Archive for the ‘Job Creation’ Category

Job Creation & Hope

Mardi, novembre 2nd, 2010

The 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.