The Great Debate UK
Targeting ‘champion’ businesses can assuage unemployment fears
– Charlotte Hogg is Managing Director of Experian UK & Ireland. The opinions expressed are her own. –
Recent news that UK unemployment has risen above 2.5 million has refocused attention on the anticipated reduction in public sector employment levels. The Office of Budget Responsibility now expects 330,000 public sector job losses over the next four years, far fewer than it forecast in June, but with the unemployment rate already running at 7.9 percent there are those who doubt the private sector’s ability to fill the employment void.
The question at the centre of the debate is whether the UK is currently experiencing a jobless recovery. It is clear that the private sector needs to create employment – and fast – if long-term economic recovery is to be achieved. As small and medium enterprises make up 99 percent of the private sector, the bulk of this burden is likely to lie with them.
The impact of austerity measures have thus far been felt most keenly in the North East, South West and East of England. However, Experian has conducted research that identifies a healthy number of private sector firms in these regions that have the potential to grow quickly and with the right support could make a big difference in stimulating regional employment. Were they to realise their potential, these small businesses could between them reverse the fortunes of these regions.
On a nationwide level, our recent Insight Report shows that less than 10 percent of small companies are actually responsible for two-thirds of all the new jobs that are created by small to medium sized businesses, a statistic that has wide-ranging implications when it comes to delivering Government support. The challenge for the Government is how to identify these budding ‘champions’ – that effectively underpin the economy – and give them the support they need to help overcome the various barriers they face and fulfil their potential.
In the past few years considerable efforts have been made to advance the UK’s green and high-tech sectors, two areas of industry with strong economic potential. However, there is also a danger in over-emphasising sectors in which employment opportunities are likely to be limited by the niche technical skills required.
The truth is that potential champion businesses exist in all sectors; crucially, this includes struggling or declining industries as well as those currently surviving the difficult economic conditions. Targeting business support only at the most successful or fashionable sectors will risk excluding a large number of potential high growth firms in other industries.
Why I have to sleep with the enemy
A week or two ago, I posted a blog bemoaning the size of Britain’s public sector and expressing the fervent hope that the ill wind of the financial crisis would blow much of it away, leaving room for private industry to expand in its place.
In response, I received a number of mildly wounding (but fair) comments pointing to the fact that, as I myself work in the public sector, I was perhaps in a false position.
Now I could offer a defence along the lines that, when I started work, the City was a club which was closed to youngsters without money or contacts, that I have spent a few years in the private sector, albeit some years back, and that even now my main occupation involves teaching students, mostly from East or South Asia, who are almost without exception paying their own fees, which makes me a one-man export industry. I also keep the wolf from the door with the help of a little freelance consultancy and some book royalties.
However, instead of an apologia pro mea vita, I want to offer myself as an example of how corrupting government spending can be – or could be if I followed the advice to refrain from biting the hand that feeds me. After all, this view amounts to me being told to show my gratitude to my benefactor, HMG.
The lesson for politicians is clear. If the government of the day can buy my support (and presumably my vote) by the simple expedient of giving me a job, the way to retain power is obvious: buy a majority. Tax people so as to pay their wages. Every job “created” in this fashion is another household partly or totally indebted to you for its standard of living, and – more importantly – ready to vote against any party that dares to threaten it. No wonder the percentage of the labour force employed in the public sector keeps rising inexorably!
Redundant redundancy terms?
-Owen Morgan is the commercial director of HR consultancy Penna. The views expressed are his own.-
As the pace of change in the public sector increases, the government is starting to reveal additional information around how it plans to deal with the funding crisis that the sector faces.
Amongst a range of controversial plans, one issue has recently caused particular consternation — the revelation that the Government plans to limit the generous redundancy terms offered to some civil servants.
While some of those in the private sector applaud the initiative, asking “why should private sector workers see their taxes go to funding severance packages that are far in excess of what they could ever expect to receive”, those directly affected are, unsurprisingly, up-in-arms.
Unions threaten industrial action and those tasked with implementing the change perceive they have just been handed another difficult issue that makes their work even more challenging. For those workers who are seeing their redundancy terms altered it’s likely to lead to increasing pressure at a time when many will be fearful regarding what the future holds.
So what can be done? How can the government navigate these proposals through the statute books whilst still retaining a motivated, loyal and performance-driven public sector, something that will be of key importance when we emerge from the restructuring phase?
Equally, how can public-sector staff who are likely to lose their roles be treated sensitively and with due care during what, for anyone, is a very difficult time.
Is the public sector really ready for change?
- David Jarrett is chief executive at Bath Consultancy Group. The opinions expressed are his own.-
For many leaders in the public sector it’s one thing to demonstrate a convincing rationale for change, show the graphs and numbers that justify your proposed strategy, draw up a new structure and win a mandate to make change. Yet this is only half the job. The other – perhaps most challenging half – is implementing this new way of working without your best people leaving, morale crashing, performance falling through the floor and dissatisfaction erupting among your customers.
In light of the public sector cuts many people anticipate will be announced following the General Election, now, it seems, is the time to question if the public sector is fit for the challenge that change on this scale represents?
An internal and external change
Given that the change demanded from the public sector is so radical, it certainly needs to be change that cascades and engages beyond the formal organisation structure to incorporate other stakeholders, including politicians, partners and service users. Not an easy or enviable task.
Yet alongside this need for stakeholder engagement, the public sector needs to look internally and start its journey to sustainable, long-term change by reviewing its fitness for the task in hand and assessing its capability and capacity for change on an organisational, departmental and individual employee level. Without attention to this type of detail, the public sector simply won’t get the return or change that it expects to see.
The sector also needs to be aware of the most common causes of failure when it comes to change. Bath’s experience suggests the most common reasons for failure are: front line people are not sufficiently involved in designing the details of the change – after all, the devil’s in the detail; that the change programme itself is not synchronised and integrated, with the result that critical gateways are missed; and, most common of all, that people see the change primarily as a structural one, not one that’s holistic and underpinned by a new mind set. Ultimately, the practical challenges of cutting costs, in terms of services, headcount and overheads are huge in a public sector culture where change may simply be resisted by ‘following the rules’.
Election reality that dare not speak its name
– Neil Collins is a Reuters Breakingviews columnist. The opinions expressed are his own –
Since Labour came to power in 1997, it has pursued a policy of expanding the numbers employed by the government or its agencies. The result is that today 6.1 million people are on the state payroll, an increase of about 900,000 in 13 years.
They are also paid, if not well, then at least comfortably. The Office of National Statistics calculates that pay in the public sector is now higher than in the private sector (462 pounds and 451 pounds a week respectively). It’s also rising faster (3.7 percent, against 1.8 percent).
Add in greater job security and the final salary pension schemes which are almost extinct everywhere else, and it’s easy to see why those in a recession-wracked private sector are resentful. Yet in over 60 constituencies, more than a third of the workforce is on the state payroll. Apprehensive politicians see public sector employees, along with their families and their client base of welfare claimants, as a block vote.
The last budget sketched a path back towards fiscal stability, but published no individual spending department limits beyond next March. Behind the scenes, departments are planning for draconian measures, while Labour is hoping nobody will notice the mismatch between this silence and its plan to cut 37 billion pounds from public spending by 2014.
Scrapping aircraft carriers, IT systems, ID cards and other follies would hardly dent the problem. Cuts in school building and roads will help, but serious money saving requires frozen and means-tested benefits and, say, a 5.5 percent cut in public sector pay. Even these contentious measures save only 15 billion pounds according to an Financial Times analysis, much less than half the amount required.
No politician has dared admit that public sector cuts of this order are inevitable. The televised debate on April 29 provides almost the last chance to face reality before the vote on May 6, but the numbers are so horrible that the viewers will probably be spared them. After all, there’s an election on — although given the outlook, it’s hard to see why anyone would want to win it.
Its simple.. the big three dont want to admit that the country will be bankrupt by 2014..
But Europe is costing the tax payer 45 million a day.. that alone is more than all there cuts they can muster..
You dont have to be a member of Europe to trade with Europe.. its a common misconception..
The press has played a part making sure the most obvious choice and only common sense party that could deal with the soon to be disaster has been stripped of all media privileges, even though they came second ahead of Labour in the European election results last time round..
four letters starting with U.K ..
Nigel Farage for PM..
Latvia: Apocalypse (not quite) now . . .
-Morten Hansen is head of the economics department at the Stockholm School of Economics in Riga. The opinions expressed are his own.-
Latvia, with its 18 percent year-on-year economic decline, ruthless budget cuts to meet the demands stated by the IMF-EU bailout package and recurring rumours of devaluation, may be the most written about country in the world right now, at least on a per capita basis.
Yet life goes on here and journalists I speak to seem somewhat disappointed when I cannot confirm sighting starvation or death in the streets…. Admittedly, it is very hard to be optimistic but it was clearly a positive sign when the parliament approved yet another round of budget cuts including across-the-board 20 percent wage cuts in the public sector and a 10 percent cut in pensions, which should release another tranche of much-needed money from the IMF and the EU. These cuts are tough but necessary as Latvian public finances were unsustainable – even in the years of growth rates of 9, 10, 11 percent the country still ran budget deficits.
Whatever the value of the currency, the public sector needs serious reform, which is why I am somewhat annoyed by the incessant rumours of devaluation emanating from in particular Sweden and the UK. The currency and the public sector are not linked to each other and should be treated as separate issues.
The Latvian central bank has repeatedly made it very clear that devaluation is not an option – and let me be the first to admit that such announcements have been made by numerous central banks on numerous occasions in the past, only to see devaluation nevertheless.
What foreign observers miss is the length to which the Latvian authorities will go to maintain the peg – very considerable pain in the form of high unemployment and declining GDP is acceptable here, rightly or wrongly, as the currency is viewed as an anchor of stability and euro adoption as the main monetary goal.
Let’s hope Latvia can sustain itself economically. Otherwise, it will bode ill for the rest of Europe. Where will all this end?
Another fine mess, Darling
– Neil Collins is a Reuters columnist. The opinions expressed are his own –
“You wanted to see me, prime minister?”
“Ah, Gus, do come in. Rather awkward. Something we didn’t think of in the Chancellor’s pension proposals — I always said Alistair didn’t have the intellectual firepower to take my job.”
Sir Gus O’Donnell sighed. “But prime minister, that’s why you appointed him.” “Yes, well never mind that now. This is about your pay increase as Head of the Civil Service. I’m afraid that we’ll have to limit you to two percent. I’m sure you’ll understand.”
“Of course, prime minister. I already get 285,000 pounds, and we all have to make sacrifices.”
“Yes, well, yours may be more than most. Two percent is 5,900 pounds, and you’ve already earned two-thirds of your final salary because you’ve been here since God was a boy — oh, sorry, that’s what they call you, GOD, isn’t it?
“Just my little joke, and to think they say I don’t do jokes. There’s been a tremendous fuss about 50 percent income tax, but that’s not the half of it.
