Thursday, 30 April 2009

Dear Mr Osborne

The Cottage
A Small Village

George Osborne MP

Dear George

Re: The 50% Tax Rate

In his final act of financial idiocy Gordon Brown and his lackey Alastair Darling have imposed a 51% tax rate on the incomes of high earners as well as ludicrousy complicated rules on pension contributions for the same class of taxpayer.

It is well understood throughout the whole world that high tax rates collect less tax than low ones.

I urge you to make this argument with force, logic and evidence and on taking office to immediately reverse the imposition of this confiscatory rate.

At the same time restore the equity to pension contributions that acknowledge that pensions are deferred pay.



Tuesday, 28 April 2009

Everybody's doing it....

First Job. Paper round for local newsagents.
First Real Job. Driving a delivery van for an electrical outfit in Sunderland. That is if you ignore the temporary nursing auxiliary on a gynie theatre as a work experience / holiday job.
First Role in Politics. Never done anything in politics, unless you count working for Barratts - the most politcal company I've had the misfortune to work for.
First Car Mini Moke. Did over 100,000 miles in it in all weathers.
First Record. Let it Bleed, Rolling Stones.
First Football Match. Local derby Ipswich v Norwich at Norwich. Bloody boring and full of louts. Never been to another one.
First Concert. 'Free' at Colchester. Excellent.
First Country Visited. Switzerland. Lived there as a kid from 1962 to 1963. (In a sanatorium. I am asthmatic).
First TV Appearance. Managed to avoid that fate. But I am on youtube!
First Political Speech. School class debate for faux election aged about 14. I won!
First Girlfriend/Boyfriend. Ahhh. Sigh. As in first 'real' girlfriend. A very enthusiastic blonde with long legs and a lovely bum.
First Encounter with a Famous Person. Bob Stokoe holding a door open for me when I had my hands full delivering electrical stuff to Sunderland football ground. I couldn't give a stuff but my van oppo was gobsmacked.
First Brush With Death. Various motor car related lucky breaks, but I think being nominated aged about 14, as the pilot for our home made rocket powered soap box cart with home made rockets (yes really) was probably fairly high up there. There were more home made explosive, soap box cart, pushbike incidents that I could list, but...
First House/Flat Owned. Love nest three bed semi in Ipswich with my lovely wife.
First Film Seen at a Cinema. Davy Crockett (part of) but first full film was ....Goldfinger!!! - Briliant, and still is.
First Time on the Radio. I've done various pieces on financial services on BBC radio Suffolk, but I cannot remember which was first.
First Politician I Met. Tim Yeo. Not impressed.
First Book I Remember Reading. Sorry. Cannot remember. I have always read an awful lot. Maybe 'Jennings Little Hut'. First book that had a big impact was The Big Sleep - Raymond Chandler's opus - which I was inspired to read by an edited comprehension piece that I worked on in my English lessons.
First Visit to the London Palladium. I've been but I cannot remeber when.
First Election. 1970. Voted Tory for a bloke that seemed to understand money who immediately went and died!

Sunday, 26 April 2009


As you may know I work at the sharp end of retail financial services. As part of that we do pensions work.
Now, we all know by now that the various schemes in which state employees (including especially the BBC) accumulate their, generally, unfunded entitlements are bust. Or rather we - taxpayers - are bust because of them.
These schemes are all of the defined benefit (aka final salary) type. The final pension you get is linked to your pay and length of service. This is lovely for those on these schemes as it is easy to work out what you'll get and when you'll get it. But it is very difficult for members to work out just what these benefits cost, or what they represent in capital terms. At the same time the cost of the pensions wipes out the income tax notionally deducted from the state employees. That 'tax' is of course nothing of the sort. It is just a rebate to the rest of us in the wealth creating sector.
Furthermore there is absolutely no connection whatsoever between the level of benefit enjoyed by public servants and the success of UK plc at creating and preserving wealth. That is there is no clear and obvious incentive for any state employee to do anything that improves the chances of the UK plc's wealth creating process. There is a complete disconnection between benefit entitlement conferred and wealth created.
It may surprise you to learn that as a financial adviser I am rather anti pensions of all types. I am though very much pro capital accumulation. The reasons for this are various but one of them is what I have termed above, 'connection'. If you have managed to accumulate a good pool of capital invested sensibly in shares, bonds, property and cash, and you can actually see it and what it will pay you as an income, then you will be very keen to see UK plc do well so that your capital at least maintains its value or preferably grows and certainly pays you an income.
But at the same time I recognise that many less clever, lucky or fortunate people do not have the ability, opportunity or personal circumstances that make such capital accumulation easy. And this is where an employee sponsored and contributed to pension scheme comes in.
At the same time the rest of us can play our part by permitting pension contributions to be treated as deferred pay and not taxed until the benefits are taken. (Please note Gordon Brown) and (Yes, I also know that in my ideal world there would be no income or capital gains tax not to not tax).
The economic and fiscal catastrophe that is New Labour has more than ever exposed these inequities. The public will now exists for reform which gives a political opportunity to lance this boil once and for all. We have a once in a generation opportunity to reform these profligate, disconnected and wasteful state employees pension schemes.
Here is my outline recipe.
1. Make all final salary schemes illegal. Or rather withdraw all their tax and other privileges making them not at all viable.
2. Close to new members all state (including all quangos and the BBC) final salary schemes.
3. Freeze the benefits of all existing members of these schemes, but for equitable reasons allow the accumulated benefits to grow in line with pay until the member retires and then honour the promised - and contractual - increases. In other words honour the contract.
4. Instigate simple money purchase schemes (personal pensions) for all new members and deferred existing members.
5. Contributions to be capped at 10% employer and 20% (I am happy to allow larger one offs) employee.
6. Outsource all the work connected with the money purchase schemes. (I'll do it, and I'll do it very well and very cheaply). There would be no charge caps or any other price controls as they never work, but as there would be a lot of people (Hallo! me too) bidding for this work the price would settle at a market price.
7. The fund choice would be entirely open and each member would be expected to take advice. This advice could be paid for by an employer or costed within the scheme.
8. Retirement ages - that is minimum age at which you can draw your benefits would be 50. If you'd accumulated enough capital for you to live on then as its your money you should be absolutely entitled to take it and go.
9. All add on benefits DIS, ill health etc must be costed and paid for within the contribution limits set above and would be menu driven.
10. Keep the existing rules on the manner in which benefits can be taken, that is annuity or fund withdrawal, but do away with compulsory vesting at age 75 and allow the full fund (if not vested in an annuity) less a tax charge equivalent to basic rate income tax to pass to your beneficiaries on your death. (There will of course be no IHT or CGT by the time I instigate these reforms and flat income tax will be heading towards 10%).
You could also, of course, link in general ill health claims. For example if someone needed health care at a young age they could draw on the fund to augment the health care wealth re-distribution vouchers that I may allow myself to be persuaded to introduce.
The purpose of the above is not just to control costs. Its main purpose is to connect everyone to the process of wealth creation. It will encourage all public servants to think very carefully before they introduce policies that destroy wealth.
What's not like? Have your say, please.
PS. I would scrap all pensions for MPs. Make them all self employed contractors, and shut down all the expense and allowance scams and treat them like any other s/e person.

Thursday, 23 April 2009

Local Authority Parking Services

My town has a new 'parking service', for which read an outsourced traffic wardens. They've got several nice Transit Connect vans all nicley decked out with "****** Parking Service". All looks nice and friendly and civic.

Why then are the 'wardens' dressed like Nazi Panzer Division tank crews?

You'd think Brown was dead in the water, but...

Late last year, before the credit crunch really hit home and the Tories were well in the lead in the polls Tory supporters were predicting a Brown meltdown. I was not suer and cautioned that Brown would hang on like grim death hoping for an 'event' to sae him. And he got one. Complete with a fall guy. The failure of RBS and Fed Goodwin. And he profited from this, despite all the problems being entirely Brown's fault.
We are now again in the same position. We are very pleased that Brown is bust and labour is sinking like a torpedoed freighter, but we could yet have another 'event' from which he will seek to profit. He is a very devious politician and very determined.
The question then arises what might this event be? A Gilt strike? A visit to the IMF? A major run on Sterling leading to a hyper-inflation? Who knows. But I would not put it past Brown to call a state of National Emergency and try to manipulate the democratic process by some devious method.
Makes you think.
But luckily I also think that this would be one 'event' too far and both the opposition parties and some of his own MP's would not stand for it. Well, that's the hope anyway.

Monday, 20 April 2009

Here we go again...

Another gem from the FSA here.

And just in case you'd like to see it on here...

I can not tell you in how many ways this sort of thing incenses me. OK, I'll try.

1. All the herberts as speakers are the same herberts who got us into this mess. How the fuck are they in any way to be trusted to get us out of it.

2. The title. 'Ensuring a sustainable mortgage market for the future'. Gawd Almighty. The answer is simple. It does not need a conference. It needs two things. Sound money, and the Market.

3. And why haven't they invited a bloke like me to speak? We know more about what works and what is right and wrong then any of these smug gits.

4. The price. For me £395 plus VAT is a lot of money. Plus I lose a days work.

Friday, 10 April 2009

Regulation and Coercion

Let me tell you a true story. It’s a lesson for the times we live in.

About 3 years ago all retail financial services businesses were required by the FSA (under another one of their ‘initiatives’) to issue each and every client with a ‘menu’. This was a prescribed document set out in a very specific way with specific wording. There was a separate menu for investment business and mortgage business and the mortgage business one had two sub-divisions. I had the responsibility of creating ours and automating them in order that we could store and use electronic versions.

Now, we are a fee charging consultative financial planning and advice business. We do not use commissions. We do not sell product, although clearly products are often recommended and implemented as part of our advice process. And in the case of mortgage business this means, in effect, getting people into debt or more debt.

Our approach has always been in essence “are you absolutely sure you want to borrow all this money and buy this house?”

The menu, which we are forced to use has a choice of tick boxes as to what type of service we are offering clients.

Box 1 had the descriptive text “We will offer you a range of mortgages from which you can select the one that suits your needs”

Box 2 had the descriptive text “Having assessed your needs we recommend that you take out this mortgage.”

As independent advisers we were required to tick box 2.

I object to this, strongly. Why?

Well, in all my financial advisory life I have never ever recommended that anybody should take out any mortgage. To be accurate as to how we work, Box 2 should have had the following as descriptive text:-

“Mr & Mrs Client, we have discussed at length your ambition to buy this house that you really cannot afford but despite our best advice you are persisting in proceeding with the purchase and in which case one of the small selection of mortgage deals we have found for you, after considerable research, will probably be your least worst option. However you will need to be very aware that if interest rates double all the affordability evidence that we have indicates that you could be in real trouble”

Fair enough, you may think. That sets out pretty well what we do, and means that I could not be hung by agreeing to the flawed wording in the FSA prescriptive menu.

So I telephoned the FSA and was put through to a young lady, whose name I cannot recall. This is roughly how the conversation went.

Me. “Hallo Ms X. Firstly, how good is you philosophy?”
FSA. (Giggle). “Why?”
Me. “This menu. I can’t use it. It makes no sense”
FSA. “Yes it does, but tell me what’s the problem?”
Me. Well, it’s this box 2 I have to tick. I can’t because it’s not what we do, and have never done”
FSA. “Well tick box one then”
Me. “Can’t do that either. We’re independent advisers. Box 1 covers banks and building societies”
FSA. (Slightly nettled) “Oh alright, tell me more what the problem is then?”
Me. "Look, what we do is advise….. (I then set out the bit about the way we work and how my preferred Box 2 text would be accurate for what we do but that the prescribed box 2 text just looked to provide the FSA with hanging material).

We batted this backwards and forwards for half an hour and eventually she said:

FSA “Hmmm. I see what you mean. Look, I hadn’t seen this before and I’m not senior enough to carry this forward, I’ll get Charlie to call you”
Me. “Who’s Charlie?”
FSA. “He’s the top bloke on the menu”.
Me. “OK. I’ll look forward to his call and thanks”.

About an hour later the telephone rang. Our admin passed me the call.

Admin. “It’s the FSA for you”
Me. “It’ll be Charlie”
Admin. “It is! I’ll put you through. Have fun!” (She was in earsight of all this)
Me. “Hallo”
FSA Charlie “Mr Farrall?”
Me. “Yes”
FSA Charlie. “I’ve been talking to my colleague about this and really what you have to do is what we say otherwise you’ll have to stop doing mortgage work”
Me. “What! You have to be kidding. Everything I am doing is right and proper. It is consultative transparent and fee based. We give proper advice and we never get people into positions of unaffordable debt, and you want us to stop doing it.”
FSA Charlie. “I can only repeat that you do as we say or stop doing mortgage business,”
Me. “So if we don’t do exactly as you say you’ll shut me down?”
FSA Charlie “Well, we would necessarily go that far but you could end up subject to enforcement if you persisted in mortgage work without using our menu exactly as we have written it”
Me. “…despite the fact that it is a compete nonsense?”
FSA Charlie. “It is not nonsense”
Me. Yes it bloody well is. And you know it is!”
FSA Charlie. “Nevertheless, do as we say or stop doing mortgage work”
Me. “No. This is what I am going to do. I will use your menu. I will add in a codicil explaining that it is total bollocks and referring to this conversation and you threat to shut us down. My clients will have all this explicitly explained to them. I will also change the header wording from ‘The FSA is the independent regulator..’ to ‘The FSA is the GOVERNMENT regulator…’ and quite frankly you can swivel on it.”
FSA Charlie “I cannot accept that attitude and we would consider that you were bringing the FSA into disrepute and carry out enforcement action.”
Me. “OK. Fine. But I am telling the truth about this and you aren’t – and you know it”

There was some exchanges on the nature of freedom and the grand conceit of regulation – all conducted amicably – and we hung up. We used my version of the menu and to this day I will not describe the FSA as ‘independent’.

However within a short time the whole menu fiasco was modified and is not now compulsory. And the offending boxes were removed.

The lesson from this though is the coercive culture that exists in these out of control quangos. It’s not me that suffers, it’s you the client.

And of course the FSA has failed spectacularly. And guess what? Yes, they are getting ever more coercive.

Saturday, 4 April 2009

Bloody Hell!

Seen this have you?
So, the softening up has begun. This government has bust us and now it's getting ready to go off the IMF for a sub. Apparently this is no longer a stigma.
Well, sunshine, let me make this very clear. It is a stigma. It is evidence of abject failure. The rule of life is that you do not live above your means. Of course I am quite happy for someone to live above thier means as longs as they are ready to take the consequences and not to drag others down with them.
Brown, you have impoverished us all.