East Devon: fourth fastest aging population in the country

“Parts of the UK are ageing twice as fast as other areas of the country, while in some cities the population is getting younger, a divergence that will have a lasting impact on local economies, local government and national politics, according to new research. …


The research is here:

How company debt (and greed and tax avoidance) will sink us all

“Corporate addition to high debt threatens to destabilise the world economy. Not my words – those of the International Monetary Fund.

A recent report by the IMF says that “in a material economic slowdown scenario, half as severe as the global financial crisis, corporate debt-at-risk could rise to $19 trillion —or nearly 40 percent of total corporate debt in major economies—above [2008] crisis levels.”

In other words, in an economic slowdown, many firms will be unable to cover even their interest expenses with their earnings. Countries most at risk are US, China, Japan, Germany, Britain, France, Italy and Spain.

One study estimated that in 2018 UK s FTSE 100 companies alone had debt of £406bn.

Sinking in debt

Low interest rates have persuaded companies to pile-up debt in the belief that they will be able to use it to maximise shareholder returns. The key to this is tax relief on interest payments.

Ordinary folk don’t get tax relief on interest payments for mortgages or anything else because successive governments argued that such reliefs distort markets and encourage irresponsible behaviour.

However, corporations get tax relief on all interest payments. Currently for every £100 of interest payment, companies get tax relief of 19%, the prevailing rate of corporation tax, which reduces the net cost to £81. The tax subsidy enables companies to report higher profits.

Companies do not necessarily use debt to finance investment in productive assets. The UK languishes near the bottom of the major advanced economies league table for investment in productive assets and also lags in research and development expenditure.

British companies appease stock markets by paying almost the highest proportion of their earnings as dividends. BHS famously borrowed £1 billion to pay a dividend of £1.3bn. Carillion used its debt to finance executive pay and dividends. Thomas Cook had at least £1.7bn of debt but that did not stop lavish executive pay and bonuses.

Fatal effects

Corporate debt facilitates profiteering and tax avoidance. Water companies have long used ‘intragroup debt‘ to dodge taxes. Typically, they borrow money from an affiliate in a low/no tax jurisdiction. The UK-based company pays interest which qualifies for tax relief and reduces the UK tax liability.

Many a tax haven either does not levy corporation tax or exempts foreign profits from its tax regime. As a result, the affiliate receives the interest payment tax free.

It is important to note that the company is effectively paying interest to another member of the group and no cash leaves the group. The inclusion of interest payments in the paying company’s cost base can also enable it to push up charges to customers, especially if has monopoly rights on supply of goods and services.

Thames Water is an interesting example here. From 2006 to 2017, it was owned by Macquarie Bank and operated through a labyrinth of companies, with some registered in Caymans.

During the period, Thames’ debt increased from £2.4bn to £10bn, mostly from tax haven affiliates, and interest payments swelled the charges for customers. Macquarie and its investors made returns of between 15.5% and 19% a year.

For the period 2007 to 2015, the company’s accounts show that it paid £3.186bn in interest to other entities in the group alone. Tax relief on interest payments reduced UK corporate tax liability. For the years 2007-2016, Thames Water paid about £100,000 in corporation tax.

Private equity entities use debt to secure control of companies and engage in asset-stripping. A good example is the demise of Bernard Mathews, a poultry company.

In 2013, Rutland Partners acquired the company and loaded it with debt, which carried an interest rate of 20%. This debt was secured which meant that in the event of bankruptcy Rutland and its backers would be paid before unsecured creditors.

In 2016, Bernard Matthews’ directors, appointed by Rutland, decided that the business was no longer viable and sought to sell it. However, they only sold the assets of the company which realised enough to pay secured creditors, Rutland and banks.

The big losers were unsecured creditors, which included employee pension scheme, HMRC and suppliers. The purchaser of the assets told the House of Commons Work and Pensions Committee that it offered to buy the whole company, including its liabilities, but the offer was declined by Rutland because by dumping liabilities it collected a higher amount.

What needs to change

There is some recognition that corporate addiction to debt poses a threat to the economy. Following recommendations by the Organisation for Economic Co-operation and Development, the UK has placed some restrictions on the tax relief for interest payments, but that is not enough.

An independent enforcer of company law is needed to ensure that companies maintain adequate capital. Companies need workers on boards to ensure that directors do not squander corporate resources on unwarranted dividends and executive pay.

The insolvency laws need to be reformed to ensure that secured creditors can’t walk away with almost all of the proceeds from the sale of assets and dump liabilities.

And finally, tax relief on debt needs to be abolished altogether.”


We MUST stop embedding Local Enterprise Partnership growth figures into local strategies

Readers know Owl bangs on about our LEP promising to double growth in Devon and Somerset up to 2030. Their figures then go on to be embedded in many Devon and Somerset council growth strategies.

Now we read (Sunday Telegraph Business – paywall) that the Office of Budget Responsibility believes that “growth” will “flatline for [at least] a decade, reaching as little as 2% over that period.

Will the Greater Exeter Strategic Plan (public consultation about which is being postponed until after 2019 local elections – a very ominous sign) use LEP figures or more pessimistic government forecasts?

And then there’s the effect of Brexit ……!

Good luck with that delivering of doubled growth, Local Enterprise Partnership!

And recall about EDDC and Exeter City Council wanting to make the Cranbrook “Growth Point” a digital miracle!

“Research has found that Exeter is the worst digitally connected city in the UK.

New data from GoCompare compares and contrasts 57 major business hubs across the country, taking into account an array of digital infrastructure such as WiFi availability, broadband speed and mobile/4G coverage.

Exeter ranked 57 out of the 57 cities with just 6.31 per cent 4G coverage, an average internet download speed of 26.84mbps and 1,166 people per public WiFi hotspot.

Unsurprisingly, some of the biggest cities in the UK ranked as the most connected including London, Manchester and Birmingham.”

Devon and Somerset – a new Klondike gold rush?

The LEP housing numbers, anticipating 50,000 new households in Devon, are almost certainly driven in part by the heroic assumptions about the local economy, as Owl has pointed out many times.

As we know, the LEP assumption is 4% growth per annum for the next 18 years. Such a sustained economic boom would invoke a ‘Klondike’ style immigration rush into Devon and Somerset, as the economies of all of the rest of the western world failed to compete with us at that level.

East Devon’s current Local Plan is based upon an anticipated annual UK economic growth rate of 3% from 2007, which has turned out to be just over 1%.

This, of course, is why many of our employment sites are dormant (and one of the many reasons why we do not need a new site in Sidford), and all our town centres are struggling – there simply isn’t demand.

Even if economic growth was to average 3% growth from now until the end of the Plan period, which looks incredibly optimistic, we would still have 33% more employment land than we need, according to East Devon’s own numbers.

The LEP’s projections have been laughed at by everyone – especially, Owl gathers, in Whitehall.

But they feed into a whole raft of housing and economic projections, that will ultimately emerge as policy around the region.

What assumption will be used for the Greater Exeter Strategic Plan (GESP) projections, Owl wonders? Now delayed until after the next local council elections in 2019?

Will the GESP team dare to condemn the LEP numbers, or will they adopt them, even when they must know they are nonsense?

What might happen if those without vested interests in the growth of expensive housing in the area were for once denied a say due to conflict of interest?

And where are the signs of the revisions of our Local Plan, based on current realities, that are required every 5 years?

Rural broadband still a second-class service

Owl says: it will drag down the “doubling of growth” our LEP promised us. But perhaps they mean in urban areas only.

“There has been a marked improvement in home broadband, according to an annual survey by the UK’s communications watchdog Ofcom.

It said that average fixed-line download speeds rose by 28% over the year to 46.2 megabits per second, while uploads gained by 44% to 6.2 Mbps.

It added that the typical household now consumed 190 gigabytes of data a month, in large part due to the use of Netflix and other streamed TV services.

But rural consumers still lag behind.

Ofcom said:

in urban areas, 59% of connections delivered average speeds topping 30 Mbps over the 20:00-22:00 peak-time period – meeting the watchdog’s definition of “superfast” – while 17% were under 10 Mbps.

but in rural areas, only 23% of connections surpassed 30 Mbps over the same hours, while 53% were under 10 Mbps.

The regulator said the primary reasons for the discrepancy were less availability and reduced take-up of cable and fibre services in the countryside.

Later this month, internet service providers will be obliged to quote average peak-time speeds in their adverts and other promotional materials, rather than the “up to” figures that have been more common.”


Bank of England and Big Business take over productivity drive from the amateurs – where does this leave our Local Enterprise Partnership?

Our LEP members are pretty much one-trick ponies representing primarily the interests of their companies or their councils. Are they now quietly being frozen out?

“British business leaders announce further plans to boost firm-level productivity at Bank of England

The governor of the Bank of England, Mark Carney, has chaired a meeting of UK business leaders who have announced a new set of commitments to help UK firms improve their productivity.

As the countdown to Brexit begins, Be the Business – the campaign organisation formed to tackle the UK’s longstanding productivity challenge – met with the governor to set out plans to make the UK more productive and competitive.

Attendees included the leaders of Amazon, BAE Systems, the British Museum, BT, CBI, Cisco, EY, KPMG, the John Lewis Partnership, McKinsey & Co, Rolls-Royce and Siemens UK.
UK productivity grew by 0.9 per cent in Q3 and 0.7 per cent in Q4 of 2017.

While positive, this follows a decade of under-performance and Britain remains 25 per cent less productive than Germany. In its latest inflation report, the Bank of England highlighted poor productivity growth as a key factor limiting the UK’s capacity to grow to around 1.5 per cent per year.

That’s why some of the UK’s leading businesses have committed to bringing world-class management and technology practices to thousands of British businesses in their communities and supply chains. This includes:

Support for a national digital platform, launched today, giving businesses best in class advice on how to improve.

A new mentoring programme, launching nationwide later this year, to help SMEs build essential management skills – supported by senior staff from companies including GSK, the John Lewis Partnership and Siemens

The national roll-out of Productivity through People – an executive education programme for SME leaders

A new business productivity index and a series of tailored programmes targeted specifically at SME productivity

The Bank of England has been at the forefront of highlighting the need for UK firms to improve their productivity. In March 2017, the organisation’s chief economist Andy Haldane warned that technological diffusion from business “leaders to laggards” has slowed. This message was echoed by chancellor Philip Hammond, who announced a call for evidence in the Spring Statement to understand how to best help the UK’s least productive businesses to learn from, and catch-up with, the most productive.

At the meeting, held on 9 April 2018, Carney said: “UK productivity has severely under-performed since the financial crisis, resulting in a lost decade for real incomes and a lower speed limit for the economy. Reviving productivity growth is critical for the UK’s long-term economic prosperity, and part of the answer lies in spreading best practice across a much wider range of firms. Be the Business are playing a key role in achieving that, helping businesses to identify and implement ways to improve their productivity.”

Also attending the meeting was Charlie Mayfield, chairman of the John Lewis Partnership and Be the Business, who commented: “Getting our businesses to improve their performance to the same level as our international competitors is the biggest economic challenge we face as a country. The UK’s businesses have the solution in their grasp. That’s why we’re building a movement that will recruit tens of thousands of companies across the UK to ensure we’re match fit to compete post-Brexit.”


Be the Business is a new business-led organisation created to close the UK’s productivity gap. Chaired by Charlie Mayfield, chairman of the John Lewis Partnership, Be the Business is spearheading a business-led drive to help companies across the UK improve their performance.

It is supported by some of the UK’s most senior business leaders including Tera Allas (McKinsey & Co), Olly Benzecry (Accenture), Sir Roger Carr (BAE Systems), Roger Connor (GSK), Ian Davis (Rolls-Royce), Carolyn Fairbairn (CBI), Doug Gurr (Amazon), Dame Fiona Kendrick (Nestle), Sir Richard Lambert (British Museum), Prof Juergen Maier (Siemens UK), Sir Charlie Mayfield (John Lewis Partnership), Gavin Patterson (BT Group), Phil Smith (Cisco), James Stewart (KPMG), Steve Varley (EY) and Nigel Whitehead (BAE Systems).

Be the Business’s advisory board members have committed the first 100 mentors to a leading nationwide mentoring programme. Be the Business will report on the programme roll-out at its next advisory board meeting, to be hosted by the chancellor, in September 2018.

Productivity through People is a 12-month regional productivity programme for SME leaders. Initially launched by BAE Systems and the University of Lancaster in January 2017, participants undertake a series of masterclasses, led by the leading business school faculty and industrial visits to some of the UK’s leading businesses, alongside tailored mentoring. Programmes are currently underway in Lancaster, Bath and Glasgow, and a national roll-out is in development for 2019.

Office for National Statistics, Labour productivity, UK: October to December 2017:

Productivity puzzles, speech given by Andrew Haldane, chief economist at the Bank of England, at the London School of Economics on 20 March 2017:


“Services best delivered locally, says study”

Owl sees a problem: these groups need GUARANTEED funding for minimum 5-10 years. Chances of that happening? Zero. Hand-to-mouth funding can be worse than none at all – offering false hopes.

“Commissioning local community organisations to deliver services boosts local economies, says a study.

The pilot study found that together 10 local community organisations enabled approximately 1,400 jobs and £120m of gross value to be added to the local economy.

Commissioned by Locality and conducted by NEF Consulting, the study calculated the impact of each organisation’s value chain.

The findings are part of Locality’s Keep it Local campaign, calling for local commissioning of public services, and are revealed in the charity’s Powerful Communities, Strong Economies report.

The report, published at a time when large national organisations delivering government contracts are struggling, sets out the benefits of local commissioning of public services.

It shows that not only do local organisations have the skills and capacity to deliver public services, there are huge benefits to the local economy when they do.

It sets out how local authorities can ensure the billions of pounds they spend each year on services has maximum community and economic benefit.

The Halifax Opportunities Trust (HOT) is one of the organisations included in the study.

NEF Consulting found that by hosting a range of services and enterprises, they contributed approximately 300 full time equivalent (FTE) jobs and £14m of gross value added (GVA) to the local area.

Locality also calculated the economic impact of their contract for the Jubilee Children’s Centre on the local Calderdale Council area.

It found every £1 of income generated by HOT at Jubilee Children’s Centre created £2.43 for the local economy.

HOT chief executive Alison Haskins said: “Halifax Opportunities Trust was established 17 years ago by local people to support regeneration and tackle poverty.

“Since then, we’ve grown to be an important local employer and purchaser.

“We realise that the way we operate as a community business is just as important as the activities and programmes we run to support businesses, employment, learning, families and social connections.”

Ms Haskins said HOT cared passionately about Halifax and about Calderdale.

“We will be here for the long term, not just for the length of a contract and will continue to contribute to local economic resilience and social value.”

Locality chief executive Tony Armstrong said: “Commissioners must heed the warning of the collapse of Carillion, and the profit warning at Capita.

“It’s time to halt the trend of outsourcing at scale to multi-national companies.

“Mega-contracts delivered by large national providers fails to meet people’s needs and wastes money.

“Organisations rooted in their local communities have deep knowledge and understanding of the area, strong existing relationships and the expertise to support people with complex needs.

“But their contribution goes much further – with huge impact on local jobs and the local economy.

“There is one sensible way forward for commissioning pubic services – keep it local.”

Locality is launching a set of free resources and toolkits to equip councillors, local authority commissioners and community organisations with practical advice to enable them to realise the local commissioning of services.

The three toolkits reflect the fact that council leaders, commissioners and community organisations need to work together to realise the benefits of local commissioning.”

More information about the events and toolkits to download can be found here.


About that doubling of productivity in Devon …

“Ageing workforce a “ticking time bomb” as employers deal with mental and physical frailties”

Local authorities are sitting on a “ticking time bomb” due to the ageing workforce a Mid Devon officer has said.

In a statement regarding fitness for work issued by the authority, the Council said that they were aware that as the average age of the workforce increases the physical ability to perform manual tasks can become more challenging and ultimately can contribute to higher sickness absence rates attributable to muscular-skeletal conditions. …

… Discussions over the district’s handling of the ageing population were brought up by Councillor Jenny Roach who shared her concerns.

“When you read this report it talks about the individual being fit for work and the authority making sure that a person was fit for work,” she said. “When you get to be over 60, and you’re having to do a hard job you’re not going to be as fit for work as when you’re 28/29. I know you’re talking about people having other skills but in reality what can be done for those people?

“I would prefer it if the authority was saying that this was a major issue as people are having to work longer to keep the money flowing. We should make sure as an authority to make sure that jobs are mechanised as they have done in healthcare.”

Cllr Roach added that the word lifting is no longer used in healthcare, and has been replaced by the term moving and handling and that Mid Devon District Council should look into ways of mechanising jobs to avoid heavy lifting.

She added: “I can think of nothing worse than at 68, having to go out every day in all sorts of weathers when your arthritis is killing you and life heavy boxes. It’s a really big issue, and it’s not usually an issue people of qualifications or high positions will have to worry about. It’s the people who are refuse collectors who will have to continue to do that job.”

Catherine Yandle, Mid Devon’s group manager for performance, governance and data security replied: “Actually, that’s a fallacy. I totally agree that they’re the ones who you think would be impacted more, but in general, that’s not the case. We all lose the ability to think and to react in quite the same way when we get older.

“Unfortunately, because the default retirement age finished about five years ago, we are waiting and sitting on a ticking time bomb of issues with older staff and people whose retirement ages have been lengthened so they have to work longer to get their pensions, who feel the pressure to do so, so they will feel they need to work longer.

“We can’t just look at people’s functional health in respect of their physical wellbeing. We look at cognitive health and how they assimilate information. Because of age discrimination, you can’t say to people that they should retire; there isn’t a default retirement age. If they’re not performing in the way that we want them to be that physical or mental agility, then we will have to go down the capability route with them because there is no way of us dismissing those people unless they chose to go.

“We have a solicitor here who is also a qualified HR practitioner, so we’re very fortunate that we’re able to have somebody who has that understanding. This is very difficult for us as an employer.”

Cllr Roach said she was concerned how the Government was pushing people to work beyond their late 60s, yet being told they no longer are fit to carry out tasks they used to be able to.

“It’s fundamentally wrong, and that is not unfair. I think this Council should be doing something about it,” she added.

However, Ms Yandle added: “I agree with you, I don’t think it’s fair, I don’t think it’s right, it leaves a very nasty taste in the mouth of the employer for having to do that, but that’s where we are.

“We could accept a lesser performance, but I don’t think you as councillors would be happy with that, because you want value for money, you are representing the electorate who expect people to be performing at a certain level.”