Rose on pay and VAT
What should happen to business leaders' remuneration in this downturn?
Well Sir Stuart Rose, the chairman of Marks & Spencer, was characteristically blunt when I interviewed him earlier today.
"I certainly won't be taking a pay rise" he told me. "It would be inappropriate for me to do so...I am 99.99% certain there won't be a bonus. I certainly won't be getting anything over and above what my staff will enjoy."
As for the example that should be set by Britain's executive class in general, Rose said there must be absolutely "no payments for failure."
Which most of you may well say is common sense, at a time when almost every company tells me that it's either reducing job numbers or is about to do so.
But as we've seen over many years, common sense doesn't always rule in the board room when remuneration is being decided
I also asked Rose whether he agreed with Simon Wolfson, the chief executive of Next, that the government's emergency VAT reduction had been a waste of time and money (see my note this morning, "M&S: no ordinary downturn").
Rose, who is a member of the prime minister's Business Council, started by saying that he "doesn't do politics". But he then added that the VAT decrease has "not made a material difference to our sales."
Which some will see as a criticism of the Treasury, although Rose was at pains to point out that he felt the government was acting with the best of motives.
As for the Treasury and Number 10, they believe that criticisms of the VAT cut miss the point.
They say that the point of the reduction in the VAT rate from 17.5% to 15% - which lasts a year and will lead to a £12bn reduction in tax revenues - was not to boost the sales of M&S or any other individual retailer.
It was to put money into the pockets of consumers and businesses, at a time when households are feeling strapped for cash and when companies' profit margins are under pressure.
The VAT reduction has done that - but, perhaps, only as an uninteresting matter of definition.
Where retailers pass on the VAT cut in the form of lower prices, that represents an increase in the real value of our disposable income. And where firms have maintained their VAT-inclusive prices (and loads of restaurants and leisure groups haven't passed on the cut), that's a boost to their profitability.
Either way, there are cash benefits to households and businesses from the VAT reduction.
But what's much more interesting - and what's hotly debated - is whether the VAT cut is the best possible use of that precious £12bn for the purpose of dampening the magnitude of the economic contraction we're experiencing.
And that's where the remarks of Wolfson and Rose are relevant.
The Treasury cut VAT partly to stimulate economic activity in the private sector. It hoped that the £12bn of foregone revenues for the Exchequer - and the corresponding increase in public-sector debt - would generate incremental revenues for business and would therefore protect jobs.
If substantial retailers like Marks and Next say the VAT cut hasn't stimulated trade to any noticeable extent, that matters (although it is not beyond the realms of possibility that Marks and Next are wrong).
I'm 
© MMIX~RS~q~RS~~RS~z~RS~32~RS~)
CommentsSign in
You need to sign in to contribute to this page. If you're new to BBC Blogs, creating your membership is quick and easy.
some people can't play anymore and just watch from the sidelines, but way to go rob.
Complain about this comment
Why dont you ask retailers other than clothing what impact the VAT reduction has had. Just a thought.
Complain about this comment
It's nice to hear that he is so committed to not getting anything more than his staff will enjoy.
Did you ask him whether that means he'll be making his own pension scheme less generous, as he has just done for his staff?
Complain about this comment
This comment was removed because the moderators found it broke the House Rules.
"Which some will see as a criticism of the Treasury, although Rose was at pains to point out that he felt the government was acting with the best of motives."
Is it now open and public ?
Gordon Brown and his Government are ruining Britain, destroying our finances, and putting us and our forthcoming children's generation into massive debt and future foreign control....
... but it is all OK, as Gordon Brown and his Government are taking these wrong, crippling and misguided steps with the best of misguided motives ?
Complain about this comment
The gut-feeling from everyone I know was that -similar to the 10% tax initiative last year and the misguided interest rate crashes* - the government rushed out an idea without thinking it through.
At first glance reducing VAT by 2.5% must have looked like an even-handed thing to do, but within a second or so you would know it would be too thinly spread to have any impact, and most businesses -who are presumably the target GB wants to encourage for recovery- are basically un-affected by VAT.
We want decisive and imaginative action from the government, but we also want it to be productive and well-considered. Haven't seen much of that I'm sorry to say.
* you don't think BofE did that all on their own do you.
Complain about this comment
Nice to see pay and bonus restraint following a negative set of results. I don't have a particular problem with high levels of executive pay when they've earnt it through creating significant value for the shareholders but if the shareholders and staff have suffered it wouldn't be right for the board to fill their pockets.
On VAT I'm still baffled by the cost of this. A 12bn GBP cost across 60m people works out at an average of 200 GBP per head (this obviously includes children- would be 800 GBP for a two parent, two children family). Does anyone at all out there feel like they're 200 quid better off as a result of this cut?
Clearly well intentioned but it seems like a knee jerk reaction and that money could have been much better spent elsewhere (or probably better still not added to our national debt at all). I'm traditionally a labour supporter by the way but think the whole pre budget report was a fiasco. Like many others I would love to see Vince Cable given a more prominent role where he can actually do something.
Complain about this comment
Will there be annual bonuses for those wonderful people at the Financial Services Authority and the Bank of England that consistently outperform the rest of the economy?
Err, well of course!
Complain about this comment
The downturn is simply because the country has run on borrowed money since Labour came to Government and Brown poured fuel on the fire to suit his own ends. The music has stopped and the pots are empty.
Business will continue to shed jobs and that will exasperate the problem. I do also wish that someone would also report on the increase in business costs due to higher fuel costs a result of Darlings increased duty.
A straightforward increase in business costs and across all sectors from food (which saved nothing from the vat cut) to clothes and all other goods that have to be delivered.
More fuel on the fire and more borrowing and blatant contempt for the working population will dig the hole deeper and deeper and someone as have a vote of no confidence in this regime before the situation becomes terminal.
Complain about this comment
One question: where did the government get the £12 billion? Answer: it BORROWED the money - which will of course have left £12 billion less for individuals and companies to borrow. The government's latest addition to the credit crunch.
That's the real reason why this policy is such complete madness.
Complain about this comment
And that's where the Treasury's barking.
People in need don't buy things with VAT on - they buy them black market from the local fence, and that's 17.5% cheaper, or they don't buy at all.
What does hit them is all the public services upping their bills by way, way over inflation, year after year after year. Now bringing that lot back into order might win an election.
Complain about this comment
There is something for he countrargument that profits are esy to makle in good time, so bonuses should be lower then - if a company can survive in the current climate, its bosses may deserve a reward.
It is obvious that the VAT cutr hasn't ecouraged spending - even the PM said on sunday, mot of the package hadn't been spent
Complain about this comment
Too many of these 'executives' of lots of companies have made hay whilst the sun shines with nice pay rises, bonuses and even when clearly displaying incompetence receive golden handshakes. RBS, NR in the UK spring to mind..
They can easily afford to take the hit that no pay rise or bonus for a year or two entails.
Meanwhile on planet real world the rest of us are dependent upon a pay rise to try and keep us in line with inflation.
Many receive no pay rise.
They have my sympathy. Costs are rocketing including those the Govt. conveniently refuses to recognise as contributing to inflation.
The current 'official' or 'Mickey Mouse' rate of inflation is 5%.
The VAT reduction was a joke and had no real impact on increasing sales. If Darling and Clown believed that it would provide any stimulus then they really deserve to be sent to an asylum.
Complain about this comment
12 billion pounds of forgone VAT is revenue the government now has to raise from some other source and it also has to plug the gap made by significant reductions in stamp duty - probably another 2 billion over the last year.
But the thing is this - if you have a comparatively low income and have significant borrowings a change to tax rates or allowances might have enabled you to pay your utility bills, rent or mortgage payments, council tax etc.
Basically quite large numbers of people have been frozen out of this bonanza purely because they didn't have spare cash to spend in the first place.
Complain about this comment
You and other journalists keep on saying that the VAT cut will put £12bn in the pockets of consumers and businesses.
But this £12bn, unlike a straight cut in income tax or a significant increase in the personal allowance, will only materialise if the Treasury forecasts on consumer and business spending hold. And those forecasts for growth and the rest are looking hugely optimistic now - as Darling attempted to the FT this morning.
The government has form on this. Remember the £600m cut in the stamp duty introduced towards the end of last year. Well the Pre-Budget Report says that it will now cost the government closer to £200m.
Complain about this comment
It's obvious that Gordon Brown wanted to be seen to be doing something to help everyone in this downturn and so he cut VAT. In fact doing nothing would have been better for the country.
As for directors pay, they have mostly been raiding the piggy bank with the support of the shareholders who are mostly pension funds controlled by the banks who have made loads of money, lending them money...It has been one great big merry go round and Gordon has been standing by doing nothing except creaming off the taxes and turning a blind eye to the short termist actions of the greedy bankes and PLC company directors. We will see the rise of the private firms again, now that people are waking up to the fact that the capital markets are no longer designed to raise money for investment. Anyone with a pension and a mortgage is paying the banks twice..how stupid is that??
Complain about this comment
If the money injected into the economy through the tax cuts gets saved instead of spent I assume that the government may have been better off to spend it on infrastructure.
No one can deny that the issue is complex but if the money gets saved it is put into banks, who are apparently hoarding the cash to build up reserves and not lending it out, so the effect on economic stimulation could be minimal.
If the money were to be spent on infrastructure there is a dual benefit provided that the infrastructure is needed anyway now or later. If Britain is like most Western countries, including Canada, there is an infrastructure deficit with crumbling roads and deteriorating bridges and outmoded water treatment systems. That might be a better home for the money. At least you are sure that it is spent in a way that provides employment and revenue for contractors and equipment suppliers.
Complain about this comment
That's some trick, "generate incremental revenues for business" and "put money into the pockets of consumers and businesses" in the same fell swoop with one lot of dosh. Perhaps the idea wasn't for it to stay in the pockets of consumers after all.
Alternatively, the Treasury dosn't know whether it's coming or going.
Ya pays ya money and ya takes ya pick. Except that the last pick-an-mix went bust.
Complain about this comment
It seems to me that the policy of this government is unravelling in front of our eyes.
It also appears that Northern Rock is becoming a bigger basket case by the day which won't do anything for the reputation of Walk on Water "inVincible" Cable.
Complain about this comment
You don't need to ask Sir Rose whether the vat reduction worked. Have your ever seen in a sale in a shop advertising 2.5% reduction. No, you don't, which is why it was a failure. People don't respond to 2.5% cuts in prices, but they do when their salary is being taxed less.
Complain about this comment
Both sides of this argument can be true and still change nothing. The Government has given away 12bn but this did not necessarily stimulate additional spending. Consumers may not have spent any more, although some may have got a little more for their money. Equally some retailers will have pocketed the difference.
The point is that this is still borrowing to fuel consumption and not investment: and borrowing cannot be paid for, or paid back, out of consumption.
This is a fundamental flaw in the logic of a credit driven consumer economy; and the idea that bank lending "creates" money. It does not, any more than the suggestion that Government borrowing "creates" money.
In both cases the fundamental characteristics of a debt are (a) that the money was already there to be lent and (b) that it will have to be paid back with interest.
All we are doing is committing future income to cover current consumption and inevitably this means less consumption in the future.
Complain about this comment
Any idiot could've spotted that a cut in VAT wasn't going to work, not when consumers were getting goods at between 10 and 70% off already.
They'd have needed to cut VAT by at least 10% to make any noticeable change in the small and mid level goods that make up the majority of expenditure. A 2.5% cut is great if you're buying a new car, somewhat less so when shopping around for gifts or equipment.
It was nothing more than a continuation of Labours desire to be seeming to be doing something, regardless of whether it'll be of any use or not. As long as they can maintain an illusion of doing something and redirecting blame, they can play political games whilst the nation suffers.
Complain about this comment
Mr Peston is rapidly becoming the mouth piece of doom, we have yet to identify the source of the Northern Rock scoop? I am sure he was fed the line. His disclosures about LLoyds TSAB, the Royal Bank etc further stimulated the current crisis in confidence. I have a feeling that he is being used to deliver the message. Some one has decided that the time has come and that they believe Peston will deliver on cue. Respected journalists have responsiblities to their sources and to the public at large. The BBC should take the time to totally review our recent demise as establish Mr Peston's role.
Complain about this comment
I don't understand how business leaders (or anyone for that matter) can state whether the VAT cut has, or has not been a success.
Unless a parallel universe exists whereby the VAT remained at 17% then we have no way to compare whether things are better (or worse!?) under the cut!
Complain about this comment
Has anyone really had a buying decision for anything influenced from a no into a yes because of the 2.5%Vat reduction?
Of course absolutely significantly not.
Any GSCE economics school child could have made this conclusion bearing in mind that the amazing sales on offer in the high street and elsewhere have made no significant difference pre christmas.
So the government have lost £12B or so of valuable revenue which now has to be borrowed to fund the credit free up which so far has been a fiasco. Why therefore do the Vat reduction? Of course it was to get desperate positive political headlines to go along side Gordon Browns underpants outside the trousers performance. Not my reccession no its American and Chinese and and.... stutter stutter I saved the world stutter stutter
It's about time Brown and Darling read and acted on Liam Halligan's sunday telegraph column- bankers into the dark private room and thumb screw them until they turn out their pockets on the toxic debt so that write downs and real rescue schemes can be organised. Until then the credit markets will continue to be dry and the economy and markets in free fall.
Complain about this comment
Sir Stuart Rose is quite correct to point out that failure should not be rewarded, a view which was also aired recently by Sir Alan Sugar. It is however unfortunately not one shared by the vast majority of the hierarchy of the UK's banking sector.
How can any of these so called professional people accept, or even worse - award themselves, these wholly innaprorpriate, unwarranted and obscene ammounts of money as bonuses. The whole of the financial situation the western world over is directly linked to their mismanagement. If that is not reward for failure then I don't know what is.
Let us see if any of them are Big enough to hand it back!
Complain about this comment
i can't help thinking that if vat was increased by 2.5% wolfson and rose etc would be arguing this would be monumental.
has a fund been considered to protect companies whoes debtors become insolvent. If the govermenent are considering protecting bank loans made at commercial interest rates there may be a logic or even equitable responsibility to protect all companies who give credit terms.
Unfortunately this clearly would be difficult to protect against the few who may look to abuse the system, but i feel sure this may be a lifeline to many companies who suffer large bad debt in a downturn
Complain about this comment
Nice to see you've taken my hint and declaring possible conflicts of interest when politicians/ business people make statements.
Thanks
Complain about this comment
Maybe the VAT cut is intended to boost things in Q4 2009 when an INCREASE of 2.5% (or maybe a lot more?) will get people out spending well before the new year sales in 2010.
Complain about this comment
Dear Riddler,
Let's extend this VATman analogy even further:
Robbin's done an enormous amount to solve the crisis and the world's totally different now. Discuss.
Your friendly neighbourhood Joker...
Complain about this comment
How noble of 'Sir' Stuart not to believe that he'll take a payrise or bonus this year or even get over and above what his staff enjoy. If only all our knights of the realm set such an example.
I assume that he won't be dispensing with the trappings of being an executive (1st class flights, company limosine, huge expenses, 5 star deluxe hotels).
As for his comments on VAT, they don't really matter. Looked at simply, why should billionaires, non-doms, bankers and corporate executives, etc benefit from tax cuts? It's absurd.
I believe Gordon Brown is being disingenuous by claiming that the 12 billion pounds is being targetted at cash-strapped households through VAT cuts.
I also believe that it's something he cooked-up with the CBI as they had nothing but praise for the initiative.
Complain about this comment
afternoon all
Well it all seems to have gone a bit pear-shaped today IMO. You currently have 2 posts going and both are seriously backed up in terms of past being moderated. Could a couple of ex-Woolies staff be found who could do some moderating? The BBC could be doing their part by creating some much-needed jobs.
Also a general comment.
Whilst I don't agree at all with the numerous posters on this blog who say that Mr Peston's negative reports are actually causing the Great Recession (which is what the NY Times has taken to calling it BTW) I do think that Robert should take a bit more time on his reports and do a bit of editing before posting them. This week's have so far been all over the place and this morning's seemed very rushed and rough around the edges.
As a result you're giving the impression of spinning around in all directions like a weathervane in a tornado, mate. This mornings blog spun round 180 degrees within the same paragraph or two.
It's green shoots of recovery one minute, then all doom again, then less bad than it could have been etc etc.
I know it's hard work doing a regular blog but I'd also like to see more reports that try and get ahead on an aspect of the economic crisis: so for instance look at different areas instead of just following the news all the time. Retail is being overdone this week. Everyone is reporting nothing but retail. What about the housebuilders? the transport industry? how about some follow-up on Jaguar and what's happening to the UK branches of the US carmakers? How about an overview of what's happening in the eye of the storm and comparing US and UK responses etc.
Sorry to be critical but some of the economics bloggers in the quality papers here and in the US (NY Times) and Canada (Globe&Mail) are doing a better, more thorough job on both reporting the latest news and breaking new aspects of the news. Funnily enough though I prefer this blog for the responses to it rather than RP's reports.
So guess you must be doing something right there!
Complain about this comment
This comment was removed because the moderators found it broke the House Rules.
The point about the VAT cut is that it (a)wasn't noticed by consumers because retailers were cutting prices by vastly more than that anyway, and (b) was too small to make a material impact on purchasing decisions.
As a way of using GBP 12bn, it was inept. GBP 12bn is 10% of the sum govt expects to borrow this year, so it is a material sum. The govt could have got much more 'bang for its buck' in other ways. That was what Mr Wolfson meant this morning.
An income tax cut would have been a better idea. But my preference would have been to put the GBP 12 bn into a programme of building council houses, which people need. The depressed state of the building industry is a critical weakness in the economy, but the flip-side of this is that the govt could have got lots of much-needed homes built cheaply.
A related point, which I have raised here before, is that, far from delaying the new aircraft carriers, govt should have ordered more Astutes and Type 45s. These ships, which the Navy needs, would not have to be paid for until later (as the yards are busy with existing orders) but would have given assurance and continuity of employment to a big swathe of important industries.
Complain about this comment
It's being used politically by the Tories as a waste, but it was supported by many at the time... i heard an interview with Ken Clarke a while back where he supported a cut in VAT... as a cut in income tax or a cash payout encouraged saving and only a cut in vat encourages spending. I'm not interested in the politics of it, but interesting that an ex tory chancellor would have tried the same initiative.
The problem with VAT is 2.5% was the maximum cut allowed within eu guidelines, and it just isnt a big enough number to motivate purchasing... all it does in the end is probably keep spending the same but make life a fraction cheaper for everyone. Better than nothing, but in reality you could argue the psychology that sending everyone a cheque might have encouraged a few people to spend it rather than save it... and lubricate more tills than the vat cut
Complain about this comment
Well Rose is Chaiman and CEO ; against current corporate government gudiance.
Plus he rejected an offer from Philip Green to buy the business at over twice the price it is worth now.
Oh dear.
As for VAT cuts, they were never to make much difference after the October Carnage. Perhaps Rose should stick to getting the job done.
Complain about this comment
Businesses cannot know what their sales would have been without the VAT change. All we can say is that cash that otherwise would have flowed to HMG is in private pockets.
Complain about this comment
All this messing around bailout here tax cut there, would it not be better if the Government borrowed enough money to pay off all our debts, credit cards, loans, mortgage, etc. then the taxpayer spends the next 50 years paying that off.
Just like the Carol Vauderman adds, take out one big loan to pay off the smaller ones.
Of course it is not fair on anyone who has no debt, but then it is not very fair for them now.
Just one condition, debt is then made illegal.
Complain about this comment
Although there is no empirical evidence that suggests Marks and Sparks contributed anything to the economic downturn,it seems wholly appropriate that another Fat Cat goes on a weight reduction programme.His %99.99 certainty of no bonus should be elevated to %101.
The trouble is that Sir Stuart is one of the Old Guard who ,lets face it ,led into this fiasco wholeheartedly and still remain in those positions.Their mindsets won't easily change.They still lay off workers without completely precluding the notion of a bonus to themselves.
We seem to be descending into a form of corporate feudalism where new Lords of the Manor now head communities in which workers ae regarded as expendable serfs.
Complain about this comment
easy solution to the UK's economic woes:
abolish the minimum wage
Complain about this comment
I believe you miss the point entirely, a VAT reduction was never destined to achieve very much anyway, but should only be attempted if the country concerned has been fiscally responsible this Government certainly has not been. To waste this money when our debt levels are so high anyway was nothing short or crazy. To encourage people to spend and increase their personal debt is sheer madness too.
Rose should stay out of politics because if he has been advising the Government on business hes done a pretty poor job.
I wish Brown and his team would become the 'do nothing party 'because everytime they tinker with the economy we get further into debt.
Complain about this comment
No 17 - May I suggest that the reason that the 2.5% VAT cut was selected rather than investment in bridges etc was that real investment takes time and work and the results often doesn't show up in financial terms (GDP of quality of life ?). What our Government wants is a mgic quick fix and a VAT cut might just be it......possibly.......er
Complain about this comment
Just a comment on these great sales we're seeing. All i'm seeing is the same as every year. 5 year old stock that no-one ever wanted at 50% off, and everything else at normal prices.
Sales have been starting before christmas for years, and the high street in general has been coming under ever increasing pressure from the internet.
Even my mum is buying stuff from ebay (i wonder how many second hand christmas presents were bought this year) and from a technological perspective she still gets stressed turning light switches on.
Given all this, i think the high street has held up surprisingly well so far. Of course 'so far' may be the most relevant part of that last sentence.
Complain about this comment
You wouldn't really expect the VAT cut to have much effect in the short term. Surely most of the effect comes a bit later when consumers have 2.12% money left over which they can spend on more stuff (or save). Also the point of the VAT cut rather than income tax is that it also gives money to people who pay no income tax.
Complain about this comment
The VAT cut is £12b over the year, not £12b immediately. There is an arguement that you could do something different with £12b - perhaps a cut in direct taxes or invest it in infrastructure, but the TYreasury are right to point out that the boost will be over time. And there is a good arguement in its favour - because it is gradual it is likely that it will be spent over the year, whereas if the £12b had been given away immediately, through say a tax refund, then people would be much more likely to save it or repay debt, which in the short term is not what the government believe is needed.
I find it rather shocking that the Tory leader denounces the cut in VAT - he either doesn't understand economics in which case he really shouldn't be leader or even worse, he understands economics, but ignores it to make cheap political points that could damage the economy.
Complain about this comment
A VAT cut does not put money in peoples pockets. An income tax cut, a national insurance reduction, an increase in personal allowances or a one off grant would put money in peoples pockets.
The VAT cut might, just might, reduce outgoings and then very marginally because discretionary spending is being cut back. Most of the goods and services liable to VAT will have been purchased irrespective of the VAT reduction. Thus, the loss to the government finances has no real benefit to business or the consumer and as usual only harms the taxpayers.
When will this government finally stop stupid reactive tinkering and think a policy through, including trying to ascertain unintended consequences, and then issue the changes without leaks, spin, and exaggeration?
That is of course a rhetorical question to which the answer is: NEVER.
Complain about this comment
The VAT cut was nothing more than a waste of money.
What should have happened is that the income tax allowances for the lower paid were substantially increased.
This has needed to be done for a very long time. People should be encouraged to work.
Complain about this comment
Robert
can you look into the PBR figures on debt?
At the time of the PBR no one believed that we would be coming out of recession and growing in Q 3 this year.
Yet this was the basis that the borrowing figures of £1 Trillion are forecast.
Gordon and Alister are now saying that its looking more like 2 years of recession. If this is the case what is the debt burden going to be, if we are to have 6 more quarters of recession than first forecast.
Can we as a country sell & service all of this debt when Germany are failing to sell their latest issue of bunds.
It's now time to get some real answers from the Government not just keep pushing their message.
Complain about this comment
Re Vat
My view is the rate should be 10%!!
However GORDY got this one so wrong
the only good thing is that it hasnt hurt
the poorest like the 10% tax band
FIASCO!!!
Obviously the EU would get shirty over
10% VAT LEVELS. . .
Complain about this comment
The stimulation packages introduced by Brown, Darling and Mandelson can only be rationalised once you realise that ....
They haven't a clue about business or...
They are absolutely bonkers and....
To a madman all wacky things seem rational
Sterling down by 30% in 6 months ?
hey so what, as a 'rational' compensation we now have a new record mountain of debt
No moves on securing energy provision ?
hey so what, as a 'rational' compensation they can all have ID cards soon
People short of cash to spend due to high tax takes and the recession ?
hey so what, as a 'rational' compensation they can have 2.5% less VAT if and when they eventually get some spare descretionary cash
No real personal or business stimulation packages ?
hey so what, all the resultant job losses will be reduced by employing extra people to help the jobless fill in CV's and provide them with consultations.
AND the People still the cash guzzling Quangos in place which NewLab won't be reducing as it is a safe place to keep their under performing buddies.
The barminess under this government goes on and on and on and on.....
Complain about this comment
Not taking a pay rise is of no difference when you are on £1 million a year.
To be in charge and see your profits shrink means you should take the pain properly and see either a pro rata reduction in the basic or take a substantially bigger reduction period.
The real time value of pay for executives needs to be addressed as it is completely based on upwardly moving levels regardless of performance irrespective of delivery.
Such a formula is not capilatism but sheer obscene greed and until there is pain at eth high levels of corporate UK, we will not perform as we should because the comfort factor is so high it doesn't matter what the company does.
We ar now the era of real time economics not debt based lala land and the numbers must reflect that.
Unfortunately Crash Brown and Crunch Darling still can't see that which is why we are not getting out of this rut.
Complain about this comment
The VAT cut is unfairly maligned. It basically gives a bit back - like a cashback of 2.5% on the nations credit card. That doesn't make us spend more but that little bonus does help.
We have all had a bit more change for a coffee, a newspaper or a charitable donation and we will feel a bit better about things longer term. Oh, and the coffee and newspaper sellers might keep their jobs and buy the stuff we make or sell as well!
Complain about this comment
The argument about executive pay needs to be based on the biblical injunction that `the labourer is worthy of his hire'.
If someone is responsible for a successful and profitable business and has demonstrated consistency within that role then why should they not have the rewards that reflect the benefits they bring to customers, workforce and shareholders.
If they are committed to that business and results are poor then they will happily forego their customary rewards.
This is known as respect.
I have known a variety of CEOs in my time and their rewards have varied as much as their characters.
The one I respected the most was the man who always put his money where his mouth was and was frugal in the reward he took. He built a fantastic business. When he got sick and sold up, his successors built themselves a lovely trough in which to wallow and nearly went bust. I left in disgust. After eighteen months the old boy, now recovered, bought the business back for much less than he paid for it.
People who go into business to get rich are usually stupid. The motivation about business is either to build one, nurture one or manage one and make a good job of it. The financial reward is secondary.
The argument that high pay gets the best results is absurd. High pay is just a high cost.
The modern bonus driven target culture, which has caused so much damage to our financial institutions, is just a process by which a certain glib sort is given every opportunity to loot and ravage good businesses for very short-term gains. The consequences of that culture is evident. It should be terminated as it obviously does not work.
Complain about this comment
Presumably Mr Peston will be joining Mr Rose on the pay restraint front.. those that have caused the economic problems should not benefit.. or will he take the bankers option and ride the wave of misery caused. I think we should be told...
Complain about this comment
#7:
That's an excellent point, questioning the basis of the 12 billion figure. I think you're absolutely right to be sceptical.
Taking your maths a bit further, and assuming (this is right, isn't it?) that the 12 billion is spread over 1 year, that would mean that every person (including children) would need to spend about 700 quid per month on VAT-able items, and probably considerably more given that most children spend hardly anything on VAT-able items.
The figures really don't stack up, do they? I'm a relatively high earner, with comfortably more than an average income (although sadly nowhere even close to Sir Stuart's level), and I don't spend anything like that much per month on VAT-able items. Sure, my total outgoings are a lot more than that, but most of them are taken up with my mortgage, council tax, utility bills, and food, none of which is affected by the VAT cut.
Something really doesn't add up.
Complain about this comment
STOP PRESS!!! Here is the real news today from the South of Engand manufacturing industry:
1. Our largest customer (a DIY multiple) has extended payment terms to us to 120 days, and asked for a 4% rebate, which will be "automatically" deducted.
2. As our sales were 17% down in Q4, our VAT payment to C & E is £50,000 over what we forecast in our cashflow.
3. Our main packaging supplier has just gone bust (dragged down by a well known retailer), and can no longer deliver packaging I need for a £100k order for 20 Jan. It will take 3 weeks to get another supplier to supply - and they want paying up front!!!!!!
4. Energy costs up 27% on a year ago. Minimum wage up 3.5%. Interest payments down so some hope.
5. Bank Manager phones to arrange overdraft review for end of January- he wants to cut by £100k. Points 1 to 4 above mean I need £175k more. The business is still profitable believe it or not.
6. Go home at 9pm to wife for late dinner. Tell her we may need to provide Personal Guarantees for £175k. Even with over 50% equity in our modest house, this will not be covered. Wife not happy, do not tell the kids.
7. Go to bed, do not sleep for fifth night on trot. Worried sick how we keep 23 employees with mortgages to pay going. Doze off. Wake up, same **** different day.
8. How can this all happen so quickly to a 30 year old and profitable business????
This is the REAL story of today in our area and amongst my bsuienss contacts. In industrial estates and high streets across Britain, good small and profitable businesses are being screwed to slow death by the acts of others.
Complain about this comment
2½% may not seem alot to some people, (I bet the Tories amongst us would be jumping up and down if VAT had gone up by 2½%) but as a pensioner it's quite a bit. If I spend £50 p.w. on items that attract VAT, over the year I'll save £65. That'll do me, thank you
very much.
Complain about this comment
40. At 5:28pm on 07 Jan 2009, johnnynemonic wrote:
"easy solution to the UK's economic woes:
abolish the minimum wage "
Yes, let's get back to (early) Victorian values, where Wackford Squeers and his like might have taught you to spell mnemonic.
Complain about this comment
I see Darwin was raised this morning.
For accuracy....
'It is not the strongest of the species that survives, nor the most intelligent, but the one most responsive to change.'
Complain about this comment
income tax cuts - rubbish, lower national insurance - rubbish. We don't need more money in our pockets and for the average wage earner it wouldn't amount to a lot anyway. What we do need is for the money we have in our pocket to actually have some real value.
It's the value of our money that's important not the quantity.
Complain about this comment
Robert
The Government had it in mind that the VAT reduction would be the 'main lever for fiscal action'. Whether companies hoarded the difference or passed it on to us was a matter of risk. The obvious hope was that competitive pressure in a looming recession would see the cut translated into lower prices of goods which would encourage us to spend more for Xmas and beyond. I dont know who worked this logic through. If it didnt work, well c'est la vie - it would be asorbed into the economy somehow. The political attraction was that it could be done overnight. This looks like a bit of a punt with such a large chunk of revenue.
The other part of the fiscal stimulus was bringing forward public works - I dont see much evidence of this either. If this is to do any good, the speed of implementation of projects is crucial as the economic downturn lunges on apace - otherwise its more hot-air I fear.
Complain about this comment
What an incredibly unbalanced, biased, pro-goverment article by Robert peston.
And I thought the BBc was supposed to be abalanced and unbiased!!!!
Complain about this comment
M&S shareholders please note.
I will do Stuart's job for a quarter of his salary and take no pay rise for the next 5 years.
Contact me via this blog if you wish to take up my offer.
C.V. available on request.
Complain about this comment
How very noble of refraining to dip his hand into the bonus pot. Woohoo..big deal! I am sure some of those poor redundant souls would not have been geting a bonus in any case.
I think that a reduction in salary at board level for the next 2 or so years possibly 3 would have been a much bigger gesture.
As usual its always the lower paid workers, the ones that make the real difference in a company that are getting the elbow.
Complain about this comment
14. At 4:38pm on 07 Jan 2009, mrsbloggs13c2 wrote:
"12 billion pounds of forgone VAT is revenue the government now has to raise from some other source and it also has to plug the gap made by significant reductions in stamp duty - probably another 2 billion over the last year."
You think thats bad. Thats peanuts compared to other gaps that have to be plugged.
In Roberts PDF THE NEW CAPITALISM he states that 30 to 40 bilion a year has been permanently lost due to the fact that the banks profits over the last 5 years didn't really exist.
See also my previous bloggs to point out other things we have got to pay for and I can't remember mentioning having to pay interest on the debt
Complain about this comment
Re this morning's post: For goodness sake Peston get a grip - your constant negative spin is getting really boring. Bet it's a laugh a minute in your house.
It's hardly a surprise that M&S sales are down, 3% is hardly 'ghastly', the business is very profitable and plans are in place to ensure that it continues to be so.
Try a bit of positivity - or at least balance - after the initial shock you may even enjoy it.
On the bright side I haven't noticed a 'I have learned' recently, or maybe I've just managed to blank them out.
On yesterday's subject.... Many thanks to glanafon and morebalaceplease for the responses on borrowers and savers. The hbos fact book is very handy.
While the 'Household Balance Sheet' is not looking as robust as it did it is certainly not as bad as I would have expected from listening to all the 'doom and gloom' spread around recently.
With the approximate balance of debt and deposits I suppose that the recent interest rate cuts may just be seen as a redistribution of wealth away from those who have been stupid enough to live within their means to those who have taken the more inspired route of not having done so.
Don't see how it's going to give much stimulus to spending and the economy though. In the current environment I would expect the reverse, as the money removed from savers in lost interest is very likely to be reflected in reduced spending to a greater extent than the money given to the previously profligate will be reflected in increased spending.
Given that savers outnumber borrowers, presumably all this has cheesed off more than it has pleased. Hopefully a contributory factor to Mr Brown's demise.
Anyway, let's hope that any further barking interest rate cuts can be avoided, that rates can soon start moving back up again and that some positive action can be taken on income taxes and NI to stimulate spending and job creation.
As most have already said, the VAT cut was, is and will be a complete waste of time, effort and money.
Just loved Rose's comment about not getting anything 'over and above what his staff will enjoy' - apart from a few hundred grand and an absence of P45 that is.
Complain about this comment
Sorry to see that comments have become pre-moderated. Always a backward step, IMO.
Anyway - the point about VAT cuts is that VAT is a regressive tax - it applies equally to the poor as to the rich. And is therefore unfair.
And any economist will tell you that a tax cut that puts money in the hands of the poor is more likely to see that money re-circulating in the economy very quickly, because the poor always have something urgent to spend the money on - while the rich are more likely to save it.
So on paper, and in principle, the VAT cut is a great idea.
Has it helped the economy? - well, in a period of massively fluctuating demand, I don't believe any retailer could tell me honestly what their sales WOULD have been if the extra 12 billion wasn't circulating in the economy.
I suspect it's more likely that they'd rather see that money given directly to the retail industry in one form or another. Well, they would, wouldn't they?
Complain about this comment
What is happening to this blog. That HTML rubbish all day and now over an hour for comments to be 'moderated'. Not good enough.
Complain about this comment
In my tiny mind I am enjoying all of this for no other reason than I can say to all my student friends from 1997......
"I told you so!".
I now have a prediction for the next twenty years..... The first ten will be under a conservative government doing unpopular and painful but necessary things to put the economy back on the right track and it will succeed, then when things are going ok again we will forget how we got there and vote in another labour government to waste all of our hard earned success and get us right back to where we are now.
The cycle is obvious: conservative governments take us from bad to good. Labour governments take us from good to bad. Voters have short memories it seems. The measure of success for a conservative government is how long it takes for it to become obvious that the following labour government has wasted the success. 11 years is pretty good going. Well done Maggie.
Complain about this comment
What I expect to happen next is that Crash and his wee pal Ally will tell us that because VAT receipts are down by X bn quid then it's obvious their VAT cutting ploy worked!
Sadly, a lot of Labour party sycophants will believe them.
Complain about this comment
There should obviously be differentiation on pay for the top jobs. IMO there are 2 ways to address this issue.
1) have a fixed set salary and the person cannot get more than this irrespective of how they perform.
2) have a ceiling pay. then there should be a 2:1 or other proportion risk reward ratio. ie if the person were to generate so much above then he would get x% bonus whereas if they underperform, then x% divided by 2 should be taken away from salary till it reaches zero.
this would be a fair way and would make ceos more accountable.
Complain about this comment
#44 duncan_harris:
"Also the point of the VAT cut rather than income tax is that it also gives money to people who pay no income tax."
While what you say is true in principle, in practice it doesn't work like that. If you pay no income tax, then pretty much all your spending goes on things that attract little or no VAT anyway (food, energy) or in which the VAT decrease is offset by an increase in excise duty (petrol, fags and booze).
So it looks like the only consumers who are helped are those that don't really need it.
Probably the main benefit goes to businesses who pocket the cut to increase their margins, but I suspect the banks end up with it eventually - they always do.
Complain about this comment
#49 alexandercurzon:
"My view is the rate should be 10%!!"
But wouldn't that mean we would have another 25 Billion little square things to pay back at the end of the year?
Doesn't sound so attractive to me!
Complain about this comment
The point about the reduction in VAT is the effectiveness or otherwise versus alternatives for the estimated 12.5billion cost to the Treasury.
Given the reality of large scale discounting of retail goods, there is no valid argument that this very large sum would be more effectively deployed to compliment consumer spending by another means, such as a direct cut in basic rate income tax.
We should not wait around for the politicians responsible for the lost opportunity to admit this as it further demonstrates their 'other world' state.
What a pity. What a waste.
John C.
Complain about this comment
If I were Stuart Rose I would put it to my staff and unions to accept a 10% put cut so that jobs could be saved and stores not closed.
You never know the old Dunkirk spirit might just be there.
Of course that would mean Stuart losing £100k p.a.
Is this too simplistic?
Complain about this comment
#56
Sorry to see the problems you are having and this shows what a knock-on effect a supplier failure can do. It also shows two elements of the credit crunch - your suppliers want payment up front - mind you as you are a new customer (to them) and they don't know your credit worthiness this is probably not surprising, your customers want to delay (and squeeze) payments in the hope that you don't have the resources to enforce your contract with them. - Nasty.
I don't deal in VAT however I believe the Government had introduced facilities to delay payment in the PBR - is this correct? Otherwise you may be able to advise them of changes in your forecasts and get them to amend the demand - just a thought.
However I must ask why after 30 years of trading (profitably) do you still need a £275K overdraft (at least?). I think that you will have to go to the bank with a concrete business plan on reducing the need for the overdraft. This will probably entail you leaving more money in the business yourself and laying off worker(s). If you can do that then the bank will be more likely to allow the facility.
Complain about this comment
#56:
As a small business owner myself, I feel your pain. I hope things improve for you soon. It's such a shame that the present government either has no idea how to help small businesses or simply doesn't care.
Just one thing I don't understand: if your sales are down, doesn't that mean your VAT payments should be down as well?
Complain about this comment
56 keepsmiling
You need to be very careful mate that the 120days does not float off into the future. Or that another little game rule is not suddenly popped into play. If there is no show on payment at 120days and you then go to see a solicitor, quite apart from the difficulty of sueing a customer which destroys the relationship, you will find that the further away you are from a court date the more certain the solicitor is, and the nearer you get to court suddenly the less certain they are and the more the costs mount. It also takes months and months to get to court, unless you are a big boy and can do fast tracking with chinwagging in the chambers. If there is a default at 120 days your bank will probably regard you as a dead duck and toughen up. Your bank by their action may be telling you that they are expecting problems in the next quarter. The hard fact is whatever the paperwork says business only exists on trust and by posting this you appear to be saying you are worried about trust. The one thing that is clear is if things go bad to the max and you have expanded your liability you lose your home. Re vat - I thought some concessions where being talked about. See your MP, they are variable but some are very good, and you would be amazed how effective House of Commons letters are with the numpties. If you go that route do all the work for them, ie present a letter addressed to the MP to them detailing the facts and showing you have checked things out already so that all they have to do is forward it with a oneliner.
Complain about this comment
#56 should be read by one and all.
(Too bad no one who actually makes significant decisions can be bothered to read things like this.)
Feeling the squeeze here as well, in ways large and small. The local bank just placed a 'look for property listings' banner on its front page, which means they have bad mortgages on the book now.
Despite all, I remain an optimist, since despair creates nothing.
One way or another, we will get through this, despite the ministrations of the Great-and-Good.
Complain about this comment
......Rose, who is a member of the prime minister's Business Council, started by saying that he "doesn't do politics".......
Something you should aspire to Robert?
How differently you have penned the last two commentators in each of those posts?
So the Tory said their " VAT cut was a mistake, that it was a waste of taxpayers' money, and that the Treasury would have been far better to cut income taxes if it wanted to encourage spending....."
However, the laborite added that the VAT decrease has "not made a material difference to our sales."
......Rose was at pains to point out that he felt the government was acting with the best of motives..... you point out.
So from both sides of the coin the same reaction, but a very disimilar blog to describe their comments. Mr Peston, I do believe that you are politically biased and as such your actions go against the BBC's remit.
Get it sorted before someone complains and you go the way of Russell Brand and JR
Complain about this comment
#45 - yes, the VAT cut is gradual but we have just passed the peak of the shopping year and other, big deiscretionary purchases like furniture, cars etc are seeing their sales volumes collapse. It would surely have been better to put the money directly into people's pockets - a sort of personal recapitalisation. Right now, most rational individuals are reducing their debts wherever they can - a cash disbursement would speed that process up, however modestly.
Complain about this comment
From the last thread 129 Amusedtodeath ;
"Another article on M&S makes for well-trodden and cosy reading. It is a pleasant enough way for you Sir to earn a salary.....But are you being tough enough on the Central Questions of the Mis-governance of Britain ?. . . . Your most urbane colleague, Mr Andrew Marr was in Downing Street on Sunday . . . to me his questioning came across as a kitten playing with his master's ball"
Very true
"...you and Mr Marr have cosy jobs, you'll not be sacked"
Maybe there is a correlation between these two facts. Does the first bit explain the second ?
Complain about this comment
Let's Forward With Jah Orthodox / Mystic
And get rid of and the Income Tax
Come let's stone the devil
Chase him on the level
Complain about this comment
58 thorntonheathen
Thank you for that : )
By the way apprentices are not covered by the minimum wage which is why there is a suddenly a push for so many. Another brill wheeze chaps, employ the same number of youngsters but call them apprentices n pay less. Just how long an apprenticeship do you need at McDs the menu is not that big. Mind you getting them to complete the apprenticeship probably reduces staff turnover rates which are pretty bad. BTW Where do these neo crypto victorians come from, is there a time machine or something.
Complain about this comment
A GBP 12 Billion Vat cut (or less, as it appears from this blog), is actually....
1) Reducing tax by GBP 12 Billion now
2) Taking out a GBP 12 Billion loan from foreign investors now to fund the shortfall in Government revenue caused
(by selling an extra GBP 12 Billion of gilts debt now)
3) Having our children pay GBP 18 Billion [in real terms) back to foreign investors extra in 10, 20 and 30 years time when the gilt debts become due for repayment (18 Billion, not 12, as interest has to be paid on the gilts in excess of real interest rates)
So we are borrowing GBP 12 Billion in real terms from our children, who will have to pay back GBP 18 Billion worth in today's terms (on top of all the other debt they have to repay then), and indebting the country.
How can we be so mean to our offspring ?
How can Gordon Brown and the Government damage this country so badly for such cheap/worthless immediate political gain ???
Complain about this comment
nobody should be getting big bonuses
All those people working in the public service who argued that their wages should be the same as the private sector should have their wages cut.
How can you justify a Chief Executive of a council ot health authority with no real power and in charge of a organisation that runs itself, getting £200,000 pa.
No wonder all the money is gone. This has all happened under a labour government, yes Mr. Kinnock a labour government.
Complain about this comment
I have a family owned and run soft furnishings retail business and have been trading for over 35 years in the mid to high end of the domestic market. We have had a very busy year despite all the global problems but profits never match up to the turnover taken due to ever decreasing profit margins. The vat cut has made absolutely no difference to our turnover but has increased our workload by having to re-price over 700 fabric and wallpaper collections, this probably means an overall 700 hours of extra work. The vat cut is literally pennies or a few pounds of savings to most customers, only saving significant amounts to those spending thousands, who whilst grateful, are possibly the lucky few that are least affected by the current situation. The government would have been better off to have dramatically cut vat to 0% for the month of December and then back to normal from Jan, consumers would have gone shopping crazy generating significant turnover increases for businesses and saving consumers significant amounts that they would appreciate, what a lovely xmas everyone would have had and less work for businesses and possibly less lost revenue in the long run for the tax man. arghhhh!
Complain about this comment
66 crosserandcrosser
'cheesed off more than it has pleased'
El Gordo and Comical Ali D have achieve what I would have thought impossible until now, to upset almost every sector of society. A truely remarkable performance. To cheese off both borrowers and savers, asset holders and non asset holders, shops and shoppers, bankers and bank customers, etc etc. You could probably fit the number of people in the UK pleased with them and not on medication on a single bus. Still they will be studied for the next fifty years. What fun.
Complain about this comment
In the mid-eighties, Thatcher lowered the top rate of tax and executives got a big rise in take home pay. They liked it and continued to award themselves high pay rises of 20-15% per annum over a twenty year period, whilst the workforce got 3% per annum. The argument was that the large pay rises were necessary to attract exceptional people. That argument has now been lost. The executives should take a pay cut of 90% to take them back to where they really should be. They can keep the excess pay they earned in the interim.
Complain about this comment
GET USED TO IT EVERYONE!!!!!
As we don't produce much nowadays we are going to have to accept lower standards of living sooner or later. Personal debt can only go so far and soon we have to realise that National debt can only go so far.
Again we are discussing RETAIL??
RETAIL AND BANKING ARE SERVICE INDUSTRY!!!!!
READ 56 keepsmilingeveryone.
When we re-discover the fact that we need to PRODUCE and EXPORT something we will perhaps then be able to start to re-build National and Personal wealth and living standards.
UNTIL THEN PREPARE FOR NEGOTIATING ANNUAL WAGE REDUCTIONS
Complain about this comment
The VAT reduction will certainly affect my spending, but not until later in the year. I'm planning to bring forward some major outgoings (building work on the house, new computer) that I might otherwise have left for a couple of years, in order to take advantage of the reduction. I'm sure many other people will be thinking in the same way.
Complain about this comment
#69 Tim Warwick
under Thatcher we were paying 15 per cent interest on our mortgage - negative equity was the norm in 1990
under Thatcher mines were closing, we could do with some cheap coal now
under Thatcher unemployment reached 3 million
and you think that was good
Complain about this comment
Anybody happen to know how much the man is paid? If he's on upwards of a mill, it's hardly a great sacrifice NOT to take a pay rise. How about saving a dozen other peoples jobs by taking a pay CUT. Now that would be truly noble.
Robert, I do think you need to slow down. This post is way too 'bended knee' for my personal taste. And yesterday's about clothing retailers seemed a little ill thought through
Most significant thing you've revealed all week is that all these captains of industry now publicly acknowledge the VAT cut was pointless.
Complain about this comment
My wife did our usual shopping in Tesco on Monday, the bill was £99.88. I spotted the line what the VAT reduction was: 38 pence! Fairly pointless I reckon.
Now petrol & diesel are going down a bit from their previous highs of way over a £1, you can be guaranteed that you will be hit back with another fuel tax hike in the not too distant future.
What labour gives with the one hand they tend to take back with the other (and more)!
Complain about this comment
Does anyone know how VAT is dealt with when calculating inflation?
Presumably taking 2.5% VAT off all consumer products means CPI inflation will necessarily fall, which is the measure the Bank of England is supposed to control through interest rates.
Will a fall in inflation created through a VAT reduction provide cover for zero interest rates and/or printing money to fight 'deflation'?
Complain about this comment
Frankly I am not surprised that M S have had a bad year. The groundfloor layout of their Bluewater 'flagship' store is utterly awful. There are no clearly defined aisles, members of the public being forced to negotiate their way around strategically placed stand while passing through the shop. The hope is that you are forced to stop and browse. I, and many other s I have seen, just get rather anoyed and force our way through. God alone knows what would happen in the event of a fire or terrorist attack.
The result is I avoid the store until every other alternative has been investigated.
When I do visit the store, I am either put off by the drab fabrics or unrealistic proces. £20 for a set of three boxer shorts!
Sorry M & S , you are out of touch. Must try harder!
Complain about this comment
Frankly I am not surprised that M and S have had a bad year. The groundfloor layout of their Bluewater 'flagship' store is utterly awful. There are no clearly defined aisles, members of the public being forced to negotiate their way around strategically placed stand while passing through the shop. The hope is that you are forced to stop and browse. I, and many other s I have seen, just get rather anoyed and force our way through. God alone knows what would happen in the event of a fire or terrorist attack.
The result is I avoid the store until every other alternative has been investigated.
When I do visit the store, I am either put off by the drab fabrics or unrealistic proces. £20 for a set of three boxer shorts!
Sorry Marks , you are out of touch. Must try harder!
Complain about this comment
#34
These appear to be entirely sensible comments - it would have been possible for the government to come up with something like this.
I also enjoyed the comment: "Rose was at pains to point out that he felt the government was acting with the best of motives."
I enjoyed it because if a business employed this tactic of doing something with the best of motives, but the result was to spend 12 billion with no noticeable effect on the business, I'm not sure if the boss would be quite so lenient to his advisors.
Of course, none of the measures employed by the government can be shown to have had any effect (as other here have said), all we will ever hear is the Brownian mantra that he could not stand by and do nothing.
I do think that Labour have employed the "placebo" tactic - appearing to do something - for effect rather than effectiveness.
Complain about this comment
Frankly I am not surprised that M and S have had a bad year. The groundfloor layout of their Bluewater flagship store is utterly awful. There are no clearly defined aisles, members of the public being forced to negotiate their way around strategically placed stands while passing through the shop. The hope is that you are forced to stop and browse. I, and many others just get rather anoyed and force our way through. God alone knows what would happen in the event of a fire or terrorist attack.
The result is I avoid the store until every other alternative has been investigated.
When I do visit the store, I am either put off by the drab fabrics or unrealistic prices. £20 for a set of three boxer shorts!
Sorry Marks, you are out of touch. Must try harder!
Complain about this comment
Sorry should not have posted my last comment. Should have read other posts first. It adds nothing.
But I have to write again to 56. I feel your pain.
A couple of things puzzle me. How is a client able to knock 4% off an agreed and presumably contractually binding price? How come your VAT payments have risen if your sales have fallen? Is it because of the nonsense VAT rule that the tax is due when you invoice and not when you receive payment? As others have said, you can negotiate with HMRC over this.
But what brought tears to my eyes was the thought of you unable to sleep with worry over your employees. I was exactly where you are now, a year ago. It is heart breaking to have to let go good workers with families and mortgages. Some of the people I had to make redundant in July 2007 still do not have jobs. Neither do I.
You feel so powerless and useless. All your working life you have been an employer, a provider, and now you can't seem to provide no matter how hard you try. You feel like you don't know who you are any more. It is emasculating - and I say that as a woman. I wept buckets for months over what I saw as MY failure.
But I have to say this to you. You are not Superman and you could ruin yourself trying to save them all, especially right now. Your first duty is to your own family. This mess is not your fault. You sound like a good, honest businessman who has done all he possibly could to stay afloat. In those circumstances do NOT throw good money after bad. Do NOT risk your home and your marriage.
Be tough with creditors and debtors. Seek help early from HMRC who individually are not monsters. And then take some tough decisions. Make what cuts you need to. And know when - if necessary in the end - to walk away.
The day you finally make the decision that has been staring you in the face for month after agonising month a huge weight will lift from you. It will be horrible. I don't pretend otherwise. But you will know when you have done the right thing.
You are probably treating this situation as if it were yet another blip. Lke the recession of the early 90s which we both obviously managed to trade our way through. But would you make the same decisions if there's a chance that the world you once knew has changed forever - or at least for the rest of your working lifetime? If the business climate is not going to be the same again?
Good luck, my friend. You are lucky to have a good marriage and a wife you can lean on for support.
Complain about this comment
#65 - Yes - this is the scariest part - the 40bn or so lost revenue is structural and will go on, compounded in perpetuity, unless new business appears rapidly to plug the gap (ha ha), or there are significant cuts in planned Govt spending. Whichever Party wins the next election is going to have to grasp this nettle but I don't see either main party beginning to address this issue.
Complain about this comment
#56: keepsmilingeveryone
Very depressing, bullies using their muscle.
If it all goes wrong name names and I, for one, will boycott them.
Complain about this comment
#56 keepsmilingeveryone
I wish I could offer you more than sympathy. The free market has never worked properly between big and small players. It is high time that there was some legal protection for suppliers to big chains. With a statutory code of practice, a fast track tribunal and a threat of name & shame and break up to those who abuse their position.
Don't let the B******s grind you down.
Good Luck!!
Sasha
Complain about this comment
As regards the VAT rate reduction, surely it is (a) too soon to tell and (b) difficult to distinguish its effects from other things going on in the economy, including consumers' and businesses' expectations about the immediate future. Our perspectives are so short term these days that economic measures are assessed long before the effects have had a chance to work through. I doubt whether anyone - for or against the measure - will be seriously able to assess its effects for at least a year.
Complain about this comment
The VAT change cost the government next to nothing to implement but, did I hear somewhere, a third of a billion for business.
I am far more concerned about the destruction of money and the almost total supine complicity of the government and the almost complete lack of any attempt to move the monetary economy in the right direction towards any form of sound money.
In contrast business has been forewarned that in about a years time VAT will be going up and they will have to pay out another third of a billion in wasted money.
VAT is a sideshow - a costly sideshow - my major concern is the lack of any realistic proposals to bring back sound money.
Sound money is money that pays a realistic return and costs a realistic sum - yes I am banging on about getting interest rates back to realistic levels. The fools (sorry the 'wise men' of the MPC) will probably lower the rates tomorrow and get further away from sound money! No sound money = no economic recovery plus the potential re-inflation of the credit bubble!!!!
Complain about this comment
#79 OldSouth....not seen you posting for a while.
Please keep posting....your US perspective is invaluable!
What do you make of Madoff posting his jewels away whilst under house arrest!....I guess we shouldn't be surprised.
Alas, we have the same types here.....however, at least over your way, they are prosecuted.
Complain about this comment
The issue weighing down the global economy is that of over-valuation. Everyone believes that the assetts they hold are worth more than they ultimately are.
To my mind the straw that broke the camels back was soaring oil prices.
Oil rich nations and stock market investors concluded that they could charge what ever they liked for their raw product. Prices of all goods around the world soared and those on low incomes, particularly in America discovered they could no longer cover their outgoings. They reduced their spending, causing what was at afirst a minor contaction within the USA economy. However, the oil price rises continued and more people were affected, both by increasing outgoings, and now reduced receiptsfrom the lower paid. The avalanche started.
This is now history.
The fundemetal issue facing the world is that most raw material stocks are significantly over-valued. In the real world the finance to purchase these stocks is no longer available, and the market for the finished goods has significantly contracted, because of the artifically high cost of may goods, due to raw material prices.
The global economy will only recover when the financial ratios converge.
Complain about this comment
Derby County against Man U were awesome tonight!
Complain about this comment
It's Capitalism when they are accepting the huge "performance" based bonuses and Socialism and Solidarity with the proles when they can no longer financially engineer paper profits.
We need to get our priorities straight and place the emphasis on manufacturers, inventors and innovators.
Careers as Bankers, Accountants, Retailers and other "service" type industries were seen as being it safe, solid and low risk.
The lesson of this recession is simple - when you stop manufacturing, your whole economy becomes a debt - fuelled Ponzi Scheme.
Complain about this comment
Vat reduction was in fact a longterm tax rise via duty on fags and booze. Smoke and mirrors.
Complain about this comment
Can I ask if when Mr.Rose and his collegues cut the redundancy packages of their employees late last year they imposed a similar diminution of their own severance packages, and now that they propose cuts to the pension sceme will their post retirement benefits suffer similarly.
THEY CERTAINLY SHOULD BUT I VERY MUCH DOUBT THAT THEY WILL.
Complain about this comment
I think people underestimate the cumulative effect of the reduced VAT. When I had my car serviced yesterday, costing £315 (ouch) I saved £7. These small amounts will add up to hundreds of pounds over the year, probably about £500 for many families. But politically there is little benefit as there is almost no feel-good factor from such a drip feed.
Complain about this comment
Sterling has jumped 10% against the Euro over the past ten days. Why?
I think that the entry of Prime Minister of Russia Mr Putin has changed the game
Putin has entered the new economic war for a future of raw power, the control of our energy and wants high gas prices.
Watch the next ten days as all of Eastern Europe has no gas with Germany and France also suffering. We are in a battle for survival and a way of life. We are drowning in a sea of debt and exposure to huge imports of food and future energy, yet PM Brown still carries on blowing bubbles in the sky. What a very strange man he is.
I predict that sterling interest rates will go down no more than 0.5% Thursday as otherwise sterling will fall yet again
Complain about this comment
#56
I feel for you-I mentioned this disgraceful behaviour on the part of large clients holding their suppliers to ransom on another blog-boots started it last year (not with my companies-they're not directly a client of ours). The same thing, lengthened credit terms plus percentage discount.
I have some suggestions to toss into the ring-not sure if they're applicable, but maybe useful..
Offering early settlement discounts
Invoice discounting-not a favourite of mine, but can help with cash flow difficulties. Be careful of charges though. Various types available-banks have their own and may be helpful in your negotiations.
Change from Standard to Cash Accounting. This makes your vat obligation only on cash in and out-not to be used with invoice discounting as vat man sees that as you having been paid in full and expects vat accordingly. Discuss this with your accountant.
Take a serious look at where you can trim your business-very hard-I know, I've done it. Do the trimming before your meeting or at least have a plan to do it before your meeting.
If you have company fuel cards of credit cards cut them up
I hope some of this may help.
Good luck and best wishes
Complain about this comment
Sterling's up cos euro suffering-eurozone rate cuts pending and economic news coming out is really bad
Arrogant CEO's make me so cross-we never took more than a modest salary from our business, and put extra to one side for rainy days such as these. Our staff are our companies. But then customer service is important too.
Complain about this comment
China Calls the Tune and Robbie thinks Gordon and Alister are decent chaps really.
Surprisingly it was a Chinese politician who yesterday said western governments needed to tell their populations the truth about how high unemployment is going to be and how far house prices are going to fall.
He is right. The reaction to possible quantative easing demonstrates that only a few realise the extent of our problems.
I've got 2 complaints to make about your reporting:-
1/ Every other sentence from government ministers repeats the mantra that the credit crisis started in the US. But it was AIG and Lehman Brothers in London who created many of the MBS's and other poison that has caused the credit crisis.
2/ Why have you not crucified the government on the matter of house prices rising 15-25%pa for 10 years when wages were rising just 2-4%pa.
This is not the time to be polite.
The nasty side of the recession is about to start, many are going to be losing jobs and a large number of those may never work again. Those who bought a house since 2004 are going to be paying unnecessary mortgages for years and some will lose their homes and everything they've paid in to them.
Gordon Brown and his colleagues did this to get re-elected. It is not a time to smile and act as if talking with a fellow professional. These people are not like us. They have done something very wrong. As a journalist who is paid by the general public, it is your duty to hold these people to account not to act as a conduit for their PR. They're making a mug of you Robert.
Complain about this comment
Something I have been msuing over for a few weeks now, what would people feel about the reintroduction of MIRAS?
Surely this would help as this whole issue has been made worse by the refusal of many banks to pass on the rate cuts and would also help people stuck on high fixed rates.
Personally, any saving made by myself this way would probably go towards paying some of my credit card debt off first?
Complain about this comment
Re Executive Pay
Over the last 20 plus years ive seen many associates literally bleed their
business or employers business dry
through greed and reckless behaviour.
Whilst the staff are earning barely 10%
of what the bosses are.
In some instances the staff are on less than 1% as an average.
EXCEPTIONAL TALENT??????????
THEFT MORE LIKE!
Complain about this comment
Hang onto your ammunition, lads, don't fire until you see the whites of the Chancellor's flag.
Complain about this comment
Correction, not his flag, his underwear.
Having given the contents of our assets to Wun Hung Lo and Company under the impression they were a British bank, simply because they hold a Banking Licence, sold the kids down the river and hocked the remaining assets, he's now selling the shirt off his back and dropping his trewsers in the hopes of attracting passing trade. Just be glad the fishnets are in the river.
Complain about this comment
Has anyone calculated the value of the spending power taken out of the economy by the cut in savings rates ?
Complain about this comment
Who is actually buying big ticket items at the moment (new TV, car, etc)? Very few of the people who have large debts to service, but alot of my colleages here in Germany are now planning shopping trips to the UK because the collapse in the pounds value makes the UK so cheap.
Hence a reasonable portion of the 12bn that HMG is borrowing will actually not be benefitting Joe Public but leaving on the next flight out.
Also, if overall spending continues to collapse and as a result the VAT cut will "only" cost 8bn, will HMG still borrow the full 12bn to spend the rest on "public services" anyway?
Complain about this comment
I await Roberts commentary today on Sainsbury's record Christmas sales...i fear I may wait many a year to hear an optomistic report from Mr Peston though !
Complain about this comment
Robert -- a few related comments.
1. "Rose, who is a member of the prime minister's Business Council, started by saying that he "doesn't do politics". But he then added that the VAT decrease has "not made a material difference to our sales." Which some will see as a criticism of the Treasury, although Rose was at pains to point out that he felt the government was acting with the best of motives."
Rose - doesn't do politics. Why then is he willing to be a member of the Prime Ministers Business Council ?
2. Why was it necessary for the BBC when it ran the statement/criticism of the VAT cut, from Simon Wolfson, chief executive of Next, to include that Simon is a Conservative Party supporter. It was as if the BBC were making sure that his statement was less than credible.
Why don't the BBC mention in their introductions on BBC TV news that their Robert Preston is the son of a Labour party member of the House of Lords.
Same sort of logic.
3. VAT cut -- it seems to be forgotten that there was a significant cost to business implementing this cut AND they have the same cost again in 12 months time.
But I guess Gordon and Alistair "meant well" or equally both show their complete ignorance when it comes to the real world.
Complain about this comment
Sorry should have read Robert Peston -- please correct. Thanks
Complain about this comment
One bit of fine-tuning on the VAT front: it takes time to work its way through the system, although the price you paid today is lower, the price your supplier paid for the materials to make what you bought was higher, so the immediate effect can even be negative in cash-flow terms, if the replacement stock purchases were placed before the change in VAT rate - and its cash-flow which sinks businesses. That's actually a net outflow to businesses until such time as the rate increases again!
Whoops, dropped another one, Darling? Instead of investing in businesses, you drained more of their assets into the consumer base!
Complain about this comment
Ref post 56.
Many thanks for all the comments, support and suggestions. Yes, i was wrong on the VAT, a bit of good news!!
The problem with 120 days is that invoice discounting is ruled out, as funding does not go beyond 90 days. As our biggest customer, we can't live without them - but now we can't live with them either.
As for naming and shaming - we only deal with oen hardware store, but friends in fresh produce and furniture tell me it's the same with them.
What worries me more is that I guess (but hope not) this is going on round the country in large numbers, and is largely unreported. If we close down 23 redundancies barely makes the local chip paper.
It certainly causes you to re-appraise what life is about. Family, wife, health, and what sort of world we want to live in.
Good luck to everyone - keep smiling!!
Complain about this comment
#123
"I await Roberts commentary today on Sainsbury's record Christmas sales...i fear I may wait many a year to hear an optomistic report from Mr Peston though !"
I expect he'll manage to find the bad side of it!
Let's hope that the £ keeps climbing back against the Euro too - it'll be interesting to see what happens if rates are cut by the BoE today.
Complain about this comment
Did anyone happen to catch Newsnight last night? Paxman pointedly asked Tom McNulty, employment Minister, whether the newly announced plan to train thousands of apprentices was a new initiative or just part of the one announced in 2007. McNulty didn?t know, and what?s more didn?t seem to think it important whether he knew the answer or not. I despair.
I sense from all the Whitehall statements in recent days, the emphasis is now planning for the future. The question as to whether UK PLC actually has a future appears to have been largely abandoned by government.
Complain about this comment
The whole debate on the VAT cut seems to revolve around whether Ally D ought to have made it an income tax cut instead. There appears to be little debate as to whether other taxes ought to have been cut.
I'll start by defending the VAT cut. If the alternative was simply an income tax cut, then there's a very real risk that any such income tax cut would simply be saved by large numbers of people who could afford to do so, ie those with high disposable income wouldn't spend it, they'd stick it in the bank (or under the bed in a deflationary, sick bank scenario like we have now). That would limit the short term stimulus to the economy.
However, I think a big reduction in corporation tax would have been a better option for the £12 billion tax cut. Why? Well a cut in CT means that for any given level of after tax profit (ie what actually matters to firms), a lower pre-tax profit will generate it. That's important at a time when firms are looking at job cuts etc to maintain profitability. Cutting CT may well have made a difference at the margin for companies looking for cost cuts, ie fewer job losses, less (bad) impact in economic sentiment, consumer spending holds up better.
There's actually also a cash flow benefit to the Treasury from lowering CT. Where companies lose money, they can claw back CT paid in previous years. So a firm losing money in 2008 can calculate tax losses at 28% of the loss and claw back its 2007 and previous years' CT payments. However, if CT were reduced, the tax loss calculated for 2008 would be lower, and hence so would be the clawback. So the Treasury concentrates help on stronger companies most likely to survive the downturn.
Lowering CT is attractive in the longer term. Evidence shows it attracts quality businesses with future growth prospects. Ireland's slashing of CT to 12.5% is a good example, notwithstanding Ireland's current economic woes which are more to do with adjusting to Euro membership. Ireland had far too low interest rates over much of the last 10 years, and it has adjusted to Euro membership via a boom in asset prices (mainly property). Look beneath the surface, though, and you find a whole raft of high value added firms and jobs attracted to Ireland as a result of low CT and smart use of allowances for intellectual property. Firms like Google, eBay, Microsoft etc all have European headquarters located in Ireland, as do many pharmaceutical companies who route patent income through Ireland to protect against taxation. Ireland effectively recovers the CT loss via the jobs created by these firms. Individual taxation is pretty much the same as the UK and VAT is higher.
The EU pressured Ireland over 12.5% tax (ie it's seen as predatory), so the UK would be hard pressed to slash CT under "normal" circumstances. However, in the current climate there is no political mileage in appearing to block stimulus initiatives. So the UK could gain a long term advantage whilst at the same time having a better-targeted short term fiscal stimulus. I'd be impressed with Ally D if he used the March Budget to (implicitly) accept the VAT cut was wrong and reverse it early (after 6 months not 12), whilst slashing CT to whatever is possible: 15% maybe? Unfortunately I doubt he'll have the nerve. With Labour improving in the polls, I suspect they'll start playing defensively.
Complain about this comment
If there is another base rate reduction then the Gov are genuinely clueless as to what to do!
There is an opportunity here to use the money being borrowed by the Gov to build a future instead they are using it to incentivise people to buy more clothes, shoes and TV?s
What a waste!
Complain about this comment
The VAT cut wasn't primarily meant to be an economic stimulus but a political one, and in that sense it worked. Think back to how the PBR was slaughtered in the media, the first polls in it's immediate aftermath, from ICM and Mori gave the Tories leads of 15% and 11%. The consensus was that the public had seen how bad things were and Labour was going to slump further. Then out of the blue ComRes produced a poll with the Tory lead just 1% followed by polls from other pollsters showing Labour closing. People have been speculating in the blogosphere about why this happened, the consensus is that Mr and Mrs Average had seen their mortgage and fuel costs decrease and then they went Christmas shopping and saw signs annoucing "40% off" M&S tagged their signs with "Thanks Darling!" and so Mr and Mrs Average thought "Oh that must be the VAT cut!" WRONG! The big discounts were almost entirely due to retailers desperate to clear stock before the New Year. Anthony Wells who runs UK Polling Report produced an article before Christmas showing a correlation between Labour's poll ratings and people optimism about the economy. Just before Christmas that rose sharply as people enjoyed the benefits of lower mortgages etc. well the latest survey has shown a sharp drop in that index and if Wells is right then Labour's poll rating should also go south. The first polls of 2009 are due over the weekend and this will be the moment of truth. Labour have been able to make the "Tories will do nothing" line work up until now. As to what will happen if Labour's "Do something, Anything!" policy fails to deliver is anyone's guess!
There's an old Chinese curse, "May you live in interesting times!" We're about to see that happen!
Complain about this comment
#129 - Yea, I thought this was very entertaining. To give him his due, McNulty does often have the decency to look surprised at the stuff he has been briefed to say.
Complain about this comment
Robert
How about doing some actual investigation into business conditions out there. Get in amongst the smaller businesses, and take a real hard look at what is happening
Then when you sit in front of the government ministers you can actually ask relevant questions and wait until you get a real answer.
I fear that publicly quoted companies will simply blame their sales falls on the "credit crunch" rather than on their poor management or procurement.
What is going to happen if all these banks not lending actually causes further short falls in bank earnings and thus makes them technically insolvent again?
Complain about this comment
Hmmm, sounds like the Chinese haven't called the floor yet.
Can't find any link to it on the BBC though.
Complain about this comment
Has everyone gone mad?
2.5% seems like nothing but when you look 2.5% of M&S 600million profit its around 15million!!
thats an extra £15million in the pockets of consumers that wouldnt be there if there was no cut. Plus thats there pretax profit and not even there turnover. plus thats one retailer for 3months!
I am sure in time someone will come up with a better idea (maybe even the Torys but more like the libdems) but thats what we have so why dont people just run with it?
Complain about this comment
The VAT cut at its inception would have appeared to be a stroke of genius. VAT is not meant to be a business tax per se but a tax on the end user. The Treasury were (in theory only) effectively putting 2.5% more retail spending power in the punters pockets. The genius of the cunning plan is that upping VAT would be nowhere near as emovtive as messing with income tax - as the 10p band debacle clearly demonstrated.
I too was thinking that the return of Miras could put a fire under the demand for houses. However this would stick in the old labour craw as it would only provided a break for the property owning classes and not those at the bottom of the economic food chain in welfare housing.
Also I'd bet dollars to doughnuts that Mr Rose does not have the same compensation package as his staff. Car? Exec Pension? Stock Options? Nice PR puff though.
It's not just BS this is M&S BS!
Complain about this comment
It appears that M and S and Next shoppers have been buying their clothes at Sainsbury's and no doubt some of them have abandoned M&S food for Sainsbury's too.
When Tesco's results come out no doubt we will see more evidence of a seismic shift in UK consumption away from specialist shops to the big supermarkets.
I remember reading on the BBC news website that Morrison's said they did very well too!
http://news.bbc.co.uk/1/hi/business/7201758.stm
Complain about this comment
mon then Bert - write us a "ghastly" blog about Sainsburys then!!
but then again good news is no news eh?
Complain about this comment
The entire firm I work for does not get a pay increase nor bonus this year either, so Sir Stuart is not alone and I am afraid I am of the opinion that he should not be receiving anything when some M&S staff will soon not be receiving any income. Just because VAT was cut was not necessarily going to get the public to charge out and spend for the sake of spending - Will the Government be increasing Council Tax? They should not because the very real facts are that many people either are not getting pay increases. Sadly many more are losing their jobs and income - There is too much uncertainty still and the Governments "good intentions" are not being effective. The be all and end all has to be the Banks. They created this situation and they are maintainin it as now they refuse to lend mortgages etc. They need to take a step back, lend sensibly (go back to 3 x the borrowers salary - Not 10 x) The Banks have the Government by the short and curlies and until they get slapped down and put back in their place then it appears that the Banks, not the Government are governing this countries finances - and may I say as it is the business that they are in - they are doing a very poor job at managing money!
Complain about this comment
re #129 Sir Cerberus
Clearly McNulty did not know if they were NEW apprentices - he looked very unsure
To think we are in the hands of this government - lions led by donkeys comes to mind
Also did you notice Milliband would not answer whether or not he was involved in drafting the Gaza resolution
BTW is he trying to look older or did he just forget to shave
Complain about this comment
#7. Cheese_Me_Too wrote:
"On VAT I'm still baffled by the cost of this. A 12bn GBP cost across 60m people works out at an average of 200 GBP per head (this obviously includes children- would be 800 GBP for a two parent, two children family). Does anyone at all out there feel like they're 200 quid better off as a result of this cut?"
You need to ask the question after a year of paying less Vat not at the beginning.
However, I do feel that it wont make a difference to peoples decision to buy or not.
Complain about this comment
It very easy to criticise the temporary 2.5% reduction in VAT.
Would people have been so dismissive, had there been a temporary 2.5% INCREASE in VAT.
I think not!
Complain about this comment
Sir Stuart Rose might well say that he is not considering awarding himself a pay and other remuneration increase because M&S is not now as profitable as it once was but, what is more important, will he and his fellow directors not accept that they should do the honourable thing and agree to cut their pay and remuneration package to reflect the downturn in the company's fortunes. Or does he, like all the rest of the nations fat cats, believe only the workforce should make all the necessary financial sacrifices.
On the subject of was/is the governments decison to cut VAT a good one, the answer might be yes if Sainsbury's results are anything to go by.
Complain about this comment
We have until the 15th Jan. Join the petition now and show your contempt for this government.
http://petitions.number10.gov.uk/Finance/
Complain about this comment
#136 QuiteLondonLad
Although the reduced VAT rate over the course of a year will put some money back into most peoples pockets, it most likely it won't make people spend more. There are lots of people who will use the "windfall" to reduce debts, which although good in the long run does not fit in with the current Government policy of stimulating the economy. The fall of M&S profits however does hit the Gov in terms of reduced corporation tax, when they need the money most for their own spending plans.
#140 Size4girl
Although agreeing with your sentiments the whole problem with getting back to sensible borrowing (ie 3 x salary) will cause the property market to find a new floor, maybe to crash. The government are desperately trying to avoid that at any cost. They really should re-consider their current stance. Once prices hit bottom, the basis of a recovery in may sectors of industry will begin.
Overall this is a tough game, with no easy answers. Clarity of though and consistency of policy is what we require above all. The credit crunch which seemed to have caught a lot of people with their pants around their ankles, HM Gov. above all, seemed to have required immediate reaction. The price of that immediate reaction is now being felt by all. To paraphrase Gordon Brown, maybe at some point the government should take some time out to "do nothing" untill at least they have a coherent plan of action.
Complain about this comment
#138 Interesting. I no longer shop at the biggest of the chains you mentioned, because of the appalling way they treat suppliers. Also, the ways they avoid tax on income generated in the uk, and their bullying tactics to local authorities on planning matters. All to do with the suppression of competition. And their prices are too high.
10 years ago, I thought the Coop was a dead duck - they simply hadn't moved with the times. Now my local one seems to show that they have got their act together significantly.
Collectively, we can have an influence by a combination of shopping ethically and shopping around.
Complain about this comment
On average, IF you had £100,000 in a savings account, then this time last year you'd have got about £3500 p.a. after tax.
If you'd spent all of this on VAT bearing items, you'd have contributed £612.50 to government coffers.
Nearly all types of savings rates have been reduced by nearly 3%, so now you might get say about £1400 after tax.
If you spent all of this on VAT bearing items in the coming year then the contribution to government coffers would be £219.
So not only will business be hit by the lost spending potential caused lower interest rates but also the real reduction in VAT contributions generated by this type of discretionary spending will be nearer 60%.
Complain about this comment
This comment was removed because the moderators found it broke the House Rules.
If your business uses the small business fixed rate for VAT watch out. The Chancellor reduced the headline rate by 2.5% - big news but the small business rate I use at 11% was only reduced by 2%. Notice the difference? ie I can now charge my customers 2.5% less but pay only 2% less in vat - the difference comes out of my pocket. Another stealth tax (albeit limited) when small businesses in general are struggling!
Complain about this comment
#141:
Milliband's old enough to shave???
Complain about this comment
A lot of the stores in our small town are closing or going into administration. I wonder if it would have been better to reduce the overheads of businesses by freezing Business rates or something else that reduces the overheads and that in turn will help a business cashflow issue.
Complain about this comment
Well done Gordon Brown and The Bank of England. I intend to go to my Bulding Soceity on Saturday morning and withdraw the £30k I have "Invested". I would encourage all other savers to do the same.
Why should the banks have the benefit of our money if they are not rewarding us. I did not extend myself with debt I could not pay. But I am paying the price for others who did.
Other finiancial institutions will also move their money abroad where 7% can still be got from banks in Europe.
How is this rate cut good for the economy?
Complain about this comment
@ #150. I found that out too. I am down 1%. it's like the 10p debarcle. make a big song and dance about the VAT reduction but say nothing about the flat rate scheme and hope no-one notices. So typical of the government. Give with one flamboyant hand and take it away quietly with the other and hope no-one notices.
Complain about this comment
Rose says "As for the example that should be set by Britain's executive class in general, Rose said there must be absolutely "no payments for failure."
Silly boy! Has he forgotten that on a wet day some time ago John Major created a second pension for Prime Ministers' worth several millions of pounds.
Its not a question of service to the nation so much as a business and what can be extracted from it.
Complain about this comment
It would nice if executive pay and perks was more transparent. I note from the recruitment websites for non-executive Directors that payment has increased by a rate well above inflation and that the avaerage pay for twelve to eighteen days work a year is thirty eight thousand in small to medium companies. If all companies were made to list their executive rewards on the company website it might encourage the more selfish and greedy to desist.
Complain about this comment
This comment was removed because the moderators found it broke the House Rules.
Its only a 2.5% reduction if something is actually purchased. If someone doesn't have the cash to buy luxuries (note that most food is zero rated) then the underlying assumption is flawed. With unemployment rising, it is almost impossible for those people to realise the real benefit of this. The only people who really benefit are those who really have money ... but then most of them have shifted it abroad.
So businesses have had to waste time with the changes probably using many staff on unpaid overtime to make it happen. Businesses of course probably have a net loss from this change when you factor in the hassle (particularly small business).
I respect Stuart Rose - I bought shares when he took over and I will continue to retain them whilst he's there. He is level headed and perhaps really needs to be the chancellor.
The only way out of this mess is for the BoE to set up a consumer arm to create baseline products for the other banks to compete with. Quantitative easing will not help if the banks don't pass the money on ... any money from this will be put into clever instruments until the market picks up. Remember the banks believed that house prices would never go down... or at least sold everyone else on that work of fiction with grand sounding products.
Having just had an argument with a credit card company today, the truth is that this isn't about money its about trust. You can't trust financial institutions as there is too much detachment from numbers on a screen and the associated social issues. When banks don't trust each other (LIBOR rate), doesn't it suggest that they still have something to hide?
Complain about this comment
The VAT rate reduction was a total nonesense. People's main non discretionary spends are food, power (for heating and light) and fuel. Food in predominately zero rated, power is at the 5% rate and the effect of the rate reduction on fuel was negated by a corresponding rise in fuel duty. On a £1000 discretionary spend the rate reduction amounts to a saving of less than £25. Not enough to change a buy/dont buy decision given that in the current competitive market you could get that reduction and more anyway. Reducing VAT doesn't put money up front in people's pockets. If the government wanted to engender a "feel good" effect then a direct tax cut would have been a better route albeit that I doubt it would have made much difference. If the approach to be taken is a Keynesian one then using the money to make direct investment in infrastructure projects would have been a much better option.
Complain about this comment
Is Gordon Brown STUPID not knowing that savers will withdraw their money from the banks and go elsewhere ?
Complain about this comment
I'm actually suprised how little change there's been year on year. Instead of the absurd "war on terror", we've now got an absurd media frenzy of "war on recession/depression".
Retailers ran big discounts and sales before christmas, including 20% off days at M&S. So disappointing sales were guaranteed. We've all bought the same amount of actual stuff as the previous year, but they discounted it heavily this time, so in pounds the sales have fallen by a few percent.
Next year the sunken pound will mean the same stuff is much more expensive than this year (when we were still protected by importer currency hedging). We'll buy the same amount of stuff again, and the media and politicians will be reporting a retail sales "recovery".
In fact, most of us carry on as normal while they mess with our money but pretend it's us changing our habits.
Complain about this comment
105
We have heard a lot of negative comments from retailers about the cost of implementing the VAT reduction. Some have repriced the goods, others have used their systems to reprice at the tills.
However, I recall no such bleating from the same sector when the Major government increased VAT from 15% to 17.5% (1992?) in conjunction with the introduction of Council Tax. Logic would suggest that if it costs money to mark down, it would have cost to mark up. If anything, the sector is more computerised now, so the transition should have been easier this time. The silence then compared with now suggests a political agenda, which devalues their complaints.
Complain about this comment
Until we see the Prime Minister and Chancellor volunteering to link their own salaries to the average earned wage (excluding tax credits) I will continue to find it impossible to believe they have confidence in their abilities enough to inspire me to have the same.
Complain about this comment
Well, I delayed buying a brand new car until December, and saved myself £225 in VAT from the cut. Result!
Complain about this comment
Robert Peston may be the prophet of doom or spiller of beans, which of course is a rather uncomfortable situation. He is not however, the architect of the crisis, far from it.
He rises in my esteem to the levels of Andrew Gillingan because this is journalism in the public interest, something which is patently not on the mind of the Government and the banks whose greed was so profound.
But lets be fair; stupid these bankers are not with their luscious houses in Mustique. In 2006 even Jeremy Clarkson had stumbled across the criminality of it all. A cut in VAT won't stimulate the growing number who don't have anymore than a cut in stamp duty. Only those who have will buy and they will soon be rapidly dwindling.
Car buyers are not buying because the UK is the traditional place where the stupid punter makes up for the lower European price of goods. And now heaven help us the Government is going to print money!!!.
The entire National debt is the size of the GDP and the reserves have been sold. The taxpayer is propping up the banks. However you may just as well buy a box of monopoly money for all its worth because thats how much the printed money will be worth. Zimbabwe here we come.
Complain about this comment
I have just come back from Thailand and the VPL briefs and T-Shirt Bra in M&S shops cost 25GBP each made in Vietnam.
I would like to know from Sir stuart Rose if the people who makes these garments get a good salary? as the same items in the UK cost 10GBP.
tongdii
Complain about this comment
View these comments in RSS