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‘Profoundly’ Broken Britain 20: one of the Britain’s poorest areas offers millions to the UK’s richest billionaire
Sarah O’Connor (opposite) writes that by treating people’s jobs as bargaining chips, and their hometowns as dots on a corporate map, companies are instilling a sense of insecurity in people that is eroding their support for capitalism and globalisation: “It will come back to bite them in the end”.
Seasoned company-watcher, Ms O’Connor, who focusses on global labour market issues, was the Business and Finance Journalist of the Year in the 2014 British Press Awards for work including a series on the pay crunch faced by the latest generation of British graduates and an investigation into Amazon and its work practices in a small English town.
In her recent FT article, she reports that one of the poorest areas in England has just offered to build a factory for Jim Ratcliffe, the Brexit-supporting chief executive of INEOS, the richest man in the UK, whose chemicals company made about €2bn in profit last year, according to its annual report.
She wrote: “The Tees Valley Combined Authority in the north east of England ‘threw the kitchen sink at Ineos’, in the words of its mayor, to persuade the company to locate a new car plant on the site of a local former steelworks – building “uncompromising off-roaders”.
TVCA also offered to clean the site, give the land ‘for free’, to build the factory, a £20m cash grant, a £100m capital allowance to offset against their corporation tax every year, massively reduced electricity rates, cash to train local workers, and a generous tax credit for research investment.
Like many readers she finds it hard to watch one of the poorest places in the country offer millions to the UK’s richest billionaire (who is, she adds, reportedly moving to the tax haven of Monaco). She feels that something is profoundly broken. She plays devil’s advocate:
“It is understandable that places like the Tees Valley Combined Authority are doing everything possible to secure local jobs. All five of its local authorities are poorer than average and one of them — Middlesbrough — is ranked the most deprived in England”. Her second comment:
“You could argue it is rational for companies to play cities and countries off against each other to extract financial sweeteners: their first duty is to their shareholders after all (in Ineos’s case, the biggest shareholder is Sir Jim himself.)”
Sir Jim is reported to be playing the field elsewhere, undecided whether to build a new chemicals plant in the Tees valley, Bridgend in South Wales, Hull in the north of England or Antwerp in Belgium. Ineos has said that financial help from the UK government might “tilt the scales in favour of Hull”.
But Sarah O’Connor ends by warning companies to resist this temptation: “It might be in the interests of shareholders in the narrow sense, but it is time to widen the lens. By treating people’s jobs as bargaining chips, and their hometowns as dots on a corporate map, companies are instilling a sense of insecurity in people that is eroding their support for capitalism and globalisation. It will come back to bite them in the end”.
Martin Wolf, former senior World Bank economist who left after becoming disillusioned with its policies, reminds readers that a goal of the Paris agreement of 2015 was to limit the global average temperature rise to less than 1.5C above pre-industrial levels. He comments:
“Achieving it means drastic reductions in emissions from now. This is very unlikely to happen. That is no longer because it is technically impossible. It is because it is politically painful.
He refers to the latest report from the Intergovernmental Panel on Climate Change on the implications of warming of just 1.5C, making plain the risks the world runs if this limit is ignored and concluding that life will survive, but not life as we know it, continuing:
“We are the shapers of the planet now. This ought to transform how we think. Unfortunately, it has not”.
Wolf believes that the theoretical and empirical arguments for man-made climate change are overwhelming, supporting this and other points made with graphs in his recent Financial Times article. The rise in average temperatures above the pre-industrial average is already about 1C. That shows how hard it will be to keep the final increase below 1.5C, or even 2C. Under the “nationally determined contributions”, he adds, we are in fact on a track towards warming of 3-4C by 2100.
if we are to have a high chance of keeping the ultimate temperature rise to below 1.5C:
- net global CO2 emissions would need to fall to zero not long after 2040
- and other sources of climate change — emissions of methane and nitrous oxide, for example — would also need to fall from 2030.
Emissions from industry would need to fall by 75-90 per cent by 2050, relative to 2010. This would need a combination of electrification, hydrogen and product substitution. These options are technically proven, but their deployment on a planetary scale is another matter. Emissions reductions by efficiency improvement will be inadequate.
(Ed) One reservation: many will disagree with Wolf’s assertion that generating energy from bio-based feedstocks is necessary and that agriculture will need to shift to production of energy crops on a huge scale.
He calls for planning changes in urban infrastructure and carbon capture and storage on a large scale, shifting the world on to a different investment and growth path right now and commenting, “This is more technically possible than we used to think. But it is politically highly challenging”.
The natural tendencies are either to do nothing, while insisting there is no problem, or to agree there is a problem, while merely pretending to act. It is not clear which form of obfuscation is worse.
Wolf points out that to preserve our planet requires co-operative effort on a planetary scale – a challenge human beings have historically only met in times of war. Climate change involves huge distributional issues between countries that caused the problem and those that did not, and, not least, between people today, who make the decisions, and people tomorrow, who suffer the results.
He warns that the chances of co-operative action seem near zero in today’s nationalistic world . . . Donald Trump has already repudiated the US pledge – other countries may fail, too:
“It is five minutes to midnight on climate change. We will have to alter our trajectory very quickly but appear to be set on running an irreversible bet on our ability to manage the consequences of a far bigger rise even than 2C, risking a world of runaway — and unmanageable — climate chaos.
“Our progeny will see this as a crime”.
Contingency plan for a no-deal Brexit: proposals to ferry in critical supplies – food, medicines and possibly car parts
The FT reports that David Lidington, Mrs May’s de facto deputy, has briefed the cabinet that under a no-deal Brexit, the Dover-Calais route could be running at only 12-25% of its normal capacity for up to six months.
“Whatever we do at our end, the French could cause chaos if they carry out checks at their end,” said one government official. “Dover-Calais would be the obvious pinch point. The French would say they were only applying the rules.” This would force Britain to seek alternative ways of bringing in “critical supplies”.
Chris Grayling, transport secretary, has discussed with government colleagues the possibility of chartering ships, or space in ships, to bring supplies into other British ports, thus avoiding the Dover-Calais bottleneck.
Government officials say they do not expect to have to use legal powers to requisition ships, although with only five months to go until Brexit on March 29, there is little time to charter ships on the open market.
According to the FT’s George Parker and James Blitz this move was greeted with disbelief at a stormy meeting of Theresa May’s cabinet on Tuesday. The prime minister announced there would now be a weekly cabinet discussion on preparations for Brexit, whether under a deal or no-deal scenario. If Britain left the EU under World Trade Organization rules, the UK and EU would be in different customs jurisdictions and would be expected to carry out checks on trade across the English Channel.
Pauline Bastidon (sic), head of European policy at the Freight Transport Association, said: “We are open to all kinds of ideas about how to keep supplies flowing in a no deal Brexit. But it’s hard to see where the extra ships would quickly be found. Nor can I see how other UK ports could possibly handle the huge volumes currently going through the Dover strait.”
The Times adds: Dover handles more than 2.5 million lorries a year and has no capacity to hold trucks waiting for advanced customs clearance. Other UK ports (Ed: see map, right) do have that capacity and could be used to take some Dover traffic. And, reassuringly:
“Ministers say that disruption would also damage EU companies and that there would be political pressure from member states for the European Commission to mitigate the most damaging aspects of a breakdown in talks”.
As the FT’s Simon Kuper recently reported, air pollution is said to contribute to more than 9,000 premature deaths in London each year and its harmful nitrogen dioxide levels are nearly as bad as those in Beijing and New Delhi – and much worse than in other developed cities such as New York or Madrid.
Nitrogen dioxide, which inflames lungs and is linked to shorter life expectancy, has become a major problem. The capital missed binding EU limits on air quality that came into force in 2010, largely due to diesel vehicles — which, it later emerged, emitted higher levels of pollutants in the real world than in tests. Congestion, which has pushed average traffic speed down to 8mph, compounds the problem. Add in the City of London’s narrow streets and tall buildings, and two of the capital’s five hotspots for excessive nitrogen levels lie within it.
The mayor of London is making headway
The impact of the City’s plans will be even greater if they bolster commitments by Sadiq Khan, London’s mayor, to prioritise fighting air pollution throughout the capital and force the government to take action across the country.
- From this year, all new single-decker buses will be zero emission.
- New taxis must be hybrid or electric.
- Next year, an ultra-low emission zone will come into force in central London, expanding outwards in 2021.
The borough of Westminster has proposed turning Oxford Street, the UK’s busiest shopping location, into a zero-emissions zone by 2022 and a parliamentary committee has called for a UK-wide ban on new petrol and diesel cars to be brought forward eight years, to 2032.
The FT reports ‘lessons elsewhere’. Singapore has had an automated electronic road pricing scheme since 1988 and is moving to a satellite-based scheme in 2020 and advocates a move to cycling rates such as those In Amsterdam or Copenhagen.
Take a carrot-and-stick approach? The FT editorial board thinks that governments should both help and oblige people to change their behaviour
It cites Germany’s carrot-and-stick approach. A court ruling this week banned older diesel cars from driving in certain parts of Berlin – after the government had offered car owners generous bonuses for trading in older diesel cars.
The FT believes that The British government has not provided enough fiscal incentives to businesses and individuals who bought diesel vehicles in the mistaken belief that they were greener.
The Centre for London think-tank has proposed offering cash or mobility credits — which can be used to pay for public or shared transport — for scrapping diesel cars, as well as smarter distance-based car charges, and higher vehicle excise duties on the most polluting cars. The FT’s truism:
“Despite efforts to address it in London and other big cities, air pollution will remain dangerously high unless more people change behaviour. The City of London’s bold moves are worthwhile — but need to be happening not in a bubble, but right across the world’s major cities”.
Two ‘hidden’ reports see the light of day – how many more are buried?
In July, Andrew Gilligan reported that the HS2 high-speed rail project is “highly likely” to go as much as 60% over budget and cost “more than £80bn”. A Cabinet Office report by the government’s Infrastructure and Projects Authority (IPA), classified as “official-sensitive” and “not for publication”, described the scheme as “fundamentally flawed” and in a “precarious position”. A group of Conservative MPs, led by Jeremy Lefroy the MP for Stafford, mounted a new bid to cancel HS2.
Is Britain’s own “deep state” once again covering up mistakes and denying access to critical documents (Carne Ross)?
Yesterday the FT reported that an official report by consultants PwC covering the second phase of HS2, from Birmingham to Leeds and Manchester, has been kept secret for the past two years. It alleges that Britain’s new £56bn high-speed rail line will cost taxpayers 25% more than similar schemes in other countries. The project was compared with more than 32 other high-speed rail projects, including the 621km Madrid-Barcelona line and the 301km Beijing-Nanjing line.
Since 2016 the management of HS2, which answers to the Department for Transport, has refused to publish the report, despite freedom of information requests from Lord Berkeley, a transport expert.
He said. “The fact that the government is embarrassed by their findings should not be a reason to withhold publication.” The findings included the following factors:
- HS2 will have 25 stations — far more than equivalent schemes abroad — and they are more likely to be in city centres.
- The 10-year hiatus between the UK’s first high-speed line and HS2 meant that the UK did not have the “base, industry and knowledge to deliver the project easily”.
- The UK has a higher population density than some equivalent countries and so has had to pay higher land values, greater compensation and carry out more extensive environmental mitigation,
The benefits of HS2 are becoming harder to discern
The Treasury’s own Infrastructure and Projects Authority has given HS2 an “amber/red” rating for each of the past six years, meaning there is a “high risk” of it not delivering value for money.
A recent report by the European Court of Auditors (ECA), which monitors value for money, found that high-speed trains rarely run at the speed they are designed for, with most running at just 45% of top speed, with none running above 250km/h. The study of 10 European lines found that the decision to “build high-speed lines is often based on political considerations, and cost-benefit analyses are not generally used to support cost-efficient decision-making.”
The ECA found that only one of the 10 routes, from Paris to Lyon, have been profitable if construction costs were taken into account.
Universal credit is NOT an incentive to work for the single able-bodied: 63p of every pound earned is clawed back
Focussing on undue delays causing hardship, highlighted on this site, The Times and the FT in 2017 asked ‘is universal credit – to date – a disaster?’
The FT today says “Universal credit is a plum example of how not to reform public services. The theory was broadly sound: the simplicity and real time data of the universal credit would ensure people were always better off in work. The reality, however, has proved calamitous”.
Conservative and Labour politicians, such as Jacob Rees-Mogg, Johnny Mercer, Gordon Brown and Frank Field, are now demanding that the government reconsiders the national rollout.
John Major has warned that UC could lead to a repeat of the poll tax debacle of the early 1990s, which saw riots against the then Conservative government.
A reader with a postgraduate degree was asked to look at these sections on a government-recommended benefits calculations site:
Work allowance for Universal Credit (Ed: able-bodied & childless need not apply)
If you/and or your partner are in paid work, you might be able to earn a certain amount before your Universal Credit is affected, this is called the work allowance. Your work allowance will depend on whether you are single or part of a couple and whether your Universal Credit includes amounts for housing costs, children and/or limited capability for work. The table below shows the different levels of monthly work allowance.
The Universal Credit earnings taper is a reduction to your Universal Credit based on your earned income. The taper rate sets the amount of benefits a claimant loses for each pound they earn. The earnings taper rate is currently 63%. This means for every pound you earn over your work allowance your Universal Credit will be reduced by 63 pence. To work out the earnings taper that applies to your award:
- Take your total monthly earnings figure after tax, National Insurance and relevant pension contributions have been taken off
- Deduct your monthly work allowance, which is the amount you can earn without your benefit being affected (if you are eligible for one)
- Apply the taper rate by multiplying the remaining earnings by 0.63
This is the amount that will be taken from your Universal Credit maximum amount when calculating your award.
Even the post-graduate reader found these instructions ‘far from simple’ and in no way producing a simpler and more effective system.
Esther McVey, the work and pensions secretary in charge of the scheme, confirmed last week that families will be poorer under UC. She did not deny reports that millions of families could be up to £200 a month worse off when it is fully rolled out.
The chairman of the Commons work and pensions select committee has described the project – running well behind schedule – as a “shambles, leaving a trail of destruction” and in its assessment this year, the National Audit Office doubted whether the system would ever deliver value for money.
The current Universal Credit system is NOT ‘fit for purpose’
Though Cammell Laird’s Birkenhead shipyard won two contracts this month, worth a total of £619 million, to provide spares, repairs and do maintenance work for the Royal Fleet Auxiliary over10 years, news of plans to axe about 40% of the workforce (290 jobs) by the end of March 2019, was given to union representatives and workers today (11th October).
The Unite union is demanding that Cammell Laird sets out the business case for cuts which will see the loss of vital skills and ‘backdoor casualisation’ of the workforce. It fears that the proposed job losses will undermine the shipyard’s ability to fulfil new contracts.
Unite’s assistant general secretary for shipbuilding, Steve Turner, said: “The loss of jobs at Cammell Laird would see skills gone for a generation and be a further blow to the UK’s shipbuilding industry . . . it is clear that the government must and can do more to support UK shipbuilding jobs. This must include the government stepping in and supporting the retention of skills and jobs while shipyards like Cammell Laird wait for new contracts to come on stream”.
Instead of ‘offshoring’, the government should be handing contracts to build the Royal Navy’s new fleet solid support vessels and a £1.25bn contract for Type 31e frigates (maritime security-focused platforms) to UK shipyards, using British made steel as part of an industrial strategy that supports jobs and communities across our four nations.
Yesterday it was reported that MPs had urged civil servants (defence officials) to pick a UK company for the £1billion contract for three Fleet Solid Support vessels for the Royal Fleet Auxiliary. Commons Defence Committee chairman and senior Tory MP Julian Lewis feared that foreign firms subsidised by their governments could undercut British rivals.
Penny-wise, pound foolish?
The MoD’s director general for finance told MPs the department’s biggest concern was “what will deliver the greatest value for money”- meaning the lowest bid – a narrow perspective. But as Labour MP John Spellar pointed out, the Treasury would benefit from tax revenue ploughed into public coffers if the work was carried out in the UK – “a significant return” – which would be multiplied by work given to British steel and component manufacturers.
Steve Turner said that a failure to have these ships made in Britain would be ‘a gross betrayal of UK ship workers and regional economies, putting at risk manufacturing skills vital to our country’.
An FT montage by Charlie Bibby decorates an article titled ‘Ultra-rich shift assets as fear of Labour government mounts’. The above slogan and background are covered with pictures of £50 notes (see next post).
Subtitled ‘Prospect of Jeremy Corbyn in No 10 is seen as a bigger threat than Brexit’ the article alleges concerns among the wealthy that Jeremy Corbyn could become prime minister, intensified as government plans for an orderly Brexit appear shakier. They fear that a general election could take place in which Labour triumphs.
It is said that London’s ultra-wealthy are moving assets out of the UK and some are preparing to leave for Switzerland, Monaco, Portugal and the US, as concerns over a leftwing Labour government led by Jeremy Corbyn intensify among the super-rich.
Multimillionaires are said to be setting up offshore investment accounts or shifting the location of UK-registered trusts holding their wealth to outside the country, in anticipation of higher tax rates and potential capital controls should Labour be elected (‘seize power’). The FT journalists quote:
- Michael Maslinski of the wealth management consultancy Maslinski & Co, also a partner at Stonehage Fleming,
- Iain Tait, a director at London & Capital, the wealth management firm,
- Grant Thornton, the accounting firm and
- Saunderson House, the wealth manager survey.
Gloria De Piero, the Labour MP, responds to the scaremongerers: “What’s wrong with you? You have all the money in the world but you don’t want to pay your fair share to help fellow citizens who work hard — probably harder than you — have a decent standard of living?”
The first responds to the phrase: “Labour said in last year’s manifesto that it planned to increase income tax for people earning above £80,000 — about 5 per cent of the UK population”.
He opens: “Had enough with the comments left against this article. Readers, get this straight in your heads:
- 80k is not a ‘low’ threshold. It’s is stonkingly above the national average and you are very lucky to have it. You might have costs, but so does someone on a third of your salary. (And later) How is three times higher than the national average, and earned by less than 5% of the British working population a “low” threshold???? And don’t give me the “yes but mortgage, bills, spouse, kids, car (holidays, fun times, tuition fees, clubs…)” mantra. Those on the national average also have to pay the above, in fact, most pay rent, which is twice to three times the cost of a mortgage.
- Your income does not reflect your value as a person. Get over it. It just means you work in a higher earning sector. You don’t work harder or better than teachers, nurses, midwives, cleaners, drivers or anyone else who would love your working hours. Nor are you brighter, smarter, better looking or more deserving than they are.
- You will not get taxed at 60% if Corbyn gets in. He won’t have a House majority to push it through. If you don’t understand that simple fact of political life, how the blazes do you earn so much? And if you do know he won’t get a majority in the House to go full the Chavez, quit whining. At the very worst you’ll get a nationalised railway, which you probably aren’t averse to and won’t use anyway because you’ve got a chauffeur and/or a Beamer. Or an Audi, which has no indicators, tail gates like it wants the other car’s babies, and has a dodgy speedometer which makes you think going at 95 is within the national speed limit.
- If you don’t understand the sentiment and underlying socio-economic issues and disenfranchisement across your fellow countrymen, women and national family that makes Corbyn popular, and which facilitated Brexit, YOU are part of the problem. Physicians heal thyselves then get back to me.
- You are not, as an individual, qualified or aware enough of all the complexities it takes whole institutions to calculate and thousands of minds, to decide what level of tax is ‘fair’, let alone sensible. 6. You live in a low tax economy with plenty of tax minimisation options, so stop sulking”.
What a hysterical little article – ‘should Labour seize power’, what you mean win a democratic election?
Which party gave us Brexit? Are the electorate so dim?
The ultra-rich protecting themselves from democracy is hardly new. Having extracted huge amounts from the state or the working classes, naturally they want to avoid giving some back.
It always amazes me when FT subscribers have such little financial knowledge that they try to blame Labour for problems which were largely created in the US mortgage market . . .
Another reader comments: Complete nonsense. The policies are lifted from Scandinavian countries.
Are you sure scared to make this comparison in case the people realise that this notion is actually a good thing for them? We only have to look at Scandinavia to see what true fairness in business does.
We need to instil an attitude of fairness across the board; sadly many people, as indicated in these comments, begrudge a better standard of living for the poor and prefer complex schemes.