Author: johnredwood

 

For many years Tesco sold people the groceries they wanted. Tesco’s market share went up and up. Profits and dividends rose whilst prices remained competitive. Sir Terry Leahy presided over a huge success.

For many years  Manchester United built up a reputation for being the best or one of the best clubs in the Premier League. Under Sir Alex Ferguson the club won many trophies, increased its world fame and fan base, and became a huge revenue generator  from tv rights, sales of products and even from selling tickets for games.

During their glory years both UK success stories had their critics. Tesco attracted endless criticism for being too big, for being too tough in negotiations with suppliers, Councils and other partners. Yet they remained the UK’s favourite grocer as measured by how many people shopped there and by  how much product they purchased. Manchester United of course drew the criticism and the jealousy of the supporters of many other teams that they usually defeated, and the special criticism of the few teams that could give them a good match and could sometimes  beat them in competitions. Sir Alex’s style with the  media often encouraged verbal retaliation.

When these two leaders retired from their jobs, both organisations started to record disappointing performance.  Manchester United had a poor season last year under a new manager chosen with the support of  Sir Alex. This season has started badly under a costly  new foreign manager who was meant to change things for the better. A club like Manchester United with very expensive and well trained players does not expect to lose 4-0 to MK Dons nor to be so far adrift of the top of the Premier league.

Tesco has reported slipping market share, with more people going to competitors than before. Last week came the shocking news that things were  not expected to get better anytime soon, and the dividend was slashed by three quarters to conserve cash and reflect the realities of lower profits.

In each case there are three popular explanations of the changes.

Some think Leahy and Ferguson were special managers, and their replacements so far have failed to show anything like their skill at mobilising the very considerable resources at their command and inspiring their teams to perform.  They have on their side the fact that the decline seemed to set in in each case on the departure of the old boss. In each case there has been subsequent management change as the owners seek to recapture the old success, implying those most involved think management is the problem or part of it.

Some think the later years of both super managers left problems behind which suddenly surfaced or became clear on their departure. Did Sir Alex fail to buy the new younger players needed in time? Did Sir Terry push too hard to cut costs and raise profits to the point where service was damaged or prices were too high? It is always tempting for new incoming management to blame the outgoing, and some times it is right. The weakness in this argument is the new management at Manchester United was able to buy new players, and Tesco’s management has been free to raise service levels and or cut prices if they were an inherited problem.

Some think the problems lie outside the managements, especially in the case of Tesco. Maybe the competition has just got a lot better, which would have posed as big a problem for the retiring managers had they stayed.

In the last couple of years Manchester City with a big chequebook and a skilful leadership, Chelsea with billionaire backing and talented management, and an improved Arsenal, Liverpool and Tottenham have all perhaps made it more difficult for the old leader.

In the grocery area the last couple of years has seen a strong and well marketed challenge from the big discounters to Tesco and to the other old leaders including Sainsbury. It may not just be Tesco that suffers from the outbreak of much tougher price competition, with customers becoming cannier and reaping the benefits.

Do you have a favourite explanation? I suspect there is some truth in all three explanations. I also think Ferguson and Leahy do make the case that some managements can make a lot of difference and are worth the money.

 

In the peak year under Labour an 18% Capital Gains Tax rate brought in £7.8 billion of revenue. Last year a 28% rate brought in just £3.9 billion, a fall of 50%.

In the peak year under Labour with  a 40% highest rate, Income Tax brought in £22.5bn from self assessment Income Tax. Last year with a 45% rate it brought in £20.85billion, a fall of 7.3%.

In the peak year under Labour the then lower Stamp duty rates on property brought in £9.9billion. Last year with higher rates the Treasury collected £9.4 billion, a fall of 5%.

The one tax increase which did work, bringing in substantial new revenue, was the VAT increase. Labour’s peak year for VAT brought in £89.9 billion. Last year the higher rate brought in £118 billion, an increase of 31%.

The tax cut that worked, taking more people out of Income Tax altogether with higher thresholds for standard rate payers, still allowed an increase in revenue from PAYE from Labour’s peak £126.4 billion to last years £135.5 billion.

Meanwhile, total public spending has risen from £655.6 billion in 2009-10 to £711.5 billion last year, a rise of 8.5% in cash terms. There are arguments about whether this is a small reduction or a small increase in real terms. Bearing in mind the  planned freeze on public sector wages, which are a main component of public spending, the inflation rate in the public sector has clearly been reduced substantially.

The latest figures for total spending and borrowing remind us there is still a lot to do in the next Parliament to eliminate the deficit. This remains a necessary task.

 

We are always told the  EU model is the best in the world, combining free enterprise to deliver the goods with bigger government to enforce redistribution and social justice. We are told by many that this model gives us all a better lifestyle. We are told that the wonderful single market provides the driver for more jobs and greater prosperity.

I have often commented on how the single market measures are frequently counter productive, leading to higher costs and fewer jobs. I have regularly pointed to the very poor record of the Euro area on employment and unemployment, showing they have got a lot wrong. Today I want to look at the big picture of overall income levels in the EU.

In 2013 the average US income was a healthy $53,000. The average EU income was a much more modest $34,000. If you allow for the fact that some of the smaller and more recent members of the union have further to catch up with the EU average, you could get the adjusted EU level up to nearer $40,000. So each person in the USA is on average somewhere between one third and 60% better off than the average EU citizen, depending on how much grace you wish to give the EU for its more recently joined poorer members.

These are huge differences. Why is no-one at EU level worried about it? Why is there no plan to ask what does the USA get right economically that the EU gets wrong? Why is their so much anti American rhetoric and so little understanding of the free enterprise system which has greater sway in the US than in the EU?

I am no uncritical fan of all things US. I am an opponent of neo con military interventionism.  The USA has more than its fair share of rules and lawyers seeking to slow down its enterprise economy. Compared to the EU, however, it gets a lot more right economically.

Take energy policy. It is busy producing more of its own energy and going for cheaper energy to fuel its reindustrialisation and heat its homes,. At the same time the EU is busily shutting down cheap energy facilities and making  itself ever more dependent on a lethal mix of very expensive and unreliable renewables and imported gas from Russia.

Or take transport. The USA provides roadspace for flexible cars and trucks to get people around its single market. The EU does what it can to make driving more expensive and more frustrating at every turn.

Look at modern technology. The USA leads the world with its digital revolution. The EU struggles to keep up, and mainly uses large US based service providers to automate its own activities.

The USA dominates the university world , the world of knowledge, with most of the world’s leading institutions. Only the UK from the EU manages a couple of entries in the top ten.

There is no evidence that EU membership is helping us catch up with the economic success of America. There is a disappointing lack of energy about the EU when it comes to helping business and entrepreneurs. The EU is in the slow lane, and proud of it.

 

The Ukraine’s application to join NATO on the eve of the NATO summit is an unhelpful intervention in global politics.

We were told by the EU and others that the EU wished to sign an Association Agreement with the Ukraine to promote more trade and friendship. It was not for military purposes. The Agreement belied that, as Russia pointed out, as it did include a clause about defence matters. To compound that with offering NATO membership would alarm Russia.

There are three good reasons to say No to the Ukraine. The first is we do not know what country  would join. Is it Ukraine on its old boundaries? In this case we have the dangerous anomaly that part of a NATO country would be under Russian control. Would it be on current de facto boundaries? In which case parts of a NATO country would not be under the military and civil control of its main government. Would it be the Ukraine minus its Russian speaking pro Russian areas? That would be unacceptable to the current Kiev government.

The second is NATO is in no position to guarantee the borders and territory of Ukraine from all comers. The Ukraine is too close to Russia. We could not protect it fully at acceptable military cost to ourselves, and without undue death and damage to the Ukraine if some  of it is taken by Russia as Crimea has been.

The third is we should not be willing to encourage the government in Kiev all the time it is part of the violence and death being visited on its own people, whatever the rights and wrongs of who started it and who is mainly to blame for its continuation. NATO should encourage democratic and peaceful regimes, who can keep their countries well governed by words and votes, not bombs and bullets.

 

Let me take as my text today some words of Douglas Carswell. I know how much some of my readers admire him. I will take words he has written since deciding to join UKIP, as some of you seem to object to quoting anything he said before this week.

“I am not against immigration”. ” The one thing more ugly than nativism, is angry nativism”. “We should welcome those who want to come here to contribute……There’s  hardly a hospital, GP surgery or supermarket in the country that could run without that skill and drive.” That so far is what we know of his current position on the hottest topic of the day. It is a generous sentiment, but  not a crowd pleaser with his UKIP audience. His only concession is he does think the UK authorities rather than the EU  should determine policy in this area, as I do.

I have been thinking a lot recently about political correctness. The reflex reaction of many Conservatives and UKIP ers is to condemn it, claiming it is one of the reasons so many mistakes have been made in public policy. The most recent mass tragedies of childcare in Rotherham are seen as an example, as it was not politically correct to draw attention to the origins of many of the perpetrators of the crimes. Political correctness seemed to get in the way of reporting crime and pursuing criminals.

Mr Carswell sees political correctness as politeness, and welcomes it. I can see both his view and the conservative reaction to it. The  truth is as a society we are struggling to find a language which does not offend a wide range of different religious and ethnic groups in our society, which at the same time helps bind us to a common outlook and also allows us to condemn and prosecute those who violate our common law and values.

I have spent all too much time on this site protecting some contributors from themselves when they seek to generalise wildly and unfavourably about individual religions, countries and ethnic groups. In this I am with Mr Carswell. It is not helpful or polite to accuse a whole religion or a whole race of general misconduct, bad attitudes or anti social approaches. It is wounding to many members of that group who may themselves be decent and law abiding, and who not share the bad characteristic ascribed to the group. I do not extend the same degree of protection to my own groups – white, male, Conservative! I understand people’s wishes to let off steam and air their frustrations, and my groups have usually learned to wear thicker skins.

Affording protection to differing religions, social values and attitudes is a crucial characteristic of an advanced mature democracy. Upholding a common law is another. We are tolerant of people practicing their own religion, but we do not intend  to base our civil and criminal law codes on a particular religious view. We are happy for people to live as they wish, subject to a common law on matters of wider importance like property rights, marriage, and the upbringing of children. It is always a difficult balance to strike.  Parliament is constantly adjusting it. However, today to be British means agreeing that girls and boys should have equal opportunities, that all should have a full time  education to 16 with other options to 18, that you only are  married to  one person at a time, that violence – or physical punishment –  is not allowed within the family any more than outside it. Those who disagree with this and related matters have to campaign for change by peaceful means.

Other matters cause tensions. We do not set out as legislators to tell people generally what they should wear,  and what they should eat. In extreme cases we do. It is not permissible in the UK to walk about in public revealing intimate body parts. There are also strong taboos, as with our social dislike of   eating  horse and dog meat. Those who are unhappy about the otherness of some people’s dress and lifestyle have to accept that there are limits to how far legislators should go in banning items. Similarly those who wish to live their lives differently need to consider the impact it has on the wider community, their chosen country. Even with good law codes to encourage and enforce toleration in most things, there will be prejudices against people who differentiate themselves too much by dress, attitude and demeanour.

In a country of volunteers who wish  to be here, we want more common feeling and shared values.  Divisive language achieves the opposite. Divisive conduct is either against the law, or damaging to the very society people have joined.