Yesterday we had the first Labour budget in fourteen years. What is the good news? Well at least we know what Labour's priorities are. I had high hopes for Rachel Reeve, as she is an economist by trade. I have now concluded that she went into politics because she clearly wasn't much good at her former job and realised that as most politicians are completely economically illiterate, she'd most likely bag a top job.
This may sound harsh, but there are two things that are indisputable. The first is that the UK's finances are in a complete mess. The second is that the only realistic fix for this is growth and increased prodictivity. Logic would say that any budget should have made this a priority. The fact that there was virtually no mention of measures to spur growth and improve productivity says to me that she is not up to the job and doesn't understand economics as well as we were lead to believe.
Of course the £22 billion extra funding for the NHS is a good thing. However, as someone who has seen far too much of the NHS over the last fourteen years, I can say without a doubt in my mind that the NHS needs massive reform and although it needs more money, a plan to reform it and invest the money sensibly is needed more. The organisation is clearly too bureaucratic. Once you are diagnosed with something like cancer, you get excellent care. However, you also get very frustrated at times because many things that should be simple end up being very complicated. I will give one example. Last March, I got an appointment to review my MRI results. This was all well and good, but they booked the MRI for June. Luckily, I spotted this, but it would have wasted both mine and the consultants time. It toom my five phone calls to rectify the problem and there was little interest from the receptionists in sorting it out.
Another worrying thing for me, was that my appointment with the Royal Free oncology department for a follow up consultation took three months to arrive and actually arrived a month after I'd had the operation to resolve the problem. With cancer, time is of the essence. With cancer, the sooner you catch it, the easier and cheaper it is to fix. Sorting the mess out that is NHS bureacracy would save billions that could be reoinvested in better treatments. I'd like to see far more spent on preventative medicine, as this would also be an investment with a huge reward. I did some work on IT systems used by the NHS a couple of decades ago. Anyone who worked on those projects. will testify that the way IT developments are done in the NHS is extremely badly managed. Sadly, no one in NHS senior management or government had the skills to even understand the issues. I saw a similar thing with Police systems in the early 1980's. My old company provided a command and control system for Northumbria Police. Every police authority paid to develop their own system from scratch, meaning hundreds of millions of pounds were spent duplicating functionality. The Greater Manchester police system was so bad that the Home Office eventually forced them to take the Northumbria Police system, which was properly designed and built.
I also worked on a system called The Post Office Cardholder Account system, that was developed in 2004 to pay benefits (this was seperate from Horizon I must add). This project was the only major government project of the decade that was delivered on time and on budget. Why? Because they bought a proven, off the shelf system that was already widely used in the USA and did minimal modifications. My advice would always be to find something that has been developed and is best in class. If you need to develop something from scratch, then choose people with a strong track record of delivering on time and on budget. It sounds simple but rarely happens. What seems to happen in the UK is that public sector authorities choose suppliers that have a record of bad delivery and high add on costs (regular readers will be familiar with what happened in Barnet Council with outsourcing).
Having looked at the NHS investment and how it should be managed, even more important is private sector investment and productivity. Unlike most MP's, I've run a successful business for four and a half decades, building it from nothing. We work in the music sector. That is worth £5 billion a year to the UK. For some perspective, that is three times larger than the UK Railfreight industry. It brings a huge amount of money into the UK.
Between 2020 and 2023, my company made a huge loss on trading due to the pandemic. We were kept alive by grants from the government during the pandemic. We ran up huge debts to our landlords (which luckily for me are my family). As we re now making a small profit, we are paying those debts back. It will take five years. We also did alost no repairs and upgrades during that time. This means that we also have a huge backlog of maintenance and equipment upgrades, which is gobbling up what little profits we earn. I am paying myself half the minimum wage for my time. The business employs ten staff, mostly students etc, on shifts, who like a part time job, where much of the time they can do coursework. Historically, we've always paid above the minimum wage. This gives us the opportunity to attract the best staff. The massive increases in this over the last 20 years have meant that it is almost impossible to do this. Whereas we paid 30-50% more when the minimum wage was introduced, now we can pay around 20p an hour more. With the massive rise in April, it will turn our business from profit to loss unless we rise prices. On top of that, the changes to employers NI will have a huge effect. I've not managed to calculate exactly how much, yet, but cutting the threshold where Employers NI kicks in means that many of our part time staff, who previously didn't atrract employers NI will now cost us money. What we will probably have to do is cut down the number of shifts staff do and have more staff doing shorter shifts. It will increase our admin, but will save us money we don't have. The chancellor will not get the money she's expecting as every such change makes us review our staffing patterns. Every business does the same thing. If an employee cannot generate a profit, then their job goes and the Chancellor pays more social security. As we have less money in the pot, we have to put off refurbishment and replacement of equipment. This has a knock on with tradesmen and suppliers. It dampens economic activity. This is happening across the economy at every level.
Our sector, the music industry gets no support. There are no schemes for musicians to support them. The pandemic and the changes to tax rules for touring bands following Brexit have clobbered the sector. Now we have to put our prices up for these hard pressed musicians. Less will come. The balance between charging enough to keep the show on the road and still being affordable is almost impossible to balance. In 2016, we had to increase our prices following a long period of stability. We lost 20% of our customers overnight, on the back of a 10% rise in costs. Luckily, most eventually came back as our competetors, who didn't bite the bullet and hike their prices went bust or shut down. What it did was make me very aware of the brittle nature of our customer base and their finances.
Rachel Reeve has completely failed to explain how businesses that are still recovering from a global disaster in the pandemic are supposed to fund a 10% pay rise for staff. She has failed to explain how companies will grow and improve productivity, when they have to divert cash earmarked for investment in the business into simply paying higher wages and Tax. She has failed to explain how the UK's woeful productivity will improve if we have no cash to develop more efficient working practices.
My main studio competetor in the UK has a business model where they have no staff on site. You simply get an online access code. All bookings are done via a website and any problems in the room require a telephone call to someone who is on call and may turn up if they can get there in time. Some of our customers do use them occasionally, often until something goes wrong and they have to abandon their rehearsal. From a financial point of view, I can see the attractions of it. However I got into the music industry because I wanted to provide a good service for musicians. The current climate in society is to get rid of staff. Shops force you to use unmanned tills, then wonder why they are plagued with shoplifting. If you have a problem with your insurance or bank, it is almost impossible to talk to anyone. Why? Because the government has made it uneconomical to emply people. As a result, we have a society where nothing works. Ask yourself this. Does this budget make that situation better or worse?
