Initial thoughts on ‘Plan C’…..
Prior to George Osborne’s Autumn Statement tomorrow – here is a summary of our findings and suggestions from last month. I’ll comment on our suggestions against those of the coalition as soon as possible
Next Forum – Fri Oct 14th – ‘Suggestions for Plan C’
At long last, our politicians seem to be waking up to the fact that we are hurtling headlong into a potential decade of austerity with David Cameron finally urging the G20 into a recovery plan. A great shame they didn’t attend our meetings or take note of our findings of the last two years though, as we have been warning that this could happen without strong leadership and vision.
But what might such a recovery plan look like?
Governments worldwide seem transfixed between two plans. Plan A appears to be cut spending with Plan B being to spend more irrespective of future liabilities. Both have, and are being tried out with limited success everywhere. So is it time for an alternative – Plan C?
This then will be the theme for the next Partners in Management Forum event to be held at the Media Centre, Huddersfield at 9.15 on Friday the 14th October and due to finish around lunchtime. It will be interesting to see how different our suggestions will be to those we made back in Feb 2009 where for example, we floated the idea of commercial credit unions being necessary to support business lending and generating growth.
Given that the Forum has been incredibly accurate in its findings and anticipations to date, can its members be as equally forthcoming in suggesting how we might avoid entering the dreaded ‘zombie’ economy and reignite growth instead, particularly from a Yorkshire economic perspective?
Whilst there is a wide representation of sectors among the membership, there are still some places available and attendees from the legal, financial advice and accountancy professions would be more than welcome.
Please contact david@partnersinmanagement.co.uk for more information.
Kirklees Business News Press Article
Press Release –July 2011
This week’s disappointing 0.2% GDP figures have just confirmed a previous economic prediction by the Forum; an independent West Yorkshire focussed discussion group and think tank. It recently had its first meeting of 2011, and although its findings don’t make pleasant reading for both the short and medium term, it does believe we can achieve sustainable growth and prosperity again, but it will take some innovative approaches to do so.
Started back in 2007 by David Broadhead of Partners in Management, a management development company based at the Media Centre Huddersfield, it was a way for senior managers who’d undertaken their strategic leadership programmes to keep in touch and debate strategic issues affecting themselves and their organisations. It now has 15 members drawn from across a wide range of industry sectors and represents both enlightened managers and small business owners.
Since its formation, their observations and predictions have been incredibly accurate leading David to jokingly suggest;
“If we could only just improve our timing we would probably be the most accurate independent think tank in the UK at the moment! That’s why we haven’t met for over a year as we needed the UK and the world to catch up with our observations and anticipations of likely outcomes.”
Back in 2007 the Forum foresaw the recession and house-price collapse; in 2008 it anticipated the Eurozone crisis and the future private sector backlash against public sector conditions of employment along with public sector industrial unrest. In early 2009 it foresaw an ongoing round of business closures, mergers and acquisitions and identified the need for courageous, unpopular but respected political leaders given the likelihood that tax rises of 10% or public sector cuts of 20% would shortly be needed. However it’s most worrying prediction in Sep 2009 was regarding the economic knife edge we were balanced on
It is on that theme that the recent discussions were held. Afterwards David said:
“Back in 2009 we couldn’t see what was going to really drive the economy out of recession long-term and that all the indicators were that the situation could get much worse rather than better. Of course this was before the General Election and we had no influence over that result and subsequent actions.
The problem now is that we still can’t see what at the moment can really make a positive difference, and if anything the problems and issues that were there before are refusing to go away! If not careful, we really could be in for a decade of austerity as the ‘zombie economy’ becomes a reality.
In particular we believe our manufacturing base has eroded to below a critical mass and is struggling to exploit any opportunities provided by world economic growth and advantageous exchange rates. It can’t find either the finance to expand or the skilled workforce needed and can’t subcontract either within the UK as that capacity is taken up.
The finance sector is faced with its own restructuring and re-capitalising issues so can’t expand or innovate whilst the service sector in general is starting to struggle as a consequence of the ongoing public sector cutbacks.
The public sector, if anything, has not seen the cuts that we originally envisaged or felt necessary to balance the economy. Over ambitious economic growth projections have reduced the government’s original cost saving targets whilst public sector spending has continued to rise. As growth, tax revenues and projected cost savings do not meet expectations we can see another round of increased cost cutting measures being undertaken soon, probably accounting for the 170,000 jobs reprieved from our original estimate and suggested too much later by the CIPD, at 500,000 public sector job losses.
Our education system, particularly higher, is about to undertake radical reform driven by cost, competition and the need for vocational employability outcomes which ultimately will lead to faster, more cost effective and appropriate high quality courses, but only following a period of turmoil, potential closures and job losses.
The construction industry is mothballed due to limited demand and again lack of finance and to add to this we face a likely second ‘dot.com’ bubble burst.
Economic growth is slowing down now in the emerging nations as they, like us, are facing increasing pressures from increasing inflation. The United States is becoming problematic too as the ‘money printing’ exercise there has failed to stimulate sustainable growth and they now face the reality of having to undertake serious deficit reduction whilst facing the stalemate situation of an election campaign.
Given as well the inevitable scenario of any one of Greece, Ireland, Portugal, Italy or Spain eventually facing reality and defaulting on their debt too, with the attendant financial crisis and confusion world-wide that will follow that, and you could begin to think that not getting out of bed in a morning was a serious option!”
So, all in all, not a healthy situation and one that will need inspired leadership, innovation and a great deal of counter-intuitive thinking to get us out of.
“Unfortunately our politicians still seem ‘content and detail free’ and driven by popularity and media response, which when coupled to a public sector that through target setting and other political fads, seems to have lost its sense of purpose and associated specialist skills, doesn’t bode well for the inspirational leadership and infrastructure support we need to initiate and support sustainable growth. If anything this is the decade when people will have to take personal responsibility and return to those positive Victorian values of aspiration and endeavour”
Not quite then the scenario we would like to anticipate, but a realistic one none the less. However, all is not lost and the Forum did consider that there were still some positive opportunities amidst all the potential gloom and doom and had some suggestions as to how we might get to a turning point after which things will start to definitely improve. David goes on to say;
Strangely enough it may well be our construction industry that offers us though the greatest opportunity. At the moment it is the only one industry with the greatest potential for UK employment. Our manufacturing and service sectors have, or have been outsourced overseas and are struggling now with key skills shortages. On the whole, the construction industry is still both UK labour intensive and sourced, so investment here can benefit the economy at large. Funding is of course a critical issue along with what to build? In our opinion, government backed low cost or social housing seems the likely answer. There is a demand, the asset stays in the UK and can be sold later too if required. Given the political ideological issues associated with this we see benefits in ‘allowing’ not-for-profit social sector landlords to borrow and invest this way, ultimately backed by the Government.
Local infrastructure construction projects too are critically important. Collectively we saw no reason to invest £32 billion in HS2 the high speed rail link to the North. All this will do is transfer yet more wealth and enterprise to London and the South East with no tangible benefits to our local economy. We much preferred investing in the local infrastructure and also encouraging enterprise directly into the area. Why not as well adopt low cost suggestions like renaming Robin Hood airport London (Don) and diverting 20% of long-haul Heathrow flights there instead – in effect becoming the third runway? With a new terminal and some relatively minor investment for easy access to the East Coast main line and motorway network, it could easily be the regional transport hub and attract the trade and investment the area desperately needs.
Finance for business remains a critical issue. There’s a great opportunity here to side-step the banks and utilise business based credit unions as a mechanism for freeing up lending and stimulating growth but as yet the Government seems to be doing little to force the issue and assist commercially sound lending through alternative approaches. Small amounts distributed wisely can make a huge difference, especially to small local organisations whereas large vanity projects favour the larger organisations and in our opinion won’t generate the same degree of growth.
Our final positive thoughts were on employment conditions. Whilst employment legislation didn’t prevent any Forum members from taking on additional employees; it, and the inconsistency of legal interpretation, didn’t encourage further employment either. Back in Nov 2008 we discussed how we needed to create a new intermediate class of temporary, flexible ‘enterprise’ type worker where individuals, particularly professionals, would be able to work flexibly but with minimal additional benefits. They could then create their own portfolio careers, working for several employers without permanent commitment by either party.
The next meeting will be in October 2011. It will be interesting to see what responses we have had by then.
Back on the 8th July…..
It’s been a while I know, but in a way we had to wait for the world to catch up with our thoughts and anticipations!!
Anyway, the Forum is set to meet again for the first time in well over a year at the Media Centre, Huddersfield, HD1 1RL on the morning of Friday 8th July 2011.
For our first get together there is no charge and we plan to finish by lunchtime. There are cafe facilities on site for lunch and further discussions afterwards if needed.
If you are not sure of the benefits of participating then its worth remembering the comments of one of our members, Charles Offord of the Financial Services sector,
“Attendees are finding it an invaluable source of business advice and insight without an expensive invoice from a consultant. We can already see members changing their business strategy in response to our discussions and deliberations”.
Members old and new are welcome and please get in touch if you would like to participate.
david@partnersinmanagement.co.uk
mob: 07957 325336
Three and a half years later………
Well at long last reality has caught up with our forecasts from three and a half years ago!
The recent discussions and debates on the Human Rights legislation have finally given us a ‘full house’ on the outcomes we anticipated happening post Oct 2007.
We just need to improve our timing……
Here’s the link to the original predictions – http://partnersinmanagement.org.uk/msc-pgdip-projections-oct-2007-to-dec-2008/
David Broadhead
Plan C – Slicing the new Gordian knot? Leave Europe behind and build HS3 instead….
When Alexander the Great attempted to untie the unfathomable Gordian knot way back in 333BC, he found a simple yet radical solution by slicing it in half with his sword. Maybe the time is now right for simple radical solutions to our never ending and unfathomable economic crisis? The so called Plan C maybe?
What these radical solutions might be was the subject of the last Forum meeting, held prior to the Chancellor’s recent 2011 Autumn Statement.
Without it sounding like ‘we told you so’, it proved very difficult to actually suggest much that hadn’t been suggested by the Forum over the last three years.
Back in February 2009 we were clearly concerned that we were heading for a decade of austerity and that bold visionary political leadership would be needed to save us from the so called ‘zombie’ economy. Inflation, the Euro crisis, the necessary public sector cuts and rising unemployment would be key drains on economic growth but that there were other opportunities for growth from investing in the infrastructure, manufacturing, localisation and ‘green’ technologies – provided that essential investment financing and employment reforms were undertaken.
So why ‘Plan C’ and not a development of ‘Plan A or B’?
In the Forum’s opinion a combination of both Plan A, the so called coalition’s austerity plan was needed as was Plan B, the opposition’s spend more and pay later plan. Unfortunately at the moment the current versions weren’t delivering the right results because they weren’t sufficiently radical, far sighted or well implemented.
We had warned previously that the austerity cuts weren’t extreme enough or properly targeted and the recent example of solar panel subsidies ending prematurely is a classic own goal example, as is maybe the NHS structural reform at this time. Back in Nov 2008 we had warned about the public sector pension and employment conditions reforms needed and had always forecast 500,000 public sector job losses were likely. The coalition’s early cutbacks here weren’t as dramatic as required and are now having to be increased. In the meantime there has been left an impression of a lot of talented, experienced people leaving voluntarily with expensive pay-offs, no effective radical reformation in service delivery taking place, and only cutbacks and relentless wasteful restructuring happening. The recent example of public sector workers striking to protect pensions irritates many in the private sector where they are struggling to ensure they have a job as their first priority and is maybe an excellent example of how the ‘cuts’ haven’t been well implemented managerially.
The spending planned hasn’t been focussed strongly enough both on infrastructure or the right ‘green’ technologies and as a consequence growth here was limited. The only headline investment was HS2 which we thought was a liability and not a benefit to the North. In a similar vein we had stressed the importance of feeding essential finance through to the small and medium sized businesses that needed it – this hadn’t happened either as the banks were just hoarding reserves instead and benefitting from the state aid granted to them.
So what essential ingredients did we think should constitute Plan C – the Gordian Knot solution, other than simply saying we want more of a focussed aggressive Plan A to pay for more of a focussed inspirational Plan B?
First of all create the right entrepreneurial infrastructure. Here the radical solution is to leave the European Union and join EFTA. We see the UK as having the potential to once more develop the culture of enterprise and aspiration through work, savings and study as opposed to welfare, crime and lack of personal responsibility. Leaving Europe would grant us the legal freedoms to implement the appropriate employment, human rights, financial and state aid reforms required and move on plus remove us from the bickering and paralysis that will ensue as it inevitably moves towards fiscal and political union. We are sure that China would see the UK then as key investment and manufacturing partner for exporting into Europe then too.
We also considered that the need to leave Europe in the future may be driven more by immigration issues and the likely need to stop and reverse the influx of migrant/welfare/health seekers. Alongside this we suggested that to overcome the displacement of local workers, benefits should be strictly limited and based on a social workfare scheme where people work for their benefit and if necessary benefit payments could be made to a new employer for a period of time to assist them into some form of work. Immigration is still desirable in certain sectors but there should be a financial penalty attached in that tax and NI should be paid on all earnings hence making immigrants more expensive to employ, thereby forcing us to address the issue of attitude and skill retraining for the indigenous workforce.
Secondly there is a need to simplify taxation, provide a fair pension for everyone, limit executive excesses and finance businesses directly. Why not scrap VAT and corporation tax and have a simple small non-refundable sales tax on all UK transactions with no exemptions? That way banks and other corporates could not hide behind off shore accounts and paper losses to avoid paying tax. Local authorities could maybe apply local sales taxes as required to supplement Council taxes and business rates. A national pension scheme could be set up into which all employees can pay and employers can match. Tax relief would be granted up to a pension pot equivalent to the national average wage after which only the employee can pay in from taxed income. That way everyone can change jobs with no loss of benefits and everyone is equal whether public or private sector. Executive pay could be constrained by introducing the concept of ‘partnership liability’ for anyone earning a multiple above say 15times the company average – that way they potentially pay for their mistakes too! Finally we have said many times we would like to see a new business banking structure, directly funded by government, and based on credit union type principles with operating costs limited to a tapered percentage of turnover to limit excess profiteering.
Thirdly we need to stimulate growth as we have said through infrastructure spending. We need to build more social housing in particular but also invest in understanding how to exploit shale gas safely and responsible, open coal mines and re-develop clean coal technologies, research and develop Thorium nuclear fuel reactors, build tidal power plants and incentivise home owners to use solar power etc amongst many others. We could be world leaders again if we had the vision and ambition to.
The regions outside London desperately need stimulating. HS2 we did not believe would deliver benefits. We still believe in developing Doncaster as Heathrow’s third runway in order to bring tourism, freight and business directly to the Northern regions. Why not start a new HS3 concept here linking Scotland, the North East, Yorkshire, Humberside and the East Midlands directly to London and the Channel Tunnel but more importantly straight through to Essex and a new Thames Estuary airport?
Finally let’s move the Bank of England to Leeds and redistribute wealth that way…….
The full mind map of findings is available for download here.