Tag: Economic Crisis

Rail fare hikes and tough talk on welfare waste: Today’s problems will not simply be solved by continually taking more from pockets when there is even less to replace it.

With a 4.2% average rise in ticket prices hitting rail commuters today, just how long do politicians think that rises in the cost of essential services, utilities and products will remain ‘sustainable’?

Stories such as this one and also the attack on welfare payouts by Iain Duncan Smith in just the past two days alone demonstrate just how little emphasis there really is in dealing with the root causes of problems, which may be unpalatable to those in power, but are nonetheless very real indeed.

As a businessman with both conservative and capitalist principles, I have enthusiastically embraced the opportunity to be both enterprising and entrepreneurial throughout my career. However, I also learned very early on that there are basic laws at work within business, one of which is that costs will generally be fixed, but profit will always be variable.

Where this goes wrong in the economy is in situations where those in control of businesses are able to fix minimum profit margins and then seek the cost of investment and renewal through price hikes which usually only affect people and other businesses who themselves have no ability to raise their own incomes or margins to cover those very same costs.

Those reading this who have experience of the commercial sector in its broadest sense will know that the circumstances which generally allow this darker side of capitalism to thrive, only exist within monopolies or within industries which provide services or products which people must have; many of which were once in public hands.

The history which has given privately owned businesses the ability to dictate the ‘breadline’ or to become able to ‘profit in misery’ is a long one. Profligate spending by idealistic politicians who believe in the principle of something for nothing, simply created a situation which left others with a more realistic understanding of the way that an economy really works with little choice in the way they had to respond.

The age of privatisation was soon born and responsibility for its evolution cannot be levelled at the door of any one Conservative, Labour or Coalition Government, as all have played their part since the 1960’s.

What can equally be said is that no one person who can ask for the votes of many thousands of people, can reasonably expect to retain any sense of respect as an MP if they have accepted that responsibility and then failed both to recognise and then to act upon the damage and pain that such levels of power are causing in the wrong hands.

Yes we need travel fares that make a job worth travelling for. Yes we need reform of welfare, benefits and taxation so that there is an incentive for all to work and stay in this Country. Yes we need managed investment in just about every area of life and infrastructure that we could conceivably imagine.

But we also need Government which is responsible, confident in taking risks and ready to deliver reforms which may well include legislative restructuring of businesses offering essential services in order to limit what they actually make.

The failure of Government to ensure and safeguard basic costs for independent living is a root cause of many of today’s problems and will not simply be solved by continually taking more from pockets when there is even less to replace it.

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Labour Council Leaders say Government cuts will lead to public unrest. But the days of passing the buck for a free Pound have long gone and all politicians must now accept that responsibility has consequences

Some Conservative Councillors will quietly sympathise with the difficult decisions being made within almost every local authority in the Country as the result of continuing budget cuts. But that’s precisely where any similarity in view will end with the content tabled in a joint letter to the Observer by the Labour Leaders of Newcastle, Liverpool and Sheffield Councils, suggesting that cuts in local government grants will break up society.

Look at our Country today and it is easy to see that we are already living within a divided society that is split by divisions which go way beyond simple demographics, political bias or the slashing of public services at just one level of Government.

These are problems that are far more serious than any senior politician on any side seems willing to address in any meaningful way. And the reality is that the demise of local authority structures and the seemingly endless range of services that they were once able to provide are only being accelerated by the ‘age of austerity’, and not caused by it as this document would apparently have us believe.

There is in fact significant irony that local authorities are also the victim of the philosophy and actions of the very movements and people who are so eloquently attempting to place blame on the Coalition Government today, for problems which have actually been a long time in the making within a system which has only been sustainable because of what must have seemed like a guaranteed bottom line to a generation of politicians who believe that idealism can be delivered without any thought for practicalities.

In just one respect alone, I found myself completely horrified when I first learned of the gargantuan percentages of Council Tax which go directly into the gold-plated Local Government Pension Scheme. Similar ideology has been rampant within local government decision making throughout living memory and any commercial business run with such an extraordinary emphasis on funding employees and their benefits would be as viable as its existence within in a competitive market.

I have little doubt that just these funds alone being made available for the purpose which the Taxpayer has the right to expect, coupled with the real reforms that every part of Government now requires, would deliver a significantly positive effect on what is today a very gloomy picture indeed for locally-funded public services.

Government and non-Government organisations of all types have for too long been insulated against the real world realities of profit and loss by protectionist culture; by the political correctness of socialist job creation; and by a guaranteed level of income which has now unceremoniously come to an end.

It’s time that everyone in positions of responsibility within all tiers of Government began being responsible, rather than looking elsewhere and expecting someone else to pick up the pieces or to pay the bills with a non-existent stream of infinite credit.

Political idealism is as ideal as it is practical. Politicians from all sides now have to accept and work with this reality. Otherwise, a new reality will continue to write itself which will go way beyond the fallout from wasting opportunities for change and from a failure to take full responsibility within local government.

The days of passing the buck and expecting a free Pound in return have long gone and all politicians must now accept that responsibility has consequences.

Effect-focussed Government has failed us all. Can we really move forward with a plan of something better for all if we never address the causes of our problems?

Leaps in utility prices touch just about everyone’s lives either directly or indirectly. No less so because of the growing paradox which appears to be a guaranteed bottom line for shareholders, whilst customers continually carry the can for everything that any non-essential business would have no option but to absorb within what are today’s unalterable margins.

Public services such as Trains run under much the same guise, and the question really should be asked if the time has come when any provider of a key or essential service should remain able to have a free reign over charges and their levels of profit when the end user simply has no choice but to buy?

Similarly, margins drawn from the production and retail of essential basic items such as milk, bread, meats and vegetables must surely now be protected from City speculation and the stranglehold of the big retailers who are together endangering various food producing industries in what is little more than an obligation to sustain and build upon profits, laid down by the purely financial motives of their masters.

So what exactly is stopping the long needed change in direction which would embrace a true form of moral or rather responsible capitalism, which in its boldest form would serve to protect a basic and affordable living for all, whilst delivering an arguably much reduced cost for Government?

One of the key failings of many of today’s politicians is a fundamental lack of understanding, will and fortitude to deal with the deep rooted causes of the problems that we as a nation face; instead choosing to do little more than dalliance in dealing with the effects of bad or flawed decisions, then going on to repeat the very same mistakes when that latest remedy itself begins to demonstrate its flaws.

Be under no illusion, this process is not unique to any political genre or ideology. It is a deep seated and inherently progressive condition, made all the worse by a political party system which now serves only to propagate itself and those within it who effectively function to do the very same, placing electability before delivery.

Successive Governments, whether they have been Conservative, Labour or even Coalitions have done the very same things, albeit with a different wrapper. But with little more than a ‘fire and forget’ mentality, the consequences are plain to see and there for us all to share and experience in our everyday lives.

The commonalities within privatisation, right-to-buy, the evolution of the free market and even political parties themselves are that they were arguably all political creations with a great and beneficial purpose in mind for those who were the driving forces behind them.

However, like most great ideas in Government that come to be manifest, they have progressively moved beyond their point of balance or what some might choose to call good, and have gone in another direction entirely. One which has benefited the unscrupulous and cost those of us dearly who have the right to expect the protection of our everyday interests by those who we put in place to take that responsibility on our behalf to do so.

Acceptance that the evolution of policies can and will continue beyond their point of good is no enviable task. This is particularly so when many organisations, NGO’s and even Government Departments have been created simply to deliver upon questionable policies and their lucrative spin-offs. In many cases they arguably continue to exist for the sole purpose of existing.

Trades Unions, Health & Safety Legislation and European red-tape are all examples of well-intentioned principles which have gone way beyond their point of good. Even UK Taxation and Benefits no longer represent the equitable and fair approach that we should all be able to reasonably expect from a 21st Century Western Government and the implementation of truly fair systems such as Flat Tax are long since overdue.

Fear of driving the watershed of change needed in an age where we have laws for the sake of having laws; where blame is a national industry and where everyday people feel that Government of all levels has no understanding of the lives that they lead, is no longer excuse enough in itself to avoid it.

Painful as it will be, somebody will soon have to be big enough to take on big business, the City and the insidious money men who are continuously elevating the breadline, all in the name of profit.

Selfless politicians must set about the change of policy after policy which may well serve their political masters today, but remain lifetimes away from serving those for whose benefit they were apparently intended.

Effect-focussed Government has failed us all and not least the most vulnerable in society and shutting the stable door after the horse has bolted does little to help after the event.

Can we really move forward with a plan of something better for all if we never address the causes of our problems?

Is the distance created by modern communication and business methods removing basic humanity from our relationships and has the time come for a whole new set of rules?

So what motivates you at work or within your business? Is it doing the very best job that you can; or is it simply to earn the greatest amount as quickly as possible and perhaps keep yourself in that lucrative job that you already have, maybe progressing you to an even better paying or profiled position?

Whilst admitting that it leaves a bad taste in the mouth just as soon as the realisation dawns that other people may have noticed; for a growing number today it will be the latter and for very practical reasons that they may never really have even considered at that. Perhaps strange then that it’s a feeling of guilt which often accompanies that understanding when it arrives, as few will ever argue that we would all like to earn more or have a better lifestyle if given the option to do so.

The reality is of course that people feel bad about making money when questioned, if they hadn’t realised that it has become the purest motivation or aim in what they do, rather than being the very healthy side-effect of a career undertaking or vocation, and then doing it damn well.

With a growing concern about the ethics employed within business, not least of all illustrated by the Libor scandal, one must ask if a loss of conscience is one of the very negative aspects that the distance created by increasingly elaborate supply chains and the rise of the Internet have created?

Many of us have simply adapted and in many cases thrived from the changes and opportunities brought into being by the rise of the Communication Age.  So workers within Internet and information technology reliant businesses are perhaps excusably less aware of the fallout hitting customers they may never even see from decision making which is without a tangible fear or concern for the ‘human factor’. One also wonders if they are therefore insulated from the future catastrophes they now have the power to create in what may seem little more than parallel lives, which to the more aware would only ever be dressed as distant elephants that look less than the size of a gnat on their horizon.

To perhaps emphasise the downside of distance more effectively, I will take a step back to an industry that we all love to hate. A profession that has always had the benefit of distance between business and customer once they have been commissioned; but a distance which is also created by time and process rather than by the remote contact of a broadband cable.

Within the property market, many are quick to become cynical of the inflation-setting-overpricing of houses and wonder how they find themselves unable to afford even a modest home.

Some would blame the gargantuan super-tanker that was ‘right-to-buy’ as set in motion by Margaret Thatcher, but can quickly forget how it was that very act in the first place which encouraged massive property ownership within parts of society where people would never have dared even dream of being homeowners before her tenure, and perhaps led to those very same people being able to aspire to making such dreams their reality to begin with.

Others would look perhaps more accurately to the realms of Estate Agents who have ruthlessly pushed prices up and up, month-after-month and year-after-year in order to secure greater and greater percentage based sales fees.

Estate Agents actually do a job that they could choose to do very well on sensible margins – even in a good market. But repeat custom is to them a very long game and if someone else is saying they can sell a house for more, it doesn’t take much excuse to follow or to lose out because the risks to them seem very distant indeed.

After all, very few owners will willingly lose many thousands of pounds on a sale just because one agent tells them what its actually worth, when another says different. The agent who ‘does what it says on the can’ will have ‘priced to sell’ and done what they were commissioned to do, whereas the second agent plays the long game, watching the market rise to the price they suggested, thereby getting the fee they want but paying little note of the pain that their customer experiences in the meantime. No wonder then, that so many Estate Agency businesses have stopped trading or been forced to make substantial cutbacks during the economic crisis.

The long-term effects of such business practices are potentially incalculable and one can only speculate on just how overpriced our homes now actually are, and how far back in time standards of living and subsequent social mobility could actually be pushed as a result of the out-pricing of starter homes for young people; a situation created purely on the basis of making higher and higher margins for just a few without any apparent risk to the many from doing so.

So with the rise of the Internet and information technology, many more businesses now find themselves enjoying a distance between themselves and  customers which is to such a degree that the abuse of such apparently lucrative opportunities could create all manner of future problems, which may only ever become apparent much further down the line.

For instance, a once heavily hands-on recruitment industry which only a few years ago interacted with perhaps every candidate who made the effort to post them a CV, has been replaced by one which has discovered a seemingly bombproof level of security from risk of losing fees by targeting ‘perfect fit’ or tick box candidates, simply by focusing on electronic advertising and administration techniques. 800 applications through an Internet Job Board sounds a lot to handle; but not if you have set up a machine to identify perhaps a minimum of 8 ‘keywords’ or phrases from 10 in those CV’s before the hand of a human with any kind of feeling will go anywhere near them.

Nobody talks about the longer-term threat to hiring businesses of all shapes and sizes that comes from recruiting candidates from what by default effectively becomes a closed field of applicants who only know and understand a specific discipline within business, illustrated by the use of a series of words. Words which may themselves actually just be buzzwords or the esoteric ensemble of a recent graduate.

And why in purest profitability terms should recruiters care when today’s bottom line is secure and they achieved it with the benefit of never having to even speak to perhaps 3 times as many candidates as they actually did. Candidates who may have provided the recruiter’s customer with benefits and untold added value which they never had the chance to see but paid for nonetheless.  A situation leaving perhaps the best candidates finding themselves removed from the running by a software package that reduced the time involved for the recruiter to all but a mere fraction of what they would have ‘wasted’ otherwise.

It is quite concerning that labour and cost saving technology for one business can itself create the opposite effect not just for one, but potentially many others. But then if you also look at the dark-art-creativity of the financial sector and money-making ideas such as cereal futures and funds that own shares in supermarkets and dairy processors, you can quickly begin to see just how the mechanics of distance and its ability to negatively affect the lives of many people actually are. After all, what is 1p on the price of a pint of milk every couple of days when you had a £1 Million bonus last year?

On the one hand, technical advances and the heralding of an information-based communication age encouraging openness and sharing is driving a potentially buyer-led age where businesses have no option but to sell on the basis of making ‘just enough’ profit and delivering quality on time every time.

On the other, the opening of doors to many more  ‘golden-egg’ opportunities which are great for those picking up the product as it is found, but like the ever expanding and deepening ripples from a tiny stone tossed into a still pond, can cause mayhem and disaster in places that they had never even considered.

So the question needs to be asked; Is the distance created by modern communication and business methods removing basic humanity from our relationships and has the time come for a whole new set of rules?

Peer to Peer unsecured business lending for SME’s is on the rise. But are you surprised?

The internet culture of openness and sharing is promoting massive changes for businesses of all sizes, as the continuing upsurge in businesses aiming to develop both our social media knowledge and use will easily confirm. But the gaps which have been bridged in one way by new basic communication mediums are now developing into fully fledged by-passes in others and not least of all through the proliferation of peer-to-peer lending sites such as Funding Circle.

When taking my first real plunge as a start-up with a solid distribution contract 8 years ago, I would have leapt at the chance to obtain £250K unsecured lending from a range of private investors. Instead, I had no option but to give a charge against the equity on my home to a high street retail bank. I’m sure that many who have driven the development of an SME whilst being the sole bread-winner at home will relate to the experience of having your partner crying as you call in at your solicitors to complete the paperwork.

But business is inherently risky, and that’s why not everyone does it – or receives the benefits that come with it. Banks however, look very much like they have become ‘penny wise and pound foolish’ when it comes to business vs corporate lending and you won’t have to dig far in to the realms of the recent Banking Crisis and the current Eurozone debacle to see where the big money has been going.

In the past, decisions on lending were actually made by a branch manager at the local bank, who wouldn’t have to talk to a faceless lending ‘specialist’ on the phone or enter all the relevant data onto a network to see if your sweat-soaked business plans were credit worthy, because they took the time to know a client and could see where real risk would lie. I can honestly remember the reverence that the ‘bank manager’ was given when I was a child – not unlike that of a GP or a Dentist. And Oh… how the times have changed.

I would guess that I am far from being alone in having sat with a Business Relationship Manager to talk through the acorns of an idea to see if the will was there to provide funds, before taking a nod away with meto go and commit many further hours of work to creating a written business plan, to then have it quashed in moments when it travels further up the chain by someone or something which basically has nothing more in mind than having one’s cake and then eating it. Put bluntly, it looks very much like interest, security and surety are the 3 requirements of high street retail business banking to small and new business today, and any more than  2 such caveats are not only unrealistic, they are wholly unreasonable.

Not one moment too soon, peer-to-peer lending has arrived, giving entrepreneurs the opportunity to put great business ideas to open-minded lenders who are able to listen to the thought and actually experience the passion behind an idea, and then make an emotional evaluation of the weaknesses and strengths of that concept or perhaps just a plan for expansion, before deciding whether they want to make a similar leap of faith. Even the Government has been caught on-the-hoof with this growing concept pledging no less than £100 Million to support this type of borrowing.

The irony is that for those ‘peers’ choosing to lend and perhaps spread £100K in £5K chunks across 20 different projects, they are spreading their risk widely after making a proper evaluation of all the lending AND receiving a good level of interest too. Banks would perhaps do well to bear this in mind as they go chasing the sure-thing of that golden egg dropping into the basket which comes from a hen with a great set of teeth…