The violent student demonstrations in London last week protesting against the increase in university tuition fees, appeared to be aimed less at Labour which had commissioned the Lord Browne report on university funding or the Conservatives in the Coalition government which proposed the increases, than at the Liberal Democrats. The problem for the Liberal Democrats is that before the election they had not only promised the many young people who eventually voted for them, to oppose any increase in student fees, but also had even signed a pledge to do so, despite the opposition at the time of their leader Nick Clegg. On the positive side for them, Nick Clegg has shown himself to be a serious politician within the Coalition cabinet by voting for the successful Commons motion to increase tuition fees; however, with Simon Hughes their deputy leader having chosen to abstain and some 50% of their MPs voting against the increase, the Liberal Democrat party has now found itself essentially split three ways by its unfeasible pledge. The party, therefore, is currently rated at only 9% popularity in one opinion poll and, having lost the moral high ground somewhat, finds itself appearing to be no more trustworthy than Labour or the Conservatives, the harsh reality of their participation in a governing Coalition under severe budget constraints.
Despite the vote in favour of increasing tuition fees up to £9000 per year for the most sought after university places, taxpayers including many on relatively low incomes and with no chance of higher education, will still be subsidising these students. The demonstrators should remember, therefore, that to succeed they need not only a just cause but also public support, the latter likely to be at a rather low level after the uncontrolled behaviour of last week and the disruption to ordinary, working taxpayers in the Oxford Street area, blocked by students chanting about their rights and even aggressive towards the heir to the throne and his wife.
Nick Clegg having fielded a lot of the political pressure leading up to the vote, now is the time for the Prime Minister and his government to stand firm in the face of aggressive demonstrations against measures which, although we are told will still favour students from poorer backgrounds, need to be more convincingly communicated. For this segment of the future student population, increased funding for educational support and keeping tuition fees low address only part of the overall problem. Such students can find it difficult to succeed alone with no help or support or motivation from within the family, particularly those families with no previous experience or history of higher education. Schools also cannot do all the work although they can help to foster or not, ambition and aspiration in their pupils to offset somewhat the lack of support at home. There is an additional cultural aspect it seems with e.g. families with Asian origins much more successful in general at getting their children into top universities such as Oxbridge compared with their black or white working-class equivalents, with the secret here said to lie in sheer hard work and application, rather than funding or entitlement.
Archive for the ‘Fairness’ Category
Tuition Fees Increase
mardi, décembre 14th, 2010Jobs in Biotech and R&D.
mardi, novembre 16th, 2010Continuing with the themes of job creation together with creative financing & where Britain has a competitive edge (see Categories/Chairman?s Blog/Fairness/ Job Creation & Creative Financing in the right hand column index), there are major players in the pharmaceutical industry with important Research & Development (R & D) facilities in the UK, such as GlaxoSmithKline (GSK), its biggest drugs company and the Swedish-British merger of AstraZeneca. However, job redundancies result when local research budget funds are diverted to other lower cost parts of the world e.g. GSK has now opened a research facility in Shanghai, China where there is then the additional prospect of major higher-value sales. The industry is also under financial pressure when governments worldwide are expecting to pay less for medicines to cut their health budgets and lucrative drug patents are expiring allowing competition to sell cheaper, so-called generic copies. Pfizer,the largest pharmaceutical company in the world, will now work with Biocon, the largest biotech company in India, to market « biosimilar » (i.e. genetic impersonations but not identical generic copies) insulin treatments designed and manufactured by Biocon. Here in France, Sanofi-Aventis announced the closure of four research facilities last year. The problem is global for the industry with the financial hurdles to successful medical drug innovation becoming ever higher and then the regulators to convince before final launch.
The UK is said to be one of the most conservative countries in Europe when regulating clinical drug trials and, with a separate body NICE – the National Institute for Health & Clinical Excellence ? responsible for advising the NHS on drug supplies, considered one of the slowest adopters of new medicines. There is also not the final prospect of major sales in the local market. Indeed, GSK spent 39% of its R & D budget in the UK last year but the country only represents 5% of its worldwide sales. However, in an effort to become more efficient the industry is looking to focus internally on fewer areas and to also buy in other work from an increasing number of smaller Biotech companies, often backed by the big drugs companies themselves e.g. GSK with its 18% participation in Convergence Pharmaceuticals, a Cambridge Science Park start-up. This offers a potential source of financial backing for R & D scientists looking to launch new businesses in the field of biotechnology.
There is seemingly room for improvement in Britain which to date has been nowhere near as successful as e.g. the US in producing successful biotech companies. However, there is a market there in the major pharmaceutical companies for such products and the opportunity to exploit the innovative benefits of spreading such creative work over a much larger number of smaller laboratories, when the likelihood of coming up with something new could be enhanced. This is why it is important that the government is considering a so-called patent box to foster R & D in the UK. If introduced the system would provide tax breaks for revenues from ideas patented in Britain and, together with the right regulatory and economic environment, provide a boost for the development of more innovative companies and their associated jobs.
Creative Financing
mardi, novembre 9th, 2010Following on from the article on Job Creation & Fairness (see Categories/Chairman?s Blog/Fairness/Job Creation in the right-hand index column of the opening blog page), something further on the related development of the necessary private sector financing of job-creating projects for public services seems appropriate, when government funds are severely limited as in the austerity climate of today.
One method has been via the so-called Private Finance Initiatives (PFIs), when sources of finance such as banks & investment companies have got together with the required project management, planning, engineering, implementation and operating companies in consortia, and been contracted to Build, Operate and ultimately Transfer (BOT) back into full public ownership, key capital assets such as schools and hospitals. The private consortia are paid back over the operating life of the contract through interest on the investment capital and service charges on the operation; the benefit for the government is to reduce its front-end capital expenditure by spreading the payback over a number of years e.g. until 2041 in the case of the Coventry University hospital PFI. Indeed, by 2041 this hospital will have cost the taxpayer £3.3 billion in interest and service charges, according to Treasury figures, some 8 times its value today (as quoted in the Times of last Sunday).
Many of the over 650 of such PFIs in the UK were set up under Labour to fund the building of new schools and hospitals, using private sector money, to thereby reduce government capital spending at the time by diverting it to future generations of taxpayers, even in the then period of relative prosperity compared with today. It raises questions on the political motives of the government behind such building programmes, as well as their number and necessity during this period.
As Sir Philip Green suggested in his recent Efficiency Review (see Categories/Chairman?s Blog/Sir Philip Green/Efficiency Review in the right-hand column index of the opening blog page), the government needs to improve in its negotiations with the private sector. This can be particularly so in the case of such long-running contracts when e.g. the escalation clauses associated with the on-going service charges for operating a hospital complex, can sometimes lead to levels considered exorbitant over the long term. MPs have apparently, therefore, now formed a 50-strong cross-party group to try and renegotiate PFI contracts because of their total accumulating costs to try and secure taxpayers a rebate which could save up to an estimated £500 million. Although it is said that at the moment PFIs are contractually protected from government cutbacks, there is often the case of major companies in the private sector calling on their suppliers to reduce their contracted supply prices to them, when times are tough. Today there is even a secondary market trading in PFI equities with school and hospital ownership passing from one company to another and e.g. Innisfree the contractor for the Coventry University hospital is now the biggest owner of British schools after the government!
The above is not to say that the private sector should not make a decent profit; profitable companies are key for growth and job creation. It is also all too easy for the media to pick up and colourfully quote things the general public can relate to such as seemingly excessive service charges for items such as car parking for hospital staff, patients and visitors, hanging pictures and installing TVs, school computer equipment and desks etc. This can tend to trivialise the matter somewhat and cloud the overall issue. The government might also find this the case with its plan to put on-line for the general public, the annual budgetary spending details and progress against associated milestones (instead of the previous and so-called Labour targets) of its various departments, in order to reduce the role of central government and quangos. The announcement of the release of such a mass of detail to the media and an anxious, unhappy public (without sufficient selling of the idea in advance and rather akin to the approach for the Big Society – see Categories/Chairman »s Blog/Big Society in the right-hand column index on the opening blog page), cannot be considered democratic management or a suitable substitute for the management responsibility of representative government.
Job Creation & Hope
mardi, novembre 2nd, 2010The Coalition government justifies its claim to fairness with respect to the effects of its overall cuts and tax rises (when also adding in the 50% upper tax rate of Labour) and it could also be said that progressively the top 2% of earners lose out most of all. Certainly there has to be a limit on how much the top earners are taxed before it becomes too much of a disincentive for both companies and individuals, effectively reducing overall tax take by perversely encouraging further tax avoidance schemes and relocation to more favourable tax regimes such as in Switzerland. Already the top 1% of earners in the UK contributes over 24% of total income tax paid, the top 5% over 43% and the top 10% over 53%.
The greater emphasis on cuts by the government (70%) compared with Labour (60%) has the opposition claiming a fairer approach to the public sector where the cuts will be felt in terms of job losses (although the planned increase in VAT will also hit private sector jobs if consumers reduce spending as a result). It is then all too easy for an opposition to say let us wait (until we are sure a fragile economy is really recovering), instead of facing up to the need for austerity to give the global financial markets confidence in UK government borrowing and its support for the critically important (to the economy) financial sector in the City of London. There is a corresponding human need to offer hope to those facing the prospect of unemployment by also growing the economy together with the accompanying job creation, noting that the wealth created by the private sector in a healthy economy is considered by economists as better able to support a public sector representing 40% or less of the total.
As a kick-start to growth David Cameron, in his speech last week to the Confederation of British Industry (CBI), has promised a £200 billion revitalisation of the road, rail, power and telecommunications networks in the UK. This also addressed the long standing complaints from the business community about the negative effects of such poor infrastructure on their operations. Since there is not much government money available for such grand projects, there is an associated plan to identify and overcome the obstacles to private investment to attract e.g. major sovereign wealth and infrastructure funds from the Middle East and Asia. Such funds, however, are wary of risk and the sale of the high-speed rail link between London and the Channel Tunnel provides a good example. Indeed the private sector consortium that started to build the link had finally to be rescued by British government funds in order to complete the project. Now the rail link is successfully up and running, pension and sovereign funds from around the world are bidding to buy it up.
Britain also needs to raise some £200 billion to spend on energy infrastructure just to meet its obligations under the Kyoto Climate Change Agreement and which would again create jobs. However, currently the initial £1 billion proposed by the government for the Green Investment Bank (to be established in 2013), to raise debt from the private sector by leveraging this taxpayer money when invested in green energy projects, is considered by experts as too small (in terms of mutual risk sharing when trying to attract private investment) and too late (by 2013) to make much of a difference. In addition, the Office for National Statistics (ONS) is concerned that such debt would have to be added to the National Debt. It has again been suggested that the renewable obligation tariff scheme for low-carbon technologies such as wind should alternatively be transformed into a low-carbon obligation instead. This would then provide for example the same support for private investment in nuclear power stations, where apparently there is still confusion in the industry over government policy. It seems though that the latest changes to the Carbon Reduction Commitment mean that the levies raised from big polluters will now go straight to the Treasury instead of funding bonuses to the better-performing companies, again not encouraging for the private sector.
The Prime Minister has also appointed Lord Young, the former Trade & Industry Secretary, to look into the problems facing smaller companies (Small & Medium Enterprises or SMEs) and e.g. how to make it easier for them to win government business or have more flexibility (compared with large companies) in not only hiring staff but also in reducing the number on the payroll when the level of business is down. Responding on BBC Radio to a question concerning the Efficiency Report on central government by Sir Philip Green (see Categories/Chairman?s Blog/Sir Philip Green/Efficiency Report in the right-hand index column), where Sir Philip is concerned that the government is not fully leveraging its purchasing muscle in offering its suppliers payment within 5 days when the commercial norm is 30 days or more, Lord Young considered government different from big business. This questions somewhat the overall purpose of the Efficiency Report. In this radio interview Lord Young did make the suggestion when asked about his ideas that e.g. for small businesses a single prequalification for a Local Authority could serve as a prequalification for all such entities across the country. In France there is a plan for the growth of employment in SMEs based on the American Small Business Act, in which regional government authorities would restructure their purchasing into separate types of business/industry lines, to allow SMEs to compete better with larger companies which have more resources. SMEs will also be supported when prospecting for export business in international markets.
Export markets provide opportunities for job creation in sectors where the UK has a competitive edge such as in financial services, advanced defence equipment, the creative industries, pharmaceuticals, design & engineering, fashion, comedy, the environment and the cream of its universities. Emerging markets offer the best prospects, accounting for one-third of the world economy but two-thirds of its growth. There is certainly room to grow business, the UK having exported in 2009 more to Ireland (£15.9 billion) than to China, India, South Africa, Russia and Brazil combined (£14.8 billion). One very visible and successful example of such a British company is Dyson with its efficient, modern and pleasing designs of top-of-the-range, bag-less vacuum cleaners, public hand-dryers and Air Multiplier fans. Dyson manufactures the products in Malaysia but is actively recruiting some 350 plus engineers for its design centre in the UK. In advanced semi-conductor technology there is also ARM an original start-up from the Cambridge University Science Park and still headquartered in Cambridge. ARM is now the leader in the design and licensing (but not the manufacturing) through a network of independent partners, of application processors for the fast growing market in mobile devices such as advanced smart phones and handheld/ pocket computers. It has 1700 employees, design centres also in France, India, Sweden and the US and makes its money from the licence for the original intellectual property, together with the royalties on every semi-conductor chip and wafer produced by its licensees.
Spending Review – Fairness & Hope
lundi, octobre 25th, 2010Nick Clegg, the deputy prime minister, should have done better than just airily dismissing as nonsense, the conclusion of the independent Institute for Fiscal Studies (IFS) which contradicts the claim of the Treasury that overall the tax and benefit measures in the October Spending Review are progressive.
The first IFS analysis in August which took account of a wide set of benefit reforms already announced by the Coalition Government, concluded that the impact of all tax and benefit measures yet to come would reduce the incomes of lower income households more than that of higher income households, except for the richest 2% (see also Categories/Chairman?s Blog/Fairness in the right hand index column). Therefore, these tax and benefit changes were considered regressive rather than progressive across most of the income distribution.
Now, when the new measures announced in the October Spending Review are added to the original IFS study, its original finding is said to be reinforced. Its analysis continues to show that, with the notable exception of the richest 2%, the tax and benefit components of the fiscal consolidation are, overall, being implemented in a regressive way. The IFS considers this as not necessarily unfair as the perception of fairness depends on the individual concerned and their personal circumstances e.g. the level of income, whether in work or on benefits etc. However, there are already a lot of people, some seemingly desperate and at the bottom end of the income scale, who are already protesting via comments to blogs on the Internet in an ugly and often semi-literate, class war-orientated and confrontational manner.
There is a need for the prime minister and his deputy with their otherwise considerable communications skills, to move this debate on from the no-win Regressive versus Progressive stage towards how they will promote future growth in the economy, together with the associated development of the hoped for work opportunities, particularly in the poorest, de-industrialised and jobless regions.
There will be some mismatches between the skills of such job seekers and those required for new jobs e.g. in the Green energy sector which is being provided with extra development funds. The key technologies for e.g. wind, solar and nuclear power do not even create manufacturing jobs in the UK but currently have to be imported from the European Continent. (Although Siemens are said to be going to approve this week a plan to build a British factory for a new generation of offshore wind turbines after receiving government assurances on £60 million for port development. The factory will employ 700 workers.) Any job creation from exports requires products and services with a competitive edge with major deficit countries such as the US and the UK wanting to export to counter weak demand from their own consumers, in common with e.g. Germany and Japan (both with home consumers unwilling to spend), all addressing the same fast growing emerging economies such as China. In addition, there will be competition from sometimes better educated and /or skilled job seekers from the more eastern parts of the European Union and outside. Ex-public sector workers are also not necessarily a natural fit to the private sector unless e.g. they are included as an integral part of the private outsourcing of former public services. There is a need for an overhaul of training schemes to help reduce long-term joblessness.
A key difference between the proposed Labour austerity programme of cuts versus tax rises in the ratio of 60/40 compared with the 70/30 of the Coalition, is that the latter considers the more you tax, the more this acts as a disincentive to new business start-ups, investment, growth and associated job creation in the private sector. There has to be a more positive vision than the mantra of Labour that cuts too soon and too deep will harm a fragile recovery. Indeed, whether the economy has recovered or fallen into recession again will not be officially apparent until sometime after the event, when the appropriate statistics for growth are made available.
Pupil Premium
dimanche, octobre 17th, 2010Ahead of the 20th October spending review and to protect politically sensitive parts of the total education budget, the government has responded to accusations of unfairness over their planned child benefit cuts by announcing a £7 billion Pupil Premium. This will be allocated over the same period as the spending review and aims to improve the educational prospects of the poorest children, supporting them up from the socially critical 2 years of age when they risk future exclusion and to the university stage. The total schools budget which normally represents some 50% of the total spend on education will also not be cut.
This pupil premium will target e.g. schools with the highest proportion of free school meals and, therefore, serving the most disadvantaged catchment areas. How the money is to be spent will be left to the discretion of individual school head teachers. Longer term savings in welfare spending are anticipated from enabling such disadvantaged children to catch up and maintain progress with their peers through extra tuition and other early support, thereby increasing their aspiration and hopefully reducing their otherwise over-reliance on state benefits in the future. Of course, with the total schools budget still limited by the restrictions on government spending, this could mean that schools in more affluent areas will get less.
Child Benefit Cuts
jeudi, octobre 7th, 2010The government has announced at the Conservative party conference that, as part of their fiscal austerity programme to eliminate the public spending deficit, it is only fair to cut child benefit for those parents considered better-off and, therefore, able to carry a heavier share of the tax burden i.e. those with annual earnings of £44,000 or more and in a higher tax bracket.
However, due to the perverse and socially engineered effects of the current UK tax system, where everyone (whether married or not) is taxed as a separate individual, this would seem to imply that a single mother earning more than £44,000 would lose her child tax credits whilst a household where both parents each earn less than £44,000 for a joint income of up to £88,000, could still retain their child benefits. It has as a result been quite roundly attacked as manifestly unfair although an opinion poll taken immediately after found 85% of respondents in favour and 15% against, roughly in the same proportions as those who would still retain child benefits versus those who would lose out!
Given that the Conservative party in common with its opponents must employ clever political thinkers and analysts, this begs the question that, if it is so easy to pick such obvious holes in this child benefit tax policy, why announce it now during the Conservative party conference and in advance of the detailed programme of cuts planned to be announced on 20th October? One would like to think that this is part of an overall policy to guide public opinion towards the benefits of a tax system which not only provides tax concessions for children but also for the supporting married couples, taxed on their joint income as per the French system for example.
The Conservative party has traditionally supported marriage as a source of stability in society and the prime minister in defending these proposed child benefit cuts has already suggested that married status should be recognised within the tax system. There are of course the arguments of those who say that this discriminates against single, childless individuals and that there is no evidence that homes with two committed but unmarried partners cannot provide as stable a family environment as a married couple. In albeit mainly Catholic but constitutionally secular France, the tax system favouring marriage and children can also be traced back to the need to rebuild the nation after two world wars fought over its soil. Indeed with the almost statutory three children the resulting low level of direct income tax paid is highly attractive to young parents, during their early and generally lower income married life.
With civil partnerships including same sex couples now recognised under UK law, why cannot the tax system recognise marriage and the added costs of raising children during the early, more financially-stretched years? Certainly, Ed.Milliband the recently elected new-generation leader of the Labour party, who has in the past been too busy to have his name on the birth certificate of his first child, has admitted to the press that he is considering marriage to his partner in the future.
Fairness
jeudi, septembre 9th, 2010Fairness is probably best associated in the British mind (or, that is, how some of us at least would like to perceive ourselves as associated) with an inherent and traditional sense of fair play, using as an example the sporting analogy of equal conditions (or a level playing field) for all within the agreed rules for a particular game. Indeed, it has been suggested that this is one of the reasons for the British being the initiators of many of the organised games and sports with popular appeal around the world. Whether within the multi-cultural Britain of today a common understanding of, and general adherence to, such a sense of fair play still applies is open to debate. However, the Conservative party is associated with certain traditional values and its current image in the public mind is embodied by David Cameron its leader and the Prime Minister. His image is that of a patrician commanding respect through his bearing, complemented by good manners (although perhaps considered rather old fashioned in the Britain of today), born to lead with a self-confident and business-like approach; together with all this, however, must come a traditional sense of responsibility with respect to public trust, to ensure that the rhetoric of the Coalition on fairness is not specious or proven lacking in reality underneath the fine words.
Therefore, it was careless of the Chancellor of the Exchequer, after insisting his budget cuts were both fair and progressive, to be caught out so easily by the Institute of Fiscal Studies (IFS). The IFS was able to point out that the distributive effects of the tax and welfare measures of the Coalition, when the tax increases on high earners adopted from the last Labour government are excluded, are in fact not progressive but more regressive with the poorest unfairly suffering cuts proportionally greater than the better off.
It is ironic that the Chancellor has just announced today that he has appointed Robert Chote the Director of the IFS as the new Chairman of the Office for Budget Responsibility, the putative independent watchdog over Treasury fiscal projections.