When Journalist and Broadcaster Alistair Cooke joined the New York Times he was puzzled by a large sign – KISS – hanging on the wall of the newsroom. His editor explained: ‘Keep It Simple, Stupid. Your readers have 10 minutes on the subway to read and understand your article. Then tomorrow it’s at the bottom of their budgie cage’. At the beginning of December, just before the Chancellor’s Autumn statement the business consultancy Deloitte did just that with their annual ‘State of the State’ report. It was published in partnership with the independent Think Tank ‘Reform’ to show how much progress the coalition government has made in restructuring the economy after the 2008 financial crisis. It is quite readable provided you have a bottle of gin to hand. You can download a copy from: http://www2.deloitte.com/content/ dam/Deloitte/uk/Documents/ public-sector/deloitt-uk-state-of-thestate- 2014.pdf 

According to Deloitte/Reform about half of the necessary spending cuts have now been achieved, BUT all the quick fixes – public sector pay freezes and redundancies etc – have been used up. What’s still to come is going to be MUCH tougher. They suggest: ‘Councils are likely to move away from providing services they are not legally required to provide ‘ (such as Markets) with the sting in the tail that: ‘Whilst early spending cuts took place in a recession, the coming ones will be in a period of economic GROWTH. Citizens are more likely to experience roads in disrepair, dirtier streets, unkempt parks, and fewer pools and libraries’. The UK has now emerged from recession and has the fastest-growing economy in the EU but government spending will still be savaged for years to come.

As a retailer your turnover may be on the up but the services your Council provides are going south. The report suggests ‘the UK’s governance, public sector and citizen experience of public services is likely to change profoundly’. Picking up the phone to complain about a pothole is about to become history in the same way that car tax discs have. The report steers clear of political point-scoring but does confirm the record annual budget deficit of 2010 meant the government spent £159 billion MORE than it received in income. This annual deficit has now been reduced by about half after the coalition government set itself the ambitious target of eliminating it entirely by 2018/19. Success to date has gone down well with our trading partners and particularly the establishment of the independent ‘Office of Budget Responsibility’ which produces ‘Whole Government Accounts’.

Autumn statement Grim reading for local
Autumn statement Grim reading for local

Amazingly, prior to 2010 there was in effect no set of management accounts for the government. That’s not exactly the way to run a country or a local authority Markets service either, but it happens. It’s even less impressive when you consider public spending has soared from £190 billion in 1964 to £730 billion in 2014. It now represents 44% of Gross Domestic Product i.e. business turnover for the UK and you are to blame for much of the problem. You keep getting healthier, more educated and living longer. Have you no shame? So once the annual deficit has been eliminated by ‘fiscal consolidation’ HMG can start paying back the £1.4 trillion of debt which it borrowed to buy Royal Bank of Scotland etc and prevent total economic meltdown. That debt continues to rise and costs the taxpayer £1 billion per week in interest payments – more than the government spends on education. The politicians can argue about how the deficit will be reduced – what spending cuts and over how long etc – but if the debt isn’t reduced then interest payments by 2023 will be three times greater than total expenditure on the armed forces. The Authors of the report then interviewed public sector Chief Executives who are tasked with finding ways to save the money and implement the next round of cuts.

This unwelcome problem has been dumped into their laps so they are less then flattering about their political masters. ‘National and local politicians have a duty to engage citizens in constructive dialogue about the changing limits of the state’ they say i.e. ‘As the elected representative it’s your duty to tell locals why I’m selling-off their playing fields and closing down the care homes’. Whichever government we have after next May the need to balance the books and buy-down the debt is so pressing that politicians won’t be able bury their heads in the sand and wait for economic growth to make the problem go away.

Halfway there but much worse still to comeIn his Autumn statement George rummaged around down the back of the sofa and found another £2 billion a year for the NHS, which was nice. He also introduced tax for Companies like Starbucks which shift profits overseas, then cut the ability of banks to offset losses against profits during financial crises. Nicer still and all good tinkering in the run up to the general election to be followed (hopefully) by another last-minute announcement to scrap HS2 to save another £80 billion.

So what does all this mean for the Markets industry?

The vast majority of Markets are operated by Local Government as one of those ‘discretionary services’ now in the accountants sights. Some still make a reasonable profit for their owners but I’m sorry to say an equal number are total basket cases. For them any possibility of improvement is further away than ever unless their owners embrace some radical new ideas. And finally, if you’re planning to stand for election in May please consider a few other problems you’ll need to resolve as well: More independence and tax-raising powers for Scotland, improving national security and counter-terrorism, addressing immigration and maybe organising a referendum or two which could take the UK out of the EU.
Not much really. Which invites the question: Why doesn’t George Osborne have grey hair?