Any other business

George Osborne still deserves praise for his Living Wage

Also in Any Other Business: what if the sage of Silicon Valley had stayed in Britain?

2 April 2016

9:00 AM

2 April 2016

9:00 AM

It was unfashionable of me to write in praise of George Osborne on Budget day. I did so, you may recall, because ‘at least we have a finance minister who’s always on the front foot’: I wanted to make a contrast between our Chancellor’s relentless activism in pursuit of his political goals, and the supine performance of eurozone leaders — who continue failing to offer any strokes at all while hoping for Mario Draghi to knock up a few runs with monetary trick-shots from the other end. Within 48 hours, however, our Chancellor seemed to be very much on the back foot, one hand clutching his protective box, as bouncers rained down from the unlikely combination of IDS and John McDonnell. So it goes in politics; a fortnight later we may observe — emotive issues of disability benefit aside — that the sheer complexity of modern fiscal policy-making leaves an unlovable risk-taker like Osborne open to attack from any angle his many detractors care to choose.

Here, for example, is my friend Allister Heath at the Telegraph writing about ‘the many (inevitably damaging but often popular) left-wing measures [Osborne] has imposed’ — while Labour’s McDonnell bangs on about ‘the bankers’ Chancellor… looking after a wealthy minority’, not least by offering higher-rate taxpayers a big cut in capital gains tax, to the enormous advantage of those lucky few who happen to incur very large CGT bills.

The recent Budget will go down as one of Osborne’s least successful episodes, even if there were measures in it, to help smaller businesses, for example, that will boost the economy in the medium term. But at risk of being labelled ‘left-wing’ by right-wing purists, let me at least say a word in favour of the Living Wage, which kicks off this week at £7.20 an hour and will rise to £9 by 2020. When it was announced in last July’s Budget it was, needless to say, a blatant bid to knock Labour spokesmen off their soapboxes. It’s also a measure that quietly shifts a little more of the economic burden on to private-sector employers and away from the state. In businesses dependent on low-paid workers, it will clearly cause strain: there are warnings, for example, that it will exacerbate what’s already a crisis in elderly care — in which the state pays as little as it can to buy services from private providers.

So what’s to praise? In the early years of this decade, wages were stagnating in a way that was not helping the recovery and really did look unfair, while rising job numbers indicated room for an uptick in pay — and evidence from the introduction of Labour’s minimum wage in 1999 suggested the impact on businesses would mostly be marginal. Whatever Osborne’s ulterior motives, the Living Wage is a nudge in the direction of a better-balanced economy, and a gambit that finance ministers elsewhere are very likely to follow.

Silicon sage

I was fascinated to learn the life story of Hungarian-born Andy Grove, the driving force behind the Californian technology giant Intel, which makes the microchips that power most of the planet’s electronic devices. The name of Grove (who died last week, aged 79) was little known outside the digital world, but he was the sage of Silicon Valley to whom more famous innovators turned for advice. When Steve Jobs was pondering his return to Apple in 1997, 12 years after he had been forced out, it was Grove he called for counselling. Always blunt, Grove told him: ‘I don’t give a shit about Apple,’ a remark apparently provocative enough to make Jobs decide to go back. At Intel, Grove kept the company at the forefront of microprocessor design decade after decade by a process of ‘creative confrontation’ — heated but non-hierarchical argument over product ideas, in which, according to one observer, ‘He was perfectly fine with having employees yelling back at him.’

Intel today employs 107,000 people and has a market capitalisation of $150 billion. We can but wonder whether it would have succeeded at all if Grove had stopped in England after escaping the 1956 Hungarian uprising and if the company’s scientist founders, Bob Noyce and Gordon Moore, who hired Grove as their first employee in 1968, had sited their research lab in, say, Swindon rather than Santa Clara. In the start-up phase they would have struggled to raise venture capital; as it was, their key US investor was Arthur Rock, who was also an early backer of Apple, where he had a hand in ousting Jobs in 1985.

Nor would they have found a welcome on the hidebound London stock market of the 1970s. Like the now-forgotten semiconductor maker Inmos, Intel’s nearest UK equivalent, they might have been spotted as a potential ‘national champion’ and drip-fed state funding, but would have failed to achieve international scale, eventually to be sold to foreigners and disappear with trace.

And there would have been no great fortunes made. Grove amassed $400 million; Noyce died in 1990 but Moore, now 87, is worth $6 billion. The most likely counter-factual, if the Intel trio really had been Brits, is that they would have left these shores long ago and gone to America.

New Europe on sea

Easter in Tenerife, but without Maria Sharapova — too shy to respond to my invitation last week. A pity: estate agents’ signs here are often in Russian, and we could have found a nice little apartment at a knock-down price. The weather’s lovely, the maitre d’s are Romanian, the doctors are Polish, the street vendors are African, the breakfast is Full English, the worst-dressed tourists are Ukrainian and the best-dressed are German but they spend no money in the luxury shops. At least the taxi driver is Spanish: he studied business in Brighton but can’t find better work. Though the nearest landfall is Western Sahara, this is new Europe on sea: fine for a holiday but economically fragile and (without Maria) not a place I’d like to live. That’s my breezy Brexit metaphor for this week.

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Show comments
  • Bristol_Boy

    Praise for this inept careerist, why?

    • Aberrant_Apostrophe

      It’s OK. It’s April Fool’s Day.

  • JohnnyNorfolk

    Governments should not be setting wages. It will backfire in the end.

    • Seax

      So why are they imposing laws on the Unions that will hamper them in negotiations?

      • JohnnyNorfolk

        The government see itself as employer and union.

  • All hail George, thanks so much for encouraging even more migrants to the UK so we can not tax them due to being under the income tax threshold and instead give them tax credits, yes it all makes perfect sense.

    • Mongo

      this won’t help our own poor, but it will help Romania’s poor

      I guess the Tories have now completely given up all semblance of attempting to reduce migration

      • Seax

        Why Romania? What about non-EU immigrants?

        I know Romanians and they are well educated, polite and hard working. I would not call them ‘poor’ in the 3rd world non-EU immigrant sense.

  • paul

    The Tories really do take the biscuit they opposed the introduction of The Minimum Wage now they have hijacked one of the Labour Party’s Flagship Policies they are eternally The Nasty Party !!!

    • Seax

      The Tories never do things for the ‘plebs’ for altruistic reasons. They want to re-direct the tax saved to the rich employers from the sweatier employers.

  • Mongo

    I don’t get it. Dave made a huge deal over how his EU renegotiations on benefits would reduce the ‘pull factors’ for immigration, and then he goes and allows this large increase in the minimum wage – essentially a gold-plated invitation to even more transient foreign migrants

    does one hand know what the other hand is doing?

    we have to Leave

    • Seax

      Leaving will not stop immigration. You have just demonstrated that.

      The Government could end non-EU immigration tomorrow but chose not to. It is because they suppress wages.

      It will be interesting to see if the ‘Living’ wage is set high enough to allow people to work without the State propping up and subsidising low-paying employers.

      The Tories have encouraged Sweatshop Britain and are now having to face the consequences.

  • Seax

    The immigration and wages issues are a direct consequence of de-unionisation. The righties hated unions fighting for decent wages and conditions. They wanted the suppression of wages.

    The consequences were that, in a country where the righties were advocating stupidly high rents and mortgages (because they thought they were coining it) more and more ‘native’ workers could not afford to work for the wages offered. So the State had to prop them up or prop up low paying employers.

    The employers had no interest in increasing wages and so had to import in sweatshop workers. If they didn’t need to import sweatshop workers they exported jobs to sweatshop countries.

    The economics of the housing bubble have made living in much of the UK untenable. Only those immigrants that are willing to live crammed in slums can live in many areas. Some even live in sheds. ‘Natives’ with families cannot compete.

    And then we have the destruction of our industries so that we have whole areas with no work.

    The righties do not mind immigrant companies coming in to ‘steel’ our high technology ideas and take jobs from our people when going gets tough. And what do the Tories do? Nothing. Because they are mates with the Chinese.

    So. All of these problems have been caused by the feckless and feral greedy right and the workers have had to suffer to pay for it all.

  • Frank

    Yeah right ! And who drove the biggest nail into the heart of the unions Labour by taking away the clause 4 agreement. Not listening to their members with regard to rescinding the unfair dismissal ruling. Failing to enforce equal pay for women. Getting into bed with unscrupulous bankers and construction companies and totally losing control with regards to the PFI agreements then again being seduced by the bankers not once but twice after being advised against doing this by respected by financial institutions and advisers and other world Governments. A mistake the people of this country and generations to come will be paying for an incalculable period of time
    The only solution is to regard the UK as being in a state of WAR which will require adequate action such as an interim Government staffed by the best qualified people from all walks of life and persuasions. Who would not be constrained by each parties internal manifesto or constrictions and not be contaminated by the tribal influence that political parties generate. Saying that there are good and genuinely honest people in all the parties we just have to identify them and get them put into the positions where they will create the best results for all concerned.