Spelling It Out

I have been asked by one of my blog readers, what do I mean when I say 'There is a shortage of houses to be sold at £10m+. Go figure.'

It's a good point. What I mean is that the top earning and most wealthy individuals of this country and those who work here but are classed as non-domiciled for tax reasons have been the least affected by the financial crisis over the last period - in fact, they have mostly benefited from it. There is a good reason for that and why Britain is still in recession despite the fact that super-wealthy people cannot find enough £10m+ homes to use their money on. It's because our bank bailouts ensured that the way these people earn their money was not just preserved but actually the whole system has been 'reset' at taxpayer cost so that they can earn far, far more from the kinds of products that mean nothing to us and society in general.

Our Government, very different to Governments of France, Germany and Japan, poured almost all of their 'stimulus' money into saving the banking system. Germany, for instance, put €10bn into directly subsidising wages so that workers were not laid off and into major education rejuvenation projects and technology plus stimulating directly, and substantially, the car industry. In contrast, we have really provided little stimulus and what we have provided mostly went down the throats of banks in the form of Quantitative Easing who used it for their high risk casino banking.

That is the reason why we have remained in recession and why the only way out to service our long term debt will be to make the low earners disproportionately less well off as tax increases will be aimed at those first.

It's hard to spell it out any clearer - but there is a tiny percentage of very wealthy people who helped cause the crash who are far better off because of our Government's policies on economic rescue. Sarkozy and Merkel told Brown he was wrong in trying to bail banks out too readily, they have been proved right.

This year over 100 banks have failed in the US and not a single saver has lost their money - nearly every one of those banks were small regional players that did not participate in the activities of the greedy banks - yet they took the brunt of the economic catastrophe. Meanwhile the newly revitalised investment banks like Goldman Sachs and JP Morgan Chase are talking in terms of record profits and bonuses.

The solution to our problems are actually making the problems worse.

Economic Barometers

Talking to business colleague of mine recently he told me a family member of his works in an upmarket estate agents. Business seems to be pretty good in that stratosphere, but they have one real worry - there simply aren't enough houses in the £10m+ bracket coming on the market to satisfy the demand.

In a sentence that about sums up this recession and financial crisis. The brunt of the hardship in this tough time has been endured at the low end of our earners. Over a million people in the 2.5m unemployment figure are classified as young and already we are talking of a 'Lost Generation'. One firm, who have fared well in this recession, has spent £200,000 on a graduate entrant scheme where in all their history they have drawn from the local labour pool of 18 to 25 year olds to man their sales desk engine. Now they start graduates there instead - it's a great investment in the future but a sad indictment of the times we are in and no incentive for young people to get a good education as it does them little favours.

What it seems is that those people who are rich may have had their net worth dented but their income stream only paused minimally - they are still exceptionally rich and earning a very strong monthly and annual incomes. At the lower and middle ends of the scale is where all the negativity has bitten hard. The stark reality is that while kids may have a lost out, there will be a new tranche of 45+ year olds who were made redundant who may never find equivalent work and earnings again - to add to those woes, they will not have sufficient pension resources to survive either. The future for those 'baby boomer' offspring is bleak.

While Prince Andrew puts out a plaintive call to protect the 112,000 people who are non-domiciles, who pay no tax in Britain he may as well have added those corporations who hide part or a majority of their wealth offshore. When Lehmans bank collapsed it left thousands of subsidiaries many housed in offshore territories known as tax havens - there can be only one reason why banks love doing this.

Small businesses, who constitute 97% of the companies in Britain, who employ over 13m people and who pay a disproportionate amount of the tax revenue in this country will be where the Government goes to get more - where VAT decreases have had least benefit and where bank lending has decreased by £14.7bn during this crisis. It will be the base level tax that will be increased most, rumoured to be a further 7% shortly while those who have demands of 50% will find ways around the system by using tax avoiding accountants and lawyers.

It all stems from the first port of call in the financial failure - to save the necks of rich bankers with no strings attached. Now we are looking spiteful in attacking bonuses but that will not stop banks making vast profits on high risk activities associated with products that benefit no one but banks themselves.

Politics takes a different view. No one wants to home in on the problem and admit responsibility, so conveniently parties like the BNP blame all those people who do not have Celtic ancestry or have skin of a different colour. If only people like Griffin knew that the Gallic races are not of these islands either but that is the domain of unintelligent brutes, they shape history as they like to suit their needs - that's why in their eyes Jews either deserved what they got or it never happened. It is when the country and crisis hits us and we see our lot diminished we look to the daft answers.

The answer is that there is a shortage of homes to be sold in the £10m+ bracket. Go figure.

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?