Unemployment vanquised! Jobs all round! Well for a while....

I guess if this blog has a theme at all it is markets: how they work and why they don't. One of the more intriguing markets for this kind of examination is the the labour market. Regular readers will know that in response to labour market failure, I've already proposed a "Jobbo Lotto (c)", a kind of job-by-scratchcard for those jobs where it really doesn't matter who does them and the benefits of allotting jobs by lottery far outweigh any potential reduction in marginal product. Indeed, it's quite likely that the lucky winners would do a better job than those chosen by more conventional means - a real win/win. But I'm now thinking about some expansion of this wheeze, beyond fripperies like MEPs and the England football manager and into areas that really matter - you know, stacking shelves in supermarkets, that kind of thing.

What's prompted this of course is the problem of unemployment which is currently afflicting so many economies around the world. When you're out of work, the world seems very unfair. You are constantly confronted by people doing jobs that you know you could do just as well as them and probably at a lower wage. It's the Yosser Hughes "gissa job - I could do that" syndrome. Why do they have a job and you don't? It's just not fair.

And how much more unfair would it seem if you do get a job but you're not being paid for doing it, while the bloke working along side you is. Surely an outrageous breach of all sorts of employment legislation you cry but no, it is a fact of life if you're on the government's workfare scheme, where people on benefits are given "jobs" on no pay. Well it isn't "no pay" of course as you're being given state handouts but it's certainly a lot less pay than the regular staffers stacking those shelves in Tesco's or wherever.

Everything conspires to protect those in work at the expense of those who aren't: real wages rarely adjust at anything like the right speed to clear the market; trades unions fight for the rights of the employed rather than the unemployed (well who pays the wages of the union leaders?); the multiple layers of legislation offer even more protection for those cocooned in the cosy world of work. This last item is especially bad news: the more obligations and cost you place on employers, the more they are discouraged from actions which might lumber them with such liabilities. This is of course why the USA, where hiring and firing is much less regulated, seems to be moving quicker towards recovery than sluggish old Europe where the red-tape makes us look like men in a three-legged race pitted against the sprinters in the US, to say nothing of places like China and India.

At this point, I could bang on about all sorts of sensible supply-side policies that the government could adopt to lubricate the labour market but that's all a bit boring so, from the blog that gave you the Jobbo Lotto, I now give you...Rent-a-Temp. Catchy eh? The idea is that you give employers incentives to employ people on a temporary basis. The way these incentives work encourages firms to take on increasing numbers of different people on fixed-term contracts. It's exciting: you might never work anywhere for more than 6 months so you get all sorts of different experience and make lots of new friends! OK so you might spend a bit of time between contracts but not too much because of those clever incentives (I haven't worked out exactly how they work yet - a minor detail) but that's a small price to pay for the massive reduction in the long-term unemployed. 

With the right incentives, we can look forward to being offered all sorts of interesting assignments. I fancy spells as a radio DJ and an advertising copywriter. I would say airline pilot or GP but that may be taking things too far and we'd have to look at some minor controls here and there - but only minor.

Let's all push for this. I look forward to bumping into you in the supermarket, the petrol station or, who knows, perhaps the Cabinet Office.

Where does power lie these days or: who needs a government?

"Don't worry about the government" sang Talking Heads a few years back. A couple of recent events have caused me to suggest an update of this to "why bother with a government?" I speak firstly of the business with Abu Qatada, who the UK government are apparently unable to deport, despite the fact that he urges death on all and sundry and, unlike this blog, people actually listen to him. Oh, and he entered the country illegally of course and so has no right to be here in the first place.

The there's the appointment of a bloke called Les Ebdon to some extraordinary post called "Director of the Office for Fair Access." Apparently our prime minister is "powerless" to block this appointment, the purpose of which is to twist the arm of universities to let in more kids who've been failed by the state education system. Might be better to concentrate on raising school standards you would think but of course that's far too hard.

Alright - I can hear you clamouring that there is a big difference between these two matters and you're not wrong but they just made me think about where power really lies these days. More meaty food for thought is not far away in the shape of the vast amount of UK legislation that wafts over on the breeze from the EU, like the spores of some plague epidemic, and over which the UK government (never mind parliament!) has no power. Or so they like to tell us. Then there's the recent "regime change" in places like Greece and Italy where new leaders have been parachuted in by the EU in a desperate attempt to shore up the increasingly loony-looking euro mission. The poor Greek poeple are now really feeling the consequences of puttng their fate in the hands of their mates in northern Europe. And this in the country that gave us the word "democracy". There isn't much of that around in Greece now, which is why the people  there are resorting to burning the place down in frustration.

Maybe I'm being too UK-centric but it seems that increasingly governments prefer to have their hands tied by various club membership rules, whether that be political coalitions (see Les Ebdon above), the EU, the euro-zone, the European Court of Human Rights, the UN, NATO or things like the Kyoto agreement, which means the government is "powerless" to stop you and I paying large subsidies to multinationals and rich landowners to stick up more of these wretched windmills that spend so much of their time doing nothing. Not to mention solar panels that cost a fortune and produce enough power to make a cup of tea once a week - or twice if we get a heatwave. And somehow or other, we the voters let them do this. Why? Mainly because there seems to be no political parties anywhere that dare to think differently, perhaps because they're all members of another club: the politicians gravy train club, the one which controls all the juicy jobs in the EU, the UN, etc, etc.

Where is all this leading? To a takeover by someone who is happy to do their own thing and exploit the power vacuum left by all these global talking shops. And who is that someone? China. They've got all the money, they make pretty much everything we use, they don't give a stuff about carbon emissions and can you imagine them allowing a bunch of unelected judges in a foreign country tell them what they can and cannot do with a terrorist in their midst?

To paraphrase Nostradamus (and of course a well-known ad campaign): the future's bright - the future's yellow.

Whither the NHS?

Or should that be "withers the NHS"? It's certainly not what it was, as evidenced by masses of anecdotal evidence and my own personal experience, the latter from both the point of view of a patient and as someone who has had an involvement at various levels in the management side. The received wisdom is that the British public has a deep affection for the NHS and regards it as the best health care set-up in the world which means that large numbers of votes are at stake for the politicians. But despite this, they can't resist tinkering around with it, believing this to be better (for them) than any wholesale changes, especially in the way its services are paid for. 

Now I'm not an expert on health economics and there are loads of people out there who are and who will have a detailed knowledge of how they do health elsewhere in the developed world but I've come to the view that we have just got things wrong, very wrong and major incisions with the scalpel are required, rather than just a couple of aspirin.

The trouble is that this major surgery cannot be carried out by the present government as another bit of received wisdom has it that any changes made by Tories must be a "bad thing" while Labour changes must be a "good thing", the Tories being inherently anti-NHS while the Labour party love it so much they would sell their daughters into slavery before doing anything to harm good old auntie NHS. This received wisdom is as misguided as the other bit above but, like the idea that Skodas are rubbish cars, received wisdom, however wrong it is, takes a seismic effort to shift.

This leads us into the worst of all possible worlds, where the Tories try to do good things but take fright every time someone squeals and then dilute changes to homoeopathic levels of ineffectiveness, whilst causing the patient no end of stress (and cost) nonetheless. This is made all the worse now we're in coalition mode and they have to share their ward with that bunch of in-house squealers par excellence, the Libdems.

Despite their supposed loved-up relationship with the NHS, most people have no idea how it's organised, which means they have no idea what the implications are of the Tories plan to abolish Primary Care Trusts and Strategic Health Authorities. If they did, they might realise that most of the people who work for PCTs are simply going to end up working for the new Commissioning Consortia and that SHAs will largely metamorphose into another form of bureaucratic meddling. In which case their anger might be along the lines of the changes not going anywhere near far enough, rather than being damaging in their own right.

Most people will never have heard of Monitor, the organisation that regulates Foundation Trusts. The government wants all hospitals, etc., to become FTs which of course means that Monitor will regulate pretty much everything. This is slightly scary (or rather exciting, depending on your point of view) when you learn that Monitor is not run by the Department of Health but is accountable only to parliament. Which means it's not really accountable to anyone at all. It's almost certain that most MPs don't know this either. 

Similarly, most people have little idea of the current extent of private sector, or quasi private sector, involvement in the NHS, which means that the shock horror response to the notion of NHS privatisation is laughable. Finally in this (heavily abridged) list of what people don't understand, the Private Finance Initiatives, a piece of Gordon Brown off-balance sheet financing of which any investment banker would be proud, which has saddled many hospitals with decades of horribly expensive debts. Until very recently this debt did not figure anywhere in government borrowing figures (just like public sector pension liabilities, but that's another story.)

In the meantime, the NHS remains sickeningly burdened with managers and administrators and with doctors and nurses who, thanks to the largesse of "Agenda for Change" (another thing of which most NHS lovers are blissfully ignorant) are paid more to do less. If you wondered where all that extra money that was shovelled into the NHS went (and my goodness it was a lot), well there you go.

New treatments are constantly being invented, which is a good thing of course. But couple this to longer life expectancy, which means more time spent in one's twilight years requiring NHS care (not to mention exploding breast implants) and you can see that the limitless demand created by the "free at the point of delivery" notion is guaranteed to lead to unaffordability and that's before the exponential rise in the number of bureaucrats, Agenda for Change, PFIs, etc., etc.

What's to be done then? Like I said, I know little of how things work abroad but I hear wonderful things about the health care system in France, for instance. It seems to me inevitable that the UK system is going to need radical surgery sometime soon. But it won't be the Tories who do it. If we want someone to rip up the current system and give us something rather different, it won't be the evil NHS-destroying Tories, it'll be a future Labour government. If the Labour party can do away with something as totemic as their own Clause 4, then surely then can be equally savage with the untouchable "free at the point of delivery" NHS.

Cry England for 'arry and St George!

Rejoice! Throw a party! Have another public holiday! Or at the very least pop over the pub for a quick one, for 'Arry is a free man! What an extraordinary thing it all is. Never mind the killings in Syria, the possibility of an imminent Israel attack on Iran, the global economic crisis, etc., etc., the news wires have been full of nothing else but the outcome of the Redknapp trial (oh and the other bloke of course, oh, and some Italian bloke who's just left his job.)

Pleased as I am (as a Spurs man) that our 'arry got off, I must say I was a bit surprised. It did look very much like he was bang to rights. After all, why do you open an account in Monaco and keep it under wraps unless you've got something to hide? And why does your boss pay you a large sum of money unless it's got something to do with your job? On the latter point, Redknapp seemed to completely shoot himself in the foot in that News of the World interview by saying that that's exactly what the money was for.

But never mind. A combination of Mandaric giving the right line, that it was a personal matter and not work related, and the joint spiel that "we've paid zillions in tax, why would we resort to some complex subterfuge to save a few bob?" did the trick. Plus of course everyone loves 'arry and how could the jury send down such a popular bloke, especially when the future of English football depended on him? I'm not sure that a judge sitting alone would have come to the same conclusion - especially if he'd been a rugby man or worse, an Arsenal supporter.

The "why would we resort to..." line is not much of a defence is it? It's a good question but the answer's largely irrelevant. I have no idea why they messed around with money in Monaco but the fact is they did and if you want to give someone some money as a friend, why does it have to go to Monaco and not your local high street Barclay's?

But there is of course nothing illegal about giving someone some money in an offshore account and if Mandaric says it was nothing to do with the job then who are HMRC to say otherwise? That's the conclusion the jury came to and fair enough. So that's that.

Now comes the issue of 'arry's future career. The timing of the Capello departure was a newsman's dream come true, you really couldn't make it up. I don't want to see Redknapp leave Tottenham but it seems inevitable. I can only hope that, as it's been pretty much a dead cert for ages, the Spurs board have done a bit of sensible succession planning.

In the meantime, if you want to vent your spleen at someone who's taken more than their fair share of the economic cake, look no further than Don Capello. He really shows the bankers how it's done: £6m a year for doing a part-time job that any football-savvy 10 year-old could do just as well for a the price of a new Xbox and a year's supply of sherbet fountains. Do check out my previous post where I suggest this job should be up from grabs as a national lottery prize (bring on the Jobbo Lotto!) I believe it's quite possible to have this in some party's next election manifesto. It might be only the Monster Raving Loony Party but then a lot of their supposedly bonkers ideas are now law!

'arry says his focus is 100% on Tottenham. Just as well - if we don't beat Newcastle tomorrow then I'll be wishing the jury had reached a different conclusion.

What taxing times we live in

A couple of tax stories on the front pages at the moment, which is quite fun for those who are either in the group who take an interest in this sort of thing or are Spurs supporters or, as in my case, both.

Not that anyone reads this but I guess if I comment directly on the 'arry R case then I'm technically in contempt of court. So I won't. But the principle at issue is this: if you receive money as a result of your job, then it's taxable and you are obliged to declare it. But if someone just gives you money as a present or as a loan, then that's fine, it's not taxable (leaving aside the slightly esoteric issue of inheritance tax) and you are not obliged to tell anyone about it. Simple, eh?

So how does the tax man know the nature of any given amount of dosh which has ended up in your bank account (or your dog's bank account)? Usually it's pretty obvious: employers are not in the habit of dishing out ex gratia amounts to their staff, except the odd gold watch on retirement or a bottle of plonk at Christmas. But if the money does not come from your employing company but personally from one of your employer's directors, and if said director asserts that it's a gift and if there is no contractual basis for the payment (not that this fact alone makes any difference) well who are HMRC to deem otherwise? The answer is they can't...but a jury can. Essentially, guilt is in the eye of the beholder.

More exciting, from a technical point of view (I can tell you're on the edge of your seats) is this business about the head honcho at the Student Loans outfit being paid via a limited company. This is an old wheeze, particularly popular with computer programmers, many of whom work on a temp basis and have their money paid to Geeks R Us Ltd rather than to themselves. Geeks R Us Ltd is probably 100% owned by Paul the Programmer and has just the one employee: Paul. Our mate Paul will need some money of course and the money is in the company's account, not his, but rather than have Geeks R Us pay him a salary, which leaves both him and the company liable to those irritating national insurance payments, he will extract his dosh as a dividend. Dividends are not tax-deductible so the company will pay corporation tax but this is at a lower rate than income tax, especially if you're potentially a high earner. And Paul will have to pay income tax on the dividends he receives, albeit their tax treatment is a bit more favourable and most importantly, Paul can make the most of this by deciding exactly how much the company pays in dividends, and when.

Doesn't sound all that exciting so far? Well as hinted at above, the big deal is that dividends are not subject to national insurance and between the employer's and employee's part of this, that's a saving of around 20% or so. Not bad. The other attraction is for the ultimate employer (viz the Student Loans company in this case.) They are simply paying a company, Geeks R Us (or perhaps Fatcat Bureaucrats R Us in this instance) for its services. You'll have spotted that this means no employer's NI payments for them plus, it's one less employee to worry about which is good news as employees come with a whole load of baggage in the shape of legal protection against sacking, health and safety obligations and God knows what else. As they are just paying a company, no need to worry about any of this nonsense - trebles all round!

Now the more astute of you may be thinking, if this is OK for IT people and top civil servants (and the student loans chap is not the only one - see today's papers and Private Eyes passim), why is it not OK for the rest of us? Why can't Dave the salesman or Diana the receptionist use this personal service company route for their wages?  Well the answer of course is that in theory, they can.

But before you get too excited, the operative words here are "in theory". There's 3 problems: first, running a company, even a paper one, does cost money so you need to earn a reasonable whack for it to be worth it, plus the less you earn, the less are the potential tax and NI savings (can't avoid tax if you weren't liable for it in the first place - people often forget this). Second, HMRC did introduce a specific measure a few years ago to try and stop this kind of thing. There are ways round this but it's one more obstacle. Third, your employer would almost certainly just say no, even though, as we've seen, this type of wheeze can be very much in their interests too.

So there's one rule for some and one for others. Such is life. It reminds me of the old saying that there's two types of tax-payers: pay as you earn, and pay when you like. Most of the latter group now seem to live in Italy where apparently there are many people on the bread-line (according to their tax returns) who somehow manage to afford to drive around in Ferraris. Now that is clever...I expect their income comes by way of gifts...

By the way, if you're in the second group, did you get your self-assessment return in on time? If not, you must be one of the 1 million that HMRC say are going to be fined for late filing. Ouch! Blame the postman...or your dog.