Apr 2008
Government incompetence
OK, so I am stating the obvious! I know. Gordon Brown's Government is incompetent in almost everything it does.

The Sub-Prime credit crisis, the loss of personal data, the sleaze, etc., have all been badly managed by the Labour Government. It has been said that Brown's economic successes were the delayed result of the previous Conservative Government policies, and that we are now in the process of reaping Brown's incompetent fiscal management policies of 1997.

It is true that we have never had it so good - many millions of people sitting on huge nest eggs provided by the astronomical inflation in the house prices. The downside, of course, is that their children and grandchildren struggle to get onto the ladder. This is exacerbated by the increase in Buy-to-Let that takes up many of the properties that first-time buyers look to buy. The high divorce rates also take up much of that lower end market, as couples buy two smaller properties when they split.

The first-time buyers don't help themselves though. Many have little to no savings, and many live at home so that they can continue a luxury life instead of joining with friends to buy a property together, and get their feet on the property ladder. The Buy-to-Let market has grown disproportionately because of Brown's taxing of pension schemes - buying a property substitutes the pensions many people feel they have lost.

The greed of the institutions throughout 1990 to 2005 has led to the sub-prime crash. Salespeople in the banks and financial institutions have been pushing credit onto people with little or no security, and little ability to repay. Thankfully we are not at the 15% mortgage rates we saw at the end of the 1980's, were repayments are a struggle in themselves.
The average adult now owes £33,000 through mortgages, credit cards and personal loans compared with £17,000 in 2000, the international accountancy firm PricewaterhouseCoopers claimed in November 2007 in the Daily Telegraph.

The data fiasco overseen by the Government is another disgrace. The loss of 25 million personal records by the Inland Revenue when they created an insecure data disk to send via the public postal system to the Child Support Agency has been blamed on a junior employee at IRCE. OK it can happen, but the pinball that ensued when the blame was being placed was disgraceful. One loss is bad, but a few months later, disks containing 6,000 learner driver details from Northern Ireland were lost at a data management company in the USA - supposedly under the Safe Harbour policy. A month later more Northern Irish names were lost on an MoD laptop.

This is all bad enough - but what do Brown and his cronies do - ignore it all. If they ignore it, they probably think it will all go away. If these were private companies there would be lawsuits, huge fines and prison sentences as deterrents for other companies. The Government, of course, make the rules, and therefore feel that they can break them at will. It is up to the public to demonstrate that this is not acceptable.

If I, or you were to buy the 'lost' data from the Inland Revenue, or DVLA, we would be charged with handling stolen goods, and breaching the Data Protection Act. The IRCE, however, bought data illegally harvested from a private bank in the tax haven of Liechtenstein, with a view to using it to prosecute about 100 UK tax evaders. Another case of double standards and illegal behaviour - after all, two wrongs do not make a right!

Following the lead of the Government, the banks, whose greed has led to the Sub-Prime crash, are now recipients of £50 billion in Government bonds to protect them from bad debts. My business is also at threat from bad debts, and for a lot less than the price of an average house! The bank's greed has been underwritten by a corrupt Government, and those bankers who live a blessed life in financial terms are now increasing their profits by keeping their rates constant despite the decreases in the central Bank of England lending rate. So who pays for their blunder - us of course, again!

If you get one of those credit card offers through the post, or the bank try to flog you additional insurance for a loan or such like, I would advise that you charge the bank for the rejection. Charge them the standard £10 - £25 for writing a letter rejecting their money grabbing attempts, and suggest that they operate ethical businesses so that they do not have to adopt such aggressive sales techniques. You can also cite the Sub-Prime fiasco as something of their own making cause by just these sorts of practices!
The Credit Crunch
So the banks have played their cards! We can now see exactly how greedy they have become. The Sub-Prime credit fiasco has highlighted what many of us knew a long time ago.

The banks around the world have been gambling, and as their gambles have paid off, they have increased their risk. It was only a matter of time before this blew up in their faces, and boy has it done that! The fat-cat salaries the banks have been paying have been fuelling and rewarding the risk takers.

One of the first rules of financial management (and one that your bank would tell you) is that if you spend more than you earn, you are in trouble.

A famous quote from Charles Dickens' classic work, David Copperfield. In it, Mr. Micawber notes the difference (in his view) between happiness and misery.

"Annual income twenty pounds, annual expenditure nineteen pounds nineteen and six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery."

So we are now in a credit crunch - first time buyers, who have been suffering because of the high (and increasing) house prices, are now unable to get the mortgages to get onto the housing ladder, despite house prices coming down. Existing mortgage customers will face a problem when they remortgage - what if the mortgage provider decides that despite a perfect record, that the person is no longer 'creditworthy' in the modern climate - what happens to their property? Will their house be repossessed? Will they be forced onto an unaffordable high lending rate - to further fuel the fat-cat pay deals at the top of the banking system?

It is an old story - the banks hold our money and charge us for the privilege, they gamble with our money and charge us for the privilege, and they screw up and charge us for the mess. The CEO of Northern Rock screwed up, and got a huge payout - and who pays for this? The shareholders - in the case of Northern Rock - this now means the taxpayer!

And then the Government offer to bail the banks out with our money. Very few of these banks are British only, and have been making the same mistakes overseas, but we are bailing them out. I leave you with one question - have you ever seen a poor banker?
Data & privacy ethics
You may have read over the last month about a breach of data privacy involving bank customers in the Principality of Liechtenstein. A disgruntled German employee downloaded the private information of thousands of customers enjoying the secret banking protection offered by this Alpine state.

This is bad enough - a breach of this type being allowed to happen. The really unbelievable action then occurred from the national taxation offices in many European Union countries, and the USA - the tax offices bought this illegal data with a view to prosecute the tax evaders identified in the files.

If a private company were to do this, they would be sued, their officers sent to gaol, and the companies identified as unethical law breakers. I do not condone the tax evasion, but Liechtenstein charges tax on all deposits, so account holders are paying taxes, albeit often lower than their home country, but two wrongs do not make a right, and the Inland Revenue are handling stolen data - obtained and resold criminally - so what makes it right for them to pursue the account holders?

The UK Government is not whiter-than-white in this matter, as offshore accounts in the Channel Islands and Isle of Man attract the same sort of people as deposited money in Liechtenstein (although they may have trusted Liechtenstein more due to their increased independence from other states).

Liechtenstein is not new to claims of inappropriate money management, even laundering. The late newspaper tycoon - Robert Maxwell - set up a number of trust funds in Liechtenstein, possibly with ill-gotten funds. Many of the world's despots are also claimed to have money deposited in Liechtenstein bank accounts - the banking secrecy legislation protecting them from their national, and to some extent, international recovery.

The Principality has been on a list of uncooperative countries complied by the UN for many years, and so generates little compassion amongst commentators. They claim to be reforming their banking rules, but they are a very popular destination for 'money tourists' who want to squirrel their money away from their national taxation authorities. This extends to company formation - where post-box companies are set up to take advantage of the cheaper company taxation rules, and banking regulations.

There is obviously a question of ethics on both sides of this argument. The Liechtenstein authorities have been trading on their banking secrecy since World War 2, and it could be said that the secrecy has been exploited by Governments around the world since then - for both good and bad. Liechtenstein
should come more into line with the international community - but British bank accounts, for example, can only be accessed with bonefide warrants, something that I believe is also the case in both Liechtenstein and Switzerland.

My real ethical bug-bear on this matter is that the UK Government supports the Inland Revenue in it's illegal purchase, use and pursuit of 'tax evaders' bought on the lists removed from the LGT Bank. The Government are currently operating as though they are Teflon coated - they are mud slinging, and think that nothing will stick on them. Brown's cronies have lost young driver data from Northern Ireland overseas (in contravention of the Safe Harbour agreement). The Inland Revenue lost data that was sent insecurely on a CD-ROM to another Government department via the public postal system.

Two wrongs definitely do not make a right - and I am sure that any court actions taken against the names liberated from LGT will use this as a powerful defence. Unfortunately, as their names are now known to the Inland Revenue, they will be pursued to uncover other 'proof' of tax evasion so that the Inland Revenue will not have to rely on the data disk. This is all underhand, and demonstrates the double standards throughout public life.