Is the recovery too tilted towards big business?

'Is the recovery too tilted towards big business?'

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Silly question....of course it is!


Millionaire ministers tell us VAT is the 'best tax'. But for whom? Why has Osborne not closed the Channel Island VAT loophole that allows supermarkets to import goods at VAT discounts? If you can avoid a 20% tax you make your goods much cheaper. So higher VAT is more likely to increase fraud?

...As well as Tesco, other big name retailers to exploit the loophole include Amazon, HMV, WH Smith, Play.com and Asda....

https://www.guardian.co.uk/business/2010/apr/13/tesco-revives-jersey-vat-avoidance

https://www.vatloophole.co.uk/

Robert - re your tweet on small businesses, check out the Small Business Research and Innovation scheme. It's supposed to give loads of small firms access to government contracts. But it fails massively year after year.

Unemployment up.
Inflation up.
Government spending up (!)
Taxes up
House prices down.
Car sales down.
Growth reduced.

I could go on.

I guess some big 'british' business, paying tax in Switzerland and selling Chinese made goods in india may be doing better.

Back in the disunited kingdom, the tories ideologically motivated cuts have stunted the record growth they inherited.

With rises in petrol/diesel prices really hitting business and consumers and the bulk of the job losses about to impact, anyone who is not a multi-national, billionaire tory supporter needs to hold on for a rough ride.

It would have been useful to have some comparative figures in this article, such as:

What percentage of the UK economy is accounted for by the FTSE100, 250 & 350?
What percentage of UK employment is provided by the FTSE100, 250 & 350?

What I hear from people I know that work in large organisations is completely counter to bigger companies driving innovation and productivity improvements. Unless these changes help the wider economy rather than single corporations they are regressive innovations.

It's worth remembering that for large companies, the internal accounts are always ex-VAT, with the tax added and deducted at the suitable invoicing point. It is only those working in direct consumer retail that give it a moments thought.

Some statements and the policies in favour of disruptive competition would certainly help restructure the economy, but this seems unlikely given the poltical support from established business, however inefficient it might be.

I just saw #3 on the Guardian site. Isn't copy and paste thinking part of the problem?

It would be more meaningful if a proper survey is carried out in six months time when the impact of the CSR will have taken hold. Even now VAT and underlying inflation are significantly deflating the spending value of middle and low income families and many businesses grew and appeared on the near capricious spending of the last five years or more. Cold turkey is the order of the day and when the government are panicked by inflation to raise interest rates the housing market and its multiplier effect will add to the deflation.

It is said that some companies are using to cover of the VAT increase to sneak in margin boosting higher price increases. This must be said by those who do not go shopping as retailers have been sneaking in 5% increases over the last year or more usually under the cover (literally) of re-packaging/relaunching/resizing or, really crafty, of discounting prior to a price increase hoping shoppers have forgotten the base price. We need more stuff on this margin creep but ultimately it is self defeating!

RP Wrote: "So, for example, 32% of them expect the economic condition of the country will improve over the coming 12 months, whereas 29% expect it to deteriorate - which is almost identical to what they thought a year ago.

But a much more decisive 60% of them expect that business for their own companies will get better in 2011 - which does represent a bit of tick up from the beginning of 2010"

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If this isn't evidence of big business trying to talk up the economy more in hope than substance then I don't know what is. The fact is the big corpoartions are in a fix, they can abosrb the VAT hike and ride out downturns but their suppliers can't as they've been cut to the bare minimum already. With the price of Chinese imports rising fast they're well and truly stuffed if they don't restore confidence somehow.

To be honest as soon as I saw the figure that 32% think the economy will improve in 2011 I realised what a load of bull this survey was, the reponses are clearly full of delusion and hope. This is all classic "Ragged Trousered Philanthropists" stuff, drive supply costs down, do half a job and increase profits, it can only go wrong, for a start supply costs are going UP and real wages are going DOWN.

And if you think Greece and Ireland were a wet kipper in the kisser, just wait until Spain hits 'em in a few months.

Optimism is expected as recovery takes hold, economy rebalances and deficit (if not debt) becomes focus of political attention. But investment will lag when forecasting future cash flows is made much more uncertain by the continued high (/ignored) inflation.

Big business gives retirement jobs to politicians and civil servants - could that possible be why?

The relative value of big vs medium vs small business needs to be considered. The valuation should be about the efficient employment of the workforce - unfortunately it is too often about the (almost criminal) exploitation of monopoly power, by big business to crush its smaller competitors!!!! See the activities of the big consultancies in crushing smaller firms (as we are about considering a McKinsey report!) We would also do well to remember Enron (and the more recent crisis) and the role of the big monopoly auditors/consultancies.

If big = monopoly it is universally bad for everone!!!

#6. At 10:12am on 5th Jan 2011, Briantist wrote:
I just saw #3 on the Guardian site. Isn't copy and paste thinking part of the problem?
---------------------------------------------------------------------------------

Maybe so but the blogger makes quite a valid point don't you think?

Of course it is.

We've magically forgotten about all those unemployed people, remember all the educated, professionals who are magically transformed into spongers overnight.

Remember the young girl on BBC Question Time who asked the panelists about housing benefit as she explained the cuts would make her homeless? Not a cheep from the panelists.

It's all business, business, business. Oh, they'll leave if they have to pay taxes. And? So? Go?

Just look at this Graph 1: Changes in real income (percentages) from https://www.poverty.org.uk/09/index.shtml

That was my niece! A PhD and her poverty-income was dropping (unlike the rest of us) because she couldn't get a job. She left the country, an economic migrant.

This government is doing exactly what the American neoliberals are doing. They'll leave us with streets full of broken, homeless people. They'll leave us with even more people unemployed, their health deteriorating as a result. They'll sell off everything. I mean, they are selling the forests. It'll be grannies slippers after they've sold Mount Snowdon and it's been transported to Disneyland, next!

https://www.taxresearch.org.uk/Blog/2011/01/05/on-the-dole-corporate-style/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+org%2FlWWh+%28Tax+Research+UK+2%29

It's time we slapped them with a massive tax increase. Leave. Every country should be slapping them with the same hefty bill. Remember, they are supposed to be serving us, not running around egging on politicians to impose economic sanctions on us if we don't want to eat their immoral technological foodstuffs.

The truth is there are not enough jobs to go around. There probably never will be. We can be cruel, or we can redistribute. Guess what we are doing. And blaming the victims as we go.

Politics. It's the only job where you get to be cruel to your own employer, in public.

Shame.

8. At 10:21am on 5th Jan 2011, NorthSeaHalibut wrote:

Thanks

I saw that and couldn't help laugh at those super-spivs who believe their horoscopes!

6. At 10:12am on 5th Jan 2011, Briantist wrote:
I just saw #3 on the Guardian site. Isn't copy and paste thinking part of the problem?
======================

If my comment #3 is also on the Guardian site (I can't find it) then it's not by me - I don't use that site.

Perhaps it's just such a good comment someone else couldn't resist?

It fascinates me that the idea of 'progressive' personal taxation is now espoused by all political parties, but none of them uses the same terminology as a basis for their business taxation policy. It seems obvious to me that the tax burden per unit of turnover is far higher on small businesses, and this should be addressed if we are to maintain the diversity in British businesses. Not even the FSB seems to be able to annunicate its policies clearly so as to redress the taxation imbalance between small and large companies. What's wrong with a Progressive approach to Corporation tax, National Insurance and even VAT?

Robert - Why is no-one talking about the huge asset HMG are sitting on? Gordon Brown did not give billions away to the banks in exchange for fresh air. He took a controlling share that the current Government should be selling now at true market value now that the banks are more stable. The UK Stock Market has gone up 20% since the crash. Those shares are worth more than they cost.

Instead the current administration are slashing services, encouraging an atmosphere of fear for working people and raising taxes, particular indirect ones. They do this because that is what their politcal dogma demands, it protects the investor but hits those who are poorer so have little choice but to spend a higher proportion f their income. Osborne would do this regardless of the economy he'd inherited.

The UK Government have an extremely valuable asset in the form of a controlling interest in several Banks that they are choosing to hang onto for one reason only - it will be useful to flog off later to free up the money to buy votes with as 2015 approaches.

'Which may not be a complete disaster in the round, if the management consultancy firm McKinsey is correct that it is bigger companies that drive innovation and productivity improvements '

That'll be why all funding has been withdrawn from Humanities, but not the Science Departments down the university then - 'cos they wouldn't possibly be the drivers of innovation, would they?

#16. At 11:04am on 5th Jan 2011, Roger_The_Cat_Too wrote:
"Robert - Why is no-one talking about the huge asset HMG are sitting on? Gordon Brown did not give billions away to the banks in exchange for fresh air. He took a controlling share that the current Government should be selling now at true market value now that the banks are more stable. The UK Stock Market has gone up 20% since the crash. Those shares are worth more than they cost."
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The bank shares will need to be a least 100% up on their purchase price, the very act of selling them will halve their value. This will never happen as the banks are far too exposed to crap so any rise in value is temporary as investors take a short punt at them, and this will stop soon when half of Europes banks go A over T. We will never get this money back.

Did someone have a bad Christmas?

Conecting

“But a much more decisive 60% of them expect that business for their own companies will get better in 2011 - which does represent a bit of tick up from the beginning of 2010.”

To

“Even so, and this looks like another contradiction, a significant 75% of them say they have or are likely to postpone investment because of the economic uncertainty - with hiring new staff the main casualty. Which rather implies that even if the recovery gains momentum, unemployment may fall relatively slowly.”

Is a bit much and demonstrates that you have never been in business.

And then linking

“There are some other interesting nuances. The vast majority of them support the thrust of the government's general economic policy and believe that the public sector deficit needs to be cut rapidly.”

To

“But around half fear that restrictions on immigration will harm the UK's economic performance. Also they overwhelmingly believe that regulatory burdens on their businesses are rising and will harm the British economy.”

Really is naughty

Trice wow is me Robert, after your final paragraph

“But an absolute decline in the numbers and health of smaller businesses would not only be a personal tragedy for thousands of entrepreneurs. It would sap the ability of the British private sector to re-make itself - which would be pretty awful for all of us.”

And along came another and another and……….

And the FT says:

Leaders of the UK’s biggest businesses are at their most optimistic about trading prospects for five years, while smaller companies are freezing investment plans and raising prices in the face of uncertainty about domestic demand.


https://www.ft.com/cms/s/0/b59a2de2-1756-11e0-badd-00144feabdc0.html


freezing investment
raising prices
uncertainty

#6 would imply that some of the posters here have too much time on their hands and spend it web surfing instead of doing productive work.

Maybe that's part of the problem.

Rob

RP wrote "Then there are those businesses that cannot escape who and what they are - witness the hideous drop in sales disclosed today by HMV, a victim of the big freeze and technological change."

One of the big disadvantages for retailers with physical shops in the UK is that internet retailers can sell DVD's and CD's without any VAT by importing them through the Channel Islands. If you buy a CD in a shop on the other hand you must pay VAT.

This means internet retailers will destroy 'record shops' selling items like CDs and DVDs in the UK.

The tax break for the Channel Islands was set up to help them import flowers but is now being used in this way at a massive loss of revenue to the taxpayer.

many small businesses are going bust because of it. Check out

https://www.vatloophole.co.uk/

for more details

Mr Peston, why are these respondents 'second-rank executives'? is that not insulting? their companies may be smaller than FTSE 100 but they are huge compared with the vast majority of small businesses in the UK. There are plenty of brilliant CEOs in the 101-350 space - I think a correction is in order.

#1 and #12 I can't help but agree, in the main.
#19 I disagree with "the need to have been in business".

Robert,
as an under-graduate in the mid-seventies, we debated these same issues back then, despite higher interest rates, corporation and income taxes - the debates conclusion was always the same - the bigger the business, the more help from the State ie. tax-payer funded support.

as an individual who moved from employment to running a small business for many years, I have been appalled at some of the support, both direct (cash) and indirect (tax allowances) larger businesses have been afforded by Governments of ALL COLOURS over the years.

Tax incentives, GRANTS, CAPITAL PURCHASES OFFSETTABLE AGAINST TAX, RATE relief, regional development funds, EU funds (often for regional development) diverted to other infrastructure projects, aiding large companies, and so on.

What has always puzzled me, given the volume of transactions "traded" in the London markets each and every day of the year, why these are not all VAT chargeable?

If I buy and sell, I have to pay and charge VAT in my transactions.

Seems the larger you are, the more clout you have to dictate Government policy and avoid regulation.

Finally post #12 makes the point about poverty, a very good one too. Its not just about jobs and size, its about WHOM you KNOW or can connect too.

After all, look at the billions that have been ploughed into Quangos and Management consultancies over the decades and more recently, the "green" energy companies.

Many of these were (and probably still are) well connected to 'government and financial circles', so prosper.

How else, in times of a dearth of lending to business, does anyone think massive wind turbine projects are funded?

Loan's don't grow on trees, it's (always in the end,) taxpayer (work) money that rewards the (kings) "top of the pile".

"Is the recovery too tilted towards big business?".

YES.

"Even so, and this looks like another contradiction, a significant 75% of them say they have or are likely to postpone investment because of the economic uncertainty - with hiring new staff the main casualty. Which rather implies that even if the recovery gains momentum, unemployment may fall relatively slowly.

But around half fear that restrictions on immigration will harm the UK's economic performance. Also they overwhelmingly believe that regulatory burdens on their businesses are rising and will harm the British economy".

-----------

So do we (quite naturally) jump to the conclusion that the festering and greedy business "leaders" will not employ home grown unemployed but will employ immigrants?

I think it's a fair question, don't you?

I believe that the biggest boost to the UK economy could come from China...if the UK allows it.
Chinese VP Li Keqiang (who had just arrived in Spain as I write this) was seeking to BOOST. Li Keqiang spoke before a meeting with Spain's Finance Minister Elena Salgado and Industry Minister Miguel Sebastian in Madrid.
Spanish officials are optimistic about big business deals and more support for Spain’s economy. Spain has become the focus of concern (4th largest EU economy) as it is projected to be headed for a bailout. But Spain’s severe austerity seems to be working, and China stands willing to invest.
Prime Minister José Luis Rodríguez Zapatero said: Spain would not only meet its 2010 target of reducing its deficit to 9.3% of GDP, but that the figure would be in fact “a little better”. He also restated the country would meet the 2011 target cutting the deficit to 6% GDP.
China’s visit has further UPLIFTED SPAIN. Mr. Li and a business delegation of more than 100 people will travel next to Germany AND THE UNITED KINGDOM.
Li - China has “confidence in the European financial market, and, in particular, the Spanish financial market, which has meant the purchase of its public debt, something which we will continue to do in the future.”
China keenly supports the measures taken by Spain in the firm belief that it will obtain a complete economic recovery. The Chinese side is willing to explore with its Spanish counterpart any positive and effective cooperation possibilities.
But the real rescue would not be in buying debt. It’s not a Chinese bailout. They are not just buying debt, but giving international support. China has money to invest - oodles of it. China is seeking foreign investment - large scale projects, even infrastructure.
China appears to be targeting finance, energy, telecommunication, information technology, transport...The Spanish foreign ministry said a a significant number of agreements are in site.
So, I may be somewhat off your direct topic; but I am talking about "recovery" in the truest sense - not stiffling the taxpayers, not fighting a constant battle against the credit crunch - but opening United Kingdom's doors to new investment, new jobs and I believe a true, long-lasting friend.

Then there are those businesses that cannot escape who and what they are - witness the hideous drop in sales disclosed today by HMV, a victim of the big freeze and technological change.

................................................................................................................
Technological change ! wait to this new 'sky cat' kicks off, this could be the biggest revolution in transport and shipping goods we will all see in our lifetimes. A straight A to B with the minimum of infrastructure. This is the sci-fi I dreamed of as a child in the early sixties. I think only a working jet pack like the one in Thunderball could better this......

> Is the recovery too tilted towards big business?

Yes. One of the best weapons in the war on big business are size taxes. Let's use them liberally.

Is the recovery too tilted towards big business?
Well...no, it's just not tilted suffificently towards medium size and small business.
UK VAT 20% - highest ever. The obvious business concern, better withstood by big business, is margin squeeze, less profit, more bankruptcies.
Then we have the financial institutions that will not lend. It's difficult enough to deal with a margin squeeze, but without being able to squeeze cash out of banks, it's next to impossible. Banks now have five times more capital and seven times more liquidity than in the pre-crisis period. So, their financials seem stronger. What is their fear?
Default.
Default because of VAT.
Default because of untanlged derivatives still sitting on the books.
Default because of what the Government might do next.
EU legislation, currently being considered, which would force Defined Benefit schemes to adopt Solvency II (set aside reserves to fund pensions). It gives me a headache just to think about this because overall it amounts to trillions of pounds. Capital would have to account for increased pay-outs in the future, requiring foresight into gilt yield trends and inflation.
April 1, 2011, NHS goes up. 'Nough said.
Here's another nasty: by the end of the first quarter (31 March 2011) company tax must be submited too HMRC using iXBRL. All corporation tax will have to use the "eXtensible Business Reporting Language". Most CFOs of larger companies have already installed the specialist software but smaller firms have outsourced the iXBRL - another, annoying, little cost. Guess what the date is for iXBRL submissions:
April 1st.
The High Pay Commission is due to report in November 2011: Income Data Services found that 64% believe a CEO shouldn't receive more than £500,000 a year. Which could leave many from the FTSE 100 facing God knows what.
Big companies have legal departments; they can cope. But imagine the little company which would have no choice but to outsource. Imagine the medium company which might give these changes a whack and mess up the works.
It's almost as though The Coalition Government is trying to put little and medium businesses out of business.

The thing that everyone involved in government or business appears to be forgetting is that ultimately if consumers do not have money to buy their products then they will suffer.

Retail sector is already seeing this but the effects will continue on up the supply chains.

So most companies seem to be merrily using the VAT to raise prices whilst using the ongoing economic insecurity to hold down or even reduce wages without considering that the people who's wages they are keeping low are also the people they expect to be consuimg the products at the end of the very same supply chains.

End result - we have proportionally less spending money with which to buy the end products, we buy less and they make less and sooner or later we get store closures with the inevitable knock ons up the chains.

They can play with the margins to a point and right now that is how the guys at the top are justifying their actions but sooner or later playing in martgins runs up against the same finite sum of cash available to consumers.

It's short termism like this that keeps our economy stumbling from crisis to crisis and yet some of the base causes are obvious to anyone running a household budget.

Until we get some 'real' people involved in national and corporate governance we'll keep seeing these ivory tower 'businessmen' making stupid decisions.

Listen to the thoughts of the smaller business owners - they are the real fuel of the economy and, unlike the corporate 'leaders', they see the economy from many angles including that of their customers.

re: #3

I know this is off-topic, but why the heck is "House prices down" in that list? Maybe it's bad for mortgage holders, but it's good for buyers, especially first-time ones who are facing the worst ever house prices as a proportion of annual income, and needing to pay what's becoming increasingly extortionate rent (and tenancy conditions) in the meantime.

Contrast with everything else on that list which is pretty much bad no matter who you are.

But hey, if rising house prices is a good thing, let's bring in the multi-property landlord entrepeneurs and the up-talking estate agents to force prices to cartoonish extremes and price all but the upper class out of the market.

Won't it be fantastic when we can only move house by selling ourselves and our first-borns into slavery to the wealthy?

It's all well and good talking about how upbeat big business is, partly because they are bigging up the recovery to make themselves and the markets feel better (or propaganda as it was called in the old days!) but how is the economy going to pick up for everyone else, particularly small to medium businesses (often quoted as the back bone of British industry). With 2.5% increase in VAT, diesel increases of around 11p per litre over last 6 weeks alone (VAT, Duty and company increases), rail fares going up between 5 and 13%, and the large rise in unemployment that will inevitably start with the council job cuts this year is going to get tougher and harder for most ordinary hard working families. It must eventually have a detrimental affect to peoples spending power and capability to spend. I can see a Summer on Discontent on the horizon, and no amount of big business or government filliblustering will help those on the dole, working short time and on ever reducing budgets.

This comment was removed because the moderators found it broke the house rules. Explain.

33. At 13:18pm on 5th Jan 2011, DebtJuggler wrote:
NOTHING IS SACRED!
---------------------------------------------

Profit is sacred, it seems.....

Sorry but I can't let #3 go without comment, "Record growth they (the government) inherited". Revisionism at it finest.

Yes the Government came to power when GDP growth was at that point very high but this was on the back on one of the biggest contractions in growth on record. A sharp return to growth was inevitable (the overall GDP was still lower than it was pre-crisis), particularly as it was on the back of yet more unaffordable fiscal largesse from Brown et al. I’m sure you all know the calculation of GDP but I have to point out to those that may have temprarily forgotton that Government spending is one of the components. Therefore, if you raise Government spending you raise GDP.

Ideally you would have run a fiscal surplus during years of growth to enable you to run a deficit in recession. Unfortunately, we had 13 years of ruinous tax and spend policies from Labour which took Government debt to GDP from 35% in 1998 to 76% today with a built in 10%+ p.a. deficit!!!

I’m sorry but it is utterly disingenuous to start pretending that the current Government inherited anything other than an economic train wreck.

On the subject of the improvement in business confidence, its not really surprising as we have a bit of stealthy inflation, the impact of the sterling depreciation and a Government whose response to the worst fiscal and debt crisis in 3 generations is not to try and borrow more money…….

Recovery? Not really; repair is a better word. The economy is beginning to repair itself. I will leave the reader to assess how damaged it was before it started to repair.

Recovery suggests an upward and steady return to normal. This will not happen as what was normal is now dead and gone. Also there will be periods of further regression as the government starts to balance its budget for the first time in ten years.

To me the real economy was sickening long before 2008 for the simple reason that so many businesses were over-leveraged one wondered how they were surviving. Alan Sugar mentions an interesting example in his robust comment in the Telegraph today. There is still a lot of bad business to be flushed out and that will hurt along with the vicious, ideological Tory cuts which have replaced the identically substantial necessary efficiency savings promoted by Labour.

However, repair is with us and it means change for businesses, large and small. The winners will be those that can change to meet the challenges.

I would agree that it is going to be easier for a larger business to recover as it has the expertise and the resources to change. Those that can't or won't change will shrink and die. Those that can redefine themselves will be the winners.

Having been shopping on 2nd January, not a common practice for me as I delegate it to the far more capable Mrs.S, all I can say is that the retail sector needs to improve its merchandise - most of it is old and shabby - and train its staff to appreciate customers. I very nearly found myself dressing down what used to be called a store-walker as his manners were quite impossible. You won't keep your customers if you arrogantly treat them as ignorant fools. The first step to change is to listen to what your customers have to say about your business.

#28. Jacques Cartier wrote:

One of the best weapons in the war on big business are size taxes. Let's use them liberally.

So your long-running war on bankers has suddenly become a war on big business in general?

Curious.

"Cautious optimism about the coming year looks like something of a trend".

New year and the news has to feed the news. In my straw pole of friends and friends of friends this statement is wide of the mark. In my memory this is the most depressing start to a new year and one without any event to make it happy (royal wedding aside, but then that lasts one day). I am looking forward to a general election which will come a lot sooner than Mr Cameron is planning then I can have my say on his record so far.

Do shares attract VAT when they are traded on the stock market?

Silly question, you might think - but it's no more silly than saying that the act of acquiring an item from a wholesaler and putting it in a shop window adds value to that item... which is the basis for levying the tax.

It's certainly high time that the markets started pulling their weight in the economic recovery instead of sitting around waiting for someone, anyone else to act and then failing to respond in a positive manner. They've been deluded by the use of weather forecasting terminology into thinking that the markets respond to something real instead of realising that THEY can actually do something themselves towards talking - and trading - us out of recession.

Certainly a lot of current... er, thinking (if you can call the mediocre flounderings 'thinking') seems to be focussed on 'what the markets will do' rather than on measures to support the actual companies and individuals of this nation.

35. At 13:26pm on 5th Jan 2011, a_sensible_comment
Sorry but I can't let #3 go without comment, "Record growth they (the government) inherited". Revisionism at it finest.
=========================================

I gave a short bullet point there. Usually I say: 'Inherited record economic growth (no credit to the last lot, it's just the upturn after a global recession)'

Have the tories wrecked it?

Well so far I have seen growth figures of 1.2% then 0.8% then 0.7%. Lets see what the next figure is. Insititute of Fiscal Studies, CBI and even the tories own 'independent' OBR have all revised their growth forecasts DOWN.

If the tories deliberately make 1 million people unemployed then those people stop spending. Several million more stop spending out of fear it might be them next. Shop workers, car makers, fitted kitchen fitters, estate agents etc etc all suffer and may become unemployed as the spending stops. It does not effect Roberts big globalised businesses in the same way it effects the car dealership in Birmingham. This is all totally predictable.

For the tories to do it at a time when the economy is so vulnerable demonstrates the extent to which the cuts are ideologically not economically driven.

36. At 13:27pm on 5th Jan 2011, stanilic wrote:
...You won't keep your customers if you arrogantly treat them as ignorant fools. The first step to change is to listen to what your customers have to say about your business.
-----------------------------------------------------

Very true, but perhaps the last ten or fifteen years of credit fuelled entitlement has resulted in a legion of ignorant fools with other peoples' money.

@ 91. At 12:13pm on 5th Jan 2011, awyc24 wrote:

>> JC: we need grounds to punish the perps.

> Quite clearly you adopt the mob mentality

You imagine that this is some little game, where we have to play by little rules to protect the perps. You're living in cloud-cuckoo-land if you think these louts would get off scott free. Come down out of your ivory tower, for once in your life, and see how the world works.

We notice that you only defend bankers on legalistic technicalities. I think we can all gauge your calibre from that quite precisely. I can only assume you work for a financial concern and you are concerned about your new, low standing. Well get used to it, chum. It ain’t going to change until the perps take their medicine.

I suspect I am living in a different world than the one that Robert Peston is reporting on. The future I see is at least 330,000 public sector employees being made redundant. There are likely to be at least an equivalent number of job losses in the private sector, possibly more. This is part of the reduction required to reduce the deficit and must surely mean a downturn in economic activity from where we are now; and whilst we have growth its not that strong. So we will at best bump along near zero growth and I suspect we will go back into recession.

Businesses deciding to invest must surely be looking to the medium to long term as the next year or two must be pretty dire. So this piece seems to me to be optimistic. Add in a view of the prospects in US, and I have to ask, 'Who is wearing the rose tinted spectacles?'

37. At 13:43pm on 5th Jan 2011, rbs_temp wrote:

>> One of the best weapons in the war on big business are
>> size taxes. Let's use them liberally.

> So your long-running war on bankers has suddenly become a war on
> big business in general?

Of course - everybody knows that too big too fail is too big to tolerate, nowadays. Everybody but you, of course! Look, make an effort to fit in, will you?

31. At 13:11pm on 5th Jan 2011, Miraglyth
re: #3

I know this is off-topic, but why the heck is "House prices down" in that list?
====================

Only as an economic indicator - if the economy is doing well and people have both money and confidence then house prices go up. Falling house prices is also an issue as the number of repossessions go up - if banks can not recoup their reckless lending then that is fuel for another collapse and tax payer funded bail out.

Personally speaking I am not one of those people who crave constant house price increases, I would be happy to see a bit of stability to help young people.

Certainly, small businesses that are not far into VAT territory, and add a lot of value, will no doubt be thinking of scaling back and coming out of it altogether. This will reduce revenues and if widespread perhaps significantly.

Still, it might well help them greatly and the recovery to some degree.

#43 - sleepy dormouse: twice as many private sector as public sector jobs equals the 1 million lives the tories and their henchmen deem acceptable to sacrifice in their ideological war aginst the poor. National Insurance is the only tax that is both progressive and unavoidable without breaking the law, whereas income tax has always been avoided and evaded by individuals and businesses of all sizes and shapes.

Er, why do we need a 'war' on big business?

What we need is for ALL businesses, large and small alike, to be run in an ethical manner with respect for their employees, their customers, society as a whole (oh, and the environment!) as well as for their stockholders.

As for griping about immigration, never mind that - I've already suggested to the government that in addition to the legislation against racist and sexist bias in hiring, they should add a requirement to give priority to applicants who are unemployed over those in employment seeking a job change.

Haven't heard back yet... despite pointing out that it's a FREE way to show that they have some small inkling of their duty and responsibilities to those disadvantaged by their policies and the current situation.

47. At 14:20pm on 5th Jan 2011, Tyto alba wrote:

----------------------------------------
Thanks for your comment. I suspect we see the same future; so why are Robert and those he is talking to apparently optimistic?

I find it difficult to believe in all these cuts when they seem to be based on flawed economic theory. Their effect will be detrimental to most of us. Yet many of those hurt by the tories will vote for them again, no doubt.
Will we ever learn??

47. At 14:20pm on 5th Jan 2011, Tyto alba wrote:
National Insurance is the only tax that is both progressive and unavoidable without breaking the law
===============
Not quite true: if you own shares in the company, you will receive dividends which are not subject to NIC. Also next year I shall become 65 so I understand that I shall no longer pay NIC, although this requires long term planning.

"The greatest global boom of all time has barely begun."

https://uk.finance.yahoo.com/news/HSBC-sees-China-America-tele-4239477277.html

No worries then. No more boom and bust?

#Another Engineer: dividends are all part of the tax avoidance scam: if the government declared them as NIable income then the tax could not be avoided but because they are exempt from NIC they are automatically excluded from my argument. Watch the age for the end of NICs to expand in line with the retirement age.

#44. Jacques Cartier wrote:

Everybody knows that too big too fail is too big to tolerate, nowadays.

But you didn't declare war on companies that are "too big to fail" - merely on "big business". There's a difference. Big business is not necessarily bad.

Look, make an effort to fit in, will you?

Fit in with whom? You appear to be suggesting that opinions that differ from your own are not to be tolerated.

"Is the recovery too tilted towards big business?"

Yes.

Power in a market economy depends on the possession of purchasing power, and as you point out Robert, big business has plenty at the moment, while the rest of us have even less than usual.

In addition to the pressure high unemployment levels impose, we have to contend with the austerity imposed by our politicians, typically paying more attention to the need to keep "the markets" happy than to the needs of voters.

There is no contradiction between the prospect of a good 2011 for big business and a bad 2011 for the rest of us, indeed this is to be expected in a world in which the market rules. Free marketeers would have us believe that, what is good for big business is good for the rest of us, but this is patently untrue.

Democracy if it were working well might give us some countervailing power, but it has failed miserably, particularly in the UK. Our broken political system gives us very little control over the actions of government.

52. At 15:01pm on 5th Jan 2011, Tyto alba wrote:
#Another Engineer: dividends are all part of the tax avoidance scam
==========
No they're not: they are a distribution of profits to shareholders and are subject to income tax the same as any other income.

#55
I should have said distribution of after-tax profits to owners as Corporation Tax has already been paid (at higher than standard rate) and higher rate tax is payable as appropriate. I know I have paid it!

35. At 13:26pm on 5th Jan 2011, a_sensible_comment

And a deficit is what, exactly?

https://www.newdeal20.org/2011/01/04/drinking-austerity-kool-aid-in-2011-31310/

It doesn't really matter what happens over here. The US government/consumers/businesses haven't got a cat in hell's chance of ever repaying their enormous debts. At the moment the FED, i.e. the representatives of the biggest banks who these days operate largely unsupervised, continue to print money in the hope that they can still save their own skin. This can't go on for ever and, when it finally does go pear-shaped in a big way, you can be sure that we will all be in this together.

@ 53. At 15:09pm on 5th Jan 2011, rbs_temp wrote:

> But you didn't declare war on companies that are "too big
> to fail" - merely on "big business".

If it's so small we don't give a hoot about it, then there's no need to size tax it. If it's too big to fail, we tax it down to the point where it's not a threat.

That's proper engineering.

#30. At 13:10pm on 5th Jan 2011, Tom;

Absolutely spot on.

The problem is, as we all know, the last twenty years of consumerism has been fuelled by debt as real salaries have been eroded by the search for greater profit. This debt in turn provided even greater profit for corporations, although we now know this was all lies based on mark to fantasy accounting and complex derivatives. What I can't fathom is corporations appear oblivious to the fact this debt has dried up and will remain dried up for some considerable time; with incomes falling, inflation and unemployment rising what are consumers going to spend? Yet some still believe we're going to have economic progress in 2011, I really do wonder about their mental reasoning sometimes.

#26 Bluesberry

China appears to be targeting finance, energy, telecommunication, information technology, transport...

Here's a novel idea. Let's tell the Chinese to go home, pull all Western manufacturing out of China and bring all those jobs back here then make it illegal to sell them any more companies or transfer any technology to China.

All this pussyfooting around with a bunch of communists intent on dominating the world is just plain stupid.

33. At 13:18pm on 5th Jan 2011, DebtJuggler wrote:
NOTHING IS SACRED!

We've been told that nothing is sacred; that no state spending is safe from being cut or eroded through inflation. We’ve been misled. As the new public spending data released by the government show, a £267bn bill has been both ring-fenced and index-linked. This sum, spread over 50 years or so, guarantees the welfare not of state pensioners or children or the unemployed, but of a different class of customer. To make way, everything else must be cut, further and faster than it would otherwise have been.

This is the money the state now owes to private corporations: the banks, construction and service companies which built infrastructure under the private finance initiative. In September 1997 the Labour government gave companies a legal guarantee that their payments would never be cut. Whenever there was a conflict between the needs of patients or pupils and PFI payments, it would thenceforth be resolved in favour of the consortia. The NHS now owes private companies £50bn for infrastructure that cost only £11bn to build, plus £15bn for maintenance charges.

Last summer Edinburgh Royal Infirmary, thanks to the extortionate terms of its PFI contract, found itself with a shortfall of £70m. Under other circumstances it would have suspended maintenance work and cut ancillary services until the crisis had passed. But its contract demanded that it does the opposite: it must protect non-clinical services by cutting doctors, nurses and beds.

=======================================================

Is this now not the true reflection of the new nasty political system that has replaced our parliamentary democracy? By using instruments such as PFI on a large scale government spending commitments for the next 30 to 50 years or so are ringfenced and guaranteed effectively dictating policy whatever political party is in power?

Cameron's desperate desire to build the HS2 train link to Birmingham estimated at 50 billion to be paid later (of course) is another example of this profligacy. Again big business benefits but does the taxpayer? And which banks also benefit? surely not the part nationalised ones... splutter splutter.

I have commented on your blog if you would be interested to have a look?

https://caxtonfxcurrencyblogs.blogspot.com/

The implication is that Big firms will create jobs. I suspect big firms will use this as a good reason to streamline and maintain profitability. For my own company this year is more pain rather than gain.

It is very likley this will be a jobless revival.

I'm sorry, but I just cannot accept that the UK economy is enjoying a 'recovery' - what is taking place seems more like 'containment'.

We have record levels of public and private debt, a bloated public sector, an appalling transport infrastructure, a manufacturing sector which has been left to wither away for years and a central bank which is reduced to creating spending power out of thin air.

The financial sector, having exploded into life after the 1986 'Big Bang', seems to have exhausted just about every money-making scheme imaginable. Where are the easy profits now to be created? What about all those toxic assets yet to be disposed of?

Talking-up the situation is comforting but ignores the truth. A sample of 102 people is woefully inadequate to draw any firm conclusions - especially if their confidence has been shattered.

This mess was 15 years in the making and will not be sorted out in a few months. We had better get used to it.

Happy New Year Robert and fellow bloggers.!

Now I am not overfond of the Tories or their Libdem lackeys.

But I do think 2011 is actually going to be a better year than you might think.

A slant to Big Business is good.

We need bighitting companies to stay solvent, to add value to shares, to export to foreign markets ,and to invest in our future prosperity with improved productivity and better goods and services.
Nothing wrong with that.

But we need to remember the little businessmen, the self-employed contractors , and the waged and unwaged.
Yes, we need to think too of the poor, the sick, the deprived, the handicapped,the young ,and the elderly.

We need good growth, low interest rates, and low inflation ..... including tax and utility cost inflation.
Is that impossible?

Can we grow by cutting ?
....... If it is pruning maybe, if it is hacking then no .

And we cannot solve a housing shortage by letting house prices slip, as this will curb development.
Much as it pains many of you bloggers, we need to get the Property GTI revving again .
Hard to live with it ; but slow, inconvenient and boring without it
.... an agonising torpor!

And that means we need about anopther £100 bln QE to get the banks lending again.
Let's face it ,we should have done this a couple of months ago.

The dollar has actually recovered since QE2 USA was announced.
Sterling already has it priced in, so let's do it!

Let's get UK moving onwards again!

Build your extensions, take out a lease on that empty shop, work overtime, explore your dreams, stop procrastinating, put a bid in , ask her to marry you,or divorce you or have a dance or whatever.... start your new career or course, join the gym , get out for a nice meal.Change your will so you do not leave money idiotically to animal charities ...put people first, paint your living room , go for a holiday, put the decking in, get some therapy, buy some flowers ......... you all know what you need to do , what is stopping you?

Let's all cheer up and get going!

onward- ho says go go go in 2011!

#59. Jacques Cartier wrote:

If it's so small we don't give a hoot about it, then there's no need to size tax it. If it's too big to fail, we tax it down to the point where it's not a threat.

Maybe (although that's open to debate). But you have still not defended your assertion that we should be waging war on big business. Not all big business is too big to fail - in fact, I'd suggest that very little big business is so big that its collapse would fundamentally threaten our economic well-being - so why should we be waging war on it?

If big buisinesses like HMV and Next are having problems what hope is there for small businesses.
The likely impact on the economy of this potential retail weakness is less clear. The UK consumer is a significant contributor to overall GDP and its weakness could not fail to be significant. To date, retail sales have held up surprisingly well in the economic downturn and the UK government is gambling that the VAT rise will not stop people spending. The early signs are not good, but cannot yet be said to constitute a trend. Investors will have to wait and see.

59. At 16:18pm on 5th Jan 2011, Jacques Cartier wrote:

'If it's so small we don't give a hoot about it, then there's no need to size tax it. If it's too big to fail, we tax it down to the point where it's not a threat.'

===================================================

With respect, given the desperate state we are in I think we need to nurture all businesses - large or small.

Once the economy is back on a sound footing, that will be the time to address the issue of size and develop a strategy to protect the UK economy.

#3: "Back in the disunited kingdom, the tories ideologically motivated cuts have stunted the record growth they inherited."

Do us all a favour and try to remember things in a bit more detail. For starters, the Tories inherited an economic downturn, after a period of insane growth caused by Brown and the feckless bankers. With hindsight that period of growth was always going to come crashing down, so none of this is exactly the Tories fault. (I don't tend to defend the Tories, but certain comments just provoke me!).

70. At 18:16pm on 5th Jan 2011, Pete wrote:
#3: "Back in the disunited kingdom, the tories ideologically motivated cuts have stunted the record growth they inherited."

Do us all a favour and try to remember things in a bit more detail. For starters, the Tories inherited an economic downturn, after a period of insane growth caused by Brown and the feckless bankers.
====================================

The tories inherited the upturn at the end of a recession.

The tories inherited growth of 1.2%, it is now down to 0.7% and all the major forecasters (IFS, CBI, OBR) have downgraded their predictions of growth for next year. All of them give reduced domestic demand/activity as a result of the cuts as the reason for their revised forecasts.

That 1.2% growth was not some great triumph for labour - it was just the upturn after the global recession.

But, whether you like the message or not, the tory cuts have stunted the domestic recovery.

69. At 17:27pm on 5th Jan 2011, TonyH wrote:

>> JC: If it's too big to fail, we tax it down to the point where it's not a threat.'

> I think we need to nurture all businesses - large or small.
> Once the economy is back on a sound footing, that will be the time
> to address the issue of size and develop a strategy to protect the UK economy.

No. Businessmen are addicts.

When we want to cut threatening businesses down to size, we can't do so. And when we can cut threatening businesses down to size, we don’t want to!

So strike while the iron is hot. Right now, they are at their lowest ebb – perfect! Our children and our children's children will always thanks us for subjugating business in the public interest. Britons shall never be slaves.

67. At 16:57pm on 5th Jan 2011, rbs_temp wrote:

> I'd suggest that very little big business is so big that its collapse
> would fundamentally threaten our economic well-being

Such businesses are too already small to give a hoot about. But if any business is so big that it threatens the public good, then it cannot be allowed to survive.

re #72

Happy New Year, Faker Jacques! So, you are turning your fire on all big businesses now and not just bankers. Biting the hand that has fed you in the past?

At what point do you decide a business is big and must be subjugated to the Faker Jacques treatment, to the will of Faker Jacques? When it is publicly quoted? On turnover? Staff numbers?

And what treatment do you propose? Nationalisation without compensation? Sequestering of assets? Punitive tax regimes? Special tariffs?

re #73

How would you define 'the public good', Jacques?

55. At 15:36pm on 5th Jan 2011, AnotherEngineer wrote:
52. At 15:01pm on 5th Jan 2011, Tyto alba wrote:
#Another Engineer: dividends are all part of the tax avoidance scam
==========
No they're not: they are a distribution of profits to shareholders and are subject to income tax the same as any other income.

Complain about this comment

56. At 15:38pm on 5th Jan 2011, AnotherEngineer wrote:
#55
I should have said distribution of after-tax profits to owners as Corporation Tax has already been paid (at higher than standard rate) and higher rate tax is payable as appropriate. I know I have paid it!
--------------------------------------------------------------------------------
Very correct, including your correction, but divs paid to offshore residents are payable according to tax laws there plus any Double Taxation agreement between us & them.

72. At 21:01pm on 5th Jan 2011, Jacques Cartier wrote:

'When we want to cut threatening businesses down to size, we can't do so. And when we can cut threatening businesses down to size, we don’t want to!

So strike while the iron is hot. Right now, they are at their lowest ebb – perfect! Our children and our children's children will always thanks us for subjugating business in the public interest. Britons shall never be slaves.'

===================================================

The problem is that it is the UK which is at it's lowest ebb - we (and you) depend upon the tax revenues that big business provides.

When you are immersed in a crisis, you need to keep a cool head and behave rationally. Lashing out in frustration is no solution. The bankers and big business are NOT at their lowest ebb - they are gaming the system to their advantage.

The priority now is to rebuild our economy and learn the lessons of the recent past.

Sometimes a period of inaction is the best course.

12. At 10:35am on 5th Jan 2011, copperDolomite wrote:
Of course it is.

We've magically forgotten about all those unemployed people, remember all the educated, professionals who are magically transformed into spongers overnight.

Remember the young girl on BBC Question Time who asked the panelists about housing benefit as she explained the cuts would make her homeless? Not a cheep from the panelists.

-------------------------------------------------------------

"Not a cheep"? Oh no. It was worse than that - far worse. The LibDem Scottish Secretary, Michael Moore, stated that in the current economic climate "everyone has to make their contribution". I trust that, when that young lady is found frozen in a doorway, she will be deemed to have made her "contribution". What I do know is that the Liberal Democrats used to be a "back up" vote for me. Never, ever again.

71. At 19:20pm on 5th Jan 2011, jon112dk wrote:

“But, whether you like the message or not, the tory cuts have stunted the domestic recovery.”

Have the cuts even started yet? The Tories have been in power since May, the cuts were not announced for a number of months and I thought most impacted 2011 budgets?

78. At 22:57pm on 5th Jan 2011, Andrew Morton wrote:

That's right! So he did!

We value M&S so much more than we do our own lives don't we......

Wonder if I could get my mitts on that particular Question Time.

"Remember the young girl on BBC Question Time who asked the panelists about housing benefit as she explained the cuts would make her homeless? Not a cheep from the panelists."

Indeed - hence another suggestion I have made to the current administration, that it be mandated that the amount being paid as housing benefit be imposed upon mortgage lenders and landlords as a satisfactory monthly payment.

Again, a no-cost to the public purse way of meeting obligations to citizens to protect them against hard times, at least in part. Costs more to rehouse the homeless than to keep them in their homes by such legislation - and no reason why mortgage lenders and landlords should not contribute to general austerity by getting a bit less than they expected... everyone else is!

Needless to say, they haven't yet replied.

76. At 22:00pm on 5th Jan 2011, Up2snuff wrote:
Very correct, including your correction, but divs paid to offshore residents are payable according to tax laws there plus any Double Taxation agreement between us & them.
==================
Of course, as UK residents will pay UK tax on dividends from shares in foreign companies.

77. At 22:44pm on 5th Jan 2011, TonyH wrote:
72. At 21:01pm on 5th Jan 2011, Jacques Cartier wrote:

>> JC: 'When we want to cut threatening businesses down to size, we
>> can't do so. And when we can cut threatening businesses down to
>> size, we don’t want to!

> The problem is that it is the UK which is at it's lowest ebb - we (and you)
> depend upon the tax revenues that big business provides.

The UK is built, remember? Or did you think we were starting out from nowhere? Our parents and grandparents paid taxes for decades to make sure it has roads, hospitals, phone networks, water treatment, sewers, power stations, docks, schools, bridges, tunnels, cities, canals, villages, towns, hamlets, reservoirs, etc. Our county is built – we just have to pay a pittance for the running of it. The government wastes so much of our money on rubbish (Olympics, bank subsidies, aircraft carriers without planes, NHS computers and blast walls!) which has to change.

> The bankers and big business are NOT at their lowest ebb - they
> are gaming the system to their advantage.

Yes. And they would game our disadvantage. We built built this great country of ours, not some spivs in London. But we'll let them use it if it pays handsomely for Us. Else, they have to go.

Never give a sucker an even break - especially bankers.

79. At 23:09pm on 5th Jan 2011, spike1606 wrote:
71. At 19:20pm on 5th Jan 2011, jon112dk wrote:

“But, whether you like the message or not, the tory cuts have stunted the domestic recovery.”

Have the cuts even started yet? The Tories have been in power since May, the cuts were not announced for a number of months and I thought most impacted 2011 budgets?
===================

Some have started (eg. redundancies in the councils), but I agree the major cuts start soon.

However, in terms of stunting recovery the effects of the cuts start early.

People who don't know if they will have a job next year behave differently. They may cut spending altogether and hoard money for a rainy day. The are very likely to avoid any long term commitments - new house, new car, anything they will have to sign a long term agreement for.

So the current weakening of growth is totally predictable. It is also totally predictable that this is going to get worse as the cuts start to bite harder.

The Last Government had policies, which were skewed in favour of big business.

Is it possible those reasons were down to easier TAX collection?

Small business is hard for the taxman to police whereas large corporations are very easy to collect tax from.

But they didn’t account for the loop holes which large corporations use…..

There will be no recovery at all just manipulation of the true facts until finally its too late for most of us.It will be a long protracted route of lies by government and economists telling us we can work through it then one day we will all wake up go to the cashpoint and find we cannot get any cash out because there isnt any because all our european friends in particular portugal,spain,italy and france have panicked and drawn their money out.There will be those scoffing at reading this thinking its unthinkable but lets see who is right come the day Spain faces the chopping block.It will come rest assured and by that point our fate will become very clear.Thats when the bankers will get their payback for what they have done.