Best foot forward: Chancellor George Osborne
The Chancellor deserves credit for sticking to the main tasks in hand, correcting the public finances and securing growth, rather than posturing on Europe. That looks to be the main preoccupation of the business community.
In his CBI speech George Osborne makes it clear that he is determined to use his post-election budget on July 8 to outline how he intends to close the black hole in the public finances. Osborne already is committed to shaving some £12bn of unidentified cuts from welfare as he aims for a surplus by 2017-2018.
He will not be relying on welfare alone. Osborne has tasked chief secretary Greg Hands to identify new savings in each Whitehall department to be made in the current financial year. He notes that many departments underspent in previous years.
The Chancellor is looking to a great government sell-off to help lower debts and the need for borrowing. In a major reform he is to bring together the two agencies tasked with privatisations: the Shareholder Executive and UK Financial Investments, that holds stakes in the Government-controlled banks.
The new agency, UK Government Investments, is being tasked with selling off the 20 per cent remaining stake in Lloyds, UK Asset Resolution (which holds the rump loan books of Northern Rock and Bradford & Bingley) and Eurostar.
The pre-2012 student loan book also is up for sale.
Together, Osborne believes that the disposals could net the taxpayer £23bn. That would exceed the more than £20bn realised from mobile spectrum sales after 1997, when Labour came to office. Efforts to bring the budget back to balance will be matched by a push to entrench growth. At the heart of this will be investment in the Northern Powerhouse. It is also known that plans for big infrastructure investments, such as the Thames supersewer, are moving forward with cash being provided by the big pension funds among others.
As Bank of England governor Mark Carney noted last week productivity is a key issue that has been holding back expansion. Osborne’s new report ‘A Plan to Make Britain Work Better’ will be issued before the July budget with a focus on transport, broadband, planning, skills, science and innovation.
All this is very promising. But Osborne also needs to look at the risk to Britain’s future export expansion by allowing R&D capacity and innovation to escape overseas.
Current bids for two British technology pioneers Telecity and AVEVA threaten just that.
It will be far more important for these deals to be scrutinised than the proposed merger of Poundland and 99p stores.
After five years at Britain’s favourite retailer Marks & Spencer chief executive Marc Bolland finally has a better story to tell.
Sales, profits and gross margins are up even though the £600m of profits is still disappointingly weak compared to the £1bn achieved by two predecessors Sir Richard Greenbury and Sir Stuart Rose. Nevertheless, the marketplace is very different now with the big grocers suffering, one of M&S’s former rivals BHS sold for just one pound and the advance of the big international retailers H&M, Zara, Gap and Ireland-based Primark.
Bolland has staked a great deal on renewing infrastructure as a means of driving down costs and building a fit-for-purpose website. After teething problems at both, that cost clothing and other non-food sales, both have settled down with website sales particularly encouraging.
The star of the show is food but under the guidance of fashion guru Belinda Earl the womenswear, for so long a problem, does look to be finding traction. Overseas operations have been badly affected by the Ukraine crisis and turmoil in the Middle East. India and the rebirth in France are more encouraging.
M&S has halted new store openings in the UK which may make its progress look a little pedestrian. What should be clear is that, despite the speculation, Bolland is not heading off into the sunset.
It is a sad testimony to the way that markets have become inured to the appalling behaviours of the banks that fines of £3.7bn levied on five institutions, including the UK’s Barclays and RBS, were followed by a relief rally in the shares.
Instead of focusing on the grotesque ethical shortcomings, which will be a shadow over the sector for years to come, investors take the narrow view that the damage could be worse. Certainly, it is less onerous than fines paid by BNP Paribas for sanctions-busting and JP Morgan for its role in sub-prime mortgages.
The very idea of banks, that depend on the trust of customers for their safety, should have been involved in criminal conspiracy is alarming in the extreme.
This is especially true given most of the offences occurred post-crisis when taxpayers picked up the bill.
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