I owe
my buddy, Paul McGill, an apology. Fifteen years ago, we disagreed over whether
or not it was acceptable for Tesco and the other supermarket big boys to muscle
out small high street shops that had sold high-quality produce for several
generations. I reasoned that whilst it was undeniably unfortunate for the small butcher and baker, who simply could not compete with the
hyper-stores, that was simply brutal commercial reality. Tesco and Co were able to offer
the consumer greater choice and better quality at lower cost through their
massive purchasing power. What was wrong with that? It was a win-win for everyone, apart from the butcher
and the baker.
my buddy, Paul McGill, an apology. Fifteen years ago, we disagreed over whether
or not it was acceptable for Tesco and the other supermarket big boys to muscle
out small high street shops that had sold high-quality produce for several
generations. I reasoned that whilst it was undeniably unfortunate for the small butcher and baker, who simply could not compete with the
hyper-stores, that was simply brutal commercial reality. Tesco and Co were able to offer
the consumer greater choice and better quality at lower cost through their
massive purchasing power. What was wrong with that? It was a win-win for everyone, apart from the butcher
and the baker.
Paul vehemently disagreed – I seem to recall coffee cups getting
knocked over in the heat of it – maintaining passionately that, in the long run, quality
would inevitably decline as the supermarket giants relentlessly drove down
prices and competed to the death.
knocked over in the heat of it – maintaining passionately that, in the long run, quality
would inevitably decline as the supermarket giants relentlessly drove down
prices and competed to the death.
A few years ago, when the BBC announced that, on the High Street, one in every eight pounds
is spent in Tesco stores, I congratulated myself on sticking to my guns in the
face of my friend’s powerful onslaught. Those guys are geniuses, I thought,
lost in admiration.
is spent in Tesco stores, I congratulated myself on sticking to my guns in the
face of my friend’s powerful onslaught. Those guys are geniuses, I thought,
lost in admiration.
But I was wrong and it seems Paul was spot-on. In the
last few weeks it has become clear that in a nightmarish, scarcely believable
tale of poorly-understood plots and sub-plots, extreme pricing competition, a
complex global food chain, sleepy regulators and a government department that
failed to read the signs, the beef bolognaise you last consumed could very
easily have been Romanian horse bolognaise. Worse, it turns out that Romanian horses
suffer endemically from some type of Aids-related virus, (Equine
Infectious Anaemia) which is why
they are subject to onerous export restrictions by the rest of Europe. (Want to know more? Watch this). It also turns out that it’s very
straightforward to mince up a diseased horse (cost: zero Euros) and label it as
prime quality, great value, beef (sale price: 500 Euros). You can understand the business model.
last few weeks it has become clear that in a nightmarish, scarcely believable
tale of poorly-understood plots and sub-plots, extreme pricing competition, a
complex global food chain, sleepy regulators and a government department that
failed to read the signs, the beef bolognaise you last consumed could very
easily have been Romanian horse bolognaise. Worse, it turns out that Romanian horses
suffer endemically from some type of Aids-related virus, (Equine
Infectious Anaemia) which is why
they are subject to onerous export restrictions by the rest of Europe. (Want to know more? Watch this). It also turns out that it’s very
straightforward to mince up a diseased horse (cost: zero Euros) and label it as
prime quality, great value, beef (sale price: 500 Euros). You can understand the business model.
In addition and separately, although
horses in and of themselves aren’t dangerous to eat (they taste like, er,
beef), many horses (particularly race horses) are regularly injected with a
strong painkiller phenylbutazone (“bute”). Horse racing in the United States is huge
business. Horses are pushed to the very limit and, when they get hurt, they are
often administered bute and then pushed some more. It’s horrifying
reading. When they
are finally put out of their misery, it appears the bute-filled horses are often
exported to Europe where, because no-one is monitoring properly, they sometimes
enter the food chain. If consumed by humans, bute causes aplastic anaemia and is potentially carcinogenic.
horses in and of themselves aren’t dangerous to eat (they taste like, er,
beef), many horses (particularly race horses) are regularly injected with a
strong painkiller phenylbutazone (“bute”). Horse racing in the United States is huge
business. Horses are pushed to the very limit and, when they get hurt, they are
often administered bute and then pushed some more. It’s horrifying
reading. When they
are finally put out of their misery, it appears the bute-filled horses are often
exported to Europe where, because no-one is monitoring properly, they sometimes
enter the food chain. If consumed by humans, bute causes aplastic anaemia and is potentially carcinogenic.
And then there’s some other murky connection with Poland.
For several reasons, then, you really do not want to
be eating horse when you believe you are eating beef.
In short, there is intense pressure on supermarkets to deliver food at affordable prices in an austere environment where many people have little money to spend, at the same time as food production costs are soaring. Something had to give, and, as government food inspectors have been steadily culled due to limited resources, it wasn’t difficult for someone in the food supply chain to switch expensive, genuine ingredients for cheap, false substitutes. In fact, it was only because an enterprising food safety officer in Ireland decided to check for horse DNA, that any of this was uncovered.
be eating horse when you believe you are eating beef.
In short, there is intense pressure on supermarkets to deliver food at affordable prices in an austere environment where many people have little money to spend, at the same time as food production costs are soaring. Something had to give, and, as government food inspectors have been steadily culled due to limited resources, it wasn’t difficult for someone in the food supply chain to switch expensive, genuine ingredients for cheap, false substitutes. In fact, it was only because an enterprising food safety officer in Ireland decided to check for horse DNA, that any of this was uncovered.
Is there anything we can learn in our own pensions
industry from this truly abysmal tale? Well, for a start, it is clear that any
industry is only as safe as its regulator is competent. If he or she falls asleep on
the job, doesn’t understand that a serious problem is unfolding, can’t spot the
tell-tale warning signs and doesn’t have a game plan, things can and will spiral out of
control.
industry from this truly abysmal tale? Well, for a start, it is clear that any
industry is only as safe as its regulator is competent. If he or she falls asleep on
the job, doesn’t understand that a serious problem is unfolding, can’t spot the
tell-tale warning signs and doesn’t have a game plan, things can and will spiral out of
control.
The Pensions Regulator and the UK Government preside over a pensions industry in deep crisis. Between them, there are major policy decisions to be made in the near future: Should pension
liabilities be discounted using market interest rates and inflation
expectations (as is currently the case) or should they be
smoothed? To what
extent should the corporate sponsors of defined benefit pension plans be
obliged to fund the deficit? Should pension plan trustees be properly qualified
and trained before they are permitted to make investment decisions? Is auto-enrolment a good idea and, if so,
has the government really thought through exactly how to make it work? What amount should we be obliged to contribute to our health care in old age? Since
there is no money in the kitty, the government is under insane pressure to lift
a little here, a little there, from pension benefits (like switching pension inflation indexation from Retail Price Indexation to Consumer Price
Indexation) – after all, it won’t be around when the chickens come home to
roost in thirty years’ time. Should an independent expert body scrutinise these things in order to prevent the pensions equivalent of not-so-much
a dog’s breakfast, more a Romanian equine lunch?
liabilities be discounted using market interest rates and inflation
expectations (as is currently the case) or should they be
smoothed? To what
extent should the corporate sponsors of defined benefit pension plans be
obliged to fund the deficit? Should pension plan trustees be properly qualified
and trained before they are permitted to make investment decisions? Is auto-enrolment a good idea and, if so,
has the government really thought through exactly how to make it work? What amount should we be obliged to contribute to our health care in old age? Since
there is no money in the kitty, the government is under insane pressure to lift
a little here, a little there, from pension benefits (like switching pension inflation indexation from Retail Price Indexation to Consumer Price
Indexation) – after all, it won’t be around when the chickens come home to
roost in thirty years’ time. Should an independent expert body scrutinise these things in order to prevent the pensions equivalent of not-so-much
a dog’s breakfast, more a Romanian equine lunch?
This horse / beef debacle is
a blaring klaxon wake-up call to every regulator and government department. Now
would be a very good time to sit with your strategists and advisors and think
through all the possible nasty stuff that could be unfolding right now in your own back
yard as a consequence of your actions, or inactions – as the case may be.
a blaring klaxon wake-up call to every regulator and government department. Now
would be a very good time to sit with your strategists and advisors and think
through all the possible nasty stuff that could be unfolding right now in your own back
yard as a consequence of your actions, or inactions – as the case may be.
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