Author: johnredwood

Whenever I have been responsible for managing a government department or a company, I have wanted my staff to be honest. All the best organisations are transparent, reporting accurate and relevant information in a timely way. They pour over cases where quality falls short or harm is done, both to compensate the customer or client and to make sure such an error cannot occur again. Remedy begins with honest reporting of the incident. Management does not normally penalise the employee who reports the mistake, but works with them to put it right. It is a bigger offence to suppress the error or seek to cover up the damage, than to make the mistake in the first place.

We see how well honesty and transparency can work by looking at good airlines. An airline knows having a 100% safe flying record is crucial to the health of the business and to the wellbeing of the passengers. Pilots and flight crew are required to report near misses, flight errors, and malfunctions in the aircraft. Each one is investigated thoroughly. Where the error could repeat a generic remedy is inserted in the manuals or programmed into the aircraft systems where this can work.

It is good news to see that Jeremy Hunt, the Secretary of State for Health, is seeking to bring this culture of good management into the NHS. The NHS has great power to do good, but it can also do harm. Serious conditions can be missed by sloppy diagnosis. Individuals can be harmed or even killed by giving them the wrong drugs or the wrong quantities of drugs. Operations can miscarry, leaving a person in pain and difficulty. Recent enquiries have shown examples of very bad care and treatment which are now coming to light.

Mr Hunt is right to carry a torch for greater transparency and honesty. He is right to demand that all medical and surgical errors are reported and properly considered. He is right to demand high standards of cleanliness, infection control and quality through our hospitals and surgeries.

Tax evasion is bad and a criminal offence. Tax avoidance is something different.

When most people in politics seem to  agree about something, it is often a good idea to ask a few questions.

Currently many politicians  seem to agree that the government should crack down on tax avoidance. It is a popular policy, as people assume it is their neighbour that is the tax avoider and they are the taxpayer. It comes “free”, offering lots of extra revenue to spend with no apparent increase in taxes.It gets them through the interview which asks how are they going to spend more and get the deficit down.

If it were that simple, wouldn’t it have happened by now? Can you remember a government that did not want to cut tax avoidance? So why is it so difficult?

It is difficult if not impossible because the self same parties and governments which want to end tax avoidance, also want to continue and expand the number of policies which allow tax relief for good things they wish to reward and identify. Most of those who condemn tax avoidance save for their retirement through pension funds. This allows them to save tax free, and to accumulate capital gains free of capital gains tax and income free of income tax in the pension fund.

Many of them with money to save also buy ISAs, to shield savings from both taxes. So why do people who so strongly condemn tax avoidance do this? Why don’t they see they are doing exactly the same as the avoiders they condemn. They are taking advantage of tax policy decisions which allow people to pay less tax. If they really believed their own rhetoric they would refuse to tax shelter their savings, and put money by for a rainy day and for retirement in tax paying funds with no tax relief.

They need to understand that just as they decide to use these “loopholes” or legitimate tax breaks to increase their own savings and wealth, so companies use tax loopholes or legitimate breaks to increase the amount of money they earn which they can spend on the company rather than sending to the taxman. If the Treasury offers companies tax offsets for investing in certain ways, companies will invest to get the break. If the government allows tax privileges if you operate in certain parts of the country, a business would be remiss not to see if it could do so.

Some multinationals get too clever at minimising their tax bills, and find they incur reputational damage when this becomes a matter of general dislike. Whilst few have any sympathy for multinationals, they do have to seek to satisfy the often competing tax jurisdictions of their various countries of operation. The UK after all sets a lower rate of corporation tax than the other advanced countries deliberately to attract more activity and cost here amongst those multinationals. UK policy is to encourage businesses to do more here to have a lower tax rate.

We can all unite to condemn tax evasion, the refusal to pay taxes due and deceit in telling the tax authorities what your profits or earnings were. That is a different mater. The present debate is in danger of confusing legitimate tax avoidance, something most people and companies do with the encouragement of government, with the criminal offence of evasion. You can  avoid all tobacco duties by the simple approach of not smoking. That I thought makes you a loyal follower of government health advice, not a tobacco tax avoider who should get on with buying some cigarettes for the greater good of the budget.

On Wednesday Mrs Merkel takes a few hours off from the Euro crisis to appear in Minsk with France, Ukraine and Russia to see if they can reach a diplomatic solution to the Ukraine crisis.

Russia will want the west to put on hold any ideas of arming the Kiev government, and will ask about recent NATO deployments. Russia will also want to know when and how the Ukrainian government will stop shelling its own citizens in East Ukraine. The Ukraine government will want guarantees of no further Russian support for UKrainian citizens in armed revolt against the Kiev government, and will argue that much of the violence has come from rebels armed by Russia. France and Germany will presumably urge caution and peace on both sides, and will seek to reach an agreement based loosely on the positions the two sides currently occupy. There is talk of a demilitarised zone around the present front line between the two forces.

It is difficult to know how the Ukraine government can pick up the pieces and offer fair and peaceful government to the whole country after what it has done to some of its civilians. The Kiev government will not want to trust the armed rebels, or forgive them their attacks. Similarly the rebels will not easily accept Kiev sovereignty, and will distrust the Kiev government. It may be possible to draw up new lines, allowing parts of East Ukraine a large measure of self government based on the territories the two sides have now established. The longer a peaceful solution takes, the more likely the rebels will want full independence and the less likely Kiev will wish to give it to them.

This is a huge test for the politicians and officials and involved. Most of the west does not want a war with Russia, but nor does it wish to see an easy Russian victory. Condemning Russian military intervention is the easy part of the response. Finding a way to resolve the conflict on acceptable terms is altogether more difficult. Delay in finding a diplomatic solution both sides can accept makes a prolonged war in Ukraine more likely, and increases the risk of a wider flare up in violence. It is a great pity the EU started out on its expansionist course with the Ukraine without properly considering the likely reaction of pro Russian people inside Ukraine, and the ability of Russia to give them support.

Ever since she conceded over setting up the Euro to France, Germany has been a semi detached member. Germany has willed the end, a common currency. She has refused the means, a political, monetary and banking union. Germany has wanted a relatively weak currency which helps her export and build up large surpluses. She has not wanted to share her wealth with the other members of the zone who are struggling financially.

Germany has been adamant that she will not pay for any weak country’s balance of payments deficit. They need to export more and import less. She has refused to prop up weak banks in other countries, saying that they need to lend less and raise more share capital. She has refused to grant or lend money to weak states that spend too much and need to borrow. She has told them to cut spending and raise taxes. All this has been called Germany’s austerity policy for the Euro. Most people think it has been followed, that Germany is in charge, and Greece will have to submit again.

It is true that all these approaches are formally Germany’s policy. It is also true that other countries in the Euro have been forced to cut spending, cut wages, recapitalise banks and do other prudent but deflationary things to try to live within the Euro. These policies will not allow the Euro to be backed by a successful, growing and prosperous area. In some co0untries they had led to mass unemployment, big cuts in wages, and a generation of young people unable to join the workforce.

However, it has not gone all Germany’s way. If Germany had kept them all on these policies all the time the Euro would have broken up by now. Just as Germany requires more cuts and more austerity, so behind the scenes step by step the rest force Germany to accept more responsibility for the communal debts, and to offer more money to the laggard economies. Germany has lost a series of crucial battles for prudence. In 2011 when the currency was near collapse Germany accepted large lines of credit being granted by the ECB to commercial banks in the zone. In 2014 Germany was forced to accept quantitative easing to bid up the bond prices of other states in the union and create more Euro cash.
Today Germany has to accept that the ECB will finance the Greek commercial banks, offering them as much cash as they need. These banks in turn can finance the Greek state.

Germany- and others – have also had to accept major debt write offs by both Greece and Cyprus in their respective past bankruptcies. Both were allowed to stay in the Euro despite their poor financial conduct.

The battle between Greece and Germany will prove once again that Germany has to lose if she wants to keep the Euro. Germany has to turn a blind eye to some new fix, some extend and pretend approach to Greek debt and continued cash supply to Greek banks. Alternatively Germans along with others will have to accept a major write down of Greek debt from another bankruptcy of the state along with possible losses in commercial banks if Germany prevents further ECB support. This morning the Greek Prime Minister has made a fighting speech implying he either wins or he declares bankruptcy and leaves the Euro. Germany and other states will take a big hit on Greek bonds if that happens.

Germany needs to wake up to the shocking reality. All the time she stays in the Euro she will be forced one way or an other to pay more of its bills. She has but a minority share of the votes (18%) and decision making, in a zone now dominated by states who believe they should be able to spend more of Germany’s money for her. So it will be, unless Germany has decided to move from semi detached to outside the zone. If she stays in she will discover she is in a terrace with shared walls she needs to pay to repair.