Loans and Finance

Loans and Finance

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News and information about loans, money, debt, finance and business issues.

Tuesday, June 30, 2009

Brown's Bankrupt Britain

Brown's Bankrupt Britain
Revised figures from the Office for National Statistics (what use are stats if they have to be forever revised?) show that the the UK economy shrank by 2.4% in Q1 2009. This is the fastest rate in more than 50 years, and far worse than expected.

In related news Brown has published a "quasi manifesto" outlining his plans for his "relaunch". Unfortunately these plans will come to nothing:

1 They are uncosted, and Brown has not stated how he intends to pay for them.

2 The country is bankrupt.

3 He has been responsible (as Chancellor and latterly as PM) for the country's finances since ZaNulabour were elected in 1997. The fact that we are in this mess now is in no small part down to him.

4 Brown is not the man to rebuild/relaunch Britain, or its bankrupt economy.

5 Public sector pensions now stand at £1.2 Trillion (equivalent to 85% of Britain's GDP), this figure is unsustainable.

Brown has bankrupted Britain, yet now claims that his relaunch will save it.

Who is he trying to kid, us or himself?

Monday, June 29, 2009

Who's In Charge?

Those of you who were worried about who is exactly is in charge of the UK need worry no more, Lord Mandelson has revealed that he is in charge and the person where the "buck stops".

In an interview with The Today programme he said:

"The spending period currently operating in Government stretches beyond the next election and therefore it is reasonable to review public spending at that time."

Adding that the Chancellor has already "made that judgment".

By making that statement in public, he has tied both the Chancellor's and the Prime Minister's hands.

Now all we need to know is who exactly is in charge of the Tripartite regulatory system; the Bank of England, the FSA or the Treasury?

Friday, June 26, 2009

FSA Tries To Pull Its Head From The Sand

Our ever "vigilant, pro active and respected" Financial Services Authority (FSA) has attempted to pull its head out of the sand and has proposed that financial advisers should no longer receive commission from selling investments, pensions and insurance products.

Doubtless this will come as welcome news to the millions of hapless endowment policy holders who were mis-sold these useless products in the 80's by commission hungry salesmen!

The FSA said:

"We propose to ban product providers from offering amounts of commission to secure sales from adviser firms and, in turn, to ban adviser firms from recommending products that automatically pay commission."

This being the FSA, even if the rule changes are implemented, they won't come into effect until 2012.

Given that millions of consumers (aside from the endowment holders) were also wrongly advised to opt out of occupational pension schemes, and were conned into buying precipice bonds and split-capital investment trusts, one wonders why it took the FSA so long to pull its head out of the sand and act.

Asleep at the wheel as ever!

Thursday, June 25, 2009

The Pension Blackhole

At the start of Labour's term in office in 1997, Gordon Brown made a tax raid on pensions to the tune of around £5BN. He was warned at the time that the raid would precipitate problems within the pensions industry.

Brown is not a man to listen to the opinions of others, when they contradict his; as such he duly ignored the warning.

The country is now reaping the whirlwind of his folly as, coupled with the economic downturn and out of date actuarial tables, the pensions industry faces a crises of underfunding.

Research from PriceWaterhouseCoopers shows that 96% of all employers now think that defined benefit schemes are unsustainable, and 74% are considering halting all accruals for existing members.

This means that even those of us in the private sector who are already members of a defined pension scheme will find that "certainty" taken away from us.

The public sector (our beloved MPs included) still pampers itself in the delusion of fully funded defined benefit schemes, the funding of course made up by an ever increasing burden on the hapless taxpayer.

Brown made half hearted U turn yesterday by putting the brakes on plans for a 7% rise in taxpayer contributions to MPs' pensions, after pressure from the Conservatives and Liberal Democrats.

However, the reality is that the public sector schemes are not sustainable.

Those who delude themselves that they can continue to demand ever larger contributions from the taxpayer, to fund these schemes, will find that the taxpayers will not tolerate being milked in this manner any more.

Failure to address the gross disparity between private and public sector pensions will cause a state of semi "civil war" between the private and public sector, as taxpayer resentment of the public sector reaches boiling point and the public sector fights to protect what it sees as its rights.

Brown is most assuredly not the man to address this issue.

Wednesday, June 24, 2009

Setanta

Setanta, the over hyped sports channel, went off the air last night at 6PM when it went into administration.

Despite the fact it was long teetering on the edge of administration, it happily continued advertising right up to the bitter end. Quite what happens to the subscriptions of those foolish enough to have bought into the hype in the few days before it went bust is not clear.

In theory, if they bought via credit card, they should have nothing to worry about as card companies offer insurance for just such occurrences. However, some credit card companies are more than happy to look for any excuse to not pay up; the fact that it was obvious that Setanta was going into administration may provide them with just such an excuse.

Tuesday, June 23, 2009

The Role of The FSA

The Financial Services Consumer Panel (FSCP) has given the Financial Services Authority (FSA) a public spanking for the "unrealistic" emphasis on consumer responsibility outlined in the FSA's consultation paper on consumer responsibility.

The emphasis on consumer responsibility, already ingrained in the FSA's philosophy, is being used by Britain's "rip off" financial services industry as an excuse for avoiding their responsibilities to consumers.

The FSCP said that the consultation paper risked shifting the focus on consumer protection away from regulated firms.

The FSA has been more than happy in the past to blame the consumer for financial product failings (eg endowment policies).

Doubtless blaming the consumer makes the FSA's job easier, not least because it is funded by the financial services industry. However, it should remember that its role is to protect the consumer from the unscrupulous financial services industry who seek to sell on products that are over complex and shoddy (eg PPI, endowment policies etc).

Monday, June 22, 2009

Government Headache

The government is learning that running a bank is not at all without its downsides.

This week the Royal Bank of Scotland, owned by the taxpayer, is expected to announce a £9.6M pay package for Stephen Hester, its CEO.

Whether Hester may, or may not, justify such a package will be an issue that will be buried in the headlines that instead will scream about the fact that the taxpayer is "footing the bill".

The sooner the government comes up with a clear plan as to how, and when, it will return its bank holdings to the private sector the sooner it will rid itself of what will become a very nasty headache for the PM and Chancellor (whoever they may be).

Friday, June 19, 2009

Gotcha!

It seems that Sir Fred "The Shred" Goodwin has struck a deal with his former company (RBS) over his pension pot of £17M.

Sir Fred, who will go into the history books along with Lord Simpson of Marconi as being one of the great destroyers of value, has agreed to forgo £4.7M of his pension. He will now draw a "measly" £342,500 inflation-protected income for life, instead of the £555,000 a year agreed previously.

For its part RBS announced that an internal investigation into Sir Fred's conduct, expenses and use of company resources had concluded that there was no wrongdoing or misconduct that could justify reducing his pension.

In other news billionaire and cricket entrepreneur Allen Stanford has been arrested in the US after surrendering to the FBI.

Thursday, June 18, 2009

King Clashes With Darling

Mervyn King, Governor of The Bank of England, publicly clashed with Alistair darling at the Mansion House dinner last night over the best way to improve the regulation of the City.

King said:

"It is not sensible to allow large banks to combine high-street retail banking with risky investment banking or funding strategies, and then provide an implicit state guarantee against failure.

Privately owned and managed institutions that are too big to fail sit uneasily with a market economy
."

However, as the Chancellor noted, restricting the size of banks is not that simple.

King also asked for more regulatory power to be given to the Bank:

"We need instruments to prevent the size, leverage, fragility and risk of the financial system from becoming too great. The resulting macro-prudential toolkit will contain a number of instruments to reduce risk, both across the system and over time."

However, the fundamental problem is the tripartite regulatory system which has no effective head. Until the system, which was introduce by Brown, is replaced regulatory issues cannot be satisfactorily addressed.

Unfortunately, as long as Brown is PM, the tripartite system will remain in place.

Wednesday, June 17, 2009

Telephone Tax

The government outlined plans for a £6 annual per line telephone tax, to be levied from 2013 on everyone with a landline. The theory being that the £1BN revenues raised would be used to fund improvements in the internet infrastructure in the UK.

In practise, as we know from other taxes such as NI and car tax, the money raised would be added to the general pot that the government uses to fund its general expenditure.

In other words, it is an increase in ordinary taxation by the back door.

The government seems to have forgotten that it raised billions when it sold, at hyper inflated prices, bandwidth to the mobile operators for the 3G networks (which have failed dismally).

Where did that money go then?

Why can't that be used to fund the "digital revolution"?

Tuesday, June 16, 2009

Keydata and The FSA

The collapse of Keydata, the structured product provider, which went into administration when the FSA forced it to set aside £5M to cover the tax bill and the potential of legal action arising from products investing in life settlements raises some interesting questions wrt the role of the FSA.

Seemingly the FSA was investigating issues around Keydata's product selling for several months before it collapsed.

- What were the FSA looking for?

- Did the FSA find what they were looking for?

- Why did the investigation take so long?

- Was the investigation the cause of the collapse?

- If the FSA knew that there was a problem with a product, which may threaten the existence of the company, why did they allow the company to continue to trade that product and why did they allow the directors to continue to draw their salaries (salaries of Keydata's three directors increased eightfold in three years to just under £2 million in 2008)?

Is this another example of the FSA being asleep at the wheel?

Monday, June 15, 2009

Woolworths Mark II?

The ex CEO of Woolworths, Sir Geoff Mulcahy, is working with a yet to be named group which plans to create a chain of 200 "Woolworths-style" stores.

The group wants to buy some of Woolworths' vacant stores, and hopes to raise between £5M-£10M from private investors.

Those of you who want to suggest a name for the group may do so via Twitter.

There may well be an opportunity here, if Woolworths II learns the lesson from the failure of the original Woolworths; namely, selling crap in poorly laid out stores that can be bought elsewhere for less is not a recipe for success.

Friday, June 12, 2009

Mortgage Rates Set To Rise

Nationwide Building Society will raise its fixed mortgage interest rates today, on its most popular mortgage deals, by between 0.26% to 0.86%.

Other lenders are expected to follow suit, as they seek to reduce the demand for their products as the Swap rates (which dictate the cost of fixed rate lending) rise.

Needless to say, savings rates will not be increased.

Thursday, June 11, 2009

Drinks All Round

According to the National Institute of Economic and Social Research, the recession is over.

Let us trust (before we break open the champers) that this is based on reality rather than just statistics, which are very likely wrong.

Wednesday, June 10, 2009

Rip Off Britain

Selftrade, the online stockbroker, has added its name to the financial services industry hall of shame for ripping customers off.

As from 1 July this year, it will charge its hapless customers an annual management fee of £40. They are taking advantage of the fact that their rules mean in order to transfer stocks some customers could be charged as much as £100, ie their customers are locked in and ripe for being ripped off.

My advice to its customers is to sell your shares before 1 July, and look for a better deal before buying back into the market (if this is financially feasible without losing more than the £40 charge).

Don't let Selftrade get away with it.

Tuesday, June 09, 2009

Lloyds Axes Cheltenham & Gloucester (C&G)

Lloyds Banking Group is to close all 164 of its Cheltenham & Gloucester (C&G) branches in the UK, with the loss of up to 1,500 jobs.

This follows the disastrous merger earlier this year, set up by Gordon Brown, with HBOS.

There is one glimmer of "good" news, Andy Hornby (the ex CEO of HBOS who destroyed value at HBOS) has found work with Alliance Boots as their CEO (earning around £1M per annum).

I wonder if the soon to be ex employees of C&G will be equally fortunate?

Tax Investigation for Dummies

Tax Investigation for Dummies

Tax Investigation for Dummies provides a good and easy to read guide for anyone caught up in an HMRC tax investigation. A must read for any Self Assessment taxpayer.

Click the link to find out more: Tax Investigation for Dummies

Monday, June 08, 2009

A Spoonful of Sugar

The appointment of Sir Alan (soon to be Lord) Sugar as the government's "business champion" has received much media attention.

Sugar plans to lead a roadshow of bankers around the country, in an effort to get them lending to small and medium-sized enterprises.

All very well, but given that the government which actually owns some of the banks has not managed to persuade them to increase lending, why should a road show (televised perhaps?) make any difference?

This is more of a publicity stunt by our ever more desperate Prime Minister, rather than a serious business initiative.

Friday, June 05, 2009

Nature Abhors a Vacuum

Unsurprisingly the current political turmoil his hitting the economy. The pound slid 1% against the dollar to $1.6022, a one-week low, while the pound hit a two-week low against the euro of 1.1277 euros.

Nature abhors a vacuum, and until the political situation is brought into some semblance of control KPI's such as the exchange rate will be savaged by the markets.

On a brighter note, well done to Alistair Darling for clinging on to his job as Chancellor.

As to whether is this is a sign of his strength, or the Prime Minister's weakness, is another matter.

Thursday, June 04, 2009

Banks Mislead Customers

As I have noted before on this site, Britain's financial services industry has treated (and continues to treat) its customers with absolute contempt.

The reputation of the financial services industry continues to plummet; endowment mi-selling, PPI, excess bank and credit chargres, high risk lending to the vulnerable, excess bonuses etc have all been nails in the coffin of its reputation.

Founded on the twin pillars of greed and arrogance the financial services industry, despite almost being destroyed by the current self inflicted recession, continues to fleece its hapless customers.

An inquiry by the Banking Code Standards Board (BCSB) noted that over 50% of bank and building society staff were feeding customers misleading information about when funds would be available for withdrawal, and when interest would start to be earned on cheques.

In other words, customers are being lied to.

When will the financial services industry be held accountable for its appalling behaviour and treatment of its customers?

Never, as long as the FSA has anything to do with it!

Wednesday, June 03, 2009

Brown's Failed Tripartite System

In February 2008 I wrote:

"As long as Gordon Brown is Prime Minister, and that looks likely for the next year or so, the current failed tripartite regulatory mechanism will not be changed for the better. He is the arrogant architect of this failure, but will never admit to it."

In March 2008 I wrote:

"The fundamental failing of the current tripartite regulatory system, created by Gordon Brown ten years ago, is that no one is actually in charge of it.

Until Brown goes, that situation will not change, and the tripartite system will continue to be ineffective
."

Later that same month I wrote:

"Unfortunately, because this dysfunctional system was created by Gordon Brown, until Brown is removed from office there will be no change to the tripartite system and the UK's financial system will continue to remain exposed to failures such as Northern Rock."

I am pleased to see that people are finally waking up to the disaster of a Chancellor/PM that is Gordon Brown (as another cabinet minister resigns), and the regulatory shambles that he imposed on the City in 1997.

The Times notes that the House of Lords Economic Affairs Committee has stated that the tripartite arrangements had failed. Lord Vallance, its chairman, said, "in part because it was not clear who was in charge in a crisis and because not enough attention was paid to macro-prudential supervision".

Sir Martin Jacomb, a former chairman of Prudential and director of Barclays, also weighed in and criticised the Prime Minister for his "disastrous" decision while Chancellor to strip the Bank of responsibility for banking supervision and hand it to the newly created Financial Services Authority.

However, as I have noted before, the tripartite system will be with us as long as Brown is PM. Fortunately his tenure in office looks as though it is rapidly coming to an end.

Tuesday, June 02, 2009

Gamekeeper Turned Poacher

Which toothless and useless "regulatory" organisation that on a daily basis lets down the victims of financial institutions greed, failed to see that Northern Rock was a disaster waiting to happen, sat back during the banking crisis and oversaw the demise of the City of London has happily awarded bonuses of £19.7m – a 40% increase on the previous year - to its staff last month?

Answer: The Financial services Authority (FSA).

The fact that it has so obviously failed in its role matters not a jot to those "in charge" of the FSA. They claim that, in order to attract high performers, "realistic" rewards need to be offered.

Isn't that the same corporate bullshit spouted by the banks that have destroyed value and the economy?

It seems that the FSA has become part of the problem, rather than the solution.

Monday, June 01, 2009

Darling in Denial

Dead man walking Alistair Darling (soon to be ex Chancellor of The Exchequer) has denied the allegations in today's Daily Telegraph that he had broken House of Commons rules, by claiming second home expenses on two properties at the same time.

Yet, within hours of his denial, he announced that he would repay part of a parliamentary expenses claim on his London flat.

He claims that he is innocent, yet he repays some money. Why repay the money if he is confident that everything was above board?

He will be out of office by Friday.