That was week ending 14th December 2012

This is the last TWb4TW until after the Christmas and New Year break. I started writing these articles in April and can hardly believe it is now nearly the end of the year and I am still writing them. I have been encouraged by the kind responses from you the people that read them and I thank you for those.

This week I thought it appropriate to produce my Christmas wish list, wishes for myself and others.  Here goes.

Cable not able

Last week Vince Cable took yet another swipe at big global companies that don’t pay enough or any UK tax. For Mr. Cable it is still the moral high ground that matters so no mention of our unfit for any purpose tax system. If the companies concerned are obeying the law then it is clearly the law that needs changing if it is not producing the result the country needs and that is the job of government.

Whilst Mr. Cable has done some good work at BIS underneath he is fundamentally anti business, or if isn’t he certainly sounds like it. I once heard him speak and claim that he was experienced in business because he had spent time as an economist at Shell. Anyone who knows anything about what economists do in organisations like Shell will know this doesn’t count as business experience.

So my Christmas wish for Mr. Cable is that he should get another job.  Minister for Overseas Development might suit his moralising better or perhaps being made to run an SME for a year might give him some “real” business experience.

It’s the economy stupid

Talking of experience my Christmas wish for George Osborne is that he too should find an opportunity to get some real experience. He is an example of yet another politician who is no doubt very intelligent but has done nothing but politics almost since he left primary school. This was demonstrated in the Autumn Statement and its aftermath where he was clearly more interested in scoring political points over Ed Balls than coming up with radical policies that would really get the economy moving. You can usually leave Ed Balls to score political points over himself, so why not get on with the job we pay you for, George because it really is the economy that matters and you are not stupid.

Does one more make a difference?

After the announcement that Canadian Mark Carney is to succeed Sir Mervyn King as Governor of the Bank of England last week we heard that Hector Sants was to join Barclays as head of compliance. Sants was previously Chief Executive at the FSA.

Now you can’t blame all the FSA’s failings on Sants. However he did step up to Chief Executive in time to rubber stamp RBS’ acquisition of ABN AMRO and he did publish just a 12 line press release on the FSA’s investigation into RBS, rather than publish the full report.

I understand that Barclays already have around 1800 compliance officers. So whilst Carney’s appointment does represent a new direction at the BoE you have to ask what real difference appointing a regulator to head up compliance will really make at Barclays.  My Christmas wish for Mr. Sants is good luck, but I have a feeling he will end up between a rock and a hard place with this one.

Train the trainers

The investigation into what went wrong at the DfT over the West Coast Mainline fiasco continues but with growing signs of avoidance tactics from anyone in the DfT who could possibly be blamed. My Christmas wish is that anyone at senior level in the DfT should be given a train set for Christmas and  required to assemble it in to a working model of the West Coast line in 30 minutes or be shown the door. Simple and effective.

HP used to work

I own an HP printer which I bought in the days when you could truly say buy HP because you just plug it in, turn it on and it works. What’s more my printer still does work, even though HP has had about 5 CEOs since I bought it. My Christmas wish for HP is that they should make me an offer for my old printer, with a suitable Autonomy sized premium and I would be delighted to sell it back to them. Then they could examine it and discover what it was that they used be really good at.

Oh no it's Silvio

You could not make it up; Silvio Berlusconi is running for Prime Minister of Italy again. This proves the view of a previous British ambassador to Italy who said “it is not difficult to govern the Italians, it is simply unnecessary”. Sr B’s first public pronouncement was to state “who cares about how much interest we pay to people who invest in our debt obligations compared to Germany”. This will be music to many Italian’s ears but maybe this time not enough of them will buy the message. So I wish Silvio Berlusconi everything he deserves.

So that was some of the week before this week. We hope you found some of the above thought provoking and useful for you and your business. TWb4TW will be back in the New Year so have a great Christmas and New Year holiday.

That was week ending 7th December 2012

The theme for this week’s TWb4TW is “and now for something completely different” or not as the case may be.

This is the Autumn of our discontent - or should that be Winter?

Last week the Chancellor delivered his Autumn Statement. Now I may be a bit pedantic and old fashioned but for me December is winter. In fact over the last few weeks I kept thinking I must have missed the Autumn Statement, we seemed to wait a long time for it to appear. Given that it required the Chancellor to admit he is going to miss almost every target that he has been telling us are essential to achieve, he may have needed more time to think of plausible excuses.

Much has already been written and spoken about the statement so I am not going to add to that. However one thought did strike me.  Suppose you are on the board of a holding company reviewing the performance of the MD of one of your subsidiaries, which has been making losses for some time. He tells you that sales are static, that whilst he has cut some costs overall they are still increasing and that several new projects he announced either haven’t started or are taking longer to deliver results. However he assures you that everything is on track, but it may take 2 or 3 years longer before profitability is restored. When you quiz him about what he is doing different that might get a different result he mutters vaguely about taking some of the spend from one part of his operation to spend in another.

How long would you put up with an MD who keeps on doing the same things and assuring you that this will deliver a different result? Not long I suspect. Did the Autumn Statement contain anything really different that looked like it might deliver a different result? Well I couldn’t spot it.

What could be different?

Most commentators had some sympathy for the Chancellor saying that he had a difficult hand to play. However I am grateful to Fraser Nelson of the Daily Telegraph who highlighted some countries that have tried something completely different and are getting different results.

Estonia is a tiny country surrounded by large and powerful neighbours, with every reason to blame global forces for its own economic problems. However throughout the downturn it has kept its tax rates low at 21pc. It cut state spending by a tenth in one year compared to our average of 2.5pc a year. The result is Estonia now has the fastest growth in Europe.

Socialist Sweden made a permanent tax cut for the lower paid that encouraged so many people back to work that the extra revenue covered the cost of the policy. The tax cut amounted to a whole extra month’s salary a year. The increase in tax allowances here will benefit about 20 million people, but the tax cut amounts to 90p a week. Not enough to spend in pound shop, much less kick start the economy!

The Swedes also reduced corporation tax from 26pc to 22pc, but they did it in 3 months, whilst our reductions are being phased over several years. So is it time to try something completely different like significant tax cuts, delivered hard and fast that will stimulate significant economic activity that in turn will deliver higher tax revenues and lower government spending? Just a thought.

No change from Tesco

It is now a year since Tesco’s Chief Executive Philip Clarke launched a £1bn turnaround plan. However like for like sales fell again in the third quarter and now around 29pc of UK consumers choose to do the majority of their food shopping at Tesco, down from 35pc in 2011.

Some analysts have said it may be too early for consumers to have noticed the improvements Tesco has been making in staff and products. I believe that the problem is more that they have not noticed anything really different and that’s because it isn’t. Some of you may recall the experience recently of my business partner who when he was unable to access an offer on Tesco’s website reported it to customer services. They insisted first that there wasn’t a problem with their site it must be with my partner’s system. They went further suggesting ways he could spend his time fixing what was their problem and of course “nobody else has complained”. Eventually last week he was contacted by a technical person (significantly not from customer service) who admitted there was a problem with the Tesco website and there had been hundreds of messages about it.

So does £1bn to revitalise stores and products and hire 8,000 extra staff make a difference? Not so far apparently and maybe it’s because it won’t make the slightest difference to Tesco’s attitude to its customers, because Tesco doesn’t think it has an attitude problem.

HP full steam on to the rocks

Last week HP’s market value fell to $27bn which is now below the $31bn it has spent on acquisitions in the last 5 years. Research has consistently shown that mergers and acquisitions usually destroy value. HP’s management seem bent on proving this by setting an all time record for value destruction. Indeed they may have already achieved it.

Market speculation is that the company may be broken up as the sum of its parts now looks significantly greater than the whole. What is clear is that it needs to do something radically different as the current strategy which is to straighten out the huge mess that is today’s HP seems highly unlikely to succeed.

Other stories from last week, worth a mention

Starbucks offer to pay voluntary corporation tax was an appropriate way to kick off the pantomime season and it was different!

Sir Philip Green’s 25pc sale of TopShop leaves his Arcadia Group debt free and with £600m to fuel further growth. Sir Philip doesn’t have to do anything different, just carry on doing what he is really good at. Unlike HP who seem determined not to do what they used to be really good at.

The report into the West Coast rail bid fiasco was published confirming what we already knew about the levels of incompetence and dishonesty at the DfT. Now it’s official will it make a difference? Not holding my breath.

The Tchenguiz brothers started their claim for £200m against the Serious Farce Office for losses incurred as a result of their wrongful arrest. This is the largest claim ever brought against a government department. You could almost wish them well until you remember it is us the taxpayers who will have to stump up the £200m. Those responsible for the mess at the SFO at the time have all left with large payoffs, again paid by us. So no change there then.

So that was some of the week before this week. We hope you found some of the above thought provoking and useful for you and your business. We trust you had a good weekend and hope you have a great week this week.