Every Fiddle Helps

The Tesco accounts scandal continues to roll on……the snowball grows……the plot thickens. Given the lies and deceit, you would be forgiven for thinking that this was the banking sector we were talking about not groceries. Bugger……forgot Tesco is also a bank. Oh well.

 

The story basically goes that Britain’s biggest retailer has a £250 million shortfall in its profits. The black hole was found in its commercial income……from income being booked from deals with suppliers very early (too early) and at the same time delaying the cost of the deals (too late). And that ladies and gentlemen is how you create a £250 million hole.

 

Tesco’s reduced profits will impact on its share price and the level of dividend to be distributed to investors……this effects the value of ISA’s, Pensions,……and so on. In effect, Tesco’s share price has been a lie.

 

To be fair to Tesco, they have brought in an external accountant to verify the accounts and sacked 8 company executives. Swift and merciless. But as we have seen with the banking sector, if employee pay is linked to profit……risks will be taken and lies will result.

 

All very sad. All very avoidable.

No Longer Wronger Wonga

The word detest is a mightily powerful word……to dislike intensely. But that is the only word I can think of towards any company that constructs its business model around praying on the vulnerable.

 

With this in mind, it’s very fair for me to state that I dislike the payday lender Wonga and all that it stands for. Oh sod it, let’s go for it……I despise them.

 

I wrote about this back in April http://stevesmithlive.blogspot.co.uk/2014/04/wronga.html but that was before the announcement last week that it is writing off £220 million of debts for 330,000 customers after putting in place new affordability checks.

 

Let’s put that another way……it is writing off £220 million of debts for those people that should never have had the loan in the first place as there wasn’t sufficient financial resources to repay it (which is the perfect scenario for Wonga).

 

Let’s be crystal clear here……Wonga didn’t reset it’s moral compass and find a conscience in the Autumn air……the regulator did what it was meant to do and shamed Wonga into the action.

 

Hats off to the Financial Conduct Authority for doing its job.

 

Let’s hope similar companies find some worthy principles sharply.

Political Flirting

It is fair to say that the vote winning flirting and pouting is well underway in preparation for the General Election next year.

 

Whilst I am always incredibly sceptical at the standard of smooching on offer from upper class middle aged former public school boys, there really has been some good to come from the vote winning antics recently.

 

Firstly, Scotland. Whilst independence has been an important issue, let’s cut to the chase on the key matter……just under 10% of the votes and Parliamentary seats will come from Scotland. Scotland could end up being the difference between an outright majority and another coalition Government. Scotland is a big deal.

 

That’s why each of the parties will work with Scotland to ensure that it gets what it wants (broadly) from the recent yes / no vote……i.e. more independence but not total independence. That can’t be a bad thing.

 

Secondly, Pension Reform. The last 6 months has seen the most radical reform of pensions in their history. The previous rigidness of pensions caused frustration and dis-heartedness for millions……yet they have been changed forever for the greater good. Why now? 75% of the over 55’s will vote next year!

 

Just remember……not all the strutting, seduction and point scoring for our votes is a bad thing.

It All About The Money

The debate on Scottish Independence has been in the headlines for months. To be fair to our press, media, twitter feeds, etc., it is pretty justified given that it is probably the biggest single political and economic event in UK history for a century……it’s certainly a top three’er!

 

We can all debate this from many angles but to stop you getting giddy with excitement……there is only one thing that England is really bothered about……money. To be fair, Scotland should also be very bothered about this as it is their single biggest issue.

 

If ‘yes’ should win, the biggest question revolves around Scotland’s choice (or lack of one) of currency post-independence.

 

The options are:

 

Sterling Union: A continued currency union with the remainder of the UK. On the face of it this would be the simplest and cheapest solution – no changes needed to financial institutions/services. The main problem here is that all 3 major political parties in the UK have refused to agree to this course of action. There would also be precious little actual independence achieved – still using the Pound, no independent Scottish central bank and with decisions on monetary policy made in London.

 

Sterlingisation: Using the Pound, without a currency union. This is in theory a viable option – keeps costs to a minimum, and has precedents such as Panama’s use of the Dollar. However, this choice gives zero control over monetary policy; the Bank of England would have no obligation to consider the plight of Scotland in any of its policy decisions – problematic (for Scotland) if economic cycles begin to diverge. Again, the amount of independence gained is questionable.

 

Join the Euro: Joining the Euro might seem sensible but at the moment, Scotland is the second biggest fish in a pond of four (England, Wales and Northern Ireland), something that will certainly not be true in the Eurozone. Added to that is the fact that any application to join the euro is subject to a veto by any EU member – Spain doesn’t want independence movements encouraged due to its Basque and Catalan separatist regions.

 

New Scottish currency: Launching a brand new currency is not a simple matter – it is expensive for one thing. However the real issue is the value that the world would place on such a currency with so little history and an uncertain future. Exposure to the global FX markets is no small risk, particularly for an open economy like Scotland that would rely on two very susceptible industries – oil and finance. The issuance of government debt would likely prove expensive too, as it is for most brand new issuers on the global stage. This option, whilst truly being independent, would be the riskiest of all of the above.

 

So there you have it. it’s all about money……but isn’t it always?

 

Expect your TV to be filled with politicians pecking like randy cockerels with the money shot of Edinburgh Castle in the background.

 

Do you not find it strange to be a voteless, powerless spectator of the biggest constitutional change in our country's modern history?

 

Just a thought......

 

Worst of The Worst

So it’s official……Lloyds Banking Group was the most complained about financial services company in the first half of this year.

 

In a sector that contains few morals, complete apathy towards client needs and / or a conscience worthy of note in many cases, it really does take some doing to be the worst of the worst……damn it……it’s almost impressive.

 

In their defence, Lloyds also owns Halifax and Bank of Scotland……which are also very complainable brands. Collectively though, Lloyds were responsible for 1/3 of the total number of new complaints to the Financial Ombudsman Service.

 

Here’s the kicker……we part own Lloyds.

 

Now I don’t know about you but I would quite like a return on the billions ‘we’ invested to keep Lloyds alive. But with this kind of publicity and the liability of more complaints in the post is hardly encouraging for potential investors. 

 

I’ve been waiting 6 years for someone to justify the long term benefit of bailing the banking sector out……

 

And still I wait.

Train Pain

There is a really simple reason why our road system is currently not fit for purpose……there are too many cars. There......I've said it!

 

But why are there too many cars on the road? We have a public transport system that (a) isn’t fit for purpose, (b) is a painful experience and (c) is not cost effective.

 

The solution?

 

To put up train fares by 3.5% from 2015. I just don’t get it……why is it acceptable to allow an increase above inflation?

 

You see the real issue lies with the Government. Firstly, for allowing private companies to run the train network. Secondly (and most importantly), they won’t invest in a fit for purpose public transport system as it will take 10 years to implement and they won’t be in power by then. Or to put that another way……there is nothing in it for them.

 

For years rail passengers have said it can be cheaper to use the plane - on some rail tickets it would now be cheaper to buy a car.

 

The latest rail fare rise is nothing short of rampant capitalism with no breaks whatsoever. It is not far from the truth to say we have a spiv Government that sees nothing wrong with it.

 

It’s morally corrupt in my eyes.

Short Sighted Savings

One of these days Barclays will do something to impress me. Admittedly the staff in my local branch of Barclays are non-offensive……but being only marginally more helpful than the staff in Morrisons is hardly in the ‘impressed’ category. Anyway, until that great day comes when I’m impressed – and unicorns come dancing down Darlington High Street to celebrate – I have no choice but to continue to highlight the continued errors of Barclays ways.

 

Its latest consumer faux pas concerns their tax-friendly Cash ISAs. From Bonfire Night (you couldn’t script it) 1.6million of its customers will see the interest they receive from their cash ISA reduced as the bank consolidates its products.

 

In total, 11 ISA plans will be done away with and everyone will be stuffed into its Instant Access Cash ISA (Issue 1) that pays interest of between 1.29% and 1.49% percent depending on how much you have tucked away. That will leave thousands pretty narked when their current rate is slashed.

 

And if Barclays are doing this……what do we think the rest of the High Street Banks will do?

 

You see the bigger issue is not how little Barclays care about their customers……we all know they don’t. The issue is that we all stand aside, let the banks dictate to us and it creates a country of spenders not savers.

 

We have the worst saving rate of all leading economies in the world. But with banks offering rates below the rate of inflation…..where is the incentive to save?

 

Those at W1 can increase ISA limits to whatever they want……but it is all worthless unless we can see a real return on savings.

 

All very short sighted……but that’s UK politics for you.

 

Boringly predictable