Tuesday 27 October 2015

Caledonia Investments update

Just keeping this one warm. As it stands, the Electoral Commission register of donations continues to list two donations from Caledonia Investments PLC worth £4000 in the financial year to 31 March 2015. As previously noted these were not disclosed in the company's annual report and were not covered by previous authority granted by shareholders (Fidelity voted in favour, natch) to make such donations.

As it stands, the FRC has told me that the company has "confirmed" to them that it did not make the donations. The Electoral Commission has told me that it is in discussions with the Conservative Party about the donations. On this basis of the info I currently have, I assume that the donations were wrongly logged by the Party, possibly because they were made by the Cayzer Trust (though I'm just speculating here). Otherwise, if the donations were made by Caledonia, I think company law has been breached.

Thursday 15 October 2015

Behavioural insight as a weapon

I've blogged on an off over the years about behavioural economics and what lefties can usefully learn from it. It seems like the surge of interest on the Left in the UK in this area has subsided a bit compared to a few years back. But I'm sure the same is not true of the Tories. The Behavioural Insights Team (or 'Nudge unit') is now a company arm's length from government, but is still beavering away on all kinds of topics.

They popped into my head today when I was thinking about the Trade Union Bill. From a behavioural perspective a lot of elements of this Bill seem to do the wrong thing in terms of engaged membership. For example, take the remove of Deduction of Contributions at Source (DOCAS). This removes the ability of potential union members to have subs deducted via payroll, and will require unions to sign them up individually by direct debit.

This is the opposite of what the Behavioural Insights Team advises in other areas. For example, in this 2013 paper on increasing charitable giving (which can still be done via payroll deduction!) they say: "One of the most important lessons from the behavioural science literature is that if you want to encourage someone to do something, you should make it as easy as possible for them to do so."

Getting rid of DOCAS makes it more difficult for employees to pay union subs. So we might reverse the message and say: if you want to discourage someone from doing something you should make it as difficult as possible. Seen in this way, the DOCAS proposal makes a lot of sense - if behavioural science is being applied with the objective of discouraging employees from joining unions.

Or look at the proposal on the political levy. Here the shift is from an opt-out to an opt-in model, with the added requirement that members are required to opt in again after five years. In behavioural terms this is changing the 'default'. Again, it's useful to quote the Behavioural Insights Team itself. The text below comes from the doc "Four Simple Ways to Apply Behavioural Insights" (my emphasis added):

1.1 Harnessing the power of defaults
We have a strong tendency to stick with the ‘default’ option, which is the outcome that occurs if we do not choose otherwise. Understanding the default and how it can be changed can significantly improve uptake of a service.
Some of the most famous policy examples from the behavioural economics literature relate to changing the default option. For example, when individuals are automatically enrolled onto pension schemes but can choose to opt out, they are much more likely to end up with a pension plan than if they have to actively opt in (see Box 1.1).
Similarly, organ donation schemes can be set to automatically enrol people. Or tax systems can be put in place that automatically deduct individual’s income tax without an individual having to take any action (as in the UK’s Pay-As-You-Earn system). In these examples the default option can be a very powerful tool for encouraging different outcomes. But because of the power of these particular policy tools, they will also require careful consideration of what might be acceptable politically and to the public at large.
If we look at what is proposed in relation to the political levy we might look at this line in particular:  Understanding the default and how it can be changed can significantly improve uptake of a service.

Currently the political levy default is opt-out, encouraging members to stay in (but having the option to leave). But it is being shifted to opt-in which will encourage members to stay out. What's more the added requirement of a 5 year re-approval of your own decision if you do opt in adds another encouragement for members not to participate.

Once again we see that the policy makes sense - if we reverse the objective. The Tories want less take-up, not more. I think they do indeed understand that the default is a very powerful tool, and they are using this knowledge by changing the default (to opt-in) in order to significantly reduce the take-up of paying the political levy. To use the Behavioural Insights Team example of pensions, if this approach was applied by a pension scheme - you have to actively join, and have to choose again after 5 years - we would assume the sponsor didn't want people in it.

To me it's pretty obvious the Government knows exactly what it is doing with theses interventions - making it harder for employees to join unions, and making it harder for them to pay the political levy. What is significant is that these policies are well-designed from a behavioural perspective if the objective is to reduce union membership and weaken union political activity. What we see here, then, is behavioural science being used as a weapon by the Right against the labour movement. We need to learn a lesson here.

The only question I really have is whether the Behavioural Insights Team was consulted or advised on the Bill, and I can imagine that it wouldn't look good if it emerged that the Government was using psychological tactics to weaken unions. So I was interested to see one stray reference to "behavioural insight theory" in the BIS paper on balloting (para 79 on page 16 here).


Monday 12 October 2015

Taxpayers' Alliance and corporation tax

There is a fantastic quote from the Taxpayers' Alliance in this BBC story about Facebook that makes explicit the trouble they have as a "taxpayer" body commenting on this issue.

"Taxpayers will be justifiably confused and angry about this tax bill. But Facebook is right to say that it is complying with UK law, which shows that the problem lies with our complex tax code, and that is what politicians should address as a matter of urgency. We have to ensure our taxes are simple to eliminate loopholes, and that taxes are low to increase our competitiveness, so that companies choose to base themselves here."

So taxpayers will be justifiably angry that Facebook is paying so little tax, but Facebook is right to pay so little tax, and our politicians need to make sure that corporation tax is low so that companies like Facebook operate here. Pick the bones out of that one as they say. The lack of a clear message from an organisation whose messaging is usually very straightforward (and effective) should tell you that they struggle with this issue.

The bottom line, as most people know, is that the TPA is a right-wing pressure group masquerading as a body that represents taxpayers. Ideologically its position is that low taxes, including low corporate taxes, are good. Which is fine, but that means they find it really hard to articulate a position on corporate tax avoidance that is both in line with their real views and doesn't muck up their populist campaigning stance. Really when they see Facebook paying (chuckle) £4327 in corporation tax the TPA don't see a problem, because the company is simply 'optimising' it's tax planning in line with the law. But they know they can't say that out loud because (rightly or wrongly) most actually-existing taxpayers will think Facebook is taking the piss. Hence you get that tortured quote above.

Friday 9 October 2015

Sports Direct chief exec faces criminal charge over USC collapse

Even since I blogged earlier things have got worse for Sports Direct. The Grauniad broke the news that the company's chief executive Dave Forsey is facing a criminal charge over the USC collapse.
David Forsey, the chief executive of Sports Direct, has been charged with a criminal offence relating to the collapse of its fashion retailer USC.
The 49-year-old businessman is accused of failing to notify authorities of plans to lay off warehouse staff in Scotland, around 200 of whom were given just 15 minutes notice by USC’s administrator in January that they were losing their jobs. Forsey was sent his summons in July and his case is scheduled to be heard at Chesterfield magistrates’ court next week.
The UK Insolvency Service said: “We can confirm that criminal proceedings have been commenced against David Michael Forsey. He is charged with an offence contrary to section 194 of the Trade Union and Labour Relations (Consolidation) Act 1992.
“The investigation into the conduct of the directors is ongoing. The inquiries are at an early stage and given the criminal proceedings it is not possible nor would it be appropriate to comment any further.”
This also reminded me of these comments from one of Sports Direct's major investors shortly before last month's AGM.
[A] top ten Sports Direct institutional shareholder has privately accused the retailer’s critics of having a “fundamental illiteracy of capitalism”.
“Unions and capitalism are not a natural fit but it is important to remember that Sport Direct has not broken any laws," the City investor, speaking on the condition of anonymity, told The Telegraph.
Well, now it looks like Sports Direct may have broken the law. What is more, I can't believe that anyone who has followed this company can be surprised by this development. The warning signs have been there for a long time, was simply a question of when they would trip up. In fact, the entire commentary from the mystery investor in that Telegraph piece is worth reading just to remind yourself of the education job people in the labour movement working on capital stewardship have to do. Some of these asset managers just don't seem to understand capitalism...

Sports Direct: you can't say you weren't warned

Sports Direct is back in the news, for all the wrong reasons. This week alone we have seen the following:

  • A BBC documentary revealed that ambulances were called to Shirebrook dozens of times in 2013 and 2014 because of employee illness. Some of these were clearly life threatening.
  • A couple who supplied workers to Sports Direct - at Shirebrook again - have gone on trial accused of modern slavery.
  • A group of former workers at Sports Direct's USC business have been awarded a protective award of 90 days pay after they were fired with 15 minutes notice. The parter representing them attacked Sports Direct for "disgraceful and unlawful employment practices".    

Sports Direct is a FTSE100 company, meaning that it's almost certainly sitting in your pension fund's investment portfolio. There are warning lights blinking here - both on employment practices and corporate governance - so Sports Direct's shareholders have a real responsibility to tackle it. No-one can claim they haven't been warned.

Monday 5 October 2015

LGPS fund merger on the way

Blurb below from Osborne's conference speech today. Directly linked to infrastructure investment, not sure if the intention is to invest back in the local region, which might raise a few issues...

At the moment, we have 89 different local government pension funds with 89 sets of fees and costs.
It’s expensive and they invest little or nothing in our infrastructure.
So I can tell you today we’re going to work with councils to create instead half a dozen British Wealth Funds spread across the country.
It will save hundreds of millions in costs, and crucially they’ll invest billions in the infrastructure of their regions.

Thursday 1 October 2015

Another Fidelity - Conservative Party link

I've blogged a lot previously about the many links that exist between the asset manager Fidelity and the Conservative Party. I've just discovered a new one that provides a bit more insight into how significant the relationship is.

The Leader's Group is one of the Tories' donor clubs. In fact, according to their own blurb, this is the "premier" supporters group:

Annual membership: £50,000 Chairman: Howard Leigh
The Leader’s Group is the premier supporter Group of the Conservative Party. Members are invited to join David Cameron and other senior figures from the Conservative Party at dinners, post-PMQ lunches, drinks receptions, election result events and important campaign launches.
It's not cheap either, at £50,000 for an annual membership. Helpfully the Tories provide some data on who meets who in this club, and look who turns up in their disclosure for Q4 2013:

FIL Holdings (UK) Ltd (represented by Barry Bateman, Director )

I had vaguely heard of Barry Batemen so I had a google around, and it turns out he's the vice-chairman of the UK business. This is a very senior position in the firm.

So in addition to funding the Conservative Party, employing a Conservative MP, sponsoring meetings of the Conservative Party's business liaison organisation and voting in favour of PLCs making political donations to the Conservative Party, Fidelity had one of its most senior UK people at an event organised by the Conservative Party's "premier supporter group".