Cash in the attic: the City of London. Photograph: Getty Images.
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UK businesses have plenty of cash to spare, and they're spending it on the young

Companies are starting to use their cash balances in at least one useful way, to provide training programmes for able young people as an alternative to university.

Companies are awash with cash. They’ve been hoarding a war chest since the financial crisis hit in 2008. It has achieved ridiculous proportions; in the US and UK corporate bank balances have doubled in size, Japan has recently seen a spike while Europe has also built a buffer, if not to the extent of other regions. However the signs are that companies are beginning to deploy this money – especially in the UK.

There are the obvious things like share buy-backs, and mergers and acquisitions, that you can do with excess corporate money, but more encouragingly companies are beginning to think in a new way about the next generation of people working in their businesses. Increasingly, a new form of sponsorship is emerging. In moves not seen for a generation, companies such as the accountants Deloittes are hiring young people into their businesses as an alternative to going to university. Business is beginning to invest in young people, filling the gap left by universities that offer courses of doubtful relevance at prices that are just too high.

The general public is smart enough to detect the whiff of corporate insincerity in any charm offensive – tokenistic community-based projects will be seen through as box ticking Corporate Responsibility initiatives that offer little lasting relevance. Businesses will only truly “put something back” if given the right incentive to do so and there is nothing like the profit and cost motive to do that especially in the new era of shareholder activism. The Labour Party’s newly announced policy to “tax the bankers” to provide youth training schemes in that respect, once more, misses the mark. It misses the mood of the day, that there is a new dynamic at work that will see companies investing in young people because it makes business sense.

Sadly, the negativity towards business identified in The Trust Deficit: After the Crash by the research group Populus for the legal firm DLA Piper, is reinforced by mainstream economists like David Blanchflower and politicians like Ed Miliband. Writing in The Independent this week Blanchflower indulges himself in yet another populist diatribe which offers little except the tired observation that some people have more money than others and because of the way unemployment in this downturn has hit the non-graduate pay grades, the income gap between them and graduates has increased in the past five years.

What Miliband and Blanchflower both miss is that if pay structures in certain parts of the economy aren’t sustainable or aren’t valued then they won’t last – they will wither and die of their own accord. It does not need a tax – it does not need a law for that to happen. Besides, with the economy picking up, they are starting to sound somewhat behind the evidence. We don’t have an incomes policy and we don’t, thank goodness, have a limit on what any individual can earn in our country and long may that last. Treating the lawful activity of whoever it is in society who earns super-normal money (which in turn feeds the Exchequer) whether that is a footballer, pop star, entertainer, private company director, public company director or, yes I’m going to say it, a “banker” as immoral is an otiose argument which only has currency at the trough of the economic cycle. That moment has passed.

In a capitalist system, like ours, you will always have cycles. Capitalism is, in that sense, inherently unstable and liable to peaks and troughs – Karl Marx appreciated that. This requires the existence of a safety net to catch people when they fall. That is the implicit social contract we are involved in. But in this downswing a new part of the safety net has emerged – one which protects talented young people from the penalty of government education policies. It is one which will see companies deploying their cash reserves, taking on a positive role in shaping the next generation of workers by helping them over barriers to entry into higher earnings via education no matter their background. Getting the administration – and opposition – of the day to cooperate with and praise that idea is much more useful than replaying tired class war ideas that send the wrong messages to our young people about the possibilities of work and what business contributes to society.

Head of Fixed Income and Macro, Old Mutual Global Investors

Photo: Getty
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How a small tax rise exposed the SNP's anti-austerity talk for just that

The SNP refuse to use their extra powers to lessen austerity, says Kezia Dugdale.

"We will demand an alternative to slash and burn austerity."

With those few words, Nicola Sturgeon sought to reassure the people of England, Wales and Northern Ireland last year that the SNP were a party opposed to public spending cuts. We all remember the general election TV debates, where the First Minister built her celebrity as the leader of the anti-austerity cause.

Last week, though, she was found out. When faced with the choice between using the powers of the Scottish Parliament to invest in the future or imposing cuts to our schools, Nicola Sturgeon chose cuts. Incredible as it sounds the SNP stood shoulder to shoulder with the Tories to vote for hundreds of millions of pounds worth of cuts to schools and other vital public services, rather than asking people to pay a little bit more to invest. That's not the choice of an anti-austerity pin-up. It's a sell-out.

People living outside of Scotland may not be fully aware of the significant shift that has taken place in politics north of the border in the last week. The days of grievance and blaming someone else for decisions made in Scotland appear to be coming to an end.

The SNP's budget is currently making its way through the Scottish Parliament. It will impose hundreds of millions of pounds of cuts to local public services - including our schools. We don't know what cuts the SNP are planning for future years because they are only presenting a one year budget to get them through the election, but we know from the experts that the biggest cuts are likely to come in 2017/18 and 2018/19. For unprotected budgets like education that could mean cuts of 16 per cent.

It doesn't have to be this way, though. The Scottish Parliament has the power to stop these cuts, if only we have the political will to act. Last week I did just that.

I set out a plan, using the new powers we have today, to set a Scottish rate of income tax 1p higher than that set by George Osborne. This would raise an extra half a billion pounds, giving us the chance to stop the cuts to education and other services. Labour would protect education funding in real terms over the next five years in Scotland. Faced with the choice of asking people to pay a little bit more to invest or carrying on with the SNP's cuts, the choice was pretty simple for me - I won't support cuts to our nation’s future prosperity.

Being told by commentators across the political spectrum that my plan is bold should normally set alarm bells ringing. Bold is usually code for saying something unpopular. In reality, it's pretty simple - how can I say I am against cuts but refuse to use the powers we have to stop them?

Experts - including Professors David Bell and David Eiser of the University of Stirling; the Resolution Foundation; and IPPR Scotland - have said our plan is fair because the wealthiest few would pay the most. Trade unions have backed our proposal, because they recognise the damage hundreds of millions of pounds of cuts will do to our schools and the jobs it will cost.

Council leaders have said our plan to pay £100 cashback to low income taxpayers - including pensioners - to ensure they benefit from this plan is workable.

The silliest of all the SNP's objections is that they won't back our plan because the poorest shouldn't have to pay the price of Tory austerity. The idea that imposing hundreds of millions of pounds of spending cuts on our schools and public services won't make the poorest pay is risible. It's not just the poorest who will lose out from cuts to education. Every single family and business in Scotland would benefit from having a world class education system that gives our young the skills they need to make their way in the world.

The next time we hear Nicola Sturgeon talk up her anti-austerity credentials, people should remember how she did nothing when she had the chance to end austerity. Until now it may have been acceptable to say you are opposed to spending cuts but doing nothing to stop them. Those days are rapidly coming to a close. It makes for the most important, and most interesting, election we’ve had in Scotland.

Kezia Dugdale is leader of Scottish Labour.