CONCERNS MOUNT

One thing that has struck me most about the horsemeat scandal is the convoluted route of the processed meat food chain.  I know that business has become increasingly global, but it takes an event like this to bring home just how international something we like to think of as 'fresh' in fact really is.  I know that in this case the food is frozen, but we have come to assume that it was frozen when fresh and that it will be not be more than a few months in storage before it is eaten.

Whilst I was down in the West Country over the weekend, I visited the new Morrisons store that has just opened on the outskirts of Bishopsteignton.  I can't now find the publicity photo I had of the inside of the store, but it shows a mind-boggling, and very colourful, array of fruit and veg.  I counted well over 50 different sorts of veg on one counter (there are several counters), including a couple I hadn't heard of.  But it was the countries of origin that were most revealing, bearing in mind that these are fresh veg - most of South and Central America and the West Indies were represented and several African and Asian countries too, as well as the usual Spain, France, Holland and E Europe.  This is all the result no doubt of our early history as world traders.  It is clear though that a good number of the flights filling UK airports each day are full of fresh fruit and veg of one sort or another.

But it is the supply route for frozen meals that is most indicative of the interlinked nature of today's global business.  I have mentioned before the case of peeled prawns.  This is of course a pure shipping cost over foreign wages issue, but it still shocks me.  Prawns are caught fresh off the coast of Scotland and landed at a Scottish or East coast fishing port in England.  There, some are frozen or chilled for immediate sale, but some are flown to Thailand where they are peeled before being flown back for sale here as peeled British prawns.  One day I guess employment conditions in Thailand will improve and we'll be able to stop this profligate waste of resources.  Until then, the prawns are delicious!

In the case of the original of the lasagne illustrated above, the final packaged meal is manufactured by Findus, a Swedish company with a processing factory in England.  The company used to be owned by Swiss company Nestle, who still own the Swiss Findus brand.  The meat for the product is purchased by a French company Poujol, who supply it for processing to a factory in Luxembourg owned by a company called Tavola, which is in turn owned by the French company Comigel.  Some meat seems also to have been supplied to the Luxembourg factory by another Italian-sounding firm Spanghero, which is also owned by Comigel.  Are you with me so far?  Both supplies of meat were arranged for Comigel by a contracting trading company, based in Cyprus, who bought the meat through a food trader based in the Netherlands.  And the Dutch company sourced the raw meat supply from two abattoirs in Romania. 

As if this isn't convoluted enough, it has now been suggested that organised crime syndicates in Romania, Poland and even Italy seem to have been involved in the supply.  One can only marvel that the cost of the meals - £1 in Aldi or a pony for a carton (geddit!?) - allows enough profit to be made by each company involved in the process.  And presumably enough profit to make it of interest to organised crime.  But then I guess that over each transaction along the way there must have been a lot of horse-trading.

CAN'T BUDGET

I thought that this was just another Daily Mail campaign against the Foreign Office (FCO).  I would have ignored it but for the rag bag of misinformation, deliberate misunderstanding, snide remarks and general blame avoidance that has driven the story into other newspapers.

The articles refer to the Head of UK Trade and Industry (UKTI) as a ‘quango chief’, a head of a ‘Whitehall body’, ‘a group of officials dubbed the club class elite’ that operates ‘with the help of the Duke of York’, and the Foreign Office ‘urging him to splash more tax-payers’ cash’, ‘to burn through a spare £1m’ and ‘go on a splurge’.  But all this inflammatory and carelessly written language misses the target.  

I can’t be bothered to go into here whether being a quango is inherently a bad thing, but, if you want government advice on exporting or investing overseas, you go to the UKTI.  It is clearly a different body from say the Advisory Group on Hepatitis or the Zoos Forum.  But there is a movement currently to dismantle quangos and, by implying that they are all a waste of money, to use the term ‘Quango’ disparagingly.  Well, many could be run by volunteers or subsumed into existing civil service departments and thus cost less (though the cost of the already overworked civil servants is not taken into account).  But there is no other government department that offers expert export promotion assistance.  In fact UKTI is jointly funded by the FCO and the Department for Business, Innovation and Skills (BIS).  I notice that The Guardian has now edited the word ‘quango’ out of its article.

Mentioning the Duke of York is just an attempt to have rubbed off on UKTI some of the mud thrown at him through Wikileaks.  There is a lot of controversy about the Duke of York’s role, and I have personally come into contact with His Royal Awkwardness, but he is unpaid and he travels overseas and meets influential foreign persons to promote British business, and whatever we think, he carries weight.  Most businessmen, as far as I know, value these efforts and British business benefits greatly from them.

As for the ‘tax-payers money’, all government money comes from taxpayers.  That’s how governments raise the money for their expenditure.  They don’t ‘splash’ it about (except maybe on military helicopters) or ‘burn’ it or ‘go on a splurge’ – there isn’t enough of it for that.  But it sounds worse using such words during a recession, when there are so many budget cuts.

UKTI is one of the departments of the horribly oversized compendium Ministry, BIS, created by the last Government.  It has 8 Ministers, to underline its size and diversity.  Overseas, UKTI staff have desks in British Embassies and Consulates.  Through an arrangement with the FCO, some of the Embassy staff posts are filled with UKTI personnel and some of the UKTI jobs are undertaken by FCO.  Their job is to advise businessmen in the UK of trade opportunities overseas, to locate British products required by foreign importers and to help businessmen of both countries contact each other to promote trade. 

But how do staff know who to introduce businessmen to?  How do they find out about opportunities?  How do they oil the wheels of business and smooth the path for businessmen into a foreign market?  Well, basically, it costs money.  And, yes, it is money that has come from taxpayers.  So UKTI and FCO staff travel the country concerned calling on foreign companies, talking to local experts, visiting regions (agricultural areas, dying or booming industrial areas, up and coming retail sites, etc), and chatting up officials and business leaders over meals or drinks to get them favourably disposed.  And of course it is this last that ignorant, envious reporters, dislike most.  But, yes, government funds have to be used to do the job.  And, yes, sometimes a senior foreign businessman is won over over dinner, rather than by disturbing him at his office.  And, yes, sometimes government funds are used to pay for the dinner.  Strange to say, businessmen in this country make deals over dinner or at drinks parties too and use company funds for the purpose.  They don’t do it to splash shareholders money about or because they want to drink the best champagne or simply to live the high life (except for bankers of course).  This is winning friends and influencing people for the good of the business or Britain.

The budget for these overseas activities comes from the Treasury.  It is not possible to overspend; careful penny pinching is required to get through the year.  Of course, to save money and make ends meet, you could sack a staff member, or you could drop a trade promotion visit or two, or you could cut out an approach to a couple of targeted companies, or you could save some of these activities until later in the year to see how you manage with fixed costs, rents, services, etc.  At the end of the year, any left over money is taken back by the Treasury and disappears into the balancing account.  This is also tax-payers money and, if not spent on doing the job, it disappears into the Treasury maw and pays off some imbalance here or some currency adjustment there.  Having around a million unspent at the end of the year is not bad budgeting.  And spending it on core UKTI activities before the end of the financial year while you have it in your budget still seems to me like a good idea, not somehow wasting tax-payers’ money.  Whereas throwing it into the Treasury pit without trace couldn’t easily be thought of as good for tax-payers, or in any way good for business, or good for Britain, except in the most tangential way.  And in case a million does sound a lot to you, the FCO budget is about 0.4% of the total government spend and it has also been left with the problem of currency fluctuation from its overseas operations as set out here which hardly makes budgeting easier.

But why do we have this crazy policy?  Why are Ministries given a budget (usually by May when all the details have been calculated) and then told they can’t spend any remaining at the end of the year?  Treasury rules now prevent carrying money over to the next year, pre-purchasing ie buying train tickets in March for April, bulk buying eg photocopy paper for the year, or anything that allows a project to run satisfactorily for more than a year.  If I ran a business like that, it would go bust in no time or be taken over by some more efficient concern.  If you don’t want Ministries to have odd expenditure items at the end of the year, Mr Cameron, then end this nonsensical Treasury budget system so that proper long-term planning can take place.  Then UKTI might send its staff on regional travel at the start of the year, safe in the knowledge that it doesn’t have to save up its annual budget and risk it being taken away. 

If the media wishes to sneer and complain about the way a government department does its job, they should check out the Treasury’s daft short term budgeting regime; and if they think someone is not doing his best to promote and support Britain, they might have a look at the way Treasury budgeting hinders British business; and if they think it’s wrong for a department to try to spend all of its budget, change the Treasury rules that prevent budgets being applied to long-term projects. The only thing missing from the articles was a suggestion to spend the million on Ferrero Rocher chocolates.