Week ending 17th May 2013

I know best

The National Audit Office’s (NAO) job is to monitor government spending on behalf of MPs.  It does this rather well, producing robust, well researched reports which in many instances highlight government mismanagement and waste.  The NAO maintains its independence from government and tells it like it is.  So the NAO is a really good thing or least you would think so.  Well it would be if governments took any notice, but they don’t.  They just receive the reports and completely ignore them.

Last week the NAO produced a report on HS2 which casts serious doubt on whether any of the benefits claimed for this £37bn project would ever be achieved and on whether the project can be delivered within the time frames that have been set.

It also criticised the DfT for basing the business case for HS2 on data more than ten years old.  Previously my concern was that by the time it was built, the basis on which the investment decision was made could be ten years out of date.  It now appears it already is 10 years out of date.

The response from Patrick McLoughlin, the Transport Secretary was to accuse the NAO of depending “too much on out of date analysis”, so you can see how much notice he is going to take.  The message to the voters and tax payers is that HS2 is good for you so that is what you are going to get (and pay for).

Not listening by politicians and business leaders is starting to stir up forces that could have unexpected consequences, for example.

Who likes the EU?

The EU has once again moved to centre stage in British politics.  However a survey published last week indicated that UK voters are not alone in having doubts about the benefits of EU membership.  This revealed that the proportion of Europeans with a favourable view of the EU has fallen from 60pc to 41pc.  The French are now more Eurosceptic than us Brits with backing for the EU falling to 41pc compared to 43pc in Britain.

This indicates that we are all members of a club that the majority of us now don’t much like.  However with a few exceptions the political and civil service classes (hard to tell the difference these days) throughout the EU still seem as keen as ever on the “European Project”.  Even in the UK whilst the Tory party is clearly split, Labour and the Lib Dems are adamant that our future is within the EU.

Politicians often accuse each other of “being out of touch”.  However is it more that the political classes as a whole are now out of touch with the rest of us?   The tensions between voters and politicians are growing and could produce very different kinds of election results as voters seek to punish politicians who they feel no longer represent their interests and don’t listen to their concerns.  This could produce a very different political landscape to that we have been used to with the current coalition government being just the first taste.

Google play on words

A sign that someone is having difficulty maintaining an argument that they had thought previously was cast iron is when they start to fall back on semantics to justify their position.

Last week Matt Brittin, VP of Google’s northern Europe operations was back in front of the Public Accounts Committee having his soft bits squeezed yet again on how much tax Google does not pay.   Since his last visit a number of whistleblowers have come forward claiming that Google does carry out sales activities in the UK.  This is contrary to the company’s claims that all its European advertising sales are routed through its European HQ in Ireland.  Mr. Brittin acknowledged that “clients may well feel that we are selling [in the UK].  But what is very clear is that no one in the UK can execute a transaction”.   He refused to admit that an earlier statement that “nobody is selling” had been misleading.  He said “The UK team are selling, but they are not closing”.

Oh dear Mr. Brittin, you really are getting desperate.  If it wasn’t for the politicians on the PAC not understanding what the terms “selling” and “closing” mean and HMRC being completely out of its depth when dealing with big multinational corporations you would be dead meat by now.  It is not just the politicians that are out of touch and not listening, it is business leaders like Mr. Brittin as well.  Watch out Google because the rest of us will eventually find a way of punishing you, even if we can’t think how to do that right now.

And if anyone was wondering what happened to the £20m voluntary contribution to the Exchequer from Starbucks, well it hasn’t been paid yet but according to a Starbucks spokesman they are “on track” to make the payments.

Rising Sun

A few weeks ago I mentioned the huge monetary easing ($75bn a month!) launched in Japan as the strategy for finally defeating more than 20 years of economic stagnation.  At that time no one could predict what would happen as nothing on this scale has been attempted before.

Now we know a bit more as the first thing that has happened is the Japanese have repatriated funds to enjoy a boom at home rather than investing in foreign bonds, but this may be about to change or it may not.  It is early days and anything could happen.  What else has happened is that Japan’s economy grew by 3.5pc in the first quarter, the Nikkei Index is up by 70pc since October and the yen has devalued by over 30pc against the dollar, yuan and euro.  This is causing concern for other Asian exporting economies, especially for China and if the Germans aren’t worried yet then they should be.  So not only do we not know what is going to happen, when it does we have no idea what the consequences will be.

And finally

Burning issues

The French have come up with a new economic indicator, burning vehicles.  Whenever the French express dissatisfaction with the EU or anything else it often involves setting fire to vehicles.  I saw a report last week that they manage to burn between 42,000 and 60,000 vehicles annually.  I don’t know how we do by comparison but I am pretty sure we don’t match (no pun intended) “l’incendie francais”.

Apparently, as the French economy deteriorates the rate of vehicle burning is increasing, with nearly 1,200 vehicles reported burned over News Year’s Eve and New Year’s Day alone.  It is feared that growing social unrest could hamper the French government’s ability to push through the economic reforms that are required. However as President Hollande’s entire political philosophy is based on not doing what is required in this respect this is hardly relevant.  On the other hand if they burn enough vehicles then this could spark (again no pun intended) a revival in French car manufacturing leading to economic recovery.  Aux barricades citoyens!

A facetious conclusion perhaps and not to be taken seriously?  Well I hope I have illustrated above that there are economic and political forces stirring that we have not experienced for many years, if at all.  Stranger things than burning your way back to economic growth could happen with unexpected consequences that we will have to respond to.  Changeability for businesses and business people has never been more significant for determining who will be the winners and who the losers.

So that was some of the week before this week. We hope you found some of the above thought provoking and useful for you and your business. We trust you had a good weekend and hope you have a great week this week.