In the headlines: Starbucks, 4G and festive adverts

Starbucks in the tax avoidance dock, 4G launching with Kevin Bacon in tow and the festive TV advert war all made the news this week. Steven Perryman rifles through the week’s headlines so you don’t have to

1. Tax – Starbucks in the dock

It seems that the arrival of the red cups in Starbucks – an event that gets way more traction than it should (a countdown website? Really?) – has actually spelt danger for the American coffee brand. Its had a tough week.

It started at the House of Commons where Troy Alstead, its Chief Financial Officer, was plonked in front of a public accounts select committee to defend its UK tax arrangements. It didn’t go well.

Trying to explain how the company hasn’t paid a penny of corporation tax in three years, but has an oddly high ‘royalty fee’ going to its European HQ in the Netherlands, proved tough with a horseshoe of MPs surrounding him dissecting every word.

But it was the claim that it has only made a profit once in its 14 years that proved too much, with Austin Mitchell MP finally snapping. ‘My heart has begun to bleed for you,’ he snarled. ‘I’m going to have to rush out to Victoria Street and have a double caramel macchiato because you’re doing so badly.’

It could have been worse: he could have worked for Amazon. Andrew Cecil, the online retailer’s Director of Public Policy (erm, where is the finance exec?), was accused of being ‘totally evasive’ after failing to explain who owned the company, and was unable to detail the income made by the British arm of his business. In the end he was sent away with derision ringing in his ears and calls for Amazon to send someone more fitting.

As if all that wasn’t enough for Starbucks, the Daily Mail has also started its own crusade against the coffee chain. The charge? Its free wifi encourages children to look at porn whilst they sip their coffee, obviously.

Beneath the sensationalist headline and inevitable hyperbole is a worthy discussion point.  With the Lords contemplating legislation to require internet service providers and phone companies to censor their internet connections by default, a new ethical debate has rightly emerged. Cory Doctorow kicked off the debate in The Guardian this week by arguing that filtering won’t work and will put power into censorware firms, helping cover up human rights abuse. Definitely one to watch.

But Starbucks shouldn’t feel too aggrieved. As Matt Packer argued here on AAT Comment this week, the general public find big brands hard to hate as they are just too convenient and engrained in our lives to have antipathy for.

And they won’t be the last to face such scrutiny, especially with HMRC’s new campaign to crack down on tax avoiders launching this week. We couldn’t help but notice that the new M&C Saatchi-designed poster to accompany the campaign bears a striking resemblance to the ‘devil eyes’ General Election poster from 1997. The target for that poster? Tony Blair. The target for the new poster? Tax avoiders like Tony Blair. Just a coincidence, surely?

2. Business – gas companies feel the chill

Feeling the chill? If you’re not, you could be with news that gas prices are on the increase this winter. Feel warmed, then, that the big power companies may be about to be the next set of corporates to get a public flogging.

This week it was announced that the City watchdog, the Financial Services Authority, is investigating claims by a whistle-blower that Britain’s £300bn wholesale gas market has been ‘regularly’ manipulated by some of the big power companies, exploiting weaknesses that echo the recent Libor scandal.

Just weeks away from the Autumn Statement there was more bad economic news, with research by the Social Market Foundation think-tank (SMF) showing that George Osborne will need to cut government expenditure or raise taxes by £48bn in the next Treasury spending round.  What with that and news that the City of London can expect to lose its crown as the leading global financial centre this year, it’s looking like a bleak winter ahead for the Chancellor.

Although it hasn’t all been bad news, with UK unemployment falling to its lowest total for more than a year. And accountants will be pleased to hear of reports of the profession seeing an increase in pay and demand, despite stagnation in other careers.

HMRC’s Real Time Information (RTI) bandwagon continues to roll on with a pilot scheme going ahead with as many as 250,000 employees between now and the end of March next year.

ICAEW has waded straight into HMRC, pointing out that its proposed RTI scheme is ‘at best unrealistic and at worst impossible’. Kevin Reed of Accountancy Age, meanwhile, argued this week that the answer could be to push back implementation another year.

3. Technology – EE footlooses ahead of its rivals with Kevin Bacon in tow

In technology the UK’s first 4G network has officially launched via EE, accompanied by a suitably ubiquitous advertising campaign (we would love to know how much EE slipped Kevin Bacon for those TV ads).

It was announced this week that the telecoms regulator Ofcom has given mobile operators four weeks to join the auction for superfast mobile broadband spectrum. The auction – pencilled in for next year – is expected to raise £4bn.

How Vodafone must be looking forward to that, with the news this week the mobile phone giant made a loss of £1.98bn, compared with a net profit of £6.68bn a year earlier. How it must wish it had the foresight of EE.

Which begs the obvious question: how did EE side-step the auction process anyway and get ahead of the game six months early? Well, the answer is by reusing a section of its own spectrum allocation previously set aside for 2G use. With initial reviews of the solitary 4G service this week proving very positive (just don’t mention the cost), the boffins at EE really have got every excuse to Footloose at the Christmas bash this year.

And finally – The Snowman takes on ‘Mum’

The festive season really is upon us and the retail giants are about to go to war. Sainsbury’s landed the first blow this week with reports that it has posted a 2.5% rise in half-year pre-tax profits increasing its market share to 16.7%, its highest in almost a decade. Tesco, the perennial market leader, is on the back foot already.

But the real battle will be on our TV screens, with the battle of the Christmas adverts now in full swing. And how they need to work this year, with news that there has been a fall in UK retail sales stoking fears that Britain is heading for a triple-dip recession.

How important retailers are seeing their adverts is best illustrated by John Lewis’s £6m ode to The Snowman, which the retailer rather extravagantly filmed on location in New Zealand. Nice work if you can get it.

But the real headlines have been made by Morrisons and, notably, Asda, for their rather stereotypical – or, as some are arguing, sexist – takes on the festive period. Dad wrestling with the Christmas tree, Mum peeling the spuds – and Nan reading 50 Shades of Grey in the corner. It’s all there:

Welcome, finally, to the silly season.

Steven Perryman is AAT‘s Editorial Manager

Steven Perryman is AAT Comment's former Content Editor.