Tuesday 31 December 2013

I have to smile

I was prompted to write this post by something I tweeted on Twitter a couple of days ago, which has generated far more responses, retweets and favourites than anything I have previously tweeted.

Clearly it struck a chord – or hit a nerve, depending on your point of view.
By way of background, I live in the area administered by Waverley Borough Council, a semi-rural location tucked into the south west corner of Surrey, bordering West Sussex and Hampshire, largely overlapping the parliamentary constituency of our Health Secretary Jeremy Hunt.  It comprises several villages and four small towns:  Cranleigh, Farnham, Godalming and Haslemere.  It is prosperous, having not so long ago won the accolade of the borough with the best quality of life in the whole of the UK, and having, at the last census, 87% of households having the use of at least one car. *
Just as a convenient index of poverty and deprivation in a community can be made from the proportion of children eligible for free school meals, for affluence you could have the “Waitrose Index”, and on that index Waverley scores highly with a near maximum score of 3 – only one of the four small towns does not have a Waitrose branch.
Two of the three branches do not have their own car parks, relying instead on adjacent Borough car parks, for which a charge is made – 80p for the first hour and £1 for each subsequent hour.  (Not, in my view, a sum which would genuinely motivate a typical local Range Rover driver to travel to BlueWater).  So, to attract business, Waitrose offers a refund of 60p against the counterfoil on customers’ car park tickets when produced at the till, where the total exceeds £10.
I don’t deal with the household’s main weekly shopping needs – that falls to Mrs M – but I typically go down of a weekend for a top-up of things like milk, fresh fruit and veg, and quite often a Sunday roast.  For convenience I use the self-scanners.  The system can’t verify your car park ticket stub to authorise the refund but is clearly configured to assume that you must have one, so as I almost invariably spend more than £10 on a visit (hard not to, in Waitrose, even with only a bicycle basket) I get the refund automatically.
Personally I think that is sending the wrong signal to customers, but it is probably a sensible commercial decision for Waitrose to take in such a car-dependent area, and here’s the thing:  those car parks get very crowded indeed at peak times.  Sometimes you can watch the bankers’ wives in their Range Rovers, roving the car parks ready to pounce on the first  space to come free – and to exercise pretty sharp elbows when two 4x4s converge on the same space at the same time.  Would it  not make commercial sense to incentivise customers who have arrived on foot or bicycle, to ease the pressure on the car parks and so make more spaces for more customers?  Should they not extend the car park refund without conditions, or even go a step further and offer a larger discount to people who can show they have not driven to the store?  The third store (Godalming) having its own free parking does not offer this refund, so couldn’t something which is not offered at all to drivers be offered there to non-drivers?
Of course, proving it might be tricky, as negatives are always harder to prove, but perhaps if they provided a rack of cycle locking points, ready fitted with locks and keys?  A bit like the lockers in gym changing rooms, where you take the key with you on a wristband after you’ve locked up your outdoor stuff but the key can’t be removed from the lock unless it is locked closed.  Or the facilities for storing your skis at the bottom of a ski lift in a typical alpine resort?  You would then simply produce the key at the till for your rebate.
Come on Waitrose (and Sainsburys, Tesco, Asda and Morrisons) - what's stopping you?
* It is also a fantastic area for off-road cycling, with conditions to satisfy and challenge almost all skill levels.  Do come and try it out.  Or if you are roadie, try the “Little Lumpy” sportive at the end of May.

Sunday 29 December 2013

Out of town, or out to lunch?

I was reading a Twitter conversation yesterday, a series of exchanges between a lady called Frances Coppola (I assume no relation to Francis Ford Coppola, the film director, but you never know) and various tweeps with a cycling frame of mind.

Ms Coppola is no doubt a thoughtful and amusing person in many respects but I thought her observations on out-of-town shopping centres vs traditional town centres were just plain silly.  Here is a taste:

Elsewhere in her timeline she comments that people like shpopping malls because they are “easy” to  park.

Easy?  Thinking about the two Westfields – Stratford and Shepherds’ Bush – and Bluewater, what springs to mind is either basement carparks under the buildings or vast flat sheets of tarmac outside.  The former are deeply uninviting places – dark and under-lit, with loads of blind corners and pillars for muggers – real or imagined/feared – to hid behind.  They are also huge, and confusing.  You could easily get lost in them, or at least have difficulty in returing to your car unless you have left a breadcrumb trail to follow back.  Unless you are an early-bird, chances are you will have to park at some distance to the pedestrian exit and access to the shops, because the early arrivals – human nature being what it is - will have snaffled all the spaces close to the exit.  You will in all probability have a longer walk from car to shops than you would have to suffer in your local town centre.

And in the  open-air examples, you may not have the fear of footpads, but you still have the confusion about where you parked you car – ever parked in Gatwick South long-stay? – the long walk to and fro, plus exposure to the elements, is no better than in your town centre.

And parking is not the only issue, as this tweet from TfLtrafficnews shows us:

No, people don’t go to Westfield because it is easy to park, or if they do, they have a screw loose.  All that is easy about it is that you will likely not be disappointed about finding a space – somewhere.  The lady referred to last year in one of Mark Treasure’s Aseasyasriding blog posts, writing to the local paper in Horsham complaining about the £1.20 per hour parking charges there, which motivated her to drive to BlueWater – a round trip of a good 100 miles and thus probably nearly ten litres of petrol at a cost of about £13 – may have been miffed about having to pay for parking, but that cannot have been her true motivation for going to BlueWater.
As that loyal hound of the Founder, Spokesman and only member of “Drivers Union” succinctly tweets:
People go to shopping malls (out of town or in town) not because of the ease of parking, or at least only partly so.  They go because the shops they want are there – mainly multiples because independent retailers could never afford the rents – and the shops they want are there because the developer has created an environment which customers want to be in and so attracts business.  That environment is frequently sheltered from weather, and it is clean and fairly secure thanks to an army of private security personnel, but mostly it is entirely pedestrian – you may have to drive some distance and for some extended time on congested streets but once you are there, it is traffic-free.  Far too few town centres are that lucky.  Mine certainly isn’t.

Thursday 26 December 2013

Taxation of the company car - a trip down Memory Lane

Income Tax was first introduced, in around 1805 by William Pitt the Younger, to finance the cost of the Napoleonic Wars.  It was (stated to be) intended to be temporary, but of course it is still with us.
William Pitt the Younger
- the man we have to thank for income tax
Later in the 19th Century the tax law was restructured into substantially the same form as we see today, although since 2003 there has been some change in the terminology used – the old references to the Schedules and Cases, which provide the framework for taxing

·         income from property (Schedule A),

·         Woodlands (Schedule B),

·         Gilt-edged securities (Schedule C),

·         Trades, professions and vocations (Schedule D cases 1-2)

·         Interest, royalties and similar receipts in the UK (Case 3) and overseas (Cases 4 & 5)

·         and the bucket category for anything else that has got forgotten elsewhere (Case 6),

·         and finally, income from employment and pensions (Schedule E)

are no longer in common use – unless like me you have been around too long to get used to the new way.

I shall concentrate here on Schedule E (employment income) and in particular the treatment of benefits-in-kind, particularly the provision of a company car.

Schedule E taxes the “emoluments” of an employment.  Over many decades, case law expanded on and clarified what this term, defined in statute in good Victorian language  as “salaries, wages, fees or perquisites of whatsoever nature”, is intended to mean.  Broadly, payment in money or money’s worth is an emolument.  If an employer offers to step in and settle an employee’s bill or reimburse an employee’s (non-business) expenses, the amount paid by the employer is an emolument.  Finally, if the employer provides the employee with goods or services which the employee is capable of realising for cash, the emolument would be the amount of cash the employee might reasonably be expected to be able to realise.  This particular point was much tested in case law – for example, when an employee was supplied by his employer with a bespoke Savile Row suit, the courts determined that the emolument was not the full cost of having the suit made, but the considerably lower value which the employee might be be expected to realise by selling it second-hand.

Where the employer provided something on loan to the employee, without transferring beneficial ownership and imposing restrictions on third party use so that the employee could not realise any cash value from the loaned item, there was nothing at all to tax.  Housing and cars fell into this category.

Unsurprisingly, tax mitigation for owner-managers of businesses and for the Directors of public companies became a major industry in its own right, and finally the Labour Government of Jim Callaghan responded in 1976 with the introduction of taxation of benefits in kind (BIK) for directors and “higher-paid” employees.  Back then, you were considered higher-paid if your taxable income, including the assessable value of your BIK, exceeded £7,500 pa, soon raised to £8,500 pa.  As my first job after graduation from Oxford, in 1977, paid £3,000 pa, my younger readers will see that eight grand really was a fairly good whack in those days.  The £8,500 threshold however has remained ever since so in effect captures almost everybody, down to minimum wage.

Directors were caught by the rules whatever they earned – in order to catch owner-managers who had become used to rewarding themselves primarily with BIK which they otherwise would have paid from their salaries.  The term director also covered Shadow Directors – people whose names didn’t appear on the Companies House register for the company as directors, but who nevertheless practically determined what the  directors-of-record could do with the company.

Alongside provisions for taxing any other type of BIK, such as accommodation, meals, gym membership, medical insurance etc, the 1976 Finance Act introduced a scale charge for taxing company cars.  Believe it or not, until 6th April 1976 an employee or director could be supplied with use of a car, including fuel and even a chauffeur, entirely free from taxation!

I think we can assume – admittedly with “cognitive bias” – that this situation must have been highly instrumental in forming the Great Car Economy of present day Britain, and the greater dependence on cars – and deeper obsession with how big/fast/new/shiny our cars are – than we typically see in many European countries where the tax system was not quite so sympathetic to motorists.

We are now into our third phase of taxing the company car as employment benefit.  In the first phase, which ran eighteen years from April 1976 to April 1994, we saw the taxable benefit of a car expressed as a fixed scale charge which bore no real resemblance to the cost of buying and operating that car.  If we consider the far most common type of company car – the middle-market saloon with an engine between 1,401 cc and 2,000 cc – the scale charge in 1976 was £225 – this is what the car was deemed to be worth as income, per year.  At this stage, provision of fuel (at the employer’s own pump or using an employer-provided fuel credit card) was still not taxed – that only came in five years later.

In the first five or so years of the scheme, the scale charge hardly rose at all – and a 50% reduction was introduced for users with more than 18,000 miles of business use and a 50% surcharge for users with less than 2,500 business miles - and then the mid-eighties saw the scale charge start to rise more rapidly, so that by its final year, 1993/4, the scale charge for a 1,400-2,000cc car had reached £2,990 (again add 50% for less than 2,500 miles business use).  Although much higher, it still represented nothing like the true cost of buying a brand new car and keeping and using it for three years before replacing with a new one.  Also, the business mileage threshold caused great distortions in employees’ travel decisions.  I remember for example driving to meetings in Manchester from Surrey in preference to taking the train, as a way of racking up the necessary 2,500 miles.  I even recall a colleague travelling to a conference in Vienna in his company car, to get his mileage in with one trip having failed to do any business driving at all throughout the year until then.

It also distorted the new car market.  Ever wondered why so many cars labelled as 2 litre actually have engines of about 1,995 cc?  Or 1,395 cc?  Now you know.  I also recall my brother’s father in law, a director of a chemicals company, choosing a “Grand Luxe” version of the Ford Granada 2 litre in preference to the standard spec for the 2.4 litre version – he did a deal with the garage to stick a “2.4 L” badge on the boot in place of the proper “2.0 GLS” badge, so he wasn’t exposed to ribbing in the company car-park!

The 1993 Finance Act sounded the death knell for the old scale charge system, and introduced a system a little closer to what we have today.  From April 1994, the BIK was 35% pa of the achievable retail price (slightly lower than the manufacturer’s advertised RRP) plus the cost of any optional extras.  Do 2,500 business miles and this dropped by a third, more than 18,000 and it dropped by another third.  There were some minor tweaks but in substance this regime continued until 2002.  It still contained the distortion of pushing people to get across business mileage thresholds by hook or by crook, and being purely price-based, it contained no incentive to buy smaller-engined or more fuel-efficient cars. 

However, the scheme had approached a balance with the actual cost of providing the car, such that when my company car came up for renewal my employer now offered me not a car as such, but a specified monthly sum to spend on a car lease, or to take as gross salary through the payroll.  Like many of my colleagues, I decided to take the money and buy my own – second-hand – car.  Working as I did in the City of London I only rarely needed to use my car for business, would normally prefer to take the train instead, and struggled to achieve the necessary 2,500 business miles to reduce the taxable benefit.  Better to be taxed on salary representing about 25% of the capital cost of that car than on a notional 35%!

Finally, in 2002 the scheme changed to substantially what we have today.  The annual charge was a percentage factor, starting at 15%, of the new retail price, for cars with the lowest standardised CO2 emissions, of 165gm/km or lower.  For every 5gm/km above 165, the annual factor rose by 1%, until it reached 35.  Today, the “threshold percentage” is 11% and the “threshold amount” is 100gms/km but otherwise much the same – 1% more for each 5gm/km until 35% is reached. 

There is now no reduction in the benefit for business mileage thresholds, so the incentive to make unnecessary car journeys has been removed.

Meanwhile, the introduction and gradual escalation in car fuel scale charges has to some extent discouraged provision of free fuel for personal use, although probably not for the most committed petrol-heads.

If my own experience is anything to go by, the 1994 scheme probably deterred some purely-personal users of company cars from taking one, but the 2002 scheme has evidently resulted in a significant reduction in uptake of company cars by “non-essential users”.  There is some reference to this as a factor in the assumed arrival of “peak car” which occurred prior to the current economic downturn, in the mid-noughties when the economy was still defying gravity.  (The RAC Foundation, of course, would deny that car use has peaked, it has merely briefly interrupted its relentless onwards march.  A Parliamentary briefing paper, which also refers to the company car effect as one of the fiscal and demographic changes affecting private car use,  prefers not to come off the fence as to whether peak car has arrived).

A report by HM Revenue & Customs evaluating the impact of the 2002 changes on CO2 emissions – not of course at all the same thing as total road travel mileage, or its impact on  traffic congestion or road danger for motorists or other road users) however suggests that the new scheme has been, and will be, fairly successful in delivering its primary aim.

Saturday 21 December 2013

Another day which will long live on in Infamy

Barely a month ago I was reminiscing about an infamous event which occurred 50 years ago, and how, despite my tender age at the time, like many others I remembered vividly where I was when I heard the news.

Today is the 25th anniversary of the destruction of PanAmerican Airlines Flight 103 from London to New York, over Lockerbie, in the borders of Scotland, at approximately 7pm on Wednesday 21st December, 1988.  Like the assassination of President Kennedy, I have a vivid recollection of where and when I heard the news.

I was travelling to Barrow in Furness with one of my bosses, Archie, for a meeting at the Vickers Shipbuilders' Trident Submarine yard.  When the train left Preston, the guard walked through announcing that news was coming in of an airliner exploding over southern Scotland.  That was about all he could tell us then, but we listened to updates as we were driven by car from Lancaster Station to Barrow, and when we arrived at the hotel we watched TV bulletins.

I don’t think we really had much inkling of quite how horrific this crime was at that time.  It was, after all, dark so the full extent of the destruction was not visible, and it was not yet confirmed that the explosion was a result of terrorist action.  We could however see that the small town of Lockerbie had suffered catastrophic and fatal damage from falling parts of the plane – an entire wing, full of fuel, as it turned out.

This had been a miserable couple of days for me.  My then girlfriend had just done a “Dear John” on me and I was still reeling from the shock and grief.  The news however brought home to me that many others would be far more shocked, and have far greater reason to grieve, than I.

The trip was eventful in other ways too.  The purpose of our visit to Barrow was to discuss the shipbuilder’s claims for “capital allowances” on the cost of construction of the yard where the Trident boats were being built, at almost unimaginable expense, with the company’s tax inspector.  Somehow, and the company staff swore it was pure co-incidence, it came to pass that the hull of one of the subs had to be moved across the yard for the next phase of construction.  A vessel the size of a modern cross-channel ferry, with about 7 or 8 decks inside its hull towering high above us as we stood on the floor of the yard, was slowly moved on a series of rail-borne bogies.  This was the first and last time I have ever seen, in reality, that cartoon image of someone’s jaw literally dropping.  The inspector immediately agreed the tax allowance claim, measured in hundreds of millions.

And finally,  a revelation about my boss, Archie.  He had always struck me as a miserable, grumpy git, a true “Dour Scot”, and I had been dreading the thought of spending a couple of evenings in his exclusive company, but he turned out to be an amusing and thoughtful companion, and a good listener to my tales of woe.

Seven years later, in November 1995, my wife and I had a long weekend in Washington.  We paid a visit, as one does, to the Arlington National Cemetery, to see John F Kennedy’s grave.  While there, we came across a cairn, a neatly constructed pile of small rocks, 270 of them, one for each of the victims in the aircraft or on the ground, built in memorial to the incident.  It is almost impossible to remain dry-eyed in front of this monument.

Saturday 14 December 2013

Hulk tamed.

I blogged a couple of months ago about a particularly frustrating occasion making one of the very few regular journeys I still do by car.

I am a fairly infrequent driver, with only two regular weekly car outings, each about 45 minutes or so for the return trip, plus other journeys, generally a little longer but less regular and less frequent, including visiting my mother in a nursing home in Winchester, and trips to the sailing club in Portsmouth.  Winchester I think is going to be too difficult, but I think I have managed to switch my Portsmouth trip to train/bike, taking the train to Fratton station and then back-tracking about three miles, on flat and mainly off-road cycle paths (mediocre quality, but at least they exist, and are quite well-used).

One of my regular weekly trips is also too difficult to change – ironic really, as it is to the gym, for an hour’s sheer torture with my personal trainer (who, I am convinced, learnt her trade at Gitmo, forcing men in orange jumpsuits to maintain “stress positions” to extract information from them – or at least that is what “the plank” feels like to me).  The other, the one which caused me such frustration recently, is to my French tutor on a Saturday morning.  I fumed then that it would be so much nicer to travel by train and bike.
Well, I finally got around to giving it a try. 

Journey by road to Guildford in blue.  By bike and train in red.

I left home ten minutes earlier than usual, cycling down to the station to pick up the 10:32 train to Guildford.  I locked up my bike at Haslemere station, as the final leg in Guildford is a steep climb and not very far so better to walk.  I arrived about 5 or 6 minutes before my lesson was due to start, and waited on the street so that the student before me could finish her lesson before ringing the bell.

For the return journey, a walk back downhill to Guildford station, then about 15 minutes’ wait for the next train back to Haslemere, spent in the waiting room (if you can call it that, but at least it has a bench and an electric heater) reading my Kindle. 20 minutes in the train to Haslemere, and a little over ten minutes’ ride back home from there.

The journey times are a little longer, inevitably, but at least I get time to read a few chapters of the “Swedish Noir” romans policiers that I enjoy, which I wouldn’t get in the car.  I also save 28 miles of driving and the fuel consumption and CO2 emissions that entails, and I have a season ticket for the train already. 

It depends on the weather – hanging around outside Anne-Sophie’s house for five minutes in the rain doesn’t appeal – but I think I might make a habit of this.

Sunday 8 December 2013

Stands to reason, dunnit?

“Stands to reason, dunnit?”

Often this is just about the entirety of an argument put forward in support of a proposition, by a proponent who considers the proposition to be so blindingly obvious that no evidence is necessary to support it.

A good example is cycle helmets.  Proponents of helmets and helmet compulsion evidently believe that wrapping a couple of centimetres of expanded polystyrene around your head must surely protect your head from damage.  After all, it stands to reason – electrical goods get shipped packed in expanded polystyrene to protect them, so it must be good.  Real evidence of course is harder to come by.  The evidence tends to be fairly inconclusive but it does suggest that head injuries don’t really decline much when helmets are made compulsory, even when cycling levels fall as a result.  Other adverse effects are also observed to come into play, such as rotational neck injuries, or health impacts of reduced physical activity – as in Australia, home of cycle helmet compulsion and apparently second-most obese nation in the world after the USA.

Moving on, a more topical example of the Stands-to-Reason assertion relates to car parking.  In thisdocument, on which the Department for Transport is asking for your comments in a consultation exercise, it is asserted that reducing charges, easing restrictions and obstructing penalties for illegal or inconsiderate parking will benefit town centres.

There is no evidence for this.  Nil, none, nada, zilch, aucune.  It just  ‘stands to reason’ that if people can get parking for free, or for less than they pay now, if they can park for longer than they have actually paid for, or if they can abuse yellow lines and other parking restrictions for example to park within two paces of a shop, that will motivate them to shop more, and more often.  There is however no academic or scientific, empirical evidence or report to support this proposition.  Appeals have gone out on the Twittersphere (from John Dales?  I forget) for information on any such documents.  As far as I know, no-one has come forward.

There is however evidence for the converse, and for the opposite.  Here and here, for example, from Transport Research Laboratory and London Councils respectively.

The converse is that, rather than pricing of parking or the availability of free parking impacting the vitality of a town centre, the vitality of a town centre impacts on the cost of parking.  This was summed up neatly two years ago, shortly before Christmas, when retailers in Wokingham were reported in the local paper demanding concessions on parking charges to boost trade.  The chairman of the local chamber of commerce, however, dismissed this as “putting a sticking plaster on a broken artery” and pointing out that in nearby Reading, parking charges were much higher and yet cars were queuing around the block waiting for access to a car park.

The opposite is that reducing parking charges can actually have the opposite effect.  Maintaining the correct level of charge for the area is an art which local authorities aim to refine, so that they can maximise the number of visitors to a town centre by discouraging excessively long stays during which purchasing activity tails off.  Avoiding “bay-blocking” in other words.  If people who stay an hour spend more than twice as much as those who stay 30 minutes, and more than half as much as those who stay two hours, then pitch the pricing at one hour minimum and high enough to encourage people to get on, shop, and leave so a new shopper can take the space.

An example, it seems to me, of how different parking areas in my own home town sustain different charges and so (probably imperfectly) optimise the use of spaces, is that a car park next door to the supermarket (which has no free parking of its own) charges at 80p per hour while another a hundred yards or so further way charges at 50p per hour, and yet in the former each space is sold twice as many times per day.

All of this of course falls on deaf ears as far as Mr Pickwick is concerned.  He persists in his bleedin’-obvious prejudice that a parking free-for-all would be good for towns, proposing to permit motorists to overstay their time by a “few minutes” (can they not afford a watch?  If not, surely they can see the time on their mobile phones?), or to park “briefly” on double yellow lines – never mind the inconvenience to other motorists, the danger to pedestrians who are now hidden behind parked cars and so  invisible to those motorists as they attempt to cross the road, or the impedance to emergency services attempting pass down congested streets.  Just tie both hands behind the council’s back in its efforts to keep things under control.  Just end up like Aberystwyth, where all parking controls were initially lifted, then after a year of total chaos, anarchy, accidents, arguments and punch-ups, they were re-instated to the profound relief of all, including the usual troublemaker in this matter, the local rag.

Parking controls do matter.  Inconsiderate parking obstructs the highway.  It impedes elderly and disabled pedestrians who need access to dropped kerbs.  It places children in danger when they can’t be seen by passing cars as they try to cross the road from between parked cars.  It blocks cycle lanes, forcing cyclists to swerve out into traffic and put themselves at risk.  Cheap parking, apart from not doing what it says on the tin, attracts more traffic so more congestion, more pollution and more road danger, making the town centre even less attractive to pedestrians and unfairly disadvantaging people who have no access to a car.

Go to the survey, and tell Pickles where he can stuff his parking free-for-all proposals.