Passing The Buck

The government, in a cost saving measure designed to save around £8M, has instructed the Royal Mint to issue new 5p and 10p coins (which are slightly thicker and made of a cheaper alloy).

However, the cost to the vending machine industry and local councils of updating machines to be able to take the new coins is estimated to be around £80M.

Add in the cost to the public of time wasted fumbling for coins that fit the upgraded machines (old coins won't work), and you have a remarkably unbalanced and inept "saving" measure applied by the government.

Read More

Cable Denuded of Powers

Vince Cable, the Business Secretary, has come spectacularly unstuck this week by falling for the charms of two young female reporters posing as constituents.

His fall from grace began with his boasted belief that his resignation could bring down the coalition, his self implosion was completed later in the day when the BBC leaked part of the Telegraph "complete expose" (that the Telegraph had "mysteriously" chosen not to publish) where he stated that he had declared war on Rupert Murdoch.

Cable has now been denuded of his responsibility for media regulation, something that he was passionate about and that was a major part of his office.

It is unlikely nthat he will remain in this severely diminshed role for much longer.

Read More

AAA Rating Stays

Not everything about the UK economy is doom and gloom, that at least is the verdict of Moody's who have kept Britain's credit rating at AAA.

Moody's is of the view that the British economy is strong enough to withstand George Osborne's austerity package.

Had Moody's downgraded their rating, the cost of servicing the UK's debt would have risen.

However, Moody's did issue a cautionary "sting in the tail" of their rating. They noted, quite correctly, that the UK has used up its protective "cushion"; ie the "rainy day" money has more or less gone.

This means that if the UK suffers another economic shock, it may not be in a position to withstand it.

Time will tell as to whether Moody's are right, and as to whether the government can manage the economy and the political backlash from the austerity measures.

Read More

Trade Minister Role Finally Confirmed

The government has finally filled the role of Trade Minister (unpaid) that has lain vacant for for months since the formation of the new government.

The role will be taken by the current chairman of HSBC, Stephen Green, who will step down from HSBC before the end of the year in order to take up the position.

Several other leading business figures had turned down the role; aside from working for free, Mr Green will have to put his assets into a "blind trust" during the period of tenure.

Mr Green will report to the Business Secretary Vince Cable and to the Foreign Secretary William Hague.

Read More

Taking The Piss

I see that our elected representatives have something of a sense of humour, and are most assuredly taking the piss out of the electorate.

The BBC reports that the Independent Parliamentary Standards Authority (IPSA), the parliamentary body set up to police MPs' expenses, will cost £6.5M (about six times the amount MPs have been ordered to repay).

For why?

Well is seems that aside from paying its chairman, Sir Ian Kennedy, a salary of £100K it feels the need to recruit 80 staff.

Yes, I said 80!

Quite why it needs 80 staff to monitor the expense claims of 600 MPs is beyond me.

Professional well run businesses, that operate in the real world, manage to run payroll and expense departments on but a handful of staff.

Exactly how difficult can it be to monitor our elected representatives' expense claims?

Clearly our MPs are taking the piss!

Read More

Political Ploy

Unsurprisingly the government is finally waking up to the fact that its 50% rate of tax will not reap the revenues that it had hoped for.

Lord Myners, the City Minister, said that the Treasury had "significantly reduced" its estimate of the revenue (originally set at £1.1BN for 2012 and £2.5BN).

Rather lamely he belated that:

"We still believe it will be beneficial."

Hardly inspiring is it?

Why do it then?

Politics!

It has nothing to do with economics, but is a political ploy.

The only surprise is that the government has taken this long to wake up to the fact that people are not prepared to pay it.

Read More

Recession Over?

Official statistics, as had been widely predicted, now show that Britain finally left recession in Q4 2009.

The last major economy to do so.

The Office for National Statistics (ONS) released figures today that show that GDP grew by 0.1% in the last three months of 2009.

However, there are a number of caveats:

1 The figures are only preliminary, and could be revised up or down. Given that the ONS has a record of inaccuracy, not too much should be read into the figures.

2 0.1% is not exactly "stellar performance", and indeed the UK is the last major economy to move out of recession.

3 People in the UK will not notice any change to their lives (whether they are unemployed or well off) from this alleged 0.1% growth.

This is most certainly not the time for celebration, or trying to take credit (as the government is doing). The UK is heavily in debt, and the effects of the recession (higher taxes and high levels of unemployment) will be felt for many years to come.

Read More

There Are Dark Days Just Around The Corner

Mervyn King, Governor of The Bank of England, has given a gloomy forecast for the future that will impact all British households.

In summary, he believes that we will spend many years suffering the painful fallout from the financial crisis.

He referred to the worldwide stimulus package as nothing more than "sticking plaster".

The four horseman of the economic apocalypse will be represented by:

- ongoing high unemployment
- stagnant real wages
- stagnant standard of living
- stagnant growth

The governor also reminded the government of the appalling levels of debt that they have saddled the British taxpayers with, and told the government to announce concrete measures to reduce the budget deficit.

Enjoy the present, the future will be appalling!

Read More

Going For Broke

The Times reports that there is anger and confusion in the world of broking, over the government's "bonus tax".

Brokerages are still unclear as to whether they will be hit by the tax. It seems that one firm is considering not paying it, whilst others are preparing a joint approach to the Government, arguing that they should not be caught by the tax as they did not receive any bailout money.

This confusion is hardly surprising, the heart of government is known to be confused and directionless; therefore any policy announcements made are themselves confused and directionless.

Read More

Cretins

Were the ordinary voter ever to require proof that we are being governed by cretins, the leaks from the Treasury about the "success" or otherwise of the 50% tax on bonuses makes for interesting reading.

It would seem that the 50% "one off" (if you believe that this is a "one off", then I put you in the same boat as our illustrious government) on bankers' bonuses is not having the effect that the government wanted it to have.

Our "leaders" wanted the tax to discourage banks from paying high bonuses to their staff.

Anyone with the slightest understanding of human nature will understand that when it comes to money, and governments trying to forbid people from making money, human beings can be remarkably stubborn and creative in the methods used to avoid government interference.

Therefore, as predicted, in the short term the banks will be paying out the bonuses (in one form or another) and either absorbing the increased tax themselves or finding ways to avoid it.

Needless to say they are also looking for ways to transfer their operations out of the UK, in order to avoid the unfavourable tax regime being implemented by the government.

Does this matter to you and I?

Of course it does!

The City, like it or not, provides a large chunk of tax revenue for our "illustrious" political masters to spend on their pet projects. Once the government starts hacking away at the money supplied by the City, there is precious little left to do but increase the tax burden on the rest of us.

The fact that the government is disappointed that bonuses have not been curtailed, indicates just how cretinous they are. The higher the bonuses, the greater the tax take.

The Treasury will do very nicely out of this bonus season, raking in around £4BN.

Such a pity that during times of plenty Brown overspent the surplus, and left us with a massive debt to pay off.

As said, we are being governed by cretins!

Read More

The RBS Bonus Row

The row over the proposed bonus payments for RBS executives and management doesn't look like it's going to go away anytime soon.

RBS, the taxpayer owned (70%) wreck of a once fine bank, wants to pay its senior staff £1.5BN in bonuses this year (they are expecting to make £6BN in profits this year).

The government, playing to the gallery, has insisted that it has a say in how much should be paid and have threatened to veto it. The board, not unreasonably, point out that it is for them to make that judgement and have threatened to resign.

As ever with Brown and his lackeys, whatever they touch simply turns to shit. However, this is not the end of this farce.

Lord Mandelson, the Business Secretary, has come out on the side of the board.

He is quoted in The Times:

"I understand the point of view that RBS directors are expressing. They have to remain competitive in the market in recruiting senior executives.

That is why it's important that all the banks are equally restrained and RBS is not singled out, but nobody is suggesting that that will happen."

In other words, don't shoot yourself in the foot just to play to the gallery.

The trouble is, Brown loves to play to the gallery.

Read More

The Secret Loans

Two of Britain's once respected banks stood on the precipice of collapse last year. Had they collapsed the UK's banking system would have ground to a halt (even cash dispensers would have ceased dispensing cash).

As such the Bank of England stepped in with an emergency loan of £62BN, to Royal Bank of Scotland (RBS) and HBOS during October and November 2008.

Mervyn King, Governor of The Bank of England, revealed the secret loan during a parliamentary hearing today. The money was repaid in full by January 2009.

I wonder if, had the responsibility for issuing the loan rested with Brown, whether such a decision would have been made (given Brown's dithering and inability to make decisions)?

"Ironically", the shareholders of HBOS and Lloyds were not told about this (ie given the full picture of the shocking sate of the banks' finances), when they were offered shares in earlier rights issues by HBOS and LLoyds in January 2009.

Suffice to say, they may well have grounds for "complaint" against the boards of these two banks.

Read More

Brave New World

Richard Lambert, the Director-General of the CBI, has seen the future and it looks "different".

That will be the thrust of the message that he will deliver today at the CBI's annual conference.

The central theme of his address will be that the recession has forced businesses to undertake a fundamental rethink of how they operate, raise finance and to cut the shackles of their past reliance on banks for providing finance.

Lambert will also say that businesses will work to create a more flexible workforce.

The lecture forms the backdrop to the publication by the CBI of "The Shape of Business — The Next Ten Years".

Lambert argues that the new "norm" will be for a more collaborative, less transactional world. Businesses will work more closely with customers, suppliers, employees and shareholders.

The sharp eyed amongst you will observe that banks and politicians have been left out of the above list.

Hardly surprising, given that the politicians and banks are largely responsible for the current financial quagmire; and have come up with precious few practical initiatives for the future economic well being of this country.

Read More

Life Is Taxing

The Times reports that small businesses spent longer doing their taxes in 2008 than in 2007, despite Labour's promise to reduce red tape.

Small and medium-sized businesses in Britain spent on average an extra five hours working on their taxes, mainly because of the temporary cut in VAT in December last year. The total number of hours spent filling in tax returns rose to a record average of 110, up from 105 in September, according to a report by the World Bank and PricewaterhouseCoopers.

Britain slipped from 24th to 25th in the rankings of 183 countries for the least number of hours spent on taxes.

Will the government ease the administrative and tax burden?

No!

The increase in the PSBR means that the government will in fact increase taxes. Unfortunately, given that we are in the middle of a recession, this increase will only make matters worse.

Read More

Don't Believe The Hype - Slowing Unemployment

The Office of National Statistics (ONS) released figures today that purport to show that the ongoing rise in unemployment is slowing, climbing by a "mere" 30,000 in Q3 of this year to 2.46M ("experts" had been predicting 2.5M).

Doubtless the government and other organisations may well spin this as signs of a recovery. However, before popping the champagne corks, the following needs to be taken into account:

1 There are still 30,00 more people out of work than there were in Q2.

2 ONS figures are notoriously unreliable.

3 Q3 ended two months ago, the figures are not real time and are irrelevant for decision making.

4 The true number of "unemployed" are hidden by government schemes that hold people off the register (eg work experience schemes, creation of "non" universities etc).

The figures are meaningless.

Read More

A Gnat's Piss On The Dung Heap of Debt

The government, in attempt to shut the stable door long after the horse has bolted, has come up with some proposals theoretically designed to force credit card companies to help customers reduce their debt.

Card companies will be forced to allow customers to pay off their most expensive debts first, rather than pay off the cheaper debts and allow charges to accrue for higher interest debt.

The minimum monthly repayment level would also be increased, to encourage people to pay off their debt faster.

The government said:

"Around one-third of people who don't pay off their credit card bill in full each month make only the minimum repayment. This can mean consumers take decades to pay off the debt."

Indeed so, but this is most likely due to the fact that they cannot afford to pay off much more than the minimum.

By forcing those already in debt to pay a greater amount, the government is in danger of pushing many hard pressed families over the "financial edge".

The government also proposes to ban the practice of credit card companies automatically increasing credit limits, without specific authorisation from their customers.

Will they also ban card companies from arbitrarily cutting credit limits on those card holders with good credit records, who clear their debts each month?

The government also wants tighter rules imposed on increasing the interest rate on existing debt without "proper explanation".

That will not make not one jot of difference to this rip off practices employed by card companies. They will continue to increase rates based on the "explanation" that they are finding their margins squeezed by "difficult trading conditions".

Until there is a thorough independent investigation of the make up/rationale of companies' charges, and the quasi "price fixing" scheme of arrangement wrt this practice operated by the companies, they will continue to charge what they like, because they know that they can get away with it.

The proposals are open to consultation until January 19 2010.

This particular horse has long since bolted and the British consumer is hopelessly mired in debt, these proposals are little more than a "gnat's piss" on the dung heap of debt that has been created by the Faustian collusion between greedy consumers and lenders.

Read More

Bargain Basement

Lloyds Banking Group has sold the Halifax estate agency business for £1 to LSL Property Services. The 460 staff who currently work there are expected to be made redundant.

The government, or rather the taxpayer, owns 43% of Lloyds; and it is for this very reason that Lloyds has offloaded this lossmaking business.

Were the group to keep it on its books, it would be forced to participate in the Government's Asset Protection Scheme (APS) which would cost Lloyds £15.6BN and an increase in public ownership to 63%, in exchange for the government underwriting £260BN of assets.

It is not clear as to whether it will be Lloyds or LSL that picks up the bill for the redundancy costs.

Read More

Snouts In The Trough

It would seem that it is not just bankers and politicians who can't resist putting their snouts into the trough, seemingly the ex directors of MG Rover could not resist taking a dip either.

A report into the collapse of MG Rover, which cost 6,500 people their jobs, stated that the four directors (aka "The Phoenix Four") and CEO (Kevin Howe) awarded themselves "unreasonably large" payouts.

Their self indulgent largess "earned" them pay and pensions worth £42M which, needless to say, was "out of all proportion".

The Phoenix Four and CEO have reacted by calling the report a "witchhunt" and a "whitewash for the government".

Quote:

"Our remuneration was not the reason for the collapse. The real reason is the government bungled the last chance to save MG Rover."

That may well be the case. However, the size of the remuneration (given that the company did collapse, and that it was beyond the norm in the industry and the mens' previous lives) is clearly beyond what was deserved.

Lord Mandelson criticised the men for not showing "an ounce of humility".

The 830-page report took four years to produce and cost about £16M. It does not contain much in the way of criticism directed at the government.

The directors would do well to remember that their excessive rewards may have been justified had the business succeeded, but were most certainly not justified in the face of failure.

Read More

Reality Bites

The government and councils are finally waking up to the burden that they have imposed on the taxpayer, wrt the burgeoning public sector and its defined benefit pension schemes.

It seems that millions of public sector workers will face having their pensions reduced, as politicians battle to save the public sector from financial meltdown and avoid a middle class tax revolt.

The Times reports that John Denham, the Communities Secretary, is drawing up plans to downsize the public sector pensions which face a shortfall of at least £60BN.

The Department for Communities and Local Government, keen to avoid a winter of strife, have said that it would ensure that council pensions were fair, solvent and affordable.

The reality is that whatever the promises made, the current level of pension benefits for the public sector is unsustainable and cuts will be made.

The public sector workers will not react well to the cuts, and the country will be in for a very rocky ride as the industrial action taken will doubtless mirror that of the dying days of the last Labour government in 1979.

Funny how history repeats itself!

Read More

Sants Fights His Corner

The embattled CEO of the Financial Services Authority (FSA), Hector Sants, fought his corner on BBC radio this morning.

In response to criticisms that the FSA's new remuneration code is too soft on bankers, he stated that politicians have "ducked" the issue and have passed "the buck to the FSA".

He quite correctly noted that the FSA was not set up to take a "moral view" on the scale of payouts. However, its role is to ensure that pay packages did not encourage inappropriate risk-taking.

He also, rather wisely, noted that it was "reasonable" for the government, as a shareholder in some institutions (ie Royal Bank of Scotland and Lloyds) to set parameters on how the companies were run. Thereby neatly reminding the government that, at least in those two cases, they really are in charge and do have a say.

Doubtless that suggestion will fall on deaf ears, as the government would very much like to pretend that it has no control over these two institutions; to admit that it does would mean that it would be blamed for the poor results.

Demonising bankers is all very well. However, like it or not, the country needs banks and bankers in order to function.

Short of returning to a primitive barter society, we will have to continue to endure seeing a handful of people making large sums of money for apparently doing very little.

Read More