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The French Revolution is synonymous with nationalism. In fact, there can be little doubt that the concept of a nationalist revolution was born from the discord that built up in and around the periphery of France during the 1780’s. There was, however, little cohesion or malice aforethought with regards to events that took place after the storming of the Bastille in 1789. Rather than being a planned experiment in nationalism, the French Revolution should instead be interpreted as the result of pent up forces and frustrated political ambitions that had been fermenting in France and throughout Europe for the previous one hundred years. The nationalism of the revolution era was thus rare; a total kind of nationalist ideology that in theory was concerned with furthering the ambitions of ‘la patrie’ (the nation) but which in reality was too dynamic for its own good. The various modes of political office that dominated France over the forthcoming decades were wholly unprecedented and unable to be contained within the national borders of France alone. As Bouloiseau declares, “the regime’s intentions were pure, but it lacked the means to put them into practice.”^[1]

For the purpose of perspective, the following examination of the role that nationalism played in the French Revolution and Napoleonic Wars must adopt a chronological approach, attempting first to trace the genesis and subsequent evolution of the nationalist uprising before attempting to draw a definitive conclusion as to why the nature of the revolution was far too complex to be explained in simple ideological terms. First, however, a definition of nationalism within the specific historical context in which it was formed must be ascertained in order to establish a conceptual framework for the remainder of the discussion.

Nationalism could not have emerged as a populist form of political ideology without there first having been the introduction of the paradigm of the ‘nation?state’, which was first institutionalised after the Peace of Westphalia in 1648. France, Spain, Prussia, Switzerland, Holland and Sweden all signed treaties during the course of 1648 bringing to an end a variety of international conflicts that had beset the European continent for the previous eighty years. The treaty acknowledged the political legitimacy of states on the European mainland, giving rise in the process to the idea of international relations – the foundation of modern foreign policy. This was an important break with the past where relations between countries had been conducted via the historical continental monarchies and the ‘ancien regime’ that had governed feudal, pre?industrial Europe for centuries. After 1648 the watershed notion had been implanted which suggested that the rule of the old continental monarchies was coming to an end and that it would be the nation?state that would become the determining factor in political affairs in Europe in the future. It is a significant point and one that should be borne in mind throughout the remainder of the discussion: without the Peace of Westphalia there could not have been a nationalist revolution, neither in France or anywhere else. Before it, it is difficult to conceive of nationalism in the modern form that is talked of today.

The revolution itself was the result of a century of frustration that had built up around the inability to turn this new concept of the nation?state into a political reality. For instance, despite the increasing urbanisation and industrialisation of the country the monarchy, nobility, aristocracy and the landowners continued to economically and politically dominate France throughout the opening decades of the eighteenth century. Moreover, as was the case with the last days of the Roman Empire, the behaviour of the traditional elite in France appeared to get more lavish and decadent with each passing year so that, by July 1789, France was absolutely ripe to experience what Marxists would understand as a ‘revolution from below’. The intellectuals and the bourgeoisie were able to use a variety of oratorical and politically inflammatory means of inciting the disaffected French masses into open rebellion at this time. One of these means was nationalism. By constantly claiming that the monarchy and the nobility were destroying the cultural fabric of France, the leaders of the revolution (bourgeois men such as Maximilian Robespierre) were able to quickly turn a large?scale riot into a wholesale nationalist revolution. In this sense, the dictatorship of Robespierre and The Terror that took effect from July 1793 to July 1794 should be seen as marking the birth of political modernity.

“Robespierre is not so much the heir of Enlightenment as the product of the new system called Jacobinism, the beginning of modern politics.”^[2]

Modern politics in this instance is a pseudonym for nationalism, which after the French Revolution became the defining concept in European politics until the end of World War Two and the destruction of the Nazi State in 1945. Indeed, the link between the revolution, nationalism and what the twentieth century would come to understand as fascism must at this point be underscored. Fascism, much like the political dictators of the French Revolution, was only able to come to power via a protracted period of liberal decadence having taken place beforehand. Thus – in much the same way as the leaders of the French Revolution – right wing fascist leaders used nationalism as a means of highlighting the need to undergo a revolutionary national re?birth; to attempt to form a phoenix from what they perceived as the ashes of political ineptitude and cultural decadence.

“Fascism is a genus of political ideology whose mythic core in its various permutations is a palingenetic form of populist ultra-nationalism.”^[3]

The association with fascism is also useful for the way in which it spreads light on how the revolution was unable to be contained with the sovereign national borders of France alone. Like Nazism, nationalism in the context of the French Revolution was a highly unstable ideological solution to a long-term socio?political problem. The revolution likewise required an external enemy in order to maintain popular support and political legitimacy. Thus, war became the lifeblood of the revolution as, during the course of the 1790’s the leaders of the French Revolution decided that it was no longer enough to have successfully removed from power the former political elite from France; rather, an expansion of the ideology and the means of putting that ideology into practice abroad became the raison d’etre of the regime.

“During the 1790’s the policies pursued by France undoubtedly contributed to mass political mobilisation elsewhere in Europe.”^[4]

The Napoleonic Wars which followed should be seen as the wars of nationalism which raged across the European continent over the following two decades. Yet there was a tangible sense of a facade appearing whereby the French claimed to be conquering foreign territory in order to transfer the libertarian, enlightened principles of the revolution to lands that had hitherto not been afforded such a valuable political and social insight when in fact the struggles that Napoleon embarked upon across the continent were simply a means of affirming the French nationalists’ belief that they alone were the superior European race. Nowhere is this better illustrated than in the invasion of Russia – again a move that strikes immediate comparisons with Hitler and Nazi Germany. By crossing the Urals and moving into the realms of Russian authority, Napoleon finally discarded the mask of the revolution that he had so far been sporting. In no way could the take over of Russia be seen as anything other than the expression of nationalism over political theory. Russia at the time was still an almost entirely feudal country with no industrialisation to speak of even in the major towns and cities such as St. Petersburg. In addition, there was no sophisticated social class system to speak of which could have proved to be a launch pad for a nationalist revolution taking place in Russia on anything like the same scale that had happened in France. Therefore, the invasion was, in the final analysis, simply due to the will of Napoleon and the nationalistic French to increase the revolutionary empire by overcoming the historical pariah of European politics. Furthermore, just like all the other nationalist leaders who went before and came after him, Napoleon was ultimately proved to be incorrect: nationalism (as manifested by the Tsar and the Russian civilian population) was a force that was just as capable of defending a sovereign border territory as it was of invading and conquering it.

Nationalism was clearly a double?edged sword so far as France and Napoleon were concerned. Essentially, the more land the French army seized, the more the Prussians and the English revelled in their own forms of nationalism which were ignited in the first place by French aggression and sustained by the military ambitions of its dictatorial leader. It remains within the realms of conjecture as to whether or not the British Empire would have been established as rapidly and successfully as it was without the experience of the Napoleonic Wars to both inspire as well as crystallise it. There can be little doubt that the rivalry of the two (which had been meted out in the colonial wars that took place at the same time in North America and Canada) had been the result of a growing sense of tension due to the nascent nationalism of both countries. The French Revolution proved to be the catalyst behind the ultimate expression of this nationalistic warfare between the United Kingdom and France – a potent political concoction whose reside is still very much in evidence in the modern era.

Mention at this point must be made of the ideological and philosophical impetus behind the French Revolution in order to manufacture an argument against the idea that the uprising was solely the revolt of nationalistic fervour, which it clearly was not. No seizure of power by a people over a ruling government can be anything other than the combination of a number of highly complex social, cultural, economic and political processes.

The build up to the storming of the Bastille has been described as the golden age of Enlightenment – an epoch that oversaw the signing of the Declaration of the Rights of Man in America (July 1776), which signalled the notion of all men being born equal and of human beings having been born with certain rights that must be upheld by national and international law. This vision of liberalism that was sweeping across the early modern western world was not initially a vision that was inspired solely by nationalism. Certainly in the United States it is not possible to speak of a nationalist revolution simply because the thirteen colonies at that time consisted of such a mixture of European immigrants as to make the concept of a nation?state wholly inadequate for the newly conceived ‘Americans.’ The ideal was, rather, a child of ideological and philosophical writings that emanated predominantly from France via contemporary cultural commentators such as Rousseau and Voltaire. Again, these ideals did not accentuate the nationalism inherent within Enlightenment. Instead they promulgated an essentially socialist view of a new European order that was designed upon a kind of meritocracy rather than values pertaining to inheritance; where ability was seen as more important than historical connection.

“Anyone who excels in something is always sure to be sought after, opportunities will present themselves and merit will do the rest.”^[5]

This inexorably socialist, libertarian seed that was first planted in what would become the French Revolution is a vital tool for understanding how nationalism alone cannot be seen as responsible for the events of 1789 and the ensuing wars which followed. The ideological impetus behind the revolution was one that genuinely envisaged a utopian new world order that would not be dictated by corrupt and inadequate people the likes of which had conspired to ruin France since the Middle Ages. The reasons as to why this ideal of a revolution from below turned into a large scale international war is entirely due to the make up of mankind, which is especially inclined to be corrupted by power and to look towards routes of making profit out of the conquer and subjugation of alien races. The point has been made before and it must be made again: this kind of overt nationalism that took control of France during the late eighteen and early nineteenth century was the driving force behind all intercontinental relations over the following one hundred and fifty years. The French Revolution thus oversaw the beginnings of the reign of realpolitik when military might became the only means of maintaining dominance in a Europe increasingly influenced by cultural intolerance and overt political nationalism.

Conclusion

“1789 meant a revolution in ideas, in institutions and individual opportunities, which a quarter of a century of upheaval and war made irreversible.”^[6]

As the above quotation suggests, the revolution that took France by storm during the final years of the eighteenth century was an extremely potent political process that seemed to gather intensity as the success first of the bourgeois dictatorship of The Terror and second of the military dictatorship of Napoleon cemented the ideals of the Enlightenment upon the European mainland. However, although this process might have began as an expression of egalitarian views pertaining to the freedom of all men, the reality of the revolution was one that spoke volumes about the essentially violent nature of the human condition and the extent of the socio?political frustrations that had been steadily rising since the middle of the previous century. The greatest beneficiary of this volatile mixture was without doubt nationalism – the only ideological force that was able to hold together the disparate aims and ideals that conspired to make up the French Revolution. Nationalism and the defence of la patrie were used as rallying cries by the petty bourgeoisie, the revolutionary instigators of the Terror and the imperial machinations of the Napoleonic war machine.

To what extent these people were successful in their aims of inciting a nationalist revolution remains an issue that still resides predominantly within the realms of conjecture. There certainly appears to be a major schism between the nationalism that gripped the streets of Paris and the other chief urban centres of France and the relative tranquillity of the rural areas of the country that largely retained their bonds both to the nobility and to the ancien regime in the years that immediately followed the revolution^[7]. In the final analysis, the concept of la patrie meant very little to the uneducated proletariat working on the rural estates in the agrarian parts of the country where economic necessity took precedence over revolutionary rhetoric and nationalistic uprisings. This then suggests that nationalism is inexorably tied to industrialisation, urbanisation and the ability to wage mobile industrial warfare across a large land mass. This is exactly what happened one hundred and fifty years after the defeat of Napoleon at Waterloo when the distorted vision of nationalism that inspired the French Revolution came back to haunt Europe and the world on an unimaginable scale.

BIBLIOGRAPHY

Andress, D. (2005) The Terror: Civil War in the French Revolution London: Little, Brown & Co.

Bouloiseau, M. (1983) (translated by J. Mandelbaum), The Jacobin Republic, 1792?1794 Cambridge: Cambridge University Press

Dann, O. and Dinwiddy, J.R. (1988) Nationalism in the Age of the French Revolution London: Continuum

Furet, F. (1981) (translated by E. Forster), Interpreting the French Revolution Cambridge: Cambridge University Press

Griffin, R. (1991) The Nature of Fascism London: Pinter

Merriman, J. (2004) A History of Modern Europe Volume 2: From the French Revolution to the Present London: W.W. Norton & Co.

Pilbeam, P.M. (1995) Republicanism in Nineteenth Century France, 1814-1871 Basingstoke: Macmillan

Rousseau, J-J (1971) (introduction and translated by J.M. Cohen) The Confessions London: Penguin

Voltaire (1964) (introduction and translated by J. Butt) Zandig London: Penguin

Zeldin, T. (1980) France 1848-1945: Intellect and Pride Oxford: Oxford University Press

Selected Articles

Biddis, M. (October 1994) Nationalism and the Moulding of Europe, in, Journal of the Historical Association, Volume 79, No. 257 London: Blackwell

Introduction

The Capital Asset Pricing Model developed by William Sharpe has significant similarities with Harry Markowitz’s Portfolio theory. In fact, the later is rightly considered as the next logical step from the latter, with both based on similar foundations.

There are also differences in how each model/theory is calculated, pertaining to risk considerations.

This paper’s main objective is to identify these differences while highlighting the similarities as well to put things into perspective.

The report will open with an overview of Markowitz’s portfolio theory and explain it further by means of describing the efficient frontier, the Capital Market Line, risk free asset and the Market Portfolio.

The report will then switch its attention to the Capital Asset Pricing Model and explain it further through the Security Market Line.

The report will then close by outlining the differences between the two with a view of answering the main objective.

What will come through in this report is that Markowitz’s portfolio theory uses standard deviation as its risk measure and takes into account all risk in an efficient portfolio, while the Capital Asset Pricing Model uses the beta co-efficient to measure risk and takes into account both efficient and non-efficient portfolios – further more it measures the risks of individual assets within the portfolio.

Modern Portfolio Theory

Modern Portfolio Theory (MPT) was introduced by Harry Markowitz, way back in 1952. At a high level it proposes how rational investors use diversification to optimise their investment portfolios and give guidance on pricing risky assets.

MPT assumes that investors are risk averse, i.e. given two assets A and B offering the same expected return, investors will opt for asset A if it is less risky. In effect, an investor who expects higher returns would need to accept more risk. The expected trade-off between risk and return depends on the individual’s level of risk aversion. The implication of this is a rational investor (a risk averse investor) will not invest in a portfolio if another one exists offering a better risk-return profile (Fabozzi & Markowitz, 2002).

For any given level of risk, investors will opt for portfolios with higher expected returns instead of those with lower returns.

Another assumption under MPT is that investors are only interested in the expected return and the volatility of an investment, as measured by the mean and standard deviation respectively. Investors do not consider any other characteristics, for example, charges.

In effect, based on the assumptions above, investors are concerned about efficient portfolios.

To explain portfolio theory further, let us consider the formula for the expected return and risk of a portfolio under MPT.

Suppose two assets A and B formed a portfolio in proportion (X) each, the expected return for that portfolio would be:

R(p) = X(a)R(a) + X(b)R(b), where:

R(p) = expected returns from portfolio

R(a) = expected returns from asset A

R(b) = expected returns from asset B

The standard deviation or risk of that portfolio would be:

SD(p) = v(X?aSD?a + X?bSD?b + 2XaXbRSDaSDb), where:

SD(p) = standard deviation of expected returns of portfolio

SDa = standard deviation of expected returns of asset A

SDb = standard deviation of expected returns of asset B

R = correlation coefficient between the expected returns of the two assets

The efficient frontier

Under MPT, Markowitz examined the efficient frontier curve. The efficient frontier curve gives a graphic presentation of a set of portfolios that offer the maximum rate of return for any given level of risk (McLaney, 2006). According to Markowitz, an efficient investor will opt for an optimum portfolio along the curve, based on their level of risk aversion and their perception of the risk and return relationship (Fabozzi & Markowitz, 2002).

Figure 1: Efficient Frontier Source: www.riskglossary.com

The curve in the diagram above illustrates the efficient frontier. Portfolios on the curve are efficient – i.e. they offer maximum expected returns for any given level of risk and minimum risk for any given level of expected returns. The shaded region represents the acceptable level of investments when risk is compared against returns. For every point on the shaded region, there will be at least one portfolio that can be constructed and has a risk and return corresponding to that point (www.riskglossary.com)

As aforementioned, each portfolio on the efficient frontier curve will have a higher rate of return for the same or lower level of risk or lower risk for an equal or better rate of return when compared with portfolios not on the frontier.

It is important to note that the efficient frontier is really made up of portfolios rather than individual assets. This is because portfolios could be diversified, i.e. investors can hold assets which are imperfectly correlated (Fabozzi & Markowitz, 2002). This will help to ensure that investors can reduce their risks associated with individual asses by holding other assets – a kind of set-off.

The Capital Market Line

The Capital Market Line (CML) is a set of risk return combinations that are available by combining the market portfolio with risk free borrowing and lending (www.lse.co.uk/financeglossary). The CML defines the relationship between risk and return for efficient portfolios of risky securities. It specifies the efficient set of portfolios can investor can obtain by combining the portfolio (which contains risk) with a risk free asset.

The formula for CML is:

E (r_c) = r(f) + SD(c)*[E(r_m)-r(f)]/SD(m)

Where:

E(r_c) = expected return on portfolio c

R(f) = risk free rate

SD(c ) = standard deviation of portfolio c

E (r_m) = expected return on market portfolio

SD(m) = standard deviation of market return

The CML indicates that the expected return of an efficient portfolio is equal to the risk-free rate plus a risk premium. Both risk and return increase in a linearly along the CML.

Figure 2: Capital Market Line Source: www.riskglossary.com

In Figure 2 above, the CML is the line touching the efficient frontier curve. It passes through the risk free rate (assumed to be 5%). The point where the CML forms a tangent with the efficient frontier curve is the point called the super-efficient portfolio.

The Risk free asset, Sharpe ratio and the Market Portfolio

The risk free asset pays a risk free rate and has a zero variance in returns, e.g. government short-term securities. When combined with a portfolio of assets the change in return and risk is linear.

The Sharpe Ratio is a measure of the additional return to be obtained about a risk free rate for a given portfolio compared with its corresponding risk. On the efficient frontier the portfolio with the highest Sharpe Ratio is known as the market portfolio.

The CML is the result of a comparison between the market portfolio and the risk free asset. The CML surpasses the efficient frontier with the exception of the point of tangency.

The Capital Asset Pricing Model

While the CML focuses on the risk and return relationship for efficient portfolios, it would be useful to consider the relationship between expected return and risk for individual assets or securities. The Capital Asset Pricing Model (CAPM) would be used for this.

CAPM is an extension of Markowitz’s Portfolio Theory or MPT. It introduces the notions of systematic and specific risks. Let us define each:

Systematic risk – this is the risk associated with holding the market portfolio of assets
Individual assets are affected by market movements
Specific risk – this risk is unique to an individual asset and represents that portion of an asset’s return which has no correlation with market movements.

CAPM assumes the following (McLaney, 2006, 199):

Investors are risk averse and maximise expected utility of wealth
The capital market is not dominated by any individual investors
Investors are interested in only two features of a security, its expected returns and its variance or standard deviation
There exists a risk free rate at which all investors may borrow or lend without limit at the same rate
There is an absence of dealing charges, taxes and other imperfections
All investors have identical perceptions of each security

This lends credence to the assertion that CAPM follows a natural progression from MPT. The assumptions are identical with the main difference being how risks are categorised and treated. This will be explored in detail in a later section.

Under CAPM, the market place will compensate an investor for taking a systematic risk but not a specific risk. The rationale for this is that specific risks can be avoided or minimised through diversification.

The formula for CAPM is as follows:

r = Rf + Beta x (RM-RF), where:

r = expected return on an asset

Rf = rate of risk free investment

RM = return rate of the appropriate asset class

Beta is the relative risk contribution of an individual security to the overall market portfolio. It measures the security risk relative to the market portfolio and ignores the specific risk. The beta equation is as follows:

Cov (i,M)/(SDm)?, where:

Cov (i,M) = covariance between market portfolio and security i

(SDm)? = variance of the market’s return

The betas for all assets are measured in relation to the market portfolio beta which is 1. In effect, if individual beta is greater than 1, then individual asset has a higher risk than the market risk. If individual beta equals 1, then individual asset risk and market risk are the same. If individual beta is less than 1, then the risk of that individual asset is less than the market risk.

The value of beta provides an idea of the level or size of the change in an asset’s return when a corresponding change in the returns of an overall portfolio is experienced (McLaney, 2006).

Beta has come under criticism from academics and investors who do not appreciate the value of beta as an appropriate risk measure. However, this is somewhat challenged by actual performance of the betas of portfolios and mutual funds. These are regarded as stable and can be used to predict future betas.

Security Market Line

CAPM can be applied by using the Security Market Line (SML). SML is a graphical representation showing the linear relationship between systematic risk and expected rates of return for individual assets. In the case of the SML, risk is measured by beta. It plots the expected returns on the y axis and the risk as denoted by beta on the x axis.

In other words, the SML expresses the linear relationship between the expected returns on a risky asset and its covariance with market returns. Its formula is:

Figure 3: CAPM and SML

The line in the diagram above is the SML.

Differences relating to MPT (CML) and CAPM (SML)

To explain the differences, it is useful to consider the relationships between risk and return in the perspective of CML and SML. CML compares the relationship from an MPT perspective, while SML does from a CAPM perspective.

The main difference pertaining to MPT’s relationship with CAPM is pertaining to risk.

Under Portfolio theory, CML gives an indication of expected returns in comparison with risk. Here the risk is measured in terms of standard deviation of returns. The rationale for this is CML represents the trade-off for efficient portfolios, i.e. the risk is all systematic risk (McLaney, 2006).

The SML on the other hand, indicates the risk/return trade-off, using beta as the measure of risk. In this case, only the systematic risk element of the individual asset is taken into consideration.

The reason why CML shows no individual security’s risk profile is because all individual securities have an element of specific risk, implying that they are inefficient. CML only looks at efficient portfolios.

The table below summarises the main differences between CML and SML

CML

SML

Scope

Covers efficient portfolios which consist of one risky asset and risk-free assets

Covers all capital assets

Measuring Asset Risks

Standard deviation is used

The beta coefficient or covariance is used

Objectives

CML aims to identify the optimum portfolios for investors

SML seeks to describe how assets are priced by efficient markets in equilibrium

Table 1: Tabular difference between CML and SML

Summary

As has been shown above, CAPM has been developed along the lines of Markowitz’s Portfolio theory. They both use expected returns and risk as the investor’s main determinant of their investment decisions. They both assume that investors are risk averse and do not consider anything else other than risk and returns.

However, there are some subtle differences which will now be summarised below:

Under Portfolio theory, the CML measures risk by standard deviation or total risk. The SML measures risk by beta or systematic risk under CAPM – it ignores specific risks
The CML graph is interested in providing information on efficient portfolios only. The SML graph on the other hand provides insight into both efficient and non-efficient portfolio and securities

REFERENCES AND BIBLIOGRAPHY

Books

Bodie, et al (2006) ‘Investments’ (7^th edition), McGraw-Hill/Irwin, London
Elton, E et al (2003) ‘Modern Portfolio Theory and Investment Analysis’, Wiley, London
Fabozzi, F. & Markowitz, H. (2002) ‘Theory and Practice of Investment Management’, Wiley, London
McLaney, E. (2006) ‘Business Finance – Theory and Practice’ (7^th edition), Prentice Hall, London
O’neill, W.J. (2002) ‘How to Make Money in Stocks’, (3^rd edition), McGraw-Hill, London

Internet Sources

www.lse.co.uk

www.riskglossary.com

www.wikipedia.com

In medieval times, the royal will was signified in documents bearing royal seal and was applied by one of the King’s ministers. Maitland has described this practice as being “the foundation for our modern doctrine of ministerial responsibility – that for every exercise of the royal power some minister is answerable”^[1]. This essay will consider the modern doctrine of ministerial responsibility and examine the extent to which it forms, in modern political times, the cornerstone of accountability in the UK constitution.

The convention of ministerial responsibility has been described by Loveland as “perhaps the most important non-legal rule within our constitution”^[2]. The convention may be said to be concerned with regulating the conduct of government activities, both in respect of Ministers’ relations with each other, and with the two Houses of Parliament^[3]. Ministerial responsibility comprises of two branches: collective responsibility and individual responsibility^[4].

Collective ministerial responsibility may be further reduced into three main rules: the confidence rule; the unanimity rule, and; the confidentiality rule^[5]. Through the operation of these rules, Ministers of the Government all appear to others to share the same policy opinions, whatever their own personal views. They are therefore collectively responsible for any decisions made by the Government and the Government as a whole should resign if it loses confidence. The doctrine of collective responsibility was stated in 2005 in the following form:

“Collective responsibility requires that Ministers should be able to express their views frankly in the expectation that they can argue freely in private while maintaining a united front when decisions have been reached. This in turn requires that the privacy of opinions expressed in Cabinet and Ministerial Committees should be maintained.”^[6]

It therefore follows that where a Minister does not wish to be publicly accountable to Parliament and the electorate for a Governmental decision, he should resign from the Government. This occurred, for example, when Robin Cooke resigned over the Labour Government’s decision to invade Iraq in 2003^[7].

Collective ministerial responsibility allows all members of Government to be accountable as a whole, thus avoiding arguments and blame-shifting between different Ministers and Departments. In this way, collective responsibility enhances the accountability of Government.

Individual ministerial responsibility is the convention that a Minister answers to Parliament for his department, with praise and blame being addressed to the minister and not civil servants^[8]. It has been said that “the fundamental purpose of the convention of individual ministerial responsibility is that it provides an important means of drawing information into the public domain”^[9] The principle has often been associated with the idea that ministers must resign in cases of official wrongdoing^[10] but it also encompasses Ministers’ on-going obligations to account to Parliament for their departments’ work^[11].

However, in 2000, Jowell and Oliver suggested that ministerial responsibility to Parliament had been “significantly weakened over the last ten years or so… so that it can no longer be said, in our view, that it is a fundamental doctrine of the constitution”^[12]. Their opinion may have been influenced by the structural changes in government. During the 20^th century tasks of the state expanded and vast Whitehall departments were created, with the effect that ministers could not oversee all aspects of the departments’ work^[13]. Executive ‘Next Steps’ agencies created since 1988 had the specific purpose of delegating managerial power. Indeed, as Turner states: “Ministerial responsibility, however, is a different matter in the modern era. It has shrunk, it seems, almost to nothing, thanks, in no small part, to the creation of “independent” agencies to undertake the work of government.”^[14]

Where civil servants have great authority, the question arises as to what extent a Minister is responsible for any acts of maladministration, and whether maladministration results in a duty to resign. Is it fair to hold the Minister responsible? If not, who should be and how does this affect accountability?

As Tomkins notes, during the Major Government’s office from 1990 to 1997 “Ministers and senior civil servants… proposed a number of initiatives that sought significantly to undermine the tenets of individual responsibility”^[15]. It was claimed that Ministers were responsible only for those decisions in which they were directly and personally involved. Michael Howard claimed, after serious failings leading to Prison escapes, that Ministers were responsible to Parliament only for policy matters, with “operational” failings falling outside the scope of individual responsibility^[16]. Furthermore, it was argued that where Ministers had misled Parliament, they should resign only if they had done so knowingly rather than inadvertently^[17].

In this way Ministerial responsibility was weakened, with accountability becoming more prominent. A minister may be said to be accountable to Parliament for everything which occurs in a department, having a duty to inform Parliament about the policies and decision of the department and to announce when something has gone wrong. However, this does not bring with it responsibility in the sense that the Minister takes the blame.

In 1997 the Ministerial Code reformulated ministerial responsibility to the effect that:

Ministers must uphold the principle of collective responsibility; (b) Ministers have a duty to Parliament to account, and be held to account, for the policies, decisions and actions of their departments and agencies; (c) it is of paramount importance that Ministers give accurate and truthful information to Parliament, correcting any inadvertent error at the earliest opportunity. Ministers who knowingly mislead Parliament will be expected to offer their resignation to the Prime Minister; (d) Ministers should be as open as possible with Parliament, refusing to provide information only when disclosure would not be in the public interest…; (e) Ministers should similarly require civil servants who give evidence before Parliamentary Committees on their behalf and under their direction to be as helpful as possible in providing accurate, truthful and full information…^[18]

This new formulation would suggest that it is now ministerial accountability rather than responsibility which forms the cornerstone of accountability in the UK constitution. Unless there is fully open Government, there may be situations which arise where no person will take responsibility for actions and Ministers’ relationship with the Civil Service will be fundamentally changed. As Hennessy points out: “For the Civil Service the buck-stopping question is of crucial importance. Under the doctrine of ministerial responsibility, ministers are the ultimate can-carriers for everything done by the civil service in their name”^[19]. This will no longer be the case where a Minister’s responsibility ends with alerting Parliament to a problem.

Bibliography

Allen, M. & Thompson, B., Cases and Materials on Constitutional and Administrative Law, 9^th Edition, (2008), OUP

Bamforth, N., “Political accountability in play: the Budd Inquiry and David Blunkett’s resignation”, (2005), Public Law, 229

Bradley, A.W. & Ewing, K.D., Constitutional and Administrative Law, 14^th Edition (2007), Pearson Longman

Brazier, R., “It is a Constitutional Issue: Fitness for Ministerial Office in the 1990s”, (1994), Public Law, 431

Cooke, R., The Point of Departure (2003), Simon and Schuster

Hansard, HC cols 31-46 (January 10, 1995)

Hennessy, P., Whitehall, (1989), Secker & Warburg

Hough, B., “Ministerial responses to parliamentary questions: some recent concerns”, (2003), Public Law, 211

Jowell, J. & Oliver, D., The Changing Constitution, 4^th Edition, (2000), OUP

Lewis, N. & Longley, D., “Ministerial Responsibility: The Next Steps”, (1996), Public Law, 490

Loveland, I., Constitutional Law, Administrative Law, and Human Rights: A Critical Introduction, 4^th Edition, (2006), OUP,

Maitland, Constitutional History,

Marshall, G., Constitutional Conventions, (1984)

Ministerial Code: a Code of Ethics and Procedural Guidance for Ministers (reissued, July 2005)

Tomkins, A., The Constitution after Scott: Government Unwrapped, (1998), Clarendon

Tomkins, A., Public Law, (2003), OUP

Turner, A., “Losing heads over the lost data”, (2007), 171, Justice of the Peace, 841

1

BACKGROUND AND INTRODUCTION

The All England Lawn Tennis and Croquet Club (“Club”) located at Wimbledon, is a private club founded in 1868. Its first ground was situated off Worple Road, Wimbledon, and the first Wimbledon Lawn Tennis Championship was instituted in 1877. By the turn of the century, Wimbledon, as the event had become known had grown in popularity and reputation, acquiring international status as the premier tennis event. By 1920, a company was formed to acquire and equip the present site at Church Road. A complex agreement governs and defines the relationship between the Club, the Lawn Tennis Association (LTA), the company, and Wimbledon as a self financing event. Profits from Wimbledon, held during June and July of each year, accrue to the LTA after meeting expenses of the Wimbledon tournament. LTA in turn utilises the surplus funds to develop tennis as a sport in Great Britain. A second company to exploit trademarks and brand opportunities was established in 1993, whereby any profits would accrue for the benefit of Wimbledon to improve the quality of the event for spectators, players, officials, and stakeholders. Surplus funds from Wimbledon that have been made available to LTA were 25.8 million in 2003. Wimbledon does not disclose revenue or sponsorship figures but it is estimated that it had a net income of ? 34 million during 2004. (Wimbledon 2005 and Schwartz, 2004)

Wimbledon, as an event does not appear to have a vision statement defined by Johnson and Scholes (2005) p13 as a “desired future state” or “aspirational statement.” Wimbledon has equally not published a mission statement, or “overriding purpose in line with the values or expectations of stakeholders.” (Johnson and Scholes, 2005, p13) However, given the close association with the LTA described above, it can be argued that the event’s underlying vision and mission are aligned and it is appropriate to quote the LTA’s vision, “to make Britain a great tennis nation,” and the mission statement, “more players, better players,” to give context to Wimbledon. (LTA, 2005) Wimbledon is marketed as an international event rather than a British event although British tennis derives the economic benefit. (Cambridge Econometrics, 2003)

Essentially a small business employing less than 100 full time staff, the club is a local tennis facility in South West London, with a web site, clubhouse, museum, and a shop for 50 weeks of the year. Its distinguishing feature is a seating capacity of 35,500 spectators to accommodate Wimbledon. The total area of the club including courts, premises, and car parks is 42 acres. There are 375 full members plus a number of honorary members (including past singles champions) and approximately 100 temporary members elected annually. The workforce increases to 6000 during the period of the tournament. (Wimbledon, 2005)

This report focuses on Wimbledon as a discrete, ring fenced event. It proposes an marketing communications strategy to the Club and the LTA committee, after due consideration of the macro, micro and market influences.

MACRO-ENVIRONMENT ANALYSIS

The environmental context of Wimbledon encompasses a number of driving or restraining forces that have the capacity to influence the effectiveness of the communication strategy.

PESTEL

A common framework is that of PESTEL comprising political, economic, socio-cultural, technological, environmental, and legal influences. (Johnson and Scholes, 2005.) Fill (2002) suggests that seasonality is an additional factor in an event environment. The framework provides broad data from which the key drivers of change can be identified.

Mega events on the scale of Wimbledon, which target an international market, and the success of which influences urban logistics such as transport and security, requires significant political support. (Bull, 2004) The United Kingdom government has established a set process for government involvement and investment that requires a clear assessment of benefits. This should also be seen in the context of post September 11^th security concerns that may affect Wimbledon. (Strategy Unit, 2002) The positive economic benefits in terms of tourism expenditure and promotion of London as a destination highlight the interdependence of the PESTEL influences and the host city. Socio-cultural influences such as changing population demographics in Wimbledon’s target audience needs to be considered in terms of media access and viewing patterns. (Fill, 2002) Emerging technologies were used during 2004 as innovative mediums for the first time to expand the audience reach. These included a combination of online media, video on demand, interactive television, and live coverage to Personal Digital Assistants (PDA) and mobile phones.

The impact on promotion strategy in the lead up to and during the championship requires careful analysis to maximise audience reach. (Schwartz, 2004) The environmental impact of Wimbledon is substantial, albeit over a short period, in terms of noise, traffic, waste management and other influences. The Merton borough in which the event is located is revenue dependant on Wimbledon’s success as part of its urban regeneration programme and hence supports the event upon which it in turn derives a benefit. An emerging influence is that of corporate social responsibility and re-investment back into the community. This has a positive impact on legal influences such as council regulations and bylaws. (Gratton et al, 1999) Seasonality affects Wimbledon in terms of weather and the time of year in which the event is held. (Fill, 2002 and Wimbledon, 2005)

Porter’s Five Forces

Inherent to the theory of marketing communication strategy is the notion of competitiveness and gaining advantage over competitors. Porter’s development of generic strategies and a five forces model of analysis of competition within an industry are useful in understanding Wimbledon as a unique event. (Johnson and Scholes, 2005) Wimbledon’s prestige and history allows it to follow a differentiated premium pricing strategy in which the objective is to “maintain the quality and character of the tournament and not to maximise income.” (Wimbledon, 2005) Although Wimbledon is a profitable venture in the event industry, the barrier to entry to a rival wishing to compete is high and the prestige of Wimbledon not substitutable in terms of world attention and focus. Buyer power is limited by the spectator facilities and hence access in high demand, whilst are suppliers fragmented without a single dominant player. Competitive rivalry between Wimbledon and other events is not material and hence unlikely to threaten Wimbledon. Arguably Wimbledon’s position may be threatened in the future if the dynamics of the macro environment change. However a marketing communication strategy that builds on the successes of the past that continues to capitalise on innovative, leading edge communication strategies will ensure an image re-invention for future audiences.

Product Life Cycle

Wimbledon has changed its strategy from the garden party approach of the early 20^th century through the skilful use of technology for its target audience in the 21^st century, demonstrating that whilst in a mature phase of the life cycle model as a brand, it can maintain market share through re-invention of its product delivery. (Czinkota, Ronkainen, and Tarrant, 1995)

MICRO-ENVIRONMENT ANALYSIS

Strategic Resources

The analysis of the macro-environment has indicated Wimbledon’s positive base for competitive advantages. The sustainability of competitive advantage in terms of capability is based on strategic resourcing that reflects the distinctive resources which allow the Club and its partners to generate a superior product at a premium price. This is based on Wimbledon’s tangible resources such as facilities and grounds as well as intangible resources such as information, reputation, and knowledge. Wimbledon’s competencies are represented by the activities and processes whereby it deploys its resources year on year, building, and learning from successes of the past and ensuring that they cannot be imitated, thus sustaining its competitive advantage. The path dependency of Wimbledon’s resources has evolved through its culture and history that is influenced by causal ambiguity implying that worldwide perception of Wimbledon would be difficult to replicate. (Johnson and Scholes, 2005)

Marketing Mix

The marketing mix is a key element of an integrated marketing communications plan. The concept has evolved from McCarthy’s 4P’s (product, price, place, and promotion) into different models that depend on their context. Recent developments have been the addition of personnel, physical assets, and procedures to the marketing mix forming the 7P’s in Booms and Bitner’s extended marketing mix model. This has especially reached acceptance in the discipline of services marketing and arguably Wimbledon’s combination of tangible and intangible resources, falls within that category. (Goldsmith, R. E. 1999) Goldsmith, 1999, p178 proposes an eighth P, “personalisation” in terms of individual needs and wants of the consumer. Wimbledon’s product offering is based on a combination of tangible cues represented by its physical offering, and intangible attributes such as prestige and status of the event.

Premium brands such as Rolex have for example endorsed Wimbledon in their capacity as the “official timekeeper of the tournament” for over 25 years at a cost of approximately ?7 million. (Schwartz, 2004) Direct pricing is represented by the gate price for access, and indirect pricing through the sale of television rights to channels such as the BBC and NBC TV, to attract worldwide viewer audiences. The personnel or people component is represented by pride with which employees and volunteers provide quality services to the public and players. (Schwartz, 2004) The top players themselves compete for the privilege of playing and hence are frontline line actors both directly and indirectly in the service space. Personalisation can be demonstrated by the clever use of technology. For example the BBC has provided interactive television coverage allowing five simultaneous live matches on one screen that allowed viewers to personalise their choice of matches thus capturing 4 million viewers in 2004. (Schwartz, 2004)

Competitors

The Davis Cup is an international team competition introduced in 1900 by American player Dwight Davis. Originally called the International Lawn Tennis Challenge Trophy, while initially only two teams participated (the USA and Great Britain), the competition has grown into an event in which over 100 nations now participate. It is a roving event and has been hosted at the Wimbledon grounds from time to time. The event itself has the same target market as Wimbledon but complements rather than competes with the championship event. Wimbledon therefore arguably has no competitors in terms of its positioning. (Wimbledon, 2005)

SWOT Analysis

A SWOT analysis (Strengths, Weaknesses, Opportunities, Threats) illustrated below in Table 1, is often used as a convenient summary of key issues from the business environment that may potentially impact on an organisation’s marketing communication strategy. (Johnson and Scholes, 2005.) The purpose is to identify the strategic options available to Wimbledon. A detailed analysis is beyond the scope of this report but Table 1 below illustrates focal elements that will be discussed in the creative proposal.

Table 1: SWOT Matrix

STRENGTHS

WEAKNESSES

Prestige brand-considered heritage and cultural symbol

Limited spectator space

Extremely popular

Small retail space

Loyal following internationally

Limited space for expansion

Well organised

Increasing visitor numbers

Attended by top ranked players

Spectator demographics

OPPORTUNITIES

THREATS

Joint promotion and marketing with London as a destination.

Weather: visitor number dependant on good weather.

Increased retail opportunities via the Internet

Security

Commercial use of brand

MARKET ANALYSIS

This section of the report considers key figures and statistics relevant to Wimbledon as a basis for a creative proposal.

Attendance

Figures from the early 20^th century are not available but in 1932 219,000 spectators attended the event. The 400,000 barrier was broken in 1986 and a record attendance of 490,081 in 2001 when play was extended into a fourteenth day. (Wimbledon, 2005)

Table 2: Daily Attendance 2000-2004

2000

2001

2002

2003

2004

Monday

39,330

38,561

38,561

38,500

35,335*

Tuesday

41,320

40,995

40,995

41,929

34,312*

Wednesday

41,146

42,457

42,457

40,787

29,156**

Thursday

41,440

41,410

41,410

41,976

36,130

Friday

40,834

41,440

41,440

39,833

39,659

Saturday

40,043

41,595

41,595

38,913

32,746**

Sunday

22,155*

First Week

244,113

244,740

244,740

241,938

229,493

Monday

38,247

41,236

38,764

39,389

39,229

Tuesday

34,083

38,375

34,448*

34,696

34,041

Wednesday

31,789

36,969

32,367*

35,911

33,703*

Thursday

29,718

30,120

33,560

30,237*

29,404*

Friday

28,303

28,813

28,016*

29,872

28,254*

Saturday

27,542

27,770*

27,857

28,216

27,956

Sunday

29,806*

29,315

29,762

30,543

29,128

Monday

9159

13,370

TOTAL

455,752

490,081

469,514

470,802

451,208

* Bad Weather (more than 2 hours lost) ** Entire Day Rained Off

(Source: Wimbledon, 2005)

The table above clearly illustrates the effect of bad weather with significant decreases in spectator numbers due to cancelled matches. The wet weather refund policy to spectators attempt to compensate spectators who are an important element of Wimbledon theatre. Weather negatively influences viewers when coverage is not available which in turn may affect sponsors through loss of on-sold advertising revenues. However, plans for the remodelling of Centre Court at Wimbledon were unveiled in January 2004 and included a transparent, retractable roof over the centre court as well as an increase in spectator capacity.

Revenue

Wimbledon derives revenue from entrance tickets, “official suppliers,” or sponsors, media distribution and broadcasting rights. Ticket sales are not the primary source of revenue with a maximum income estimated at ?20 million using average ticket prices. The 15 official suppliers contribute an estimated gross income of ?120 million. Wimbledon does not publish revenue or sponsorship figures and the aforementioned figures are estimates. NBC TV for example pays an estimated ?7 million for broadcasting rights. (Schwartz, 2004 and Wimbledon, 2005)

Official Suppliers provide goods and services, which are both essential for the staging of Wimbledon, and which meet the Club’s objective of improving the quality of the service provided to the players, spectators and the media. For example, Rolex appears on court scoreboards as the official timekeeper and Hertz provides transport for the players. (Schwartz, 2004 and Wimbledon, 2005)

Demand for Wimbledon tickets has for decades exceeded supply. Tickets are also sold through the LTA and to their affiliated tennis clubs, schools, membership scheme and to foreign tennis associations. Wimbledon remains one of the very few major UK sporting events for which one can still buy premium tickets on the day. Each day (excluding the last four days, approximately 500 are specifically reserved for sale at the turnstiles. Ground tickets may also be purchased on the day of play on every day. Costs of pre-booked tickets range from ?24 to ?59 or ?4 or ?16 sold on the day. Every five years centre court Wimbledon debentures are sold. The issue of 2,300 debentures for the 2006-2010 Championships inclusive has already been oversubscribed. Each debenture, priced at ?23,150 (nominal value ?2,000, a premium of ?18,000 and VAT of ?3,150), entitles the holder to a reserved seat in Centre Court on each day of the tournament during the five year period. (Schwartz, 2004, and Wimbledon, 2005)

The lack of detailed financial information does not allow a realistic or accurate comparison with Wimbledon’s competitors in the international arena.

Target Market

Wimbledon has an 82.4% adult television reach in Britain during the tournament. UK Sport suggests that tennis tournaments and Wimbledon in particular to the younger ABC1 income group with a gender bias towards a women audience for British success in sport. Accurate figures for the world audience are not readily available. (Taylor Nelson and Sofres, 2002)

Hassan, Kraft, and Kortam, (2003) suggest that the scale and reach of an event such as Wimbledon requires rethinking in terms of a converging commonality of a global consumer’s interest in the event. They recommend an avoidance of over complex marketing plans that rise above domestic or micro buyer attitudes, motivation, and behavioural demographics commonly used for segmentation in local markets.

CREATIVE PROPOSAL

The proposal to Wimbledon’s committee is to leverage the existing brand equity associated with the tournament in order to improve perceptions of tennis in the broader international environment as basis for entrenching Wimbledon’s position as the premier international tennis event. The concept is a natural extension of the LTA’s British vision to that of the international arena and represents an affirmation of Wimbledon’s commitment to the principles of corporate social responsibility. It is suggested that the current “tennis ace” campaign of identifying talented, but economically disadvantaged players be extended to the third world whereby winners would be invited to celebrity matches during the tournament hence leveraging off the existing promotional mix of the event. (LTA, 2005, and Wimbledon, 2005)

Brand equity is a measure of a number of differing components including beliefs, images, and core associations that consumers have about a particular brand such as Wimbledon. A brand with strong equity has the capacity to strengthen barriers to entry and ensure sustainable competitive advantage, and in so doing, maintain premium pricing. (Johnson and Scholes, 2005) An integrated marketing communication strategy has an important role to play to ensure consistency of message across domestic and international marketing initiatives. (Fill, 2002)

The marketing communication objectives will be to raise levels of awareness amongst stakeholders with respect to Wimbledon’s commitment to developing tennis as a sport internationally and more particularly in potential future markets in the developing world. In order to achieve this objective, Wimbledon will have to maintain its position as an important contributor to the LTA and hence it’s commitment to Britain, but at the same time extend the awareness of its developmental commitment to tennis globally. Suitably credible spokespersons representing tournament winners will be important balance the possible conflicting interests of LTA domestically and Wimbledon internationally.

CAMPAIGN

A campaign is a unique combination of advertising, promotional events, public relations and other marketing communication activities that all express the same consistent message. When implemented effectively, they present a cumulative strategic message to the target markets under a collective symbolic umbrella whilst enhancing the emotional connection to a brand. (Robinson and Hauri, 1991) The proposed campaign methodology for Wimbledon is a gentile form of ambush marketing in that the official suppliers and television broadcasters will provide the communication channel for the initiative. A programme definition, scope, and schedule of activity will be constructed for the “tennis ace” project to coincide with the promotional strategies that lead up to the tournament. (Arens, 1999)

The indirect endorsement by mega brands such as American Express, Hertz, and Rolex will add to the strength of the message. It is Wimbledon’s stated objective that free-to-air television, and radio access across the world should be made available for all or part of the tournament and by default, to the developing world and emerging markets. (Wimbledon, 2005) This will ensure accessibility to talented players participating in the scheme and arouse local country interest in the programme.

Campaign scheduling would automatically align with the promotional activities of official suppliers and broadcasters. The profile and push strategy defining the campaign is estimated at ?1.2 million, including concept, creative and limited internal marketing with a ?500,000 budget for control and evaluation. Important to note is that an estimated 1.8 billion people in 164 countries watched 5,700 hours of Wimbledon coverage in 2004 through existing channel arrangements. (Schwartz, 2004)

Control and evaluation would be affected partly through external agencies such as the sponsors and broadcasters, but Wimbledon would be responsible for overall message delivery and control. Focus groups, tracking studies of awareness and perception and recall tests will be used to monitor the impact of the campaign. In particular the marketing communication objectives will be assessed regularly as the main form of evaluation. (Fill, 2002)

CONCLUSION

This reported has reviewed the external and internal environments of a highly successful event with the objective of leveraging off existing competitive advantages to entrench an already strong position as a means of expansion into potential new markets. It takes cognisance of the emerging importance of corporate social responsibility in terms of itself and its official suppliers and establishes a cost efficient programme to meet international requirements whilst contributing to its own future success.

REFERENCES

Aarens, W. F. (1999) Contemporary Advertising, International Edition. Irwin, McGraw Hill.

Bull, A. O. (2004) “Mega Or Multi-Mini? Comparing The Value To A Destination Of Different Policies Towards Events.” Unpublished paper presented at Third DeHaan Tourist Management Conference, 14 December 2004.

Cambridge Econometrics. (2003) “The Value of the Sports Economy in the Regions: the Case of London.” Sports England.

Czinkota, M. , Ronkainen, I. A. and Tarrant, J. J. (1995) The Global Marketing Imperative. Lincolnwood, Illinois, NTC Business Books.

Fill, C. (2002) Marketing Communications: Contexts, Strategies and Applications. London, Financial Times, Prentice Hall.

Getz, D. (1997) Event Management and Event Tourism. New York, Cognizant Communications.

Goldsmith, R. E. (1999) “The Personalised Marketplace: Beyond the 4P’s.” Marketing Intelligence and Planning. Volume 17, 4.

Gratton, C., Shibli, S. and Coleman, R. (1999) The Economic Benefits of Hosting Major Sporting Events. Insights.

Hassan, S. S., Craft, S. and Kortam, W. (2003) “Understanding the New Bases for Global Market Segmentation.” Journal of Consumer Marketing. Volume 20, 5.

Johnson, G., and Scholes, K. (2005) Exploring Corporate Strategy Seventh Edition. Harlow, Pearson Education Ltd.

LTA. (2005) Lawn Tennis Association. www.lta.org.uk Accessed 21 April 2005.

Robinson, W. A. and Hauri, C. (1991) Promotional Marketing. Lincolnwood, Illinois, NTC Business Books.

Strategy Unit. (2002) “Game Plan: A Game Plan for Delivering Government’s Sport and Physical Activity Objectives.” www.number-10.gov.uk. Accessed 19 April 2005.

Schwartz, J. A. (2004) Wimbledon’s Marketing Grand Slam. www.imediaconnection.com. Accessed: 21 April 2005.

Taylor, Nelson and Sofres (2002) UK Sporting Preferences. UK Sport.

UK Sport

Wimbledon. (2005) “All England Lawn Tennis and Croquet Club: the Official Web Site.” www.wimbledon.org. Accessed: 20 April 2005.

195462

A discussion of the factors that contribute to lower life expectancy in

the west of Scotland as compared to other parts of the U.K

Life expectancy, the number of years that a person can expect to live on average, is a single measure of population health which is used to monitor public health, health inequalities, and the outcome of health service interventions and to allocate resources.

Life expectancy in Scotland

The relationship between health and wealth is complex. One as yet unexplained paradox in Scotland is that, even when matched with their English counterparts of comparable socio-economic status, Scots are relatively less healthy over a range of indicators from age standardised mortality to specific disease outcomes (Figure 1).

Figure 1: Directly standardised mortality rates per 1,000 populations, 1990/92, by country and deprivation quintile.

These findings suggest that there are factors at work, other than simply wealth, which are making Scots unhealthier than people in other parts of the UK (Scottish executives 2007).

West of Scotland: A Description

West of Scotland is one of the eight electoral regions of the Scottish Parliament which were created in 1999. In terms of local government areas the region covers:

West Dunbartonshire

East Renfrewshire

Inverclyde

Most of Renfrewshire (otherwise within the Glasgow region)

Most of East Dunbartonshire (otherwise within the Central Scotland region)

Part of Argyll and Bute (otherwise within the Highlands and Islands region)

Part of North Ayrshire (otherwise within the South of Scotland region)

Within Scotland, life expectancy is lowest for people living in the west of Scotland. According to the Scottish household survey, healthy life expectancy at birth is 63.3years and 60.3years in females and males, respectively of greater Glasgow for example. These figures are the lowest in the UK (Scottish Public Health Observatory 2007).

Life in the West of Scotland

While parts of west Scotland have prospered with greater employment and better paid middle-class jobs, in other parts ‘worklessness’ and low income are commonplace. The issue for west Scotland is that greater reductions in disease have been achieved elsewhere and so west Scotland’s health has become worse relatively in comparison to other UK cities. Estimates of life expectancy suggest that people living in west Scotland not only live shorter lives, but succumb to disease and illness earlier in life. An explanation to this is that the health of an individual is largely determined by the circumstances in which he or she lives. Poor health is associated with poverty, poor housing, low educational status, unemployment and a variety of other life circumstances (Tackling Health Inequalities 2007). Health inequalities within Scotland and between the west of Scotland and the rest of the UK appear to be widening. In the 10 years to 2001, average male life expectancy in Scotland increased by 3% but the rate of increase was more rapid in the most affluent parts of the country, with the least affluent west areas falling behind (Whyte and Walsh 2004). The recent decline in death rates from common conditions such as cardiovascular disease has also been more rapid among the more affluent (Krawczyk 2004). Thus, despite the overall improvements, the west of Scotland still lags behind.

Economic factors

A number of trends related to the economy are also notable in West Scotland. There are now more women than men in employment in Glasgow and part-time work has grown to represent more than a quarter of all jobs. The service sector has grown to become the most important sector of the heart of West Scotland’s economy, while manufacturing employment has shrunk (Scottish Public Health Observatory 2007).

Social factors

It is common knowledge that those who smoke, become obese through eating a poor diet or through lack of exercise, and those who drink alcohol in excessive quantities or abuse drugs have poor health. Smoking levels in west Scotland have remained higher than those observed in other parts of the UK. Hanlon and his colleagues (2001) have shown that, by 1991, deprivation appears to explain only 40% of the excess deaths in Scotland (2001). Gillis and his colleagues (1988) have found that, at comparable daily smoking rates and levels of affluence, men in the West of Scotland are more likely to die from lung cancer than other populations in the UK or the US (Gillis 1988) (Figure 2).

Figure 2: Comparison of lung cancer mortality in Renfrew and Paisley with three major cohorts in US and UK.

The increasing impact of alcohol is undeniable: There are estimated to be more than 13,500 ‘problem alcohol users’ resident within Glasgow City, and since the beginning of the 1990s, there has been a striking increase in numbers of alcohol related deaths and hospitalisations especially in west Scotland. Simple projections of alcohol related deaths based on recent trends suggest that the number of alcohol related deaths in Greater Glasgow could double in the next twenty years (Figure 3) (Scottish executives 2007).

Figure 3: Alcohol related mortality in West Scotland: Greater Glasgow

The impact of the use of illicit drugs also serves to further decrease life expectancy in west Scotland in comparison with other parts of the UK. Between 1996 and 2004, drug related deaths in Greater Glasgow for example, rose by a third. There are estimated to be around 25,000 problem drug users in the West of Scotland, of whom more than 11,000 live in Glasgow (Scottish executives 2007). Life expectancy for drug addicts is expectedly very low and these figures will impact negatively on the overall life expectancy for the region.

In Glasgow and other parts of west Scotland, it is predicted that single adults will account for 49% of all households in the next ten years, while lone parent households may rise to make up almost one in two of households with children (Scottish Public Health Observatory 2007).

Obesity levels have risen exceedingly in west Scotland to the extent that in Greater Glasgow, for example, a fifth of males and almost a quarter of females are now estimated to be obese, with well over half classified as overweight. Trends in hospitalisation for diabetes, much of which is associated with obesity, have also risen dramatically in recent years (Scottish executives 2007).

A cultural issue

The ethnic minority population of west Scotland has risen in recent years and looks set to increase further, particularly taking into account the recent rise in the asylum seeker and refugee population. The influence of this trend on life expectancy within the region remains to be determined (Scottish Public Health Observatory 2007).

Provision of services

Despite improvements in overall house conditions and dramatic decreases in levels of overcrowding, housing-related problems persist for considerable numbers of residents of Greater Glasgow and the West of Scotland (Scottish Public Health Observatory 2007).

Recent research suggests other important ways in which the environment and life circumstances can affect biological processes which in turn can make individuals more susceptible to ill health. By following the progress of male civil servants over a 10 year period, Marmot and his colleagues found that mortality was approximately three times greater among the lowest grades than the highest (Marmot et al 1978). When deaths from heart disease were considered, the recognised risk factors of smoking, high blood pressure and elevated cholesterol levels could account for part of the differences between the groups. Other studies have confirmed that higher levels of risk of death in a working population are explained by health-related behaviours (Marmot 2000). There is mounting evidence that at least part of the unexplained increase in risk across the social classes is related to how the body responds to social stress. Available data shows that people are perhaps exposed to a high level of stress factors in west Scotland (Scottish Public Health Observatory 2007). Whether these stress types and levels are more or comparable to what is obtainable in other parts of the UK remains an unanswered question.

.

References

Gillis CR, Hole DJ, Hawthorne VM, 1988.Cigarette smoking and male lung cancer in an area of very high incidence-II Report of a general population cohort study in the West of Scotland. J Epidemiology and Community Health 42: 44-48.

Hanlon P, Walsh D, Buchanan D, Redpath A (2001). Chasing the Scottish Effect. Public Health Institute of Scotland (now NHS Health Scotland) Glasgow 2001.

Marmot MG, Rose G, Shipley M, Hamilton PJ. (1978) Employment grade and Coronary Heart Disease in British civil servants. J Epidemiol Community Health. 1978 Dec; 32(4): 244-9.

Marmot MG (2000) Multi-level approaches to understanding social determinants in Berkman and Kawachi (eds) Social Epidemiology New York. Oxford University Press pp 349-367.

Scottish executives (2007) [Internet] Available at http://www.scotland.gov.uk/Topics/Statistics/Browse/Health/TrendLifeExpectancy

Scottish Public Health Observatory (2007): Healthy life expectancy in Scotland (Internet) (Accessed 15/04/07) http://www.scotpho.org.uk/web/site/home/Populationdynamics/Healthylifeexpectancy/hle_intro.asp

Tackling Health Inequalities – An NHS Response (2007) [Internet] (Accessed 15/04/07) www.sehd.scot.nhs.uk/nationalframework/Documents/TACKLING%20HEALTHINEQUALITIES240505

Whyte B and Walsh D. (2004) Scottish Constituency Profiles 2004.www.phis.org.uk/info/sub.asp?p=bbb

Krawczyk A. (2004) Monitoring Health Inequalities. Scottish Executive Health Department Analytical Services Division 2004.

Key marketing issues facing HSBC Bank in the United Kingdom and globally: How it can be improved for entering in to 2011

Abstract

Today’s global banking environment is highly volatile, but this does not hinder competition from being intense. Consequently, organisations such as HSBC Bank plc, “the world’s local bank”, need to align their marketing strategies to improve on their brand value and positioning. To enter into the year 2011, they need to address both internal and external environment(s) which inevitably affect their competitive advantage, positioning and performance.

In the following, the researcher aims to explore these avenues with the view to propose an extended study on new strategies to improve upon HSBC’s current standing.

Table of contents

Chapter 1: Introduction

Chapter 2: Methodology

Chapter 3: Literature Review

Chapter 4: Evidence

Chapter 5: Conclusion and Recommendations

References

Appendices

Introduction

In the last few years, the banking industry has undergone tremendous change in the face of global transformation. As a result, executives are finding it difficult to meet competitive challenges as the pressure to become global intensifies. HSBC Bank plc, headquartered in United Kingdom, is a global business which faces the same challenge and is being investigated in the following dissertation. The aim is to survey the key marketing issues that challenge the bank, in the UK and globally so that the researcher could further its study in developing solutions for the same. Some of the objectives that the researcher aims to achieve in this dissertation proposal are as follows:

Objectives

1. To explore key external and internal environments to address major issues that plague HSBC to function successfully as a global bank.

2. To identify the marketing mix that should be adopted to be integrated in the bank’s marketing and competitive strategies.

3. To investigate organisational functions like MIS (Management Information System) and CRM (Customer Relationship Management) to align them with the market structure.

4. To evaluate the brand value at HSBC, and perhaps identify new strategies for improving its global positioning.

Background

Today, change catalysts are being integrated by major consolidated organisations to adapt and become flexible to the changing needs of consumers. The banking industry, likewise, has been following the same trend of consolidation through mergers and acquisitions (M&A), despite the fact that these M&As are creating even more complex organisations. This can be gauged from HSBC’s organisational spread. HSBC has over 100 million customer base, spread across the globe through its Customer and Global businesses. With 9,500 offices and 335,000 staff in 85 countries and territories, it is considered to be one of the world’s top financial brands by The Banker Magazine (HSBC Official Web site 2008). While it is regulated by the Financial Services Authority in the UK, the global nature of its operation subjects it to be regulated by 510 central banks and authorities around the world as well (HSBC Official Web site 2008). To ensure that HSBC meets global challenges, the bank has been constantly evolving its strategy. For the past decade, it has focussed on being “the world’s local bank” with a wide network spread to mostly international emerging markets to develop unique cosmopolitan customer base to strengthen its financial standing. The four key business areas – private banking, commercial banking, personal financial services and global banking markets – help HSBC to align its presence with global trends such as fast growing emerging markets, world trade, and longevity in business (See Appendix 1). In line with this focus, is the strategy to leverage brand and network to increase revenues and maximise efficiency (HSBC Official Web site 2008).

This conservative positioning strategy had been adopted for the past decade and has paid off in terms of higher earnings, and improved performance (BBC 2001). However, recently there has been a fall in profit earning (UK Annual Report 2007)(See Appendix 2), which has been translated to low performance. Some of the factors that have afflicted the bank include inflation in developed markets; slow down in emerging economies; and the ongoing credit crunch, especially in the UK and neighbouring Europe (HSBC Annual Results 2007; “Toxic Shock” 2008). The growing importance of globalisation only emphasises on the need for integrating marketing strategies within competitive strategies to leverage future performance. According to a Deloitte report (2007), banks like HSBC, with a global focus, need to understand external and internal factors that affect them, in order to devise comprehensive competitive strategy. While experts (Dietz, Reibestein, and Walter 2008) predict growth in global banking revenues estimated at 7 to 8 percent from 2006 to 2016, how to harness this forecast is dependent on the individual firms’ strategy. For this purpose, HSBC need to revise its strategic orientation.

The purpose of research is to gain new knowledge through logical and systematic methods. According to Smith (1981 qt. Gliner and Morgan 2000), research is a broad discipline which must be carefully examined before adopting methods for evaluation. Whether the researcher chooses the naturalistic, experimental, survey or historical methods, the choice should be consistent with the inquiry defined. Accordingly, research approaches in the social science discipline can be divided into the positivist or quantitative, and constructivist or qualitative approach (Mangan, Lalwani and Gardner 2004). Depending on the quantitative or qualitative paradigm, a researcher must choose the approach of research. A quantitative paradigm is associated with scientific methods in acquiring research results and identifies causal relationships (Phillips 1992; Lincoln and Guba 1985 qt. Gliner and Morgan 2000). On the other hand, the qualitative approach is a constructivist approach that studies humans and physical objects with the meanings inherent in their social roles and symbolism. Considering the qualitative nature of the topic, the researcher proposes to adopt a constructivist approach which would be more appropriate in exploring the issues that affect HSBC. This is a logical proposition as it would allow the researcher to predict the causes and market behaviour based on theoretical frameworks studied through comprehensive literature review, a gist of which shall be explored in the next section. Furthermore, the researcher proposes this choice of research approach based on the premise that social science researches often seek to predict and control (Bryman 1995). Research questions raised are often open-ended and encompass extensive avenues before decisions can be made. Therefore, a qualitative method shall be suitable for the study of key issues challenging HSBC in the future.

To take a brief overview of banking, the researcher has carried out a brief literature review to study the issues that surround the organisation. In the following section, the researcher shall explore the current market environment, as well as attempt to understand it through theoretical frameworks.

Banking Industry

As the world’s banking industry globalises and consolidates, cross border investment barriers have fallen to give way to new and volatile markets. To serve evolving markets, banks have been observed to develop new competitive strategies that capitalise on operations, resources and functionality, and serve new types of customers. The challenge for banks today is the geopolitical risks and structural market challenges which they need to adapt to, for addressing international compliance of standards, demographic shifts, and developing relationships with customers. The diversified nature of the banking environment makes it difficult for global organisations, like HSBC, to focus. A global bank can be defined as having the widest reach in providing services to affiliates, while a local bank has narrower reach in provision of services to institutions in the country. Some of the challenges that affect these organizations are explored below:

1) External Environment

The basic premise for gaining competitive advantage in a global environment according to experts like Porter (1990) and Weihrich (1982), is through formulation of strategies that reflect the conceptual framework of the TOWS Matrix (See Appendix 3). The TOWS (Threats, Opportunities, Weaknesses and Strengths) Matrix is a systematic analysis model which identifies factors that surround the industry, and, thereafter, help identify solutions by maximising opportunities and strengths. By identifying the competitive advantage against competitors, the industry or firm can maximise the attributes it posses at the international level. These competitive advantages can be factor conditions such as skilled labour or infrastructure; demand conditions such as demand of the product or service; related and supporting industries; and firm strategy, structure and rivalry (Porter 1990). However, critics are of the view that Porter’s formula does not provide the key to success (O’Shaughnessy 1996) as it does not address operational and environmental issues like culture, competitive advantage in emerging markets; political and national history; or role of government. In today’s global banking environment, these issues play critical roles (Jones 2005). These are evident from the Deloitte report (2007) on key issues challenging the banking industry, which include off-shoring; local insights for global branching; cost-reduction; emergence of hedge funds; and complex anti-money laundering regulations (Deloitte 2007). Not only is the global business environment of today strived with uncertainty due to emerging markets’ participation (Fahy 1993; Bansal and Penza 2000), but also the technological, political and regulatory environments have heightened competition.

In the past decade, HSBC has focussed its competitive strategy on Europe after the slow down in Asia-Pacific region. Europe is an ideal setting for international integration based on a single market program (Berger, Smith, and Judge 2003; HSBC 2008). There are, however, issues that hinder development and competition including loyalty to local banks, regulatory restrictions, demand for global banking services, and technological advancement of banks. As a result, HSBC needs to rethink its current strategy.

2) Internal Environment

As a result of the above factors, the internal environment of global banks has to be revolutionised. At the forefront is the adage “the customer is king”. Global banks are changing their strategies to alter banking environment congruent to customer’s needs, rights and choices. Services and products are tailored to the living conditions and customer patterns of banking use. These conditions set off alternative marketing strategies that emphasise on individuality and relationship building. Investment in technology, skills and branch networks, for example, has helped traditional banks to grow and profit from new sources of income (Jayawardhena and Foley 2000). In the UK, especially, the scale of investment in knowledge management and technology has helped transform the banking industry to succinctly harness potential businesses and create advantage for organisations. Learning organisations, however, is still a relatively new concept for many to understand and appreciate its implications (Harris 2002).

Besides the above, global banks are also undergoing structural changes. As more and more banks become global, the traditional role of retail banking has to be revisited. (Bansal and Penza 2000).Issues that affect HSBC like credit and market risks, competence and expertise have come to the forefront, as banks diversify their businesses. For these reasons HSBC needs to be prepared for change management in its internal environment.

3) The Marketing Mix

Given the diversified nature of the global banking industry, Jagersma’s report (2006) suggests that banks need to rethink marketing strategies to meet the challenges in the future by improving customer focus, innovating products, pricing products competitively and organising product information for its strategic positioning. The challenge that awaits organisations is to rethink strategic objectives that would align with the new environment. One approach is to develop a visual identity and develop a communication network to establish relationships with customers. The communication strategy would be the life line for the organisation’s strategy in adapting or changing its market context or other environmental alterations, according to Melewar, Bassett, and Simoes (2006). Similarly, Gummesson (2002) is of the view that relationship marketing is the new approach to marketing that focuses on customer, suppliers and organisations in a complex network environment or society. It is only through these new communication frameworks that the banking sector can address the core and brand values it has to develop for successful marketing mix. (See Appendix 4) HSBC needs to re-evaluate its marketing mix in order to generate newer ones.

4) Market Segmentation and Targeting

Indeed, the nature of the marketing mix is no longer simply the 4 Ps of Price, Product, Position and Promotion but involves complex analysis of the target market and its segments. In fact, Papasolomou and Vrontis (2006) are of the view that today’s banking organisations have different sets of customers and expectations. Customers are no longer limited to the walk-in type, but extend to internal customers such as employees, stakeholders and shareholders; service delivery is not limited to providing service, but extends to standards and expectations; development involves training and development in motivation, and inspiration; and employee incentives. To be successful, organisations must adopt alternative strategies. Market segmentation in the banking industry has changed from niche segments to accumulated customer base of corporate, private or commercial customers, although the principles for targeting them remain the same – customer relationship building; ease of access; delivery of service through diverse workforce; and collaborative banking strategies. As a result, banks like HSBC would need to improve upon customer focus, introduce new ideas to customers and drive aggressive campaigns (“Wells Fargo and First Direct” 2007) using a strong communication network (Berner and Kiley 2005) to build brand image.

5) MIS and CRM

What differentiates and establishes brands depends on the power of the brand to communicate its value to the market. According to Sinek (2008), successful communication is dependent on the bank’s ability to offer different products and services reflective of the customers’ needs. Hence, branding alone would not differentiate banks, but the humanness of the bank’s philosophy would. Thus, Umpqua Bank and FirstDirect’s popularity with customers is due to their understanding of the need for convenient banking, need for alternative products and services, and their understanding of the ever-changing world of banking. By harnessing the online banking technology, direct banking has become possible to their customers. The attractiveness of these banks to their customers is inherent in the shift away from traditional transaction-based to customer based banking (“Branching out” 2007).

Furthermore, banks have also capitalised on technological networks to expand globally to bring customers closer to their banks by defying geographical dispersion (Lefton 1997; Branching out 2007). However, in the process, issues like outsourcing labour to foreign regions, which are alien to the customers, and low quality service delivery compromise the overall expectations. Banks, especially, rely on outsourcing companies for their customer service which constitutes a major part of their service/product delivery (Gottfredson and Phillips 2005). This reliance on external organisations for the bank’s success is volatile and, at times, detrimental to its relationship with customers. Whether HSBC should rely on these systems or not shall determine its performance in the future.

6) Brand Positioning

The objective of competitive advantage is dependent on positioning of the product. A firm’s communication strategy and its effectiveness depend on the positioning strategies. In marketing strategies for service-oriented brands, positioning is even more critical as it modifies the intangible perceptions of the service in relation to the competition (Blankson and Kalafatis 2007). For these reasons, strategic implications of brand positioning are critical for the organisation’s competitive strategy. Service positioning differs from tangible product positioning as its characteristics are different from physical goods. Customers differentiate the service from goods through communication, standard of service delivery, and the quality of the benefits reaped. Thus, marketing communication plays a vital role in establishing the marketing positioning of brands. Consequently, Papasolomou and Vrantis (2006) emphasise on the importance of internal marketing throughout branch network to strengthen relationship marketing and the brand. In banking, this could be achieved by launching internal marketing campaigns to sustain the brand through employees and their experiences such as brand proposition, overcoming internal barriers, continual improvement and expansion. These HSBC needs to explore in to incorporate into its future strategies.

From the above brief literature review, the researcher is of the view that HSBC, as a global bank, faces tremendous challenges in the near future to improve upon its marketing strategy. The above literature also suggests that, while the current marketing strategy has been successful in launching the HSBC in the international market, the bank needs to revise and develop its marketing strategies which would sustain HSBC in global environment. Issues that plague the world’s global banking industry need to be evaluated in the future study to understand the extent and breadth to which HSBC has complied with, before competitive strategies can be evaluated.

The brief literature review also indicates that today’s marketing strategies are different from traditional methods adopted, especially for a service-oriented organisation. Consequently, marketing strategies for HSBC needs to be re-valuated to gauge its future performance, and perhaps devise new ones to address current and future issues. Issues like MIS, CRM, brand positioning and marketing mix shall be revisited in this extended dissertation in order to tackle the issues that plague its internal and external environment.

From the above evidence, the researcher proposes an extended study in the form of a dissertation to review HSBC’s performance and how it can improve upon its current marketing strategy in order to develop an integrative competitive strategy for the future. Considering the fast-paced and highly volatile banking environment of the UK and globally, HSBC needs to improve its performance in order to sustain competition. With the extended study, the researcher hopes to achieve the following objectives:

a. A detailed investigation of the external and internal environment of HSBC in order to identify its strengths, weaknesses, opportunities and threats.

b. Identify the marketing mix that it should adopt and integrate within its organizational strategies to enter into 2011.

c. To study the current organisational function such as MIS and CRM to the advantage of HSBC and integrate into its future marketing strategies.

d. Improve on its current brand value and global positioning.

Author not available (2008) Toxic shock: how the banking industry created a global crisis, Guardian [Online] Available at: http://www.guardian.co.uk/business/2008/apr/08/creditcrunch.banking

Author not available, (2007) Wells Fargo and First Direct lead the way in the banking sector. Strategic Direction, Vol. 23, No. 6, pp. 29-31.

Author not available, (June 2007) Branching out. Economist, Vol. 383, Issue 8533.

Bansal, V. and Penza, P. (2000) Measuring Market Risk with Value at Risk, John Wiley and Sons.

BBC (August 2001) HSBC confounds doomsayers, BBC [Online] Available at: http://news.bbc.co.uk/1/hi/business/1475589.stm

Berger, A.N.; Smith, D. C.; and Judge, J. (November 2003) Global integration in the banking industry. Federal Reserve Bulletin.

Berner, R. and Kiley, D. (August 2005) Special Report: The Best Global Brands. Business Week [Online] Available at: http://www.businessweek.com/magazine/content/05_31/b3945098.htm

Blankson, C. and Kalafatis, S. P. (2007) Positioning strategies of international and multicultural-oriented service brands. Journal of Services Marketing, 21/6 pp. 435–450

Bryman, A. (1995) Research Methods and Organization Studies. Routledge: London.

Deloitte Touche Tohmatsu (2006) Global Banking Industry Outlook: Growth Solutions in a Changing World 2006. Deloitte Touche Tohmatsu [Online] Available at: http://www.deloitte.com/dtt/research/0,1015,cid%3D116421,00.html

Deloitte Touche Tohmatsu (2007) Global Banking Industry Outlook: Issues on the horizon 2007. Deloitte Touche Tohmatsu, [Online] Available at: http://www.deloitte.com/dtt/research/0,1015,cid%3D116421,00.htm

Dietz, M., Reibestein, R. and Walter, C. (January 2008) What’s in store for global banking, The McKinsey Quarterly.

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Gummesson, Evert. (2002) Total relationship marketing 2nd ed. Oxford: Butterworth-Heinemann.

Harris, L. (2002) The learning organization – myth or reality? The Learning Organization, Vol. 9, No. 2, pp. 78-88

HSBC Official Website [Online] Available at: http://www.hsbc.com/1/2/investor-relations/strategy

Jagersma, P. K. (2006) Strategic marketing and the global banking industry: elements of excellence, Journal of Business Strategy. Vol. 27 Issue: 4 pp. 50 – 59

Jayawardhena, C. and Foley, P. (2000) Changes in the banking sector – the case of Internet banking in the UK. Internet Research: Electronic Networking Applications and Policy, Volume 10 . Number 1 pp. 19±30

Jones, G. (2005) Multinationals and Global Capitalism: From the Nineteenth to the Twenty-First Century. Oxford University Press: Oxford pp. 137.

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Melewar, T.C.; Bassett, K. and Simoes, C. (2006) The role of communication and visual identity in modern organisations. Corporate Communications: An International Journal, Vol. 11 No. 2, pp. 138-147.

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Papasolomou, I. and Vrontis, D. (2006) Building corporate branding through internal marketing: the case of the UK retail bank industry. Journal of Product & Brand Management, 15/1 pp. 37–47

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Appendix 1

Appendix 2

Appendix 3

Appendix 4

A beneficiary under a trust is a volunteer unless he has provided valuable consideration.^[1] Where a gift is made, the beneficiary will always be a volunteer as it is by definition made without consideration. The traditional equitable maxim is that equity will not assist a volunteer.^[2] This generally means that where a gift is made imperfectly, equity will not enable the intended beneficiary to claim the gift under a trust. However, there are exceptions to the rule. This essay will consider these exceptions and the extent to which the rule has developed from “equity will not assist a volunteer” to a position of “equity will not assist a volunteer if, in doing so, it would repair the consequences of a would-be donor’s folly”.

The leading case in this area is Milroy v Lord^[3] where a voluntary deed which purported to assign 50 shares to Samuel Lord on trust for Milroy. Lord was already acting as Milroy’s agent under a power of attorney. The formalities of the share transfer were not complied with. Milroy therefore sought to establish that a trust had been declared. It was held that an ineffective transfer does not constitute a declaration of trust without there being a clear intention to create a trust. Furthermore, if a voluntary settlement is to be valid and effectual, the settlor must have done everything which was necessary to be done to transfer the property and render the settlement binding upon him.^[4] As the shares had not been transferred, no trust was created and no gift made.

The case of Milroy v Lord thus provides that for the settlement to be binding there must be either an outright transfer, a declaration of self as trustee, or a transfer of property to a third party as trustee.

The facts of Jones v Lock^[5] were that a father produced a cheque payable to himself and said “Look you here, I give this to baby; it is for himself” and placed the cheque in the baby’s hand. He then took the cheque back stating that he was going to put it away for him. It was held that there had been no effective gift because no valid transfer had occurred. Moreover, it was held that a failed gift cannot be construed to be a valid declaration of trust. It was said that the crucial principle is that an owner must not be deprived of his property unless, by making a valid gift or trust, he has demonstrated the seriousness of his intention to dispose of the benefit of his property.^[6]

However, where the property is vested in the trustees in circumstances outside their capacity as trustees, the trust may be constituted, even though the beneficiaries are volunteers^[7] (Re Ralli’s Will Trusts^[8]). Other exceptions include the rule in Strong v Bird^[9] and Donationes Mortis Causa. As these exceptions are uncommon, the main exception and development as set out below will be the focus of this piece.

The case of Re Rose^[10] demonstrates the principle that where a donor has done everything they can to transfer title to another but that outright trust has not been completed, an equitable interest will have passed, even where the donee is a volunteer.^[11] This principle is therefore an exception to the general rule that equity will not assist a volunteer and is based upon the inequity of reneging on a promise once the donor has purported to transfer title by doing everything necessary for him to do.

The principle in Re Rose has recently been extended. In T Choithram International SA v Pagarani,^[12] a man lying on his deathbed sought to declare an inter vivos trust over his property. The settlor’s intention was to become one of nine trustees, but he failed to transfer legal title to all nine trustees and as a consequence, under the ordinary law of trusts, the trust would not have been validly constituted. The Court of Appeal thus held that he had neither effectively vested the property in the trustees, nor did his words of gift render him a trustee. Furthermore “the court will not give a benevolent construction so as to treat ineffective words of outright gift as taking effect as if the donor had declared himself a trustee for the donee”. In the words of Hopkins, the Court of Appeal decided the matter on the basis that “equity will not assist a volunteer” or “perfect an imperfect gift”.^[13]

In allowing the appeal, the Privy Council accepted the maxims but added that “equity will not strive officiously to defeat a gift”. The reasoning for holding a trust was that the settlor had done all that was necessary to constitute a trust, by declaring himself as trustee. His words that he would ‘give’ could only then mean “I give to the trustees of the foundation trust deed to be held by them on the trusts of the foundation trust deed”.^[14]

The case of Choithram may therefore be taken to be support for Hopkins’ statement that that the courts have left behind the well-known equitable maxim “equity will not assist a volunteer” and have reframed it as “equity will not assist a volunteer if, in doing so, it would repair the consequences of a would-be donor’s folly.” This is because, in both Re Rose and Choithram there was no folly in the sense that the donor had not done all that was necessary and therefore, on the basis of the reformulated maxim the trusts were rightly held. Conversely, in both Jones v Lock and Milroy v Lord, the donor had not done all that was necessary, and was therefore acting in folly.

However, this is not the end of the developments. In Pennington v Waine^[15] A owned 1500 of the 2000 shares in C Ltd. She instructed P, a partner in C Ltd auditors, that she wished to transfer 400 shares to her nephew H and that he was to become a director. A signed the share and P placed it “on the company’s file”. A made her will a short time later bequeathing the rest of her shareholding but making no mention of the 400 shares transferred to H.

Under the traditional law, as seen above, the gift would have been complete only once the signed stock transfer form and the share certificate had been handed to the donee. The Court of Appeal in fact held that the gift was to be regarded as completely constituted, despite the lack of delivery and the fact that there was apparently nothing to stop A from recalling her gift.^[16]

The Court of Appeal followed the maxim as stated in Choithram that equity will not assist a volunteer but will not strive officiously to defeat a gift. It was held that at the time it would be unconscionable for the transferor to be able to change their mind, equity should hold the gift to be properly constituted. Per Arden LJ:

“If one proceeds on the basis that a principle which animates the answer to the question whether an apparently incomplete gift is to be treated as completely constituted is that a donor will not be permitted to change his or her mind if it would be unconscionable, in the eyes of equity, vis-a-vis the donee to do so, what is the position here? There can be no comprehensive list of factors which makes it unconscionable for the donor to change his or her mind: it must depend on the court’s evaluation of all the relevant considerations. What then are the relevant facts here? [A] made the gift of her own free will: there is no finding that she was not competent to do this. She not only told [H] about the gift and signed a form of transfer which she delivered to [P] for him to secure registration: her agent also told [H] that he need take no action. In addition [H] agreed to become a director of the company without limit of time, which he could not do without shares being transferred to him.”

It has been argued that this decision was based on a misunderstanding of the decision in Choithram where it was held that it would be as unconscionable for a settlor who had declared a trust when he was one of a number of trustees to subsequently resile from his declaration as if he had declared himself to be the sole trustee.^[17] Moreover, it is widely accepted that the decision goes much further than previous law.^[18]

Examining Hopkins’ statement in light of this development, it is unlikely that the maxim can be said to be redefined to incorporate the donor’s folly, as the present position appears to leave plenty of scope for assisting a volunteer where doing so would correct a donor’s folly. Indeed, Pennington v Waine may well be overruled in the future, but at present, the most apt re-statement of the maxim is: “equity will not assist a volunteer unless it would be unconscionable not to do so”.^[19]

Bibliography

Delany, H., and Ryan, D., “Unconscionability: a unifying theme in equity”, (2008) Conv 401

Garton, J., “The role of the trust mechanism in the rule in Re Rose”, (2003) Conv 364

Halliwell, M., “Perfecting imperfect gifts and trusts: have we reached the end of the Chancellor’s foot?”, (2003) Conv 192

Hopkins, J., “Constitution of trusts – a novel point”, (2001) CLJUK 483

Hudson, A., Equity and Trusts, 5^th Edition (2007), Routledge-Cavendish

Martin, J.E., Hanbury and Martin: Modern Equity, 17^th Edition (2005), Sweet & Maxwell

Morris, J., “Questions: when is an invalid gift a valid gift? When is an incompletely constituted trust a completely constituted trust? Answer: after the decisions in Choithram and Pennington”, (2003) PCB 393

Oakley, A.J., Parker and Mellows: The Modern Law of Trusts, 9^th Edition (2008), Sweet & Maxwell

Pettit, P.H., Equity and the Law of Trusts, 10^th Edition (2006), Oxford University Press

Tham, C.H., “Careless share giving”, (2006) CONVPL 411

Watt, G., Trusts and Equity, 3^rd Edition (2008), Oxford University Press

Limitations of Research: the researcher could not use all the internet sources because some of them are written in Chinese, the researcher followed the structure that is provided by you but I have noticed that there is repetition in the points that are mentioned in the objectives and the points that are mentioned in the chapter plan, also there is a repetition in the resources that are mentioned in the data and information needs and the points in relevant literature consulted.

The researcher shall bear no responsibility for any confusion caused by the un-clarity of the attached document.

Introduction:

More than 120 countries have imposed Goods and Services Tax, the only developed country that has not imposed this tax is Hong Kong.

VAT or GST has been introduced by France in 1954(Ministry of Economy, Finance and Industry).

All the developed countries (except Hong Kong) and most of the developing countries have followed France in imposing VAT/GST because this tax is considered:

Fair: VAT/GST is considered a fair tax because it relates the amount of collected tax to the amount of consumption; the more you consume, the more you pay VAT.
Simplicity: unlike any other taxes, VAT/GST is considered a straightforward tax; it is imposed according to a known percentage on the value of the products and services
Efficiency: this tax is very efficient, it is very easy to collect it and it is very difficult to avoid it.

Chapter2: Objectives:

The purpose of this research is to find out whether VAT/GST is a suitable tax for Hong Kong or not.

The research has covered very large material and literature about Hong Kong and similar economies to Hong Kong such as Singapore.

The research also aimed to show that most of the governments of the world are broadening their budgets by imposing VAT/GST on customers while they are trying to reduce income and corporate taxes.

Chapter3: Literature consulted:

The research has covered a large part of literature published by global accredited organizations such as Price Waterhouse coopers, Ernest Young and the government of Hong Kong.

The major text books have been used to give us a broad idea about the issue in research while the specialized working papers, Internet articles and government websites have been used in order to give us a clear idea about the issue in research.

The research consulted working papers published by several universities and bodies in order to explain the theoretical principles behind imposing VAT/GST (Hubbard,G,R(1997)and the impact of VAT/GST on the informal sector in developed countries.

Chapter4: Proposed Methodology:

we can see from the above chart the deficit that have faced Hong Kong from 1997 until 2003, the revenue was very low compared to the spending which proved to be steady.

”During the same year, about 70% of the total revenue collected by the Inland Revenue Department came from profits tax and salaries tax. Nevertheless, the profits and salaries tax nets are very narrow and shrinking. Less than 40% of our workforce of 3.2 million people pay any salaries tax, and only 10,000 people pay the maximum salaries tax rate of 15%. About 5% of the payers of profits tax contribute to 80% of the profits tax revenue. Further loss of profits could occur as a result of globalisation. Besides, the spread of e-commerce will have implications on all governments’ abilities to assess and collect business-related taxes. In this regard, both the Financial Secretary and the Secretary for the Treasury expressed their concerns on the impact of the exponential growth of e-commerce on Hong Kong’s territorial-based tax system. The Government will set up a Task Force to review public finances and an independent committee on new broad-based taxes”, Wong, J(no date given)

The research has depended on major questionnaire that have been distributed to citizens and companies in Hong Kong in order to get their opinion about VAT/GST tax.

The response that I have got from this questionnaire has been used in predicting the change in consumption behavior by the citizens of Hong Kong.

The research has also depended on comparative analysis in order to see how Hong Kong economy will be affected and how the whole tax system will be redesigned.

The research depended on some graphs to illustrate the topic further.

Chapter5: Data and Information needs and sources:

This research needs theortical as well as practical data and comparative analysis.

This research is different because it assesses the potential of something that might happen in the future.

The researcher has conducted a questionnaire in order to measure the acceptance of the people to VAT and their views about the fiscal position of their country.

The researcher tried to make sure that the sample is random, so the results are random too and not biased.

The research required me to use some theoretical concepts in order to assess the impact of VAT.

The research also depended on comparative analysis in order to see what happened to similar economies that have implemented VAT/GST.

Chapter6: Chapter Plan:

Understanding the principles behind using an expenditure tax like GST/VAT:

Definition of GST:

Goods and Services tax is imposed on:

Goods and Services tax is broad-based and equitable and is capable of yielding sizeable and steady revenues.

VAT or GST is a consumption tax, it is paid by the consumer of the product or the service as a percentage of the final price.

It is related to all commercial activities involving the production and distribution of services; it is not charged on companies which mean that companies can deduct from their VAT liabilities the amount of tax they have paid to other taxable persons on purchases for their business activities.

Hong Kong government is considering introducing VAT/GST tax in 2009(Hong Kong’s Inland Revenue).

Difference between VAT and Sales Tax:

VAT is imposed on every stage of production while Sales tax is actually collected in the form of extra charge by the retailer, who remits the tax to the government.

VAT and the Theory of Economics:

There have been a long debate between different economic schools of thought around the world about tax reform.

Some economists prefer income tax to VAT/GST because it provides fair treatment to the citizens of the country while others prefer VAT/GST.

According to Hubbard,G,R(1997), some economists support VAT for the following reasons:

Imposing VAT instead of income tax will encourage capital accumulation and savings.
Removing income and profit taxes will remove distortions in the allocation of capital among different economic sectors.
A broad based consumption tax would avoid potential costly distortions of firm’s financial structures.

Importance of VAT:

Today it is a key source of government revenue in over 120 countries. About 4 billion people, 70 percent of the world’s population, now live in countries with a VAT, and it raises about $18 trillion in tax revenue, Liam E., Michael K., Jean-Paul B. and Victoria S(1991)

VAT has advantages and disadvantages:

Disadvantages of imposing VAT:

VAT discourages specialist economic activity and fragmentation in the production because VAT will be fragmented; VAT encourages integration in order to avoid compounded VAT.
VAT encourages financing big governments: in the 1960s, the size of governments in the US and the UK were approximately equal, in the year 2002, the size of the government in Europe have exceeded the size of the US government, many analysts attribute the difference between the sizes of the two governments to VAT, The expansion of the government will lead to higher prices and inefficient production, the thing that will lead to more taxes in the future.

VAT will reduce the available capital to private businesses and raise interest rates, increasing interest rates will stifle economic growth and reduce the potential growth.

Advantages of imposing VAT:

VAT could finance the debt of the government because it provides stable and steady stream of income that is capable of financing development projects.
VAT could reduce consumption and make the citizens of any country save and invest more money.
By encouraging integration, VAT could push the economy towards mergers that will reduce the stages of production; VAT simply tends to encourage big businesses to get bigger by buying other companies, this could yield economies of scale and generate synergies..
Selectivity: the government can select the products and services that it needs to impose VAT on, for example, most government exclude food from VAT, by using VAT governments could take into its consideration the difficult economic situation of the poor and decide the exclusions that apply to them.
VAT is a secure way to finance the government’s structural deficit, VAT covers most of the economic segments in the economy and it is very difficult to evade it.

Introduce a historical background, economy and tax system in Hong Kong:

The Modern History of Hong Kong:

Hong Kong was a British dependency from the 1840s until July 1, 1997, when it passed to Chinese sovereignty as the Hong Kong Special Administrative Region (SAR), Pannell,C(1998).

The British control of Hong Kong began in 1842, when China was forced to cede Hong Kong Island to Great Britain after the First Opium War. In 1984 Great Britain and China signed the Sino-British Joint Declaration, which stipulated that Hong Kong return to Chinese rule in 1997 as a Special Administrative Region (SAR) of China. The Joint Declaration and a Chinese law called the Basic Law, which followed in 1990, provide for the SAR to operate with a high degree of economic autonomy for 50 years beyond 1997, Reference: China Connection.

In the Fifties of the last century, the threat of the cold world was looming over the world.

Investors were looking for a safe heaven to locate their businesses and investments in a neutral place away from the eastern and the western camps, investors found in Hong Kong a promising country that is able to deliver good business environment that could foster growth and political stability at the same time.

Growth in Hong Kong depends on several other economies such as the growth in the US economy and the growth in China and Southeast Asia in general.

Growth in Hong Kong is related to oil prices and world wide prices; Hong Kong is a small island with very little raw resources, it depends on exporting raw materials from abroad in order to manufacture them on its land and re-export them again to other parts of the world.

Manufacturing:

In 1950s, Hong Kong attracted manufacturing jobs and the vast majority of its work force where working in factories.

In 1980s, Hong Kong had about 905,000 manufacturing workers and manufacturing was the most important economic sector, Economist Intelligence Unit (2003).

Until 1990s, Factories were manufacturing products that depended on labour intensive work force, after that manufacturing jobs started dropping because of the climbing costs of labour and land.

In 1990s, the number of manufacturing jobs was about 575,000 jobs.

In 2001, the manufacturing sector contributed to less than 5% of the GDP, Economist Intelligence Unit (2003).

Like most of the developed nations, Manufacturing in Hong Kong is becoming concentrated on manufacturing hi-tech products and services.

The manufacturing sector has been replaced by rapidly expanding service sector, in 1991; the service sector has generated 72.3% of the GDP in Hong Kong and in 2002, the service sector has generated about 83.9% of the GDP, Economist Intelligence Unit (2003).

Services:

A- Banking:

The banking sector is now the most important economic sector in Hong Kong, Hong Kong is currently the fifth largest banking centre in the world.

Hong Kong offered investors a very good opportunity to invest in a growing emerging economy.

Investors benefited from tax free capital gains and high dividends.

B- Tourism:

Tourism is a significant source of economic growth in Hong Kong; nearly 9 million people visit Hong Kong every year, Tourists spend around $7 billion every year.

Tourism is the third source of foreign exchange reserves in Hong Kong.

The banking and the tourism sectors have delivered a very good growth to the Hong Kong economy.

In 1996, Hong Kong’s per capita gross domestic product (GDP) was second to Japan and Singapore in Asia and exceeded that of the United Kingdom, Canada, and Australia, Reference: internet article: Marimari (no date given).

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Sources of Success:

Hong Kong offered investors business-friendly laws and gave complete freedom to the movement of capital in order to encourage investments and promote growth.

Hong Kong is duty free zone and there are few barriers to trade goods and services; this has made the country an important link ring between the east and the west.

Hong Kong left market forces decide wages and prices; the government did not legislate any minimum wage requirement or anti-trust laws.

Competition in Hong Kong:

The decline of the manufacturing sector has caused the decline of competition in Hong Kong.

Competition is considered an essential part of the market system.

Competition benefits consumers and businesses, it benefits consumer by lowering prices and it benefits businesses by allocating resources in a more efficient ways.

Competition is very important to the health of Hong Kong economy, competition gives world economies the flexibility to adjust its prices in the case of external shock (macro-economic shock) Sturm,P, Jahangir,A, Breuer,P, Nishigaki,Y (2000).

Emerging economies that depend on fixed exchange rates usually suffer from real exchange rate appreciation.

The real exchange rate appreciation could be treated by either:

Switching to a flexible exchange rate: according to the “law of one price” flexible exchange rate will adjust exchange rates in order to make tradable products have the same price everywhere in the world.
Lowering prices: lowering prices of products is an important toll in avoiding international competition, lowering prices could only happen if the structure of the market is competitive.

Having a competitive market structure in lowering prices and keeping international capital flows coming to Hong Kong.

Tax Regime in Hong Kong:

Hong Kong tax regime is based on a territorial-based tax regime; the tax is imposed on incomes that arise from Hong Kong, Hong Kong’ Inland Revenue.

The economy of Hong Kong has gained a competitive advantage because it imposes no taxes on capital gains and dividends; this has encouraged many investors to invest in that country and established an important financial centre in Asia.

Hong Kong has the following simple tax structure:

Property Tax: Property tax is levied on rental income from land and buildings situated in Hong Kong.
Salaries Tax: Salaries tax is imposed on incomes derived from working in Hong Kong or if incomes derived from services rendered from Hong Kong.
Profits Tax: profits that are generated in Hong Kong are subject to taxes, profits of unincorporated business stands at a rate of 15% and corporations at 16.5%.

The relationship between Hong Kong and the foreign exchange rate:

The currency in Hong Kong is Hong Kong dollar which is pegged to the US dollar, if Hong Kong government wanted that peg to continue, it should tighten its fiscal deficit.

The currency of Hong Kong is an investment asset, many investors diversify their currency allocations, this diversified allocation to the funds of the global investors results in an important cash inflow to Hong Kong.

For the Hong Kong dollar to get part of the allocation, Hong Kong should stabilize its budget in order to attract more foreign investment.

Analyze why the government considers launching a broad-based tax;

Narrow tax base:

Hong Kong has very narrow tax base, narrow tax base means that the collected revenues do not provide enough revenue to cover the expenditure of the country.

If we compare TAX/GDP ratio in Hong Kong compared to other Asia Pacific and OECD countries we find out that Hong Kong has the lowest ratio of TAX/GDP.

Hong Kong has a narrow tax base because the tax base is shrinking since 1998; sound tax systems are based on growing and stable (not volatile) tax base.

Hong Kong has the lowest corporate tax rate among the OECD countries, the current corporate tax stands at 16%.

Erosion of Tax Base:

The erosion of tax base is actually a result of several factors, such as: sliding house prices, illegal betting, e-commerce and online stock trading.

In the following section I will explain each of these factors separately:

sliding house prices:

For a long time, Hong Kong depended on land and property transactions to contribute to government revenue of Hong Kong.

Collected tax from property in Hong Kong(stamp duty, rates and shares and estate duties) is well above the international benchmarks as a percentage of GDP, Property from taxes/GDP=24% for Hong Kong against 5% for the OECD and 10% for the Asia Pacific countries), Reference: Hong Kong Government, Tax Base Study.

Hong Kong depends on Land sales revenues in financing its budget, this has made Hong Kong increasingly dependent on non-tax revenues.

In the tax base study that has been conducted by the government of Hong Kong and KPMG consultancy, the study reports the fact that Hong Kong’s non-tax revenue is about 80% of its tax revenues against 16% for OECD benchmark.

Because Hong Kong has enjoyed a buoyant business environment for years, banks started granting credit very easily to businesses, the expansion of credit was accompanied by rising house prices, land prices started going up sharply from 1984 to 1997, Gerlach, S & Peng, W(2002).

Many companies found working in the construction sector very profitable because they can make profit from two sources:

Net profits from building new houses and buildings.
Profits from capital gains resulting from continuous increase in house prices.

The construction sector was one the most attractive economic sectors in the country.

Foreign and national banks expanded credit to companies which operate in the construction sector; the banking sector played an “accelerator” role in the run-up of the property prices.

The government in Hong Kong has constructed its tax system around the fact that land prices are going up all the time because they are in demand.

Because of the financial crises of August 1997 that hit south east Asia and also because of the government policy on housing, Revenues from land sales and land utilization(lease, rent) dropped dramatically, suddenly the government found its huge revenues from land dwindling.

On the 16^th of January 2000, the secretary for the treasury stated that:

“The other significant factor supporting our finances, in recent years, has been the high levels of revenue from land and property transactions. But as property prices stabilize, the huge windfalls are unlikely to recur in the future”

illegal betting:

Hong Kong’s treasury depended on revenues from betting activities in the country.

Hefty taxes has made too many people start thinking about illegal betting, Schuman,M(2004).

On the 16^th of January 2000, the secretary for the treasury stated that:

“The impact of illegal gambling and the rise of gambling through the Internet threaten to erode our income from betting tax”

Hong Kong’s Home Affairs bureau said handle plunged 30% from 1996-97 to 65 billion Hong Kong dollars (US$8.3 billion; euro6.5 billion) in 2003-04, while government revenue from betting dropped from HK$12.3 billion (US$1.6 billion; euro1.24 billion) to HK$8.78 billion (US$1.13 billion; euro882 million).

Meanwhile, the amount of cash and betting slips seized from illegal soccer and horse gambling operators jumped from HK$9.38 million (US$1.20 million; euro942,000) in 2001 to HK$19.7 million (US$2.53 million; euro1.98 million) in 2004, according to the government.

The government said handle is projected to drop another 30% by 2007-08 if no action is taken, Reference: the associated press (2005).

e-commerce:

Hong Kong tax system is based upon territorial system, which means that profits and incomes that are derived from Hong Kong should be taxed according to Hong Kong tax laws, the development of e-commerce and the expansion in on-line selling to customers who are not based in Hong Kong through websites that belong to the global network makes hard for the government of Hong Kong to draw a clear line between the income that is derived from the internet and the income that is derived from Hong Kong.

On the 16^th of January 2000, the secretary for the treasury stated that:

“The spread of e-commerce will have implications on all governments’ abilities to assess and collect business-related taxes. For us, the impact will be further accentuated by the territorial-base of our taxation regime”

online stock market trading:

the development of modern communications and the development of the financial markets made trading on-line possible from all over the world, trading has been made very easy by websites that are based on the web, the development of futures, options and spread betting markets have made possible to trade 24 hours a day.

It is very hard to impose taxes on online trading because the companies who established these websites do not have a physical place in Hong Kong.

On the 16^th of January 2000, the secretary for the treasury stated that:

“The acceleration in global stock market trading through the Internet will require us to consider whether the stamp duty we charge on stock transactions can be maintained at its present level, or whether by doing so we would impede the further development of the Hong Kong stock market”

Hong Kong has a prolonged problem in tax revenues resulting from low income tax on working population and the constant decrease in the number of working individuals because of aging.

The secretary of treasury addressed this problem by saying:

“For we all take for granted the low level of taxation which we enjoy in Hong Kong. For example, less than 40% of the workforce pay any salaries tax, and only 10,000 people pay the maximum salaries tax rate of 15%. Companies pay profits tax at 16%, and only profits arising in Hong Kong are subject to tax.

Also we have no taxes on other income or capital gains, no sales or value-added taxes on what we buy, and duty is payable on very few commodities.

So much for revenue, on the expenditure side, the community expects more and better public services. An ageing population will place increasing demands on our health and welfare services. The need to tackle pollution will bring substantial costs. We need to reconcile this need for additional spending with a contracting revenue base.

Based on the above reasons the treasury of Hong Kong is considering widening the tax base a strategic option.

Expanding the tax base is a constitutional obligation as well as an economical obligation.

Hong Kong has to reduce its deficit if it wants to keep the value of its dollar strong and able to attract investors.

…. These sound practices are now enshrined in the Basic Law. So we are under a constitutional obligation to keep our finances in a healthy state. With a fiscal deficit last year, and a projected deficit this year and next year, the law and prudent financial management demand that we bring our finances back into the black in the near term. This would also have the added advantage of maintaining our fiscal reserves at the level necessary to help support the Hong Kong Dollar, an indisputable requirement given the events of 1998.

5- Aging population:

Hong Kong has an aging population; this has put an increasing pressure on the social security system and the infrastructure.

This has made the secretary of the treasury to state:

“The directions indicate that the continuation of current revenue and expenditure policy is not an option“

Considered that introducing general consumption tax is the most suitable for Hong Kong?

In order to see if the general consumption tax is the most suitable tax or not we have to evaluate all Hong Kong tax options.

Tax Options for Hong Kong:

1- Reduce Personal Allowance: Hong Kong tax systems is one of the most generous tax systems in the world, as we have said earlier fewer than 40% of the work force pay taxes, some tax experts are suggesting the government reducing its tax free income allowance in order to increase tax collection revenues, experts say that a reduction in the basic allowance of 10% will raise about $2bn revenue, even if Hong Kong decided to reduce the personal allowance by 50% this will raise 90% of its traditional revenue from the existing tax base is simply contributing more revenue, this options will not be suitable to Hong Kong because it does not broaden the tax base, this option will increase the weight of salaries tax in the overall tax collection, KPMG Tax base study.

2- Expand the Existing Tax Base via imposing capital gains tax: this option is not considered the best option because it will affect investment decisions negatively and lead to capital outflow from the country and make the country lose its competitive advantage.

Imposing capital gains tax may cause job losses and that will make the tax collection from salaries substantially less, so the gains from imposing capital gains tax will be offset by loss of tax from loss of income and salaries taxes.

Imposing taxes on dividends may not lead to desirable results.

3- Increase corporate taxes:

Increasing corporate taxes is one of the main issues that the government of Hong Kong is discussing, most of the analyst believe that this is not an option because increasing the corporate tax will simply cause damage to the position of Hong Kong in the global market, analysts think that there is a global trend to reduce corporate tax in all over the world.

Analysts think that countries are in competition with each other to provide facilities and tax concessions to corporations.

If Hong Kong increased its corporate tax, it would be very easy for corporations to shift their headquarters to somewhere else in the world.

According to Hong Kong Institute of Certified Public Accountants the government of Hong Kong is suggesting giving more corporate tax concessions to corporations in the following three areas:

A- Full profits tax exemption to regional headquarters/offices in

Hong Kong in respect of management consultancy income

Derived by the Hong Kong entity from associated entities

Overseas.

B- Exemption of interest income received by regional offices from

Loans made in Hong Kong to their overseas associates.

C- Group relief.

D- Loss incurred in the current year of assessment should be

permitted to be offset against the assessable profits of one

previous year.

3- Introduce New Taxes: introducing new taxes (apart from VAT/GST) could an innovative solution to Hong Kong’s structural fiscal deficit. In fact, there is no limit to the number of taxes that a government could impose in order to provide suitable macroeconomic environment for development. For example, Hong Kong could introduce environmental taxes in order to reduce carbon dioxide emissions from cars and factories, we all know that developed countries contribute significantly to the increasing stock of greenhouse gas emissions that causes global warming.

Because Hong Kong has very busy airports and sea ports, Hong Kong could impose new taxes on land and sea departures.

Experts advise the government to outsource the activities that it does not usually do efficiently, outsourcing will help the government reduce the deficit that is caused by inefficient use of resources.

Experts did not only advise the government to introduce new taxes but also to abolish some taxes. For example, abolishing taxes on alcohol beverages in order to encourage wine tourism

Experts think that applying this option will not solve Hong Kong’s structural deficit problem completely for the simple fact that Hong Kong has a reputation that it is a low tax country and if the government imposed taxes on several economic activities, Hong Kong reputation will be affected and this may have a damaging effect on the position of Hong Kong in the financial and business world.

What experts are trying to say that Hong Kong government should introduce new taxes and abolish old taxes in order to keep the current balance of taxes and respond to the modern needs of the society (such as environmental taxes).

4- Broad-Based tax on general consumption: this could be VAT (Value Added Tax), GST (Goods and Services Tax) or Sales Tax.

Kong’s structural deficit problems.

Government says that a 3% GST will yield about $18bn which stands for 1.5% of GDP.

Analysts recognize that GST is a powerful solution to Hong Kong’s Problem, 3% GST is capable of solving the problem, and in addition to that, 3% GST is in line with international standards.

This tax is not only capable of covering the government expenditures but also capable of broadening the tax base since it is imposed on nearly all kinds of consumption.

There are few points that the government needs to take in to its account when constructing the VAT/GST:

It is recommended that the VAT/GST should be simple; simplicity is the common feature of Hong Kong tax system and keeping the proposed VAT/GST simple is consistent with the rest of the tax system.
It is recommended that the VAT/GST should be comprehensive; in other words, it should include most goods and services in the economy, making the VAT/GST comprehensive will guarantee stable revenue to the government and will prevent further increases in the rate of VAT/GST.
Stability: it is advised that the rate of the VAT should stay constant for 5-10 years to come, stability in the tax rate is very important in creating stable consumption and investment decisions, consumers will base their consumption decisions upon the prices of products and s

Is a crime committed because the criminal is a rational being, able to make the decision to offend as an act of free will?
Does the crime occur because environmental influences – parents, peer group, culture and so on – determined the act would invariably happen?
Or is the real clue to be found in the genes: are criminals born not made?” (Hollin, 1989, p.3-4)

Discuss each of these perspectives and consider which theory (or combination of theories) is the most plausible and why?

Introduction:

What motivates individuals to commit crimes, particularly violent crimes against other individuals has been the subject of research in criminology for over two hundred years. Globally the search for the causes of crime continues to form the bedrock of most criminological studies (McLaughlin et al., 2003, p.73).The nature versus nurture debate in respect of criminology has been central to the research, having been especially intense, and often emotional in explaining criminal behaviour (Sarbin and Miller, 1970). The debate regarding the relative impact of genetics and environmental influences continues to inform a considerable body of research.

In respect of commission of crime two distinct schools of thought have dominated the debate. Classical criminologists approach the question from the standpoint of individuals having, and employing, a free will. They take no account of the circumstances or environment in which an individual has been formed, taking the view that a criminal commits a crime because he wants to, the deed depending only on the voluntary determination of the individual (McLoughlin et al., 2003, p.53).

On the other hand are those who believe that an individual acts in a certain way as a result of the circumstances in which he finds himself. It is only when the circumstances conspire against an individual that he will commit a certain criminal act, but this will not happen simply as a consequence of his wanting to (McLoughlin et al., 2003, p.53). Those approaching the problem from this point of view believe that intervention programmes and improvements in circumstances could reduce levels of violent crime in society.

The aim of this paper is to investigate these theories and the evidence in support of each of them. I will conclude with a consideration of which is the most plausible theory, or combination of theories, following on from the arguments given.

The Concept of Crime and Criminology:

Criminal acts may, in their simplest form be thought of as acts which are prohibited by the law and they can be specific to a particular culture, what is acceptable in one, being unacceptable and unlawful in another. There have been wide ranging definitions of what constitutes crime, but this has been problematic as there is no general agreement on what crime is (Jones, 2006).The fact that crimes do not constitute natural or homogenous behavioural categories poses particular difficulties in identifying the subject matter of criminology and for constructing theories of “crime” and “criminal behaviour” (Blackburn, 2000, p.16). Because of the difficulties faced in defining the patterns of behaviour associated with criminality, there is an associated difficulty in isolating the causal effects of intrinsic and extrinsic factors and the extent to which these exert an influence on an individual’s behaviour. More and more evidence is suggesting that the criminal justice system is home to individuals with psychological problems. The fact that many of these problems have been shown to have a genetic component suggests that individuals could find themselves engaging in criminal activity (Jones, 2005). In order to address this problem and effectively treat the individuals involved, it is necessary to attempt to establish the causes of these psychological problems.

Criminal Behaviour:

Criminal behaviour is defined in the context of the legal structure adopted by a society. It is a widely held view that criminal behaviour falls within the realms of anti social behaviour. The influence of genetic components on anti social behaviour has been investigated by Morley and Hall. They suggest three different ways to define anti-social behaviour as follows:

Anti-social behaviour can be equated with criminality and delinquency, with individuals involved being liable to arrest and involvement in the criminal justice system which may include prison;
Anti-social behaviour can be defined as a result of personality disorders, particularly anti social behaviour problems which lead to an increased risk of involvement in criminal behaviour;
Anti-social behaviour can be defined as a measure of personality traits, which can lead to an increased likelihood of engaging in criminal behaviour. These include aggression and impulsiveness, both of which have been associated with increasing levels of criminal behaviour.

(Morley and Hall, 2003, cited in Jones, 2005).

Genetic Factors:

Family studies have been the focus of research for quite some time. While the early studies in this area suggested that there was an inherited basis for a predisposition towards criminal activity, it was shown that environmental influences could modify an individuals characteristics and personality (Joseph, 2001). Research like that carried out by Joseph was questioned largely in methodological terms, but nonetheless raised important questions which became the focus of a great deal of further research (Jones, 2005). In recent years the study of genetics, largely as a result of more sophisticated techniques, has become one of the fastest moving and most significant areas of modern science (Williams, 2004, p.131), giving an enormous insight into the make up and working of the human body, including the mind. Human behaviour patterns are generally accepted to be an interaction of life experiences and genetic predispositions (Mednick et al., 2003, p.77), with an acceptance of biological explanations only suggesting that criminals are inherently defective (Blackburn, 2000, p.136).

The idea that genetics are a factor in criminal behaviour has existed for a very long time, one of the earliest studies in this area being carried out in 1877 by Richard Dugdale. His work investigated the criminal behaviour of a notorious American family called the “Jukes”, six of whom Dugdale had encountered in prison. When tracing their family tree over a period of two thousand yeas, Dugdale found a history of poverty, prostitution, and crime. With no scientific basis for his supposition, he attributed this to the “degenerate nature of the family, and despite the lack of scientific support, the work was very influential at the time. He did not consider the fact that the family members were being impacted upon by the same or very similar environmental factors which could have impacted substantially on their behaviour.

By the end of the nineteenth century, scientific theories in respect of heredity had taken on increasing importance and were being supported by empirical evidence, albeit doubtful in validity. Another early writer, Goring, suggested in 1913 that criminal tendencies were basically inherited. He studies convicts from the same families and found that the correlation for criminal behaviour was very similar to that for some physical characteristics such as eye colour, and stature, suggesting that the genetic material passed on by parents was vital in shaping the way their children would turn out. Parents who were criminals would pass this trait on to their children in the same way in which they might pass on any other characteristic (Goring 1913, cited in Williams, p.132).

Twin Studies:

Twin studies have been important in trying to establish links between genetics and subsequent behaviour. There are two types of twins:

Monozygotic twins come from the same egg. They are commonly known as identical twins, although this is, in fact, incorrect. They have the same genetic structure, are the same sex and have a very similar physical appearance.
Dizygotic twins occur when two eggs are fertilised simultaneously and are no more genetically similar that any two siblings.

It could therefore reasonably be said that if monozygotic twins were to behave in the same way, for example in criminal behaviour, this could be attributed to some sort of genetic influence. If crime is related largely to environmental influences, then it would be safe to assume that all twins would have the same chances of future criminal behaviour. Studies involving twins have been notoriously difficult because of the very similar environment in which they grow up, making it difficult to isolate genetic from environmental influences. The chances of monozygotic twins who are separated would be the ideal for the purposes of research but, due to the fact that twins are not often separated, the sample on which research can be based has traditionally been small.

Such studies have nonetheless been carried out, one of the earliest of which was undertaken by the German physiologist Johannes Lang. he studied pairs of criminal twins and found that in 77% of cases concerning monozygotic twins, where one twin had a criminal record, not only did the other twin also have a record, but the patterns of the offences were similar in nature. In a group of dyzygotic twins, the correlation dropped to 12%, falling to only 8% when pairs of brothers were compared. The studies were subject to methodological flaws in so far as the identification process was based on observation only, and many of the twins came from psychiatric clinics which may mean that the chances of criminal behaviour were increased from the outset (Jones, 2006).

Christiansen attempted to overcome some of the methodological problems of earlier work when he studied the entire database of twins in Denmark. For both male and female twins he found that the rates of offending were more highly correlated for monozygotic than for dizygotic twins. He also found that the more serious the offence, the stronger was the potential genetic component. He was nonetheless aware of the difficulty in separating genetic and environmental factors which he acknowledged in his work.

Adoption Studies:

Adoption studies have been central to research which has attempted to establish the relative roles of genetics and the environment in determining an individual’s behaviour. The rationale behind these studies is that if children adopted soon after birth resemble their biological parents more than their adoptive ones, the evidence points towards genetic rather than environmental explanations. One of the earlier studies in this field was carried out by Hutchings and Mednick in 1975. They compared adopted children whose fathers had criminal records with adopted children whose father did not. They reported a higher incidence of criminal behaviour in those children whose fathers had criminal records than in those whose fathers did not (cited in Towl and Crighton, 1996, p.15). These findings have been refuted by a number of subsequent studies which have suggested that these findings are unreliable, as only a very small number of adopted children engage in criminal behaviour in adulthood. Stott has suggested that it is more likely that the predictor of this criminal behaviour is the result of problems encountered by mothers during pregnancy. Many of these problems are most prevalent in low socio economic groups which is typically the tier to which mothers who have their babies adopted tend to belong. He argues that it this rather than the operation of any genetic factors which accounts for the relationship between criminality in adopted children and their biological parents (Stott, 1982).

Family Studies:

Studies in this area which have attempted to ascertain the relative influences of genetics and the environment, have been largely unaccepted in academic circles. The most salient problem inherent in research of this nature is the notoriously difficult task of separating the nature from the nurture effects and therefore establishing causal links. While this is a problem that is also inherent in the twin studies, it is more apparent in family studies when the genetic similarity between siblings is less.

Mednick and his colleagues tried to address this methodological issue when they investigated rates of criminal behaviour in children of criminal parents who had been adopted and were not therefore exposed to their parents. They found that the children of such parents were indeed more likely than the population in general to engage in offending behaviours, but that the genetic explanation did not account for the types of criminal behaviours these would be. They concluded that there was at least some genetic component in the commission of criminal behaviours (Mednick et al., 2003, p.89-90).

Biological Factors:

Recent research has suggested that characteristics observable at birth will develop in the context of the circumstances in which an individual finds himself. Manicus asserts that it is brain activity that provides the causal mechanism for behaviour thereby making biological processes as real a cause of crime as social processes (Manicus, 1987). Many studies have suggested that crime does, in fact, run in families. Research conducted by Blair and colleagues has pointed to a genetic component in the development of psychopathic tendencies. They suggest that as well as this genetic component, complications during the birth of some babies are a strong risk factor for later violent and anti social behaviour, but recognise that intervention and helping parents could be an important component of ensuring that such behaviour does not subsequently manifest itself (Blair et al., 2006). Problems encountered by mothers during pregnancy has been attributed to subsequent criminal behaviour.

Chromosomes:

Recent advances in the field of genetics have led criminologists to look at the role of chromosomes in the criminal behaviour. In particular scientists have investigated the sex chromosomes and their possible role in crime causation. This research began in 1965 when a British researcher, Patricia Hayes, examined chromosomal abnormalities in a group of Scottish prisoners. The blood test employed, a technique called karyotyping, revealed that twelve out of the 197 examined showed abnormalities in their chromosomes while seven were found to have an XYY chromosome. Normal males possess an XY chromosome, and while there are several different permutations of the chromosome, the XYY male was identified as potentially very dangerous and termed a “supermale.”

A number of criminals have subsequently tried to offer this a defence saying that this biological trait was what spurred them on to criminal activity. This defence was successfully used in 1969 in Australia by one Lawrence E. Hannell, judged a “supermale” and subsequently released on the grounds of insanity. Other attempts have not been so successful. When such an attempt was made in the case of Richard Speck, accused of killing a number of his classmates in the United States, he was not acquitted and it was later revealed that he did not, in fact, have an additional Y chromosome.

While a number of studies have subsequently been carried out in this area the majority or the research has suggested that this is a theory with little or no substance. In their study Sarbin and Miller concluded that “studies done this far are largely in agreement and demonstrate rather conclusively that males of the XYY type are not particularly aggressive” (Miller and Sarbin, 1970, p.199).

Genetic Causes:

Family studies have been the focus of criticism but research carried out by Brunner and colleagues has made a considerable contribution to the research in this area. Despite the relatively unsuccessful investigation into the role of chromosomes as a possible cause of criminal behaviour, in the 1990s Brunner and his colleagues claimed that they had uncovered a specific gene which was linked to criminal behaviour. They engaged in an extensive study of what was termed “the Netherland’s most dysfunctional family”. The male members of the family in question seemed to be unable to control their violent tendencies and were frequently arrested. Tracing the family back for five generations, Brunner et al. found fourteen men whom he said were predisposed to criminality, including violence towards members of their own family who were female.

Brunner and his colleagues suggested that because men have only one X chromosome they are especially vulnerable to any defective gene. After a decade of intensive research the scientists claimed that they had isolated this defective gene. The gene, they said is the one which is responsible for production of the enzyme “monoamine oxidase A”, which is involved in the process by which signals are transmitted in the brain. Specifically it breaks down serotonin and noradrenaline which, when found in excess, have been linked to aggressive behaviour in humans. Since men with the mutated gene identified by Brunner and his colleagues do not produce the enzyme necessary to break down chemical transmitters, researchers suggested that they were overwhelmed by stimuli in the brain, a situation that causes uncontrollable urges and leads them into criminal behaviour (Schmalleger, 1996, p.182). While the authors accepted the fact that their research had not been replicated in any other studies, they did suggest that this was an area for future research, suggesting as it did, that genetics play an important role in criminal behaviour (Brunnet et al., 1993).

Monoamine oxidase has been linked with other neurochemicals which may be linked to criminal and antisocial behaviour (Jones 2005). Eysenck’s personality theory has been used to measure possible factors of personality which may be influential in the commission of crime. Suggesting that within the criminal fraternity different types of crimes are related to different personality patterns (Eysenck, 2003, p.93) Eysenck has pointed out that it is connected to norepinephrine, epinephrine and dopamine, all of which have been linked with personality traits important in psychosis Eysenck, 1996).

Biochemical Factors:

An increasing awareness of the physiology of the human brain, coupled with more sophisticated techniques, is leading modern criminologists to investigate the effects that certain biochemicals have on behaviour. If it were to be established that certain chemical imbalances were responsible for certain types of criminal behaviour, then this would lend weight to the theory that certain behaviours are indeed not within the control of an individual.

The Effect of Serotonin:

Current research centres on the role of neurotransmitters, chemicals in the brain which are fundamentally important to all human behaviour. There has been considerable research in respect of serotonin levels and the role this plays in criminal behaviour, where it has been identified as an important element. Serotonin has been shown, in both animal and human studies, to be an inhibitor of aggression, so low levels of serotonin have been linked to violence and suicide in humans (Williams, 2004, p.152). Raine found that individuals who were prone to anti social behaviour had lower than normal levels of serotonin in their brains (Raine, 1993), a relationship also found in research carried out by Virkkunen and Linnoila (1993). This would appear to confirm the findings of the Dutch study described above. Serotonin has been linked to brain development and it has been suggested that a disorder in this development system could lead to an increase in levels of aggressiveness and impulsivity, suggesting that the individual in this case would not have full control over his actions.

While scientists have been able to link a number of neurotransmitters, with various sorts of anti social behaviour, the nature of the relationship is not completely understood. It is unclear whether these neurotransmitters are linked to all aggression or are linked to specific types of aggression and may lead to the commission of certain specific acts and crimes. Williams points out that the role of neurotransmitters is a classic chicken and egg situation. It is not known whether the mood produces the neurotransmitters or whether the neurotransmitters lead to changes in an individual’s mood (Williams, 2004, p.153).

Criticisms of the Biological Approaches:

Attempts to explain criminal behaviour in the context of biology and genetics have been criticised, often on the basis of methodology. Walters and White have criticised many of the studies carried out on the basis that they have been badly designed, and largely inadequate in addressing the relevant issues. In particular they highlight the following shortcomings:

Few biological studies have adequately explained the concept of criminology, often relying on a single arrest as an indicator of criminal tendencies;
Twin studies, in particular, have often been inaccurate in identification of monozygotic and dizygotic twins;
Biological data has often been based on interviews with individuals which is subjective in its nature and therefore open to a range of interpretations;
Methodological problems are common including small sample sizes, lack of control groups and the use of inappropriate data analysis techniques;
Results have not shown consistency from country to country.

(Walters and White, 1989).

Personality Disorders:

The term “personality” is used to describe an individual’s temperamental and emotional attributes that are relatively consistent and will influence behaviour (Jones, 2006, p.398). In recent years there has been an increasing focus on individual personality traits, persistent or stable personality characteristics, and disorders and this focus has been seen as extremely useful in predicting future criminal behaviour. Theories talk about a criminal personality in which it is assumed that individuals possess definable and dominant sets of rules which determine how they will behave in virtually any situation (Williams, 2004, p.178). Many tests of personality have been developed by psychologists over the years in order to test the theory that those who have criminal tendencies have personalities which are different from those of the normal population. Many of the personality disorders which manifest themselves are initially evidenced in childhood. If it were indeed to be the case that these are predictive of later criminal behaviour, intervention with children displaying personality disorders may be a useful preventative measure.

Holmes and colleagues have identified three personality disorders which can be diagnosed in childhood and have been shown to be predictive of later behaviour:

Oppositional Defiance Disorder – characterised by argumentativeness and non-compliance. As these children become older their behaviour often changes for the worse, with them often starting to engage in petty crime and displaying aggression to their peers and others;
Attention Deficit Hyperactivity Disorder – children with this disorder are unable to stay focused on any one task for anything but a short period of time. These children are unable to analyse the consequences of their behaviour, cannot easily see things from another’s point of view and are generally unable to learn from their previous behaviour;
Conduct Disorder – children diagnosed with this disorder are already at the stage where they have begun to break society’s rules. This is the most severe of the three personality disorders as diagnosed in childhood and is often predictive of the development of Anti Social Personality Disorder, a disorder which can only be diagnosed when an individual is aged eighteen, and at which point they have travelled quite far down the road of anti social behaviour and not conforming with the norms in society.

(Holmes et al., 2001).

With a clear link established between these early childhood disorders and future criminal behaviours, early diagnosis and effective interventions are vital in this area. Tests for determining an individual’s personality and the likelihood for future criminal behaviour have come under considerable scrutiny. The tests themselves have developed considerably in their complexity and the sophistication of their methodology but a study by Arbuthnot and colleagues stated that the doubtful validity of much of the research that had gone on in this area prevented their coming to the conclusion that there was a link between personality and criminal behaviour (Arbuthnot et al., 1987).

Problems in respect of personality theories have mainly concerned the way in which personality has been measured, usually on some numerical scale. Personality tests are also problematic in that they require objective attitudes in respect of what constitutes normal. Inherent in the use of personality tests is that those who commit crimes and go against the norm must have something different from that which is viewed as normal.

The personality theories that have found the most application in the context of criminality are psychoanalytic explanations and the learning theories. There is some evidence that personality difficulties displayed in childhood are highly predictive of later criminal behaviour and can be inherited. Personality theories have not really seen much application in the predictive context, having been used mainly in respect of treatment after an offence has been committed. The rationale behind using personality tests is that behaviour can be changed by behaviour modification techniques.

Criticisms of Personality Theories:

Personality theories generally assume that all individuals have a core personality which explain how they will react to a wide variety of stimuli and whether they are likely to become criminal. They take little account of the fact that these could be changed through interventionist or environmental factors.

Environmental Influences:

Criticisms have been levelled at the approach which considers genetics as being the dominant factor in criminal behaviour, often because the methodology of the research conducted has been questioned. One such study was that carried out in Denmark in 1977 by Christainsen who reported that identical twins inherited some common characteristics that increased the likelihood of their becoming involved in criminal behaviour (Crristiansen, 1977). The criticisms levelled at this and other similar research is the fact that twins may share higher than average levels of shared experiences, thereby making it difficult to isolate the genetic component as a causal factor in such studies.

The first real attempts to consider crime in the context of where criminal lived, and their associated environment, took place in the 1820s in France and Belgium. These studies were pioneered by Adolphe Quetlet and Andre-Michel Guerry who collected data about the areas in which criminals lived, and in so doing began a field of research that would continue throughout Europe for a long time to come, eventually being adopted by American and global researchers also.

Modern Environmental Criminology:

It has been suggested that the impact of the environment on behaviour reduces with age. While adults are able to exercise some choice as to their environment, children have no such choice, so the impact of the environment in more profound (Jones, 2005). Reluctance to consider genetic factors as instrumental in criminal conduct has had political overtones (Haller, 1968), as it suggests a somewhat depressing prognosis for individuals born with the genetic predisposition to become criminals. The idea that there as an inextricable link between crime and the environment has been considered as an alternative and really came to the fore in the UK in the 1970s, with crime figures beginning to rise sharply, and crime being increasingly attributed to young, disaffected males living in areas of social deprivation (Jones, 2006, p.134).

Situational Crime Theory:

The ideas surrounding environmental criminology have had a considerable impact on public policy in the UK. The Home Office Research Unit was set up in the 1950s and began to work on what it called situational crime prevention, an attempt to reduce the opportunities to commit crime. This approach does not see crime as the result of any physiological or biological impulses but sees it as more opportunity driven which causes individuals to make choices in the context of these situational factors (Jones, 2006, p.138). Situational crime theory does not focus on career criminals who will find their own opportunities to commit crime, but seeks to address the problem of those who may not have been involved in the criminal justice system before. In the context of this theory the key factor is opportunity and the exercise of free will, and proponents of this approach argue that a reduction in opportunities will, in turn, lead to a reduction in the commission of crime.

Situational crime theory has its critics who suggest that the theory focuses too greatly on the crime at the expense of focusing on the type of persons involved in the commission of crimes. Tonry has argued that it is likely to increases the fear of crime among the general public (Tonry, 2004). Despite criticisms, recent research carried out in London has added weight to the idea that there may indeed be a causal link between deprivation, crime and a particular area, when a study by Dorling and colleagues in 2001 suggested that patterns of social deprivation in London have changed very little since the turn of the nineteenth century (Dorling et al., 2001).

Crime and Poverty:

Because large numbers of crimes are committed by people who have very little money, there has long been a school of thought that there is a causal link between crime and poverty. This is a view which has been held for many years and was first investigated in France by Guerry who found that in the more affluent areas there were higher rates of crime against property while in the poorer areas there were higher incidences of violent crime. There were poor people living in the more affluent areas and Guerry concluded that it was not poverty per se that caused higher rates of crime but the fact that there was more opportunity in the wealthier areas for crime against property. Recent research as been inconclusive regarding the role played in criminal activity by poverty. What does appear to be clear is that there is no direct link between crime and poverty as an isolated factor as there are, for example, many tribes who are materially very poor but did not engage in high levels of criminal activity (Williams, 2004, p.286).

Research has suggested that poverty only becomes a factor in criminal activity when there is a large degree of social inequality, a large gap between the “haves” and the “have-nots”. This leads to the suggestion that if, in the population as a whole, there was a degree of poverty, this would not lead to higher rates of crime. This has been coupled with the suggestion that it is not even the inequality which is the causal factor but the perception that this is unfair which leads to higher levels of criminal activity (Stack, 1984). Recent theories have investigated the link between crime and inequality and it has been suggested by Vold and his colleagues, who refer to a number of studies, that there is a link between inequality and violent crime including homicide (Vold et al., 2002).

Family:

In terms of environmental factors, none is more important or exerts such an influence in shaping an individual as the family in which he grows up. Famil

The Skilled Helper Approach

Outline

This paper is about integrative counselling using the skilled helper approach. In this paper we will discuss the theory and application of the integrative model of the skilled helper and components of person centred counselling and solution focus therapy. We will look at this integrative model and the benefits as well as the possible downsides. A case study will then be presented using this integrative model to counsel the client.

Introduction

Integrative counselling looks at several approaches that have been combined and used within a therapeutic counselling relationship. Coming away from a single counselling approach and combining suited models of counselling, both the counsellor and client reap the benefits of the integrated model (Arkowitz, 1997). Robertson (1970) stated that his ‘radical eclecticism’ bypassed theory.

Introduction – Gerald Egan

Gerald Egan is professor of organisation studies and psychology and programme director for the centre for organisation development (CORD) at the Loyola University of Chicago. Egan developed the skill helper model and in 1975 published the first edition of his book The Skilled Helper , which demonstrateding an eclectic framework for a problem management approach to the counselling process.

The Integrative Counsellor

There are counsellors that see themselves as being eclectic in their work. It is viewed they are syncretism-using techniques from many models^[RZ1]. Eclecticism – no or little theoretical rationale^[RZ2]. Merely pulling techniques from many models without a sound rationale can only result in syncretistic confusion (Lazarus, 1996, 1996; Lazarus, Beutler, & Norcrossk, 1992).

Development of Therapy

The three main influences on the development are the skills training approaches to counselling, the social influence theory, and behavioural theories of learning and change. Egan sums his approach up as ‘A conceptual framework…. to organise borrowed ideas, methods and techniques systematically … and to integrate them into [one’s] own theory and practice of helping^[RZ3].’’.

Theory

The skilled helper model is a Tran theoretical approach to integration. The client seeks counselling or assistance when they are experiencing difficulties in coping with problems in his or hertheir lifeves. The Counsellor will find and act on solutions to these problems. This is done by using a problem solving process. The process is demonstrated by using 3 three main stages which originally were titled Exploration, Understanding and Action, and which are now renamed as Present Scenario, Preferred Scenario and Getting There^[RZ4].

The Three Stage Model

The three stage model consists of three steps within three stages. Egan describes this model as “A a cognitive map with practical potential, complex enough to make sense of reality and simple enough to use^[RZ5].”.

1 Present Scenario

The client is helped to describe and explore the present Scenario^[RZ6]’,

she is going through at present

2The Preferred Scenario

Articulate a preferred scenario that includes future goals

aAnd objectives.

3Getting There

Develop and implement action strategies forrom moving

from the current to preferred scenario.

The Skilled Helper Model is integrative, going mainly through three stages:. Person– centered, to establish the therapeutic relationship;, Gestalt, for intense work on awareness; and behaviour therapy to work on change. Egan states ‘do whatever is ethical and works.’ (1990:62). (Robertson (1979) stated that his ‘radical eclecticism’ bypassed theory. The writer^[RZ7] argues that theory is evident within the approach as it is influenced by strong theoretical approaches integrated into the skilled helper.

Dr Carl Rogers argues that “It is the client who knows what is hurting and in the final analysis it is the client who knows how to move forewardords ..…. the counsellor’s task is to enable the client to make contact with his own inner resources rather than to guide, advise or in some other way influence the direction the client should take …. Thus thus emphasising the central importance of the client’s phenomenological world”. (Mearns & Thorne, 1988, P1).

The three stage model is a systematic way of learning to work with clients helping them to cope more effectively with their life,. ‘tTo manage their problems in living more effectively and develop unused opportunities more fully’, and to ‘help people become better at helping themselves in their everyday lives.’ (Egan G., ‘The Skilled Helper’, 1998, pp. 7-8). Using the approach counsellors are able to explore the client’s feelings, thinking and behaviour.

In stages one and two, clients are helped to explore and understand themselves their feelings and their world better, and in a different light. In stage 3 three, clients are helped to take effective action to achieve constructive change.

Assumptions of the Model

Some counsellors see the skilled helper model as being basic counselling and a paradigm that is made more complicated than necessary. Egan is slightly contrary about human nature^[RZ8] ……..

Egan and Cowan 1979^[RZ9]

Egan and Cowan 1979, 1980: Egan, 1984^[RZ10]

The focus of the skilled helper model is concentratesd on the client, with the aid of counsellor, in enabling the client to develop new skills of self management, interpersonal communication, and decision making. The counsellor and client wWorking together on strategies to bring about change, and they. examine Looking at what the client would like to change or manage differently.

Psychological Health

The heart of the problem solving process is the client’s action itself (Egan, (1975:227). This is achievable by enabling the client to tell his or her storey. The skilled helper model is one that sees the potential of change to take place in clients (Inskipp, 1993:92), w. Where the client shi8fts their behaviour from unhealthy to healthy to juvinate^[RZ11] positive change. Change comes about through action “The heart of the problem-solving process is the clients’ action itself (Egan, 1975:2227^[RZ12]). This is by way of the client letting go^[RZ13].

Change begins to take place when the client is given space to tell his or her their storey. In telling of the storey, the resources for change areis identified and used. Client The client is helped to reframe by seeing the story and, situations in a different light, seeing him or heerself as a survivor rather than a victim. However, simply Just wanting change to take place is not sufficient. The cClient must be active in the process of change by way of adapting his or her behaviour through action, reflection and new learning. “Constructive change is always the bottom line.” (Egan 1990:207).

Practice and clinical issues

The counsellor has to be effective in the way the approach is used. ‘Helpers are successful to the degree that their clients – because of client – helper interactions – are in a better position to manage specific problem situations and develop specific unused resources and opportunities more effectively.” (Egan, 1998:7). The role of the counsellor is to assist the client in understanding his or hertheir storey and /problem, and assist with skills that will aid their client in being effective in the management of particular challenging situations.

The gGoals of the counsellor in the relationship are to build and empathic alliance;, to assist;, identify;, support; and to evaluate.

Counsellor’s use of the Model

Understand and confidence of the 3 stage model with a willingness to adjust to accommodate the clients needs^[RZ14]. Counsellor works with the client in the here and now. Some of the skills used would be their natural internal supervisor and , attending skills, through awareness and use of the mnemonic SOLAR (squarely, open, learn, eye, relaxed). For non verbal communication, using the model as a template for change, the counsellor worksing therapeutically at the client’s pace using assessment skills, identifying if the degree of difficulty experienced by the client gets in the way of achieving change in mood and relationships.

Making a contract with client, focusses of the work, nature and frequency of contact, confidentiality and possible limitations of it, review and evaluation^[RZ15]. Evaluation is ongoing through sessions as this helps identify what is /or is not helpful during the session.

Use of skill – through communication

The counsellor engages with the client attending^[RZ16], active listening, establishing and conveying empathy and the use of probes and questioning, immediacy, and appropriate self– disclosure to client. Brain storming is a cognitive way of helping client to look at new perspectives on situations. Brainstorming generates hope that this^[RZ17] can be different – this helps client to move foreward into working creatively. The cCounsellor can engage with the client using a variety of different skills, such as . Prompting — : what do you really want for yourself in this situation, miracle Miracle Ququestion – brief therapy, Blank wall – visualisation – NLP (DeShezer, 1988; O’Connor and McDermott, 1996)0.

Goal setting and reviewing helps client to see hopes as goals that are SMART^[RZ18], specific, measurable, achievable, realistic and time-limited.

Change Process

Egan takes his process of change from the behavioural approach (Wopolfe et al., 1989:11). Seeing behavioural change over cognitive change^[RZ19]. The counsellor uses empathy to form a strong working alliance with the client through the exploration of feelings. The exploration of feelings plays the main part in effecting for change to take place. Within an article about change showedOne source identifies three3 agents for change: stated affective experiencing, cognitive mastery and behavioural regulation (Karasu 1986:690). ^[RZ20] These three3 agents play a major part in the skilled helper approach for change to take place.

Nature of therapeutic relationship

Egan sees that the therapeutic relationship is instrumental in the counselling process. Working to achieve goals within specific time restrains the counsellor takes on the role of^[RZ21] . ‘A relationship of service, not an end in itself’ (Egan 1990:57). Whereby Rogers argues that the therapeutic relationship is fundamental in the counselling process^[RZ22].

As part of the skilled helper approach, Egan incorporated Rogers’ core conditions. Egan describes himself as ‘standing on Rogers shoulders^[RZ23],’ owing much to him as the core conditions is a major part of the approach. Rogers, on the other hand, concentrates on the person as a whole human-being. There are many differences between the two approaches (see Table 9.1).

Format of a typical session

Each session is different as there are is no set format. Tthe process depends on where the client is with the process of change.

Indications and contraindications

This approach is similar to the cognitive and behavioural approaches. The model is only beneficial for clients with mild to moderate conditions. The approaches concentrates itself onwith the client having the motivation to change and test out feelings and perceptions in a new framework.

The model can be used with most clients and situations including depression ()Mynors-Wallis et al., 1995; Sseeley et al., 1996), and working with young people (Mabey and Sorensen, 1995).

The model is described as being eclectic (Inskipp and Johns, 1984).

Weakness of Model

The model can be iInflexible, not suitable for clients with deep roouted problems, and there is little research to verify its efficacy^[RZ24]. Although the problem management programme is beneficial, it may have to be modified to fit some cultures.

Obstacles to Integration

Within Tthe development and usage of an integrative mode,l as opposed to a single model, has its drawbacks and possible pitfalls. Hastily combining counselling models on a at whim just because the models separately are pleasing does not necessarily not lend itself to necessarily be combined successful combinationly into an integrated model.

No one theory or model can testify that it ey holds athe patent off the truth. No one single model or set of techniques have or can always be effective with diverse clients. Nonetheless, tThere is a current trend, as the basis for future counselling practices; writers are developing integrative approaches (Lazarus, 1996^[RZ25]).

Some models of counselling integration are The Skilled Helper Model, Cognitive Analytic Therapy (CAT) and the Conversational Model.

There are times, however (dependent on the client) when a single established integrative model may be used. For the purpose of this essay an example of the Skilled Helper model will be the main integrative model.

Case Study

Introduction

This case study looks at the use of the skilled helper model with Lisa, a 16 year old college student on a one year foundation course. Her problem is that she finds herself more and more angry. Every week there is an aggressive situation at college between Lisa and her peers or with members of the college staff. She has been officially warned twice and is in great jeopardy of being thrown off her course and out of college. Throughout many of her comprehensive school life she has been expelled from several schools because of her behaviour. It was recommended by the Student Support Manager that Lisa attend some sessions of counselling to “get herself sorted out^[RZ26]”. This was an option recommended to herim as an alternative to expelling her.expulsion.

Theory

“Helping relationships are influenced by whether the helper is a trained counsellor or is using counselling skills as part of performing another role. Helping relationships takes place in the head and in the heart, as well as face to face. Ultimately all helping relationships need to become client self– helping relationships.” (Nelson-Jones, 1999, P.118)

Stage one looks at the problems, issues, concerns, and undeveloped opportunities for Lisa.

Lisa agreed to attend counselling;, this was not a new experience for her. She had previously received counselling and anger management several times and stated, “Tthey don’t work.”.

Assessment and Contracting took place during the first session. Lisa was listened to, enabling her to tell her storey of what brought her to counselling and the lead up to it. During the session, probing was used to discover that Lisa felt alone even though it appeared she had many friends. She was the leader of her girl gang. “Not real friends, they don’t know me. They’re only with me because I fight for them. Some of them are bigger than me.”. She felt unloved by her mother because there was no discipline and they only encouragement given was for her to stand up for herself. Her dad has spent years in and out of prison. Lisa felt ugly and was often told that she wasso. She dressed in boys’ clothes and kept her strawberry blond hair (which almost reached halfway down her back) secured with an elastic band. She had an older sister who was 20, who had changed her religion and was preparing to marry within into a Muslim family. Lisa had two younger brothers that seemed to get away with ruling the household with their demands. Lisa proudly carried a small photograph around with her of her deceased sister, the only person she really felt loved by, and the only one she loved. With more gentle probing, it became apparent that her sister died as a baby two years before Lisa was born^[RZ27]. Her past time is spent hanging out with her friends and at times purposely causing trouble. She left school with no formal qualifications, and therefore was placed on a foundation course which she found did not hold her attention as she got through her work quickly. and so Aas she could move foreward, Lisa found she was helping other students in the class with their work^[RZ28].

Lisa is asked “what do you really want for yourself in this situation?” Brainstorming technique is used to look at course and career options. Lisa looks into the future of how she would love to be an accountant as she is very good at maths, or even an actress^[RZ29]. In the past she had thought that someone like her would not have the opportunity to do either, but she was happy to look at moving foreward.

A mental list was used for the client to come up with some of the things she would like to change. She realises that she is on the wrong course and comes to know that by accepting support from the educational guidance worker and Foundation studies manager she may be able to change her course to one that will be pitched at a higher level to do business studies and accounts. She also realises if she had toned her behaviour down at school for the last few weeks before the end of term, she would not have been expelled^[RZ30] and would have done her exams at school rather than giving up her 9 GCSE’s even though an alternative school was offered for her to take her exams. Her estimated grades were mainly B’s and C’s.

3 sessions – Llisa seems agitated, feeling she has to no choice but to come. – options given^[RZ31].

Fears of exclusion, no qwualifications, failure^[RZ32]

The counsellor gave aAssurances that given everything is confidential with the exception of disclosures to child protection agencies, or in the case of imminent harm to self and others. The counsellor also eExplained counselling is not a prescription; n, she not does not have to come, the decision will be hers, no implications with or from college staff^[RZ33].

By telling her storey at the place^[RZ34] she has more insight into the issues she faced. She sees herself as helpful, hardworking and a good communicator.

The model of the skilled helper is explained more fully to clients

Part of the process within the model used. Learnt basic features of model for focus, direction, guidance interactions with peears^[RZ35].

Stage 1 – Step 1 — Tthe storey

Client tells her storey which is facilitated by me using probes;, this encourages the client to offer detailed information about herself. This enables client to understand her situation, so as she can look at what needs to be done to manage it.

Goal setting – What do I really want?

Step 1b – Blind spot

Lisa is helped to identify signifcicant blind spots about herself so as she can develop new perspectives in moving foreward.

This is used to break through areas that prevent Llisa from seeing herself and her situation^[RZ36].

Step 1c — Cchoosing right problem to work onn.

Lisa has many problems, I hHelped her work on problems that will make a substantial difference in her life. The client is encouraged and supported in working on her problems.

The questions^[RZ37] help Llisa to look into her future. Lisa discovers there are many things she wants; there is a , right course for her, one that she is interested in and can enjoy. She can enjoy bBetter relationships with peers and staff. She can enjoy tTime for herself and her mom.

Lisa was fFurther encouraged to look at needs and prioritise them. Overall she needs to feel she is achieving academically, making progress in relationships with family, and she would like to change her image – “be a girly girl.”.

Setting priorities help her to think about how she might achieve them. I then helped her to explore and clarify her priorities. Tthis is done by asking her how would she know she is achieving, what would it look like. The type of course is then explored in the areas of accountancy and performing arts and which one would be more suitable for her needs and wants, and by. looking at which one is more practicael and achievable.

Stage 3 — Developing action strategies

.

At the beginning of counselling, mentoring support group work was offered to Lisa. This service was offered again to client^[RZ38]. She breaks through some blind spots, getting a better understanding of and prioriitising her needs, as well as. eExploring what she needs to do to get what she wants. Lisa talks more about her hoped– for ambitions prioritising accountancy, making contact with the college guidance worker to see what she would need to get onto a course. On being an actress, it was decided by the client that she would need to attend sage school or the performing arts course at college. We explored each profession, looking at pay, reliability, enjoyability, the possibility that it would possibly help form good character, as well as career endurance. Accountancy took priority, coming out on top in Lisa’s evaluation. This also linked into the fact that the client enjoys and excels in maths and has experienced accounts at school., Armed with this information, the client contacted her personal tutor and foundations manager. She put her case forward to them them — both to be able to be transferred onto an accountancy or business studies course with administration. Giving the client space to do this contributed to her empowerment.

The mentoring group consisted of eight 8 students, 16 – 18 years of age. This gave students a safe place to explore her feelings about her relationships and her body image. She Lisa bravely asked “Ddo your moms help you with your hair and make– –up? Ttalk to you about boys?” The questions generated much conversing over two sessions. As a result of the group, work the hair, beauty and holistic therapy departments were approached. Client wanted to be a “gfirly– girl,” which meant she wanted help in knowing how to style her hair, and to apply put make-up on. Sessions for a course of holistic therapy to help with stress were arranged;. these therapies helped her to physically see herself in comparison to whathow she had imagined within her own mind.

By being a valued member of the weekly group, the client found she was able to receive support as well as give it, leaving her feeling empowered. Being action^[RZ39] in her therapy has allowed her to concentrate on her course, career prospects, and image, which leads to improved personal conduct, relationship with peers, members of staff and mother, thereby. rReducing the anger and sometimes hate she felt for herself and resentment towards her mother.

Client Lisa eventually moves out of the group, as she feels less angry and stressed. Although client she may have benefited from staying for one or two more sessions, the end of session evaluation was that the client felt that she had sufficiently improved and wanted to withdraw; therefore the helping process had served its purpose (. Waehler and Lenox (1994)). Therefore Hher relationships are more productive and enjoyable; she is. feeling better about herself as she knows some of the feelingss and views of her peers as they saw her — . hHow she was and how she can be. by way of a connextios^[RZ40] worker client is being helped to communication her needs to her mother taki