How To Avoid Tax - Get Rich

At last a credible figure in the world of celebrity has come out and identified the need for greater transparency in the tax system (should have mentioned public servants' expense accounts but maybe that's for next week). None other than Dragon Den's star, Duncan Bannatyne, in his column in Today's Telegraph identifies that super rich people are the ones who most easily avoid paying tax in this country - sometimes none at all.

Lord Levy and Lord Sainsbury famously paid naff all tax at least one year and then became Government Ministers. Now we have the raft of bankers, and board directors of conglomerates who either award themselves large tax free entitlements like pensions or some other form of cleverness. At least two people knighted by this Government use the 'non-dom' status to avoid paying huge sums in tax - Easyjet's Stelios and Arkadia's Philip Green are the culprits. Green sets a bit of a record having one single bank loan converted into a £1.2 billion dividend which was paid to his wife, who happens to qualify as 'non-dom'. Neither paid a penny of tax on it, and he is so proud of himself.

It's frankly disgusting. Why on earth we allow it is beyond the wit of sane individuals but, as always, the richer you are the less tax you will pay because you can afford to find ways not to pay your fair share. It has to be stopped - the burden of tax is getting heavier and much of it is thanks to the greed and senseless actions of the richest people in the world who caused this financial meltdown.

Yet they seem to treat Britain as a slot machine with a fault - it always pays out for every go, tax free.

Bannatyne makes a very important point from a business perspective also. Such super rich, tax free people have a competitive advantage over those who cannot claim 'non-dom' status and who pay their fair share of taxes as these people have more of their profits taken by the Government which cannot be re-invested in their businesses. The super rich use this competitive advantage to leverage even greater amounts of money from banks and funds to acquire more businesses and make even more money - and at each turn they cover their tracks carefully.

This Government has granted special tax status to such people and we must stop it. In particular, private equity people are doing more harm than good and the argument they are saving businesses and jobs does not stack up. Every business attempts to do the same thing and has to pay taxes. They have special status for doing so and making vast profits - and in many of the cases their gains are short term as the companies they buy and sell are left to whither.

Yesterday was a chance missed yet again by Brown and Darling. When will we make sure that everyone who makes profits in doing business in this country in whatever form pays the same level of tax as everyone else?

Power Napping

John Redwood was accused of 'nodding' off during Shadow Chancellor, George Osbourne's recent speech on the economy in the Commons. Yvette Cooper, leading the Government in the absence of Alistair Darling who was getting another pep talk from his Boss, made the scurrilous accusation to draw attention away from the fact she was useless at her job and fast asleep at the wheel of the speeding car that was the UK economy.

Rather like Labour Lord Ahmed, who killed a man while texting and driving his car in the outside lane of a motorway, Cooper and her crew of idiots have not just wrecked the economy but botched the attempts at solutions, only to get off scot free.

Cooper has been at the heart of the debacle of bail outs and negligence.

Contrition

It seems that Labour have this issue with being accountable. They put in lots of daft targets - one for the Foreign Office was apparently 'To make the world a safer place'. You may think that was not measurable but after the 9/11 tragedy in the US, 7/7 in the UK, Bali, Madrid, Russia etc and now wars in Afghanistan and Iraq, tensions in Iran and North Korea, I would say that there has been massive failure. Don't even start on the NHS or Education.

Gordon Brown came the closest he has ever done to accepting blame for the financial mess we are in recently when he said he should have been stronger in pressing other countries after the Asian Crisis in 1997. Right, that explains what you did not do in 1997, so talk us through the 12 years since - what else did you not do that would have avoided this financial havoc we are in?

Unregulated markets, greed culture, over dependence on bank profits, poor taxation policy on corporates, stealth taxation, lack of planning for the future in terms of squirreling profits in good times and pension provision for retirement (except of course for public servants who are laughing), openly rewarding private equity and financiers with tax breaks, not dealing with the non-domicile problems, allowing Non Executive Directors to make money with zero responsibility and governance, allowing the housing market to spiral out of control and the financial products associated with it to become ever more unsound, making people think they could create money from their assets to subsidise their living when wages were dropping, not reading the warning signs in the economy as long as 6 years ago when the IMF made it clear Britain was heading for trouble, borrowing too much and creating a 'credit culture', allowing an unprecedented growth in unsecured loans, letting the benefit system get out of control.......

You could go on and on but the basic premise is that this Government came in on a wave of good economic conditions. Whether you liked the Conservatives or not, many of the toughest decisions on the economy had already been made and the books were in far better order than the horrible mess Labour created last time around - for all her dictatorial, hard-headedness, Margaret Thatcher had given Britain a second chance. Change was definitely needed and Labour took over and just kept the economy in simple shape by watching certain dials and setting limits. It all seemed so easy.

The Shape of Things That Did Come

But a feature of this Government was how they avoided detail - they thought governing was easy and as long as the numbers looked big, it was all fine. The defining moment came quite early for me and set the scene for 'laissez faire' Government. The late Robin Cook, as Foreign Secretary, was awoken one night to find that Britain was involved in a fracas in Sierra Leone. He was baffled - he had no idea that there was trouble there and least of all that British troops were deployed. His Civil Servant lackys pointed out that if he had read his Dispatch Boxes, he would have been fully aware of the situation. Cook had famously swept into his office saying that he did not read the Dispatch Boxes and governed on a 'need to know' basis only. Presumably, he got his updates from newspapers and hearsay in the corridors of power.

Mandelson, Blair, Vaz, Lord Levy, Lord Sainsbury, Robinson and many others have flirted with the heady mix of power and sleaze/cronyism. Blair relied on a body of external advisers to effectively run the country so much so that at one point Alistair Campbell effectively ran the Government. Meanwhile Blair could get his head into the trough and sort out things for non-domiciles like Mittal and then invest in properties for his son via his Trust that wasn't so blind, using the services of a convicted conman in the process. The peerages for loan scandals slipped off his greasy back after certain email servers seemed 'inaccessible' to investigating police who in the end were vilified for wasting public time when in fact people should have been brought to book. Mandelson we know is an unreformed character - with constant 'diplomatic shuttles' to Brazil which must be the most promising of links to Britain judging by the number of times he has been there, murky meetings on yachts with Russian Oligarchs and now even a blind trust for a career politician whose wages surely should not justify it, yet he has nice properties and a lavish lifestyle. He only recently got his handy 3 year unwarranted pay off from the EU for services rendered and backs scratched so it is curious as to how he enough money to afford one as setting them ain't cheap.

Again, you could go on.

Sleeping At The Wheel

My point is, John Redwood nodding off in the Commons during yet another speech haranguing the Government's abysmal record is nothing compared to the sleeping at the wheel by people like Yvette Cooper.

Because of this Government's failure to govern properly, every taxpaying citizen is in hock to the tune of £40,000 over and above what our normal tax liabilities are on an annual basis. It doesn't sound very much when you say it like that, but like any debt, we will have to pay it off over time and we end up paying a multiple of the principal - and that's if we have the wherewithal the afford it.

Contrition and accountability are lost words in this Government's vocabulary but I would forgive them that if they could just do their jobs properly and stop trying to deflect blame onto some mythical global blob of energy that has supposedly created the financial meltdown. People are not stupid - all the warning signs were there. We now get bleats on avoiding protectionism so that we can once more feed on that global energy and revamp our nation.

Yvette Cooper is the 'Janet & John' of politicians with her simple words so that idiots can understand that numbers are big and we are too stupid to comprehend them so leave it to her to sort out.

No thanks, Yvette. You lot slept for 12 years and have the gall to complain someone dozed for a few seconds. How very Blairist of you.

When One Job Is Not Enough

For a growing portion of the UK population, already over 2 million, and in countries like Spain where the proportion of population who may lose their job is expected to rise to 20%, one job is all they want and need.

Many would argue that having more than one job means that you cannot put enough time and effort into any one of the jobs in order to make a difference. If nothing else, it will mean changing focus and juggling time - which are never easy things to do. I would personally look at the raft of people who are serving multiple Boards as Non-Executive Directors (NXDs) and then hold down real jobs as being prime examples. I strongly believe we are in the mess we are today over things like pathetic watchdogs who just do the Government's bidding and have no bite of their own and the mess over Fred Goodwin's pension which still rumbles on having been negotiated by puppy dog NXDs. Again, from my own experience, I have yet to work with an NXD at a company who has made a single bit of sustainable difference to the company in terms of contributing effort and nearly all were reasonably well known.

So today we have Lord Levy talking about why Tony Blair should step down as Middle East Envoy as he has not the time to focus, the tools to do the job and, I think he hints at, the heart to focus on it. In my opinion, it is not a job you can play at as it affects the lives of thousands of disgruntled people and to give it a small percentage of your time a) shows you have no idea of the enormity of the situation and b) degrades the importance of humans.

But Tony has his snout deep in the trough of making money from his time as Prime Minister and he is not about to listen to people who let him down - friend or no friend.

Multiple Jobs And One Focus

I have blogged on this before. Many people who get to a certain level in industry join the gravy train that is multiple NXD and watchdog or quango jobs. After years proving that if they focus on one thing and be ultra successful, they suddenly believe that they can handle multiple roles and still be successful. Of course, in the world of NXDs there is no requirement to be successful as you are not measured on the success of the company. In the aftermath of the banking fiasco, hardly a single NXD has been blamed for the failed business model that led to a £1.3 trillion total bail out.

Tony Blair has many jobs. He is an NXD or Special Adviser to JP Morgan at £2.5m a year, the same at Zurich Financial £2m per year, he has a faith foundation, has £4.5m in advances for his memoirs which he is busy making up, and he is earning nicely on the after dinner speech circuit - at the height of the crisis in Gaza he was giving 90 minutes of his wisdom to drunken telecom executives in Barcelona for £240,000.

Lord Levy is right, for all his dodgy tax past and loans for peerages scandals, Blair is too busy making money to care one jot and do anything for the crisis in the Middle East and he is also one of the last equipped people in the world to advise having been party to starting a war in the region for wholly illegal reasons.

Besides, Tony, wake up and smell the coffee, for the effort you have to put in, there is no financial reward at the end of it - that just would not do while you are on the high speed gravy train to riches you think you deserve.

Pensions And Pensions

The full horror story of Fred Goodwin's pension saga is beginning to unravel. Under the Defined Benefits Scheme at RBS, Sir Fred would have been entitled for his length of service, age and the fact he was taking early retirement, to a great deal less than £703,000 per year he is getting. However, between he and his nice NXDs, Sir Tom McKillip and Bob Scott who were charged by the Government to negotiate Fred's settlement, they managed to bump up his fund to the equivalent of not just full service but add in all his bonuses as earnings too plus the ability to claim it for life from the age of just 50. Anyone else at RBS or other Defined Benefits schemes will know that the basis of pension benefit calculations is basic salary only. Goodwin even had the bare-faced gall to tell the Treasury Committee he was on the same sceheme as everyone else at RBS. I would love to see just one bank teller taking 'early retirement' get a deal on their pension calculated the same way.

Having lost billions of pounds and exposed the taxpayer to billions in liabilities for toxic debts of magnitudes far beyond our imagination, Fred Goodwin has been allowed to walk away with a great deal more than he was legally entitled thanks to the ineptitude of Government Ministers whose responsibility it was to get this right and make sure failure was not rewarded - now the same people are scrambling to be seen trying to correct this after the event.

At the same time we see the effects of Quantitative Easing (QE), the process of printing more money to inject £150bn into the economy to trigger us to spend more. The process has the initial effect of devaluing money already in circulation, although many would argue this is not a great effect. But, it has far greater effect on the long term worth of your money. This QE has a big effect on the debt market.

Pension funds depend greatly on the interest rates on Government debt and the deficits on pension funds widen as interest rates lower. Rates dropped at a great rate this week on the introduction of QE and this means there are greater deficits in pension funds - to the tune of £100bn in one week. The deficit in company final pension schemes is now estimated at £390bn - or more than £150,000 for every final salary scheme.

So it sharpens the thought process when looking at Government incompetence which allowed Goodwin to walk away with almost double his pension entitlement on a final salary scheme and then see them create an even wider pension deficit by introducing QE which increased the deficits of all final pension scheme funds. It means the cost of servicing Fred's pension just went up for the taxpayer who pays his pension.

Nice one, Gordon and the rest of the inept team.

'Slugger Cable'

I still have to look hard to find out what Nick Clegg does or if he exists as the only person at the Lib Dem Party who is regularly visible and commenting is Vince Cable - I still think he is the actual leader. No matter, this week he made an interesting analogy in a speech to his Party, likening this Government to the Bad Bank concept to deal with toxic debts. The moral mandate to govern has been lost, he claims, and the Government seems bankrupt of any ideas to get us out of the fiasco we are in and so their moral stock has become toxic and Labour is the Bad Bank of failed policy.

Very nice - I wish I had thought of that one.