Tax but don't spend

Last February I wrote a post in which I peevishly listed various experiences of organizations not working very well. One item on the list concerned the problems of getting through the HMRC (the British tax office) on the telephone. So I was interested to see that this week the National Audit Office (NAO) published a report on HMRC’s quality of service. This identified a “collapse” in customer service over 18 months in 2014-15 with call waiting times tripling and some customers being kept on hold for up to an hour.

What lay behind this were massive cuts in staffing levels, which in personal tax fell from 26,000 to 15,000 between 2010-11 and 2014-15. This of course is just one of the many consequences emerging across all parts of the public sector as ‘austerity economics’ bites deep under the ideology that eliminating the government’s budget deficit is the sole aim of policy (what Nobel economist Joseph Stiglitz calls “deficit fetishism”). But there is more to it than that: associated with the cuts was the technocratic fantasy of paperless (on line) tax returns and automated telephony.

We’ll break here for another oldster rant: why does everything have to be done online, with endless passwords and usernames in hundreds of different formats? How I long for the days when you could just fill in a form and send a cheque in the post. There are still a few places you can do this and I would single out from my own experiences the insurance company NFU Mutual as particularly good not just for this but for that fact that they have an ordinary phone number that goes to the local office where I talk to a person I have met and who has been in post through all the years I have dealt with them. And, on the one occasion I’ve had to make a claim, they are excellent to deal with. Is it because they are a mutual organization?

Back to the HMRC and what is interesting is to note how this story illustrates some of the recurring – and linked - themes of my book, namely those of unintended consequences and of the ambiguity of efficiency. In terms of unintended consequences the issue is how cost savings in one budget show up as new costs somewhere else. This is especially obvious in relation to HMRC because an effective tax gathering system is vital to meet the costs of government spending departments. So to impinge on the first inevitably has consequences for the second.

The issue of efficiency is linked in that what may be efficient for the HMRC maybe inefficient for other departments but, beyond that, inefficient for the user – in this case the taxpayer or, as they are now called, with tragic inevitability, customers. And let’s just have another break here to remind ourselves how crass, how nonsensical, it is to describe people paying taxes as ‘customers’. The NAO Report is helpful in quantifying this by reference to the HMRC’s own costings of people’s time (£17 per hour, apparently). On this basis, the time spent waiting and talking, and the cost of the call, added up to £97M (of which £66M was the cost of waiting to be answered) in 2015-16. So HMRC’s efficiency savings become its “customers’” costs. According to the NAO and the HMRC things are now getting better, though I must say that this is not my personal experience and, anyway, we have been here before. A damning 2012 NAO Report on phone call waits was also met with promises of improved performance and assurances that this was beginning to happen.

There’s a bigger organizational story here. The HMRC is the result of a merger, in 2005, between what were previously the Inland Revenue and the Customs and Excise office. Culturally very different, many date the problems at HMRC from this archetypical example of reform through reorganization. Subsequently, there have been repeated high-profile scandals. Dave Hartnett, its boss until 2012 when he joined global accountancy firm Deloitte as a consultant, was accused of cutting lax ‘sweetheart deals’ with big corporates like Vodafone and Goldman Sachs, and called “a liar” by the chair of the Public Accounts Committee. His successor, Lin Homer – dubbed ‘Dame Disaster’ by satirists – was criticised for failures in relation to the HSBC tax scandal and also for claiming the HMRC to have had its best year ever in 2015 despite – yet again – massive problems with phone systems. She stood down in April 2016.

As for the future, who knows? HMRC have taken on more staff, but the ongoing closure of 137 local tax offices in favour of 13 regional centres does not bode well, and the latest NAO Report says that HMRC’s capacity to sustain planned cost reductions rest upon its Making Tax Digital initiative, another techno-fantasy, which has already been met with scepticism, if not outright derision, by tax accountants.

It’s tempting to ascribe all this to the well-attested failures of neo-liberal ideology in general and the effects of its application to the public sector in particular. But it’s more complex, and worse, than that. Even the most assiduous neo-liberal assumes, accepts and expects that the State will act as a ‘nightwatchman’, undertaking the basic functions of tax collection, law and policing. But cuts have “brought the court system close to breaking point” and are causing a crisis in policing and in the prison system. It used to be the leitmotif of anti-state ideologues that cuts could be achieved by getting rid of ‘five-a-say Czars’, ‘diversity officers’ and, of course, that perennial favourite ‘faceless bureaucrats’. Now it turns out that even the most basic functions of the state are up for grabs. If proof of that were needed, look no further than current plans to privatise the Land Registry, the body that administers that most basic feature of any capitalist economy, property ownership.

Unsurprisingly shocking

I have not posted for a few weeks now, partly because I took some holiday at the beginning of April, partly because of pressure of work, and partly because I have been writing several blog posts for various sites working with the EU Remain campaign. The most recent of these can be found here for anyone interested and there are several more in the pipeline. And in the even more unlikely event of anyone being interested in my holiday, my new profile picture shows me emerging from a Norfolk pub (quite sober, I should say) whilst I was away.

So there’s plenty I could write about but I’ll focus on the news this week that the retailer British Home Stores (BHS) has gone into administration, with debts of over £1.3Bn and a pension deficit of £571M, leaving the 11,000 employees across its 164 UK stores in limbo, and creating much insecurity for former employees with deferred pension rights. Like all statistics, this depersonalises the reality but I visited my mother this week and, by coincidence, her care assistant used to work for BHS and told me how worried she was about her deferred pension. I tried to reassure her that the Pension Protection Scheme meant that 90% of her rights were assured, but for someone on (I guess) the minimum wage and with limited pension expectations that 10% matters, even if she trusts that the 90% will be forthcoming.

BHS is one of those high street stalwarts that seems to have been there forever – I can remember one of my sisters having a Saturday job there in the 1960s. In fact it goes back to 1928 and joins the long list of British companies, some of which I mention in my book (pp. 105-106), that have fallen by the wayside. There are all sorts of reasons for that, of course, from the rise of the internet to the growth of Pound shops. I actually go to BHS quite regularly to – look away now, kids – buy cigarettes and that branch, at least, seems faded, dilapidated and dated, and the staff demoralised.

That is because underneath the general trends in retailing there is another story to be told about BHS. Bought by the fabulously wealthy tycoon Sir Philip Green for £200M in 2000 he sold it for just £1 in 2015. In the interim, rather than investing in modernising the business it had been used as an enormous cash cow and systematically pillaged for massive dividend payments. Far from ‘adding value’ in the manner self-righteously claimed as the hallmark of dynamic entrepreneurship, value was ripped out of BHS and pocketed. There are now calls for a public inquiry into what happened but, whatever the details specific to BHS, it is just another case of the consequence of rapacious financial engineering of the new capitalism (discussed in chapter 5 of my book). Hardly less noteworthy is that its post-2015 owner was a company run by a twice bankrupt former racing driver with no retailing experience, and the demise of BHS comes as no surprise. Interweaved into this sorry saga are the usual array of offshore tax avoidance schemes and global investment bank advice.

Such stories have become so commonplace that they lose the power to shock. Even so, there is still a jolt of surprise in recollecting that as recently as 2010 Green was commissioned by the British government to make recommendations on improving its efficiency. Reading his report today, my immediate reaction was to think how thin it seemed – I have seen undergraduate student workplace projects with more depth. My second reaction was to recall how similar it was to the 2004 review of public sector efficiency by Sir Peter Gershon. In fact, on government procurement especially, the Gershon recommendations were nearly identical. It makes you wonder what the point is of these endless reviews – perhaps they have the same ritualism as public inquiries, about which I have written before.

Anyway, Green’s review concluded – surprise, surprise – that the way forward was for government to adopt the methods of the private sector, apparently unaware that this has been exactly the approach since the early 1980s, so what he was observing was the consequence of precisely the course of action he was advocating. And his headline finding was that the government was “failing to leverage both its credit rating and its scale”. In other words, the government should get on the wagon of the same financial engineering techniques that he was at the time so assiduously applying to bring BHS to disaster.

With the controversy now surrounding him, it’s unlikely that Green will in the future be asked to give advice on how the government should organize itself. But there will always be someone else – whether a faceless but fresh faced MBA from a big league consultancy, or whoever the currently lauded tycoon may be – to apply the same failed logic. Because however often it fails it is never discredited; worse, each failure provides the impetus for its re-application. That, too, has lost the power to shock.

Required reading

Over Christmas I have been reading Jonathan Coe’s latest novel, Number 11. Like John Lanchester’s Capital, which I ‘reviewed’ on this blog, it can be read as a ‘state of the nation’ novel (Coe even makes a joke about this) and, via five interlocking sub-stories, it reprises some of the themes of his earlier books, especially What a Carve Up! and The Closed Circle. Overall, I would characterise these themes as being about the unwinding of the post-war welfare state and its accompanying collectivism, and the ongoing consequences of individualization, privatization and – a key one in Number 11 – monetization (in the sense of putting monetary value on things like education which might otherwise be regarded as valuable in themselves).

The title Number 11 carries several resonances: the address of Britain’s finance minister; the number of the circular bus route that a character rides so as to be warm without heating her home; the number of subterranean floors being dug below an uber-rich family’s London home to extend their already commodious residence. For it’s a satire – sometimes almost judderingly heavy-handed, other times almost painfully delicate – that often addresses some of the themes of this blog, especially those of inequality, tax avoidance, the pitfalls of choice, the politics of ‘austerity’ and, even, the perils of twitter.

The section that spoke most profoundly and personally to me is entitled ‘The Crystal Garden’ which tells of the doomed attempt of Roger, an Oxford academic of about my age, to track down a short film he had seen as a child:

“Roger was convinced … that life was better, simpler, easier, in the past … it wasn’t just a hankering for childhood. It was bigger than that. It was to do with what the country was like … in the sixties and seventies …. For Roger it was about welfarism, and having a safety net, and above all … not being weighed down by choice all the time … he loved the idea of trusting people to make decisions on his behalf. Not all of them. Just some. Just enough so that you were free to live other parts of your life the way that you wanted.” (Coe, 2015: 176)

It’s important to understand that this isn’t about nostalgia, or at least not just about nostalgia. It’s about a rupture that animates – in very different ways – the politics of both nationalists and socialists across, at least, Europe. In France, Les Trentes Glorieuses, Jean Fourastié’s term for the 1945-1975 period of economic growth and social security, captures the same sentiment that Coe expresses. This rupture is described in my book in terms of the shift in the 1970s to the new capitalism (pp. 104-120) and so, of course, present in the book I most heavily draw on in that section, Richard Sennett’s (2006) The Culture of the New Capitalism. And it’s no coincidence that at the heart of Roger’s memory was “waiting for his father to come home from work – from the same place he worked for forty years” (Coe, 2015: 176) because stable employment was at the heart of the economic and social security of those years. As I’ve argued elsewhere on this blog, the erosion of that security constitutes the most pressing political issue of the present time in Western societies, in ways well-captured (for all that it is startlingly inattentive to the ‘critical management’ literature that says much the same thing) by Boltanski and Chiapello’s (2007) The New Spirit of Capitalism.

We can understand this in conventional political terms: the social democratic consensus of North and West Europe and, to an extent, the USA in the post-war decades was about the best economic and social arrangement that has so far existed (even if it did not always seem so at the time). But perhaps it is better understood without thinking in terms of economic or political theory. Bill Bryson’s humorous memoir The Life and Times of the Thunderbolt Kid expresses it well as regards the United States; David Lodge’s novel Nice Work captures the beginning of it in the UK, especially as regards academic life. And Coe’s book is the latest example of the powerful way that art and humour can illuminate social science.

In a somewhat related vein, another Christmas read was Douglas Board’s novel MBA. This is not nearly so well-written (but, to be fair, whereas Coe is a well-established professional novelist Board is a coaching and leadership consultant who has turned his hand to fiction) and it’s a fairly clumsy satire, if not farce, of business schools. Still, it does hit what are for me some familiar targets in terms of the corporatization and even corruption of the contemporary business school, including the hubris of high-flying deans (see Parker, 2014 for a real world example). And there are some acute insights along the way about, for example, the enmeshment of business schools and politicians in the marketization of the public sector that also get a look-in in Coe’s book. MBA certainly isn’t a great or even a good novel, but it’s the first that I know of that tackles the business school. I feel sure that this setting is ripe for the attention of a latter-day Malcolm Bradbury or David Lodge campus novel.

Bitter chocolate

At one point in the book on which this blog is based, I discuss the chocolate firm Cadbury’s as an example of how the ‘new capitalism’ works:

“This was a firm with a history dating back to the nineteenth century and marked by a strong interest in worker welfare. In 2009 a hostile takeover bid from Kraft, a giant US food corporation, was rejected but subsequently, in 2010, a deal was agreed. The deal generated an estimated £240 million in fees for the investment banks and advisers involved. One especially controversial aspect is that Cadbury’s had had plans to close its factory in Somerset and move production to Poland, but Kraft undertook that this would not happen if they took over. However, after the takeover the factory was closed in favour of the Polish location, and amongst the hundreds laid off were families who had worked for Cadbury’s for decades. So here a workplace rooted in a history and a community was eviscerated. Is this just ‘the way things are’? No, because such situations arise from particular regulatory regimes and, as the former chairman of Cadbury’s has argued, the UK regulation of overseas takeovers is especially lax.” (p.106)

My point here was about the fracturing of links between organizational ownership, communities and places. But this connects with another issue, also mentioned briefly in the book (p.118) but more extensively on this blog, namely corporate taxation. For it has now emerged, perhaps unsurprisingly, that Cadbury’s under its new owner Mondelez International, a spin-off of Kraft, paid no UK corporation tax last year. This was not because it was unprofitable (Cadbury’s made £96.5M profit in 2014) but because it used a complex, albeit perfectly legal, device to avoid paying the tax. Briefly, the tax liability was avoided using interest payments on an unsecured debt, listed as a bond on the Channel Islands’ stock exchange, which were then offset against the profits made leading to a zero corporation tax liability.

The use of tax avoidance techniques such as these is widespread. Facebook, Starbucks and Amazon are amongst high profile cases and the recently announced 'reverse takeover' of Pfizer by Allergan is another variant. Here Pfizer – the bigger firm – is formally being taken over by the smaller one, allowing it to headquarter the new entity in the lower corporate tax regime, in this case the Republic of Ireland; so-called tax inversion. These techniques link to the wider issue of organizations and localities because they reflect the freedom of companies to locate globally and the absence of any legal or for that matter normative commitment to any particular country or community.

The problem here is not – or not simply – one of abstract morality. It is that corporate tax avoidance leads to the erosion of the tax base. It is remarkable that with so many countries pursuing policies of fiscal balance there is so much more attention paid to government spending than to government revenues. Yet what the OECD refers to as Base Erosion and Profit Shifting (BEPS) has become a major problem, especially in the developing world leading to a set of proposals for reform being presented to the G20 last October. The OECD initiative, and that of the EU, may in time have an impact (although in the case of the EU proposals they have, depressingly, been rejected by the UK). However, it is equally likely that corporations and their advisers will find new ways to circumvent these rules, and in any case I am not clear that they would have any traction in cases such as Cadbury’s. One problem here is that both national, and these new transnational, rules are immensely complex and it is that very complexity which gives rise to new loopholes.

Apart from legal and regulatory changes to the tax system, the only other game currently in town is consumer action and boycotts. There is some evidence that these can be effective, with Starbucks responding to a UK boycott threat by moving its headquarters to London in 2014, although it has been questioned whether this really made much difference to tax revenues. In any case, such an approach is only ever going to be applied to a few high profile cases. How many consumers will, or could, apply pressure to all the corporates involved in tax avoidance? It’s difficult to imagine many users of Viagra boycotting its maker, Pfizer, to protest against the abstruse-sounding tactic of reverse takeover to facilitate tax inversion!

Whether through changing tax laws or exerting consumer pressure, both these approaches suffer from the fact that they are after the fact attempts to address problems arising from the fracture of ownership and places, especially countries. Thus I continue to think, as implied in the extract from my book that I quoted earlier, that the more important issue is the regulation of international mergers and acquisitions. We can’t put the genie of globalization back in the bottle but there are pragmatic and eminently workable ‘glocalized’ approaches to organization.

It is already the case that takeover rules in Germany, say, are far tougher than in the UK. One consequence of this is the strength of the Mittelstand – medium-sized, often family-owned, businesses – that are the bedrock of German manufacturing and exports. These are firms which are plainly local, and maintain a strong link between ownership, community and employment. Yet this is not an ‘anti-globalization’ argument for the Mittelstand is most certainly global in its clientele. A combination rather like Cadbury’s, in fact, in the days before it was taken over.

Strivers and scroungers

In this post, I want to pick up on an oblique point in my previous one. I mentioned there how a very potent political trope is to draw a distinction between scroungers and strivers. Scroungers, here, are those who do not work and rely on welfare benefits. Strivers are those who are in work and, by implication, are seeking to better themselves through work. I was reminded of this not just in writing my post on Greece but also, today, by an announcement by the British government that inheritance tax liability is to be reduced. It’s the justification that is relevant here, because it was couched in the argument that “hard-working families” who had saved to buy a home and improve it should be able to pass the fruits on to their children rather than to the tax collector.

This term – “hard-working families” – has become a cliché in the political lexicon. It’s a strange expression in and of itself. What is a hard-working family? One in which every family member (and how extensive does it have to be?) works hard? Are single people who work hard part of it? Should the idle rich be taxed more? What about those who go to work every day but slack off?

In relation to inheritance tax it seems especially strange. The new policy is aimed primarily at those whose houses have become very valuable, and in the UK housing market, especially in London, they have indeed become very valuable. But this has nothing to do with work, or saving, or home improvements. All you have to do is sit there and it happens. Recently it was reported that in many parts of Sothern England house price inflation earns homeowners more than they receive in wages. So there’s no particular virtue, and certainly no hard work, or even any work at all, involved in accruing an inheritance based on home ownership to pass on. Moreover, what of the recipients of this inheritance? Manifestly, they have not put in any hard work at all. So why, if hard work is the cardinal value, should they receive anything?

The counterpart, of course, is an equally incoherent – and very longstanding - narrative of the deserving and undeserving poor. Indeed, in the same package as the inheritance tax changes are further restrictions on welfare articulated through exactly the same distinction. Ironically, many of those who will suffer as a result are, indeed, hard-working families in receipt of tax credits to top up low wages. Nothing new there, either: the Speenhamland system of the early 19^th Century was similarly a subsidy for low wages, as the Poor Law Report of 1834 demonstrated.

And those most poignantly affected by welfare changes are the disabled. Here, again, a narrative of the deserving and undeserving is in play, with endless stories about fraudulent claims from the ‘bad back brigade’ accompanying sentimental and self-congratulatory statements of sympathy for the ‘genuinely’ disabled, which seems to mean those who are so self-evidently handicapped that even the most stony-hearted cannot deny it. Or perhaps not, since in some cases people who cannot walk, talk or feed themselves are being called to the job centre. At all events, plans to shift disabled people on to jobseekers allowance suggest a belief that they are ‘shirkers’ and not ‘strivers’. Yet when it comes to migration, the narrative reverses. Here, the problem is the strivers – the economic migrants – pretending to be asylum seekers, or in other words ‘bogus’ asylum seekers. These strivers are to be rounded up into detention centres and deported pronto. Whereas, in a long-remembered phrase, unemployed workers should get 'on their bike' and look for work, an idea espoused by the government as recently as 2011, those who get on the boat (and risk their lives) to do so are the most dangerous of scroungers.  

There is no logic in any of this, unless it is the logic of spite and division. Which is not to say that work – whether ‘hard’ or not – is unimportant. On the contrary, work is massively important both economically and in terms of self-worth and identity. But work bestows or enables value and identity; it does not express it, nor does it disclose any fundamental morality. The idea that it does is deeply rooted, though, enabling the idea that poverty and suffering reflect individual moral failure rather than systemic inequality or just dumb luck. Over a hundred years ago, the founding figure of organization studies, Max Weber, wrote one of the most important books about modern society, a book that influenced me deeply - The Protestant Ethic and the Spirit of Capitalism. It still has much - all too much - to say about the contemporary world.

Taxing times

Tax evasion, by both individuals and corporations, is the story of the moment, and it’s a global one. In Australia, the Tax Justice Network estimates corporate tax avoidance (we’ll come on to the evasion/avoidance distinction shortly) by the top 200 companies at Aus$8.4bn, prompting a Senate inquiry. The same thing is happening in China, especially as regards the tax location of multinationals. Meanwhile, in Greece, clamping down on tax avoidance and evasion is a core plank of the new Syriza government. Whilst in the UK there has been a huge row this week about the activities of HSBC’s Swiss subsidiary in promoting tax avoidance.

The figures involved here are eye-watering. According to a 2011 estimate, globally tax evasion amounts to $3.1trillion or 5% of global GDP. This matters for all sorts of reasons, but most obviously because of the context of government deficits, which of course represent the difference between what governments spend and what they take in tax. It is these deficits that drive the case for the Austerity economics that characterises the fiscal policies of many countries. Such policies proceed on the basis that the problem is excessive expenditure, when what really drives deficits (apart from the cost of rescuing failing banks) is the erosion of the tax base in many countries.

As an adjunct to that, it is also remarkable how political discourse has prioritised cracking down on welfare fraud ahead of cracking down on tax evasion and avoidance. I give some figures for this, as regards the UK, in the book (p.118), but to update them – for 2012/13 HMRC, the UK tax authority, says that there was £1.2bn of fraudulent welfare claims but £4.1bn of tax evasion and £3.1bn of tax avoidance.

So what about this issue of tax evasion versus tax avoidance? In the book (p.128n5) I offer the standard distinction – that avoidance is legal and evasion illegal. But that is extremely simplistic. What is legal and what is not, within complex tax regimes, is always a matter of interpretation and negotiation, not an iron-clad line. HMRC eschews a definition but offers some ‘signposts’, reflecting the haziness of the concept.

One of those accused of tax avoidance this week in the UK – the splendidly named hedge fund plutocrat Lord Fink - opined that ‘everyone does it’. What he meant is not clear, but on internet discussion board the frequently made point is that many ordinary people make use of tax-exempt savings accounts (called ISAs in the UK) and so in this sense are tax avoiders. This of course is nonsense. Such tax accounts were created by government legislation to encourage saving, and account holders are using them for the purpose intended. Tax avoidance means finding ways, legal in themselves, to exploit tax advantages unintended by lawmakers. Now that is a hazy area – for who can say for sure what those intentions were – but it certainly is not hazy with respect to ISAs because they were explicitly set up as a tax free route to saving. Similarly, charitable gifts in the UK are tax exempt so that the beneficiary can receive the basic rate tax and the donor the balance of any higher rate tax. Again, exactly as designed. It is pure sophistry to call such things tax avoidance.

This issue of tax feeds into many others I’ve discussed on this blog, especially inequality. Within these, one fundamental issue is how economic globalization has not been accompanied by a globalization of politics and regulation. This disjuncture appears in debates about labour standards, immigration and, indeed, tax. In relation to immigration, I’ve written about the contrast of cosmopolitans and locals, and this can be seen in the tax debate, too. Cosmopolitans like Lord Fink see tax avoidance as just what everyone does, reflecting a world of trust funds a million miles away from that of locals. Similarly, there is a temptation to see privilege in local terms – posh judges and snooty civil servants – rather than those of global financial elites.

In the current debates about tax evasion and avoidance there is a moment of possibility – I don’t put it higher than that – of enacting a more realistic conversation about global governance and of the irredeemable interconnection between national polities and the global economy. Meanwhile, in a little-reported move, in Croatia the poorest have had a debt write-off – a local solution to a global issue which some economists, such as the Australian Steve Keen, see as the only way forward: the idea of a ‘debt jubilee’. Now that, truly, would be something that everyone does.

Follow the money

I don’t often write about universities on this blog, because to do so seems too inward-looking. But current developments underway in UK universities should be of real public concern. I’m referring in particular to a massive shift towards requiring academics to generate substantial amounts of grant income to fund their research. To understand why that matters, it’s necessary to understand a little bit about how research funding works in the UK (more precisely I should say England in terms of what follows, although there is considerable similarity in the rest of the UK). There are two main routes. One is the government funding distributed by the Higher Education Funding Council for England (HEFCE) on the basis of the quality of research undertaken (hence it is called QR funding), with this quality being assessed by the Research Excellence Framework(REF), the latest results of which are due next week. The other route is research grant income (RGI) which may come from a variety of industrial, charitable and government sources, with the UK’s research councils (RCUK) being the most important as regards the latter.

With respect to QR funding, this is driven mainly by assessments of the quality of publications (but also by the wider impact of these and some other factors). Academics undertake QR funded research as part of their contractual duties and are not tied to any particular projects. RGI funding, by contrast, is based on bids to support particular projects. QR funding therefore offers considerable freedom of research focus, but it is not a ‘free for all’ since the REF assessment is stringent and, indeed, a source of much complaint from academics.

In recent months, many British universities have been imposing massive pressure on academics to increase RGI and in some cases have set very harsh targets on individuals to secure such funding, under threat of redundancy. Three cases in particular have attracted some publicity: those of King’s College London, Warwick University and Imperial. The latter example has a particularly tragic twist with the suicide of a Professor of Toxicology, apparently linked to the demands for RGI generation placed upon him, recalling other cases of suicide in organizations discussed in a previous post.

These issues relate to many others discussed on this blog and in my book, especially the general impact of the New Public Management and the ways that this has given licence to capricious managerial privilege and, for that matter, bullying. How this relates to universities are brilliantly explored by in a 2012 article by Yiannis Gabriel and, with respect to business schools, in a 2013 article by Martin Parker. But I want to focus on some more narrow issues here.

One is just about the financial rationale of what is happening. Suppose we want to be very ‘hard-headed’ and say something like “well, of course, research must pay its way: it’s high time these academics learnt to live in the real world”. Apart from any other problems with such a view, it neglects the fact of QR funding. Academics who publish work judged to be excellent by the REF generate income for their universities via HEFCE. Why, then, insist that only RGI money matters?

The other is even more important. Funding research via RGI requires that the funder be persuaded in advance of the research that it is worthwhile. That presents several very important issues, both practical and political. On the former - it’s very well-known that the value of research is often only apparent many years after it has been conducted. The computer applications of pure maths are obvious examples. On the latter – research that seems controversial or unfashionable will be a poor prospect for deliberative funding decisions. The two are linked, since it is almost inevitable that grant and project based funding decisions will be small-c conservative: they are based upon existing knowledge and understanding.

This has a particular significance when it comes to the funding of critically-oriented research about organizations and management. For all that academics may complain about REF, it has allowed such research to flourish to the extent – and it is a considerable extent – that it has generated publications deemed to be of high quality and hence generating QR funding. An approach based on RGI offers a much less propitious environment for at least two reasons. One is that the very fractured and fractious state of the field makes it hard to get consensus from referees on grant applications. Another is that, to the extent that RGI requires identifiable end users, critical research, whose ‘users’ are typically civil society at large, is likely to struggle.

Of course we are not in that situation yet, and that is one of the strangest aspects of this story. For it is not that QR funding has dried up. True, there have been for quite some time persistent calls that all government university research funding should be channelled through RCUK. But that is not yet the case. It is tempting, then, to read the preoccupation of university managers with individual RGI records as a matter of managerial control for its own sake, rather than financial exigency. If so, academics who have for so long complained about REF may find themselves in the ironic position of defending it in the face of the emerging landscape RGI targets.

That in turn should be a real worry beyond academia. I suppose it is just about possible to imagine at least applied scientific and medical research being funded by industry and research councils, and some humanities and social science research being funded by charities and research councils. But even in these cases much of value will be lost. It’s very difficult, though, to imagine that much in the way of critical organizational research will get funded, which means that one of the core areas of human existence will mainly get researched uncritically. If in doubt, look at the RCUK web page entitled ‘Research and Business: A Productive Partnership’ telling us that “the Research Councils are a source of ideas, knowledge, expertise, skills and research infrastructure for your business”. No mention of the public good there, you may notice, for all that the funds come from each and every UK taxpayer.

Tax Avoidance

The tax avoidance strategies of large international firms like Starbucks, Google and Amazon have become a big political story in the UK recently. But of course it isn’t only a UK story – it’s a global issue precisely because these are global companies. In my book, I give a little explanatory one-liner (p.128, note 5) that tax evasion means illegal tax-dodging, whilst tax avoidance means legal ways of reducing tax liability. That’s true so far as it goes, and it is the defence wheeled out by these companies. But it hides a more complex reality: what constitutes legal tax avoidance is a matter of interpretation and of negotiation between companies and tax authorities. And beyond that it constitutes a matter not of legal technicality but ethics and political philosophy.

What lies behind this is the way that economics has run ahead of politics. Globalization was to a large extent produced by national political decisions to open up world markets but, having done that, the capacity of national polities to regulate global companies has disappeared, as s I mention in the book (p.107). The genie can’t be put back into the bottle. It may be possible for national governments and national public opinion to ‘shame’ global companies into paying more tax, but that is only going to be limited in effect, and possibly contradictory. For example, Starbucks has just said that it will pay more UK tax, but it is also cutting back on the rights and benefits of its employees. This is also, by the way, an indication of why issues of economics and politics are inseparable from those of studying organizations, something I am so keen to argue in the book.

If there is an answer to these issues it can surely only come from inter-governmental action, and an internationally agreed tax regime, but at the present time the institutions to take such action are pitifully weak. One thing which is worth saying is that concern about the conduct of these companies is not, inherently, anti-capitalist. Some of the biggest losers in all this are the local coffee shops and book shops which have no choice other than to pay their taxes and, as a result, are severely disadvantaged. And hence their employees, the local high street, and our sense of community. To make organizations work we have to re-connect ownership, employment and place. That may also mean that we all – me included, as someone who, for example, buys and sells books through Amazon – need to pay a bit more. More importantly, we have to be prepared to vote for political parties that tell us that uncomfortable truth.

Because the bottom line is that for all that we may bemoan its consequences, for 30 years or so significant numbers of us have deemed ‘unelectable’ any political party which questions the orthodoxy of economic globalization, or the doctrine of self-interest that makes it both inevitable and justifiable that companies will minimise their tax liabilities if they can get away with it.