Eurocrisis - Quarterbridge

Staying out of the Eurozone was the best decision the last government was ever forced to take – now that the Germans are tightening the screw. The UK can look on with more than a hint of smugness as hoteliers report a surge in demand for ‘Staycations’ from holidaymakers who can afford to buy a small Greek island for the price of a fortnight in St. Ives.

We’ve already loaned some £30 billion to the International Monetary Fund to prop-up the Euro.

What a pity then that well over half the UK’s exports are to the Eurozone. No spending there means no sales from here – so although we’re not in the Euro it’s in our interests to promote a solution rather than just sit back and watch the currency implode. We’ve already loaned some £30 billion to the International Monetary Fund to prop-up the Euro and we can’t expect the Americans to join-in. They aren’t that interested in reviving a protectionist trade zone but are interested in exporting to countries off their West coast. So everyone in the EU is now looking to Germany – the largest Euro economy by far – to finance a solution.

But they might not get quite what they want. During the latest round of crisis talks between the Germans and the French the German Chancellor arrived at Paris airport for emergency talks with the new French President. She stepped off the plane to be confronted by a French immigration officer:

‘Name?’ he asked.

‘Angela Merkel’ she replied.

‘Nationality?’ he asked.

‘German’ she replied.

‘Occupation?’ he asked.

‘No, just here for some talks…’ she replied.

Cash is king at the moment, and the Germans are in no hurry to part with theirs except on their terms. The Bundesbank will only guarantee a bail-out of Spanish, Italian and Greek banks if it can control how the bail-out is spent. Ms. Merkel can’t lend direct to foreign banks because of the German constitution but she can lend to sovereign governments. But Europeans with a long memory don’t like the thought of Germans telling their government what to do so lots of very clever lawyers are now devising ways to overcome the problem. One suggestion is that all bank debts are pooled in a fiscal union to spread the pain across the Eurozone, but that is just not going to happen. Hardworking German voters don’t see why their taxes should bail-out of a bunch of ClubMed party animals and neither do voters in smaller economies like the Netherlands and Finland. Agree to give away a quarter of your tax revenues to subsidise Spain? I think not.

London dominates the EU’s financial services sector with 60% of EU financial exports channelled via London.

At the same time David Cameron has been fighting off the idea of a Financial Transactions Tax to boost the EU coffers. This was proposed by Merkel and others but, unsurprisingly the PM says it is out of the question. The UK wants to see the EU get well again but not at the cost of reduced competitiveness against New York and Tokyo. London dominates the EU’s financial services sector with 60% of EU financial exports channelled via London which makes a massive contribution to our tax base. HM Government accordingly supports financial services just like the Germans support their automotive sector and the French their agriculture. The British counter-proposal of an EU-led invasion of Argentina has not attracted support.

Of course the UK could have stepped-in and doubled it’s support via the IMF if it hadn’t bailed-out the Royal Bank of Scotland with £45 billion of taxpayers money. That thought probably occurred to some MP’s who sit on the toothless-but-influential Treasury Select Committee. They were looking forward to giving Hector Sants – Chief Executive of the Financial Services Authority – a good gumming later this summer when he was due to appear before them, after which he would be confirmed as Chief Exec. of the shiny new Prudential Regulatory Authority – the FSA’s replacement. They might have heard Lord Mandelson explain how regulatory authorities like the FSA were outwitted and governments blackmailed by banks which dumped massive bank losses onto their sovereign balance sheets. The inquisition would have been worth watching but sadly Sants got wind of it, bottled-out and tendered his resignation instead.

But HM government is not heartless. At the same time as sorting the Eurocrisis our Dave found time to keep in touch with his greener, cuddlier side by re-stating the government’s commitment to reduce litter and landfill by a ‘bag tax’ on single-use plastic bags. 5p per bag is now the norm in Wales and will be Northern Ireland from April next year. Quite how this would apply to the Markets industry I haven’t got a clue but neither has the government. However the Scots government is now consulting on the idea – and about time too. Thanks to global warming more and more sea turtles are visiting our shores and the Marine Conservation Society has shown how a discarded plastic bag often looks just like a juicy jellyfish to a hungry turtle, before killing them. I don’t know about that because there aren’t many beaches in Oxfordshire, but anything which reduces litter on the A34 sounds good to me.

But would you believe it – the bean counters at HM Treasury have knocked it on the head. A spokesperson said something like: ‘After the granny tax, pasty tax and fuel tax fiasco we don’t seem to have an appetite for plastic bags.’ They might not, but turtles do. That’s just typical. They think it’s more important to look after the Germans than the turtles.

Lord Howe of Aberavon – former minister in Margaret Thatcher’s cabinet – used a recent speech in the House of Lords to call for an end to the UK’s mixture of metric and imperial measures. He said the failure to remedy this in the year of the London Olympics was the most glaring omission from the Queen’s Speech. The UK was, he said, now split between ‘a metrically-literate elite and a bewildered majority, which increases costs, confuses shoppers…causes accidents and puts us all to shame’.

When the laughter died down someone reminded him of the rather more pressing issue of the Eurocrisis. Oh yes, and his 1979 abolition of the metrication board when Chancellor of the Exchequer. And his speech in 2000 when he pronounced ‘the UK must put itself into a single currency zone and enjoy the immense benefit of stability… in the European Union.’

One shouldn’t be too unkind – he did seem rather tired and confused and tried to exit the chamber via a cupboard. There are rumours he was put up to this by Chancellor George Osborne who is keen to ensure drivers cannot work out that 143p/litre for fuel actually represents £6.50/gallon of which £4.10 goes straight back to HM Treasury in fuel duty and Vat.

But maybe Lord Howe is right – thinking in Imperial can be bad for your health. £6.50/gallon seems a lot more expensive then 143p/litre. But on the other hand 100 miles seems a lot less distance to drive than 160 kilometres and 40 miles/gallon sounds a lot nicer than 8.8 miles/litre.

High running costs of an indoor Market Hall means ‘exclusive’ rents are the norm – Stallholders pay a service charge in addition to their rent.

It depends on Howe (sorry about the pun) you present the figures – a problem not uncommon to Market service charges. Most Open Markets charge an inclusive ‘all-in’ rent i.e. your £25/day or whatever includes the cost of staffing and waste removal. But the high running costs of an indoor Market Hall means ‘exclusive’ rents are the norm – Stallholders pay a service charge in addition to their rent.

Historically, many Council Landlords also shared the partial exemption from Vat which they enjoy. Pressure from HMRC has though made this increasingly rare and is often compounded by rating assessments on individual stalls. Add to this the expensive-to-run and overdue-for-replacement heating and refrigeration equipment seen in many Markets and there are plenty of reasons for high service charges.

Most service charge complaints are caused by poor presentation – they fail to explain why the charges are so high and what efforts have been made to reduce them.

Of course no-one likes paying bills but most do so, grudgingly if they can see there has been an effort to reduce them. Most service charge complaints are caused by poor presentation – they fail to explain why the charges are so high and what efforts have been made to reduce them. This is a hangover from far too many outdated Market leases which don’t make provision for a detailed service charge statement at the end of each year as a matter of course.

You wouldn’t get away with that in a Shopping Centres let to High Street multiples. But spare a kind thought for the many Market managers whose cost-cutting efforts are frustrated by lack of money to replace outdated equipment and charges of £110,000 a year from a City Engineer for a part-time cleaner and skip. From what I saw the cleaner wasn’t even very good at pushing a brush.

Delivering discretionary local services like Markets without financial support from Whitehall is the purpose of the Localism Bill – not driven by political aspiration but by economic necessity. The Bill now has Royal assent and the chaos in Euroland is piling even more pressure on Westminster to reduce financial support. The presumption in favour of ‘top-down’ delivery of services has been reversed in the Big Society agenda to relegate local government as an ‘enabler’, not necessarily a deliverer of discretionary services like Markets.

The loss of control does not sit comfortably within most Councils and maybe a service charge dispute will trigger someone to lodge a ‘right to challenge’ as embodied in the Act. But challenging the deliverer to relinquish control to you won’t work unless you can deliver an alternative source of development capital. That is, I’m afraid, commercial reality.

In the meantime the local elections are out of the way so there’s one less reason for a Council not to ‘actively target their own businesses rate discounts in the best way for local businesses’. If you’ve been lumbered with an assessment for business rates now’s the time to look at Small Business Rates Relief. You’re more than likely to be eligible for a 100% or at least partial waiver.

On a more cheerful note, Morrisons, the country’s fourth largest supermarket has sparked a minor petrol price war by cutting a couple of pence off a litre following a fall in crude oil prices. Their petrol director Mark Todd put a polished spin on it by announcing: ‘The continued bad news in financial markets is good news for motorists. After seeing continued reductions in the price of oil we are taking the opportunity to bring down prices at the petrol pump’. Nice one, Mark – but I still make it well over £6 / gallon. In response Tesco cut 5p off a litre ‘provided you spend £50 in store’.

I remember my Dad pompously announcing he would give up motoring when the price reached £1 per gallon. It seemed sensible enough at the time but now seems about as realistic as Lord Howe.