I’ve already noted Sir Philip Green’s report on supposed government purchasing inefficiency, and the gaping holes in it, here and here.
But then it occurred to me — if he’s so good at buying why do his stores ever have sales?
After all, aren’t sales just an opportunity for a store to get rid, at low margin, of what they bought in error and couldn’t sell at full price / margin? If he’s so good at buying surely they wouldn’t need to do that, would they?
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With all this talk of efficiency and not paying over the odds for things, he seems to be quite happy to pay more for certain services, as the following extract from the Arcadia 2009 accounts shows:
2009
2008
£’000
£’000
Auditors’ Remuneration
Audit Services
Statutory audit of the Company and its subsidiaries
147
151
Tax services
Compliance
16
16
Other tax services
407
218
All other services
28
79
Oops – that didn’t format very well – anyway the point was £407k on tax services in 2009 versus £218k in 2008!
I think you will find that most retailers have a myriad of promotions, including sales – it is a way of getting increased footfall. Surely you understand how retail works?
@alastair
Sure I do
But have you seen the tat in the Top Shop sale?
Don’t tell me it was all bought deliberately for a promotion – because it wasn’t
@Deeply Depressed
Useful indication of relative values…
Not really sure what your point is. How about a bit of flesh on the bones.
The answer is quite simple. Clothes retailers buy clothing well in advance of actually stocking them (sometimes a year or so in advance) as well as buy clothing for each season…autumn/ winter & spring/ summer. Not all buyers can correctly predict the fashions/ styles a year or so in advance, the weather affects sales and sometimes you need to clear the decks for the next season’s clothes coming in. On top of that, having a sale or two encourages shoppers to come into your shop.
@JohnBuckles
Ah, so buyers aren’t clairvoyant
and they get things wrong
And order what people don’t want
At prices they won’t pay
I get it now!
From what was shown in the weekend papers, it appear Green is doing an ok job and finding daft things, such as junior staff being given Blackberry’s (when they are clearly not needed) and huge amounts of unwanted office space.
Of course these were reported in the Times, meaning I can’t link the article. And also one could possibly question it’s impartiality……
@JayPee
Richard’s original posts question Green’s credentials for giving efficiency advice to the public sector. I am merely pointing out that someone who spends 25 times more on tax advice than tax compliance may not be best qualified to advise the Government on the value of its purchasing. Whilst I’m sure he understands the costs, he has a different set of values – which is borne out by the difference in what he chooses to spend his money on. I am not an expert, just an interested observer. However, it would appear that Arcadia’s effective tax rate in 2009 after “prior year adjustments” was 4% – somewhat less than the 30% required by law. Seems like the advice paid off, at least.
This comment has been deleted. It failed the moderation policy noted here. http://www.taxresearch.org.uk/Blog/comments/. The editor’s decision on this matter is final.
Abusive comment aimed at other commentators is not allowed
@ Deeply Depressed, one could easily suggest that if Green is resourceful enough to avoid large amounts of tax, then maybe he’s the perfect person to find areas of wastefulness within the public sector.
However, there is then the odd fact of a government stating it wants to cut tax avoidance, and then employing someone who seems to be partial to the odd bit of avoidance!
Fashion buying is always one of a bit of guess work because the public is so fickle. Once a fashion has passed the goods then lose value hence the need for a sale.
A4 paper for an office will never go out of fashion, so even if you over purchase it will get used up, as long as you stop buying. A4 is an ideal product for central purchasing which can then be called off by local offices as when required.
@SimonF
And let’s not suppose for a moment that most of the savings are on A4 paper
I would love to know what the “different values” are that make wasting tax money on over-priced paper and telecoms laudable.
My values as a tax payer paying for it are what count, not the civil servants values of not giving a damn about it.
I didn’t say they were, just trying to politely point out that comparing fashion and A4 paper is a of an bit oranges and pears comparison.
This sounds a bit like “playing the man instead of the ball” (with apologies to Sir Humphrey) to distract from Sir Phillip’s ideas which people don’t like.
As a 42 year old man have no idea what fashions are in Top Shop, but my teenage daughter tells me that she likes shopping there because the clothes are good, fashionable and excellent value for money. As a taxpayer, what I want most is value for my tax. That is the key. In a civilised, democratic society taxpayers’ money should be used where it produces value for all taxpayers. If central government (and I dread to think what goes on in local government) can’t get this right and “do the basics” to an acceptable standard then how can we have confidence that its policy programmes are well directed and funded appropriately?
PS: I notice that you have tightened up your moderation policy recently Richard. Isn’t it nice when you just hear from your mates who hang on your every word!
I don’t have an issue with this. Philip Green is obviously very good at making money and to make money you have to be good at saving money as well. I don’t doubt for a minute that he’s finding waste and inefficiency. What you think of him in this instance is of no relevance. If you want a mercenary you hire the most effective and ruthless one you can find.
Many retail sales these days are not really sales either. They are promotions with all the risk carried by the supplier and not the retailer.
You appear to be comparing apples and oranges here.
One is an item for sale, risks are always taken when purchasing for resale as you may simply get it wrong then are forced to discount even to a loss to recover whatever cash possible, this covered by the items you did sell at a healthy profit.
The other is purchase of an item which will be used in generating revenue but does not directly generate revenue (yes I accept the government doesn’t actually generate revenue but the principle is sound as it still relates to going about its course of business).
A better example would be asking if Sir Phillip’s companies regularly overpaid for floor space compared to other (and smaller) retailers, or left floor space or units idle. If this were/is the case then you have hypocrisy on your hands. If not then the accusation has little basis in fact.
Philip Greed only buys cheap clothes imported from sweatshops abroad and
pays his staff the minimum wage to flog them. He has grown his ’empire’ through acquisition – i.e. buying other shops. It’s easy to make economies of scale (logistics, IT, buying, HR etc) when all the businesses are generally the same. Government is different. Supplying services patients in the NHS is different from equipping troops in the MOD. In order to get efficiencies across divergent departments would require a huge bureaucracy which would negate any cost savings.
I’ve worked in private and public sectors and both are wasteful in their own particular ways. Both include departments who max out their budgets come year end otherwise they risk getting a cut the following year.
Travel is abused in all sectors too. Airlines couldn’t survive without overcharging for business class and these so-called efficient organisations don’t flinch at the inflated costs. Many executives moan about the travel they do, but it’s clear they see it as a perk to be exploited at will.
I think if we are going to talk about hypocrisy here then we need to look at the waste involved in the Arcadia Empire and what that means for us consumers (or at least those who buy from the stores). The central tenet of PG’s review is that waste is endemic in the public sector, in other words public sector buyers are paying too much for their purchases, thus costing UK tax payers more than it should.
The famous economist JK Galbraith makes this point far more eloquently than I can but the thing is, waste is endemic in private business through excess and inflated prices (or unsustainable business models). PG has a private Gulfstream V to ferry him from Monaco to London (or wherever else) and back. That is waste. The group paid a dividend of £1.2billion to its ‘shareholders’. That is waste. Anyone who shops at any of the Arcadia outlets is in effect paying a premium to fund the excess PG and family enjoy in a similar way to our money being ‘wasted’ by public sector buyers. I found the talk of lavish parties in the public sector rather ironic, bearing in mind PG’s famous 50th birthday party, he apparently flew guests in a chartered Airbus and paid Rod Stewart around a quarter of a million to perform, apparently.
Regardless of whether you look on him as a shrewd and successful businessman or a cutter and slasher, the fact remains that there is massive waste inherent in his business and we all pay the price.
@Richard
You got on none the less, eh?
My moderation policy is aimed at stopping abuse
It is also aimed at stopping some of those who Andrew Marr recently described
And rightly so
@Lee and all others
Well, it’s amusing a tongue in cheek comment got such reaction – especially from all those who have had a Worstall implant
And that you miss the point – which is a simple one – that all organisations are inefficient
I have no doubt at all that there is inefficiency in government.
But I’d have local education authorities, a centralised NHS, one armed force administratively and so on. And I’d require a central buying agency for all local authorities – with standard prices (if Viking Direct can do it so can central government)
But you have a mantra of decentralisation and removing admin
And you argue for devolution of decision making
And you argue central government is bad
And you argue for ‘competition’ – so we have thousands of NHS organisations including 500 new ones run by GPs who have no clue at all on purchasing set up by a new Tory administration
In other words I fairly and squarely blame market ideologues for this mess
What an excellent comment from Neil. I’m going to use it on FaceBook discussion, if he doesn’t mind.
Richard
Your reference to tension between decentralisation and centralisation is a good point, and actually illustrates one of my main criticisms of the appointment of people like Green to carry out this kind of review. They are usually entirely ignorant of how and why the situations they are asked to review arose in the first place and therefore ignore the contradictions inherent in their own findings and recomendations.
Take centralisation/decentralisation. This is a tension that has been researched and written about since the 1960s, such that by the 1980s Kramer and King (two US scholars of government)described it as ‘an endemic dilemma’. One of their examples of the intended and unintended consequences of this was the development of radio equipped police patrol cars in American cities in the 1960s. This led police departments to centralise command and control and massively reduce the number of foot patrols in local neighbourhoods (thus reducing costs). Officers were instead kept on call at precinct houses. The result – as with the demise of beat policing in the UK a decade later – is well known. So, what costs were actually reduced?
I have direct experience of another example from local government in the UK from the early 1990s. This concerns the decentralisation and devolution – of which privatisation and contracting out were a major feature – of all ‘non core’ services and functions, ostensibly to save money (which it did in the short term). This was done to conform to central government policies and political expediency.
However, the degree of fragentation this produced led, within 18 months, to extremely high levels of duplication of activities across the local authority. Aside from the loss of economies of scale it also required staff to spend inordinate amounts of time coping with the new, supposedly slimlined (but in fact highly complex) fragmented structures and systems. This cost was never set against the initial cost savings.
Fast forward to now, and here we have a classic example of the ‘endemic dilemma’ of decentralisation/centralisation again. Certain policies and ideas – such as the ‘big society’ based on the one, while Green’s ideas are based on the other. Green – and the government – seem utterly oblivious to this and the fact that we have been here many times before over the last 40 years.
@Richard Murphy
“A Worstall implant” – what a horrific idea…
maybe that’s what they were up to at that libertarian conference/seminar in London last month!
@Carol Wilcox
No problem!