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

PPI: Fact or Fiction

I am sure you are sick of the phone calls, texts, adverts, etc. from companies promoting their services to assist with your PPI claims. It seems that if you once walked past a bank on the high street then you have pretty much met the criteria to claim.

 

Whilst this seems to have been dragging on for years, the intensity of the phone calls, texts, adverts, etc has gone up a few levels over recent times……and with good reason.

 

The simple facts are:

 

- Some 64 million Payment Protection Insurance (PPI) policies were sold in the UK according to the Financial Conduct Authority (FCA).

 

- Just 12 million people have so far successfully claimed compensation for being mis-sold (which equates to 24 million policies).

 

- The FCA have set a deadline of 29 August 2019 to make a claim.

 

- £27 billion has been paid out in compensation by the banks to date, with a further £10 billion set aside for predicted future claims.

 

Clearly not all of the PPI policies will have been mis-sold and there will have been a genuine need for the individual to have the policy. However, that is not the issue. Banks need to prove that the individual had a genuine need for it, document appropriately and justify a recommendation. And that is where it all falls down……the banks collectively didn’t keep sufficient records to justify the policies and the regulator assumes inappropriate mis-selling if that is the case.  

 

With around 2/3rds of policies still not checked, expect this mess to get bigger.

 

I wonder what the PPI claims companies will turn their attention to next?

Introducing Crawford Falconer

Crawford Falconer……could this be the most important man (economically speaking at least) to be ‘positioned’ in our lifetime?

 

He will be the man in charge of negotiating the UK's trade deals once Brexit is finalised and starts his new post as Chief Trade Negotiation Adviser at the Department for International Trade this week.

 

Interestingly, he is from New Zealand. More significantly though, he is a former ambassador to the World Trade Organisation (WTO) and has a wealth of experience in such trade negotiations. Certainly a lot more than the UK……for the past 40 years trade deals have been managed by Brussels.

 

Mr Falconer will be responsible for developing and negotiating free trade deals with countries outside the EU, striking deals with a range of countries covering specific sectors and products and supporting the UK as a member of the WTO.

 

At the last count, he has in excess of 100 non-EU trade deals to thrash out in less than 2 years……roughly one trade deal a week seems like a tough ‘inbox’ to be starting a new job with!

 

We can only wish him well……we need him to do well.

Red Bus Rubbish

 

If ever you want to understand the utter rubbish we must decipher from Westminster before we make thoughtful decisions on how to vote, the ‘red bus’ that went on tour prior to the Brexit vote sums it up perfectly.

 

You remember that red bus (dubbed the ‘Brexit Battle Bus’)……the one that Boris Johnson took on tour with the slogan “We send the EU £350 million a week – let’s fund our NHS instead”. It was hard hitting. It got the message across. It worked. ‘Leave’ won the referendum. Job done.

 

The problem was, it was complete nonsense……which has now been confirmed by Treasury figures this week that reveal the UK made a total net payment of £8.1 billion for the 12 months to March 2017. This works out as a net payment of £156 million per week to the EU (after rebates and EU payments to the UK’s public sector have been taken into account). £350 million v £156 million. That’s one huge overshoot / lie / fib / misrepresentation / inaccuracy / embellishment / fabrication / distortion (delete as appropriate).  

 

Interestingly, the UK's weekly net contribution to the EU Budget of £156 million is the lowest since 2012.

 

Back to the point though……why has it been simply accepted that it is ok to mislead on such a scale for political gain? Why has nobody been held to account?

 

We have to base our voting decisions on the information and messages we are given……basing our decisions on false facts demeans the power of our vote and makes democracy laughable.

 

For the record, Boris Johnson has been ‘penalised’ for the lie……he has been given one of the top 5 most powerful positions in Government (Secretary of State for Foreign and Commonwealth Affairs).

 

What a farce.

Missing The Pension Point

The press and media have been very busy with a report issued by the Institute for Fiscal Studies (IFS).

 

From 2010 to 2016 the State Pension Age was increased from 60 to 63 for women as part of the ‘equalisation’ of the State Pension age for men and women to age 65 and the IFS report has confirmed that this will provide a £5.1 billion annual boost for the Government. Or to put that another way, 1.1 million women have been impacted by receiving their State Pension at an older age and the Government is saving £5.1 billion a year as a consequence.

 

Enter campaigning and rights groups arguing against the morality of it all. I get it……I really do get it. I have family that have been affected. But there are bigger points here.

 

Firstly, there has been no alternative offered and the age that the State Pension is received has been dictated. Surely it would not have been unrealistic to offer the original State Pension age but at an increased cost for an individual? Give us a choice. The Government would not have had to foot the bill, so why not options?

 

Secondly, we live in an age when private pensions aren’t understood or trusted (or both) and 80% of company pensions have a big black hole of underfunding. Is it really too much to ask to have a State Pension that would provide more than £155.00 per week and at an age that can be chosen individually?

 

Yes, it might be complicated to calculate and design a new scheme. Yes, it might not win many votes with the under 30’s if they have to pay more National Insurance Contributions. Yes, it will have teething problems. BUT……we are one of the most economically advanced countries in the world and it is doable.

 

Alternatively, we can let each Government that comes around every 5 years (or is that months?) mess around with the State Pension and come up with no solutions as there is nothing in it for them in the short term. Why not leave a legacy? That’s what leading the country is all about rather than simply balancing the books (together with immense borrowing – it’s a ‘kind of’ balancing) as simply as possible.

 

Oh how I would love a ‘leader’ to be Prime Minister.

 

One day maybe.