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• 

  Gerry puts out the candles

  Lee 10:40 pm on 20 February, 2010 | 5 Permalink | Reply
  Tags: deprivation (4), Economy, One Wales (16)

  Gerald Holtham has a forensic mind.  The former IPPR head who came close to heading the WDA in the early days of the Labour Government has established his effectiveness in distilling a complex argument in his Commission’s first report on funding.  Today he used the same skill to gently, but brutally, unpick some of the loose thinking around the replacing the Barnett formula.

  At a meeting in Plaid Cymru’s conference in Cardiff Holtham disarmingly pulled apart many of the assumptions of his hosts.  Every time Helen Mary Jones or Dafydd Wigley lit a flame of hope, Holtham gently placed his fingers on the wick and extinguished it.

  A fair share for Wales?  You’ll be lucky.  Though Wales is £300m under-funded by his calculations the Treasury say that’s within the margin of error and would quickly disappear with a different set of assumptions.  But the real problem is that using the same calulation Scotland gets £4.2bn-a-year more than it would if every part of the UK was treated the same as an English region.  With the SNP running strong the Treasury won’t consider change: ”If you think they’re going to change that, forget it” (quotes courtesy of Tom Bodden).

  A fairer income tax regime in Wales?  Not on your nelly. The high earners would flee across the border: ”You would get virtually no revenue from the upper rate of income tax and if you raise it too far you would probably lose it…If you want to maximise revenue you would cut the upper rate of income tax, [and] put a penny on basic rate…How you explain that to the Welsh electorate I don’t know.”

  How about a tax on natural resources then?  Small change.  Even if you could overcome the barriers a tax on water exported from Wales would only raise about £30 Million a year – and the Treasury would probably deduct it from the Welsh block in any event.   Not worth the grief.

  But Helen Mary Jones refused to be sidetracked, this simply confirms that Wales needs to flex our muscles more she said.  The Scots have shown that extra support for the SNP gives the country greater leverage (though Plaid’s affection for the SNP may not last long if there’s a hung Parliament.  Dafydd Wigley said they’d be working at cross purposes and should hold separate negotiations with the Tories).

  Helen Mary went on to say that the Conservatives might not mind “annoying the voters of Scotland” because they have so few votes there.  But I don’t buy that.  My reading of the Conservatives is that they see the generous Barnett settlement for Scotland as a price worth paying for keeping the Union together.

  But Gerald Holtham did give leave his audience with some cause for hope. The Calman Commission in Scotland suggested extending the tax-raising powers on the grounds of accountability.  Without a stake in revenue raising the Executive will have too easy an excuse to blame London for not providing sufficient funds.  The UK Treasury have accepted his argument.  “That’s boxed me in” Holtham explained.  ‘How can I not recommend tax raising powers now’ he mused…

   

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• 

  Quakers, Savers and the Welsh Economy

  ian 3:31 pm on 20 January, 2010 | 0 Permalink | Reply
  Tags: Economy

  I don’t know how many readers of this blog have been following the protracted saga of the takeover battle for Cadbury but the news that ownership has passed into the hands of US based food giant Kraft holds some vital lessons for all our economic welfare. Cadbury was the last independent member of a British stable of profitable, socially responsible and internationally competitive confectionary brands. What Frys, Rowntree and Cadbury all had in common is they were Quaker families who mixed successful business with their enlightened approach to the welfare of their workforce and their families. I am sure many readers are familiar with Bourneville, the model community from which the brand takes its name.

  Earlier this week Kraft increased its offer to Cadbury’s shareholders, the Board recommended the deal to shareholders and another British company has passed into history. It may come as a surprise to some of you that ultimately, even if indirectly, the owners of the business were you and me. Cadbury’s shareholder register include the names Legal and General and Standard Life. If you have a savings arrangement, such as a pension or a life policy, with these institutions they will be managing and investing those monthly contributions on your behalf. These institutions have a powerful role as the providers and custodians of capital, the very lifeblood of our economic system. Some serious questions need to be asked as to quite how they see themselves executing their responsibilities as business owners of businesses and in particular how their actions align with the interests of their savers and the wider community. Their recent record gives scant grounds for confidence. Many of the very same institutions held positions in the banks at the time when their rampaging activities were bringing the system to its knees. One might reasonably have expected them to consider it their duty to exercise a restraining influence on excessive behaviour. If nothing else perhaps it is about time they recognise more clearly they are paid by and are therefore agents of British savers.

  So how does this tie in with the performance of the Welsh economy. Takeover history tends to show that the majority of acquisitions destroy value and wealth in the long term because of the difficulties in effectively merging different operations and approaches to business. As an aside all too often takeovers are fuelled by the corporate ego of senior managers and the fee generating instincts of professional advisors, for instance close to home think about the Welsh Water and SWALEC deal nearly a decade ago, who no matter what the consequences for the rest of us, always walk away with a handsome return (for an iconic insight see this link to Where are the customers yachts? – http://www.moneyweek.com/investment-advice/how-to-invest/moneyweek-book-review-where-are-the-customers-yachts.aspx ) . Kraft is funding its acquisition by raising loans and these have to be serviced. Inevitably that means savings and potentially job losses. Cadbury owns a cocoa processing plant near Wrexham, whose future must be shrouded in uncertainty at a time when Welsh manufacturing is under the cosh.

  I will leave the final comment on corporate events to a spokesperson for Cadbury’s second largest investor Legal and General. “We believe the increased and final offer for Cadbury by Kraft Foods fails to fully reflect the long-term value of the company. “We are disappointed management have recommended the offer for this iconic and unique British company, but are grateful for the constructive way they have engaged with us.”

   
• 

  Bonuses and the Economy

  ian 2:33 pm on 4 November, 2009 | 2 Permalink | Reply
  Tags: Economy, public sector (9)

  It has been apparent for some time the bonus culture is not confined to the hyper-inflated rewards associated with bulge-bracket investment banking. Therefore I must congratulate the Western Mail on a fine piece of journalism today.

  Using the Freedom of Information Act, Sion Barry its Business Editor has identified bonus payments for the last financial year made to civil servants in the upper echelons of WAG. I am not sure what signals this sends out but at best it seems the payments are badly timed.

  It also raises wider questions about the need for remuneration structures to include this element of incentivisation. There was a time when people in all walks of life did their job and were compensated accordingly. The price of continuous failure was inevitable and the reward for success was the respect of colleagues, appreciation from your employer and enhanced self-esteem in the knowledge of a job well done. At some stage this all changed.

  From memory it seems to have been associated with the self-justifying claims on the part of large corporations that to remain internationally competitive the best people needed to be brought in and they needed to be compensated appropriately. Nothing wrong with that but maybe a better approach would be to establish the right level of expectation and set the pay level in accordance with this.

  Which brings me back to the world of banking. That notorious Welsh-man Lord Griffiths of Fforestfach, Vice Chairman of Wall Street investment bank Goldman Sachs recently defended the banking bonus culture by suggesting the British public should “tolerate inequality as a way to achieve greater prosperity for all.” This is an interesting point of view and needs to be contrasted with the news in Friday’s Financial Times that Moody’s, the ratings agency, has suggested UK banks are expected to experience further writedowns of between £130 and £250 billion over the next few years.

  If this proves to be true there are numerous implications from this. One of them should be the cancellation of bonus-time and a stinging rebuke from the mouth of Lord Griffiths to those contemplating being rewarded for failure.

   
• 

  Work is the answer

  victoria 12:18 am on 30 October, 2009 | 0 Permalink | Reply
  Tags: Economy, unemployment (6)

  Getting people off benefits is about more than forcing them to do job search and threatening them with losing benefits. A new study from the Joseph Rowntree Foundation of 6 deprived communities – including Amlwch – finds that the problems are shortage jobs, low pay and poor conditions, and lack of affordable childcare. No surprises there, except that this is a very coherent argument for tackling worklessness by providing work – decent, flexible, family-friendly work.  That you tackle worklessness by tackling the workless should go down as one of the 21st century’s more bizarre ideas. In practice, JRF argue for expanding the Future Jobs Fund in areas with few jobs – like Amlwch, like the south Wales valleys, at the same time as improving pay and conditions and encouraging affordable childcare.  Rather than more ‘helping people back to work’ programmes, WAG could usefully develop the Future Jobs approach and get childcare sorted. Meanwhile, watch the JRF Amlwch video.

   
• 

  Heart and Soul?

  heledd 3:14 pm on 27 October, 2009 | 0 Permalink | Reply
  Tags: Economy, Heads of the Valleys (5)

  Yesterday, a new campaign was launched to promote the Valleys as the heart and soul of Wales. The reaction has been interesting, with many people from North and Mid Wales up in arms asking – what about us? Many already think that a lot of schemes and so on are far too South Wales centric, and see this as yet another kick in the teeth for the rest of Wales.

  Personally, I welcome this campaign and think its a great idea. There are plenty of misconceptions about the Valleys out there and its good to see a focused campaign intent on tackling those head on. It’s an area of Wales that I’ve only recently started getting to know, and I must admit I’ve been impressed by the surprising beauty as well as the warmth of the people. It’s about time the rest of Wales and the world saw a different side to the Valleys as well.

  Obviously, I’d like to see tourism develop in Wales as a whole and I would personally dispute that the Valleys are the ‘heart and soul’ of the country. I think every single area in Wales has an unique contribution to make to the essence and spirit of the country. But as a marketing campaign, I think it’s clever. Let’s just hope it has a positive impact and attracts more people to visit Wales, thus giving a much needed boost to the local economy.

   
• 

  Dependency culture to end

  victoria 3:51 pm on 13 October, 2009 | 0 Permalink | Reply
  Tags: Economy, One Wales (16)

  At last, someone – in this case Ieuan Wyn Jones – is brave enough to consider scrapping hand outs for businesses.  Grants have long been the Emperor’s New Clothes of economic development.

  Everyone has a story to tell about how A.N. Other widget ltd would not have relocated had it not been for a few quid to support job creation, but overall the evidence for any real impact of grants on overall economic prosperity is weak.  It seems that the money will be spent instead on R&D instead.  

  As well as this, a significant chunk of the money saved also needs to go into good quality, long term skills training and on regenerating disadvantaged areas.  Otherwise, money will simply reinforce the advantages of the already well off parts of Wales.

   
• 

  Objective what?

  Lee 7:58 pm on 11 October, 2009 | 0 Permalink | Reply
  Tags: Economy, public sector (9)

  The BBC today reports what we already know – the current round of EU Structural funds is likely to be Wales’ last. 

  It was only our lamentable economic performance that saw us narrowly qualify for the current round of Convergence funding.  The enlargement of the EU to include even poorer areas than our own is likely to mean that in 2013 we’ll have to learn to live without the top level of European structural funding.

  What the BBC failed to ask was, is that a bad thing?

  Clearly £1.2 Billion over seven years is not to be spurned, £171 Million pounds a year clearly matters.  But in the context of the annual WAG budget of over £16 Billion a year, it is relatively small.

  More important to my mind is the opportunity cost incurred trying to spend the EU grant available to Wales.  Over the last decade Welsh public servants have learned a whole new language – Eurospeak.  It is a secret code.  They talk of the intervention rates which they can draw down EDRF to match funds – and that’s the intelligible bit.

  Civil servants, Quango staff, Local Government officers and voluntary sector workers have become very creative in piecing bits of funding together to access European money.  But it has a distorting effect on the way public services are designed and delivered in Wales.

  The amount of time, effort and imagination that is being absorbed by tapping into a relatively small funding stream must have a considerable opportunity cost.  Time spent on finding ways round opaque EU funding rules is time not spent on thinking new thoughts.

  Looking back the debates of ten years ago about ‘match funding’ seem rather quaint.  Anyone with a rough working knowledge of way the Structural Funding is working in practice knows that genuine ‘match funding’ is a myth.  But the amount of energy exerted keeping the myth alive is considerable.

  In a contracting public spending environment losing access to any top-up cash is regrettable, but it is a far more nuanced picture than the reports suggest.

   
• 

  More jobs to go

  victoria 10:14 am on 8 October, 2009 | 2 Permalink | Reply
  Tags: Economy

  Bosch looks set to join the hundreds of other multi-nationals which have left Wales in search of cheaper locations in Hungary, Poland, Eastern Germany, etc taking with it hundreds more jobs.  This is of course part of the EU dream of the free movement of goods and services across borders and supposedly how the EU will increase its competitiveness.  Losing more and more jobs (and output) affects Wales’s employment rate and GVA, and so – right on cue – the EU will come to Wales’s rescue with bags of cash, trying to help Wales to overcome its problems.  Meanwhile the biggest of all borne by the people who lose their jobs, and by the Assembly and UK government who are left to pick up the pieces via welfare benefits, healthcare costs etc.

  It is surely time to question the merits of a ’single market’ where low costs in new member states are simply leaching manufacturing out of other disadvantaged areas.  I don’t know what the answer is but MEPs from Wales and other (former) industrial areas in the UK need to be thinking about this and developing some firm proposals.

   
• 

  The Tories on...poverty

  Lee 1:57 pm on 7 October, 2009 | 2 Permalink | Reply
  Tags: Conservative Party (5), Economy, social exclusion (8)

  As part of his own medium-term strategy for positioning himself for the leadership Conservative AM Jonathan Morgan has set out his party’s claim on the Social Justice agenda.

  He is right that tackling poverty cannot be the property of any one party.  But he gets carried away with the symbolism of the Conservatives setting out to capture this agenda, without tackling the difficult detail of this intractable problem.

  He wants to see a greater emphasis on business and enterprise in the Communities First programme.   He echoes the criticism of the community lead initative and suggests the answer lies in a clearer focus and a greater “understanding toward the economic issues which are the most pressing”.

  He wants a greater role for central Government and a strong set of targets and benchmarks.  That will be help acheieve “a positive synergy to bring about affirmative empowerment”, apparently.

  I believe that we should restructure the programme to ensure the delivery of specific economic outcomes. Communities First was designed to tackle poverty, therefore the focus should be on those economic factors and shouldn’t be a panacea to cure every problem.

  Much of his critique is widely accepted.  But his solutions are vague.  Yes, Communities First is very broad, but so are the causes of poverty.  Also it allows each community to decide the priority for their area.  The Conservatices rhetoric of localism is in danger of giving way at the first sign of difficulty to the target culture they have done so much to criticise.

  His engagement with the issue is to be sincerely welcomed, but I can’t help feel that when it comes to solutions it is easier said than done.

   
• 

  Should we be sleeping more on the job?

  angela 1:27 pm on 29 September, 2009 | 1 Permalink | Reply
  Tags: Economy, Health (10)

  On a day off, taking a nap sometimes is a small but nice pleasure. Dozing at your desk isn’t, especially if a colleague walks in on you, but sometimes exhaustion just takes over. I find spending too much time in front of a computer makes me really dozy and if I read back through what I have done when I feel like that , the flow and quality of thought isn’t as good.

  The 2008 Sleep in America poll, conducted by the National Sleep Foundation, found that nearly one-third of adults who work at least 30 hours a week have fallen asleep or become extremely drowsy on the job, behaviour that employers frown on.

  Should they lighten up? Perhaps, in a knowledge-based economy that dependent on sharp minds, a few minutes of shut-eye could be really good for business.

  A report in the June 2009 Proceedings of the National Academy of Sciences showed that a nap with REM (or “dream”) sleep improves people’s ability to integrate unassociated information for creative problem solving, and study after study has shown that sleep boosts memory. If you memorise a list of words and then take a nap, you’ll remember more words than you would without sleeping first. Even micro naps of six minutes-not including the time it takes to fall asleep, which is about five minutes if you’re really tired-make a difference.
  When you’re in need of sleep, though, certain skills start to slide. Visual discrimination, which allows you to sort out what you see, can fade over the course of a day.

  The many effects of too little sleep and how our health can be affected are well documented may be some of those need to be looked at in terms of how we work and how we can be more productive in work. A 30-minute nap can stop the burnout, and 60 to 90 minutes that include some REM sleep will improve visual discrimination.

  So may be along with staff canteens and showers that employers provide how about some comfy chairs and black out rooms. But I think we should draw the line at jim jams and cosy slippers!