Erikka Askeland: Goss strikes a balance between capitalism and the proletariat

AS IF they were all singing the same song, the Institute of Directors’ (IoD) and British Chambers of Commerce’s (BCC) twin calls for a clampdown on employment regulation got a response yesterday from George Osborne in Manchester.

The BCC had highlighted in a survey – timed perfectly to land on the big day for the Tory party conference – that the employment tribunal system was holding small firms “to ransom”. And so, with a flourish, the Chancellor announced a series of reforms to employment law, including a charge for any employee taking their boss to tribunal, but refundable if they won their case.

Osborne said the policy was “ending the one-way bet against small businesses”, chiming with the BCC survey which found that as many as 37 per cent of firms faced with a tribunal were settling whether they thought they were in the wrong or not, because the prospect of going through the procedure was prohibitively expensive.

The BCC said this had led to a “culture of settlement” that encouraged “spurious claims” and undermined cases of those employees who actually do have a fair claim to compensation. The Chancellor’s proposed £150 to £250 charge for employees launching a case would serve to weed out the chancers, but could also prove prohibitive to anyone on low wages who is being treated unfairly.

Of course, the unions were incandescent with rage, arguing that the Tory party is merely siding with the “asset strippers and predators” that fund the party conference’s champagne receptions and fill its coffers.

According to the GMB, there are between 50,000 and 60,000 claims for unfair dismissal each year, with 5,000 of these succeeding at tribunals, paying out an average of £4,900 each. It may not sound like much of a hardship, but averages hide a multitude of excesses.

The BCC points out that as many as one in five SMEs it surveyed had been threatened with a tribunal and the risk most face when considering hiring more employees is that “one bad recruitment decision could wipe out a whole year’s profit”.

Getting rid of red tape is always tricky, because for every business owner that struggles with ensuring he is meeting a library the size of Brussels filled with employment law requirements, there is a pregnant worker who is grateful she can keep her job but also spend some time raising her child. Those who favour more laws tend to think businesses are by their natural instincts oppressors of the poor, while those who are against more laws believe that employers will happily create more prosperity for all if they don’t have to worry about being sued for it.

The answer between these two positions, and one that might surprise the unions – it surprised me – came yesterday from an arch asset stripper, Bill Goss. The 67-year-old head of bond fund giant Pimco turned red in his latest monthly blog and argued that the shift from labour to capital – the measure of the sort of “greed is good” capitalism of recent decades – had so undermined the market, made up of increasingly cash-starved workers, it was in danger of collapsing in on itself and needs to change.

“Long-term profits cannot ultimately grow unless they are partnered with near equal benefits for labour,” he argued, adding: “Investors/policymakers of the world wake up – you’re killing the proletariat goose that lays your golden eggs.”

If more businesses, and investors, thought like him, then all red tape could be dissolved away.

Georgios is making eyes at Angela – and Olli and the rest

IMAGINE the Greek prime minister Georgios Papandreou, shuffling his feet with hands stuffed firmly in his pockets and avoiding eye contact. He’s come up with some of the money but not all of it and on Sunday he had to face the music and admit it.

His interlocutors were shocked into silence. Olli Rehn, the European monetary affairs commissioner, looked on stony faced with his arms crossed, while German chancellor Angela Merkel, who is worried she will have to bankroll the whole fiasco, narrowed her eyes into a hard stare and thought hard about keeping her blood pressure down.

But what did they expect? thought Papandreou. The International Monetary Fund and the European Central Bank knew very well that putting the bloated Greek economy on such a stringent diet would make it too weak to deliver a strong performance, didn’t they?

Clearly they didn’t. Or they decided that they could gamble on the off-chance that Greece could pull it off like Rocky IV, or if not, it could buy them enough time to calm the markets.

But, as a surprise to no-one, especially the bond holders, Greece came up a little short and instead the country’s deficit will be €18.7 billion (£16bn) this year, and not the £17bn or so it promised.

Sadly the European bluff isn’t working and Papandreou now needs to give big eyes to his hard-staring European backers to get the €8bn it needs by mid-October, or else the country risks going bankrupt.