Googled

 

Google's £130m UK tax settlement was not exactly a glorious moment for the Government. The UK tax authorities agreement with Google has fuelled a sense of injustice that big businesses receive preferential treatment.

 

However, you would be forgiven for thinking differently if you believed the spin from Chancellor George Osborne who called the settlement a "major success". Well if it was such a success of major proportions, why not release details of how Google and HMRC came to such an agreement? Pretty simple really and impressively transparent. I’ll not hold my breath.

 

What annoys me even more is that France are going after Google for unpaid tax to the tune of £1.3 billion. Now that would be a “major success”. Especially when you consider Google sales in France are lower than in the UK. Do the French really have more balls on this subject than the UK? Do they really have a greater sense of injustice than the UK? Or is it simply more poor leadership at the very top of the political system allowing too many to get away with so much?

 

I’d love to think that valuable lessons have been learnt. The reality may be far different though.

Brexit: It’s Not All About Immigration

 

Like them or loath them, UKIP did a great job at the General Election last year in raising the subject of our membership of the EU and whether we should continue to be ‘in’. Such was their success, that here we are facing a referendum on the very subject.

 

It costs the UK £8 billion ‘officially’ to be a member of the EU. However, UKIP would argue that it is nearer £200 billion when you factor in the many associated costs of EU immigrants living in the UK (cost to public services, NHS, welfare benefits, etc.).

 

Whilst there are a huge range of factors that should be taken into account on whether we retain membership of the EU, the brutal reality is that the actual debate and headlines will all be about immigration and the strain that EU immigrants put on our public services and welfare benefits system. To be fair, it already is.

 

It really is political point scoring with voters to debate the things that will generate the most positive headlines for their own argument. Sad but very true.

 

The simple reality is that 93% of all social benefits paid in the UK go to UK nationals with only 2% paid to EU nationals living in the UK. That’s it……just 2%.

 

So just remember when there is vast air time given to political debates on immigration, the reality is that the issue is far smaller than you will be forced to think.

Brexit: Referendum Off & Running

With David Cameron’s recent trip to Brussels to negotiate a better deal for the UK deemed a success (well, in his eyes), a date for the referendum on whether to remain in the EU and the compulsory political flirting with us voters, has been set for 23 June 2016.

 

The Tories and David Cameron would have you believe that the referendum was all their masterplan for the ‘good of the people’. However, it really all started when UKIP caused quite a stir in the General Election in 2015 when their very upfront stance on closing the UK borders and leaving the EU gained quite some popularity amongst voters. To such an extent, major political parties agreed to hold a referendum on whether to remain in the EU by the end of 2017.

 

Broadly, there are 3 major campaigning parties that want to remain ‘in’ the EU and one that wants ‘out’. Those that want to remain ‘in’ wanted the referendum as soon as possible to leave little time for the ‘out’ campaign to gain any momentum. In the same way as the Scotland independence vote, the referendum will dominate press / TV / social media with political twisting for the next 3 months. 

 

The key ‘in’ and ‘out’ campaigning topics are likely to be dominated by:

 

• Cost of Membership 
• Immigration
• Jobs 
• Regulation 
• Trade 
• Foreign Direct Investment 

 

Whilst the principle of the EU is ‘freedom of movement of goods, services and people’, there are some key economic points to consider:

 

               57% of UK goods / services are bought by EU countries.

 

               53% of goods / services bought by the UK come from EU countries.

 

David Cameron’s recent visit to Brussels was to negotiate better terms for the UK so that he can campaign that it is better to stay ‘in’ and that the terms are far better. The key parts of the UK deal he brokered were:

 

• Allowing Britain to opt out from the EU's founding ambition to forge an "ever closer union" of the people of Europe.
• Allow greater powers to national parliaments and to block EU legislation.
• Restrictions on other EU nationals getting in-work benefits in the UK.
• Explicit recognition that the Euro is not the only currency of the EU.
• Obtain guarantees to ensure countries outside the Eurozone are not disadvantaged or have to join Eurozone bailouts.
• A reduction of the "burden" of excessive regulation and extending the single market.

 

So there you have it……the referendum political campaigning trail has officially started.

 

I’m not really too sure I can take months of political spin being force fed……let’s hope the referendum arrives quickly!

 

 

Fearful 2016

It is fair to state that it has been an extremely gloomy start to the year from an economic and investing perspective.  

 

However, the reality of this seems to be lacking perspective. We need to look at what is actually happening in the real economy instead of focusing on the headlines.

 

Firstly, let’s consider oil. Oil price decline has in fact been driven by oversupply rather than simply a decline in demand. A decline in demand could be an indicator of longer term recession. But the collapse in the oil price is partly driven because OPEC are operating at maximum output when demand just doesn’t warrant it. This provides a boost to consumers, businesses and oil-importing countries and could be a net positive for the global economy. It is putting more money in consumers’ pockets and this will feed through to increased spending eventually.

 

Secondly, we have China. We know that China’s economy is going through a ‘rebalancing’ away from an exports driven economy to something more diverse. There has been a large decline in capital investment and industrial production but broader data on the rest of the economy is still relatively good. In fact China is actually performing better than the press headlines suggest. 7% economic growth for 2015 is far from a poor performance (2.5 times that of the UK and US).

 

Thirdly, let’s consider economic growth. While financial markets are focused on China and plunging commodities prices, it is important to remember that recent employment data from the US, UK and Europe shows these economies are still growing.

 

So there you go……reality check over and hopefully a little perspective from the 'scary reading seeking headlines'.

Fiscal Smoke & Mirrors

 

Recent figures from the Government independent Office for Budget Responsibility (OBR) show that public borrowing was £7.5 billion in December 2015. Given that this was £4.3 billion lower than December 2014, this was quite a result.

 

Or was it?

 

Now come on, you know the rules by now……always believe there is more to the story than just the headline we are force fed on!

 

The December 2015 borrowing figure of £7.5 billion takes borrowing for the financial year to date to £74.2 billion. This makes the running total already above the £68.9 billion forecast for the whole fiscal year by the independent Office for Budget Responsibility (OBR). And there are still 3 months to go!

 

So there you have it…..the real story. After all of the Public Sector cuts and austerity measures, the debt is still way off target. And just to cheer you up further……total public sector debt (excluding support for banks) now stands at £1.54 trillion.

 

And for dramatic effect, that’s £1,540,000,000,000.

Banking Blah (Part II)

 

I blogged (see below - Part I) at my disillusionment at the city regulator’s (Financial Conduct Authority) decision to terminate their review into banking practices.

 

On reflection, my disillusionment expanded to anger and frustration when I reflected and delved a little further.

 

The background bit……

 

In January 2013, the FCA outlawed commission in relation to advice on financial products and banned them. As a consequence, the banking sector en masse scrapped their financial advice divisions……the reason had nothing to do with a lack of demand for the service. It was all about the prospect of no longer earning huge commissions. You see, the banks are just a financial product selling juggernaut. Take commission out of the equation and they’ve very little to peddle.  

 

What has become clear since 2013 is that there aren’t enough advisers to meet consumer demand for financial advice and huge parts of society are now DIY financial advisers. Clearly this has its own dangers.

 

Fast forward to 2016 and the FCA is about to publish the findings of its report into the actions they propose to address the lack of financial advisers in the UK. Coincidentally, at the same time they have terminated their review into banking practices relating to risk, pay and bonuses.

 

We have moved 3 years in a complete circle and the solution to the problem is to return to the problem and allow banks to offer advice for huge commissions rather than allow the general public to make big mistakes at DIY financial advice.    

 

Rather than beat the banks with a stick we have to accept that the powers that be have realised they now need help from the banks as they are not being creative enough to think of an alternative. 3 years, millions spent on investigations on what went wrong, millions spent on researching an alternative solution and the winner is……banks. Right back where we started.  

 

I despair.

Banking Blah (Part 1)

The thought of the nation’s taxpayers having to bail out champagne-guzzling bankers with their six-figure bonuses while many faced redundancy and feared for their financial future during the credit crunch made the banks fair game. And to be honest, I’ve never held back at voicing my despair at them.

 

 

We were promised by the then Labour Government that heads would roll. Back in 2008 then prime minister Gordon Brown said UK banks have been taking unnecessary risks. He said: “There have been abuses in our system... and they’ve got to be dealt with too.”

 

 

Since then a knighthood has been lost, millions more taxpayer pounds have been spent examining what went wrong and some fat cats lost their jobs. Interestingly, nobody has been charged with wrongdoing or spent time in jail. It appears being morally corrupt is perfectly legal in the UK.

 

 

Which makes last week’s decision by the Financial Conduct Authority to ditch their review into banking culture all the more baffling.

 

 

I really am starting to think this Government isn’t even trying anymore to pretend they don’t like banks. It is clear that W1 has move than a soft spot for the banking sector. The FCA insists it was their decision to ditch the banking review and nobody in Westminster forced their hand. Honest gov’na.

 

 

Equally baffling is the reasoning for their decision being that each bank is unique and could not be easily compared. That’s like the police saying we can’t really police the streets anymore because each street is slightly different and each burglar has unique reasons for theft.  

 

 

The whole point of the review was to determine whether programmes to shift culture were driving the right behaviour and solving issues such as risk taking and banker pay.

 

 

If we can’t trust the Government and Regulator to hold banks to account, what chance do we really have?