Oil Is So Last Year

The world’s most valuable resource is no longer oil……it’s data. However, concerns are being raised by the giants that deal in data……the oil of the digital era. Alphabet (Google’s parent company), Amazon, Apple, Facebook and Microsoft are juggernauts in the data world.

 

Such dominance has prompted calls for these tech giants to be broken up. Don’t get me wrong, size alone is not a crime and there have been great consumer benefits……few of us want to live without Google’s search engine (I wish I had £1 for every time I have heard young and old say “google it”), Amazon’s one day delivery service or Facebook’s timeline. However, there is cause for concern……internet companies control of data gives them enormous power.

 

Just think of the power these 5 companies have……smartphones and the internet have made data abundant, ubiquitous and far more valuable. Whether you are going for a run, watching TV or even just sitting in traffic, virtually every activity creates a digital trace - more raw material for the data distilleries to analyse. The data we are giving these 5 companies is hugely powerful and equally scary……that’s the new oil for you.

 

And this power converts to money. Alphabet, Amazon, Apple, Facebook and Microsoft profits are surging……collectively racking up over $25 billion in net profit for the first quarter of 2017. That’s the power of data.

 

Just like cars are evolving away from oil to embrace a data digital world……it will be fascinating to see how the next 10 years evolves with digital data.

 

Very difficult to fight against it……it looks like compulsory embracing is the only way forward! 

Interesting

If you want to learn a new swear word or two, simply ask anyone over the age of 60 what they think of the interest rate on their savings. You might also want to duck as well……it will probably get physical.

The last decade has seen the Bank of England keep interest rates at historically low levels for an unprecedented period. Great news for borrowers……dreadful news for savers. But that could be changing thanks to the current rate of inflation hitting 2.9% recently. 

The general economic policy of controlling inflation is to use interest rates. Putting interest rates up will cause borrowers to have less money in their pocket, they spend less and then inflation falls. Simple (well in theory rather than practice at least!). With inflation above the Bank of England’s target of 2.0%, the shuffling of papers has started at the Monetary Policy Committee on whether to increase interest rates. 

Whilst the recent monthly meeting of the nine-strong Monetary Policy Committee voted 7-2 to keep interest rates on hold at 0.25%, the language being used suggested that the possibility of an interest rate rise “has definitely increased”. 

Just a suggestion of an interest rate rise was enough to send the pound to a 15-month high against the dollar. Why wait for fact when the rumour is ‘sexy’ enough? 

Whilst the times aren’t changing yet, it is clear the economic super-tanker is moving……you’ve been warned borrowers!

Brexit Thoughts #4: Tax

Who will pay tax and how much after Brexit?

 

It’s a question that will send a shudder down the spine of the Chancellor but it will have huge implications for some.

 

There is no doubt that the rest of the world has lost confidence in the UK in a post Brexit world. We haven’t left the EU yet……but just look at the exchange rate against most major currencies and a similar story is told. A weak pound is a consequence of weak confidence.

 

To combat this and to get overseas investment into the UK at a time of low confidence requires tax breaks……a sweetener to make us look more attractive. Lipstick for the economy. A reduction in Corporation Tax for businesses and lower Income Tax has been promised……but it comes at a cost. How will the sweeteners be paid for? It isn’t as simple as borrowing the money on the UK credit card or cutting public services.

 

There is no doubting that offering lower Corporation Tax to stimulate economic activity once the UK has left the EU could mean more companies choose to move here, invest, create jobs, create tax receipts, etc. But the benefits will take years to filter through.

 

Which brings me back to the original question…… Who will pay tax and how much after Brexit?

 

Those sweeteners need paying.

PPI'll Be back

What has the financial sector regulator, the Financial Conduct Authority (FCA), and Arnold Schwarzenegger got in common?

 

Well, you would be forgiven for thinking that this was the start of a reasonable joke (well, reasonable by my standards)……but actually Arnold Schwarzenegger has been employed to front a £42.2 million FCA advertising campaign to inform those that haven’t made a claim for being mis-sold PPI that the deadline is 29 August 2019.

 

Before we all throw our toys out of the pram about the £42.2 million cost to taxpayers for the advertising campaign…..the regulator is making 18 banks pay for it.

 

The majority of the £42.2 million spend is going on adverts featuring a robotic head of the Terminator star, with £24 million used to buy advertising space in cinemas, billboards and on TV. £4.9 million has gone towards ‘talent fees’ and production costs, with another £3 million going to the creative agency (M&C Saatchi – the Conservative party’s longstanding ad agency!!!!!) which designed the campaign.

 

My initial reaction to the £42.2 million figure was……bloody hell, that’s a lot of cash to spend on something that pretty much everyone has heard of. Anybody who doesn't know that they can claim for mis-sold PPI over the last 6 years must have been living in a cave, on the moon or in a North Korean prison.

 

My second reaction was one of frustration……we need the banks as they are the key to economic growth more often than Government policy. The more we keep kicking them in the shins, the more difficult it will be for them to initiate what the Government won’t (or can’t).

 

My third reaction was pretty simple really. Might it have been more effective if the FCA had required the banks to write to those who had been required to pay for PPI. Pretty sure there would have been change from the £42.2 million after the cost of the letters, envelopes and stamps Just a thought.

 

My fourth reaction was one of confusion…… I'm not sure what has been the bigger scam – the actual PPI policies themselves or the PPI compensation recovery?

 

My fifth reaction (yes, I had quite a few reactions!) was that it was the best and most realistic work of Arnie's career.

 

The advert can be seen by clicking: https://www.youtube.com/watch?v=cfwk0bAAfPk

 

Hasta la vista PPI