Archive | March, 2012

Accountancy Age: Budget 2012 coverage

23 Mar George Osborne: Giving with one hand, taking with the other? Flickr/Conservative Party

The morning after the day before I was called in to do some Budget post-mortem for Accountancy Age, a leading British online news service for all things accounting and business. Here’s a slightly longer mini-feature analysis piece I did.

George Osborne: Giving with one hand, taking with the other? Flickr/Conservative Party

George Osborne: Giving with one hand, taking with the other? Flickr/Conservative Party

Will changes to the personal allowance drive a change in work behaviour? Melanie Stern examines all the views

The Chancellor has proclaimed he will save two million low-earners the trouble of paying income tax at all through his changes to the personal allowance, and has concurrently been lambasted for attacking dear old grannies by cutting pensioner allowances.

Those groups know where they rank in George Osborne’s priorities. But in the centre of these groups is the working majority – the ‘squeezed middle’ – for whom the changes in personal allowances provide a conundrum.

The good news is that the personal allowance will increase by £1,100 to £9,205 from 6 April 2013; a quarter of the benefit will be passed on to higher rate taxpayers. That comes with the the decision to cut the top rate of income tax next year from 50% to 45%.

The less good news?

There will be a £2,125 cash decrease in the basic rate limit, taking it to £32,245, which is expected to bring 300,000 into the higher rate band.

And a few quiet voices are lamenting a missed anomaly: due to the phasing out of personal allowances for those earning between £100,000 and £116,000, that group will now effectively pay a rate on income tax of 62%.

“The increase in the personal allowance is good news, but the squeezed middle – income around the higher rate threshold – has little to cheer,” says Tony Spillett, tax partner at BDO.

“Equally, those earning £100,000 will be wondering how their marginal rate of tax is allowed to remain at 62%.”

Andrew Shaw, head of personal tax at Kingston Smith, points out this hidden anomaly will cost anyone with income over £100,000 £1 of their personal allowance for every additional £2 of income.

Indeed, the business and accounting communities are split on whether this will hinder or help the overall raison d’etre – to stimulate national economic growth, to get all hands to the pump. Though some think the hidden higher rate will de-motivate that income group, slowing their input into the economy, others say it will lead to small business owners becoming limited companies to take advantage of the cut in corporation tax.

“We’ve got the message, from talking to our members, that higher rates of income tax can be a deterrent to effort,” says Richard Baron, head of taxation at the Institute of Directors.

“When you see that if you earn an extra £100 and you only get to keep £58 of it, after paying national insurance as well, you’ll think ‘was it really worth all that effort’? People will think twice about applying for promotions because they’ll now take home less of a pay rise,” adds Baron.

“Or it could be a case of deciding not to put in the overtime because it isn’t worth it for the amount of cash you’d get out of it.”

Jan Lockley, head of tax at chartered accountants Berley, is less fatalistic. “I think the idea those individuals will work less hard or stop wanting promotion is absolutely absurd.

“If you’re doing a job you usually want to do it to the best of your abilities. If a promotion does involve an increase in salary, at the end of the day you will still have that increase – but equally it will lead on to bigger and better things,” she says.

“If you give yourself a ceiling and don’t progress beyond it because you perceive you get no value from it – well, that is very short-sighted.”

Lockley adds that in the aftermath of the Budget many of her clients, who are sole traders, have been in touch to ask about converting into limited companies, to take advantage of the cut in corporation tax. Surely that indicates that those individuals might shortly be making a greater contribution to the economy?

“That is still a numbers game – you still need to work out if it’s worth it for you with the extra professional charges that come with incorporating. But I think once all the figures are known and have been modelled, we’ll probably end up taking most of our clients that way,” she says.

Lockley adds that she thinks the changes are broadly good for individuals and believes that those earning between £60,000 to £70,000 will be marginally better off, to the tune of about £200-300 a year.

“I think they’ll be about 25% better off from the change in allowances after doing all the sums and modelling the effect, even considering that people are smoking cigarettes and drinking alcohol, which is becoming more expensive.”

If there is one thing we know about the squeezed middle, it’s that they’ll keep on finding the cash to pay for their ciggies and their Friday evening beers. They’ll need it, what with the net extra income tax they’ll pay.

Link –


Photo for the Week: Carpathian Mountains, Romania

20 Mar Picnickers, Transylvania, Romania, 2005

I’ve dug out this photo from my 2005 archives, my trip to Romania (click the image to expand). This was a beautifully hot, blue-skied day when my travel partner and I set out for the ‘waterfall of the Seven Stairs’, as recommended by the guy who owned the house we were staying in.

Picnickers, Transylvania, Romania, 2005

Picnickers, Transylvania, Romania, 2005

We had planned to laze our way to what I thought was to be a little lake with a waterfall at ground level, which we could dangle our legs in and generally do very little in the May heat. Two hours later, several kilometres along a motorway walk and much sunburn damage done, we arrived at this verdant expanse, clearly a popular idyll with the locals. It seemed the whole town of Cluj had decided to picnic that day and that the only (unwritten, but universally understood) rule was to bare as much puffy, winter flesh as possible, build a little fire and grill some meat over it. What an impromptu paradise. We walked through and past the picnic-makers and into the woodlands, finding with relief a dense forest giving us shelter from the burning sun, but also noticing that in flip flops and with one bottle of water, were not prepared for what was to be an uphill hike.

Nonetheless, another two hours in we arrived at a babbling brook, from which we filled our little Evian bottle, drank, caught our breath and climbed up metal steps fixed to towering clods of rock to see the waterfall of the Seven Stairs. But what stuck in my mind was actually the picnickers…

Los Tiempos: British Minister thinks Bolivia doesn’t have much instinct for outside investment

19 Mar UK Minister for Latin America, Jeremy Browne, on his first visit to the country in summer 2011. Pic courtesy Flickr/UK In Bolivia

Here is what is hopefully the first of several features I will write for Los Tiempos, a daily broadsheet newspaper in Cochabamba, Bolivia. This article was published today (Monday 19 March 2012), encapsulating an interview I conducted with Britain’s Minister for Latin America, Jeremy Browne, after a speech he gave in London about his trip to Bolivia last summer.

The published Spanish version of this is below (there may be slight differences that occurred in translation), but this is my original English-language article.

Seven months after his first diplomatic mission to Bolivia, Britain’s Minister for Latin America, Jeremy Browne, has spoken of his reflections of the country as too hamstrung by the notion of preserving its traditions to actively pursue important inward investment. He believes many British companies would not consider doing business in Bolivia while the spectre of expropriation remains.

UK Minister for Latin America, Jeremy Browne, on his first visit to the country in summer 2011. Pic courtesy Flickr/UK In Bolivia

UK Minister for Latin America, Jeremy Browne, on his first visit to the country in summer 2011. Pic courtesy Flickr/UK In Bolivia

Presenting his reflections on the visit at a meeting of London’s Anglo-Bolivian Society, a group of Bolivians living in England and British citizens with an interest in the country, the Minister said Bolivian people and the Bolivian government “had less of an instinct for attracting inward investment” than other Latin American nations. “Mercantile leaders in Bolivia have an insular character and a degree of caution about engaging with places as far away as the UK,” he said. “Bolivians seem very keen to preserve their traditions and way of life.”

Asked about the progress made in exploiting and processing the lithium in the Salar de Uyuni, the Minister said that in contrast to Peru he perceived Bolivians as “cautious about opportunities of that kind”, pointing to Peru’s rates of growth as a result of recent gains in its mining industry and his impression that Peruvian citizens had benefitted from that, in contrast to Bolivians. He also pointed to Chile and Panama City as noteworthy examples of economies that welcome inward investment in the region.

Arguably, the single most critical hurdle to the future of the bi-lateral relationship is the outcome of the legal dispute between the Bolivian government and British power generating company Rurelec. Its Guaracachi operations in Santa Cruz were abruptly expropriated in May 2010 – by a gang of men in balaclavas, brandishing machine guns, according to Rurelec’s claim filed with The Hague – and in March Rurelec confirmed that it was seeking compensation from Bolivia of $142.3 million.

The Minister said that the spectre of expropriations by the government “has a negative impact” on British appetite for investing in the country. Though he denies that it has eroded trust between the two nations, that is a diplomatic turn too far. Rurelec’s chief executive Peter Earl says that he would use part of a settlement to make a “significant” buy-back of Rurelec shares so that the company “can focus on paying dividends from operating power plants, rather than seeking redress for wrongs suffered”. (It is worth noting that he is the single largest shareholder in Rurelec, so it is personal.) It does not help smooth the path back to trust for British or other European companies operating in Bolivia when Morales, in the same breath as telling Petrobras and Total executives that their Bolivian investments “will always either be protected or guaranteed”, he also threatened further nationalisations if any foreign companies in the hydrocarbons sector are, in his opinion, found to be “boycotting or sabotaging their investments”, as was reported by EFE in February this year.

British companies are as unaccustomed to bands of men in balaclavas storming their businesses on behalf of the state, as they are unfamiliar with the notion that they are not the one ‘on top’ in any business arrangement, nor that they have legal redress. Meanwhile, Morales needs their expertise and investment to open up Bolivia’s natural resources, to make good on the 2009 Constitution’s statements that the country will preserve sovereignty by keeping more of the benefits of those investments for its citizens. It is embarrassment enough that, having taken over the power plant, the Cuban operatives who Morales’ people called to run it thereafter blew up the generator and the government was forced to call Rurelec’s own people back to Bolivia to help get it operational again.

Browne says that the Rurelec case, in addition to unexpected nationalisations of other businesses operated jointly by YPFB and foreign companies, spooked British investors, because in some cases they resulted in disputes between the Bolivian government and British investors. “A satisfactory solution to ongoing disputes will be the key to attracting further British investment in Bolivia – investment the Bolivian government has said it wishes to pursue,” he says. Though vice minister Alvaro Garcia Linera has said that the size of Rurelec’s compensation claim is “abusive” and that “talk of [compensation] more than $100 million would be unjustified”, a settlement around that figure is thought likely to be reached before the ruling date in April 2013. That will set an expensive precedent for any future nationalisations Morales may choose to make.

With that case in progress, Browne says the British government is keen to see the proposed new Bolivian Investment Law brought in to guarantee “fair and proportionate settlement of disputes” in cases of nationalisation. He thinks this is the framework British companies seek, “so long as it allows for some form of arbitration and other provisions currently held within bi-lateral trade treaties,” he added. “A fair and predictable legal framework is essential to encouraging more investment.”

British investments in Bolivia span hydrocarbons, mining equipment, and financial services to the Bolivian banking and insurance markets, and together are worth a lot of money. He issued a challenge to Morales to visit Britain for discussions around this topic. “When I am speaking with businesspeople in Britain, it barely crosses anyone’s mind to invest in Bolivia,” the Minister admitted. But he added: “the president of Panama visited the UK before Christmas; if Morales wants to visit us too…but Bolivia isn’t associated with a hunger for inward investment.”

 The issue of coca

The Minister did not try chewing coca when he was in Bolivia – after all, that is not illegal and could have been a useful insight on why the practice continues. He may have not appreciated the integral part coca plays in the life of many poor Bolivians working the land or the mines. But the Minister believes the proposed laws to replace the existing Counter-narcotics Law 1008 must be expedited if the government seeks to genuinely demonstrate a commitment to reducing narco-traffic. The UK is the single biggest consumer of cocaine in Europe according to the United Nations Office on Drugs and Crime, so the British government addresses spends a significant amount of money addressing cocaine production and export in Peru, Colombia and Bolivia as the main originating sources.

The Minister believes it evident that Bolivia is producing more coca than it needs for traditional consumption, though he also concedes that it is difficult to measure that. But he recognises that external interest in the coca trade touches a raw nerve about the protection of Bolivian sovereignty. “It is clear that significant quantities of excess, illegal and unregulated coca are diverted to the cocaine trade,” he said. “We are not in the business of challenging sovereignty,” he added.

And in Spanish….

Bolivia and used clothing – a video

9 Mar A Bolivian shop selling second hand clothes. 2007.

I found this on YouTube. It’s a short video, made three years ago shortly after Bolivia banned the sale of used clothing, and demonstrates the split between two broad sections of society; those who make new clothing and want used clothing gone because it is so hard to complete with, and those who sell or buy used clothing because it is cheaper and nicer to them than new Bolivian clothing.

A Bolivian shop selling second hand clothes. 2007.

A Bolivian shop selling second hand clothes. 2007.

Over in Europe second hand clothing is a booming market where a pair of cast off jeans or a nasty 80’s blouse is so de rigeur among the youth, it will go for almost what it would have cost new – or maybe lots more. Over there, those items would cost a matter of a couple of pounds, and carefully selected and cared for, brings your look up to date with international fashions, while wearing well for years. But that doesn’t wear well with the new 2009 Bolivian Constitution which highlights self-sufficiency, independence, sovereignty and national pride; all of which, in the eyes of the government, are contravened by Bolivians who wear ‘cast offs’ from rich nations like North America.

To be honest, the Bolivian-made clothing I’ve seen in the markets is drab, dated and poorly made, as well as overpriced. Has the ban on second hand clothing changed things? Probably not.

What’s more, when I was looking into this while in Bolivia in 2007, trade union leaders told me that people wanted to buy Chinese clothing rather than Bolivian, so local manufacturers were sewing in ‘Made In China’ labels to their manufactures in order to get people to buy them. I read a report dated March 2012 which quotes the Bolivian Chambers of Commerce grumbling that this particular issue had grown so large that Bolivian manufacturers needed to find export markets quickly if they are to survive. So that kind of proves that second hand clothing is not the silver bullet those companies thought it was. Perhaps the issue is those companies just aren’t competitive, period.

Have a watch.

The Guardian: Is the office job falling out of fashion for the working woman?

6 Mar Aww, that's nice...but self-employment for women has changed. Flickr/The National Library of Wales. 2012

I have had my first ever story published by The Guardian. This featured in the Work section on Saturday 1 March 2012, on the front page of the supplement! I was pleased, I can tell you. You can read it in situ with all the comments here or see it below.

Aww, that's nice...but self-employment for women has changed. Flickr/The National Library of Wales. 2012

Aww, that's nice...but self-employment for women has changed. Flickr/The National Library of Wales. 2012

The Grauniad’s subs changed my suggested title and standfirst to ‘rise of the odd-jobbers’ (it was “From office monkey to business owner: a surge of ‘odd jobbers’ may not not be evidence of entrepreneurial zeal, but there’s plenty of proof the newly self-employed wouldn’t go back to office life”) though the piece is actually about people leaving classic, ‘professional’, desk monkey life for self-employment – and how the bulk of those who have done this in the UK in recent years are women, although historically the vast majority of British self-employed are men. I added a little afterthought at the bottom official statistics suggesting that there has also been a surge in people moving into ‘elementary occupations’ – what is usually termed unskilled work, pulling pints or moving lawns. I think the term ‘unskilled’ can be rather pejorative myself. I mean, I can’t pull a proper pint but there is a huge market demand for pints – and to serve it could be a skill. But I digress.

Self-employment: the rise of the ‘odd-jobbers’

Job insecurity and a lack of opportunities have swelled the ranks of the self-employed – and the charge is being led by women, finds Melanie Stern

It was my mother who summed it up. “I’m in my late 50s and I don’t have a degree. All that’s available to me is boring little jobs in offices or supermarkets. Then I thought, ‘Why not make a job out of the things I do at home anyway?'”

And so she and her business partner, an estate agent, set up Shabby Little Secret last October to sell the quirky vintage finds and “shabby chic” soft furnishings I grew up watching my mum sew or paint at our kitchen table.

My mum is a member of one of the fastest-growing clubs in the UK, that of the self-employed, whose ranks had swelled to a record 4.1 million – or 14.2% of all employed people – according to the Office for National Statistics, by last autumn.

As a woman, she’s one of their hardcore. While two-thirds of the self-employed are men, 60% of those who have become self-employed since 2008 are women.

There is some dispute over the meaning of this trend. Some think it is an entrepreneurial boom; others, including John Philpott, chief economic adviser at the Chartered Institute of Personnel and Development, points out that between summer 2008 and summer 2011, nearly 27% of the new self-employed moved into “elementary occupations”, or unskilled, intermittent odd-jobbing.

“It’s likely that most would take a job with an employer if only they could find one,” says Philpott.

Yet many who have become self-employed amid the current economic crisis, find themselves glad to be there. Between the loss of job security, the erosion of employment rights and a working quality of life people got used to in the past decade, there is a sense that classic “employment” is a thing of the past for the groups who dominate the new self-employed.

Financial recruitment consultancy Robert Half says 29% of human resources executives in the UK cite work-life balance as the main reason employees leave. Paul Wilson, who works with self-employed clients at accountant Beever & Struthers in Manchester, notes his newest punters: a PR consultant and kitchen planner “who realised they could do their jobs better if they did it for themselves”; a computer vendor “who reckoned he could do the same job in his pyjamas from his front room”; and three guys who set up a solar panel business. “They’re making so much cash I can’t keep track of the noughts,” he says. “One of them turns up to our meetings in a Bentley. Or his Mercedes, if he’s roughing it.”

Dan Smith, 35, quit his media advertising career a year ago, exhausted by the culture. With no money coming in, he found himself labouring for a friend’s building firm – but is now looking into apprenticeships in the building field. “I was on £35,000 and had a budget to entertain clients. But I hated it,” says Smith. “I left because my boss was an idiot. The company agreed, but said he was too expensive to sack.”

While Smith admits labouring is not well-paid, he enjoys “being outside, doing different jobs every day, knowing what’s expected of me and not dealing with office politics. I’ve spent a decade filling the pockets of my shareholders and my bosses.”

Many in the new wave of self-employed people are now discovering their true potential. Many, like Wilson’s clients, came to self-employment voluntarily when they realised that without much job security they were better off. Many were laid off and saw no other options. In the middle of this, Venn diagram is a group of individuals digging out business plans put aside years ago, finding skills they didn’t know they had; discovering ways to balance work and life that employers can’t compete with.

It’s not so much of a leap for those who have decided to make a living out of something they already enjoy outside of work, turning a hobby, interest or a even a bugbear into a business. Last March, Hayley Chalmers turned her perpetual search for decent work clothes to fit her 5ft 1in frame into Short Couture, designing, manufacturing and selling these very products online. Redundancy from her IT management job drew her to dusting off the business plan she’d drawn up five years before but, with no fashion industry knowledge, found too daunting to pursue at the time. Now she thinks life is better outside the corporate world. “Years in big firms gave me experience in so many business disciplines, which is a real help now. But it took me too many years to realise I don’t really fit in at large corporates. They don’t like people who question things,” she says.

“Though I’d always wanted my own business I didn’t know exactly what, but I’d reached a point where that world was no longer for me. I’ve worked for too many ladder-climbers that don’t care about doing things well.”

Last autumn, Bibiana Tellez-Garside turned what she knew – a career in marketing and the saleable beauty of her home country – into specialist Bolivian travel agency High Lives, taking a part-time marketing job elsewhere while she establishes the business.

In August 2009, York-based events management specialist Sophie Jewett set up the chocolate-making business she’d wanted to have, Little Pretty Things (and last year, the York Cocoa House) for many years.

Tellez-Garside’s and Jewett’s launches were the product of much preparation while still in employment, in jobs specifically chosen because they allowed more time to focus on other things. Tellez-Garside left a large financial publisher for a small marketing consultancy last April, to start work on her business plan. She was laid off less than a year into the job, seeing it as a chance to focus on High Lives.

Jewett moved from a catering job on 70 hours a week into a more nine-to-five events management role for a university, but resigned in May 2010 before redundancy hit her department. “I started off doing some activities while I was still working just to see how they went, easing myself into having my own business,” she says. “By the time I left I had been running it for one year, having to turn opportunities away because the day job was getting in the way.” Both turned their existing contacts into business.

Much has been said about women bearing the brunt of mass job shedding. But a picture of the working world is emerging that reveals a culture still essentially hostile to family life, which still seems to plague women more than men.

In February, Nick Pearce, director of the Institute for Public Policy Research, tweeted a chart that showed employment rates for the UK among women with children compared to women without. The rate for women with dependants between 2008-09, was 78%; without dependants, it was 65%. “Look what can happen to female employment rates when childcare costs are very high,” Pearce says.

Robert Half’s UK managing director, Phil Sheridan, says companies risk losing their “star employees” if they don’t provide “help with balancing work and their personal lives”. The recruiter suggests companies offer flexible working – but only as “a strategy best reserved for top performers”. The problem getting women into board-level or other top roles in business is well documented, so it seems unlikely that many women will qualify for these rewards.

Laura Rigney turned that problem into her motivation for becoming self-employed and into her business model, founding Mumpreneur in 2010. It offers events, advice and support for mothers thinking of becoming self-employed. “I was employed until I had my third child and going back to it just wasn’t an option. The cost of childcare would completely suck up all my wages,” she says.

When a mum starts a business, nine times out of 10 she will start it when she is on maternity leave, Rigney says. She adds that mums tend to grow it slowly while their children are young. By year four of the business, with children at school and more time available, it hits a growth spurt. That’s one reason, she thinks, why women-owned startups often find it impossible to secure bank loans, growing too slowly to provide the financials bank managers want to see.

Though parents of children aged 16 or younger have the legal right to request flexible working, says employees can be reluctant to ask if it runs “counter to a dominant long-hours culture”, to the extent that they’d rather leave the company than raise the issue.

The promise of flexible working is a myth to many. “Companies talk about it, but in reality the number of flexible working opportunities is tiny,” says Rigney. “Ten years ago, mothers were the preferred employee; we were considered a safe bet. But now around 70% of British companies prefer not to hire a mum because of the potential for additional maternity leave or time off for sick children.”

Her business is growing as more working mothers choose self-employment, with Mumpreneur’s fourth annual conference expecting double the delegates of its launch event, a national roadshow in the pipeline and daily requests for regional events. Eight in 10 delegates she surveyed at The Baby Show event in October 2011 wanted to start their own business within six months. Her punters won’t have to beg their managers for the right to fit their work around feeding times, school runs and parent-teacher meetings. “It’s not the easy choice, but it’s the more workable,” Rigney says.

A regular salary is a compelling comfort blanket when you’ve spent the working day “managing expectations”, battling with bureaucracy and giving away good ideas. But for many it’s no longer enough of a trade off. “Regular pay is no compensation for not being allowed to do a job well,” says Short Couture’s Chalmers.

Jobs for the one-man-band

Between summer 2008 and summer 2011, nearly 27% of those who became self-employed moved into “elementary occupations” – or odd jobs.

Gumtree, the online board for classifieds, saw a 57% rise in adverts with “odd job” in the title in the year to January 2012. Reflecting the ONS data, these ads spiked last summer, and have now hit a two-year high.

School-leavers, newly redundant nurses and hard-up retirees make up some of the ads. Some are a little unusual: the “Husband For An Hour” odd-job man working in the Ascot area offers anything “from picture hanging to building an extension”, accompanied by a snap of him grinning wildly while bottle-feeding a baby tiger.

Another seeks a “professional couple” to keep house, cook and chauffeur. “The cook must have imagination and find it second nature to produce pleasing meals. Salary negotiable depending on past experience.”

What about a full-time, live-in vacancy in a Bournemouth pub? If you’ve got a joinery background, don’t mind splitting your week between pot-washing in the kitchen and pulling pints between odd-jobbing, then Bob’s your mother’s brother.