Cleaning Up Politics

Cleaning up politics is alleged to be one of Gordon Brown's pledges of the new year - it was a pity he missed the opportunity to fast track legislation in the Queen's Speech to augment this but his latest pledges are seen as the last throw of the dice for his party in the run up to the election.

How bad did politics get?

Well let's not go over old ground but the revelations this year made us all extremely angry at a time when British families were suffering most as a consequence of the credit crunch and recession. It is now alleged that some 6 politicians are under police investigation for suspected fraud, mainly to do with claims on second home allowances for phantom mortgages. To be honest, there should be many more - Tony McNulty and Hazel Blears spring to mind but we get the age-old claim that they did everything within the spirits of the rules at the time, a convenient excuse to hide a flagrant disregard for common decency.

But there is much more at risk than just expense claims. What the whole drama illustrated was the priority of the individuals in politics to look after themselves ahead of acting with true conscience. It makes you wonder what people really thought about major issues like Iraq and Afghanistan but kept quiet as it would upset the gravy train. Surely more individuals other than Clare Short and Robin Cook questioned Tony Blair's decisions, particularly on Iraq? How many were reminded of their 'obligations' to support the party rather than vote with decency in mind?

There are more decisions which could be scrutinised but for many people, trust flew out of the window. How can you back people like Julie McBride when she fails to see that what she did was immoral and should be illegal? We clamp down on benefit fraudsters and tax evaders but these abusers of the taxpayer have played a game with us all forgetting all sense of moral values. Yet it seems that politicians will get away with it; they will sit at the next election and they will likely get voted back in. For those 'Zombie MPs' who have already said they will step down, they hang on for the last milking of the system, the pay off for losing the election - the parliamentary equivalent of the Premier League relegation pay off.

Why do we let disgraced MPs have that opportunity to finally screw us when the very reason they are going is because we have found out that's what they did?

It is at this point that leadership is called into scrutiny. Why have Brown, Cameron and Clegg not acted and simply sacked those individuals who have transgressed and admitted it? Why are they allowed one final shafting of the public when they have been royally doing so for some time?

My point is that if the party leaders cannot see the problem properly, how can we trust anything they do? This is a pretty fundamental issue about trust and they seem to care little about their own sinners, allowing them a final hurrah rather than acting to clean the whole system up and getting rid of the rotten eggs now. Then again, trust is something politicians abuse time and again - they are happy to tell us whopping great lies and justify them later when they manipulate the facts of the time.

It is little wonder that we have them all debating the Green Book, whether they should pay back what was claimed and whether they are bunch of thieving swines. It is in their blood - by definition if you want to be a politician then you are probably not morally strong enough to be one.

It will take far more than talking a pledge to clean up the system - it will take a fundamental overhaul of the political system at all levels of Government. I will bet my tax increases over the next 10 years that it will never happen.

Let's All Do The 'Flip'?

It is great to see free advice for anyone who has a second home in Britain being given on the BBC website - this time by an accountant named Sharon Bedford.

She points out that the 'Time to sell' rule allows the perfect foil for flipping which has been the domain of MPs like Hazel Blears and Geoff Hoon. Hazel Blears famously announced whilst in leathers outside her main residence, or was it her second home, or third - well one of her homes - that she had behaved within the rules of the House Commons and the 'Rules of the Inland Revenue'. Within a week she was seen grinning like and over eager actress in a Daz advert holding up a stainless garment that was a cheque for the Capital Gains Tax (CGT) on the sale of her second home - which he had told the taxman was her main residence.

Now, if Sharon Bedford's advice in her article is right, then our little Hazel had a clear conscience and need not have paid back the tax. But if she is wrong, then the little devil was quick to bury the evidence - sadly she did it on TV and in front of millions. It was like a jewel thief replacing their stolen goods with their mask off on 'Richard and Judy'.

'Flip Again, Like You Did Last Week'

So goes the new song in the corridors of Westminster. According to Tax 'Mitigation' Expert, Ms. Bedford, if you have a second home anywhere, all that you have to do is to send a letter to the taxman, say, the week before you want to sell your dry rot ridden chalet in Southampton and declare it as your main residence, sell it the next week and so pocket the gain in value tax free, then a week later write to tell the taxman to change it back to the place where you actually live with your family.

It is that simple and the taxman is that stupid. You see, under a rule called 'Time to Sell', the moment you change your status of your second home to the main residence, the taxman assumes you have lived there for the past 3 years which is counted as time to sell. Even if you have been renting the place out. According to Ms. Bedford.

In the case of Ms. Blears, when she bought one of her residences in London, she has a two year period to declare whether that place will be her main residence. By deciding for the taxman that their main home is still their residence, i.e. the one in Salford where she can be seen grinning in her leathers like a 'Hell's Granny', she can sell the new bijou flat in London any time in the next 2 years and pocket the profit as long as the day before the sale she writes to the taxman and tells him it has suddenly become her second home - the 3 year count back applies to save any CGT.

Meanwhile, under parliamentary rules, little Hazel sniggers profusely and does precisely the opposite. The moment she buys the flat she can either declare it her second home and claim full second home allowance in whatever way she can and then 'flip' whenever she wishes to pay for things in Salford.

Jaqui Smith famously declared a bedroom in her sister's house as a main residence in London so that she could claim for everything, including her husband's porn, in the real main home but in Parliament's eyes her second home. Tony McNulty, who is now paying back £3,000, was even more cynical. He declared his parent's house in Greater London as his main residence and his flat in London as his second home. Incredibly, he thought that was legal and within the rules - how wrong he was.

In The Real World

In reality, second homes under real Tax Law is more complex. In reality you have to 'prove' that you have lived at an address which is designated at any time, your main home. So, if, as Sharon Bedford suggests, that you flip your residences at the last second and the 3 year count back assumes you have lived there but you only bought the flat two years earlier but have rented it out - there are two conflicting things going on. This is the only case I can think of when a person can 'legitimately' get away with this.

But there are issues for the rest of us. Firstly, you need to declare to the taxman any earnings from rent over and above the mortgage value in any second home. Secondly, for mortgage purposes, the property is assumed as 'buy to let' which signals to the taxman your intent. Thirdly, by flipping a buy to let property, I do not think the count back rule applies but it is worth checking. What it does mean, is that you have to have extensive knowledge of the system in order to avoid it - which is where people like Sharon Bedford come in.

For Hazel Blears, Geoff Hoon and all the gang who 'flipped' to make money, you have to have a clear view of the two sets of rules in play in order to profit. There is no accidental way you can make money. So when dear Hazel paid back the cheque, she publicly declared she had defrauded the taxman. The others hide behind the shroud of mystery that is the system they exploited for gain.

I still believe, despite what Sharon Bedford suggests, that the taxman is not stupid. One thing I do know, is that the taxman does like to made to look stupid in the real world. It is a travesty that all MP expenses have not been scrutinised but I suppose it's a question of where do you start.

Flipping is where I would start. In all cases, it is a deliberate and well advised method of avoiding paying large sums of tax. It is a flagrant misuse of public money for personal profit. It is a crime even if that is a moral crime. Saying it is either the system or the rules are to blame is no excuse, that just shows moral bankruptcy and such a person has no place in positions of power or trust.

Gordon Brown says Hazel Blears has done a good job. I think she is rotten to the core and I suggest she will get voted out at the next election. If Brown had half an ounce of intelligence, he would be reading the growing anger in the public as a clear indication that if he leaves people like Blears, Hoon, McNulty, and Smith in place at the next election, those will be seats he will lose.

Denial can be a powerful tool in politics - it can also be your downfall.

Is It A 'Flipping' Fraud?

One of the most frustrating aspects of the whole MP Expenses Scandal is knowing that no one will be brought to book for obvious abuses of taxpayers' money. Under the rules of the now infamous Green Book, the bible of rules which frankly are pretty explicit in their wordings yet still allow latitude for those with less morals less than the normally morally inept MPs, does not stipulate punishments for abuse.

It is such an alien concept for us - no company would allow such abuses of the system and, more importantly, the HMRC would not either. You would be in very hot water if you chose to take the HMRC on, as you would if you were a Benefits fraudster, so why are these goons above the law?

The Scams

We are rightly outraged by the petty-mindedness of claims for tampons, sink plugs and horse manure, but they are cheap. Some of the bigger things are arguably allowable too. Barbara Follett is an interesting case. Her £25,000 spent on private security outside her home was justified because she was scared after being mugged. However, as no one knows who she is beyond her being her rich novelist husband's wife, she was not mugged because she was an MP - and given they are so rich, surely this was her choice not to use the police?

Anyway, the real scams which, in my view, are beyond the the lines drawn by the law, are 'Flipping' and London second homes for those who live close by.

Flipping

The basic idea of the second allowance is that you have a home in London or near enough to commute, so that you can work each day while your main, family home is wherever you live, usually within your constituency. Tony Blair was a famous example of a 'nomad' MP who had a home in London but a constituency in Sedgefield, and he 'flipped' his second home to be Sedgefield. That seems fair, given he was PM, but not really as 10 Downing Street is clearly a 'grace and favour' home, so he should not have a second home at all. It's a moot point.

The real crime of flipping is when an MP deliberately exploits the expense system by temporarily changing the address of their designated second home. By doing so they can 'legitimately' fully kit it out, use up all their allowance and then flip it back. In theory, in any given year, they can flip as many times as they like. A serial 'flipper' is Hazel Blears, allegedly, who used 3 different addresses in a single year. Margaret Moran (who?) designated her second home to be a coastal cottage (there is no coast in London unless I missed something) and had it treated for dry rot.

Keith Vaz, that perennial abuser of power, has a perfectly good family home in Stanmore but another property in London, even though Stanmore is an easy commute, and a home in his Leicester constituency. He used 'flipping' to maximise his allowances.

It's a disgusting practice but it was widespread and because the rules are not scrutinised by HMRC then they are independent of the tax system allowing MPs to profit from lack of Capitals Gains Tax on selling a designated second home by calling it their main residence to the tax man.

Again, this all appears to be within the rules but I can assure you that it does not say anywhere that you can systematically drain the expense system for massive personal gain. This is as bad as 'Tax Avoidance' or VAT carousels. It is the abuse of taxpayers' money.

London Homes

Having second homes while having a main residence already in London is both absurd and abhorrent. It should also be illegal. The cost and ease of commuting is there for all to see - even if it is taxis in the early hours because of late sittings. This is sheer abuse of the system and surely not in the spirit of the Green Book. Tony McNulty is under investigation by the police now, and this is right. His second home in London was not even his own. Jaqui Smith claimed her Main Home was her sister's house in London so that she could kit out her Second Home in Birmingham and pay for porn films for her husband.

Walking Tall

The two above scams are amongst the worst and most costly to us and the ones I believe ought to be subject to a police enquiry in every case. They are beyond the rules and it disgusts us all.

But what kind of people do these things? They are certainly not people who represent our best interests, who decision make, law make and send us to war. You would not ask con men to do those things yet that's what we have done. The whole system of democracy has suffered a massive blow, public confidence is lost and still these people walk tall. They see the crime as being the Telegraph paying for leaked information - they see the crime as 'defamation' of their characters because just one of the claims may be wrongly communicated.

They are trying to portray themselves as the victims while others hide behind the rule book. Some even justify what they have done by saying they think the rules should be changed - those are the worst offenders as they 'knowingly' abused the system when they knew the system was morally wrong. Gordon Brown is included in that category - not just because of his own abuse but he allowed himself to be surrounded by people he knew were effectively fraudsters.

It makes Parliament look like some sort of pathetic version of the mafia. They do get people killed and not dirty their own hands but the they rob and cheat and then prey to the Green Book for forgiveness.

Every last cheating one should have the moral fortitude to resign at minimum, pay back what they stole and get a taste of the real world and the law. As for the Green Book - burn it and get someone with an ounce of decency to write it and have it administered by HMRC.

The need for Expenses Reform is obvious - now let's get members of the public to write the new Green Book rather than non-executive director stooges like Lord Turner or similar who have their snouts too far in too many troughs. Get real people to do it and I would gladly help.

What it has shown is that if MPs haven't get their heads deep in the troughs then they are too too far up their own backsides to ever know how to govern us properly or see what is really going on. It's time we had a true democracy in this country.

Quick, Give Me A Policy - Any Policy!

Government policy seems to be descending into farce - well more farce than usual, anyway.

True to the trusted formula employed by the Campbell-Blair regime, Gordon Brown reacted swiftly to the expenses scandal which saw several of his minsters with their heads so far in the trough that all that could be seen was their backsides, which was only part of what was being seen by Jaqui Smith's husband, courtesy of the taxpayer. First he called for reform but that did not quell the criticism of the drama of Smith's husband's possible self-abuse problem or Tony McNulty's inability to join in with the daily hundreds of thousands of commuters who travel a good deal more than 11 miles to their work in London for far less than he was claiming for his second home - that wasn't even his. So our superhero then came up with an idea of scrapping the second home allowance that seemed to be the issue (not withstanding porn films or employing family to not even turn up and work) and instead give MPs a daily fixed sum just for turning up to work.

It's a novel idea which some might term as 'salary' or doing what they were elected for but the rather sumptuous £60,000 is for actually not guaranteeing that they turn up at all. In fact, Sinn Fein MPs have never taken their seats, but claimed their salary and still clocked up massive expenses. As they don't need second homes, you have to ask how they did that - but our minds can boggle.

The PM's plan has now backfired as he failed to get enough support for the idea and so there will not even be a vote on it. Of course, it shows the PM is pretty out of touch with the whole issue but that seems to be par for the course on most things at the moment. He eagerly awaits the Standards Committee's report as he desperately needs inspiration on what to do next and it shelves the issue for a while.

That is, until the next Minister with his/her snout deep in the trough is uncovered. That wouldn't be '3 home' Brown or Hoon would it? You know the fellas with 'Grace & Favour' accommodation, a prime home and claiming for a second home they shouldn't be using? Perish the thought.

Taxing Conundrum

Well the budget speech had no real surprises for us but Mr. Darling has been surprised by the fact that borrowing has been higher than he predicted and the recession deeper. Fair play, though, he's only running the country's finances.

The only minor shock was the last minute hike in the top rate of tax for those earning above £150,000 per annum to 50%. Of course, anyone earning between £150,000 and say £250,000 will be grinding their teeth and spitting, particularly if they take that as salary or bonus. For those earning above that level, we are into the stratosphere where compensation can come in varying forms from capital gains to dividends or some other contrivance.

In fact, of the 50+ billionaires who are supposed to make their living in the UK, they pay less tax proportionately than those on the average wage.

You see the richer you are, the more creative you can become. And for those in the super-rich bracket, well they know every trick in the book. Sir, and yes he was knighted by this Government, Philip Green made sure he did not pay a bean in tax on a single dividend of £1.2bn that his company did not earn. The dividend was paid by a bank loan and went to his wife who is apparently an non-domicile. Like many hedge fund, private equity and top end traders in the City, Green has the facility to evade paying taxes in the UK - and he is mean-spirited enough to make sure he doesn't pay a penny, not just make sure he doesn't pay more than he has to.

The best part of all that is that this Labour Government have not just allowed this to happen, they have openly supported it and enabled these super-rich people to avoid tax by making our top end system more attractive. Instead of promoting funding for new business ventures, innovation, creativity, entrepreneurship and backing bright ideas, they have allowed billions to be created off buying, revamping and reselling existing businesses and shorting stock prices. Britain is way behind its rivals in terms of injecting capital into good ideas and many of the so called 'Venture Capital' companies plough their money into juicy deals for fast-buck turnarounds rather than back creative new businesses.

What this new hike in tax will do is call into question the raft of high earners who actually have to go to work for their living, selling things, building businesses and creating employment for others. They will be the ones who stick around here not able to afford fancy Trusts like the Labour golden boys and so pay their taxes. So when the opportunity arises to work abroad for a few years or even choose their country of domicile as anywhere else in Europe, like Switzerland, then they will do so.

The whole borrowing and tax situation is only going to get worse. As unemployment moves toward a peak, the strain on the welfare state gets higher and tax revenues decrease - so the majority of us will pay for it. Tax on fuel, because we have to drive to work whereas it is nothing to the super-rich means that once again working Britons bear the brunt of all the tax bill now and in the future.

Why didn't we see 'windfall taxes' for hedge funds or private equity? Why didn't we see a higher rates of tax on future profits on banks as they should pay back the money we are stumping up ahead of us? Why don't we see all senior banking executives having capped bonuses for the future with higher rates of tax applied? Why don't we see scaled Capital Gains Tax for businesses that proportionately rewards owners who have nurtured their businesses over many years vs. those who buy, asset strip and sell in short order?

It's because they won't pay. Tax the hedge funds and they will all register their headquarters outside of the UK, same with private equity. We need a wholesale change in legislation on companies and where they pay their tax and any individual working for them before coming to the rest of us for the price of this mess created by a bunch of ministers who cannot even get the numbers right from day to day.

Once again, this is a budget on the mass of people who regularly cough up and cannot afford to leave the country. The super-rich once again get away without paying. There was a time when Labour represented the party of social equality - but, with their former leader's head so far in the trough of riches, it's pretty obvious that's all in the past.

As a final note, I heard Tony McNulty on the radio today 'defending' himself on his expenses row. He stands by the fact it's all in the rule book. It reminded me of the old Peter Sellars film, 'I'm alright, Jack' - he has got his head so far in the feeding trough he cannot see that his job is no different from the average person who has to commute to London. He claimed £60,000 on a second home that wasn't even his and is less than 13 miles from Westminster. The rule book doesn't say you have to be a greedy, money-stealing swine with no conscience.

But that's what it takes to be a Labour Minister these days - that and skin thicker than a rhino's hide.