Thursday, 26 June 2008

A Bill Off Balance

Equality in the balance Controversy once more within the comments pages as Labour today announced the introduction of a bill designed to allow 'positive discrimination' in favour of women and ethnic minorities.

Harriet Harman wheeled out the latest government addition to the statute book under the guise of an enhancement to equal opportunities laws, but in the eyes of many pundits this is another government miscalculation. Instead of nods of approval for Labour's noble efforts to bring equality to the workplace, there was derision at what is seen by many as another blow for the silent majority. The Daily Express headlined with 'White Men Face Jobs Ban', while a Chartered Institute of Personnel and Development advisor remarked that she thought the bill 'incoherent' and risked introducing a 'box-ticking approach to produce minimum standards in diversity'.

The view that the government is once again going against broad public opinion is evident in the popular press, with commentators regarding it as at best the latest example of political correctness and at worst an unworkable and unnecessary burden on employers.

Why is this bill needed? The government trots out figures suggesting that, 40-odd years after equal pay legislation was brought in, women's pay is still only 87% of men's. But it does not seek to question why that should be. Perhaps because of lower experience due to career breaks, because within a family unit there is often agreement that the roles of 'breadwinner' and 'homemaker' are still largely, and consensually, taken up respectively by men and women. Perhaps because in some roles and environments an aggressive male functions better - in the same way that in others an empathetic female works best. Of course the roles are easily reversed, and often are, but the reasons why men and women find themselves in particular roles and at particular levels of pay are normally far less sinister than the government would have us believe. In 25 years of working in and around a variety of industries I have never encountered sexism in employment selection, either overt or disguised. The fact that there are now more female managers and directors than at any time in commercial and industrial history must be testament to the progress already made, and must raise the question as to whether pushing for more is actually worthwhile. Are the barriers and glass ceilings real or imagined?

Yet the government insists on barging into the labour market with the aim of righting perceived wrongs, while creating more wrongs in the process.

The principle of positive discrimination is a questionable one to start with. It goes against the market's basic right to match skills with remuneration. It also unfairly denies opportunities to individuals who have done everything to deserve consideration for a post, only to lose out because of the demographics of the employer's current workforce.

Imagine a situation where two candidates for a job are equally matched, one male one female. If the employer already has more men than women he/she will be required to show positive discrimination in favour of the female candidate. How can that be equitable? Both candidates had equal abilities and the employer should be forced only to more carefully judge their skill differences, not give way over gender.

A more likely scenario is one in which an employer favours one candidate over another, perhaps on the basis of 'soft' attributes like personality, friendliness, charm, ability to mix with existing staff, enthusiasm or even a 'gut feel' that they are the right fit. However, because of the need to apply a bias to meet equality targets that candidate might still lose out in favour of a lesser applicant who was of the 'right' sex, letting the employer off the hook. Hardly a fair way to employ people.

The aspect of pay has similar difficulties. On paper a man and woman may have similar academic qualities and a similar career history, but that does not make them equally able to do the same job. The ultimate test of what is reasonable pay is what someone is willing to pay you to do the job. If your employer doesn't pay enough, and you think you are good enough, go get another job!

Here we stand at the onset of the most difficult economic period that we have had to face for two decades. When inflation is flaring, unemployment - once in perpetual decline - is now resurgent, with overseas competition already having robbed us of our industry, still champing at the bit to take the rest. What does the government do? It stokes the fires of the unions and militants, arms them with weapons with which to hammer their employing companies, adding to the wage spiral and pushing ever farther away the last vestiges of our competitiveness. They are fiddling with legislation while Britain burns.

Idealism is fine when you are a student, but these politicians should know better now. In the real world people get paid according to their worth to an employer. Forcing an employer to pay over the odds, or to take on the wrong person to meet a political ideal of the perfect workforce demography, is plainly ludicrous.

Harman believes that being seen as 'fair' will place us in a good light in the global market place. She couldn't be more wrong. With much more of this kind of inane legislation we might as well hang up a sign at the border saying 'Great Britain: For sale by the liquidators'.

Sunday, 22 June 2008

The Exercise in Futility

Futile Gordon Brown will by now, one presumes, be starting to appreciate the futility of his mission to the Middle East. With despondency amongst his cabinet, mutterings of revolution within the backbench ranks and evaporation of goodwill from the electorate, it's not clear precisely what audience he is playing to. He would like us to see his trip to Jeddah to persuade OPEC oil producers of his 4-point plan to ease world oil market mayhem as befitting the experienced statesman he sees himself to be. He is acting as though his guests have a scintilla of empathy with his aims, and as though his domestic protagonists will see the move as anything greater than a vain attempt to be seen to be doing something, anything to shift the focus away from him and his increasingly tenuous administration. Brown would love us all to be behind him in blaming the rest of the world for our local problems.

And, to be fair, he does have something of a point. Britain's influence as a world power withered to next to nothing years ago. If we ever had the oomph to force the oil producers to revise their output plans, it was lost decades past. But Brown does still preside over the world's 5th largest economy, even if our place in the league table has the force of gravity upon it. We are a heavily oil- and gas-dependent nation, and it is reasonable for our leaders to be trying to bring to bear whatever arguments they can muster to entice more production from OPEC. And the recent 2% output rise promised by Saudi Arabia is a nod in the right direction. (Interesting that, having been handed salvation of their country from Saddam the Kuwaitis are not falling over themselves to raise oil output to ease the woes of their liberators.)

However, in any bargaining situation both sides have to stand to gain. We need a win-win. Gordon's plan is flawed and futile because it does not even meet this basic criterion. Put simply, there's nothing in it for OPEC, so why should they even listen? They will listen, they will shake his hand and pose for the cameras. They may even bring out their second best tea service for refreshments before he catches his plane back home. But what they will not do is cut of their own noses. Don't expect oil production to rise any time soon.

So, to Brown's plan. Where is he going wrong? As he told EU leaders, his aims are:

  • Making the market work better to reduce volatility in oil prices
  • Making the most of the world's existing oil reserves
  • Accelerating the switch to alternative sources of energy
  • Enabling oil producers to invest in alternative energy supplies

Making oil markets work better. Why would that make a jot of difference to oil producers? They produce what they want, when they want. The purchaser keeps paying higher prices. So far as they are concerned, the market is working pretty damn well at the moment. They care not a jot whether speculators are making a killing in the middle so long as demand stays strong and they maintain security of income. Nothing will happen in the short to medium term to disavow the world of its love of oil, nor the speculators that they can second guess the market. Certainly no gesturing from the UK government stands any real prospect of influencing either the market makers or the oil producers. Brown 0, OPEC 1.

Making the most of the world's oil reserves. Now even OPEC will admit that oil isn't going to last forever. They won't tell you how much they have in reserve, nor what the life expectancy of their oil fields are, so it's a guess just how long supplies will last. But as oil becomes scarcer the producers will want more for it, not less. And the resources which were hitherto too difficult to economically extract can be drilled when prices are high enough to make it worthwhile. Decreasing supply = high prices until supply runs out entirely. Brown 0, OPEC 2.

Accelerating the switch to alternative energy sources, enabling oil producers to invest. Now here Brown may have a fighting chance, although not in the way he would like. Sure, while the sheiks are trying to extract every penny they can from a diminishing resource they must have an eye on how little Johnny and Sally Sheik will pay for their fleets of Mercedes in the years to come. Quite how far into the future that will be is uncertain, but those OPEC countries whose economies depend almost entirely on oil (which is most of them) must surely foresee the day fast approaching when the last well is closed off and they have to make a living some other way. So expect to see investment in wind, wave, solar and ground thermal power sources increasing from the OPEC producers over the coming years. But don't imagine for a second that they will compromise their lifestyles in order to introduce these wonderful technologies. The buyer will fund it through high oil prices, just like now. As Nick Clegg put it, if Brown thinks OPEC will fund wind farms in the UK he must be living in 'Cloud cuckoo land'. The boy Clegg doesn't get it right too often, but he's bang on the nail there. Brown 0, OPEC 4.

Quite apparently the oil producers have the upper hand. In fact the entire deck is rigged in their favour. Brown calls for a change to current practices so that "Whenever there is protectionism it is tackled. So that instead of uncertainty and unpredictability there is greater certainty. And instead of instability there is greater stability". Hang on, did he say that protectionism should be tackled? Isn't that like asking the Mafia to adopt safe working practices, or trying to persuade Marlboro that cigarettes cause cancer? OPEC is protectionism. It is protectionism enshrined, embodied and unembarassingly emblazoned on the souls of its members. Brown has more chance of persuading David Cameron to get a Michael Foot tattoo on his arse than he has of getting OPEC to look after anyone's interests ahead of its own. It will protect its profitability until the last barrel is bone dry.

Brown want's win-win, but the truth is he lost 11 years ago. Back then Blair and his henchman had the chance to invest the increasing tax take in renewable energy, nuclear power, bringing the grid up to speed to connect to offshore wind farms, encouraging efficient vehicle production (rather than taxing inefficient vehicles), done all of the things he is espousing now but ahead of the crisis instead of within in.

But despite this he could not have prevented the oil running out, the Asian economic boom or the obscene power wielded by international speculators. He could not have prevented the fall.

But he could have given us a bigger pillow to land on.

Thursday, 19 June 2008

Chicken, Egg, Scrambled Message

Inflation - Chicken and egg Alistair Darling can only be applauded for trying. In his Mansion House speech he called on employers and employees, private and public sector, to exercise restraint over pay increases. A valiant but vain attempt to curb inflationary pressures bubbling up from the workplace in a way not seen for over 15 years.

The news that Shell tanker drivers had received a 2-year 14% pay deal must have been greeted with a grimace by the Chancellor as he prepared to convince City bigwigs that pay must be controlled. And with the Bank of England Governor's inflation letter in his pocket, announcing the CPI has breached 3.3%, perhaps even Alistair could be forgiven for disbelieving his own message.

Inflation, once it gets a foothold, is self-perpetuating - as we all know. As fuel, food and housing costs push skyward almost daily we as rational individuals can only reapply that pressure to our employers. Over the last 10 years there has been little need for employees to do this, but as the pips start to squeak the workforce is moved to act. And so the dominos tumble.

The Shell drivers episode is chilling. Already earning well above the national average (and several times their real worth), these workers were nevertheless able to force a monumental rise out of their employers. True, they had more influence (in terms of being able to bring the country to a standstill) than most employees do. But their actions may have set a dangerous precedent. Firstly they signal to workers in similar jobs that they could demand similar wages. Secondly, they showed that the unions have a lot more power than we are used to crediting them for.

Back in the 70's and 80's we were familiar with the regular and frequent attempts (often successful) of unions in forcing up wages; industrial action was commonplace, union membership was high; stoppages at Leyland, pickets at coal mines - the unions held sway for much of the post-war period. Then came Maggie and the unions were effectively neutered. And with economic growth, full paypackets and high employment, there was no place for militant unions. But things are changing. Whether we are seeing a real resurgence of the unions is too early to say, but many of the signs are there. Unions get their strength from disenchanted members, their growth when workers feel threatened and want support. Those times are most certainly upon us, being fuelled by a pound that buys less and less.

Darling is saying what he has to say, but while we can all agree in principle we will be not be complying in practice.

There are surely more challenges to come when public sector pay settlements hit the negotiating table. With an official target inflation rate of 2%, yet with the RPI topping 4% and rising, there are going to be increasingly disgruntled government employees out there. Can we really countenance a nursing strike, or a police work-to-rule?

MPs are reportedly angling for a pay increase again, to take their pay to £75,000 with a 21% rise. Brown has supposedly ordered his ministers to refuse an increment to set an example. But anything above 2% would be utterly hypocritical and given the furore over expenses payments in recent weeks it's amazing that Parliamentarians have the nerve to ask for a raise at all.

The spiral has begun to turn, the dominos are tilting and about to fall. Government may thinks its message is clear, but in reality it is scrambled, unconvincing and ultimately futile. Costs go up, wages go up. Wages go up, costs go up.

I may not know much about poultry, by I know Chicken and Egg when I see them. Hello inflation. It's been a while...

Sunday, 15 June 2008

Randomly Muttering Again

Tanker sadnessThe Shell tanker drivers strike continues, and confirms the pernicious attitude of both the drivers themselves and their myopic Unite representatives. Secondary strikes are adding to the disruption, with BP drivers reportedly joining in and secondary picketing sparking up at fuel depots.

Thanks to labour laws that protect these guys from intervention from their employers it isn't possible to do the sensible thing and sack or suspend them, to allow replacements to be brought in. So Joe Average, already pushed around with scandalous petrol prices and looking forward to a seaside summer break to beat the air fuel surcharges, now faces the prospect of getting no fuel at all. Going to be some unhappy kids this vacation.

These drivers already earn way over the national average for doing a job which they contend is dangerous and skilled, but which we all know involves sitting on your rear and operating the power steering most of the day. When Shell subcontracted their work 9 years ago, these guys were released to the vagaries of the real, commercial world and they can't face up to the fact that they are not worth as much as they thought they were. Thankfully for them they have control over a valuable resource and therefore have the means to publicise their grievances freely. But that doesn't make them right. We can only hope that sense will prevail soon and lack of wages will force the tanker drivers back to work.


Dob you in The Government 'Tax Abuse' hotline was reviewed this week. This scheme was set up in 2006 for anonymous citizens to report to HMRC their suspicions of tax evasion by neighbours, traders, temporary businesses and anyone else not meeting their tax obligations.

120,000 calls were received though apparently, and disappointingly, many were malicious attempts to make life difficult for petty enemies, annoying neighbours and people of whom the callers were plainly just jealous. It's curious but true that 'keeping up with the Jones' now extends to prying into Mr Jones' tax affairs and, if possible, dobbing him in to the Revenue to make you feel better when he gets a better car than you. A uniquely British trait I wonder?

That's not to say that the confidential phone line is not worthwhile. When most of us are taxed to the hilt it is galling to see people apparently getting away with paying little or no tax on their undeclared earnings. Every wondered why big expensive houses often seem to have builders' vans parked outside, or why hairdressers seem to have the nicest sports cars? Ever met an electrician, plumber or window cleaner that didn't have a healthy tan at least twice a year?

Now I'm not going to say that people should be locked in irons whenever they do a 'cash in hand foreigner'. I've filled in a few tax returns in exchange for a drink over the years. The odd few quid here and there is fair and, let's face it, un-policeable and unpreventable. What most people object to is systematic tax evasion, and those that practice it are difficult to pin down because they are below the radar of the tax inspectors. The authorities rely on insider information to detect the cheaters and on the the fear of random selection for scrutiny of their income and expenditure. That's why a hotline is still a good idea, along with heavy fining for blatant abuse of the rules. The hotline should stay, even if it does encourage a minority of us to use it as an anti-social weapon against friends and neighbours.

A footnote - why not require self-employed home workers to display a notice on their premises, or register on a public record that they conduct a business from their home? That would take away the suspicion, born from secrecy, that their neighbours harbour over their tax status. Or is that naive?


Company car racerIt's getting easier to spot the company car drivers on British roads. Travel the high streets and suburbs and you won't be able to tell that there is a fuel crisis, but get onto the dual carriageways and motorways and it's apparent who is and who isn't paying for their own petrol.

According to a YouGov poll in today's Sunday Times, 41% of us are making fewer car journeys and 26% are driving more slowly. So although many people are trying to be more thrifty, three quarters of us are not making much effort. I bet I can guess who are the ones who have not modified the use of their right foot.

Company cars are still a stock part of the standard white collar, middle to upper management / sales representative's remuneration package. Often the company will also pick up the tab for private fuel use as well as for the cost of petrol or diesel used in the pursuance of the company's business. There are an awful lot of company cars on British roads (estimate at between 5% and 10% of all passenger vehicles) and they consume a very large proportion of the petrol and diesel used every day. If the government wishes to successfully reduce fuel wastage, this is a good place to look. Notice I said wastage, not usage. Driving a company car - as I have done - is essential to many jobs; it simply isn't a choice if your work requires you to move around the country. What is discretionary though is the manner in which those cars are driven. Through the tax system there should be a carrot for those companies and drivers who consume the least fuel, and a stick for those who do not try to economise. Frankly, bombing down the motorway at 90mph in your company Beemer should not only lose you friends in Greenpeace but should hit your pocket as well as your company's P&L. And when there are technology-based alternatives like email, telephone, teleconferencing and even humble webcams there is now less need than ever to get into the car at all.

If you have all your fuel - business and private - paid for by your company then you will have very little incentive to drive more frugally. These days I try to conserve the contents of my tank and drive at the speed limit, or less. Yet I am routinely tailgated and flashed by besuited young drivers in a hurry to overtake. They have no personal interest in economy, whether micro or macro, because they personally have nothing to gain from being better, slower, greener drivers.

The government should recognise this and tax private fuel benefit accordingly, and companies would do well to reconsider the value of the benefit in kind that giving private fuel away bestows. Maybe companies could consider sending their drivers on courses for economical driving, or structure bonuses around fuel economy.

With the right incentives perhaps we can make the oil last a little longer, and have a few less Lewis Hamilton-wannabe Mondeo drivers on our roads.

Wednesday, 11 June 2008

Stand, and Deliver the Fuel!

Shell tanker drivers are hell bent on holding the UK to ransom to squeeze a pay increase from their employers. Incenced and goaded by their union, Unite, they today failed to agree to a 6.8% pay rise that would put driver's on a basic pay of £39,000 per annum - before overtime.

We need tanker drivers. No one would deny them a decent wage. But consider, by way of comparison, what other trades and professions earn - take a look at the table for some typical examples:

Notice anything? If your work means you may get killed for your country, have to work long hours in a hospital mending people, meant you had to slave for years to earn professional qualifications or must work long or unsociable hours to cart drunks around on public transport then you must be feeling a bit of a mug right now. All along, if only you'd known, you could have been driving a Shell tanker and been quids in.

Now I am no defender of the oil companies and it certainly grates on my nerves when I am waiting for my £60 worth of diesel to fill my tiny tank, to think that Shell made $27 billion profit last year. And that was when crude was averaging $90 a barrel. I wouldn't be first in the queue of objectors if Darling levied a windfall tax on the likes of Shell, Total, BP and the other winners in this daft excuse for an oil market.

What I do object to is these already generously paid blue collar guys throwing their weight around at a time when they can cause the most disruption to motorists. Did I say motorists? Good heavens I sound like a Sun journalist. I mean citizens; just how many people do you know who don't drive a car, ride a bus or rely on the Tesco delivery man these days?

The opportunism of the tankermen and their shortsighted union backers is blatant. They know that no matter how much the oil companies and government implore people to be rational and not 'panic buy', that is precisely what they will do. As an industry spokeman made clear this morning, to the individual it is perfectly rational to buy fuel if you think it won't be available and you have to drive to work, take your old mother to the hospital or get the groceries.

So the arrogance of this union-backed action is of real annoyance to me and I have no doubt millions of others who will be caught up in their squabble.

If these guys are worth more, let them seek it else where.

Apparently they are short of people to drive tanks and tankers in Afghanistan. But they'd have to take a pay cut - so best to sit back, have a cuppa and cripple the economy instead.

Saturday, 7 June 2008

Oiling the Bicycle

Oil for your bike sir In the basic economic theory of supply and demand, prices rise when there are more people wanting to buy than there is capacity for sellers to sell. Likewise, when there is a glut of product available prices fall to entice more buyers.

So much for theory. How does this apply to oil?

The world's demand for oil is not subject to such simple laws. 

World oil consumption

Despite the USA's dominance in world consumption, growth in demand in China and India particularly over the last decade has surged. It must be said that much of this increased consumption is simply from the displacement of industry from the west to the east; as factories close in Birmingham and open in Guangzhou, the requirement for oil to fuel production and transport moves too. But the increased opulence and rapid move to a more capitalist culture in the Indian subcontinent and the Far East have also accelerated local demand for oil too. Meanwhile, the West remains largely reliant on its familiar fuel sources and, while prices have been relatively low, disinterested in reducing consumption.

The USA's fixation with gas-guzzling automobiles, and the European addiction to cheap air travel have also taken their toll. Demand continues to rise all over the world.


World oil production  1930-2004Total Oil Production

Supply kept pace with consumption for the best part of the last century, but in the last decade and especially in the last 2-3 years the supply has failed to meet demand. That is one fundamental reason why oil prices have risen.

So why has supply not risen? And what else is influencing prices?

Around two thirds of the world's oil supplies are dictated by OPEC. This organisation's sole purpose is to deny the market place the ability to set prices according to 'free' supply and demand principles. It is a cartel - yes, the sort of thing that governments try to ban within their own borders - but it operates unashamedly to protect the interests of its members. Its members agree to raise or reduce oil production levels, thereby controlling supply. As demand is inflexible within economies based upon oil consumption, the only release for the mismatch is for prices to rise. And when they do, the oil producers' profits rise with them.

There is the argument that the more oil we extract from the earth, the harder it is to get more. So the exploration, extraction and production costs rise and therefore the oil producers do have some justification for lifting prices in order to pay for this. They might also be forgiven for restricting supply of a scarce commodity in order to prolong the time over which they may enjoy the income from selling it. Many of the OPEC countries' sole or main income is from oil. When it runs out they will have nothing left to replace it.

But the secrecy over which the oil producers treat their planning and their insistence that supply is sufficient to meet demand leaves many to conclude that their motives are profit driven. Put simply, they are greedy and cannot resist taking advantage of a captive world market.

There has been a lot of talk in recent months about the effect that market speculators are having on oil prices. Speculators buy contracts today in order to sell them for more tomorrow in a rising market (or sell contracts they don't own today hoping to buy them for less tomorrow in a falling market).

The weakness of the dollar means that investors are looking for places to make money. Betting on the dollar when US inflation and unemployment are on the rise looks like a bad bet, so oil is getting more attention than ever before. And with the lack of transparency over potential future oil field discoveries, reserves held by both producers and consumers, the rising demand trends and the lack of alternative energy sources, oil prices have only one direction to take.

Oil is not going to be cheaper any time soon, and the world (most especially the West) has left it woefully late to find those alternatives.

Time to dust off the bicycle, oil the chain and leave the car in the garage.

Thursday, 5 June 2008


PlugNoBollocksPolitics has been soiling the bedlinen of the political blogosphere for a little while now, and is steadily picking up readers. Or at least there are people who are freakishly unable to remove me from their feed list. If you find an idle moment while you're waiting for your beer to warm up or your cappuccino to cool down, why not come over to NoBollocksPolitics and catch up on previous mutterings. All comments welcome so long as they are words of more than 4 letters. Free speech required and admired.  nbp.