Skinflint's City Diary

It seems a bit bah humbug to be beastly about charities (I am not referring to dubiously conceived private charitable trusts) at this time of year but since this is the time they come most to notice perhaps it is inevitable that one looks a little more closely. They deserve a second glance. When last I wrote about Shelter (December 7) 1 did not mean to imply it had produced only a report on tied accommodation and a radio' phone-in show under Douglas Tilbe's rule there, merely that these were the only worthwhile major projects there. So Tilbe's letter a fortnight ago does nothing to change my view, though the three other reports he mentions do not seem a startling volume of output, irrespective of quality. But this really raises the question of what a charity ought to be doing. Should they be helping the poor or producing reports? The former seems the obvious charitable work and the latter the prerogative of politically-minded pressure groups, but it could be argued that persuading the government to change policies could in the long term do more for the needy. The problem is, however, that persuasion of this type does inevitably become political, diverts attention and resources from a group's original function, and alienates some of its backers.

Influencing government policy or public opinion is a perfectly honourable course — so long as the case is sound and the arguments truthful — but it accords ill with charitable work. So a body must choose where its priorities lie. Once the decision is made the rest of us may then have criteria for whether we wish to support the aims and also judging whether the body is effective.

To turn from generalities back to Shelter, I agree with Mr Tilbe that it has been doing sterling work housing the homeless and advising the poor. (Though I am intrigued by his reference to the regional staff as professionals — professional whats?) If a management consultant were to examine such work his concern would be whether the staff and the organisation were right for the work and whether the work was producing the best results possible. None of which would be easy.

Incidentally, I am sorry Mr Tilbe was forced to live in a slum for ten years but would point out that such an experience no more suits a person to run a campaign for the homeless than having operated a lathe is a necessary qualification for a man running British Leyland.

But in any case the major scandals are not with institutions like Shelter which, whatever reservations one may have, are bona fide charities. Many of the charitable organisations operating in Britain are wasteful to the point of lunacy, but are in their incompetent way trying to help people. What is far more deserving of a second look is the sort of trust which purports to be a charity but is merely a devious way of avoiding death duty and capital gains tax and is, in effect, the private bank of the donor.

Which reminds me that one senior industrialist informs me it is possible to get round the gifts tax by a father playing a game of poker with his son and losing all his cash in the process.

Better still, I have heard that the most effective method of avoiding the capital transfer tax is for a parent to form a E100 company in favour of his children and to work it up to the disadvantage of his own capital, through favourable loans and so on.

What is the Treasury doing to us?

Claws of Bonn

At last a message is coming through from the cloud-cuckooland where British Leyland and its chairman have lived for far too long. Even its imprudent bankers have decided to stop throwing good money after bad and have drawn the line at further loans, so BL has sidled under the wing and into the claws of Benn.

It was perhaps predictable that no government would incur the political odium of causing the widespread unemployment that would have followed the logical 'course of allowing the suicidal company to pursue its chosen route. But we cannot afford blank cheques. One condition for propping up this legless duck should be the immediate departure of its chairman — the way Lord Stokes has for years poured out anodyne euphoria about his company shows ignorance or irresponsibility. For it has been obvious to anyone who bothered to add up the figutes that the company has been dead for some time.

Its net short-term debt was immense, its need for cash considerable. On top of that, a stagnant level of output (production last year was below the level of six years earlier) could never generate enough cash flow to reduce expensive debts and fund investment. So it needed further working capital.

To help the indebtedness problem the company's bankers, for reasons not readily obvious to outsiders, were prepared to allow it to convert its short term into long term debt. In addition BL went about selling off some subsidiaries. All of which is rather like rearranging the furniture when the house is on fire.

The predictable result is that Lord Stokes is now knee-deep in ashes. Not that he was alone hi myopia. The serried ranks of heads beneath the sand included many stockbrokers who continued to advise clients to buy BL shares through several years of graceful and inexorable price slide. Which confirmed a lingering suspicion that brokers know little more about companies than intelligent investors, and in this case could not even interpret an Extel card; but judging from the share perfor mance investors could.

And of course there are the workers. Well, to be accurate, the employees. Another precondition for pumping our money into the company should be that labour costs per car are comparable with other countries. How this is achieved is immaterial; reduced wages, increased output, fewer workers are some. options. And these costs should be calculated net of strikes.

On many counts the BL management and employees can be indict ed for incompetence, and the inability to see ahead. But on One count the management is most culpable — it should long ago have seen this crisis coming and done something earlier to avert it Two years ago there were options open which the current disaster has closed. The managers could have done some much more ruthless pruning; they might have been more free to decide whether to concentrate on the high cash flow but low profit Austin-Morris side or the high profit, low turnover Rover Triumph side; they might indeed have contemplated merging with some large organisation (not necessarily British) which had the cash and management to pull BL round.

None of this is now possible, and the fault must be with Lord Stokes.

I have nothing against the man personally — he is very pleasant, affable and charming man, and a first rate lorry salesman — but it seems he is not up to the strategic thinking BL needed. And presuma bly this applies to his more realistic but still unsuccessful number two, John Barber. He has an impressive reputation but he was finance director of AEI and when GEC rescued that company the AEI finances were not that glorious.