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The ravings of an individual, UK voter frustrated with our politicians

Posts Tagged ‘british economy

Bradford & Bingley nationalisation, is it a good deal?

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As I have said, not for the first time, I am no financial expert, but I am a little confused about the ‘part nationalisation’and ‘part sell-off’ of the Bradford & Bingley deal. I accept that there is probably still more detail to come about, but from the little that is available, I find myself wondering, whether the government, on behalf of the hard-pressed taxpayers of this country, worked out a good deal.

In the past, building societies received deposits, in order that they could then use that money to offer mortgages and loans to others. The saver would receive interest on their money, the mortgage payer would pay interest on their borrowings and the building society would take a commission in return for the introduction and managing of the arrangement. Although this model has been turned on its head, with the wholesale trading of these mortgages, the principle should still be sound.

Therefore, if the government have taken on all of the mortgage debt of the Bradford & Bingley, estimated to be some £50bn, why not retain the deposits as well? Instead, they “sell”, the ambitious Spanish conglomerate, Santander, some £20bn of saver deposits (2.7 million people), for the miserly some of £612m. How can this be a good deal for the taxpayer? How can the government be so sure that the savers interests are protected, given we don’t really know that much about Santander. In fact, if the government were responsible for the sale of these customer deposits and something were to happen to Santander, would the government be culpable or liable, given it was they who negotiated the deal?

This particular arrangement can’t be good for the employees either, because Bradford & Bingley employed some 3,000 people and operated 197 branches. Does anyone imagine that a foreign owned bank, will give a toss about these employees? No, from what I can see, the UK government has passed over the profitable side of Bradford & Bingley to the Spanish owned bank ‘Abbey’, whilst leaving the British taxpayer exposed with just the bad mortgage debt. What was the point in getting rid of depositors money which has traditionally been used to offset mortgages? Looks like a very poorly thought out deal to me and somebody needs to explain why? Santander must be rubbing their hands with glee at the at the apparent naivety of the UK government.

I would not normally be a supporter of nationalisation, although in this case, as in the case of Northern Rock, there was probably no palatable alternative. However, I do believe that the government is responsible for driving home a decent deal for the taxpayers, they have a duty of care to the public purse and a responsibility to the taxpayer. No matter how urgent the problem, they should not lose sight of this. Yet here, from what I can see and perhaps against the views of many other observers, I fail to see how anyone, other than Santander would be considered to a be a winner.

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Gordon Brown criticises companies for off-balance sheet activities

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What a hypocrite Gordon Brown is, this man lauded for his so called economic competence. In an in interview with Sky News, Gordon Brown criticises companies for running “large off-balance activities”. He then goes on to say, “We cannot excuse the irresponsibility that took place in a number of institutions. And, you guessed it, he did this with a straight face and no sense of irony.

So, this is the same man, that to be certain that he did not break his own golden rules, ensured that the cost of the Private Finance Initiative’s (PFI’s), were not included on the government’s own books. These are calculated to cost the tax payer some £172bn between now and 2032. This is the same man that forked out £110bn of tax payers money in loans and guarantees for Northern Rock, once again, ensuring that it was not included on the government’s balance sheet.

Then there is a further £1.7bn that the government must pay for Metronet’s debts, this figure is also excluded from the governments balance sheet. There is also a further, estimated £790bn in government pension deficits, this is another liability that is excluded from the government;s balance sheet. Now I accept that this may be ‘legal’ but it is morally wrong and serves only to deceive us all into a false sense of security. Some would argue that the game that these large companies and institutions alluded to in Gordon Brown’s interview did nothing more than he has.

Now, Gordon Brown has says that “It’s got to be cleaned up and its got to be cleaned up quickly.” I would hope, that when he is considering these words, he will consider his own actions, because their are many in this country that would consider his own actions as “irresponsible” and “inexcusable”. Enough said!

 

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We need wholesale tax and benefit reform, not meddling

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The news that the Liberal Democrats wants to reduce income tax for middle and low income earners is welcome news, albeit the chances of them getting sufficient votes to deliver on this commitment is unlikely. However, it does appear that they are willing to fill the void left by the current reincarnation of the Tory party.

The conservatives have traditionally been a party of tax cuts, not something that is always justified, but nonetheless, for the most part that is how they are perceived. David Cameron does not seem to want to make this commitment, because he is justifiably concerned that the Labour party will scream that the conservative party will hit schools and the NHS to fund the tax cuts. Rather than fighting this unsubstantiated claim, David Cameron is avoiding the fight and in my view, showing how incredibly weak he is, both as a person and a politician.

Gordon Brown said in 2004 that he could save £20bn per annum in an efficiency drive within high spending departments. He has not delivered on that commitment in fact, quite the reverse, we have actually seen an increase in public sector spending. Neither the LibDems nor the conservatives are willing to look to fund tax cuts from an efficiency drive, yet only an imbecile would claim that government departments are efficient or not guilty of waste. There have been numerous reports lately claiming that £billions have been wasted.

What we need is wholesale reform, not tinkering, backed up by a firm commitment to reduce taxes. The government, and it has to be said, the opposition parties believe it is okay to keep taking more and more of our money, every time they screw up, they either borrow, which lets face it, we will have to pay for, or they will introduce more stealth taxes. It has to stop. Under this Labour government, more and more people believe that they have an automatic right to look to the state, more accurately the tax payer, to provide them with an income, housing etc. There are nearly 870,000 people claiming unemployment benefits and 2.5m on some form of disability benefit. That is 3.4m people that require some form of tax payer funded benefits.

Now I accept that there are people with genuine disabilities and they should receive our support, but how much longer can the tax payer be expected to fund 3.4m people (and rising), that are making no contribution? I have deliberately ignored pensioners given many have contributed to state pensions for most of their lives.

Someone needs to say it how it is. There are just too many people expecting too few tax payers to fund their living costs, subsidise housing costs, as well as provide free education and health. Enough now, some of these people, probably that vast majority, can help themselves and they must. In these difficult economic times, those working have to make significant cuts, or take on extra jobs, or both. Why? Because we are expected not only to cover our own cost of living increases, but also the rises faced by those who make no contribution, in other words we pay twice.

Uncontrolled immigration places a further burden on the tax payer. It does not take a genius to work out that the contribution in taxes and national insurance made by many immigrants seeking work in the UK, does not cover the free education and health benefits received by their offspring. So, what happens? There are fewer jobs available for the 870,000 people claiming unemployment benefit, so we have to keep forking our our hard earned money providing them with tax payer funded benefits. Whilst the people coming into the UK and accepting low paid work, cannot possible pay enough tax and national insurance to cover the free benefits they receive.

There is nothing wrong with immigration, provided they can make a genuine and a net contribution to the UK economy, not simply provide employers with a source of cheap labour, which in itself is exploitation of the individual and the tax payer. There are many people that have genuine disabilities that prevent them from taking any work, but this is by no means the majority, those genuine claimants are entitled to our help, because that is our way. The rest must find some form of gainful employment, even if it is part-time. There will always be people unemployed and of the 870,000, some of these may be between jobs, but once again, they are likely to be in the minority. The others, well some will have never held a job and they must be required to make a contribution.

Redistribution of wealth may be a fine goal, but not if the hard pressed tax payers are simply expected to reward people that are making no attempt to make a contribution to society. Successive government have failed to grasp the nettle, but they must, we need to urgently reform our whole benefits system, so that the genuinely needy receive an appropriate level of help and support and the others, those that refuse to make a contribution are forced to go to work.

Very wealthy people are able to employ clever people to avoid paying too much tax, but the rest of us, who do not have that luxury are expected to make up the balance, simply because we are the easier target. It is far, far easier to hit the lower and middle income earners than it is to get the long term unemployed back to work, to determine which of the 2.5m people are genuinely unable to work and tackle those guilty of extravagant and complicated tax avoidance schemes.

Think about it for a moment. We tax and insure our cars, because if we didn’t, we could expect to be arrested, charged and fined, because we are, for the most part, law abiding tax payers. The others, well they won’t tax or insure their cars, if they are arrested they skip bail, if they get caught by a camera, then it doesn’t matter, because the car won’t be registered in their name. It is estimated that there are 1m uninsured and untaxed vehicles on our roads. We tax payers, received our pay, with tax and national insurance deducted, why, because we are law abiding citizens, the others, well they work cash in hand, because the chances are they won’t get caught? Why, because it is just too difficult to track and too costly to enforce?

We need wholesale reform, after all, any money earned, starts off as our own. That’s right, when you apply for a job, you get told how much your employer will pay you. Then the pimp, sorry the government comes along with hand extended and says, well you have a “social responsibility” and we are going to-redistribute some of your income to those less fortunate than you and to pay for things like health, education and pensions. We all sit there and take it, why, because we are law abiding and of course, we don’t have any choice? If government gets it wrong, no matter, they will just come back for more, perhaps in the form of direct tax, such as that on petrol, energy, insurance, vehicles etc.

Some people don’ realise this and of course the government won’t tell you. But when you buy petrol or a new car for example, the government add the duties and then VAT to the duties. How bad is that, not only do we pay VAT on the cost of the goods, but we also pay VAT on the duties! No wonder they think we are a bunch of mugs.

Someone, perhaps a political party, needs to stand up for the hard-pressed tax payer. Accept that there is a disproportionate amount of money taken from us and that the system needs serious reform. The LibDems have suggested that they could provide some tax cuts by tackling waste, but they have set the barrier way, way too low, even if this is a paradigm shift by the LibDems. If you are going to take flack for suggesting that we can keep some of our hard earned money by the government tackling waste, why not also target abuse, not just the wealthy, but those happy to receive tax payer funded benefits?

We need a party for wholesale reform and they need to tackle the people that are registered as disabled, but are able to work. After all, those that use or abuse the system are just taking it away from the genuinely needy, who should receive our help. Those claiming unemployment benefit must be required to work within a given period or lose all benefits. It is enough now, for far too long we have heard (and have allowed to pass unchallenged), people on benefits saying that they would be “worse off if they went back to work”. Surely this means that the benefit payments are too generous?

Why can’t lone parents group together, so that some can go to work, whilst the others look after the children? In the real world of the tax payer, that is what we do. What makes lone parents any more deserving? Why should someone that has never contributed anything in the form of income tax, be entitled to housing, benefits, free furniture, free health and free education? If they have an automatic entitlement to receive these benefits, what incentive do they have to work and make a contribution? Successive governments have added to the notion that everyone is entitled to state aid of some sort. Why should these people not be encouraged to help themselves, rather than helping themselves to the hard-earned money of honest tax payers.

Unemployment figures have been massaged by this government by allowing more and more people to claim that they are unable to work through disability, there are currently 2.5m in this category. It is a fair bet and some government ministers have alluded to this, that as many as 1.5m are able to do some form of work. So is the true unemployment figure actually 2.4m? Those that are workshy as opposed to genuinely disabled, must be identified and should be forced back to work. If necessary, through a steady decline in the benefits they are receiving, if that means that some become homeless, so be it. They always have a choice.

I accept, that if there are no jobs available, then we must take that into account, but whilst there is, those able and capable of working must be dissuaded from claiming benefits. Not incentivised, because that is morally wrong, they must be dissuaded through a steady fall in their tax payer funded benefits. We must also change some of our language, for example, state benefits should be changed to tax payer funded benefits, which is a more accurate statement. The state is faceless, but everyone know someone who is a tax payer, they will invariable be the people looking knackered without the ability to buy a pint in their local.

Many low paid workers are claiming that they need more money to deal with the rising cost of living, well firstly I should like to point out that the problem is not uniquely theirs and it is wrong to play the victim as if it is an exclusive right, everyone is suffering. But, more importantly, they need to approach it from another angle, they should not be looking for more money funded, in the case of public sector workers, by the tax payer, instead, they should be entitled to keep more of their own money. By tackling government waste and making more people contribute, we can all see a reduction in our taxes, we will all feel better off and this country will prosper again.

I cannot see any of the political parties tackling this issue. The LibDems have moved from a party of higher taxation to one that is now talking of reduced taxes. Albeit it without the support of the entire party and, it has to be said, with a limited remit in terms of what aspects of abuse they will tackle. The conservative party has consistently refused to address taxation as if it is a poisoned chalice, because they don’t want to take on the current government on regarding waste, and abuse of the benefits system. Then the Labour government, who, through their self-righteous programme of re-distribution have built up this waste and allowed a situation where even they know that there is no more money to be had from the hard pressed tax payer. What hope is there for us with such weak politicians?

I am not advocating that everyone who is claiming unemployment benefit should lose, it, nor am I suggesting that everyone in receipt of disability benefit is workshy, far from it. I am arguing that unless we reform our tax and benefits system, this country will be bankrupt. We already have a massive accumulated deficit in public sector pension schemes, an aging populating and high borrowings. We also have hugely expensive PFI schemes that need to be paid for over the next 20 years. The tax payer is straining under the additional burden placed upon them by this government’s failure to tackle the issues in case they lose some of their core vote. However, unless we address the issue of those that are contributing little of nothing in the form of income tax and national insurance, then we will reach a stage where those currently funding this largess will no longer be able to cope themselves.

There needs to be a reduction in those claiming tax payer funded benefits, a corresponding increase in the number of people contributing income tax and national insurance and a halt to immigration unless or until they can demonstrate that they can provide a net contribution to the UK economy, taking account of their needs, such as free health and education…the government has no right to exclude this cost when making statements about how they contribute. If we don’t, we will reach the point of no return, where we have to borrow more and more money just to fund our pensions and benefits system, until one day, our government bonds will have the same status as junk bonds. By then, it will be too late and there will be considerably more people that will need some form of tax payer funded benefits, but with no-one left to turn to. Doomsday scenario or basic economics, you choose?

 

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E.On UK energy company brag about making more money

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What a complete idiot executive director of E.On, Mark Owen-Lloyd is. At a time when the government is under increasing pressure to apply a windfall tax on energy companies, he brags that a harsh winter will “make us more money”. Obvious yes, but not a very bright thing to say in the current circumstances and it must leave the public questioning the quality of the senior team at E.On. It may have been a quip, but it was idiotic and insensitive, however it was intended to be received.

Perhaps the shareholders of E.On should be reminded, that at a time when raw material prices are rising and therefore the retail prices, additional margins are not because the board are business gurus, it is because even if the margins were maintained at the same percentages as before (and that is questionable), because of the higher revenues, their profits would increase incrementally. So, even if their directors are not as bright as their profits, they would still make more money. So guys, get off your high horse, before you find the public really do start to hit back.

It is ironic and possibly symptomatic, that this idiot felt comfortable making this cheap comment at an Ofgem winter outlook seminar. Ofgem are the very people that should be implementing controls to prevent the energy companies from abusing their domonat positions to make higher profits. Yet, E.On, in the form of Mark Owen-Lloyd, had no concerns in making his comment in front of Ofgem. What does that tell us?

This should really place the spotlight on Ofgem. Either they are ineffectual as a regulator, or they have insufficient powers to take any action. If it is the former, they must buck up their ideas, or head home and soon. If it is the latter, then the government must rush through emergency legislation to beef up their powers, it is likely they will get all party support.

Ofgem needs to ensure that the six principal energy companies do not profiteer from their dominance of the UK energy market. Ofgem should place caps on the energy company prices charged to Uk customers to prevent them from abusing their dominant positions. Why is it for example, that Ofcom in the telecomminications sector, have considerably more success at preventing abuse of dominance than Ofgem?

There are 5m people on prepay meters, there is no justifiable reason why the people using these meters should be charged higher tariffs. The energy companies should be required to bring prepay tariffs in line with their best tariffs. This has to be preferable to the government doling out taxpayers money to assist those in fuel poverty and in turn further boosting the profits of these energy companies.

The government are due to announce that they and the energy companies are going to increase the amount of money invested in improving home energy efficiency for the less well off. Commendable, but not if the rest of us have to pay it in the form of higher bills, because lets face it, we are all under pressure with higher bills, not just those in fuel poverty. In addition, the government must come clean and tell us if they have done a deal whereby the energy companies have agreed to increase their spend on this initiative, but against the backdrop of a secret deal with the government, allowing them to increase customers bills to cover their costs. That would not be a success, it would be a failure.

Given the government is also profiting out of people’s misery, they should be announcing new money, not repeating previous pledges, they can start by returning the £250m they withdrew from the Warm Front project.  We shall be watching very closely at what the government does, how the energy companies are responding and specifically whether or not Ofgem do their job.

I do not agree with a windfall tax on energy companies profits, but I certainly do believe that Ofgem should be ensuring that they do not profit out of the misery of the majority, if they cannot do this simple thing, then the government must replace the Ofgem team immediately.

Fuel Poverty – The case for creative thinking and solutions

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Within the UK, there is no denying that there are a high number of people in fuel poverty. These include ordinary families on low incomes, pensioners, lone parents, the unemployed and those with long term disabilities and registered as unable to work. In fact, the problem is so large, estimated to be some 4.5m, that the government cannot wave their wand and make the problem go away. That is the long and short of it.

Union leaders and Labour MP’s can huff and puff as much as they like, but the harsh reality is, this government has squandered much of the income it has gained as a consequence of the economic boom, higher taxes and borrowing. This means that the cupboard is bare. The union leaders crying foul, are the same people that fought and succeeded in getter higher wages for their members and in the process, supporting this government. The MP’s bleating, are the same ones that thought the gravy train of higher taxes, followed by waste, was okay. They have themselves, New Labour values and specifically, this government to blame. So there is no point trying to convince us that you are fighting for the ‘people’ when you are as guilty as the rest for the position we all find ourselves in.

It is time to stop the whining and start thinking creatively. It is time to forget trying to fleece the ordinary taxpayer that has spent the last 11 years supporting those that cannot or will not work and propping this government allowing them to claim that they have successfully invested in our services, whilst failing to demonstrate any real tangible benefit to the majority.

The Labour government typically throw money and/or resource at problems in the hope that it will fix the problem, or at least provide a brief respite, perhaps with some good headlines. Their spendthrift ways have lumbered this country with an enormous mountain of debt, which includes official borrowings of £450bn and another £170bn that needs to be paid between now and 2032 on PFI schemes. This ignores the £800bn or so shortfall in government pension schemes. In fact, it is an utter mess, and demonstrates what a tardy bunch this government is. Many of the foolish press barons have hailed Gordon Brown as a prudent or successful chancellor, history will judge him differently.

With nothing in the kitty, ‘working’ taxpayers are so highly taxed through direct, indirect and stealth taxes introduced by this government and with realborrowings at an all time high, there is little room to manoeuvre, even for a government adept at screwing every last penny from the rest of us. Now is the time for new ideas, a bold approach, creativity and above all honesty.

Windfall taxes are a ‘one off’ short term measure with long term consequences, given the energy companies will get the money back somewhere, either by reducing necessary investment, increasing energy cost for the majority, or, most likely a combination of the two. Similarly, throwing money at the problem, assuming we had any, in the guise of fuel credits is knee-jerk and would then be expected every year. The answer is investment in ways to reduce energy consumption through insulation, energy saving appliances and bulbs and other such measures. Estimates suggest that these measures could reduce our energy bills by up to 35%.

The government should encourage the energy companies to invest their carbon credits in the UK rather than elsewhere. They should be incentivised, rather than bullied into offering more support for the Warm Front programme and the government should put back the money they withdrew from the scheme. The energy companies should, however, be forced, by legislation if necessary, to offer the so called ‘social tariffs’ to all those in need and should be prevented from charging higher tariffs for meters on non-direct debit customers. The energy companies have dragged their feet on social tariffs and the penal rates they charge people who use pre-payment meters, this in unacceptable. The regulator should be given more powers to mandate and control issues such as access to social tariffs as well as price rises.

The government then needs to be more creative. Lets face it, at a time like this, everyone needs to pull together. Those in fuel poverty should be encouraged to help themselves, not simply come along to the government expecting more money, which the rest of us will have to pay. Ordinary working families, whether they fall inside or outside the fuel poverty trap are feeling the pinch. Many have had to reduce their expenditure on non-essentials in order that they can meet the higher fuel prices, higher costs in getting to and from work, higher food prices, higher mortgage costs and higher local taxes. They too are suffering, even though they are working, some, many have had to also take on a part-time job in order that they can meet their obligations and keep their head above water. What of these people, the taxpayers that make it possible to support so many that are not working or are retired, don’t they matter?

No solution is going to be perfect, but you can be damned certain, that chucking borrowed money that this country doesn’t have at the problem is going to be much worse. Here are some ideas the government could consider.

  1. Determine which of those in ‘fuel poverty’ are capable of helping themselves with government assistance or encouragement and which are not.
  2. Allow those on fixed incomes, such as lone parents, disability allowances and the unemployed to take on a part-time job (stacking shelves, land work, cleaning houses etc) and retain the income, free of tax, national insurance and, most importantly benefit deductions. The limit for this extra income should be set at a level equivalent to what the government believes is the additional cost of living as a consequence of food and energy increases.
  3. Allow those in ‘fuel poverty’ and in receipt of some form of ‘tax credit’ to earn an additional income through a part-time job, free of tax and national insurance, albeit up to a pre-determined limit, set by the government or better still, experts!
  4. Remove VAT and any other forms of duties on items that are routinely used to save energy, such as, energy saving bulbs, insulation, gas boilers and so on.
  5. Reduce the amount of paperwork pensioners have to complete in order that they can take on a part-time job. Provide them with an additional ‘work credit’ whereby they can earn up to a pre-determined amount, free of tax and national insurance contribution, without affecting their pensions. Increase the work credit by an amount equal to each allowance they do not claim, such as the ‘winter fuel payment’, the savings could be reinvested.
  6. Stop paying the winter fuel allowance to pensioners that no longer reside in the UK and reinvest this money into support for the most needy or energy saving measures.
  7. Provide, if necessary, secured short-term, interest free loans to private landlords, housing associations and local authorities to allow them to bring properties under their control up to acceptable standards in terms of energy efficiency. – A large proportion of homes that need upgrading are in the private sector.

The policy of assuming that there will always be enough taxpayers that can be fleeced to support those that are actually capable of helping themselves in times of need has to stop, it is not sustainable. Yes, if they cannot work, through a genuine disability, age, or lack of mobility then we should offer support, but if they can help themselves, why should they get away scotfree whilst the rest of us pick up the tab through higher taxes and having to take on extra jobs? It is time to view the so called priviledged not as a gravy train, but as the conduit through which those less fortunate can have a better existence.

The truth is, many of those that are capable of helping themselves, probably would if they are in dire straits. However, New Labour has exercised and grown this culture of state intervention, the government will always come to the aid of those less well off. Little or no effort is put into finding out whether they can or are willing to help themselves. If someone on benefit tries to get a part-time job to cover the additional energy costs, they can expect to lose the equivalent amount in state benefits. Why, where is the incentive? I am not suggesting that we should let people abuse the system, just that they are encouraged to help themselves, within limits that relate to their assessed additional needs.

Similarly pensioners are penalised if they work part-time. Clobbered with paperwork and additional taxes, encourage them, don’t penalise them. Government should look to incentivise, cajole and if necessary bully people into helping themselves, rather than transferring the burden onto overburdened taxpayers who are suffering just as badly.

Okay, I accept there are flaws and risks in some of my suggestions, but then I am not an economist or a civil servant. What I do possess is commonsense and a desire to be constructive in my criticism, the former is something the government lacks and the latter something the opposition parties lack. At least my suggestions are a start, perhaps those better qualified than myself can come up with working proposals that encourage those that need help to do more for themselves, thereby reducing the burden on existing taxpayers already facing pressure on their own finances.

 

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