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Latest news, views, comment, debate and useful links for students and alumni of The Open University Business School and business-related courses.

Keeping patients safe from harm

Following the Francis Report on the crisis at Mid-Staffs Hospital, world experts in the cultures and processes of keeping people safe have been asked to advise the NHS in England on how to prevent patients being harmed while receiving healthcare.

National Advisory Group
The National Advisory Group on the Safety of Patients in England will be chaired by Professor Donald Berwick, President Emeritus and Senior Fellow at the Institute for Healthcare Improvement, an organisation that Professor Berwick co-founded and led as President and CEO for 18 years.

Members of the international group have been invited for their areas of expertise and interest covering all aspects of the culture and processes of minimising patient harm, healthcare management and nursing to sociology, psychology and the mobilisation of change.

Professor Hartley
Professor Hartley’s contribution will be on public leadership and on creating and learning from organizational change and innovation following her extensive research in these fields. She has also written six books including Leadership for Healthcare.

Speaking about her appointment to the Berwick Advisory Group Professor Hartley said: “I feel very privileged to be working with this panel of world-class experts in improvement of public services. This is a real opportunity to improve patient safety. We have seen several reports about what went wrong at Mid-Staffs NHS but the Berwick Advisory group goes well beyond this. Our collective aim is to advise on how problems can be prevented in the future, to enhance quality of care for patients and families, and to create a culture for staff that is focused on learning and continuous improvement.”

International experts
Professor Berwick, who will be leading the Group, was asked by the Prime Minster David Cameron to set up the advisory group following last month’s final report into the devastating breakdown of care at Mid-Staffordshire Hospitals. The team of 12 includes recognised experts from the US and the UK.

Prior to his service in 2010 and 2011 as President Obama’s appointee to head the US Medicare and Medicaid programs, Professor Berwick was a paediatric consultant, Professor of Health Care Policy and the Harvard Medical School, and Professor of Health Policy and Management at the Harvard School of Public Health. He is world-renowned for his expertise in patient safety, and advised NHS Scotland in the development of its first national patient safety approach.

Professor Berwick said: “Assuring patient safety and high quality care is never automatic. It requires the constant attention of leaders and continual support to the workforce. I have read, and been deeply affected by, the harrowing personal stories of individuals and families who were so badly injured when this commitment flagged at Mid-Staffordshire Hospitals.

“Our group will do whatever it can to recommend how the NHS in England take serious and profound action, learning from this tragedy to make patient care and treatment as safe as it can possibly be, and ever safer. Indeed, there is no reason why English health care cannot aspire to be and become the safest health care in the world.

“Making patient care as safe as it can possibly be, at all times, is a major challenge in any health care system. It involves leadership, training, staff culture, organisational structures, systems and processes, data capture and analysis, regulation, deep patient and family involvement, and much more.

“It is important to remember that England is in many ways an international exemplar in patient safety, but Mid-Staffordshire shows us that there is still a great deal of work to do. The national group includes English experts as well as some from the US, and with such formidable knowledge and talent on board, I am confident we will be able to set out clear, practical advice and leave a legacy of safer care in the NHS.”

The group will build on the work of Robert Francis QC, advising the NHS on how to deliver real change, based on the best available scientific evidence from across the NHS and from other industries and health services from around the world.

They will report their findings and advice to the NHS Commissioning Board and the Department of Health at the end of July.

Find out more

Profile for Professor Jean Hartley

Professor Jean Hartley joins the OU Business School

Average: 1.5 (6 votes)

Professor Jean Hartley, Professor of Public Leadership at The Open University Business School is one of the world-class panel of experts invited to join the Berwick Advisory Group which will advise the Prime Minister and the NHS on how to keep patients safe from harm. Following the Francis Report on the crisis at Mid-Staffs Hospital, world experts in the cultures and processes ...

People

Leadership Masterclass: Leadership in tough times - confronting complexity and inspiring hope

Location: Hotel Russell, London

Date: 25 April 2013

You can now book on our third event in the Business Perspectives series, which focuses on Leadership. The event will explore leadership in the current climate, how best to lead for growth in challenging times and manage a team through cutbacks, loss and stress. We’ll discuss how leaders can inspire a sense of direction and moving forwards in difficult contexts, drawing on the insights and experience of our speakers and participants.

The event will be led by Jean Hartley, newly appointed Professor in Public Leadership at The Open University Business School, who together with leading practising managers will explore leadership in both the public and private sector.

We’re delighted to announce that joining Professor Jean Hartley at this event will beCaspar de Bono, Managing Director B2B at the Financial Times, and Sue McAllister, Director General of the Prison Service, Northern Ireland. Both of whom are leading complex teams in challenging times and will share their contrasting experience and insights, alongside other leading field experts.

During the daytime masterclass, participants will be able to explore leadership best practice through action learning and workshops with peers. You will be able to take practical tools, techniques and ideas back to your organisation. The focus will be to explore the best and worst of leadership in the harsh current environment – is there a silver cloud amongst the gloom?

The stand-alone but complementary evening event will be hosted by the Dean of the Business School, Professor Rebecca Taylor and will include key notes from industry leaders.

Further details can be found on our website together with full details of costs and alumni Early Bird discounts. The full programme will be announced in the coming weeks, however, to register your interest or to book a place please contact Janet Barker.

We’re waiting to hear from you…

Visit our Business Perspectives blog for the latest insights and let us know your thoughts and comments on this topic. We look forward to hearing from you!

Average: 2 (3 votes)

Location: Hotel Russell, London Date: 25 April 2013 You can now book on our third event in the Business Perspectives series, which focuses on Leadership. The event will explore leadership in the current climate, how best to lead for growth in challenging times and manage a team through cutbacks, loss and stress. We’ll discuss how leaders can inspire a sense of ...

OU news

OU unpicks the myths of Rogue Traders

Mark Fenton-O'Creevy, Professor of Organisational Behaviour, has been researching and observing the work and behaviour of financial traders since the mid nineties. In his recent article for Thomson Reuters he questions the current perception of traders as simply amoral risk-takers and asks whether the reality is far more complex.

A brief trawl of media comment on the banking industry over the last few years suggests that the industry is awash with criminals and fraudsters. The picture of traders, often presented in the press, is of amoral risk-takers with bosses who are always ready to turn a blind eye if profits are being made. There has been a public parade of rogue traders from Nick Leeson to Kweku Adoboli and the LIBOR and EURIBOR scandals are setting new records in terms of the number of people implicated. So, is this picture fair, or is something more complex going on?

Criminologists Peter Grabosky and Grace Duffield suggest that fraud is the product of three factors: a supply of motivated offenders; the availability of suitable targets; and, the absence of capable guardians.

The Wheatley review of LIBOR focuses in its prescriptions on the second and third factors. Recommendations concentrate on reducing the opportunities for fraudulent manipulation of LIBOR and on strengthening oversight both through external audit and internal improvements in governance. The first factor, the supply of motivated offenders, is not addressed by Wheatley. It is to this issue that I turn below.

Unpicking the myths
I have been researching and observing the work and behaviour of financial traders since the mid-nineties; interviewing and studying large numbers of traders and their managers, collecting data on their personalities, risk-taking behaviour, performance and more recently on their physiological and emotional reactions to stress and market volatility. The findings do not reflect the press stereotype. To unpick a few myths:

There is not a particular trader personality type. On average traders are slightly more conservative and introverted than the population average but among their ranks you can find the full range of personality types.

Traders are not especially risk-takers: on average traders actually seem more risk averse in their everyday lives than the population mean. Generally traders don’t seek risks for their own sake. They bear risks and learn to manage them in pursuit of other goals.

Traders are not especially dishonest. In many cases we were struck by the emphasis placed by traders on rigorous honesty, with themselves and others.
In truth traders are not extraordinary, they are ordinary human beings with ordinary human failings and problems; perhaps somewhat at the more intelligent end of the spectrum, but not universally so.

So what are the factors that may lead these ordinary people to lie, cheat, and commit fraud? What are the factors that ensure a supply of motivated offenders?

Skill and performance are loosely coupled
Trading is skilled work, but good traders often lose money and poor traders can get lucky. There is a lot of noise in the relationship between skill and performance. Trader managers often found it hard to articulate to us what makes a good trader; falling back on phrases like ‘a certain flair’ or ‘a nose for markets’. However, most agreed that it can take a couple of years to establish if someone is any good; that good managers play down early successes and understand that even top traders have periods when everything seems to go wrong.

This can be a source of enormous performance anxiety for traders. The trader who gets lucky early on and develops an undeserved reputation (and bonus) for good judgement will feel under great pressure to maintain a level of performance that is beyond them. The good trader who is having a period of bad luck and diminished confidence can see earnings and reputation suffer. But traders build up financial commitments that reflect their earnings and faced with an inability to sustain performance (and status) can feel under tremendous pressure to take unreasonable risks or bend the rules. For example, in one of our studies we wired traders up with sensors to measure stress and emotional reactions. Overall the results showed traders struggled to manage their emotions in volatile markets. But one very experienced trader exhibited high stress when markets were quietest. He told us that he was seriously below target and when markets were quiet he had little opportunity to make money; the stress was the “difficulty of resisting the temptation to do something stupid”.

Performance related pay motivates effort not thinking
Recent research suggests that one of the important limitations of performance related pay is that competitive incentives induce people to work harder but not smarter. Excessively high rewards can lead to a ‘choking under pressure’ effect, which can create inverse relationship between incentives and cognitive performance. Whilst some thrive on pressure, others react by increasing effort at the expense of performance. To shortcut the relationship between performance and reward, some may become increasingly willing to bypass controls or expose the organisation to unacceptable and hidden risks.

Fraud is easiest when the victims are faceless
Most of us find it hard to lie to someone’s face in a way that harms them. For this reason successful con artists are rare and often have a degree of sociopathy. However, the more the victim can be distanced, the easier it is to avoid feelings of guilt. That is one of the reasons why internet fraud has become so common. The move to abbreviated forms of electronic communication in the banking industry may also bring about this distancing effect. Further, a culture in some investment banks of seeing customers as ‘marks’ to be exploited and of ‘revenue at any cost’ may encourage what criminologists call ‘neutralisation strategies’ where potential victims are disparaged and described in terms that make them seem unimportant or unworthy of respect. In the case of LIBOR manipulation it may have been easy for traders to tell themselves that for every loser there was a winner, so their manipulation was morally neutral.

Given the right incentive we are very good at fooling ourselves
Any good con artist knows that they don’t need a watertight story; given the right motivation victims will fool themselves and clever people have the most brainpower to devote to their own self-deception. Similarly in banking, if you want to know why clever people sometimes seem blind, look to the incentives. In the recent financial crisis a lot of senior bankers had been noticing unusually high levels of profits in the sub-prime market, yet seemingly failed to ask,” if we are making unusual profits, what are the unusual risks that underpin those profits”. Humans are good at ignoring information that makes them feel bad and often privilege information that shows them in a good light. The same process probably underpins why some managers failed to notice the illegal activity under their noses. While the courts will judge who was complicit in the LIBOR deception, banks also need to ask themselves whether some managers may have been unconsciously complicit.

Rules and systems don’t preclude the need for effective line management
Reflecting on several years of research in investment banks we concluded that “in a combined 70 years of experience, the authors have never encountered so little management development in sophisticated organisations of vast resource” [2: 209]. Many of the issues I outline above are tractable to good line management. There are certainly some good line managers in investment banks but since the route to management is primarily through trading, management skills are variable and there is often insufficient attention paid to selecting for or training the skill-set that trader managers really need. As is common in large organisations the gap in management capability is often filled by complex rules and systems that are difficult to police; both of which may have unintended consequences.

The Wheatley review does perhaps present part of the answer, but without improvements in skilled line management and attention to the role of perverse incentives, the conditions which ensure a continuing supply of motivated offenders are likely to continue.

Find out more:

Professor Mark Fenton-O'Creevy
Study a Business and Management qualification at the OU

A version of this article was originally published by Thomson Reuters GRC. ©Thomson Reuters 2013

Posted: 14 March 2013

Average: 2 (8 votes)

Enter the Santander Universities Entrepreneurship Awards 2013

Have you got a brilliant business idea? It could be worth a share of £44,000!

Open to both students and alumni who graduated with the OU within the last two years, the Santander Universities Entrepreneurship Awards offer a fantastic opportunity to celebrate the success of our student and graduate entrepreneurs. Not only could the awards potentially bring significant cash investment to aid your business idea, but the winners will also benefit from valuable press coverage from taking part in the nationally recognised awards.

What are the prizes?

As one of the 66 partner universities, the OU has been invited to submit two student or alumni business plans for the national competition – one each for the Undergraduate and Postgraduate categories.

Prizes

Undergraduate:
• 1st prize: £5,000
• 2nd prize: £3,000
• 3rd prize: £1,000

Postgraduate:
• 1st prize: £20,000
• 2nd prize: £10,000
• 3rd prize: £5,000

How to apply?

If you would like to discuss the particulars of this competition, please contact Dr Malcolm J Stokes on 01908 652885 or email malcolm.stokes@open.ac.uk. Further details may be obtained from Wendy King on 01908 654898 or email wendy.king@open.ac.uk. All submissions need be made by Tuesday 26th March 2013.

All entries will be assessed by a panel at The Open University. The two shortlisted proposals will then go forward to the national competition.

Average: 1.8 (4 votes)

Have you got a brilliant business idea? It could be worth a share of £44,000! Open to both students and alumni who graduated with the OU within the last two years, the Santander Universities Entrepreneurship Awards offer a fantastic opportunity to celebrate the success of our student and graduate entrepreneurs. Not only could the awards potentially bring significant cash investment to ...

OU to help NHS develop leaders who support compassion

The Open University has been chosen to design and deliver the new foundation level leadership programme for up to 25,000 NHS staff.

This is one of three programmes – foundation, mid-level and senior level leadership – being developed by the NHS Leadership Academy to help leaders in the NHS support their staff in delivering caring and compassionate services.

The three programmes will see thousands NHS staff each year – including doctors, nurses, Allied Health Professionals, healthcare scientists, human resources and finance staff– learn how to lead their teams and/or services to achieve better patient care.

The Open University will be working with global management consulting firm Hay Group on the foundation level programme, which is for all NHS staff aspiring to a role which involves leading others.

Karen Lynas, Deputy Managing Director of the NHS Leadership Academy, said: “Our goal is for patients, carers and families to be treated with compassion, dignity and respect, and this cannot be achieved if we don’t have appropriately-skilled leaders and decision makers at every level."

25 February 2013

Useful links

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Average: 1.8 (4 votes)

The Open University has been chosen to design and deliver the new foundation level leadership programme for up to 25,000 NHS staff. This is one of three programmes – foundation, mid-level and senior level leadership – being developed by the NHS Leadership Academy to help leaders in the NHS support their staff in delivering caring and compassionate services. The ...

Good news for the Eurozone at last

cartoon by Catherine Pain shows Draghi as Santa Claus

The season of miraculous gift-giving is over, but Europeans are still playing happily with their earliest and biggest Christmas present. Santa Claus turned out to be a central banker – and one willing to dispense on the promise of future good behaviour, disregarding recent misdemeanours.

A single act of generosity by Mario Draghi, the European Central Bank (ECB) governor, has restored lasting calm to the previously turbulent Eurozone, neatly deflecting the winter blizzards across the Atlantic.

Draghi’s most dramatic achievement is to have radically reduced the cost of borrowing for Italy, Spain and other Eurozone countries that have large budget deficits to finance. This cost (the ‘bond yield’) fell to less than 5% in Spain’s early-January auction, from a crisis peak of more than 7.5%. It is a similar story in Draghi’s native Italy, where the public finances have been so effectively shored-up that voters can even contemplate a Silvio Berlusconi comeback. By promising ‘outright monetary transactions’ (OMT), the ECB has asserted the market-stabilising power long enjoyed by its American equivalent, the Federal Reserve. As a result, investors searching for higher yields have now moved back into corporate bonds and shares, lifting Eurozone stock markets to their highest level for two years.

From regarding the Euro area as a sinking ship that would either have to ditch its weakest members or be dragged underwater by them, some investors now view it as a better sovereign borrower than the previously mighty US. Both are currency zones with wide fiscal deficits. At present the US has a more impressive growth rate, while there is still a risk of weaker Eurozone members being cut adrift and forced into default. But in the longer term – if it can now hold together – the Eurozone has a better external balance (exporting more than it imports, thanks to Germany), greater power to impose fiscal discipline on its members, and stronger safeguards against unleashing inflation (sovereign borrowers’ traditional way of short-changing their creditors after securing the cash).

Debt guarantee
Perhaps most remarkably, Draghi has achieved this monetary escapology without having to part with a single euro of ECB funds. All he has done is announced that his bank will, in future, buy up the debt of any Eurozone country that is forced to default. This guarantees the debt of Italy, Spain and other struggling member-states, making it safe for ordinary investors (and investment funds) to buy. Their governments can now continue to finance the public investment needed to restore growth so that banks and households can bring down their own debt, and the costs of welfare support until new jobs emerge.

The announcement was well timed, coming at a moment when banks and bond-buyers are globally desperate for high-yielding issues, and prefer those which have a government behind them, regardless of quality. After all, Ukraine with an economy stalled by sliding steel sales and politics sliding back into industrial oligarchy and Latvia bailed-out by the IMF in 2008 and dragged through Europe’s deepest ever recession have recently made successful bond issues, despite having higher currency risks and lower credit ratings than any Eurozone member.

Neither Spain nor Italy, the most dangerous of the Eurozone’s weak links, has asked for a bailout so far. Both know that, if they do so, they will be subject to a German-driven, EU-administered ‘adjustment programme’ – worsening their already perilous economic and social situation, and probably discrediting whichever government has to enforce the emergency measures. Their additional borrowing is raising the scale of any future rescue effort. The ECB’s calculation is that, by making it clear that all Euro debt will be honoured in the event of a bailout, this becomes less likely to happen. That’s because member countries now have the fiscal strength required to drive a recovery, and because speculators will stop short-selling the debt in order to fulfil their own expectations of its collapse. The ECB’s promise buys time for governments to act so that the promise won’t need to be fulfilled.

Cross-Channel fallout
If this gamble works, it should be good for other European governments – notably the UK, which will blame its imminent return to recession on the weakness of demand and investor confidence in the single currency area. But in one important respect, the Eurozone’s improbable gain is its non-members’ loss. The UK had retained its top AAA credit rating, allowing it to finance its overrunning budget deficit at negligible cost, partly because it was regarded as a ‘safe haven’ for investment funds that felt at risk from Eurozone exposure. Now that Euro debt has been turned into a positive one-way bet, that of the UK doesn't look so enticing.

A credit-rating downgrade need not (as the US has demonstrated) cause any rise in UK interest rates, or loss of confidence in its turnaround strategy. But it makes it harder to maintain the present low rates long enough to complete the banks’ recapitalisation and float Britain’s mortgage borrowers off the rocks.

Mario Draghi is unlikely to be on George Osborne’s Christmas Card list at the end of 2013. But if his gamble succeeds, it’s a small price to pay.
Alan Shipman 24 February 2012

Alan Shipman is a lecturer in Economics at the Open University. He is responsible for the modules You and your money:personal finance in context and Personal investment in an uncertain world, part of the foundation degree in Financial Services.

The views expressed in this post, as in all posts on Society Matters, are the views of the author, not The Open University.

Cartoon by Catherine Pain

Your rating: None Average: 2 (9 votes)

Santa Claus operated out of Frankfurt last year – and gave the Eurozone the fiscal equivalent of several billion stocking-fillers. But the European Central Bank’s largesse may not extend to those who don’t believe in it, writes Alan Shipman. The season of miraculous gift-giving is over, but Europeans are still playing happily with their earliest and ...

Yvonne Cook's blog
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Strategy Masterclass Webinar: Competitive strategies for business growth

This hour long webcast will introduce video highlights from the event and invite delegates to participate in Q & A and interactive discussion to develop learning and understanding. Learn to think about strategy proactively not reactively. Find ways to use best practice to innovate your customer value proposition. Learn to lead organisational growth, what works, why and how to drive action.

We aim to develop the theme of strategy in business further across sector, industry and geographical boundaries. We will hear from strategy creators at senior management levels and external consultants about the challenges facing business today. Addressing issues such as which strategies add value and which are implementable.

Keep up to date with strategy as well as the business perspectives programme and join the community in the continuing discussions on the Business Perspectives blog.

contact:

janet.barker@open.ac.uk

start date:

Tuesday, 26 February, 2013 - 19:00

end date:

Tuesday, 26 February, 2013 - 20:00

Have you missed the Business Perspectives Strategy Masterclass held in Manchester on 7 February? Don't worry, you can still catch up on all the highlights by joining our free virtual event on 26 February, regardless of your location. This hour long webcast will introduce video highlights from the event and invite delegates to participate in Q & A and interactive discussion to develop ...

OU Business School appoints new Professor in Public Leadership

The Open University Business School is strengthening its research and teaching in public leadership and management with the appointment of Professor Jean Hartley as Professor in Public Leadership.

Professor Hartley joins the OU Business School from Warwick Business School where she was Professor of Organisational Analysis and a co-founder of the School's Institute of Governance and Public Management.

Her core discipline is organisational psychology but most of her research is cross-disciplinary and focused on public leadership and management.

Her special interests are in leadership with political astuteness, and innovation and organizational change in public services.

Professor Hartley said: “I am pleased to be joining the OU Business School at a time when it is actively strengthening its presence in public leadership and management. In this respect we share the same vision.

"Even in a period of austerity, public services remain a significant part of the economy and society, contributing to wealth and well-being, and will play a key role in recovery.”

For more information see the OU's media release here.

More about The Open University Business School

Business and Management qualifications - undergraduate
Business and Management qualifications - postgraduate
The Open University Business School

Average: 1 (3 votes)

The Open University Business School is strengthening its research and teaching in public leadership and management with the appointment of Professor Jean Hartley as Professor in Public Leadership. Professor Hartley joins the OU Business School from Warwick Business School where she was Professor of Organisational Analysis and a co-founder of the School's Institute of Governance and ...

OUSEN: Doing business with Myanmar (Burma)

Myanmar is slowly opening for business after decades of economic isolation. Ethical and cultural challenges face those who wish to do business with this beautiful country. Thuta Aung, co-president of the OU Society of Entrepreneurs (OUSEN), returned to Myanmar in 2011 after working and studying in the UK, Switzerland and Malaysia. He founded HamsaHub consultancy in Yangon (Rangoon) to promote responsible business and skills development. Please join him for this informative presentation and discussion.

contact:

Andy Burton

start date:

Monday, 25 February, 2013 - 17:00

end date:

Monday, 25 February, 2013 - 18:00

OUBS alum featured in BBC series and thanks OU MBA for his career success

Congratulations to Philip Skill, OUBS MBA graduate and Chief Planner at Stroud District Council in Gloucestershire, who is featured in the new BBC series The Planners, on BBC Two.

Feeling a compulsion to expand his horizons, in his 20s, Philip enrolled on a BSc course with the OU and achieved an upper second. This qualification enabled Philip to progress quickly within local government and helped him gain sponsorship for the postgraduate certificate, the diploma and finally the MBA.

“The MBA directly led to me being considered an all-round manager, enabling me to switch careers and becoming a charted town planner”, Philip said, crediting the OU for its part in his success in progressing his career.

The Planner is an eight-part documentary series following town planning applications and the contentious processes behind them. Philip Skill has contributed to four episodes.

Find out more about the programme

Congratulations to Philip Skill, OUBS MBA graduate and Chief Planner at Stroud District Council in Gloucestershire, who is featured in the new BBC series The Planners, on BBC Two. Feeling a compulsion to expand his horizons, in his 20s, Philip enrolled on a BSc course with the OU and achieved an upper second. This qualification enabled Philip to progress quickly within local government and ...

professional certificate in accounting

planning to start this course, anybody done it.how does it compare with the aat/acca.

Den Wallace - Mon, 11/02/2013 - 17:42

General discussion

Can George rediscover the engine of growth?

The high-speed rail track is the latest signal that the route to deficit reduction now runs via ‘saving to spend,’ explains Alan Shipman.

Banks’ recent mishaps with ‘financial innovation’ have demanded some unusual displays of Finance-Minister innovation. And George Osborne has confirmed his role as one of the most innovative modern Chancellors, even before he prepares to deliver the next Budget in March.

In expanding the UK government’s infrastructure-building commitments while pushing for another round of welfare spending cuts, Osborne has gone the opposite way to most of his post-war predecessors. They tended to let the welfare budget expand, as the inevitable consequence of falling income and rising social need during recession. To fund it, they traditionally swung the axe over capital projects – trusting that most existing roads, railways, power stations and public buildings could creak along for another year without major upgrades or replacement.

The northern extension of HS2 (see this Guardian video is just the latest in a long line of contrarian Coalition commitments, which also include a revived school rebuilding programme, support for the Crossrail project whose cost was questioned in opposition, and a new way of letting big institutions finance public investment projects. Although capital spending reductions announced in 2010 have not yet been fully reversed, it is now clear that further cuts to the government’s redistribution and running-costs will be used to finance new capital projects, and not directly repay debt.

The Coalition headstand
Past Chancellors have usually taken the opposite approach to ‘fiscal rebalancing’ because cuts to benefits and tax credits are more socially (and electorally) painful than cuts to most infrastructure projects. Indeed, big civil engineering plans often bring some distinctly uncivil responses from the ruling parties’ supporters, as confirmed by those living close to the proposed high-speed route (see HS2 route set to trigger fresh protests).

Economically, spending more on benefits has the merit of immediately boosting demand, by putting money into some of the poorest pockets – shortening the post-Christmas roster of retail-chain closures, even if not enough on its own to get the economy growing again. A higher welfare bill is traditionally the ‘automatic stabiliser’ that helps to end the recession which gave rise to it. In contrast, even a ‘shovel-ready’ infrastructure project can take months to get into motion. Those crossing affluent backyards can take years, even when planning procedures are fast-tracked to HS2 speed.

Osborne has taken the opposite approach because investment is the key to long-term expansion. A consumption boost worked in 2009-10, restoring the economy to growth, because there was plenty of spare capacity. But three years and a double-dip later, it’s uncertain how much idle machinery can still be easily switched back on. With unemployment falling, the amount of easily-redrafted labour is also unclear. Some economists fear another burst of inflation as rising demand hits inflexible supply. So investment, which adds to capacity as it boosts demand, looks like the safest way to engineer an upturn.

Investor of last resort
Another powerful argument for more public investment was delivered to the Treasury Select Committee at the end of January, as it probed the impact of Quantitative Easing (QE) – the wholesale purchase of government debt by the Bank of England. QE has enabled the Bank to keep base rates interest at a historically low 0.5% throughout the recession, when the wider public deficit and above-target inflation would normally have been expected to send them up. Low interest rates were intended to promote economic recovery, by boosting business investment and reviving the housing market.

But pensioners’ and pension-fund managers’ representatives pointed out two serious side-effects. Low interest rates widen the deficit on the remaining final-salary pension schemes, forcing big companies to divert funds away from investment so as to plug the gap. Low rates also flatten the incomes of pensioners, and others now living on their savings – squeezing their own expenditure, and tying the helping hand that previously assisted younger family members with home-deposits and other big expenditures (see this article).

So for low interest rates to be sure of stimulating recovery, those who benefit most from them have got to be willing to spend more. The government is the biggest beneficiary, and will still enjoy the country’s cheapest credit even if agencies downgrade its currently top (AAA) credit rating. As the damage to pension funds is already done, QE’s overall success may now rely on the Treasury’s ability to splash the cash.

Infrastructure spending has one other major benefit from the Chancellor’s perspective. Because the public outlay can lever-in substantial private investment , and because much of it will take place beyond the Treasury’s 5-year budgeting horizon, the succession of big projects announced with increasing boldness since 2010 need not undermine the Coalition’s promise to eliminate the structural budget deficit.

Many economists are anyway convinced that governments should borrow for public investment, and that the UK should follow standard accounting practice by separating its capital budget (on which rising debts are usually justified by rising assets) from its budget for current expenditure, where debts incurred in downturns should be paid down during recovery. The Treasury’s own forecasting model was highlighting the need for more public capital spending, even before the release of disappointing fourth-quarter growth figures. Osborne’s break with tradition, to boost investment, is fast becoming the new orthodoxy. It should help sidestep the awkward question of whether HS2 will eventually get him (First Class) from Plan A to Plan B.

Alan Shipman 6 February 2013

Cartoon by Gary Edwards

Your rating: None Average: 1.7 (10 votes)

The high-speed rail track is the latest signal that the route to deficit reduction now runs via ‘saving to spend,’ explains Alan Shipman. Banks’ recent mishaps with ‘financial innovation’ have demanded some unusual displays of Finance-Minister innovation. And George Osborne has confirmed his role as one of the most innovative modern ...

Yvonne Cook's blog
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Hello

Hello,

I am starting Business Studies standard pathway degree in April. I have read lots in the student homepage and there have been some useful tips and I feel alot more confident about getting started. Really looking forward to working with people on here and helping each other get through the course and sharing ideas.

Just wondering if there are any other people who are starting the standard pathway for business same as me in April?

Hello, I am starting Business Studies standard pathway degree in April. I have read lots in the student homepage and there have been some useful tips and I feel alot more confident about getting started. Really looking forward to working with people on here and helping each other get through the course and sharing ideas. Just wondering if there are any other people who ...

Zad Latif - Tue, 05/02/2013 - 00:24

General discussion

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Have you heard about the OU’s ‘best kept secret’?

Would you like to know more about the role of the Royal Bank of Scotland in the banking crisis? Then discover the OU’s ‘best kept secret’ – your online library!

Library Services has been experimenting with some new videos to promote and highlight the wealth of resources available to support your studies. Collections of ‘world class’ high quality online content covering ejournal collections, newspaper and document archives, video and audio content and a growing range of ebooks have been selected and used in a suite of themed showcases presented via the library’s ‘Explore library resources’ web pages.

Are you aware of all the library resources available to you when you study with the OU? Review this video created for Business and Management, and let us know which resources you didn’t know about or what you thought of the video. Email your comments to library-promotions@open.ac.uk.

"Often forget about the wealth of resources just a click away" OU Student

Evan Davis returns to Radio 4 with The Bottom Line

In the first episode of the new series yesterday (Thursday 24 January) Evan spoke to Ian Maclean of luxury knitwear company John Smedley; Julie White of drilling and demolition firm D-Drill; Tim Wates of construction and development group Wates.

They discussed the backbone of economies all around the world, family businesses – the majority of firms are family-controlled, from the millions of modest firms, to commercial giants such as Ford and Wal-Mart. And yet less than a third survive to the second generation. Evan Davis and guests explore the possibilities and pitfalls of the family ownership model. Click here to listen to this show now.

On 7th February Evan Davis joins business leaders at an OU hosted event in Manchester. Here they will present a masterclass on competetive strategy that is open to all. The event provides an opportunity to discuss strategic processes and practices with strategy creators that run their own companies, as well as external consultants and managers that sit at senior and middle management levels. You will find out what works for each and where the challenges exist. Which strategies add most value; which make most sense; and most importantly, which are implementable. To join them, book your place now.

The Bottom Line is broadcast every Thursday on BBC Radio 4 at 8.30pm, and is also shown on the BBC News Channel at weekends. For full details of upcoming broadcasts, and links to listen or watch again, visit bbc.co.uk

To hear the latest discussions between Open University academics and the series guests go to OpenLearn here.

The BBC and The Open University come together to bring Evan Davis and his CEO experts into your living room. Each week, Evan invites three people from the very top of the world of business to share their insights from the top on The Bottom Line. In the first episode of the new series yesterday (Thursday 24 January) Evan spoke to Ian Maclean of luxury knitwear ...

Study brings business success

When his business crashed, Michael Lewis set himself two challenges – launching a new firm and getting an Open University degree.

He took a range of modules that would help him build his new business, often taking his books to bed at night to study.

Four years on Michael is set to attend an OU graduation ceremony and his firm The Underfloor Heating Store is booming with Michael named Essex Businessman of the Year.

Now his wife Paula (pictured with Michael), whose support helped him keep on course for his degree, has taken up OU study herself.

The full story of how Michael and Paula fought back after a crisis is featured in the Mirror.

Photo by Carl Fox, courtesy of The Mirror

When his business crashed, Michael Lewis set himself two challenges – launching a new firm and getting an Open University degree. He took a range of modules that would help him build his new business, often taking his books to bed at night to study. Four years on Michael is set to attend an OU graduation ceremony and his firm The Underfloor Heating Store is booming ...

Strategy Masterclass: Competitive strategies for business growth

Thursday, 7 February 2013. Marriott Victoria and Albert Hotel, Manchester

The series of Business Perspectives events, hosted by The Open University (OU) Business School, aims to bring together practitioner expertise and the latest academic research and insight.

This, the second of the Business Perspectives events, will focus on how businesses can deliver a clear and coherent organisation growth strategy.

Speakers include Alison Copus, vice president of marketing at TripAdvisor, Antoine Boatwright, Global Director, Dell, and Evan Davis, BBC editor, presenter and OU Business School Visiting Professor.

The event will consider how, in an environment of austerity and reduced consumer confidence, managers and leaders can configure and implement a competitive strategy to deliver sustainable growth, enhanced performance and increased profit.

The masterclass will focus on the process and practice of strategy-making and will hear from strategy creators that run their own companies, as well as external consultants and managers that sit at senior and middle management levels.

It will explore what works for each and where the challenges exist; which strategies add most value; which make most sense; and most importantly, which are implementable?

Professor Thomas Lawton, Professor of Strategy and International Management in the OU Business School, will lead the masterclass and will be joined by key business leaders and Business School academics.

The complementary evening event will be hosted by the Dean of the Business School, Professor Rebecca Taylor, and Evan Davis will ask if British companies need a more dynamic, strategic approach to prevent them lagging behind in the global economy.

We really hope that you will be able to join us at this exciting event.

Further details can be found on our website together with full details of costs and MBA Alumni Early Bird discounts. Certificates of attendance will be issued and may count towards your continuing professional development.

Watch video highlights from the previous event to give you a taste of the masterclass, and hear what other delegates have to say about the Innovation Masterclass.

To register your interest or to book a place please contact janet.barker@open.ac.uk

Those unable to attend can take part in a webinar which will feature edited highlights from the event, and a summary report of the findings on strategy.

It takes place on Tuesday 26 February. Further information will be posted on the Business Perspectives blog.

The next theme in the Business Perspectives programme is Leadership and it will again feature a face-to-face event (London 25 April 2013) followed by a webinar and summary report. The final quarter’s theme will focus on Entrepreneurship.

Average: 2 (4 votes)

Thursday, 7 February 2013. Marriott Victoria and Albert Hotel, Manchester The series of Business Perspectives events, hosted by The Open University (OU) Business School, aims to bring together practitioner expertise and the latest academic research and insight. This, the second of the Business Perspectives events, will focus on how businesses can deliver a clear and coherent ...

Business Students 2013

Hey guys

Anyone starting the Business Studies BA this april?

Looking forward to working with you

Chris Walters

Hey guys Anyone starting the Business Studies BA this april? Looking forward to working with you Chris Walters

Chris Walters - Sat, 19/01/2013 - 22:42

General discussion

8 comments

Leadership and Management - April 2013

Hi there, I am starting Leadership and Management in April - just wondered if there was antyone else out there looking for a study buddy in the Guildford area of Surrey.

Thanks,

Darren.

Average: 1.5 (2 votes)

Hi there, I am starting Leadership and Management in April - just wondered if there was antyone else out there looking for a study buddy in the Guildford area of Surrey. Thanks, Darren. 1.5 Average: 1.5 (2 votes)

Courses

4 comments

What does snow cost the economy?

Hoorah, it’s snowing in the UK again! Time to have a snowball fight, build a snowman and have a few unplanned days off school and work. But what about the economy? The OU's Helen Roby explains on OpenLearn.

Average: 1.8 (5 votes)

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