• 20 Oct 2010

          So the cuts are finally here?

          Peter Smith

          At last we’re hearing the trugt about the ‘cuts’ to the UK public spending budget.

          I’m afraid my sympathies don’t lie with the army of quangocrats who will hopefully be the first ones affected, because it’s about time the public sector faced what has been normal in the private sector for the last eleventy years.

          Historically the civil service played a supporting role, facilitating rather than creating, back in the dim and distant past when we were told apout it in careers guidance  it was pointed out that taking a job meant a lifetime of never really being in the limelight, settling for a salary around 10% lower than you could get in the private sector, but in return  you would face no commercial risk, guaranteed job security, and retirement on 40% of your income, inflation proofed.

          Sadly the last decade has seen the politicisation of the Civil Service and large swathes of it replaced by quangoes who have no heritage, no tradition, often very ill-defined objectives, and none of the checks and balances so beloved of Sir Humphrey.

          What they have had is buckets of public sector money – usually authorised by one or other of the Ministers for Political Correctness. Like many of my clients, I struggle to name a single one of the 850-odd quangoes whose work we would miss if it were not here.

          Although many in the public sector would point to the banking collapse as the cause of today’s cuts, the reality is that it was just the catalyst that caused the reaction – the underlying factors were already present, and had been for a long time.

          When Lehmann hit the wall and the press started revealing just how bad the country’s finances were, one of our clients saw its entire quarter’s worth of orders dry up in a single day – that was following three years of steady growth, during which they had grown from one man and a dog to 12 employees.

          They held on for six months – every one of which cost the owner £50k, of which about £8k went to HMRC in PAYE and NIC for the staff.

          In April 2009 his bank refused any further lending – he was near to losing his house – so he had to close the business. We had to write off over £40k for unpaid bills, and for a small business that hurts, but it’s nowhere near as painful as losing your home.

          It’s a fallacy that ‘the rich’ or ‘companies’ can afford to take the hit. In reality it’s the middle classes and the small businesses that are getting squeezed, but they don’t have any more money than the government does.

          What few of the general public understand is that businesses are hit by a mass of red tape, and ‘hidden costs’ – 12% of the payroll on NIC, 50%.of your office rentals in Business Rates, premium costs for energy, £3.00 a bag to have waste paper removed, and so on.

          We now know the truth about the disgusting state of this country’s finances – brushed over, no, let me be honest –  frankly, lied about –  by Gordon Brown, and that we’re in this mess because of incompetence, self-serving politicians who put dogma before common sense, and a ‘spend every penny in case we don’t get it next year’ culture that has become endemic in the public sector.

          Just yesterday I got an email from an advertising agency in the midlands telling me they can access a BusinessLink fund that will contribute 50% to any advertising I want to do in the next four months. This is exactly the kind of thing the government should be stopping – the money hasn’t been spent, doesn’t need to be spent and will do the square root of s*d all to benefit anyone.

          The cuts are long overdue – but unfortunately they are hitting small business far worse than any other sector, because unlike large corporations – who can decide to bring their call centres back to the UK and create some jobs – or set up manufacturing here rather than in Eastern Europe, we depend on demand created by others for our income.

          The private sector needs encouragement from the government to help take up the slack, and we’ll gladly do it. But that means we need a favourable environment for enterprise, not subsidies for worthless, politically correct ventures.

          Hopefully the government will see that and put in place the infrastructure to support growth,  not just cut the state.

          As any businessman knows, you can keep cutting costs as long as you like, but unless you increase revenue, your business is doomed.

        • 3 Oct 2010

          Whither lies the future of 'news'?

          Peter Smith

          An interesting post on one of my Linkedin groups this morning raised the question ‘ Can anyone hope to do business in the world today without an iPod/iPad?’

          So of course I contributed, but as occasionally happens, the piece decided to write itself, and on re-reading I found it had gone in a very interesting direction, so decided to reproduce it here.

          The interesting aspect of this discussion is the question of business use of the iPad/tablet/mobile devices, and we are on the threshold of this taking off.
          I must declare a vested interest – one of my clients is at the cutting edge of putting BI Apps onto iPad, and has attracted massive interest from the corporate sector by delivering the ability for anyone in a company, from CxOs downwards, to see real-time data and trends that affect their job, displayed on what many think of as a ‘consumer device’.
          iPad//iPhone are truly changing the paradigm of consumer / business adoption, because they are a consumer product that is being taken over by business. This is a major change, because if you look back over any technology revolution through history, from the wheel forward, you find that the impetus for its creation is either industrial or military – often coming together.
          The discussion rolled on with the moderator trying to re-focus to as his agenda was to find out about the uptake of iPad-specific newspapers. That led me onto think about the challenges of online news consumption.
          This is a very interesting discussion, especialy for publishers, and yes we do have one or two of those in our client portfolio –  as my  friends well know, I was heavily involved in one of Reed’s first forays into Electronic publishing eleventy years ago, and have banged on about it ever since.
          This week a debate on Radio 4 raised the same questions that I have been looking into – about how you  sell information against a market where sop much is free that its value becomes lost? IN the discussion, a very interesting statistic came out from the editor of  the New York Times, who commented that while 80% of its reader interaction now takes place online, 80% of its revenue still comes from the printed version.
          This is creating a major dilemma for media owners, of how to get people to pay for news. It’s also creating a conundrum for us consumers – why pay for journalism when you can get so much for free?
          But no-one wants to talk about the elephant in the room – if the likes of Murdoch and his clan can’t afford to carry the costs of e-publishing, then where lies the future of news?
          Or indeed for that matter where lies the future for any paid information? We are already seeing large scientific organisations reining in expenditure on library services, and outsourcing the decisions which the information from these services used to validate to third parties who take the risk on their behalf in return for higher rewards. The Internet has demolished local newspaper revenues in favour of eBay and Totaljobs.
          So who is going to pay the journalists when their work is no longer valued?
          In the UK we have the BBC, which does a fine job, but it is increasingly being accused of political bias, yet they are the primary source of news and entertainment information for a significant chunk of the population – I heard a figure that somewhere in the region of 30% of UK internet users take some feed from the BBC.
          This of course gives succour to the BC’s paymasters, HM Treasury who can see there is a valid reason for continuation of the licence fee. It also gives it the ability to ensure a steady flow of news that shows them in a good light, and whole the present government could hardly be accused of influencing the BBC output, most of which is downright hostile to the coalition, the previous incumbents had an extremely easy ride from a largely sympathetic editorial team.
          The lack of commercial benefit raises another question – Will it mean that the Internet, rather than liberating us from the monopolies of a few press barons, will actually re-shape the future of ‘proper’ news, i.e. the type that involves a journalists researching a story, validating it and then reporting it, to inevitably fall into the hands of the state?
          What value citizen journalism if no-one has the financial resource to publish it?