Lots of rich hot air

Of course, while I was away, the government and it's well-healed friends were getting their knickers in knots over who was better at avoiding tax. The Budget - which appears to have had more booby traps in it than an Afghan highway - wants to limit the amount the rich can write off against tax. The whole thing has blown up in the face of the Big Society government with donors cancelling future giving hand over fist because they won't be able to write it off against tax.

Now, I'm a basic rate tax payer and I give to charity. When I do so, I sign a gift aid declaration so that the charity gets a little extra as a result of the tax I've paid on the donation (averaged out at 25%) being given to the charity. How come some people are able to write their donations off against the tax they pay? Apparently, according to David Cameron no less, some very rich people only pay 10% income on their earnings. How does that happen? Well, one reason of course is that our tax system is labyrinthine, a chartered accountants wet dream. Another appears to be that some people put their income into charities that, in the words of a Downing Street spokesman, don't seem to offer much by way of public benefit.

Clearly, some people are taking the mick and need to be stopped. But the slapdash way that it was announced in the budget has spooked the very charities that the big society is meant to be supporting. Of course, the charity that I'm involved with doesn't face this problem directly because we don't have anyone making huge personal donations.

The thing is that if the government is really serious about tax avoidance, it would go after the deals that are fairly commonly enjoyed by senior bankers (and other 'captains of industry'), where their tax bill is picked up by their employers in the interests of equalisation between tax regimes. Pull the other one!

The latest to have a fuss made about it is Bob Diamond of Barclays (you can read about it here). The bank is picking up his tax liability of £5.7m (for last year), so he doesn't have to (memo to the church...can you please employ me via my Lichtenstein shell company and pay my tax bill in the interests of equalisation?). He'll be doing it again in the current tax year and the one after that. No one's worth what he's costing us.

If the government nails this kind of shenanigans, then we'll know it's serious about tax avoidance. Until then it's just so much hot air

Taxes and loving our neighbours

Another day, another crackdown...

Every government has tried to cut benefit fraud. So it's not surprising that the current collection of millionaires want to stamp it out. It's estimated that around £2bn is fraudulently claimed or paid due to administrative cock-ups. It's quite right that this money should be better used. I'm not sure the credit-rating agencies being employed as bounty hunters is the answer, however.

I look forward to the same amount of government zeal being put into chasing the estimated £30bn that is not being paid by UK tax payers because they've found interesting ways of  defrauding the Inland Revenue. When in opposition, the Lib Dems were always going on about targeting tax evaders. But now the Lib Dems have disappeared without trace and with them, any sensible policies they used to promote.

So David Cameron says in today's Manchester Evening News says: "We need to do more to stop fraud – £1.5bn of hard earned taxpayers' money is being stolen from the taxpayer. This is simply not acceptable. Nor is it right that only £20m of benefit fraud-related debts are recovered each year. Or that three in four of those caught don't get prosecuted." adding: "It's quite wrong that there are people in our society who will behave like this. But we will not shrug our shoulders and let them get away with it any longer. We will take the necessary measures to stop fraud happening in the first place; root out and take tough action against those found committing fraud; and make sure the stolen money is paid back."

I'll be cheering when he says the same about tax evaders, also robbing ordinary hard-working tax-payers. until then, I'll just assume this is yet another tough talking gimmick.

I think the only bit of tax advice in the Bible is in Romans 13 where Paul says that we should pay our taxes as a way of expressing our love for our neighbour (v6-7 in the context of what it means to be living sacrifices, 12:1-13:14).

We pay taxes to ensure that those who are suffering in straitened economic times are not thrown to the wolves. I am pleased that my taxes go to support those who are unemployed, need help with their housing costs, are struggling to make ends meet because of ill health or difficult family circumstances. It's love of neighbour in action.

Bail out Iceland

There's a great piece in today's Guardian G2 on Iceland. It contains one of the most priceless understatements to have emerged from the current financial meltdown.

The lovely Prime Minister, Geir Haardie, asked what he'd learned the whole frightening experience of the past two weeks, answered: 'it is not wise for a small country to take a lead in international banking.' You can say that again!

I, for one, think the IMF should bail Iceland out, however, because it has given some of the most wonderfully sublime music of the past decade. Bjork and Sigur Ros have been consistently creative, mystical and, admittedly, not a little bonkers.

Maybe we could all buy a share in them and it would recapitalise iceland's banking sector. In return, each of them could play a gig in our streets. Now that would be a result.

I always wanted to own a bank

I always fancied owning a bank. Now, it seems, I own four - obviously not on my own, I share the ownership with whole population of the UK.

'We're living in extraordinary, turbulent times.' So says the Chancellor on the morning he's taking big stakes in three high street banks - RBS, HBOS and Lloyds (these last two are still about to merge to form a super retail bank).

So, the 1983 Labour manifesto pledge to bring the banks into public ownership has been fulfilled by a Labour Government whose economic policies owe more to Margaret Thatcher than Karl Marx.

I think such ironies can be enjoyed - even in the midst of the worst financial crisis since the last one. Indeed Alastair Darling keeps using the words 'exceptional and extraordinary' to describe these events. He's not wrong there.

'The world has had a shock,' he says. Too true. I was glad that in the midst of this shock, the chairman of the World Bank reminded the G7 leaders of their commitments to the poorest of the world, calling them to ensure they redouble their efforts to see the millennium goals achieved by 2015.

Let's hope the world - and the Chancellor - is listening.

Keeping the rich to their promises

Well, as some of us feared, the credit crunch is beginning to affect how the rich world is acting towards the poor world. At meetings this week at the UN, France and Canada are wobbling on commitments they've made to helping fund the millennium development goals because of economic wobbles.

You can read about it here, sign the petition and sign up to receive alerts from this intriguing sounding organisation called Avaatz, a campaign and advocacy web portal seeking to empower ordinary people to act together to have their voices heard. It looks good.

It was deeply disheartening to hear Breakfast TV's 'typical' British family responding to Gordon Brown's conference speech by saying that they didn't care what happened in other countries, they just want help to cut their fuel and food bills. They didn't speak for me. I hope they don't speak for many. But it serves as a warning that a little economic gloom can make us inward-looking and more selfish than we normally are.

It's true that I spend more at Sainsbury's now than I did last year. But I've got a full fridge and an over-full stomach. The huge hikes in the cost of basics like rice and wheat, combined with the severe weather affecting many parts of the poor world, means that more people are dying for lack of food.

Now doesn't seem a good time to be turning our backs on those in need.

Bringing a historical persepctive

Thanks to Iain for his comment on the last post - always good to see sensible baptist ministers at work!

There was an excellent documentary on Radio 4 this morning looking at the context of the current economic woes. It was by Jeff Randall, someone I don't always agree with. But I thought his analysis was spot on, especially in terms of the effects of the big bang (October 1986) on the way money markets work. You'll be able to listen to it again for a week at the BBC website.

What was great was hearing the latest member of Hoare family suggesting that markets crash from time-to-time and we all get on with life. His family bank has weathered many storms since it was founded in the 1690s. You could almost hear his eyebrows rising as he spoke.

Also good to hear Brian Winterflood's perspective. He's been a city dealer for more than 50 years. I used to talk to him occasionally when he was a stock jobber. He lived through the market meltdown of the early 1970s and said it was worse than this one - people lost trust in the banking system altogether and were taking home bags full of Kruger rands to bury in their gardens!

A bit of perspective never hurt anyone - perhaps someone could tell the Today presenters.

Market meltdown and the millennium development goals

Have others seen the irony in Barclays acquiring Lehman Brothers US operations for $1bn today but walking away from the opportunity to rescue the group on Saturday despite the chairman of Barclays trumpeting today that it was a great deal at any price?

I was a financial journalist in the early 1980s when Mrs Thatcher was presiding over a financial meltdown that caused similar headlines to the ones we're seeing now. Unemployment hit three million plus, interest rates were in double digits as was inflation. Manufacturers were queuing up to go to the wall. Whole towns were left wasted and broken. In those days, furrowed brows combed the public sector borrowing requirement numbers for evidence of who knows what... There was much chin rubbing and mutterings of 'the markets will correct'.

Now as we face a yet another serious correction in the financial markets and jitters like we've not known for a good while, we are nightly treated to ever younger reporters overdosing on hyperbole as they seek to tell us that things are even worse than they were yesterday. I find myself sounding like the classic grumpy old man, shouting at the TV screen 'how many recessions have you seen, sunny boy?' Of course, when I was pontificating on the state of the economy, I was a mature 25 year old! 'Twas ever thus...

I wonder how much of this might have been avoided by cooler, wiser heads suggesting no one panic, no one buy or sell anything, no one create yet another fictitious financial instrument to make it look as if our asset-base is bigger than it actually is and we are all richer than we really are. I remember an FT ad in the 80s that asked where the money goes in our crazy 24 hour, global securities trading system, asked 'does it even exist?' I wonder...

Soon, it seems, we'll all be banking at the single global financial services conglomerate left after the current meltdown. Funny how unfettered markets and rapacious competition reduces the number of players and the choice left to hapless and baffled consumers.

Nothing like a good rant.... It makes me feel better about my bank being taken over by the bank I left because I wasn't happy with its service. But it also leaves me with a broader question.

When the dust settles, what will have happened to the Millennium Development Goals? How much of the money that was earmarked for achieving those - you know the ones, free primary education for all children by 2015, rising levels of healthcare, access to clean water, action on HIV, TB and malaria - has been diverted into propping up the financial institutions that fuel the global economy that has kept the developing world on its knees for too long?

Bruce Cockburn got it right back in the 1980s when the seeds for this mess were being sown in the privatising policies of the Thatcher/Reagan governments and the IMF started intoning its free-market mantra. He sang: 'spend a buck to make a buck, you don't give a flying f... about the people in poverty.' Now that's high quality economic analysis and commentary from a seasoned hand!

hyperbole and market mayhem

It looks like the bank I used to bank with is taking over the bank I moved to to get a better service - the lengths some organisations will go to to keep customers!

LloydsTSB is taking over HBOS - or are they merging, consolidating to weather the chill winds of the worst downturn since hyperbole began?

I wonder if, when the dust settles after all the shenanigans going on in world financial markets, we'll still believe in the myth of unfettered free markets; or will we be able to admit that without governments the economy doesn't work and that the mixed economy of John Maynard Keynes is actually the way things are and that Milton Friedman's pipe dreams lead only to catastrophe - especially for the poor.

It is a curious irony that those who have telling government to leave well alone for the past twenty-five years are now blaming the government for everything that's gone wrong and insisting the government sorts out the mess. Northern Rock shareholders objecting that they weren't getting a fair return on their investment when the bank was nationalised seemed oblivious to the fact that market forces - in the form of their bank going to the wall - would have left them at the back of the queue of creditors and almost certainly with nothing. That's capitalism for you...

Ah well... Providing I can get my money from a hole in the wall, I'm happy (and frankly am not too fussed which combination of barrow boys actually manages it.)

The excitement of Budget Day

In my previous life as a financial journalist, Budget Day was a highlight of the year. A long day listening to the chancellor, talking to contacts in the City and adland, finding an angle, writing endless words of analysis, finally going to press around midnight and then seeing your words the following morning, part of the ocean of ink spilled in an effort to interpret what the Chancellor had done.

I still get a frisson of excitement on Budget Day. So I watched Alistair Darling yesterday while I had lunch. It was the dullest speech in living memory - I gather former Chancellor Geofrey How fell asleep in the peers gallery!

And yet it seems to me to be as good a budget as we had any right to hope for. It's good for poor people - despite Nick Clegg's rather snide remarks - in terms of child benefit, tax credits and fuel payments. I would have liked him to be bolder on dealing with the utility companies but I hope he'll return to the fray if in the coming year if they do nothing to end the inequity of the poor paying a higher price per unit for gas and electricity than the rich - that's a scandal.

I think the alcohol tax rises were well balanced and the green initiatives on car pricing and tax rates, though small steps, are steps in the right direction. I'd have quadrupled the VED on Chelsea tractors (while offering a waiver to farmers and those who need four-wheel drives - though the trouble with that is that it removes the incentive to the industry to improve the technology in these vehicles and opens a loophole that some clever accountant will exploit).

I was also pleased that he left gift aid untouched - £300m left in charities and voluntary sector organisations (and, of course, churches). That was a bold statement of commitment to this vital sector of our society.

So all in all, I thought the Chancellor done good - given the bad hand dealt to him by the world economy and some of his predecessor's decisions. We'll see how it plays out in the coming months.