Taxpayers to subsidise wage costs?
Corus tells me that the employee pay-cut proposal is one of only a series of measures being discussed by Corus's management and workforce.
Those discussions seem to be constructive. A strong survival instinct seems to be dominating the approach taken by management and unions.
But it seems unlikely that such a pay cut would eliminate the need for redundancies, such is the scale of the collapse in demand for steel that has taken place.
So Philippe Varin, Corus's chief executive, has lobbed the ball over to government, by asking for temporary financial help.
What Corus would like to see in the UK is a version of a scheme recently introduced in the Netherlands, by which the Dutch government pays up to 70% of the salaries of struggling Dutch companies for up to 24 weeks.
The point of the Dutch scheme is to keep employees on the books of stretched companies during the most acute phase of the economic contraction - in the hope that the relevant companies can afford to pay wages once more, when the recovery begins.
There's certainly a logic to the Dutch safety net, in that it should mean that important companies don't permanently lose access to a trained, skilled workforce.
But, if introduced in the UK, it would involve ministers making a nightmarish judgement about which companies and employees deserve such a subsidy and which should be left to stand or fail on their own.
I'm 
© MMIX~RS~q~RS~~RS~z~RS~00~RS~)
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Far cheaper than letting people go onto dole and wouldnt reverberate around economy so much. But would government make the right decisions? Take Woolies, its demise has very little to do with economy and far more to do with huge debt built up over many years when owners took money out of the business and sold its assets to satisfy big stakeholding shareholders who were only interested in dividends and value of shares.
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You still seem to favour a short recession despite all the evidence to the contrary. Clearly proof if ever needed of the maxim that logic is not persuasive.
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Capitalism : The end is nigh!
Incidentally there is no reason why anyone should be out of work in the first place, the only reason unemployment exists is because the rich have enslaved those which have employment...........
I look forward to inflation wiping out the banks bonuses, if wage inflation does not follow suit then you're looking at a revolution!
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Employment subsidy??
Not the worst idea for strategic industries!
The problem is always HOW LONG FOR??
THIS COULD BE NEEDED FOR 4 years plus.
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1,
I thought wollies problem were related to credit insurance for their suppliers?
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So redundancies in the banking sector are ok but in the steel indusrty they are not. Another way of looking at it is one group predominately vote Tory, the other Labour.
The owner of Tata was one if not the richest person in the world - where his wallet?
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I planned for a 30% drop in production
last year for 4th quarter 2008 through
2009/2010 from our 2007 levels.
Some natural wastage, no wage cuts
no subsidy, no handouts, no job losses.
This has been funded by saving for a rainy
day and NO BORROWED MONEY.
GOT THAT NEW LABOUR????????????????
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So long as in the 'good times' the difference is paid back to make it tax neutral then it's a good idea.
This is better than Browns current plans
£100 million to halt around 9,000 mortgages up to a value of £400,000.
A VAT cut which just hasn't worked as essential items are either not charged at full VAT or have seen the duty component increased.
Brown is adding more borrowing and prolonging house price corrections.
The market has corrected itself before and it will whatever Brown does as banks can no longer borrow large sums to lend to householders to out bid each other for houses.
The Dutch idea is a good one and it should focus on large scale company.
The government needs to stop banks for pulling overdrafts and raising interest rates on loans to smaller businesses at the same time so they can see themselves through as well.
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If our labour government have got money for this kind of thing sloshing around doing nothing, then they should be cutting taxes.
If the government cut income taxes, maybe more companies could cut pay without changing employees 'take home' pay.
Everyones a winner.
Although that in itself would be a problem for brown - he is committed to the twised left wing dogma that under no circumstances should anyone considered 'rich' ever get any benefit (whether direct or indirect) from anything he does - so 'everyone being a winner' would be an anathema to him.
ps. Any update on mandleson/olge/eu-tarriffs ?
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Frankly, no. All attempts to keep anything (banks, companies, governments) afloat during this correction are simply more fingers in the dyke, which frankly has had a hole a mile wide blown into it by outstanding amounts of greed in the last decade.
As a PAYE "schmoe" I'm starting to get a bit miffed (to say the least) with paying taxes to keep the whole ridiculous house of cards standing. Let it fall. From the rubble, something perhaps a little more sustainable may rise.
Then again, this would take a complete clearing of our CBI and government decks - their holy alliance has caused much of this mess (and other alliances like it in the US).
Could we be teetering on the brink of something apocalyptic? I doubt it. It's nice to think that the utterly engulfing greed of the last 10 years has "done to itself" what Tyler Durden managed to do. The only thing that's making me angry about this is it's me and all the prudent people like me who are bailing out the banks: the companies: the mortgage holders (yep, I got priced out): the big screen TV idiots, and all the other greedy morons who couldn't think long term.
This is not a nice way to run a society.
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The good ideas seem to be coming in from abroad these days.
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There seems to be an assumption that companies are failing because the market has lost confidence. If the Government can prop up the company during the uncertainty then, once confidence returns, it will be fine.
However experience tends to suggest that the hard hearted city traders are just being realistic as there are sufficient facts to justify their judgement namely the levels of debt and overvaluation of assets (as Robert continuously points out).
If I borrowed 100k 2 years ago and lived life on the hog without working then it is real that I would now be destitute and unworthy of further credit or investment.
Unfortunately the imperatives of power dictate that Brown has to believe that the situation is purely down to lack of confidence and prop up the ailing companies.
The economic illiterate view the state as a vast unlimited source of succour whereas in reality it still has to obey the laws of economics.
To pay for this support money will be printed and inflation will take off. It will be a repear of the 1970's.
Eventually a 'Maggie' figure will arise within the Tory Party and there will be bad medicine for the nation as we stomach our debt.
Then once everything is all sorted along will come another Smiling Chancer and the cycle will repeat once more...
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How many steelworkers will still be around to take up their old jobs in six months? Just about all.
How many SME’s will be able to start up again in six months? Very few.
I should think the answer for government ministers is easy, except you do not get big headlines for saving an SME compared with a steelworks
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Stop the subsidizing madness!
At some point we need to just take the pain.
All we seem to be doing is subsidizing Gordon Brown's political popularity.
Lets go through a short, painful recession, get rid of the man who helped steer us there, and then start recovering in around 2010.
I dont own a house, and I hate the idea I have to pay other peoples mortgage payments, thereby stopping the housing market from going down and making it more difficult for me to buy a house.
This government has to go soon
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Get rid of all current tax allowances, unemployment benefits and tax credits etc, and instead just give everyone (working or not) a flat rate state benefit. And do that on a permanent basis. That's the only way that the interests of the employer can be made to exactly match the interests of the Nation when deciding whether to make people redundant or to hire them (and how do we expect a market economy to function correctly if those interests are not made to coincide?).
Rather drastic, and I guess it would require a significant rise in the rate of income tax, but it would mean that workers would benefit significantly from taking on work at even very low wages . Poverty traps would no longer exist and effectively you could remove the threat of unemployment while making the economy function more efficiently.
Just a thought....
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tax payers already subsidise wages, what do you think tax credits are? my employer made 3 billion pounds for share holders last year, meanwhile workers are paid such low wages that we are all on tax credits. once again an example of public money going to private, from the poor to the rich. Role on the end of capitalism soon please.
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When in a hole, stop digging, Alistair.
A strategically-inportant company comes under economic pressure, because of unfair trade terms. We do nothing to sort the trade terms out, to restrict the competition, or to promote the business, neither do we expect the shareholders not to take a dividend. Instead, Tata goes straight to blackmail, cough up or we destroy some workers' lives.
Tata, Tata, if you need support sell it back to us for a penny.
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More so than America is being 'held up' by the Car Industry there, the UK Government are over a barrel with any foreign owned industry facing difficulty. Corus know full well that the number of people on the benefits queue would increase with any economic cut backs made by them, actual jobs would be lost permanently, but more importantly, foregn investment would be lost - throwing yet another ball into the juggling act that is the UK economy.
We all remember the uephoric sigh of relief and almost pleasant surprise, when TATA began investing in our industry, can we afford to find out what the reverse might be like?
Think of words strong enough to describe the opposites of 'Euphoric', 'sigh of relief' and 'pleasant surprise' and I think the importance of our actions here becomes self-explanatory!
Mick Hart
Nottingham
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Ridiculous idea; once again things that are attractive in the short term lead on to disaster.
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1) Can we trust this government to make the right (not politically favorable) decisions?
2) Where is the money coming from?
3) Who will be next to come cap in hand?
4) When do we start saying no?
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The Dutch are in dreamland if they think things will start picking up in 24 weeks !
All this would do in the UK would be to park the problem for a while.
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#5
No, that was the end game. I used to trade with Woolworths when they were powerful and they were simply poorly managed.
A rubbish company to whom it was very hard to seel on any terms other than price, run badly.
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Yes - it has a level of attraction in that it keeps skilled workforces together, but business is business and should not expect government handouts when they get into difficulties. There is a worrying trend here of everyone getting out their begging bowls.
What I would prefer to see if we as taxpayers are to provide any support is that it is only provided in a structured way that takes the politics out of picking who gets support and who does not. Perhaps under the umbrella of insolvency procedures or perhaps a scheme where the support is given but if the jobs do not still exist in X months or years then the value of the support together with interest at a punitive rate is recovered through corporation tax.
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An interesting proposal but:
What happens after the 6 month period?
Does the company go back with another begging bowl?
Will this bailout happen for small businesses or just for those who employ large numbers of people?
I'm not sure how feasible this proposal is given that the recession is likely to last more than a year.
People, businesses and Govt. need to accept responsibility for their actions.
Will we continue to reward failure instead of teaching people about accountability and responsible actions?
Risks are taken but the taxpayer cannot bailout anyone and everyone otherwise we will have a debt millstone around our necks forever.
Britain is no longer a world powerhouse and is unlikely to ever regain such a position for the forseeable future...
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And what happens when the 24 weeks are up? Do we get another bout of begging or blackmail? What happens if like Northern Rock the employer has lots of employees in labour held constituencies?
It doesn't answer the simple question just who will pay for this?
Post 5 the issue for Woolies was simple. They didn't own the shops as the shops had been sold off and leased back the last time Woolies were resold. Woolies having been bought and sold and refinanced a number of times since 2000. As such they had little they could sell to keep going and a huge amount of debt.
The credit insurance was merely the final nail in the coffin. Credit insurers stopped giving cover as they knew the business was effectively bankrupt and depended on credit from suppliers to keep operating. Credit insurers and suppliers were effectively allowing them to continue trading
woolies owed huge amounts, I believe over GBP 300 million, to banks including the finance arm of General Motors and it was the banks that pulled the plug in the end as they didn't want to roll over or increase borrowings.
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No!!!!!
I don't think the banks were suitable for a bail out.
In the same way why should we bail out failing companies.
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It's called insurance, if the companies want this then they can pay into a pot that they can draw from in times of need.
Same should be applied to employees, so only people who've never been in work qualify for JSA.
The taxpayer is getting regarded as the gift that keeps on giving, and considering we're already going to have to bail out Browns economic boondoggle over the next half century and we're being expected to spend our way out of recession, how about giving our squeaking wallets a break?
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This is the first time i have commented on one of these blogs.
In one word... "Ludicrous"
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Everyday a new failure. Everyday the same question.
Should 'Smash Gordon' print more money to keep paying this particular group or that a wage. Even if that means further deterioration of our currency, and yet more debt for the future. Maybe he should in some cases, I do not know. Certainly Woolworths employees who sell tat for a living will not be saved. Steel workers may have some strategic value. Welcome to the depression where every decision hurts both ways. I'm sure many here now regret buying that new X5 from the proceeds of an equity release on their house now that they have to service a large mortgage and have job worries.
For those fools here talking about 'looking forward to inflation' because they somehow think that the erotion of savings is a good thing and are motivated not by any desire to see a fairer, more secure country, but by sad envy, are going to discover they are still going to be bottom of the heap only their standard of living will fall the most.
The wealthy and the smart have already deserted sterling in droves. There have been dozens of mentions on this site going back months to get out of Sterling and those who heeded this advice have secured their savings and made a profit. Why else do you think the rate has already dropped to 1.12 today. This is the smart money. The main wave is yet to come. What do you think the Germans are talking about?. For those who only have wealth in their house and totally rely on salary or pension things will be bad; which is most of us including me - minus my savings in Euros. For those with no savings who lose their jobs look forward to a soup kitchen.
In a crisis most of the rich only get less rich which means they stop lending to the poor. Many in the middle find out they are not as clever as they boasted at that dinner party last year. Those at the bottom discover inflation means that benefits literally will do no more than prevent starvation.
Time for an election. Enough of the socialists.
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Woolies problems were cash-flow related to not being able to pay for stock while waiting for their customers to pay them. This kind of thing is why many businesses are failing suddenly - they are owed money which isn't being paid to them by their customers.
And, as 1 business fails, it stops paying its suppliers which creates a huge snowball of other failing businesses.
I reckon this is more important to the economy than any amount of fiddling with VAT and house prices, having a tremblingly weak currency isn't going to help exports if there aren't any exporters left!
And house prices aren't going to hold up if everyone loses their jobs, regardless of the new repo protection scheme, it'll end up costing us more in the end than if we did help out struggling businesses with their cash flows.
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Re comment 5
How could a company that has been in existance for so long owe so much? Its my understanding that a long time ago Wollies owned B&Q and split it off and the holding company also sold Woolies assets (eg shops - the trendy thing to do then encouraged by institutional shareholders wanting income) and then Woolies rented them back. So the assets were sold on the grounds that retailers shouldn't be property companies. And people invested in Woolies not understanding the significantly changed nature of the business. And no doubt there were sales projections just showing sales ever increasing. This happened throughout retail, so now they only have long term leases (ie liabilities) with no assets. I doubt if administrators will get any money for shareholders. (This has happened with Kwik Save, Somerfield, Gateway and I'm sure many others).
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Some rescue packages are cheaper and less disruptive than bancruptcy but in the long run the steel industry is going to have to contract yet again.
We should be spending the money investing in a low carbon future.
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Robert,
this Dutch scheme you mention:
(What Corus would like to see in the UK is a version of a scheme recently introduced in the Netherlands, by which the Dutch government pays up to 70% of the salaries of struggling Dutch companies for up to 24 weeks.)
Is it a loan?
Is it a bailout?
Who pays for it?
Who is eligible for it?
Can't the government advertise enough underwater basket-weaving co-ordinator posts in the Guardian to soak up the excess?
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This presupposes the economic future can be predicted. Politicians cannot be expected to back winners or we would not be in this mess!
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Dear Robert
An Absolute cracker of an idea, as long as it is for the worker thats fine, and there are no Hidden issues. "wHY Not"?
Cetainly keeps people off the dole , and in ajob,
This is also the basis of the governemnts return to work policy for those on benifit, if you want benifit, it should be linked to the number of Hours you work, for the community, or other community service and at an hourly rate.
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Well the Government has put our money into the banks - strangely though that seems to have protected the salaries of the fat cats rather than the jobs of front-line staff. And it certainly hasn't done anything to ensure that banks treat their customers - business or personal - equitably.
If taxpayers' money is to be used, then the Government needs to be strong in ensuring it is used to look after the people who most need it. It should NOT be used to ensure that those who cream off the best from those organisations in the first place and 'laughing all the way to the bank' (excuse the irony)
HotNewsCol
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#11 stanilic, I thought Gordon Brown was leading the world, and saving it. I'd watch out, a comment like yours could lead to Anti-terrorism police turning up at your home and workplace!
Isn't a Democratic Government wonderful?
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Of course if we had any industry in this country the demand they generated for steel would make this kind of interventionist action unneccessary.
It would be nice if the government would share with us its vision for the future. We have been world class spenders, now we need to be world class at something else.
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No share holders should
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If Corus' problems are temporary, then they ought to be able to cover costs from internal resources (see Alex Curzon's post #7 for how it's done).
If they need government subsidies it means they don't expect a turnaround soon, so get the pain over and done with now.
And, RP, please don't try dressing up this "Dutch idea" as something novel, interesting, and worthy of great debate. It's nothing more than a scheme to pay unemployment benefit to people who, nominally, are still in work. As such, it has the great attraction to your mates GB and Ally D of reducing headline unemployment figures. The money will be paid one way or another. The question is whether or not we have the honesty of higher unemployment numbers to go with the cost.
Per RP: "The point of the Dutch scheme is to keep employees on the books of stretched companies during the most acute phase of the economic contraction - in the hope that the relevant companies can afford to pay wages once more, when the recovery begins.
There's certainly a logic to the Dutch safety net, in that it should mean that important companies don't permanently lose access to a trained, skilled workforce."
If any of this were the case, Corus would cover the costs themselves, as many other firms are already doing without putting out the begging bowl. Actions of this type already attract government help, in the form of lower corporation tax liabilities and income tax/NIC in the case of salary sacrifice.
The fact Corus is asking for explicit government help means they have little confidence of the good times returning.
I say again: if accepted, this would be nothing more than a scam to hide the true level of unemployment. Incidentally, what are the Labour majorities in the constituencies around Llanwern?
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Perhaps if "Master of the Universe" hadn't planned to hike up NI.
A TAX ON JOBS.
Then firms requesting its employees took a pay cut wouldn't be required.
Now Peston you float the idea that government subsidies wages.
So let's get this right.
1. Government taxes workers and employers more NI.
2. Firms cannot afford the payroll.
3. They lobby government for subsidy.
I have an idea.
Why not just cut out the government middle-man, they are not exactly adding value are they?
Just cut NI for firms and employees.
Far, far, far more effective and it might save some jobs.
Jobs pay tax revenue and don't take dole.
I can't believe what I read here...
Taxpayers subsidising the economy, subsidising business.
Why not just cut government spending and cut taxes?
Set business free from the slow, incompetent hand of this government.
Oh, sorry, too Thatcherite but exactly what happened to sort out the last Labour administration that pee'd the country's money up the wall.
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You can’t beat having a free market and then intervening at every step along the way
They call it policy?
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#14
"This government has to go soon"
We can only hope - I beleive that unless he continues with this borrowing to subsidise cr@p that the Labour party could be effectively wiped out at the next election.
The concern that that raises is the possible rise of the BNP to fill the vacuum left by the implosion of the Labour party.
They could come 4th in the next election!
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Instead of Gordon Brown wasting borrowed money existing manufacturing companies who export should be given financial support as they will be the life blood of any recovery.
Not to rescue them from inevitable insolvency but to give them sufficient time to restructure and maintain viability.
Unfortunately because of the financial restrictions a selective response is required as to which companies are given such help.
As in the US they should be able to produce a sound business plan for the future.
New businesses take years to become established so it is essential for now that what is sound is preserved.
There is no point in this PM being stubborn because it blows away his ridiculous idea that countries should not be protectionist.
He will find that inevitably all countries will be doing the same.
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PetersKitchen wrote:
So redundancies in the banking sector are ok but in the steel indusrty they are not.
________________
Since the steel industry actually manufactures a real, physical product that can be exported and create real wealth, then yes protect what remains of our steel industry.
The idea that the Government haven't bailed out the banks and saved many jobs in the financial industry is a off the mark as well.
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Taxpayers credit card. Biggest credit card in the world. Any lame giant duck can apply. Special rates for 10% job discounts. Sorry not available to individuals and small businesses. Save the world now.
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If this happens then surely the subsidy must be swapped for equity in the company, which could then have the option to buy back later at a price which reflected the taxpayer contribution plus interest.
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5 re Woolies and credit insurance.
The thing that made credit insurance either unobtainable or unaffordable for Woolies was the absence of any significant assets in the company, for reasons correctly stated in post 1.
Apologies if this explanation turns out to be in one of the other 30 posts awaiting moderation.
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I wouldn't have a problem with subsidising wages of struggling companies if we were living in a COMMUNIST SOCIETY.
However, the last time I looked, we weren't. The danger is that the subsidy will keep the workers in employment, but when we reach the other side of recession, that money will effectively make up executive pay.
You can't have your cake and eat it. Either we save all industries - or we save none.
Saving the banks has set a dangerous precident, and now everyone wants in on the action.
In hindsight - maybe the banks should have been allowed to fold because the Government cannot afford to save every business.
That means there will be picking and choosing - and we all know what that means don't we? Donors and Friends of the current administration will be saved while the others are left to wither and die.
Does that sound like a free and fair society to you?
If they save the car industry then I really will go mental. Next we'll be subsidising the reconstruction of the wolly mammouth industry, which really shouldn't have been allowed to die out 40,000 years ago in the first great depression.
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I vote for us subsidising the pay of people who teach our children, look after us in hospitals, and maintain law and order...
Railtrack gets subsidised - whether you call it a subsidy of workforce wages or something else, it all amounts to the same thing.
Politicians seem to have an easy enough time deciding which of these 'businesses' to save. I don't see any anguish about the increase in civil service numbers over the past few years, and the general widening of the state.
Are you seriously trying to tell me they get all coy about being able to make decisions when it comes to businesses that don't usually strain the public purse?
Why's this a problem for the steel industry, when the decision seemed so easy for the banks?
I know there's little justice in the world, but please, save me from the bleeding hearts who feign that they can't make a decision...
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On the main point of employment subsidies, these are simply unaffordable.
On the other hand, they potentially would have been affordable, indeed potentially desirable, had the government not panicked itself into the broad-brush, vastly expensive and (as we shall soon see) utterly ineffectual cut in the VAT rate.
There is much to be said for a policy of incisive, targetted and temporary intervention to save jobs, indeed whole industries, in times like this. But only if it can be afforded. And Gordon has already spent all we had, and then some more, elsewhere.
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Post 10 Base_experince
Quite right we should not keep afloat anything which has perished by its own hand or will be of little value to us in the future.
However we should work hard to preserve anything we will need for the future
My feeling is SME’s, more than any monolith retailer, heavy industry or bank will be more important and essential in any future order of society.
Problem is no one seems to want to work out what the future will be and therefore what we will need to make it work.
Let’s hope when Barack Obhama said change he meant change and had a few ideas for what that might be.
Of course he could always consult the world’s saviour Gordy.
Quite an appropriate slip given the time of year though im’ not sure which is the Inn and which the stable number 10 or the House of Commons.
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I instinctively hate this idea, I remember British Leyland and the money that was wasted on British Steel but...
We have an enormous structural problem in the UK paying for our current standard of living. We run a 4% deficit because we don't make enough and spend (and borrow) far too much. We have been dependent on Financial services which are unlikely to provide as much wealth and tax for many years to come.
Can we really afford to lose yet more manufacturing capacity? What are the implications for car makers in the UK if they have to import all their steel? Are new plants likely to be built nearer the source of supply? Unlike the days of Red Robbo there is commendable realism and practicality being shown by the Unions here and this deserves support. I totally agree that things are likely to be worse in 24 weeks not better but why is it always the UK plants that are allowed to close first when capacity is being reduced?
Our major problem going forward is that this incompetent government has spent far too much on the Banks (£600bn+) which has damaged our credit rating as a country. I therefore also agree that we have to learn to start saying no and stop wasting money like the VAT cut. Oh Lord help me stop sinning but not just yet...
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where will this stop, sorry but NO , no no no, my company have advised no salary increased for next 2 yrs, now we need to get a wake up cal lin the uk, the wages paid are too low to live, when the average house costs almost 1?$ million and av wage £20k or less how on earth was this mess not seen.... this government must be held accountable and must stop bailing companies. will they pay my salary increase ive needed for year but my comapny ( one of biggest employers in uk - private sector ) in saying that they can pay milliuons on stupid tv adverts
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Robert Peston, whilst sitting back in his Ivory Tower, should rembember that his salary is paid for by licence payers, many of whom are employed in the private sector. Licence payers in the publice sector are paid for by the private sector through taxes. He seems to think that he can spout off about what happens in the private sector as if it is another world, as though what happens there doesn't matter.
It is the private sector that ultimately pays for all government spending and creates the wealth of the nation. The government should be doing all it possibly can to help private business without Mr Peston's somewhat dismissive ramblings from his Ivory Tower.
Perhaps Mr Peston would prefer to see the UK as a centralised economy, nationalise business and have 5 year plans? Come to think of it, isn't that what Gordon Brown would secretly want too?
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Chorus and the American big three should be put to producing Dutch tulip bulbs to save capital costs .
Remember Britain is well placed [at the bottom of the sea like the tuttannic]to wether the current financial storm according to the highest par lammentable Authority
Rest assured that the mperrors will not cut hire taxis
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Well here we are again writing miles of complaint about what is wrong or sometimes right but offering nothing towards the debate as to how to resolve matters for the future.
Is it to difficult or is it to horrific to unpopular to even debate the solution.
It’s certainly a lot easier to do nothing problem is doing nothing will give more space to anarchy (see Greece) of course you can lie that you have the answer that will delay anarchy (see Zimbabwe).
If you want the indicator of who is on the right economic track and who is on the wrong tack take a look at the Dollar the Pound and the Euro exchange rates.
We can not become a manufacturing exporter in hard economic times because basic products can be produced and distributed far cheaper in the Far East Eastern Europe Africa and India and until we get back to world wide growth we will not be able to export our high value technology and service products.
In short we would in the West have been better of rather than give our money to our banks to have distributed it among the poor of eastern Europe and South America they would have then spent it on buying essentials food, warmth clothing ( basic Maslow’s hierarchy of needs) so improving their position.
That would have improved the wealth of the middle economies Russia China India etc who would then have bought our hi-technology from which we would earn money.
We may be a nation of shop keepers as one prominent European once accused us of being but given Woolworth’s position maybe not for much longer and as we are no longer the industrial power or basics manufacturing nation we were no solace there
The banks will never earn anything for us again until they can build a new false economy and that is going to be a long memory away from now.
Sadly blogs are turning the pen from being mightier than the sword to being a blunt penknife folded neatly even more effective than the police are being with knife crime.
Now I'm of for a four mile walk
There that’s most of today’s news dealt with in a few short lines but to what avail.
Read this view point elsewhere before me thinks?
Wonder if there something in it?
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Gruad999
"The economic illiterate view the state as a vast unlimited source of succour whereas in reality it still has to obey the laws of economics."
What a fantastic sentence to sum up the origin of our nations problems.
Economically illiterate covers a very significant percentage of the population and I fear includes members of the cabinet.
When will enough people realise that nothing is "free" and everything has to be paid for by individual taxpayers (not the "state")
This government has done more than any other to encourage the beleif that we can have everything we want and have to pay little or nothing for it.
This has been acheived by excessive individual and government borrowing. Now we've got to pay for it and I for one doubt that we can.
I'm worried / scared!!!!
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"it would involve ministers making a nightmarish judgement about which companies and employees deserve such a subsidy"
And their judgement has proved to be so good, hasn't it ?
But just as much to the point, which 24-week period would they select ? Despite what Darling is relying on - a recovery starting towards the end of 2009 - things aren't looking at all good for the whole of that year - and beyond.
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30 gbjbaanb
You suggestion is fine providing the true facts are presented and the situation is steady state and the assessing agency is accurate. This is usually not the case. The true facts are not presented, the situation is dynamic and developing, probably downward, and the assessing agency, the government, is abysmal in its judgement. Just why should UK taxpayers money be piped to multinationals where it can be moved at the click of a mouse - Lehmans Bros moved money from the UK to the US. Or do you then say no to multinationals and if so why economically. It could just turn into a Dutch Auction, quite appropriate as the quoted case is in the Netherlands. And how do you limit who applies. Corus seem to think a 10% salary cut will save them, why? Their judgement has been wrong, why should this be right.
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45. At 2:12pm on 11 Dec 2008, TheMightyRover wrote:
PetersKitchen wrote:
So redundancies in the banking sector are ok but in the steel indusrty they are not.
________________
Since the steel industry actually manufactures a real, physical product that can be exported and create real wealth, then yes protect what remains of our steel industry.
If that is the case why do they need bailing out or protected?
The idea that the Government haven't bailed out the banks and saved many jobs in the financial industry is a off the mark as well.
Wasnt it the financial hub in London that contributed 20% of UK GDP?
I dont think it is way off the mark, a failing business needs to restructure and if nescesary, cut jobs - you can only export what people want to buy and more importantly what protectionist policies allow people to buy. This is a no brainer, the factory's only market will be what it has internally and unless they decide to build a lot more carriers, it aint a lot. Finance is/has done it and so should every other sector without support.
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Voluntary 10% wage cuts the tip of the deflationary spiral, this is just the beginning. In the 30's US unemployment rose to 25% and those still employed were paid 40% less. The modern day labour force is far less fluid than in the 30's can you see city workers digging holes
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If Corus is Indian owned, shouldn't it be the Indian Government bailing it out
As no17 comments, if it is bad we'll buy it back for £1, and let the administrators follow you for the rest
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Quit incredible in my responses on this blog I got
The Heinz post
The pack of cards post
The meaning of life post
Now I wonder where this post will fall.
Maybe it’s the way forward for governments to make decisions on our future, by the law of co-incidence.
{Has he finally gone - I hear you say?]
I wonder why Gordy can’t
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This wage cutting has happened many times in the past and it has never stopped redundancies or the closing of businesses.
All it will achieve is the workforce accepting less money and the company bosses laughing at them while their salaries an bonuses remain the same. It will not help the company or save any jobs at all in the long term.
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49 theresonlyonesoupey
I agree - its capitalism on the way up, socialism on the way down - then capitalism on the way up again. A downsize is needed with some of these businesses, there just is over production based on over consumption and some of these businesses had problems when the bubble was there, they are boud to have problems when the bubble has gone. It is just madness and will be uncontrolled.
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"If they save the car industry then I really will go mental. Next we'll be subsidising the reconstruction of the wolly mammouth industry, which really shouldn't have been allowed to die out 40,000 years ago in the first great depression."
very funny, but a few too many meaningless 'have your cake and eat it' phrases in the rest of your post
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there yuo go I missed both sides
Ah well we carry on as always then. shame it might hve worked.
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without any guarantee this scheme is foolish ! What happens when after we have saved the world ( or its steel makers ) they decide that , on the rise out of depression , Corus decide to say ta-ta and go anyway?. To paraphrase a slogan from about 1776 ' No taxpayers money without guarantee '
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What should have happened is schemes like the dutch one should have been in situ all along for a set of core british industries.
But hindsight is a wonderful thing the Governments past and present have allowed all our core industries to be in foreign hands and its impossible to pick and choose who should or should not get help.
Jobs are safe at westminister though and pension funds are secure so why should they care,and as they are the only ones who can change it they are in a rosy position.
With industry in foreign hands,our education system in turmoil,our national health being slowly privatised,europe making our laws,the banks bringing the world economy to its knees it does make you wonder just exactly what an MP does,we should really look at forcing major cuts on the numbers of them, they are surplus to requirements.But how ???
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Screams in Horror, so we are now paying our own wages through Tax, brilliant idea
I have a better idea, scrap the government, let companies that cant adapt or adjust fail, and let me spend my wage how I want
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What happened to the days of good old free market Britain?
We've lost our way.
Recession is a natural part of the economic cycle, trying to "prevent" them only prolongs them and the suffering they cause.
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If we had money I'd say yes, but the government is broke. Can't pay anymore money. If it keeps spending the whole country collapses. Its redundancies or company collapse.
By the way Robert, could you tell us what would happen if the government declared the country backrupt and said our loans were too big to pay.
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50 peabop
The jobs you quote are typical public sector jobs. They, bar the odd case in the private sector eg private teachers or nurses for example, are already paid for by the taxpayer. The public sector pays tax but in doing so it is just returning some of the taxpayers money it has been given. In what way are you suggesting the taxpayer further 'subsidises' something they are already paying for. If you are saying that you dont want cuts in the public sector that will have to happen so it will be a case of means testing services or getting rid of invented jobs like dustbin police and litter police and fluffy feelgood jobs. And stopping the public sector feeling they have to investigate every numpty query for fear of offending or not being politically correct. Something called 'efficency' more usually present in the private sector.
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I see
So I am a small company in competition with a big one
The big one employs 500 people and I employ 10
The big one has contacts with government because it gives large donations
I do not because I am small
The big company gets a 70% subsidy on it's wage cost
I do not.
I go bust
He does not.
If I pay tax I have to subsidise my competition.
This sort of interference will not work unless it is for everyone and it will not work if it is for everyone as it will cost too much and support businesses that were going to fail anyway
I really think that these are all pointless eyecatching political initiatives and should be avoided.
As far as Corus is concerned Tata will save what should be saved based on what is worth saving
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does it matter really......whats really worrying is that i dont think anybody knows what to do? brown .cameron .king economists. me .people on here .danny blanchflower(wasnt he the footballer!!). nobody has a clue its the blind leading the blind....the only thing for sure is the money men get richer and the poor get poorer. and what happens wen the euro = the pound? does that mean were in the euro? the whole system is a total mishmash. we could do worse and get some of the bright kids on countdown running the economy.
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The real problem with bail outs, guarantees, employment subsidies and the rest of the proposals for softening the effects of recession is that they are largely deferring the day of reckoning, and possibly thereby prolonging the recession. Robert, you have highlighted how a funding gap grew of £740bn in your ecellent sumary on Monday. What the government seems to be doing is trying to defer curing that particular problem until after the next election. Good for Gordon, but not necessarily for us and our children in the longer term.
As for the government trying to pick out those to subsidise, well, we have some history with the last period of labour government. Picking and propping up industrial champions, particularly British Leyland just doesn't work. The wrong recipients are chosen for the wrong reasons, and the taxpayer foots the bill.
I believe that the government must oil the wheels of banking to allow normal commerce to resume, but otherwise there has to be a lot of pain. The country has been on a binge to end all binges and now has to suffer the hangover.
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Frankly, the huge truth is that we need to encourage true entrepreneurs and discourage those on the publics books. We must shrink the public sector. Remove the final salary scheme from all public sector workers who earn more than £25K/year - cut back on the endless number of overpaid public servants in job-for-life posts or make them compete (globally) as the rest of us.
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I don't understand the logic in this proposed scheme. I can't see recent levels of growth in the global economy returning for a long time, if ever; these levels of growth were driven by record levels of consumer borrowing in developed countries and, from I can gather from the commentators, this will not happen again (at least not for a while). The result of this is that we have overcapacity in certain industries and that overcapacity is not a short term problem. There is only one real solution to this; capacity will be lost. I appreciate that this will involve job losses but attempts by the Govt. to bail out/subsidise these industries will not work. It will cost to much and o on for too lon. The other big problem I see arising from it is that it effectively involves protectionism. Presumably we will have to throw EU competition law and the free trade treaties out of the window. There is a risk that this is the start of a slippery slope. Maybe we can prop up Corus by purchasing steeel to build armaments............
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I hope the Government are not seriously contemplating this madness. It would make the German Finance Minister's comments seem flattering.
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"What Corus would like to see in the UK is a version of a scheme recently introduced in the Netherlands, by which the Dutch government pays up to 70% of the salaries of struggling Dutch companies for up to 24 weeks.
The point of the Dutch scheme is to keep employees on the books of stretched companies during the most acute phase of the economic contraction - in the hope that the relevant companies can afford to pay wages once more, when the recovery begins."
I'm sure Corus would LOVE to see a scheme like that, but it's not for their benefit, it's for the benefit of the tax payer.
24 weeks from now is May 2009 and I've not seen any sensible predictions that say we'll see a recovery by then.
So, as others have asked, what will happen at the end of the 24 week period?
Also, what restrictions would be placed on it?
I appreciate it might have some use if it's saving companies that would otherwise go broke, but how do you stop it being exploited by companies that have enough money to last 24 weeks, but nevertheless fancy having 70% of their staff costs paid?
Maybe the answer is to cut a deal where companies that are:
(a) in shrinking sectors
(b) don't have the money to tide themselves through 24 weeks
(c) show promise of recovery
could get a deal where the govt pays their staff what the staff get on the dole (including housing benefits etc) and the company makes up the rest.
That might be a bit fairer.
(and more likely to save jobs, rather than just postpone redundancies)
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#71 wrote
"Screams in Horror, so we are now paying our own wages through Tax, brilliant idea
I have a better idea, scrap the government, let companies that cant adapt or adjust fail, and let me spend my wage how I want"
And when your wife or child contracts a nasty disease and you have had to sell your house and you can no longer afford the treatment for them, will you still have the same opinion.
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#61 "Wasnt it the financial hub in London that contributed 20% of UK GDP?"
Hmm... More like the financial hub in London *consumed* 20% of GDP. I'm not sure it contributed all that much of real value. It's like having the finance depatment of a company costing 20% of turnover. Crazy.
Better to see the finance sector itself as being another tax on the few of us in manufacturing/farming etc that produce real wealth
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I would love to see the economy in 4 years time, I suppose it will be in a mess if Labour still rule the Goverment policy.
My father works for Corus, my mother in the National Trust and I work for a large finance company.
We are all now at a desperate threat that we all may be made redundant. I shall be made redundant next year... so in response to an earlier blogger I neither or have never got a bonus and will have no job as of next year.
We need a change of government...and quickly!
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On a related topic, here's another Bloomberg article. This also has resonance with GB and Ally D's campaign to kick start bank lending.
GB's new best friend, Pres Sarkozy, has been "doing a Gordon" on a few French banks, and now has them lending money to a loss-making auto parts maker at less than commercial rates. Which means that somewhere in France, firms that are willing and able to pay commercial rates (and are probably profitable) cannot get credit to stay afloat (or even better expand). A sign of things to come in Britain?
http://www.bloomberg.com/news/exclusive/
The relevant article is entitled: "Faurecia Receives `Windfall' Credit as Sarkozy Pushes French Banks to Lend"
According to the article:
"French banks that got 10.5 billion euros ($13.8 billion) in a government bailout gave loans to Faurecia SA, the nation’s largest auto-parts maker, at below commercial rates, credit analysts said."
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"What happened to good old free market Britain" ?
"Free market Britain " helped get us into this mess. Compare our current prospects with France.
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Would this apply to the self-employed? Would there be a limit on the size of company, or its location, or the sort of product/service it provides?
Frankly, I'm against any bail-out of any kind, for any company - and that includes the banks. But I wish the world was so simplistic as to easily accommodate my hardline position.
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In the Depression of the 1930s legislation was passed to maintain wages as a means to aiding recovery. Sadly, the consequence was that companies continued to shed labour and the downward spiral continued. As the Depression progressed this law was rescinded and wages fell to reflect the wider fall in prices. Soon the economy started to recover and employment recovered. Falling wages were only part of the recovery process but they did play their part.
One of the things that made a fall in wages possible was the deflation going on such that the cost of goods and services fell which made the lower wages easier to manage. It is reprehensible that the politicians believe that encouraging inflation to come back will be a solution to our problems. It emphatically will not and will hit the poorest in society most. Take a look at Zimbabwe where the consequences of printing money and encouraging inflation are vividly seen. The Governor of the Reserve Bank of Zimbabwe was even praising Gordon Brown's monetary policy recently! Inflation is never a solution. Who would want to pay more for something rather than less? Pursuing a policy of encouraging inflation to make things feel better in the short-term is a policy of a charlatan who is more interested in popularity and re-election than solving the problems.
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Well is it not time to reduce Council Tax now, the houses are worth less, the tax should be cut in half at least to let the good folk get back on top of things again.
Tax Tax Tax that is all we get, we pay out a fortune, just like the 16th Century, come on UK fight back and let the good people of this UK get back to some sense.
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#88copernicus62
The Governor of the Reserve Bank of Zimbabwe was even praising Gordon Brown's monetary policy recently!
You know you are trouble when your monetary policy is being applauded by the Zimbabwe government!!
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PetersKitchen wrote:
Since the steel industry actually manufactures a real, physical product that can be exported and create real wealth, then yes protect what remains of our steel industry.
If that is the case why do they need bailing out or protected?
Wasnt it the financial hub in London that contributed 20% of UK GDP?
______________________________
You are quite correct, there is little reason why the bulk of the UK's manufacturing capacity will not be transferred to the Far East to take advantage of the lower labour costs. As we purchase their low cost products then that money is lost from the British economy. It creates the illusion of prosperity but in the long term it is financial suicide.
The Chinese love of gambling and dexterity with numbers suggests in a few years they will be able to handle the stock markets as well as the best traders in London and New York. When this happens the City of London will decline as a financial centre.
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#67 - acrossley89
Have my cake and eat it? I come from the United Kingdom where the public vote in the party who promise lower taxes and higher public spending.
I seem to recall the Lib Dem's suggested a policy of higher taxes and higher public spending a few elections ago - and no-one believed they could deliver it!
Unfortunately the reason we have this reccession is because too many people have had too many cakes and eaten the lot.
....hence the rise in obesity.
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Just a thought:
Even if we wanted to join the Euro now as €/£ parity surely approaches, would they have us - the sick old man of Europe - in the club?
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The problem with giving money to beggars is it becomes impossible to refuse all the others too. In the end you have given everything away.
Sometimes you have just got to walk past them.
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Frankly, I would rather subsidise workers of a struggling but potentially viable business than subsidise the bonuses at the banks.
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If we ALL get our wages paid through tax then surely we have created an economic perpetual motion, and none of us need to go to work? Count me in!
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It's understandable that Corus and the unions would discuss pay cuts amongst other things - in the Depression wages in the US declined by a third over 5 years or so but unemployment still rose to 25%
But your mention of the Dutch initiative to pay 70% of wages for 6 months reminds me of the huge dangers associated with the unco-ordinated nature of all these bail-out arrangements piling up at national level; the EU alone is now home to a dozen competing/bickering bail-out programmes....... the US and Canada are not co-ordinating their actions despite being in NAFTA together; China, Korea and Japan are all doing their own thing; god knows what the Russians are doing etc etc
I agree that extensive govt intervention is justified to try to soften the severity of the downturn, but the lack of co-ordination makes these bail-outs less likely to work, whilst greatly increasing the likelihood that multi-national companies will demand money from each country in which they operate; if they don't get paid to stay then they will close their operations; if they do get taxpayers money they may close their operations anyway whenever they like; if govts are going to intervene then they need an industrial strategy to identify priorities ....... banks vs steel vs cars vs Woolies vs aircraft carriers vs housing........ tricky choices!
And what about the UK construction industry? The whole sector will be on its knees by the Spring so are they to be bailed out? very hard to tell if it would be justified, though at least they can't easily up sticks and move 'production' to a different country
The Big 3 US automakers are a perfect example of how difficult it may be to achieve much through bail-outs; even if they do get the $15 bn 'bridging loan' through the Senate, and it seems doubtful that the bill in its current form will get the necessary Senate votes (a false start, like Paulson's $700 bn toxic debt bail out, might mean a new and severe dip in the stock markets next week, by the way). A Big 3 bail-out would only keep them going for 3 or 4 months, when there is no sign of sufficient demand to justify the continued existence of more than 1 or maybe 2 of the 3 companies; and will they keep their branch plants open in Canada, which employ 400,000 workers, if they don't get the $6 bn they demand from the gov't there? but Chrysler have friends in govt so the lamest duck still gets to carry on quacking .... for now
This patchwork of reactions to the crisis shows no sign of working at all so far. Our great leaders might as well give us each £10,000 in vouchers and tell us we have to spend them by the end of the financial year. That would also lead to the wasteful consumption of a bunch of stuff we don't need but it would make the winter more cheerful. Whatever the short-term measures though, we do need to start accepting a lower standard of living; get those allotments hoed over so that we can plant some vegetables in the Spring; good for us and good for the planet
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If the government subsidises industry then the taxpayer must be given shares to the value of the subsidy so that if and when the recession ends ,there is some reward for the taxpayer. However before any subsidy is paid then the employees of the company and the directors must agree to take considerably less out of the company in salary while it is being subsidised and no dividends can be paid to shareholders, or shares traded on the stock exchange.
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NO.
There will be no economic recovery for YEARS.
Look at what the market data is telling you, Robert.
Such a scheme would quickly become a sunk cost, and once the fallacy takes hold, as it surely would of our stubborn politicians, our economy will be sucked into a black hole. I do not trust their judgement to choose impartially, let alone wisely.
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JayPee28bpr #40 - couldn't agree more. Keep the unemployment figures articficially low - along with fibbing about the true nature of public sector debt and just how much tax, pain and currency devaluation is around the corner - just long enough to squeeze over the line with a tiny majority in a 2009 election thanks to the support of the traditional Labour supporting electorate that those in Tory and Lib Dem constituencies have been paying for for 6 months or more
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The taxpayer pay Corus's payroll for 6 months! Come off it, that's ridiculous. The first port of call should be its shareholders if more capital is needed. If the company's market has collapsed, and shareholders are not prepared to cough up, there will have to be redundancies. If the industry is deemed to be strategic, then the govt. should do what it did with the banks, put in short term capital and effectively nationalise them for a while. But GIVE them 6 months payroll.....even Gordon's not that stupid.
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Just as with smaller companies, if Corus's future prospects aren't sufficiently solid to attract short/medium or long-term money from financial institutions ( much of this taxpayer money already),what real hope is there for taxpayers to get their money back ?
Corus's and others' cloth needs to be cut sooner rather than later to preserve the prospect for any semblance of a business in the longer term
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A large part of the reason as to why the 'toxic debt' hit the banking sector so badly was the 'Mark to Market' regulation (EU inspired) which basically states that a Balance Sheet must reflect the market Value (i.e.Share Price) of the Bank.
So as the short sellers bore down on a share price, as with HBOS, the Balance Sheet was devalued, ultimately to below the normal carrying value of the 'good' investments.
The Moodys' of this world then lowered the credit status of the bank thus making it impossible for them to borrow money, the staff of business life, at commercial rates. Share prices collapsed, Balance Sheet worsened, Credit Status knocked ....
The self defeating prophecy was in place and the result is for all to see.
Until this invidious legislation is repealed the banks etc will continue to hoard cash and the recession will deepen.
No doubt wiser counsel will tell me I have got it all wrong - but such is life!
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... re previous post - and shame on Robert Peston for buttering us up for this next sham policy. This forum is not a Labour focus group!
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Taking a wider view than just Corus, while I have not read all of your blogs I believe you have commented on the contagion of fear that can ripple thorugh the markets and prolong uncertainty.
If you agree then you can help solve the economic recession we are all facing; get rid of that horrible big red arrow mnemonic plunging into the ground on all BBC business news reports since the start of the credit crunch.
Replace it with a blue one emerging from the red and heading for the skies, led by Pestin in a a la Superman!
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The downturn does occasionally throw up a bit of good news though. For instance the 'delay' in building this great sea power's two new aircraft carriers; Hoon trotted out some lame excuse about having no planes to put on them just now, but I can only hope they are really going to be cancelled due to lack of funds.
HOW ABOUT CANCELLING THE TRIDENT NUCLEAR SUB REPLACEMENT NEXT; WE DON'T NEED THEM AND IT WOULD SAVE A BUNDLE
It would be sad for workers in Barrow etc who work on defence contracts but they should be retrained to make something technologically complex but useful - wind and tidal turbines for instance or carbon-capture systems
Funnily enough, submarines and carriers are proving of limited use so far in dealing with the pressing problems in Zimbabwe, Sudan, Afghanistan ..... damned thoughtless of these countries to be land-locked and I can only assume that war with Bolivia is iminent
Who knows, perhaps Gordy is a fan of Werner Herzog's 'Fitzcaraldo'* and in his continuing task of Saving the World plans to drag a couple of aircraft carriers over the Khyber Pass to Kabul and roll a couple of subs across Africa to Khartoum and Harrare.
Good plan Mr Brown but the element of surprise will be hard to maintain.
* the true story of a 19th-c steamship being dismantled into 2,766 pieces and hauled by mule 12,000 feet up to the shores of Lake Titicaca. The 'Yavari' was re-assembled as a gunboat for the Peruvian navy. It never went to war and was abandoned early last century, until being discovered and restored by a 'crazy English Lady' and an ex-Captain of the Peruvian Navy.
Even Hollywood wouldn't believe our current economic script so why not......
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Governments will always subsidise loser companies rather than winners: it is inevitable.
Government subsidies go to companies that are performing badly, never to those that are successful.
Result? Well-managed companies are weakened by unfair competition from subsidised companies - and pay higher taxes to subsidise those companies.
Moral: Governments should never subsidise companies. It weakens the economy as a whole.
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It depend but probably no.
Do Corus and Tata pay less corporation taxes than wholely UK-based and registered companies? Do the managements and owners enjoy ex-dom tax breaks?
If the answer is yes to any of the above, then there should be no government help.
If the answer to both question is no, and a significant portion of steel produced is exported then some government help should be considered but the total amount must be returned and capped at a portion of the taxes paid by Corus over the last 3 years.
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Well I'm probably going to give them the money.
I first need to evaluate if this is a company that can not be allowed to fail, either because it is stragic, employs so many, or is critical to the defence of the country.
If the answer is yes, then you get the money but there are a couple of strings attached.
1) the entire board must resign and are barred from holding office for 7 years.
2) the new board will consist of 30% government appointed directors.
3) The board will be paid a maximum of 10 times the lowest full time employee, no bonuses, no options.
4) The company and possibly the entire sector with be flagged to the competition commision. When recovery eventually comes this business will never again be allowed to fall into the 'can not be allowed to fail' catagory. It will either be restrained in size or nationalised as appropriate.
Now Corus (HBOS, NR, etc), do you want me to consider your request?
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Some still say we should let market forces follow their natural course. But market forces are just a force of nature, like say electricity. In its raw form electricity just kills you. It's only when you design systems around it that it does things that are useful. Similarly in any market economy there is always a system within which market forces act (regulations, taxes, benefits etc). Ideally these would be designed in a sensible way so they give some desired result - in reality economic systems have just grown in a haphazard fashion.
A system where we subsidise wage costs is no more invalid than a system where we don't. The only major design constraint that should always be followed when designing a free market system is that the interests of each actor in the system (companies, consumers, etc) should align as much as possible with the interests of the society as a whole.
Thus if the society decides to pay benefit to the unemployed rather than watch them starve, it is necessary that the financial choices made by companies when increasing or decreasing their workforce should take this into account. This is something our current system completely fails to do.
We could fix this if we want - see my comment at #15
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#15
you mean something like this
http://www.citizensincome.org/
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#16 give your head a shake, tax credits are giving people back their own money. If they weren't taxed to the hilt in the first place they wouldn't need the subsidy. GB has created an army of docile voters by giving them their own money back after stealing it from them in the first place.
Get rid of all tax credits entirely, BUT only levie income tax on earnings above the national average wage.
GB is a thief, who is distroying this economy by piling on more government debt. We are all cutting our cloth accordingly, so should the governement - start by sacking the majority of civil servants, abolish final salary pensions for state employees, make them pay into pension funds like the rest of us.
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Taxpayers already subsidise wage costs via working tax benefits.
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83. At 4:13pm on 11 Dec 2008, random_thought wrote:
#61 "Wasnt it the financial hub in London that contributed 20% of UK GDP?"
Hmm... More like the financial hub in London *consumed* 20% of GDP. I'm not sure it contributed all that much of real value. It's like having the finance depatment of a company costing 20% of turnover. Crazy.
Better to see the finance sector itself as being another tax on the few of us in manufacturing/farming etc that produce real wealth
Our representatives have chosen to support the mechanism (albeit futile) rather than the workforce in the financial sector, yet choose to support the workforce instead of the mechanism in the manufacturing industry. Isn't that just the point?
All over the world the what the reps believe is that the banking system is not expendable, but the workforce is. However, autos, steel, etc need supporting to keep their workforce in employment. Why?
People lending money when people dont want to lend it get the boot. The mechanism they work for get anything they want. The people making Steel keep their jobs when people dont want Steel and the factories remain idle.
Rather than procrastinating about what they are doing, ask WHY?
Answer: The world we live in now accepts that economies can only survive through the selling of debt , not production - except those countries that do the opposite.
Give people time (recession) to pay down their debts and then we can start over again..............and then the idle factories can start producing again.
Fools errand if you ask me!
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Zombies, zombies everywhere,
Over here and over there.
Draining all our money away,
So their executives can make hay.
As we know our course has been set since 2001 when the UK and US governments decided to promote the debt bubble to create and maintain a feel good factor in conjunction with the Chinese government who still refuse to float their currency.
Asset prices and wages will always return to equilibrium. It is unavoidable. The only choice we have is between inflation and deflation.
The world governments have opted for deflation. That worries me. We know how to stop and bring under controll an inflationary spiral. But the same cannot be said of a deflationry spiral. Facism and world war were the results last time.
We do know that deflation creates zombie banks and firms. And that these strangle the life from the rest of the economy. That is exactly what we are seeing RBS, HSBC, Lloyds, HBOS and Barclays do to businesses large and small. Now government is planning to step in and prop up more businesses, spreading the zombification wider and wider. So how do we stop it.
We still have a window. So here is my plan.
1/ The BOE is the printer of cash. Current accounts are the equivalent of cash. So move all current accounts to the BOE where they can be guarenteed.
2/ Allow the banks to fail. Let the market and the administrators sort out the results. Billions in loans will be written off. Huge numbers repossessed. But even so, the new owners will want properties occupied and the new banks making new loans. So that won't be such a disaster.
3/ Lending should remain a private industry. There is huge amounts of capital looking for a safe haven. Sensible lending would flourish once the threat to the nations current accounts was disappated.
4/ There are no strategic industries that wouldn't be bought up after bankruptcy. If it's cheaper to make steel elsewhere then the only strategy in maintaining Corus is an election strategy. Too late for that me thinks.
5/ Unemployment will be a big problem. This will need infrastructure spending, the end of the employers NI contribution and the return of Taper relief for CGT with an allowed maximum.
6/ Tax relief is wasteful. It just gets sucked up by the zombies with no return. 7/ It is important to share the burdan of unemployment. Changes to tax and employment law are needed to enable widespread part-time working to limit unemployment.
Just for disclosure. I have a small business. I have always remembered my mentors words, "if you borrow money the bank have you by the balls".
In the last 3 months our work has diminished by 1/3. But we are cash rich and can survive for 2 years on no work if we don't invest. Even at 2/3 I anticipate further investment and new employees next year. If government is serious then lower my costs so I can employ more people, and let my employees go part time by giving them a tax break for it, and I'll employ even more.
The govt won't do what is needed. They don't have the courage. So I think our situation will get much worse for far longer than neccessary.
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Well we have been subsidising the wages of so many Public sector freeloaders (and no - not all of them are freeloaders).
This wage cut idea seesm like a good one - I could do with a few quid of the license fee - what do you say Robert? Want to share our pain or is it more fun commenting on it?
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the dutch government need to destroy the drugs they confiscate and stop passing them around the members of parliament
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If you wanted any confirmation of the BBC's stance on Darling Gordon and the grand plan - they've been referring to the admirable Peer Steinbruck's comments as undemocratic and dismissing him as jockeying for his own election benefit on BBC World all day.
Funnily enough, they've not reported to the rest of the planet that Gordon Brown has declared himself saviour of the planet yet
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Robert
This has got to stop. The money for this will not come from tax payers but from an already vastly overextended govt borrowing position.
Your post of the other day highlighted the problems we are facing and the cause, that is debt. If the govt now proposes to bail out all and sundry it will merely make matters worse in the long run.
There are going to be many casualties over the coming months, I'm going to be one of them. By embarking on a policy of chucking money it doesn't have at every problem, the govt are ensuring that the UK will have a debt problem so acute that it will take generations to pay.
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Gordon Brown worships the sun
Brings you down...into the doldrums
Thief in the night
Taxpayer`s fright
Always a frown with Gordon Brown
Every time just like the last
He`s controlled by the ruling class
Serves the E.U
Freemason too
Always a frown with Gordon Brown
Gordon Brown tries to impress
New world order he is obsessed
Bilderberg tool
Think`s he`s so cool
Always a frown with Gordon Brown
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#111 fairsociety
Yes - that's exactly the kind of thing. Not only a fairer system, but also one that actually works far more efficiently.
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I can support a safety net, but I'd like to see it paid back by the companies
If these large companies post huge profits and then want the government to save their staff to prevent unemployment figures rising when they hit trouble then they should pay it back to the government rather than shareholders when profits rise again - would mean you could protect more businesses as well that way
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And that is why the Dollar and the Pound are taking a dip in the pond and the Yen and the Euro (Germany) are gaining strength.
The currency market is the only consistent barometer out there and it puts everything in B&W
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Just some random thoughts:-
The Government states that SMEs must be saved.
My question is who are they going to do business supplying?
Car Industry?
Computer industry?
Building Industry?
Steel Industry?
Other Manufacturing?
Are these industries going to be expanding in 2009? I think not, so why are banks (bless them) going to be forced to roll over loans to SMEs that have no markets?
Second thought, wasn't the owner of TaTa steel a major Labour Party contributor?
It's probably just coincidence that he wants the taxpayer to provide a gift (not a loan) to his business.
Third thought, when all the major Government banks reduce their interest rates to zero (which they will have to soon enough) won't we then head into deflation which is a notoriously difficult problem to solve (ask the Japanese).
I had to laugh on Tuesday when the Americans were buying treasury bills which had a negative return on them (ie you pay the Government for the privilege of owning treasury debt) ...madness sheer madness.
I tell you we're all doomed ..doomed I tell ye!
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I have been reading with interest the various contributions that have been made to the public v private sector pension debate, the glaring inequity that exists between the two and the resultant gargantuan hole the funding of the public sector pensions punch in the taxpayer finances which have been the subject of many articles.
I'm not sure that it has always been made clear the staggering size of the gulf that exists.
I will use very basic figures and assumptions, using some of the figures quoted by another contributor. I acknowledge that the figures are not exact but they are in line with many I have read in the press and other contributions.
The example assumes that the average public and private sector salary is the same at £25k pa. I think the reality is that the average public sector salary is higher, however it would only increase that gulf that exists in the example below.
A contributor stated that in one public sector pension scheme, I think it was for teachers, the pension contribution by the employee is 6.4% of gross salary and that for this scheme, the final index linked pension will be the number of years service/80 * final or average salary plus a lump sum contribution of 3 times the pension. A previous example assumed a 30 year working life and I have assumed that the individual starts contributing at 30 and retires at 60. I have assumed a final/average salary of £25K, appreciating that there will be differences on whether it was actually final or average salary scheme.
Using basic assumptions the public sector individual would contribute in total, 6.4% * £25K *30 years = £48,000.
In return this would produce a final index linked pension of 30/80 * £25K = £9,375 plus a lump sum of 3*£9,375 = £28,125.
For this the public sector individual has contributed 6.4% * £25K a year = £1,600 pa.
To buy this pension in the private sector would require approximately (using a 3.5% annuity rate and an assumed lump sum of £28,125) a pension pot of £296,000. Another contributor stated that the average private sector pension pot is around £20,000 which would buy a lump sum of £5,000 and an annual pension of £525.
The calculations are reasonably straight forward in the public sector because there is no need to take account of investment performance as the pension is guaranteed irrespective of investment performance, effectively being paid out of taxes existing at the time.
It is more difficult to be exact with private sector calculations because they do rely partly on investment performance.
I think it fair to say that most investment performance in a standard insurance company private pension over the last 10 years have added virtually nothing to the individual's contributions (I appreciate there are exceptions to this but not in a dramatic way, also the example of Japan clearly shows that investment performance could be significantly negative over a far longer period). In the example I have taken a neutral view on investment, that is to assume it neither adds nor decreases value of the contributions after performance and charges.
If a private sector employee contributed £48,000 over 30 years, grossing up for say 20% tax relief, then this would produce a pension pot of £60,000. If the same public sector lump sum of £28,125 is removed (I appreciate that 25% is the actual maximum), this would leave a pension pot of £31,875 with which to buy an annuity.
An index linked annuity for a 60 year old will yield approximately 3.5% (and annuity yields are likely to reduce further with falling interest rates and increased longevity) which would buy an annual pension of £1,115.
This is 12% of the public sector pension or expressed another way, the public sector pension, for the same amount of individual contributions, is 8 times that of the private sector pension.
This is a staggering inequity.
The cost of funding this inequity and all its implications for the uses of taxpayer finance is almost beyond comprehension.
I appreciate that were investment performance to improve this gaping chasm between the 2 sectors would reduce and that investment performance remains the imponderable. However those with private pension pots have seen these significantly reduced over the last 5 years.
The gulf and the incredible strain it will put on taxpayer finances is mind numbing. The public sector pensions need to be modernised, reduced and brought into a more financially manageable state.
When and how will it be addressed when those with some of the most generous public sector pension schemes, being MSPs and the senior civil servants who advise them, are the ones who benefit most from the existing system ?
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Saving companies and saving banks sounds selfish like self-serving people are only saving themselves. But it is always sold as saving the people, when its is really a case of milking them dry. When the debt man and HMRC start chasing people who can not pay them, they will be totally ruthless.
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Robert
Please try and get an answer to my question; Why are 100,000's of financial sector jobs expendable, but manufacturing jobs not? Why are the companies that are sacrificing the most jobs getting the most money and the tax payer paying for idle factories?
It is a valid question, isnt it?
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98 kaybraes
The taxpayer to get shares in lame duck giganticus in return for money.
Lets go back to the banks. They are paying 12% and paying back the capital.That is the plan, it may not work,certainly with some of them. It is however a very limited timescale deal with a very large business(s) that is likely to pay back the money overall. These businesses skim, a take on every transaction in the UK. They have an effective monopoly on the UK. For that reason I personally viewed intervention, wrongly referred to as a bailout as unavoidable.
Now lets look a business making metal boxes. It is in trouble. It has been propped up by the bubble. Its products are overprices, its technology aging. The product can be made elsewhere with cheaper labour. The raw material can be made elsewhere cheaper. You want to take shares in this company, high risk with no obvious profit. There is decline, competition from overseas. It is almost certainly a black hole. You are a danger to yourself and to others. This is why the government should not go anywhere near an area which is not their speciality. They do not make decisions based on business. There would be more sense in setting up a factory to make plastic wheelie bins which are all made in Germany and in short supply, at least there is a mandated need for those. Taxpayer money should be regarded as a limited and valuable resource, not just thrown about willynilly which is what is happening. This is just an extension of the credit frenzy which in 5 years has destroyed balance. In the depression approx 85 % of businesses survived, just in a smaller form.
Incidentally I went out and bought a metal box today made in Hungary with Japanese technology. I wanted to make a purchase of a metal box made in the UK but couldnt justify it on cost and functional analysis. The UK product cost 40% more, which is what I would sadly expect. I am afraid I cannot afford to subsidised the UK any more.
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It would be nice to help Corus
but I got to pay the Rent Man
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#104 "... re previous post - and shame on Robert Peston for buttering us up for this next sham policy. This forum is not a Labour focus group!"
A "Labour focus group" is exactly what I thought this blog was - that is the main reason I read it. It certainly isn't due to the incisive economic analysis - though some of the bloggers have interesting insights.
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106 somali pirate.
It was never that clever to plan to have the carriers before the planes were available, delaying them is sensible.
I'd have thought a couple of aircraft carriers would be useful against somali pirates. Fast jets are a lot more practical than slow ships for policing a large chunk of ocean.
And for keeping our hands on the mineral wealth under the ocean that comes from owning various islands around the worlds oceans. The technology to extract it should be available during the lifespan of the carriers.
And a couple of carriers could be helpful in making sure we can get oil at a reasonable price from the gulf if there is trouble in that part of the world.
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RIGHT to do it, to do it RIGHT!!
The degeneration game, hosted by Gordon Brown
And on the Gordys belt tonight.............
an unemployed bank worker
a cuddly bank
a broken steel factory
a cuddly steel worker
a banks safe full of cash
a tax payer bill for the steel worker
a cuddly bank
two framed prints of Gordy and Darling (in a steel frame)
a broken small sized business
a cuddly donor to the labour party
a stainless steel pen set ideal for a banker
a cuddly bank
100 unemployed bank workers
a tax payers bill for unemployed bank workers
a free ticket to an election
a cuddly prime minister
A new game
The Price is RIGHT
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glanafon wrote:
Incidentally I went out and bought a metal box today made in Hungary with Japanese technology. I wanted to make a purchase of a metal box made in the UK but couldnt justify it on cost and functional analysis. The UK product cost 40% more, which is what I would sadly expect. I am afraid I cannot afford to subsidised the UK any more.
_________________
In Germany they do things differently and compete on quality, German metal boxes aren't cheap but they are the ones people aspire to owning. They're prepared to pay 40% more if they feel the metal box is 40% better.
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125 Upthebarns
Well the problem is we have been living on Browns fantasy island and too many people thinkit is a video game with a reset button.
If more rather than less fiddling is to occur by somebody who has got it so wrong you have to ask is it going to delay recovery, recovery being to a lower level than recently, which some people just point blank do not wish to comprehend.
I am all for 'smoothing' things but it has to be against a backdrop of reduction and realistic. A parachute is not a replacement areoplane. It is early days but there is a figure reported somewhere recently of 800 major businesses in the US asking for one sort or other of waiver or aid. What happens there usually follows here pro rata so that would be 200 here already getting ready to queue. That is just for starters. The taxpayer cannot prop up the whole economy and who is to say which business is the best to support. Mandelson. So that would be big business then.
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It reminds me of the story of a man who found an injured snake which he took home to look after. When the snake got better it bit him, because that's what snakes do.
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#125
You should have worked in the public sector. I was laughed at by all my peers who earned lots more and laughed at how my final salary scheme would be a pittance compared to theirs and how my working for the public good would cost my family in the future.
I worked in the public sector for 10 years and 20 years in the private sector earning a lot more and paying a lot more into my pension fund - which seems to have dissappeared in charges and things.
And now my peers try and tell me that the scheme they laughed at should be ditched.
Economics or jealousy?
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#83
Though no lover of banks or bankers, I'm afraid you're wrong.
Until recently 30% of all PAYE tax revenues came from the City. Yep, a third! That means that little operation there was substantially financing the entire country.
Through their funny and now discreditied schemes they also conspired to invent so much money that they covered up the awful truth that almost all the rest of the country was creating little or no wealth.
Now they have failed it's for the other 99% of the population to live off what they create. That's why it's a catastrophic recession, because they don't do much.
I'm no banker, I run a successful manufacturing company but it's the truth.
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It's a good idea. There is pride and respect to be maintained through work, and while motivation might not be the same for everyone, it is better to make some sacrifices and keep the skills - as long as those skills are likely to be valuable in the future.
Being trained and skilled in something has got to be better than being skilled in nothing. This isn't just for the individual, it's for the company, the family, the community and society in general.
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Once upon a time, there used to be a technique called, I think, reductio ad absurdum.
Essentially it stated that you continued an assumption for a long period and considered the result.
For example, if house prices/wages/productivity rise at a certain rate e.g. 15 per cent compound then eventually the whole persons’ wealth today is needed to buy a car/pint of beer/loaf of bread in fifty years time. Clearly a nonsense unless hyper inflation has occured.
Brown’s Ponzi schemes are just that and that is why sterling is falling through the floor as those who recognise a Ponzi scheme cash in their chips as fast as possible.
All the straws being grasped will not keep us afloat.
Take the hit NOW and rebuild when the dust settles or condemn our children and grandchildren to penury or worse
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#125
They don't protect the public sector pensions for personally selfish reasons, but because you're dealing with the weakest employer in the land, the most idle (overall, excluding certain professions) workforce and the most strike-happy (ditto as above) workforce.
Oh, and they remember the late '70's.
Forget about the Government standing up to public sector workers; they talk tough but always leave the dirty work to the private sector.
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Why are there posts on here about the justification or otherwise of protecting bank jobs. How many jobs in banks are for processes that add zero value to customers? How many processes in banks are for processes to handle the awful gaps in capability created as a result of outsourcing to IT companies?
So here is how it has worked...Top guy get's a massive bonus for introducing a short term saving through local job cuts, outsourcing to India. The people left to perform the work struggle because of said job cuts, and because the Indian capability doesn't fill the gap, and introduces a process/culture/language (there is English-English and there is Someone-Elses-English). Meanwhile, top guy clears off to next job with a higher salary based on a track record of making savings....meanwhile previous company costs sky rocket, morale is reduced to a lower plateau, and the staff await the next great cost-cutting-bonus-claimer
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133
You bought a German box that 40% more costly than a box made in Britain because it had the look of quality, the feel of quality and resilience of a box that Britain can not produce. We have the idle factory and workforce, but that box just does not have the kudos. Why pay 5 quid for a British box when you can pay 7 quid for a German one.
Subsidy instead of pride?
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Correction:
The German box was cheaper.
Market forces prevail in Germany without diminishing the Brand
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#133
We need to remember that we have no British manufacturers of metal boxes, just foreign ones who locate factories here to make their boxes. Then they send the profits back to their homelands.
British metal box manufacturers gave up ages ago, since their boxes were expensive and made by fools.
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Gordon Brown is not so stupid as to allow Corus to take British money to support a former British industry that Corus recently snapped up so cheaply.
He will not be fooled by threats of redundancies, it would so obviously be throwing good money after bad.
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I work for Corus and I dont remember the Welsh voting to take a pay cut when Ravencraig was in trouble or when my division made people redundant earlier in the year
Yes we have a problem and I dont know teh answer
Thats why Mr Varin gets paid teh big bucks and I can look forward to a pay cut
Turkeys vote christmas.........go figure
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We do subsidise wage costs. A large number of people being paid more than me, for doing a job that isn't required.
It's called the public sector.
Note that this is not aimed at all public sector workers, some who do very important jobs very well. I still find it galling that a public sector worker who was on strike for better pay rises couldn't understand why I didn't agree with him- why should I pay more taxes on my salary (which is going up less than inflation) so he can have the full payrise he wants? Everyone has to realise their standard of living will take a hit. Maybe they should look at lowering the wages of government-sponsored bankers, who have had above inflation rises for the last decade, as they can afford to take a cut!
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Topical:-
The German steelmaker and engineering company ThyssenKrupp has begun talks to reduce working hours at its steel production facility, the German daily Handelsblatt reported.
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# 133
Ten out of ten, given the choice people will pay over the odds for perceived value and quality. They will also shun the shoddy. Hence sterling’s decline, it is poor value and prone to breaking down. Congratulations to Gordon and the ugly glove puppet. You have ruined Britain by levelling down not raising up; but of course that is what the socialists always want to do.
Quantity never ever quality.
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shiver me timbers tom edinburgh # 131
You haven't done very well catching me so far and you already have a fair-sized navy and a carrier or two.......
I CONTINUE TO INTERCEPT YOUR SHIPLOADS OF MARKS and SPARKS SWEATERS AND PLASMA TV SCREENS WITH IMPUNITY; SOUNDS LIKE YOU WON'T BE NEEDING THEM ANYWAY
but having a couple of nice new aircraft carriers and no planes to put on them might require a level of stupidity beyond what we've seen so far, if that's possible
guess you could use them to store unsold cars offshore at Southampton docks
I cower before your naval mite
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It's always a conundrum isn't it?
I remember the early 90's (when, incidentally, a differently coloured set of politicians were in power). No hand-outs then.
But you could see the skills drain out of UK manufacturing as the old-guys got redundancy, graduates turned away, apprenticeships scrapped. Sure we had not invested over the previous years like we should have done. But it would be good to have some of that manufacturing back now.
Perhaps we let it go too easily then?
Surely one of our basic problems since the 1950's has been short-termism. But, there again, perhaps we haven't been able to afford anything else? So letting the SS UK go down at last sounds like an option, but of course it is not - the chances of any good coming of that chaos is negligible. No politician of any persuasion would advocate that because it would be so cruel on so many.
So do we repeat the 90's and let more manufacturing go to the wall, or try and keep some this time?
By the way, there's a lot of talk in here about "markets" as if it is a religion that must be believed in blindly. I don't want to deny the existence of markets, that would be crazy. But they are not deities - if you stop blindly believing in them, you will find that they are a man-made mechanism that is a friable as any other man-made mechanism. The reverence they enjoy is only a fashion.
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#144
We need to remember that we have no British manufacturers of metal boxes, just foreign ones who locate factories here to make their boxes. Then they send the profits back to their homelands.
British metal box manufacturers gave up ages ago, since their boxes were expensive and made by fools.
_______________
You're right of course. Though I believe it's more a case of lions lead by donkeys when it comes to UK manufacturing. Those 'fools' seem to make a decent enough job of building Japanese metal boxes.
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re: 141. At 7:34pm on 11 Dec 2008, ebuyeck
(re: IT Outsourcing)
Actually it is all about costs not quality. Your daily wage is the equivalent of a monthly wage in India. As Indian quality is currently missing, the plan is to slowly train them and roll out operations.
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I cannot be the only one who is is sick of hearing about "government" and "the taxpayer's" money being used for x, y and z.
It is PRIVATE SECTOR money. Any "taxpayer" that is employed by the government or working for a company supplying the government is NOT really a taxpayer. Where does the money come from for them to pay their taxes?
These people are not wealth-creators they are simply wealth-consumers (maybe even wealth-destroyers). And the few wealth creaters are getting fewer by the day.
Perhaps it's about time we took the corollary to the old colonnial's idea and have "no representation without taxation". Why should they have a vote in a system for which they are not paying?
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#137
But *almost all* the money made by the City is effectively a tax on the rest of us. The fact that the Government gets30% back in taxes is a small consolation. It's as if the Sicilian government got 30% back from taxing the mafia - it wouldn't change the fact that the mafia money was extorted, and the rest of business in Sicily would be a lot better off without it.
Why do you thing the money we've been paying into our pension funds has disappeared? It's basically a slush fund for the City.
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As a tax payer I object to funding poorly run business'.
If it cannot stand then let it fall.
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140
I think you are probably right in that MPs do not do something about public sector pensions not because of selfish reasons.
By my reckoning there are more private sector workers than public sector workers.
There are many millions of private sector employees with serious pension provision issues.
The sums needed to finance public sector pensions are astronomical and dwarf the amount of taxpayer monies poured into save the Banks.
Robert, how about an Article on this ? The sums involved are larger than most of the other UK financial issues recently raised.
This must just about be the largest financial issue to dominate taxpayer finances over the coming years, yet it receives comparatively little political debate and scrutiny, although it is regularly mentioned in the financial press.
I have no qualms with a lot of the work undertaken by teachers/doctors/nurses/police/firemen and a whole host of other public sector employees, especially those on lower incomes.
However there are great swathes who are, compared to the private sector paid far too much when pension provision is taken into account.
There is far too much attention paid to the average private or public salary. Indeed as has been pointed out, the average public salary already exceeds the average private salary.
The focus should be on the average private v public sector remuneration package, including the associated pensions.
Crunching the numbers, the average public sector remuneration package, including index linked pension, is around 40-50% higher than the average private sector remuneration package, if the impact of the end pension is taken into account.
It needs addressing.
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The point of the Dutch scheme is to keep employees on the books of stretched companies during the most acute phase of the economic contraction - in the hope that the relevant companies can afford to pay wages once more, when the recovery begins.
==============================
This statement is not true, the Dutch 'scheme' you talk about does not exist. The Dutch workers have indefinite contracts, this means that unless a company goes bust it is almost impossible to sack staff, this Dutch 'scheme' has existed for at least 40 years.
Also, all people working in the Netherlands pay part of their salary to ensure that if they do lose their job they will receive up to 75% of their old salary for one year.
I am unaware of any other blog on the topic, however, I wanted to draw your attention Mr Peston to the comments of the German Minister, his comments are shared by the Netherlands, Belgium and Luxembourg economic ministries.
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:-) somail pirate #150
I have to admit that buying an aircraft carrier without signing off the budget for the jets is a bit silly.
I hope you have life insurance. Probably the main reason the US navy is leaving the pirates alone is that sorting them out will be a convenient way for the new guy in the White House to show the rest of the world that he's not a soft touch.
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#152
The "fools" were not restricted to the nutcases of Longbridge (our old friend Derek Robinson for instance). The management was pathetic.
"Lions lead by donkeys" is gross overcompensation. I prefer "Lemmings lead by Timid Rabbits".
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#125
Yes there is an inequity. But the problem lies with the private sector pensions rather than the public sector ones.
The whole concept that we need to stash away 15%-20% of our income in "pension funds" that are then "invested" by the City is an enormous con. They just use the money as a slush fund, particularly tracker funds then just follow the market slavishly and lend the funds out to shorters, not caring what the effect on the fund's value might be. The money just slowly disappears.
The true concept of pensions is that at any point in time, those in work contribute some of their income to those who are retired. This has always been the idea, from the Stone age onward. That is still the way public sector pensions work. 30 or 40 years ago that was largely still the case with private sector pensions, until crooks like Maxwell started stealing from the funds and it was thought safer to spread the fund across the stock market. And that just led to further theft.
We need to move to a European model where we rely on the state to provide our pensions funded through current taxation. The idea of privately saving a large percentage of our income throughout our working lives just doesn't work. It leads to a glut of money in pension funds, and hence to the asset price bubbles that have brought about the current mess.
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vegetable-grower , private sector employers don't "create wealth " from nothing , you know. In an industry like steel as much as any , the *workforce* helps 'create' that wealth too . The same workforce that is the subject of this blog. Sounds like you need to have a look at Marx's labour theory of value, even if you only accept some of it.
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tompaineXR5 (#162):
I didn't say it was only employers did I?
As someone who currently owns the means of production, employs no-one and lives by the fruits of my own labour I think I may be past needing to refer back to Marx's labour theory of value :o)
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133 Themightyrover
The technology is mature, there is only superfical difference between German British or French Japanese products. The Germans targeted percieved technology as a marketing tool, ie making something look technical as well as being technical and talking about quality. I hold first degree in design and a first degree in engineering. I have worked in senior management in technical, marketing, contract positons and managed major R and D programmes with internal projects and major contracts with centres of 'excellence'. I am not in that area at present, I am involved with something less fundamentally dependent on UK policies for strategic reasons. I want to be independent as far as possible of Crash Brown and his kin. There is nothing wrong with the quality of UK workers or technical capability. There is a lot wrong with the short termism management. QED. There is a lot wrong with the governments strategy, QED. There are also problems with the EU grant aiding start up factories in any sector when there is oversupply for political reasons, again QED. Conventional UK manufacturing has done nothing but shrink and it has not finished shrinking. It is unstoppable and a delusion to think subsidy can help. When people in India go wading in a river fishing for shrimps and get eaten by crocodiles because they cannot earn 50p a day elsewhere and have to eat, the differential is too big. You build a training centre, educate them give them a mature technology and away you go. If it takes a while so what. Asians are bright and hard working. Manufacturing of a particular type is returning to the UK but not the traditional sort. China is impacting adversely on some craft sectors in India which gives you some idea of the scale of the problem.
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#155
It was a massive net exporter of whatever it is they did; the Balance of Trade is now about £8.2bn negative on goods and £3.5bn positive on services, each month. Of the services, finance is the biggest.
So it did/does have a net value to the economy.
Of course, this brings me onto my favourite subject, which is the apalling loss made by UK PLC every month. c£4bn a month. Every month. THAT'S why we're going bust.
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161.
A fair point although imagine the cost of the government having to equally support public and private sector employees' pensions !
I lost faith with my private sector pension fund when the large insurance company running it decided to charge me for holding some of my funds in cash, on top of already producing a miserable return on cash, at a point in time when it was quite easy to make 5-6% return on cash.
Virtually the only reason for investing in a private sector pension fund is the tax relief, whether that be 20% or 40%.
Even with that, the average private pension pot will produce such a meaningless pension that the average person would be better advised not to contribute to a private pension scheme.
Private sector annuity rates will further decline, longevity will increase and the returns from private sector pensions will barely cover the council tax, used to finance local authority index linked pensions !
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I visited a medium sized manufacturing company in Germany this week. Who have put many of their employees onto short hours (50% reduction in hours in some case) .
This is a very fine company that is just doing its best to ride through these difficult times without making people redundant.
I understand that in Germany the Government Employment Department (Job Centre) subsidise partly the lost income.
I also understand this is open to all companies that want decide it is right for the current needs of their company. And is possible for a period of up to 18 months.
I am surprised that Robert Pestons spin on a similar arrangement being considered has to take such a negative view, and suggesting that the Government would have to pick winners and losers. The alternative is people being made redundant which the Government has no say in (They cannot pick and choose) So keeping people in employment could help minimize the impact on wider economy and save Government money as they will not end up having to pay full unemployment benefit to employees that have been made redundant.
And a timescale of 18 months gives companies a chance to adapt to the changing economy.
Some more positive stories please Mr Peston.
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# 104
I think you'll find that this is precisely a Labour focus group actually! Every policy GB has had on the crisis has been tested here first. RP is the Treasury Press Officer at the BBC.
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I notice a lot of comments on public sector pensions and how they should be modernised (I supose that means an end to index linked). Well ok that's fine, so we need to balance this with some private sector pay structures so that public sector employees can plan for their future as well.
This of course assumes the private sector is a better, more efficient vehicle for delivering wealth creation, and after this unregulated banality that is questionable.
This unholy mess is a direct consequence of our inability over the years to protect develop and invest in real wealth, the skills of individuals that manufacture the best quality goods. We have little manufacturing base to work from now, that's why our pain in this recession will be intense beyond imagination.
We need a leader of vision and intellect to guide us through these stormy seas, with a clear picture of what is to be achieved, and we just don't have one, in any of the parties that currently govern or wish to govern us. If we change governments now it will make not a jot of difference.
The Welfare State needs a complete and utter overhaul, Visionary investment in MANUFACTURING of all types, world beating quality cars (plenty of scope for technological innovation there) down to quality toys. This may help us regain world respect from our skills and innovation.
For far too long individuals in our society have been overlooked for the margin of profit that can be paid to the owners of capital. It's long overdue but a swing to labour and away from capital as the most important factor of production is something that must happen, people must get their voice back, society must recognise its most important asset, people must become more involved with politics and this can only happen if these people no longer feel disenfranchised and feel their voice is important.
State as the remover of choices is not an option for any sustainable period of time, people must dictate to Government and not the other way around.
One final thing, the cost we pay to be governed. Government itself is far too expensive and has now become a yolk too far! Welsh Assembly, Scottish Parliament, Westminster, Europe, and thats without poll tax.
All in all we are looking right poorly, and its us, hard working folk with a genuine sense of family that will need the most surgery and consequently feel the most pain.
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# 108
Corus pays CT just like any other company operating in the UK. I won't bore you with details of transfer pricing etc to make sure "we" get our fair share, and they can't "export" revenue to low tax jurisdictions. I wouldn't worry about it.
Now, if Corus were to subsidise their workers' wages for 24 weeks, ie if they think the downturn is temporary, then we can assume their profits here will be lower. If that's the case, they pay (quite sensibly) less CT, efectively a sharing of the pain between the company and the taxpayer.
So, my question is, why should taxpayers subsidise them more, and pay all the wages for a time?
Answer, as I said earlier, this is just a scam to pay unemployment benefit in all but name to those on Corus' payroll, thus avioding more bad unemployment headlines for the government. Nothing to do with looking after the workers, unless you regard Labour MPs as "the workers".
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Why is Corus struggling when from November 2008, three trainloads of steel coil is being imported weekly via Immingham on its way to Washwood Heath? It seems strange that this arrangement has just come about when Corus wants money from the taxpayer. Surely if we were not importing so much there would be no need for short time. It is ironic that these trainloads would be passing very close to Corus in Scunthorpe. Information read in 'The Railway Magazine' dated January 2009.
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You know the feeling!
http://www.dw-world.de/popups/popup_lupe/0,,3866223_ind_1,00.html
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#165
I wouldn't argue with you regarding the importance of the loss made by UK PLC every month. The fact that this was deemed "unimportant" and ignored year in year out until we are massively in debt is probably the most serious problem we face.
I'm not at all convinced by the so-called net income on services/invisibles over this period though, at least not in relation to the financial sector. How much of this income was simply temporary inward investment because we had excesively high interest rates and an overvalued currency? ie exactly the opposite of what was needed for our manufacturing industry to have succeeded.
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I wonder how much of British industry consists of plants whose current running costs are not competitive but have continued to be run during the last few boom years because the capital expenditure has already been made in the past and so its not worth replacing them with capacity in other contries.
Obviousl these if these "zombie" plants are closed during this down turn they will be replaced by capacity elsewhere when things pick up.
It may be worthwhile for the goverment to offer help for such capacity, as it may last another decade or so if it survives this downturn. By then who knows what the world economy will look like.
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# 118
All I can say is I wish Steinbruek was running for office in the UK (I'm British) or Ireland (where I live). I'd vote for him. Clearly streets ahead of any of the muppets we have to choose from (in both countries).
Brown, Darling, "Dave", "Ossie". What a total waste of space! What hope Al Qaeda blow the lot up before the election? I guess we can always hope.
As for the Irish lot. Corrupt to their collective core, irrespective of party.
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#166 "Virtually the only reason for investing in a private sector pension fund is the tax relief, whether that be 20% or 40%"
Quite - and I would propose abolishing all tax relief on pensions and using the additional income to boost the state pension as a first step.
I have no confidence in my private sector pension schemes at all (and am mightly relieved that my wife has worked in these public sector all her life).
It wouldn't cost anything to switch all pensions to be funded out of current taxation. We could do it tomorrow. In fact I'm tempted to say we could just nationalise the private pension funds now and use the money to pay our way out of the growing depression.
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# 124
"...wasn't the owner of TaTa steel a major Labour Party contributor?"
You cynic! ;-) And just to add to the fun, was he the one Mandy tried to get a passport for and had to resign? Remember, the second time Mandy resigned?
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# 124
Oh, and I forgot. They're now calling the US Treasuries market as the next asset price bubble for the reasons you alluded to, ie actually paying Uncle Sam for the privilege of lending him money.
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I GIVE UP
My last post on any subject (in a semi-sober state)
The thumb of 'Caesar' is being used and abused during Caligula s reign
Keep blogging and enjoy yourselves, this blogger is obviously off course and being ignored.
Signing out
peterskitchen
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7#
How's the administration going over the one million plus default by one of your retailing customer's? Hope you factored bad debts into your risk management strategy!
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#154 "I cannot be the only one who is is sick of hearing about "government" and "the taxpayer's" money being used for x, y and z.
It is PRIVATE SECTOR money"
This is ideology and wrong. Very little that you have would be possible without social organisation. Power, transport, education, police etc. As for the money itself, look who's head is on the notes.
Without society, there would be no private property, no justice, just the law of the jungle. You would only possess what you could fight to keep hold of, until you got old. Look what happens to old male lions. Not nice.
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# 130 chivalrousStephenG
Sorry hadn't read this before I said pretty much the same thing later on. Glad to see I'm part of a group of cynics. SplendidHashBrowns is another one.
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# 134 glanafon
The 800 US companies are actually lobbying to be allowed not to make top up contributions to their pension schemes that are in deficit.
We haven't even started on this one in the UK yet, thought the FT one day this week led the front page with a story that UK pension schemes are GBP 155 billion in deficit.
RP hasn't covered this yet. I wonder why? GB and Ally D mustn't have a world saving plan ready yet.
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163 and previous .. veg grower
A flat growth rate whilst the bubble was growing. A collapse in the financial sector whcih has been suggested as providing approx 20% of tax revenues, whether that is right or not. Some tax revenues still to flow but unstated so not total wipeout but a big hit. Presumably substantial tax income from housing market and spin off and support areas now missing, another big hit. A government that wants to keep spending despite a fall in income. A private sector with shrinkage. A public sector which is proud of the level of expenditure and does not want to consider cuts, actually boasts of the level of expenditure. A growing number of economically inactive people who still want sophisticated support. Private businesses in decline looking for government handouts.
The numbers do not add up. There is no sensible government discussion of the numbers not adding up. A number of people are likely to vote with their feet fed up with the nonsense, let alone a GE. There does not seem to be any rush to grasp the nettle and realise the forthcoming environment either at government or in some businesses. It is implement changes to suit the new environment and implement them rapidly or have damage. Then get growth.
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31#
Isn't Somerfield still trading? Look out for lawyers!
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158. At 8:24pm on 11 Dec 2008, Rustigjongens wrote
"I wanted to draw your attention Mr Peston to the comments of the German Minister, his comments are shared by the Netherlands, Belgium and Luxembourg economic ministries"
Thanks for the insight. No surprise the BBC isn't mentioning it. After all, it's basically an extension of the Treasury's/No 10's Press Office. The world that GB is saving appears to be shrinking pretty quickly.
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I absolutely share the concern about the risks of losing deeply grounded skills in the steel and car making industries.
Myself and my poorly qualified graduate engineers are grateful to have an opportinity to risk our professional and financial necks every day in our quest to make a modest living in a lowly NON-STRATEGIC industry.
Our over-arching feeling however is one of great reverence for the enormously skilful and STRATEGIC accountants, lorry drivers, draftsmen, metal bashers, machine operators and the like..who must have millions and millions of o'levels in order to work in a STRATEGIC industry.
I want to contribute 15% of my earnings to paying their wages during the downturn and would like to know which government agency to send my money to...can anyone help please?
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#173
Such transations aren't I believe, part of that services surplus. Capital sums are excluded I'm certain.
The banks were very profitable and with the City being a World centre it was definitely a big exporter.
I agree though about the ignorance of the balance of trade. It's annoyed me for many, many years. the bad news is that many still don't get it; a notable economist only three weeks ago argued with me that it didn't matter much (as we have a floating currency!!!!!). The man is a fool of course, but sadly economics has never been a science blessed with much in the way of genius expertise.
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# 161
Pay As You Go pensions were, as you say, the norm until recently. Indeed, State pension schemes continue to operate in this way, and are all slowly going broke. Most countries are moving to a personal pensions model, such as the UK scheme announced not that long ago.
You need to think of changing demographics here. 60 years ago, the "typical" male worker started work at 15, retired at 65, and died at 70. So, they worked for 50 years, paying taxes to support the already retired etc, then drew down (and depended on the next lot of 16-65 year olds) for 5, then died.
Today, the average age of someone joining the workforce is 20. They want to retire at 60, and there's a good chance they'll live to 80. So, they now work for 40 years (down 10) and draw pensions for 20 years (up 10). The ratio of "paying" to "consuming" years has dropped from 10:1 to 2:1. Increased life expectancy is adding at an exponential rate to the number of pensioners to be supported. At the same time, birth rates have fallen since the end of the baby boom years of the 60s, so there are fewer people to pay pensions. The fact is your PAYG model simply doesn't work. Within 20 years, workers will have to pay something like 35% of their earnings just to maintain the current State pension level (adjusted for inflation) of the then-retired population.
I'm not going to explain why defined benefit pension plans, the standard form of provision in the private sector until recently, have been the greatest source of wealth redistribution that the world has ever seen. You will probably never accept it. Suffice to say, such schemes are the largest source of capital accumulation in the UK, and most people of working age, certainly over 35, will have some benefits accrued under them. Whilst returns have been poor over the last 10 years, mainly because of the 2000-2002 equity bear market, and this year's crash, the fact is they represent a fantastic accumulation of wealth for the bulk of the working population over the last 60 years. Again, however, they are unsustainable in an era of fewer workers, shorter working lives (now changing, I know), and longer retirements/life expectancy.
The fact is your "European model" of pension provision is a one-way street to poverty for virtually all. Every European state is looking to move away from such provision (check the Swedish system for an example).
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#182 JayPee28bpr
V chivalrous of you! Thanks - I enjoy your posts and I will look out more for SplendidHashBrowns in future too.
So many Govt initiatives in Uk at the moment seem aimed either at generating simply the appearance of activity or else to postpone the gravest consequences of Recession (or should I say Downturn) for a year or so, building up a takeover poison pill defence in the process.
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When you think about it, it's blatantly obvious how the huge govt liability for public sector pensions will be paid, as will the huge amounts of unemployment benefit required.
The government will print money. This will rapidly cause the pound to become worthless. The beauty of this is that MP's salaries and pensions will also become worthless.
If you are a prudent saver and have no debts, the obvious thing for you to do is to transfer your wealth to another currency or gold. Better do it quick because exchange controls will be brought in sooner rather than later.
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"Pay cuts" - I said it would come to this months ago - 1930's here we come. Next it will be the public sector and the BBC!
Would it not be better fro the Government to start cutting the sillier froth from the spending plans, i.e. ID cards etc. and bring our troops home as we cannot afford to keep them in either Iraq or Afghanistan. Would it not be better to pay large number of British workers to build aircraft carries instead - we can't do both!
A pay cut for senior civil servants would be good idea too.
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Can Robert Peston comment on reports in the Daily Mail today about leaks allegedly from the Treasury into which the Police may be inquiring.
In earlier reports in the Daily Mail in recent weeks Robert Peston's name was linked to that of a Treasury official named by the Daily Mail as John Kingman with whom he had worked at the Financial Times.
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#181: Sasha,
#154 "I cannot be the only one who is is sick of hearing about "government" and "the taxpayer's" money being used for x, y and z.
It is PRIVATE SECTOR money"
"This is ideology and wrong."
I believe it's closer to being a fact than mere ideology. The money to pay taxes comes initially from private sector endeavours - workers, managers, owners or whatever. These people produce the goods and services we need - and a lot that we don't! As to whether what I said is "wrong": surely that depends on whether it is indeed "ideology" or a "fact". Surely the point of ideologies is that they can differ/be debated without necessarily being "wrong" :o)
"Very little that you have would be possible without social organisation. Power, transport, education, police etc."
Have I advocated doing without it? I've only said we should acknowledge where the money comes from to pay for it. And questioned whether that source of funding will be enough to last.
"As for the money itself, look who's head is on the notes."
Not sure how relevant that is - there's a horse on my cashpoint card:o) Banks normally create money more than societies do. Although at the moment HMG is competing with them!
"Without society, there would be no private property, no justice, just the law of the jungle. You would only possess what you could fight to keep hold of, until you got old. Look what happens to old male lions. Not nice."
Again, you seem to be putting words into my mouth. Where have I mentioned "social organisation" or "society"??
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The worrying thing for me, as a recent graduate, is that if inflation does become rampant, my savings become worthless, whilst the student loans company shift my owings up in line with RPI.
Any large amount of inflation is going to cause massive problems for the millions of people saddled with student debt, which ironically, is one of the few debts it is impossible to manage without at the minute.
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#189
Sadly the world has been copying us (and more importantly the USA) in many unfortunate ways over the past few years.
The demographics have certainly changed, and that means that the costs have increased - but that is equally true for either approach. Essentially 18%-20% of GDP now needs to be spent on pensions (I can't agree with 35%). But that *does not* mean that that money has to sit around in a City pension fund throughout each person's working life. The idea that the European style pension is "going broke" might be put out by pensions companies, but it just isn't true.
I could be flippant, and say that "defined benefit pension plans" have indeed been "the greatest source of wealth redistribution that the world has ever seen" in that huge sums of money have transferred from ordinary people to the City. I'm (sadly) well over 35 and I've worked for companies that have made very generous contributions into my pension schemes - but even before the current crash, my pension funds are hardly worth having (FWIW I moved my schemes into cash a couple of years ago so they are not quite as bad as some peoples')
As you say, returns have been poor over the past 10 years, much better in the previous decade or so. Why do you think the previous decade was more typical of long term performance? I can think of many reasons why the performance preceding the last decade was atypical (first inflation was higher which ate away at the true value of pension payments, and then we had a stock market boom primarlily as a result of money being pumped into the stock market precisely because of the conversion to defined benefit plans).
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I see no problem in principle calculating the benefits workers would otherwise receive and paying that through companies but what's the company side of the deal - to take them backonfull payroll at the end of 6 months or to retrain themfor leavingteh company at the end of the 6 months? If nothing the Dutch are in for a very nasty shock when they realise every single company is claiming the subsidy! Surely this sort of subsidy is illegal anyway under EU law?
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The best way to stop the brain drain by making people unemployable is to to do the following:
1) Reduce income tax to 15% of first taxable income of £25,000
2) Next increase income tax to 25% on taxable income from £25,001 to £38,000
3) Next tax all taxable income from £38001 to £80,000 at 40%
4) Finally, tax all income above £80,000 at 45%
5) Freeze the job seekers allowance for 5 years at £60 per week including any related benefits like housing etc.
6) Abolish income tax on all bank interest up to £10,000 and any interest above £10,000 should be taxed at the top marginal rate of the taxpayer.
7) Start taxing dividends in the normal way like any other income including repay any tax credit due to low income earners.
Please pass these points to our Chancellor for his consideration.
Thank you.
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industries deplete resources for profits and not utilitarian ethics
doesn't anyone ever wonder or worry that all the debt built up has been for total junk. e.g. designer clothes, cd's, home decorations
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Careful what you wish for!
And remember: "their money" ie Gordon Brown's subsidies is actually YOUR money.
Want the Dutch solution still?
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If , as according to some previous posts , the City is so good at generating wealth for fundholders why are so many of the Endowment Mortgages taken out ( touted) in the 80's coming up to fruition with a ( sometimes disastrous ) shortfall . To cap it all they are asking for a top up payment adding to the premium to bring it back on track . If after all that time ( twenty - odd years) they can only muster approx. 80-85 % then how can anyone have any faith in the city providing them with a decent pension . For the man in the street to rely on the city to provide anything worthwhile for his future personal financial needs is foolishness.
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# 159 tom me boy
Mr Obama is our honourary Kenyan friend and would surely never hurt us; anyway he'll be pretty busy trying to rescue the American economy
Meanwhile the pirate economy is doing just fine compared to most; and we don't keep our loot in any of your crooked banks, just buried on a beach; inflation, deflation, sterling/euro exchange rate....... it's all the same to us
We don't support the Chicago School or the Keynesians and don't give a damn what the Germans might have to say about it
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Virgin megastores going bust?
Article in the times about knock on problems from Woolworth's and Zavvi.
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# 196
The figure of 35% required to fund state schemes comes from government reviews, not the City or the investment industry. And it's governments that are acknowledging that demographics make PAYG pensions unsustainable.
As for defined benefit pension scheme returns, I said they'd been fantastic over a 60 year period, not the 10 years prior to the last decade. The reason I said that is, well, because they just have! Just check the numbers.
If you just want to check investment returns generally, check the BGI survey of UK investment returns. This shows returns going back over 100 years across various asset classes (equities, bonds, property, cash). You might also like to read virtually anything by Warren Buffet, who'll give you great insights on how to invest successfully over the long term. His publicly traded Fund (Berkshire Hathaway) is likely to suffer a significant loss this year: the first one in about 40 years.
From your comments, I suspect you have defined contribution pension provision, ie you bear the investment risk. I'm not sure what advice, if any, you've had on your asset allocation strategy. Such advice may well have been poor. However, I can state with no fear of contradiction that your preferred option of PAYG pension provision is officially dead throughout the world. There is not a single country looking to adopt it, and the vast majority are actively working to reduce their exposure to it. It just doesn't work in an environment of increased longevity and declining birth rates.
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What I would like to know is - instead of just blindly subsidizing wages, can't the government subsidize the extra admin/HR cost to incentivise companies into offering part-time schemes in this situation? This way, people might voluntarily also give up some work-time / pay to help the company along to give companies an alternative to just laying people off.
I see that this is not an option for everybody - but for skilled workers on 'better' salaries it is, and the more of those can be kept IN work, the better it will be for both those people AND the economy (after losing so much of production work, and not being quite as competitive as possible in low-skilled working areas, losing high-tech / high-skilled workforce will make it a lot harder to get OUT of the recession on the other end...
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ad2002ad - yes, I'd go for that if there is a fair chance that it will (a) save money on things like paying dole, (b) soften the rise of crime caused by high unemployment or other unemployment related costs (e.g. psychological impact on the unemployed, secondary jobs lost), (c) means keeping companies running that will PAY taxes (and employees that pay taxes)...
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Taxpayer support of various industries sounds like the 1970s re-visited, although some strategic industries should be protected. The tax payer already subsidises millions of low paid jobs through the tax credits system.
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# 201
Firstly, let me admit to having worked in financial services all my career.
Then let me say I sympathise with your view of the industry based on things like endowment policy mis-selling. I can add a few more to the list. The point, though, is that financial services consumers have been woefully served by the organisations supposedly set up to protect them over the last 20 years. The fact is that FSA and its predecessors allowed firms to sell endowments, for instance, knowing both that: a) purchasers did not understand them and hence the risk of them failing to "do what they say on the tin"; and b) providers were aware of the risk that there would be shortfalls.
The concept behind endowment mortgages, which began to be sold in the 1970s, is that debt falls in real value terms in times of inflation. And of course we had high inflation during the 1970s-1980s. In such times, equities may well fail to provide real returns (ie beat inflation), but they're unlikely to fall, whereas debts such as mortgages stay at the same monetary value. Therefore, using an insurance policy linked to equity investments ought to result in lower overall mortgage payments in times of high inflation as the nominal increase in equity values part pays off the mortgage.
The model risks not working when inflation is low. Firstly, there is less real erosion of the level of the debt. Second, there is less inflationary "fat" in equities' performance. Basically, they is much higher risk of them falling in absolute as well as real terms. In which case, it's safer just to pay off some of the mortgage principal each month rather than risk savings via equities failing to grow sufficiently to pay off the mortgage.
So, selling endowments in the high inflation 1970-1980s was fine, but why did SFA or its forerunners allow them to be sold in the 1990s when inflation fell steadily? Effectively endowments are a 25 year bet on a high inflation environment. No prudent adviser would suggest taking such a long dated bet on the largest single investment any of us ever make, ie our house. The related borrowing is usually a multiple of the borrower's income. The borrower typically has limited other assets to liquidate to repay the debt in the event of the endowment falling short of the required value to pay off the mortgage. It's an inherently unsafe product to sell in a low inflation environment.
So, I understand why you feel let down by the financial industry as a result of examples like this. However, you should know there are plenty of us who would never have dreamed of selling you something which is so obviously unsafe. You might like to ask why the regulators, at least, did not stop the sale of these things well before their mis-selling reached scandal proportions. That's a story in itself. Suffice to say, there are many conflicts of interest between government (who love the industry's tax payments), regulators (who are under pressure not to damage the tax take and many of whose staff really want to work for the firms they supervise), and financial firms (who love the veneer of strong regulation). Consumers are the last group who get considered.
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# 164
Galanafan you speak a lot of sence. Lord only knows where we go from this position we find our selves in.
I'm not at all optimistic about the future of the UK economy.
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For goodness' sake! What next?
A tax on teddy bears?
How can we possible entertain such an idea as wage cuts when a great many people cannot afford to live on their current wages as it is?
And would they agree to it anyway? Just yesterday, I asked one of my workers (already paid a reasonable sum, and more than at his last employment) to stay late for a couple of hours. He replied that he would only stay late if I paid him time and a half!
Unfortunately, he is attitude to work is all too common. We are renowned for being 'good' employers - we reward commitment, initiative, and hard work. We are considerate and this is what we get in return?
Pride in having a job and doing it well is fast disappearing.
Not only is this latest idea daft, as a nation we are too broke to pay for it. It would be too easy for many unscrupulous directors to claim difficulty paying salaries, have the government pay instead, and pocket the difference!
And ask yourselves this :
1. If darling Gordy and his gang put this in place, how many businesses would they actually help?
and
2. Who do you think would be at the front of the queue?
Answers:
1. Not enough of the right ones, cos they don't vote Labour!
2. Anyone who can falsify a balance sheet.
CUT THE BLASTED TAXES WHICH ARE DRAINING OUR DISPOSABLE INCOME, PUT vat BACK TO 17.5%, GET HOUSE PRICES BACK INTO INFLATION CALCULATIONS, AND GIVE PEOPLE MORE OF THEIR HARD EARNED CASH TO LIVE ON!
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#210
"Pride in having a job and doing it well is fast disappearing."
Yes, this is a point, but I'd doubt people have ever had that much pride in a "job". Most people have pride in a career that they have to carry with them for life.
How many people actually stay in the same job or even at the same company these days?
There's no motivation if you can just do enough to satisfy for now and if it doesn't, ah well, can always get another that pays just as well.
I'd wager the people who actually have some pride in what they do are (largely) doctors, nurses, vets, lawyers(!), soldiers, etc, (professional) people who have shown grit, determination & hard work to get to where they are, intend to do it until they retire and aren't motivated purely by the financial reward.
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I guess my point is that a career is what you do for a living, a job is just what you do.
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Haven't seen this on BBC news - from the Independent
Steffen Kampeter, the budget spokesman for Ms Merkel's Christian Democrats, said: "Peer Steinbrück's comments have nothing whatsoever to do with internal German politics as Prime Minister Brown has suggested. In questioning the British Government's approach, Peer Steinbrück is exactly expressing the views of the German Grand Coalition.
"After years of lecturing us on how we need to share in the gains of uncontrolled financial markets, the Labour politicians can't now expect us to share in its losses. The tremendous amount of debt being offered by Britain shows a complete failure of Labour policy."
A couple of comments on the Biased BBC blog also struck me :
"if weakness in a currency were such a good thing (for exports), Zimbabwe would be going through an economic miracle"
"Exports are yet another of Brown's non-existent divisions being moved around the map in the Downing Street bunker"
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Can't we just take the pill, get rid off the illness and start to recover. All I see is a cold. turning into flu and some way down the road a bed case. Come on Brown, grow up and take the medicine other wise the pain will get worse.
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Paying 70% of wages might sound a good deal too many but without some guarantees its not a solution i suspect many of the workers would like either.
What is to stop the firm getting a handout from the government and still making the workforce redundant ???
For the workers themselves any redundancy payment is probably based on their last 12 months earnings a large wage cut would cut a massive hole in there entitlement,and they are still out of work so they might as well go sooner rather than later.
These are all things to consider.
People who think this recession is going to be over in the middle of next year are the ones who are good at creative accounting,we will change the way the figures are calculated again like we did with inflation figures.
It worked with us for inflation so worth a try again ???
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Looks like the World isn't quite as much behind Crash as he'd like us to think.
http://news.bbc.co.uk/1/hi/business/7778828.stm
And the German internal politics looks remarkably united and consistent!
At a time like this there really should be an election to allow the people a choice of which way to go. They weren't elected on a manifesto pledge to put the country in hock forever and really don't have the mandate to do so now.
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Bailing out the British steel industry is the biggest joke going for now. This is a guaranteed loss-maker without cheap energy sources. Since coal is no longer available because (1) very little is mined here anymore and (2) the environmental fascists are up in arms over its use in such industries, there is no hope that this industry can compete with others with better resources.
The same money could be used to bail out 10x or more people in SMEs throughout the land !!
Of course, this government will bail out the steel industry by forcing mothers with young children back to work !!
Politics uber alles !!
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Wage Cuts eh? Would the Government support this if it went on wholesale? I very much doubt it.
Not because it's immoral, but because every worker claiming tax credits cannot lose - their tax credits will increase and they will be no worse off. The only ones who will actually take a hit would be the childless and those further up the chain who are on a high wage.
Not only would Tax Credits increase for those affected, but more would fall into the Tax Credit zone.
And who would make? Why big business of course with it's wage bill slashed and effectively subsidised by the workers.
I never used to believe revolution was a good thing. Now I am beginning to see lamposts with bankers and businessmen dangling from them.
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Robert, you seem to gloss over criticism of the Govt, I suppose this has nothing to do with your presumed proximity to Gordoom and Nulab?
The Germans are right, crash is trying to set up an early election before anything Brown hits the fan (or his fans hit Brown?). Brown is so incompetent financially that his plans will not only produce disastrous borrowing to be paid for by future generations, but will blow up in his face before an election (or be a damp squib like Vat cut). His focus groups will see woolies got there best ever trading day in the closing down sale - this will clearly encourage Gordoom to close down many more businesses to enjoy the same closing down sale success for the economy.
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Just heard Milliband! ON RADIO 4
As barking barker says:
JEEEEEEEEEEEEEEEEEEEEEEEEEZZZZZZZZ?
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BillieBson 180
Administration? Taking them over today.
Bad debt?already catered for.
Going all out for verticle integration to
control point of retail sale.
Woolworths maybe?? HA HA no assets.
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Dear Stevegwent,
Of course shareholders are only interested in "dividends and the value of shares". That's why they bought the shares. How a company achieves both is a by being profitable and growing so that it can afford to pay dividends and it's share price rises. That's in everyone's interests. Taking on debt is efficient (you pay less tax and the company is worth more) as long as your profits are stable enough to support it.
I don't know the Woollies case well, but in general, you are right that many companies (and households! and governments!) took on what looks with hindsight to have been too much debt, as interest rates were so low that it was cheap. The sudden reappraisal of risk we've seen since August 2007 has caught many out, not least the banks.
Greed has had a part to play in the crisis and recession, but shareholders wanting dividends and the value of firms to increase is not an example of it.
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Politicians seem to think the coming recession will be short (despite strong suggestions to the contrary).
Politicians' response to a problem is to throw good money after bad.
What we need, therefore, is for some money to be pledged to something we actually want to be saved (like ailing manufacturing companies rather than banks or V.A.T.) and will earn money for us later.
Only a 'temporary' pledge, of course.
Then as the recession deepens, they will have to continue their support or look as if they had made a mistake.
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I asked my occupational pension scheme whether there was a corresponding (advantageous) cap to the (disadvantageous) ceiling of pension increases [if RPI exceeds 5% pensions increases above that level are discretionary].
Good news! If deflation does come and RPI becomes negative then the lowest annual increase for my pension is capped at 0%.
Deflation seems to be a new utopia - savings become more valuable. Pension income becomes more valuable. Net savings interest rates (net of RPI and tax) become much bigger than now.
Please, please can we have some deflation?
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Re 210
I applaud your employee - he was just testing whether his staying late was valuable to you or just a whim on your part.
He was right - you didn't really need him to stay or you would obviously have paid him to do so (or offered him the same amount of time off when it suited him).
Sounds like the sort of place where people resort to sick leave rather than asking for a day off.
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Re 208
Excellent. But endowment 'shortfalls' are actually a bit of a storm in a teacup. You can see them coming and they leave you with a mortgage debt that is substantially smaller than the one you started with. Worst case scenario is a few more years of mortgage payments at standard variable rate.
What about 'interest-only' mortgages. These were not permitted (even in the high inflation 1970s) without an 'endowment-like' payment plan to ensure (most of) your debt was paid by the end of the term.
Whereas an endowment mortgage or a repayment mortgage has a defined term, an interest-only mortgage cannot have a defined term - it is for perpetuity, unless you move or go into long term care. Most people will move before they die and so allow the mortgage to be paid off then.
The next mis-selling scam will be anyone who has been sold an interest-only mortgage and told it was for a defined term - their mortgages will have to be paid off at the end of the defined term as their form of compensation.
Haven't seen this discussed much yet!
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An interesting moral dilemma,
As the bank of England continues to make huge cuts in interest rates without any real evidence that this will stimulate our flagging economy. What will happen when interest rates reach 0% as is predicted? One must remember that savers outnumber debtors by a ratio of 7 to 1 so in theory seven people will be worse off for every one who gains. This then removes far more spending power from the economy than is in reality put in. One could argue that the debtors on average gain more than a lot of the savers lose but I would imagine that most debtors spurred by their own risky situation will use any relief that interest rate reductions give to their finances to reduce their present exposure. Whereas those with savings who have used their interest as a form of income will have a greatly reduced spending power. On balance then one could reasonably argue that such a scenario would shrink rather than stimulate the economy.
Faced with this cut in income it is unlikely that savers who rely on this money will leave it in the banks and will no doubt look for alternative ways to invest thereby reducing even further the banks ability to make loans, for their depositors base will have shrunk considerably. I for one would rather have money in a safety deposit box at 0% than have it at 0% in banks that under such circumstances would all be vulnerable and I fear many would do likewise.
If or perhaps more likely when we arrive at this point in the economic downward spiral there is plenty of evidence to suggest that house prices will have slumped an unimaginable amount. However banks will be in no position to lend for mortgages to any who do not have an excellent financial history plus a very large cash deposit. At this point those savers earning 0% on their savings will snap up cheap properties without mortgage to rent for a sustainable income and who could blame them for doing it.
The government seems to overlook the simple fact that those who have considerable financial commitments are hardly likely to take on more debt and those who are solvent are not in need of sudden purchases for they are in a position to have purchased whatever they want when they wanted it without the need for credit.
We are in interesting times, how will it be resolved that is the issue?
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181 sasha
The problem is there are too many people doing things which are not driven by reality. The mentailty in the public sector is to focus on compliance with political correctness and documenting and proving all decisions are within the guidelines, even when it is known the guidelines are wrong. Whilst the private sector has its problems with focus it is only too aware that if it gets it wrong sooner or later it will fail. There does not seem to be the same imperative in the public sector. For example incapacity assessment is structured to comply with the statute. In almost all law the statute is amended by case law and that is taken into account. However case law is ignored in incapacity assessment until a review is demanded which is why reviews favour the applicant, who incidentally is probably sick and can be mentally ill and isolated in society, and most unusually is refused legal aid. It is most unlikely the so called reforms pending will change this situation. I could go on about other issues but they are all fundimentally the same. Carefully crafted execution against government issued bulletins which are pumped out willynilly and which are flawed in structure and do not allow commonsense to intervene. The public sector is not grounded in reality at present. The employees in it do not even seem to comprehend where the money comes from. We have now had several occassions where we have been threatened about non payment of council tax when the payment has in fact been made, and it is just a shrug of the shoulders and a 'clerical mistake'. Nobody would deal with these idiots if they did not have a monopoly. They would not exist in the private sector. I am afraid veg grower is right in at least part.
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# 225. At 09:35am on 12 Dec 2008, svrsig
My understanding on interest only mortgages was that they were only sold with some sort of plan in place to cover repayment of principal. I seem to remember "ISA mortgages" were a fad for a while, whereby the mortgage was interest only but the mortgagor also had to take out a regular savings ISA to provide the capital repayment. Pretty much the same as an endowment, except much cheaper. The regular savings into the ISA are set using pretty conservative assumptions for growth in equity values, so as to leave the mortgagor with their mortgage repaid and a nice excess as well. Interest only mortgages do have a term, just like any other. They have the same risks as an endowment mortgage.
Incidentally, I agree with what you say about endowment mortgages. The mis-selling scandal really was about how they were sold, ie "guaranteed" to pay off the mortgage and more; forget about the mortgage for 25 years etc. Many people found out very soon before they were due to pay off the mortgage that they had a shortfall. Essentially the (supposedly) financially expert sold products to the financially uneducated without fully explaining the risks, probably because the sales force typically don't understand the products themselves. Rather they sold them as a "no brainer" that only the stupid would pass up. They weren't quite as safe as suggested. Unfortunately, fairly typical of the way the financial services industry operates. Most of the people selling these things are as clueless as the purchasers.
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So Bowie was prophetic after all. "Panic in Detroit" (adapted) - "Having blown a trillion dollars they (the CEOs) made their way back home..."
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#204
If you think in terms of real goods and services, then the concept of pensions is really simple. Each generation of workers makes X% more goods and services than it needs and then gives them to that generation of pensioners. Whatever system is used that is what happens. It can be done directly and openly via taxation, or it can be done more covertly by defined benefit pension schemes (and note if the pension schemes do actually grow faster than the economy, then that too is a transfer of wealth and can in effect be looked on as just another tax on the working).
Either way the living standards of working and the retired at any point in time are the same. The problems with the defined benefit schemes are greater volatility and risk, leakage into the City and the huge distortion to the economy that they cause.
As for PAYG being out of fashion throughout the world, that is true. On the other hand it's only a few months since the whole world thought sub-prime CDOs were a really good idea.
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Could the government perhaps apply a condition when they fill the begging bowls of companies; all those at the top are paid the minimum wage - until the loan is paid back?
And maybe the politicians could start with themselves....?
I realise very simplistic but a lot of dross at the top would be removed or be made viable. Small companies sink or swim - why should big fatcats float around in taxpayers' handouts?
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Re 229 "My understanding on interest only mortgages was that they were only sold with some sort of plan in place to cover repayment of principal"
No longer true, I believe.
Most people's plan is "after 25 years or so of inflation, the debt will be trivial".
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# 231
"Either way the living standards of working and the retired at any point in time are the same"
Are they? Don't know and frankly I think you miss the point in terms of what PAYG means at the individual level, which is what matters.
Unfortuately, where the number or workers is falling because of falling birth rates, and the number of pensioners is rising because of improved longevity, then the cost to each individual of providing PAYG pensions rises, and the benefit to each individual pensioner declines (or stays constant).
To put numbers to it. Let's start with 4 workers for every pensioner (the level at end-WW2). If we set the pension at 100, then each worker contributes 25 to pay each pensioner 100.
Now fast forward to the near-future, where we have 2 workers for every pensioner. Now they have to pay 50 each to pay each pensioner 100, ie a 100% rise in contribution for no increase in benefit.
Now let's throw in general resistance to paying more taxes, so the 2 workers won't vote for parties that propose upping their tax to pay the pensioners. Let's say they remain willing to pay 25 each. So now the pensioner only gets a pension of 50 not 100, a 50% cut in benefit to someone "who paid in all their working lives". They probably won't see this as fair.
In practice, PAYG schemes have linked pension increases to inflation (not general earnings increases) in order to mitigate increasing costs and try to maintain a balance between workers and pensioners, both of which represent big components of the voting population. That's still not stopped the cost of pensions escalating out of control. Why? Because the simple explanation above does not factor in shorter working lives, and increased longevity, the impact of which is to reduce the total "paid in" by workers over their working lives, whilst increasing the total "taken out" by pensioners in extended retirement.
There simply is no alternative to saving throughout working life to meet financial requirements in old age. If you want to buck the trend and assume "the State" (ie future taxpayers) will keep you in old age, then prepare yourself for poverty. I doubt you'll be allowed to die in any developed economy, but you won't be comfortable.
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233. At 11:24am on 12 Dec 2008, svrsig
Don't know if that's right or not. Worrying if it is!
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Instead of direct subsidies to companies like Corus, would it not be better to ensure that they got some orders. In this way taxpayers could get something useful for their money, and to the extent that workers who otherwise would be doing nothing are employed, in real terms they would get something for nothing.
In Scotland we need a new bridge over the Forth, the old one might become unusable in a few years time. Why not allow the Scottish government to borrow the money to start work on this? Since the bridge would remain in use for many years, it perfectly reasonable to expect future taxpayers to pay.
There must be many similar projects. Think of all the steel required to update our railway system.
I do not accept the argument that it would take too long get these projects going. During World War II people were told to get on and do things, not just to sit around discussing how and what.
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#236
Ah, but now you're expecting the government to actually manage to do things rather than talk and tell others what to do.
Haven't you been paying attention these 11 years?
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I think Katy Perrys song Hot n Cold catches well the volatility of the market...What disgusts me about this car bailout story is the level of scrutiny given to the carmakers!!!They did not put the economy in a mess, the banks did but I cant remember a Spanish Inquisition for them!!!In other words lots of politicians brothers are bankers. Total hypocrisy!Well come to the new age of cant!
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Does Gordon Brown have an Iron Age person's brain? Researchers at York University will now be able to find out.
http://www.bloomberg.com/news/science/
Article:
"U.K.'s Oldest Fossilized Brain Found, May Give Clues to Life in Iron Age"
"A 2,000-year-old skull unearthed from a muddy pit by archaeologists in northern England contains one of the oldest brains ever discovered and may help scientists learn more about the confused workings of the Prime Minister's mind"
"“It’s a very exciting discovery, full of research possibility,” Richard Hall, the trust’s director, said in a telephone interview. “Brains are usually amongst the first parts to putrefy and start to go liquid within hours. It seems that this has happened to Mr Brown's"
OK, I've adjusted the quotes a bit, but maybe the problem we have is that GB is actually a living neanderthal.
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ebuyek - a good point on #141 and something I have experienced first hand.
The whole outsourcing model is a proper con and is yet another example of short-termism.
The initial savings are what encourage the firm to take up the outsource. These are merely wages saved because in the difference in the standard of living between us and typical outsourcing countries.
The first thing the bean counters forget is the management of the outsourced function. This is ommitted from the analysis because the thicko's don't realise that there is not an outsourced function that did not require management from the source company. I know this because I have been the mug who suddenly found they had to do their job - plus the management of the outsource.
The second classic mistake is that the wage difference is only temporary. I worked somewhere that was keen to outsource to thailand - and did - much to the applause of those bean counters. However as we trained up those lovely Thai guy's they worked for us for a period, and then realised the power of competition - and promptly left for other outsourced companies within Thailand - of course getting a bigger wage for doing so.
Very quickly wage inflation takes off as you have to increase wages to keep the staff. The result is a function which doesn't speak your language as it's first language - and which isn't costing you much less than you are paying UK people - who of course don't need the hands on management either!
This is almost a perfect model of the future of capitalism. Currently growth has been achieved for the last 100 years because there is always a new market to grow into. There was (not in correct order) Europe, the US, South America, The Far East, The middle east and the new hope is Africa.
However as each market gets eaten up and burnt dry - it sticks to the ever growing ball of capitalism and then an even bigger new market is required to continue the growth.
Now if this is correct - and it does have some basis in economic theory, then once the last new market is over - we are in for the mother of all deflation. It will be worldwide and there won't be anything that can stop it.
However - that in itself won't be the end of the world, but it's going to require a serious mind shift for people to get used to living with deflation as the norm rather than inflation as we do at the moment.
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The news will only get worse whilst Peston and crew continue to paint it black.
Our firm got a new job today....
Interesting that the real economy isnt all black but it is being made so by the sort of negative press the BBC has taken to peddling..
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1588#
Can you provide verifyable sources to back up your comment on Belgium,Luxembourg and Netherlands as I am a bit suspicious. These three counties have all been involved in financial bailouts.
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The 'Credit crunch' (lazy journalist term .... but I'll join in for now!) will be used as an excuse by corporate negotiators for the whole of next year in pay negotiations. Management Bonus, like the £3 million Adam Crozier received at Royal Mail last year, wont be touched I suppose.
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It does not matter the subject matter of the blog as posters will hijack comments to expound their theories on matters they are knowledgeable about ( or think they are ) and the favouite agenda on this particular blog is the funding of pensions! The back slapping of the 'usual suspects' is tedious at best but at worst, juvenile.
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210#
Are you a supervisor, manager,owner or director? Did the worker have any commitments that day e.g. getting home to let his wife go to work or any other reason. What would one man accomplish in two hours? Would the business have profited financially if he had stayed for no pay or ordinary time? Your post raises more questions than answers but I will stop here.
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211#
You must be either a doctor, nurse, vet or soldier so do you care to enlighten us to which category you fit in to?
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213#
'Nothing whatsoever to do with internal German politics'
If you believe this you are so naive, the German Grand Coalition is made up of three parties SPD/CDU/ CSU and there is an election looming with every politician positioning themselves.
Germany is in protectionist mode at the moment with one in seven workers dependent on the car industry a 500m Euro guarantee has been given to Opel, fighting new EU laws curbing car emissions and opposing the climate change package. Germany has of course suffered the rampant inflation of the 1920s and are very defensive with Merkel seeking closer ties with Russia to ensure they have sufficient oil to keep their industry engine supplied when the upturn comes.Goose stepping is on the way back?
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240#
How about the Chinese gov being encouraged to allow 3 children per family?
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#181 Sashaclarkson
You say "Without society, there would be no private property, no justice, just the law of the jungle..."
What is it you are either describing or defending?
What is "private property"? How can this concept have meaning when 500 indiv¡duals in the US have aggregate wealth of over $5 trillion?
What is "justice"? When millions of old people are trying to struggle by about GBP 100 per week - and 500 individuals in the US have aggregate wealth of $5 trillion? and one guy is suspected of a $50 billion fraud?
What kind of gaol time should you get for fleecing your fellow citizens of $50 billion? Why is it ok to fleece $50 billion provided you are surrounded by an army of lawyers who all swear that every move was legal and fully compliant.
With apologies to Bob: D´ont it make you feel ashamed to live in a land where justice is a game?
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I don’t know about subsidising people’s wages by the tax payer but can someone agree with me on this
I am pig sick of paying so much in TAX we pay tax for everything apart from breathing and I can’t afford it I’m so sick of the UK this is getting beyond a jock they say the average man working earns £20,000.00 I’m sorry what planet are they on most people I know get £12,000.00 and they have to pay everything
We should cut the politicians wages we would save a fortune I mean what do they do when a letter costs £50.00 to send just two blocks away and we pay on average £90.00 a month council tax
I say cut the politicians wages and we will be able to do loads let them fund it
I’m a Debt advisor and I see people every day in trouble but I’ll say this they will keep this up till we all rise and start to confront them I can’t afford to pay my tax never mind fund someone else
We need to sort out exactly where our money that we pay in tax goes and who to then we need to assess whether this is worth it we constantly look at third world countries and ask people to contribute to charity sorry there is people in this country that can’t even afford to put on a light or buy a loaf of bread never mind help people I say cut cut cut politicians wages and do it now or make them pay
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I am so fed up of paying TAX we should sack the government and start again
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Why are we paying for millionaire bank managers and big bosses mistakes they are retch let them pay we should sack them all
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HELPING SAVINGS AND SAVERS
In these extraordinary financial times would it be possible for the government to help savers by issuing very well publicised National Savings Certificates - say for a 2 or 3 year period - at a high fixed rate of interest to help those of us who have saved all our lives and are now faced with next-to-zero returns?
I realise that there would be extraordinary consequences for some of those who hold our savings (and treat them as their own) but it does seem very unfair that, while everyone else is getting a handout, no help is being offered towards the very people who will have lost most.
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"At some point we need to just take the pain. " #14
Have you any idea what that will actually mean in terms of economic, social and political fallout? Someone else said we needed a thatcher figure to sort it all out. Fair enough but when she came in her policies were nto that radically rfree market and took a while to build up a head of steam. The problem now is that if we were to take a thatcherite route the scale of the slump is so much greater than in 1979 that the political fall-out would be immense. I don't know, maybe that is what is needed but fasten your seat-belts!
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Corus is not a British Company and is just palying for more hand outs.
Pay them all you will.
But when the crunch comes they will go.
Not a Penny should be given to support them.
Thatcher let the wolves loose.
If they starve so be it.
Perhaps next time folks will think of our people.
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How long are we going to pretend that the UK economy is a free market in the light of the astronomical state bail outs into practically every aspect of its failed system?
The successful operation or the failure of an economic system governs everything and completely overides any democratic voter decision via a pretentious 5 yearly electoral parliamentary system where political competition and point scoring is determined by how less hypocritical either New Labour or the Tories are in bailing out capitalism!
What voters think, what they do, their attitudes towards others and the class system in general are all determined by the efficient working of whatever economic system is in force.
Throughout the post industrial revolution age, capitalism has always succumbed to the state (either monetarily or militarily) to bail it out when in slump and even when it does recover it never does to the same magnitude as before as this particular meltdown will make plainly evident. This is unfortunately missed by mainstream economic commentators like yourself Mr Peston throughout your and your colleagues broadcasts.
Until this stark fact is recognised and the economy democratically planned in line with all global economies where economic frontiers, nation states are dispensed with, such debates like these over the relationship between tax and wages are utterly futile!
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Do it, but then don't go on to penalize those already out of work, on benefits and are at the bottom of the pile supporting the whole mess. Why not go the whole hog and give everyone an equal wage? Let everyone have an equal share in the country's wealth. Is that too revolutionary?
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I am a self-employed Business English teacher whose income has been reduced because of the gobal recession. Can I have half a million Euros (not sterling) please?
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And would they agree to it anyway? Just yesterday, I asked one of my workers (already paid a reasonable sum, and more than at his last employment) to stay late for a couple of hours. He replied that he would only stay late if I paid him time and a half!
Unfortunately, he is attitude to work is all too common. We are renowned for being 'good' employers - we reward commitment, initiative, and hard work. We are considerate and this is what we get in return?
Pride in having a job and doing it well is fast disappearing.
I take it your employee signed a contract for a certain number of hours per week. Why should he give you more for nothing ?
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Why is it only the man in the overalls who gets the pay cut whilst the man in the suit still gets a bonus
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The idea has some merit if, and it is a very big if, the recession is indeed short lived. Any such scheme, in similar fashion to any financial assistance offered to Jaguar and that already offered to the banks, should include the taxpayers assuming partial ownership of the company which can then be sold as soon as market conditions allow.
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Those requiring that the Government has to go soon are of course correct, however the plain fact is that Gordons little clique have no intention of going anytime soon. You see they are presiding over a catastrophy with no hope of winning an election. From the Conservative point of view the longer the better because they don't want to have to reconstruct and they can't force the issue because they will loose a vote of no confidence. Moreover all their ideas will be taken up and twisted by Labour. Therefore no side has the advantage, but I do suspect that come the next election the changes will be very discomforting.
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#260
Perhaps because we can't stop it happening?
Absolute power corrupts absolutely.
Whole thing seems a bit more clearcut in Ireland, but not necessarily better
http://www.independent.ie/opinion/analysis/dont-help-the-banks--take-them-over-1582376.html
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My confidence in the Government & Treasury has been eroded since the Icelandic fiasco in October 2008
There is even a e-petition now to open the UK Court papers - to find out what the UK Government was up to :
http://petitions.number10.gov.uk/SealedUKsecrets/
It has my vote to find out the "hidden" secrets
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Excellent article RP. although these pdf's might come back to haunt you as I suspect we will be hanging onto our current PC's (and harddrives) for quite sometime rather than the usual annual upgrades.
“As for alleviating the burden of all that debt, history would suggest that’ll necessitate
the printing of money on a colossal scale, ”
This is happening right now although the money supply figures for Dec08 won't be out till Feb/Mar09, I work for a business that turns over in excess of 30g per day cash (my branch alone), all of a sudden the 20's are brand new (you can tell when there is fiscal tightening, the notes get shoddy, think about it and then look in your purse/wallet)
#Ishakandar said “#113 Great idea !! Once fuel reaches 2 quid per litre food costs soars since much of the cost is transportation of fertilisers, pesticides, farming materials and transportation from the fields to the supermarkets !!”
Yes, perhaps that will put and end to one Ssupermarket sending organic carrots on a 530 mile round trip to a store less than 15 miles from the farm gate.(the only store that provided those particular carrots - 'locally grown organic carrots')
#kikiread said “There are no real financial experts or magic guarantees for low risk investing “
I agree about the financial experts but the only magic guarantee for low risk future investment are children,education and health.
Wealth (money,lucre,wonga whatever you want to call it) is a product of work and work is is a product of people.
# Lionel Refson – Equifax/Experian – yes they have far too much power and they should be regulated to ensuer correct data, it should be free for anyone to see and correct their own data as it is “their own data” and not Equifaxs or Experians' or anybody else's.
Pay Cuts ? – Why is it always us at the bottom that have to suffer this ? (I don't see John Varley taking one).
Well I don't think so pal, I earn barely above the minimum on a 43 hr week and I work bl###y hard, if the business can't afford to pay my wage then it's not in business and I for one would welcome it's demise so that it could be replaced with one that can.
But despite the doom and gloom I Hope Everyone has a Merry Xmas and we ALL are allright in the new year (whatever that may bring :)
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#1 stevegwent - correct, woolies shareholders sold out to asset stripping private equity group as they had no interest in the business, only as roi. This was the thing at the time.
#5 javaMan1984 - no assets left to insure against
#12 gruad999 - 'The economic illiterate view the state as a vast unlimited source of succour whereas in reality it still has to obey the laws of economics.'
Please don't patronise them just because you can read, educate them so that they can discover their truth for themselves.
#22 bogbrush - and a sudden downturn revealed that business for what it was, not a business at all.
# stevegwent - 'I doubt if administrators will get any money for shareholders.'
And neither should they, shareholders invest in the management of a company, this company was mismanaged, shareholders could have replaced bad management but declined to do and instead took big dividends.
Won't someone think of the Workers.
They have invested their time (the only thing they have, no spare cash on minimum wage here) hopefully to get a roi (paid at the end of the month) If I worked there, it would have to be cash up front for a days work cuz I'm pretty sure one of these days they will turn up for work and there will be a notice on the door saying 'go straight to JSA, do not pass go' and 'oh yeah, you might get your wages and your redundancy from the government sometime in the future'
meantime your landlord demanding the rent and your bank is stiffing you with bank charges for unpaid DDs.
These people have no power and get absolutely no say in what will happen to the management of their lives.
Shareholders, who do (or did), please form an orderly queue at the very back.
#43 scouseflyer - they probably will come 4th but at the expense of the tory party
#48 jrperry - you got there first, sorry, I came in late from work and started writing this in response to the posts in order.
#50 peabop - first paragraph spot on but I would include independent judiciary and due process.
#216 bogbrush - expect an election may 10th, lab to win with decreased majority. (probably the only bet worth putting what little is left of your own shirt on)
My View
PayCuts - yeah I'll take a cut in cash if the rest is paid in equity, I (perhaps foolishly) believe that the business i'm working for is viable and am willing to invest both in the short term, 30 days nett till payday, and in the longterm, until I retire, because I can see my fellow employees working hard all week, what we want for our money is management who can manage this wealth creation and the ability to fire them if they can't.
Corus, Jag/LandRover and Tata -
Tata have always wanted to shift production of JLR to India, they just haven't had time yet.
They maintain UK steel as an access path to europe and to be able to play one plant (dutch) against another (uk) they have no real interest in uk jobs.
Fairplay to Tata management, the government seems to be wanting to hand out (free) cash then why shouldn't they try to grab some (I imagine their shareholders are jubilant that they made it to the front of the queue)
They should however, after being strung along for a while, be told to get stuffed.
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