Night of The Long Knives?

It was a very bad day at the office for Gordon Brown. Having only the day before been seen smiling like a Cheshire Cat with Peter Mandelson (he's Lord Mandelson to the rest of us) while unveiling a new container port development in Essex, he rose to find that a new, more sinister campaign had sparked to scupper his leadership.

No lesser persons than Geoff Hoon, whose own credibility was low after his appalling tenure as Defence Secretary and then the MP Expense scandal, and former party darling, Patricia Hewitt, had been texting Labour MPs to have a secret ballot to change the leadership. MPs were slow enough, ministers even slower, to rebuff such calls and when they did the wonderful world of equivocation was invoked with responses from the likes of Alistair Darling saying, 'We will concentrate on winning the election.'

Central to all this was the statement by the plotters that six serving ministers were prepared to back this if MPs supported the secret ballot. Among them were Harriet Harman, David Milliband and Bob Ainsworth, as unearthed by the BBC's Nick Robinson last night.

Peter Mandelson chose his moment carefully. He had only just been found guilty of openly pleading to his party to stop just focusing its election efforts on core Labour voters but to widen the message to include people who had voted for the New Labour dream at the last three elections. According to yesterday's Telegraph this had been induced as there was a growing rift between Brown and Mandelson which had been fuelled by the Pre-Budget Report which had been so focused on bankers. Clearly Mandelson feels we should not pick on bankers so much as he would like to be one when he is finished with politics, perhaps. Then last night, Mandelson came out to try and stop the revolt in its tracks by stating that Brown was 'secure in his position'.

It was, perhaps, the most dangerous outcome for Brown. There was not overwhelming support from either his cabinet or MPs - Mandelson had to step in and that has to be bad news.

Mandelson's original reconciliation with Brown at his lowest ebb in terms of popularity has led to a remarkable turnaround in fortunes and recently polls suggested that we could have a hung parliament or even a Labour win, such has been the magical effect. But Brown has been foolish enough to distance himself from Mandelson of late and rumours of a rift have been fanned. Mandelson only recently made a statement that he supported his own Government's stand on cutting the budget deficit as if he had to endorse it to give it credibility but why he waited so long is also a mystery.

The revolt may well have been scuppered but for Gordon Brown it has been at another heavy price. After having to ennoble his old nemesis and allow him to have a 3-year pay deal with Brussels on leaving his Commissioner post, Mandelson has had to step in again to save his skin. You will bet that Mandelson has dictated his terms and central to that will be how the election is campaigned for and a free hand in policy making.

As for the six named ministers, well we will see an unsightly scramble by each and all to distance themselves from the plot now that Mandelson has decreed there is not one. They really should have checked with him first, but you live and learn. Certainly for those six, their days in office under Brown will be numbered, but you never know how politics works and you would suspect that they will have a future under Lord Mandelson.

After all, they did exactly what he wanted - they reminded the Prime Minister just who is running the show.

National Debt - The New Sub-Prime?

If sub-prime mortgages in the US really did cause the Credit Crunch then perhaps National Debt will be the cause of the next Crunch.

Newsnight featured a piece on it last night and the subsequent discussion saw Will Hudson of Workgroup defending Government policy saying there was a clear pathway to cutting £100bn off the budget deficit. He seems to know a lot more than others, possibly the Government itself as today Peter Mandelson, fresh from giving us an extra Bank Holiday to celebrate the Queen's reign (how appropriate but which Queen?) is moving to allay market fears that Britain really knows what they are doing about cutting the deficit.

One thing is clear, it is no longer simply a matter of economics. There is plenty of techno-speak on what it's all about but it boils down to politics and the stomach of the British people to fund the deficit. The politics is all about the approach to tackling the deficit - current Government thinking is no better than to continue spending and hope for growth, making a few cuts and raising taxes after the election so as not to spook people. Conservatives seem to be lost in a parallel universe where they seem to have the same recipe but different ingredients. The Lib Dems - yes, well they always seem to be a bit lost on such matters.

What it boils down to is this - there are going to have to be drastic spending cuts and these will need to be deeper and more harsh the longer we leave it and we will be paying considerably more tax in the future. The people of Iceland just voted with great drama about how they feel on paying for the mistakes of their banks in allowing deposits from foreigners to burn elsewhere, there could be a time when the British voter wakes up and smells the whiff of bull enough to know that we are being fleeced for huge economic hubris.

The point being, should we slither down this pathway then Britain will almost certainly look like, if not become, a bad debt risk in the eyes of the markets. There is a view, expressed last night, that the Government may even flirt with being a bad risk before galvanising to do something about it all - like being put on a watchlist as many other nations are now. The reality is that many nations, some richer than others, are now showing warning signs that their ability to service their national debt is worsening. Britain is not yet one of those nations but as the Quantitative Easing is due to exhaust soon, our National Debt will become the focus of the open markets and at that point we will get the first clear indication of how others see our true economic condition.

I think we are in for a rude surprise.

New Year, New Job

According to research from US 'Retention Firm', Finnegan McKenzie, this is the traditional time of year when firms ramp up their recruitment.

It's a bit of a 'No sh*t, Sherlock' moment as lots of firms have year ends in December and so new budgets are agreed for the new year starting in January - on both sides of the Atlantic. However, 2010 is not just any year. For the UK this will be the first quarter, hopefully, of growth since we lurched into recession and so firms are still very tentative about investment plans and unemployment tends to lag the recessionary quarters. So it may not be the bonanza of new opportunities for career change that traditionally happens this time of year.

From the candidate's viewpoint, it is also a time when many people will be looking for a new job. According to Finnegan McKenzie's research this is very prevalent in senior management. They claim up to 51% of senior executives in the US will have actively put out their CV with the intent of changing job or perhaps to test the water by 1 January. This may be as a result of new year resolutions, a desire to increase year on year money, or just a stark evaluation of the previous year and a realisation that the job was not fulfilling or they did not like their boss. Whatever, I think many people in the UK would identify with this 'New Year, New Job' enthusiasm.

In a good year, this would be 'fish in a barrel' for recruiters. Fresh new CVs from highly paid and experienced senior executives to match to a plethora of new opportunities would be the time for a feeding frenzy of fees. I think that will not be the case this year - recruiters are still down on their luck and many are still suffering as the volume of openings are not rising very fast. Still, it has to be a period of hope.

I would argue though, that this is the point where many companies investing in growth make big mistakes. Because the recruiters match the fresh CVs to openings, corners are cut. Only that 51% of senior executives are moving and they are actively after a job - easy prey for recruiters and, I would argue, not the cream of the crop. In fact, I would wager that if Finnegan McKenzie drilled down on their research, then of the 51% of senior executives that put out their CVs at the beginning of a new year, there would be many of the same names as last year. I even wonder how many are people who actually moved jobs last year and want change again?

I always strongly argue, it is those who are not looking for jobs, who are delivering year after year in roles, who are the ones worth chasing. There is a band of senior executives and senior salespeople who are perennial job-hoppers who have great looking CVs but have delivered little sustainable difference to the companies they have been employed by. You can bet that their names will be known in the industry as that is their real skill, networking. I have been involved in the computer industry for many years and time and again the same names crop up. The daft thing is that many companies will mobilise themselves at the mere mention that one of those names are 'available' and they will be snapped up via clever recruiters masked as 'headhunters' who claim they have 'enticed' that name to move. Easy money.

It's a time to be wary. The growth that will be gained this year will come at a heavy price and will not be for the fainthearted. For many of us who have lived through recessions, there will be a period when firms may 'shoot their bolt' and try to get growth too early. This is a period of cagey moves and it also a time for reassessment of old markets and discovery of new as many firms will have learnt in the last two years that much of their business was tied up in too few companies at too low a price and exposed how little differentiation they have. Recruiters themselves have found that particularly revealing over the last 12 months in particular.

The good news is that many computer distributors are bragging of a very strong close to the year and this is a good barometer as technology will almost certainly lead the way in private sector growth. The consumer end was reasonably strong, accounting for good growth and part of that will be spurred by the VAT change, it is thought. But there was also brisk business in the banking sector.

This month sees the end of the first quarter for computer giant HP, December marked the year end of many large firms, notably Cisco. The first signs are there that technology sales are on the road to recovery and that will mean a general return to growth will follow. However, watch out for the 'Usual Suspect' CVs. There will be a mass exodus from firms at senior level - though be very wary that this year it will be for different reasons and the usual bragging rights associated with senior executives will not be there after a recession. Most will be leaving because they have been found out rather than before they have been found out. Recessions tend to do that.

Again, good luck in 2010 - growth may just be round the corner. I hope you find your fair share.

Vote Winning Taxes

I heard a radio interview with Junior Minister for the HMRC, Stephen Timms, this morning who was carping on about the Government stopping the 'amnesty' for offshore accounts.

This is where wealthy people store their money offshore and avoid tax. In a similar previous amnesty about £450m was raised. Now, if these people admit they have offshore funds then the penalty for declaring will only be 10% of the tax bill - whereas if they do not admit it, the penalty could be as high as 100%. This is expected to raise a further few hundred million.

Along with the windfall tax on bankers which is expected to raise £550m this year, this offshore clampdown is seen as a real vote winner by the Government as it targets the rich. Fine - they should definitely all pay their way.

However, when Stephen Timms was pressured by Mickey Clarke of Five Live on how to tackle the Budget Deficit there was a drawn out defence on tackling 'inefficiencies' in the public sector but no mention of real cuts or job losses. Naturally, such talk is seen as non-vote winning yet the reality is that if we actually raise £1bn or more by taxing the rich, it does not even help much on just paying the interest on our National Debt. Interest payments alone will be £30bn+ this year, rising to £44bn next year. And that is not even helping bring the deficit down.

The longer the Government deny the problem on public sector spending and focus solely on vote-winning activities like taxing the bankers and the rich, then we are deferring a problem that is only ever going to get bigger. In the next year, unemployment is set to peak at 2.8m, but having created 1m extra jobs in the public sector in the last 12 years, this may be way off the mark when cuts are made. And I think the cuts will have to be far deeper and more disrupting the longer it is left and the Government view is to leave it all until after the election.

The only logic that can support this is that cutting would disrupt the potential for getting growth as we exit recession and so pull us back into the mire. That is flawed thinking - all businesses know that while investing in growth you look for efficiencies in parallel - not doing so only buys worse problems later and i reality you are not really 'investing' but supporting the status quo.

I think delaying cuts is a grave, grave error.

Overpaid Officials?

If you want an early new year titter, read the linked article on Ryan Air and the OFT.

I quote a magical response to criticism that Ryan Air only allows one type of obscure method of credit card payment in order to get round legislation that would normally prevent it from advertising all flights with credit card fees included, which would mean almost double the fares in many cases of their advertising.

"Ryanair is not for the overpaid John Fingletons (of the OFT) on this world but for the everyday Joe Bloggs who opt for Ryanair's guaranteed lowest fares because we give them the opportunity to fly across 26 European countries for free, £5 and £10. What the OFT must realise is that passengers prefer Ryanair's model as it allows them to avoid costs, such as baggage charges, which are still included in the high fares of high cost, fuel surcharging, strike-threatened airlines"

I am sure John Fingleton of the OFT may have a case to question if they know how much he is paid and whether that compares badly to the money the spokesman at Ryan Air earns but here's how the Ryan Air little dodge works.

For every passenger booking a flight there is a single credit card fee of £5 even if the total is paid on a single credit card transaction - so if 4 passengers are booked on the same transaction, then the fee taken is £20 ($40 if the flights are returns), whereas the actual underlying cost is between 1.5% and 2.5% of the value of the original transaction. All airlines are up to similar stupid tricks at the moment but I have been victim of Ryan Air's wheezes where quoted costs are miles off the actual price paid.

It's not a debate to get into early in the morning because I think Ryan Air have done a great deal to open up air travel across Europe but their advertising has consistently annoyed me as it bears no relation to the real costs you pay and the total rubbish service that ensues - they squeeze every penny of profit they can out of people.

It's a little conundrum on a Monday morning, but if Ryan Air actually do provide millions of seats across Europe at little or no cost, then how do they make their money (and their profits are very nice)? And even if a fair proportion of passengers do pay through the nose as I have done for small incremental services, what things do Ryan Air not pay for that other firms do that costs them significant operating costs?

It's a little thing, but I would hope pilots and engineers are paid and used consistently across all airlines, or am I being naive?

Icy Reception

Iceland has agreed to pay a sum equivalent to 40% of its GDP as compensation for the money lost by Dutch and British savers in the collapse of online bank Icesave.

Icelandic voters are up in arms, seeing this as taxpayers coughing up for the mistakes of businessmen, to the tune of almost €12,000 per person in a country of only 320,000 people. In terms of lost opportunity, the interest on the payments alone would run the cost of their entire health system for six months.

Icesave attracted savers and Local Authorities alike through its marginally higher interest rates but when it collapsed it was not covered by the FSA compensation schemes - something that savers had ignored in order to get at the extra savings interest. One could argue convincingly that the apparent lack of care by the FSA and the savers allowed this to happen while taxpayers in Iceland can rightly say that they should not be liable for compensation for the mistakes of a small group of greedy businessmen who happily risked the deposits on crazy products as a result.

In Britain, even before the banking collapse, saver deposits were protected to a certain extent and the Government moved in quickly to support all deposits, following Ireland's lead. The FSA has always had such a scheme - but why should it support the deposits of foreign savers? And should Iceland have a similar scheme?

Perhaps more importantly was the question of why several local authorities, including my own, were depositing funds in such saving schemes when they knew they were not protected by the FSA? It seems that not a single person in Local Authorities lost their jobs for not checking this and many such staff in charge of the management of funds do not even have formal accountancy qualification. Yet, such mistakes have to be funded by private citizens who pay tax in Iceland.

The Icelanders are not taking it lying down. A large petition has been put together and around 56,000 or 23% of Iceland's voters have signed it to try and prevent the payouts. If only the British voters could have been bothered to do the same perhaps we would have saved paying out such massive blank cheques to save the careers and fuel the wealth of a tiny percentage of this nation's citizens or at least made sure there were enough caveats to make them all culpable should it ever happen again.

But that's the stoic Brits for you. £1.3 trillion bail out to save rich bankers? Why not.

Happy New Year 2010

The Noughties are over and we are in 2010, whatever we call this decade.

Happy New Year to all who read this blog and I hope 2010 brings you success and all you hope for.

It's hard to say what the year will bring - many people are finding it difficult to call this year. Cautious, slow recovery perhaps? Certainly, I think this year will mark the ascendancy of China as a dominant economy and currency but what does it hold for the UK?

As we head into the run up for an election there are two things that could really strangle us - 1) a Labour win and 2) a hung Parliament. I think in both cases it will create market chaos particularly with our bonds for National Debt. This may sound anti-Labour but realistically they seem to have no plan, other than vain hope for massive economic growth to be conjured out of nowhere, to cut our debt. They have put off spending reviews, they have not tackled any public sector cuts, they have not targeted any inefficiencies - they have simply ignored the fact that come the end of Quantitative Easing our bonds will have to be bought by investors with real money and they must trust in our plan to repay. There simply is not one.

A hung Parliament is even worse as even I would imagine that Brown and his crew really do have some idea of what cuts they have to make and tax increases beyond the headline grabbing bank windfalls and on higher earners that frankly make no dent in the pile of money we owe and does not go anywhere near the interest payments we have to make. If there is no result at the election, then there will be a period of bargaining, power broking and total inertia as everybody works out how to agree on things and make anything happen. It could be a period of hiatus that literally finishes this country. So with Labour clambering back up the polls, the likelihood of a hung Parliament increases and that's bad news.

Of course, there is a curve ball. The rumoured growing rift between the arch-powerbroker, Peter Mandelson and Gordon Brown has Blairesque overtones. Once again, we see the puerile stance by Brown on the subject and there is a rumour of even a leadership challenge possibly before the next election although you would have to think that Labour would be effectively committing political suicide if that happened. Worse, it could happen after the election and we once again have an unelected leader at the helm. That would be a disastrous blow for democracy and if Labour think Brown is as bad as the rest of us thinks he is, then get him out now and let's see the mettle of the new man - whoever that may be.

Mandelson is apparently aggrieved that, having saved the political skin of Brown, he is being increasingly marginalised on decision-making and his position of 'most powerful man in Britain' is diminishing. Not surprising really, Mandelson has been behind some of the most ineffective of schemes which have talked of big money help and delivered nothing in the economy. Scrappage was an idea nicked from Germany and France while the VAT decrease had nothing to do with him. The grand Enterprise Loan Guarantee scheme and credit top up did have something to do with him and neither have really helped anyone. The £2.3bn car industry boost never materialised with not a penny used since February last year and all Mandelson seems to have done is to travel all over the place, talk and get green custard thrown on him.

So the big question is, 'Will Brown survive?' You know, I have a sneaking suspicion that the man who wrecked our economy, who dithers on foreign policy, who has no idea on how to get us out of the economic mess he put us in seems lucky enough to actually get away with it. Even if the electorate votes him back, I think his own party will ditch him.

How democratic is that? Makes Afghanistan look positively fair.

Happy 2010!