed to take the personality, the drive and the initiative out of a junior minister".

This situation was the whole basis of Yes Minister and although both the last Conservative government and the current Labour one has had ample time to correct this, nothing much seems to have changed. Considering the proportion of our income we give these guys, they don't achieve much, do they?

Marketing through social media

2009-01-06T13:13:00.003Z

To cut your advertising costs by 80 per cent while maintaining your target prospect numbers would be a useful trick during the current bout of economic distress.

One business has done so by producing regular 'home made' podcasts. The Wiggly Wigglers story is told in this video from the British Chambers of Commerce.

MacSilliness

2009-01-06T11:32:00.001Z

With Apple's geeky fans absorbed by the latest happenings at Macworld, The Onion has offered this, possibly speculative description of the next Apple computer.

Apple Introduces Revolutionary New Laptop With No Keyboard

Quote of the Christmas holidays

2009-01-05T16:50:00.002Z

...with thanks to Iain Dale.

"Gordon Brown saying he should be allowed to fix the economy is like Bomber Harris offering to fix a few windows in Dresden."

Frank Skinner on
Have I Got News For You

Michael Winner - financial advisor

2008-12-18T12:08:00.003Z

In the late 1960s I was a bit naughty – I took some money and put it into an account in Switzerland without declaring it. That money eventually made its way back into England, but it haunted me that I hadn't paid tax on it.

About five years ago I decided to tell the Revenue and they went ballistic. They instigated a four-year detailed inquiry into my affairs with the threat of criminal charges. Eventually, we settled and I paid them £3m with another half million in lawyers' fees, whereupon the chief investigator said to me: "Now you are respectable, Mr Winner."

and

My main mistake has been listening to people who think they know what they're talking about. In my opinion, the City is run by idiots and now we have the proof.

He's probably right. Find the rest in the Daily Telegraph here.

Nationalisation? No thanks...

2008-12-16T14:16:00.002Z

With the 1970s horror stories of the management of British Rail, British Steel, various Gas Boards and the rest still quite fresh in my memory, it always astounds me that anyone can believe nationalisation to be the answer to anything. Yet there are plenty that still do.

Already there is political interference in way Northern Rock and the newly nationalised banks are run. And it's as well to remember that although the directors of some banks have not made particularly bright decisions over the past few years, we can be pretty sure that politicians would have done worse.

The latest evidence showing how badly the government handles our money comes from the overpayment of 95,000 public sector pensioners over a surprisingly long period (doesn't anyone ever check?). And now, the House of Commons Public Accounts Committee has reported that a £57m efficiency drive at the Department for Transport actually cost £81m.

As The Independent reports it:

Transport ministers showed "stupendous incompetence" in leaving taxpayers an £81m bill for an efficiency drive designed to save the department millions of pounds, MPs said.

The Commons Public Accounts Committee condemned the "lamentable" handling of the scheme to cut back-office costs at the Department for Transport, "one of the worst cases of project management" they had seen.

More here, if you can bear to look.

A blow for honesty

2008-12-12T20:34:00.002Z

Bending the truth to win an argument in politics is nothing new. But something is new today: Downing Street being slapped over the wrist for misusing official statistics, evidently as part of their usual news-management agenda.

The chairman of the UK Statistics Authority has written to the head of the civil service at Downing Street criticising action:

"corrosive of public trust in official statistics, and incompatible with the high standards which we are all seeking to establish".

The full letter can be seen as a pdf file here.

You've got to laugh

2008-12-12T14:07:00.002Z

Michael Gove, Shadow Secretary of State for Children, Schools and Families, spoke in the House of Commons yesterday:

"Of course, some hon. Members may have been in good spirits yesterday for reasons other than the formal anniversary of the children’s plan. They may have been listening to the Prime Minister taking pride in his global rescue plan. Well, we now know what the man in charge of Europe’s biggest economy thinks of that. The Prime Minister may believe, in his more modest moments, that he is Franklin D. Roosevelt, but the truth is that he is closer to a political Max Mosley: he thinks he is king of the world and he has clearly got money to burn, but all people remember is that he got a terrific spanking in German. [Interruption.] Thank you."

It's worth reading his comments in full.

Always look on the bright side...

2008-12-12T13:41:00.002Z

Once again I find myself agreeing with John Redwood:

We certainly have two Britains. The government has split the country into the hard working compliance ridden tax paying private sector, shivering without cash and awaiting the call of the well heeled state Inspector, and the overbearing, camera wielding, humourless, play by the increasing number of rules politically correct Inspector state where any amount of borrowed money can be channelled into more nonsense. This is why the state can afford to prosecute us for parking in the wrong place, for offering a client a glass of wine or for using the wrong words to describe people, festivals or religious observance with no sense of proportion.

There is a growing sense of injustice amongst all those who run businesses and try to make a contribution through the private sector, and growing sense of unfairness between the towns and districts where people mainly work in the private sector, and the ones where a majority now draw their income from tax and public borrowing.

In the longer term the danger is that the government will want to use the printing presses to sort out its huge debt, which will be inflationary when the banks are working again.

More here.

Not to worry, though, because 'Crash' Gordon, saviour of the world. will see us through.

German finance minister distinctly unimpressed with the Brown plan

2008-12-10T21:49:00.003Z

Peer Steinbrück, the Social Democratic finance minister in Chancellor Angela Merkel's cabinet, does not believe that the 'rescue' plan being implemented in the UK will do more than increase our national debt.

Our British friends are now cutting their value-added tax. We have no idea how much of that stores will pass on to customers. Are you really going to buy a DVD player because it now costs £39.10 instead of £39.90? All this will do is raise Britain's debt to a level that will take a whole generation to work off.

You can read the full interview in Newsweek magazine here.

George Osborne, shadow chancellor, was clearly delighted with Steinbruck's comments and said of Gordon Brown:

"On the day he claimed to be saving the world, the world answered back."

More on how we arrived here and where we're going

2008-12-09T15:02:00.003Z

Now it's Robert Peston's turn to give his view on the events and policies that led us to today's economic distress - and on what may happen next.

...the biggest lesson of all is that we are a million miles from having created the political and regulatory institutions to help us contain the risks of globalisation. We and most of the world may well have been beneficiaries of the open global economy.

But as millions lose their jobs in Europe and the US in the coming year, the benefits will be forgotten. If the unfettered movement of capital, goods and services is going to survive, if there’s not going to be a retreat into national fortresses that could impoverish all of us over the longer term, we’ll have to find a far better way of monitoring global risks and of bringing governments together to deal with these risks.

This is a good summary of the story so far and well worth a read in full. You can find Peston's opinion as a pdf file here.

Return to depression economics?

2008-12-08T15:49:00.003Z

We are hearing day by day about the difficulties many busineses are having to face in obtaining/ renewing bank and other finance. Deals that banks would have been hungrily competing to take on early last year are now routinely rejected. Why?

Nobel prize-winning economist Paul Krugman has a book due out this week: 'The return of depression economics and the crisis of 2008'. If this helps any of us - and especially the government - understand exactly what is going on, that will be good news. An exract from the book appeard in the Guardian on Saturday:

The US, Britain, Spain and several other countries probably would have suffered recessions when their housing bubbles burst even if the financial system hadn't broken down. But the financial collapse seems certain to turn what might have been a run-of-the-mill recession into something much, much worse. The intensification of the credit crisis after the fall of Lehman Brothers, the sudden crisis in emerging markets, a collapse in consumer confidence as the scale of the financial mess hit the headlines, all point to the worst recession in the world as a whole since the early 80s. And many economists will be relieved if it's only that bad.

The full article makes an interesting - if disburbing - read; you can find it here.