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

Back Pocket Compassion

One of the by-products of the Russia conflict in Ukraine is the ‘tit-for-tat’ ban on economic relations between the UK and Russia. Effectively, Russia banned food imports from a number of Western European countries (including the UK) in response to a ban on these countries buying Russian products.

 

But this could all be a good thing.

 

As we have seen on far too many occasions over recent decades, politicians rarely put human life ahead of money. However, as soon as the issue hits a country’s back pocket, then it is amazing how quickly action is taken.

 

As the Russia conflict in Ukraine has shown, people dying in conflict or through a plane being blown up has caused little political comment. Let’s see how the attitude changes now that the back pocket of the UK could be impacted.

 

Very predictable and very sad.

 

 

The Cost of Financial Education

The results of a recent study by the Centre for Economics and Business Research (they’re independent – we can trust them – they’re not part of the Government!) into the cost implications of a lack of financial education have been made public.

 

It concluded that the lack of knowledge (everything from credit cards to pensions) costs UK taxpayers over £3.4 billion every year. That’s staggering…… 3,400,000,000.00

 

It also found that financial education could:

 

- Reduce unemployment by up to 10 per cent

 

- Save £1.8 billion per year on subsidising those in retirement

 

- Cut personal debt by £716 million a year

 

- Save consumers £244 million a year on mis-selling

 

Whilst over 20 countries teach personal finance in schools, the UK has lagged well behind. So far behind in fact, that they aren’t visible in the distance.

 

Some good news though……from September 2014 the UK will teach financial education to young people in mathematics and citizenship lessons. 

 

That just leaves the gap to be filled of the millions who never received personal financial education. By continuing to ignore or address will destroy future financial prosperity for too many.

 

It’s a start though.

 

 

Claim On A Claim

Well who'd of thought it......more scandal surrounding the banks. And to save you guessing all day on what the subject is this time, I'll save you......it's PPI again.

 

I think we all sick of the phone calls, adverts, etc. in fact the whole subject to be fair. But this compensation beast looks like it's set to roll on and on.

 

It's a little bizarre this one as the banks have been oh so willing to award compensation for the mis-sold PPI but appears that their calculations have not included all of the recompense due. Yes premiums have been refunded and interest awarded in line with regulator guidance, additional changes and fees have been 'forgotten'. Forgotten to the tune of around £1 billion.

 

That's quite a memory slip.

 

However, the biggest loser in all of this is our economy. As long as banks have liabilities that need cash, they will be reluctant to lend to the business community at attractive rates and this will stop the Private Sector growing and creating jobs.

 

What a mess......and all so avoidable