Tax To The Rescue

Today's furore on the Government's proposal to add 1p to National Insurance is caused by a letter signed by 23 top business people in the Daily Telegraph which says that they back Tory plans to scrap the increase.

Ostensibly, they believe it is a 'Tax on Jobs' and that after steering their companies through the recession, now is not the time to compromise corporate recovery by increasing tax burdens. Naturally, the Government says that they have to cut the budget deficit and so how else are they to make inroads as this would raise £19bn toward that goal - and is actually only a fraction of the ever increasing problem.

I think it is more fundamental than this. On the one hand, the Government finally recognises the need to cut the deficit and then argues that it should not cut spending as this jeopardises Britain's economic recovery, so it says it must raise taxes and therefore individuals and business should make the necessary compensation for lack of cuts. So the burden is transferred to business to make the cuts in order to afford the amount needed - the circular argument here is that the payroll bill rises and this threatens jobs which in turn puts an increased burden on the Welfare State if Unemployment rises again.

On the other hand, if Government does not tackle the budget deficit, they have at least realised that Britain risks major issues on the bond market where it is so heavily reliant on raising debt - if our credit rating gets affected by market confidence in our ability to repay then we join Greece and Dubai as being the world economic pariahs and our bonds will become junk.

But the real issue is this, to my mind. The whole economic mess we are in came from appalling hubris and suicidal economic policy over a long period. The Credit Crunch arrived with the recession and banks rolled over like nine pins. Who had to come to the rescue? The taxpayer. We have been used as the crutch for the economy and the banking industry is making the same mistakes all over again at our expense. As we still reel at the magnitude of the problems and gasp in awe at the incredible cost of the bailouts, we are the ones expected to have to pay for more stupidity - the basic mismanagement of the economy as well.

Even successful businesses strive to contain the growth in costs and gain efficiencies at the best of times, let alone the worst. There is no point in spending money if it does not give a tangible return in that vain. And so to Government. The now ingrained belief is that if we stop spending a single penny then the whole economic recovery will implode and we would be plunged back into recession is clouding the need to re-evaluate what is important in terms of spending in Britain. And this is a typical economic dogma from the Government who seem to go to bed each night to read the same pages of the same economics book that got us into the mess we are in.

The stupid voters seem to take it all in. As we foot the bill for all this, the banking idiots who got us into this mess are making bumper 'profits' and are making huge bonuses once again thanks to us resetting the levels of debt they clocked up - we actually created the money for them to earn, it is that simple. It could not have been more stupid. But that's economics for you - it isn't for logical folk like us. We are the ones who sit bemused and just keep paying more of our earnings back into the pot to be wasted all over again.

The point that these business types make, which they do not make loud enough, is that the Government should go find the inefficiencies and save some money first before coming to the supposed limitless trough that is the taxpayers' pockets and goodwill. If this is just the start of it, would it not be nice to know before the Election just how much we are to be fleeced for over the next 6 years to get to the mythical halved deficit?

Because if it goes not come in spending cuts, guess who will be paying.

Banks Sorted - Move Along, Nothing More To See

A simple podcast and bit of TV interviewing and finally Gordon Brown and Alistair Darling have brought the banking crisis to its conclusion.

The final solution is the FSA will be given the authority to tear up bankers' contracts if they feel they are excessive or reward high risk activities. Makes you wonder why the FSA would do that after sitting by and watching the last crisis unfold last time and doing not a sausage about it - in fact, receiving bonuses themselves for their good work at the time. Indeed, to a person, the same staff exist at the FSA so we can expect this new, draconian behaviour to really work. Sure.

Along with a few gems on higher capital to be kept by banks, Gordon Brown confidently announced in his podcast that "We will ensure that the banking crisis we have experienced over the last two years should never again come at a cost to the taxpayer".

The finality was awesome - the banking crisis as we experienced it will never happen like that again but if it does we will never have to pay for it the way we did before. Of course, if you believe that then you will believe anything and vote for a landslide Labour win at the next election.

Much more to the point, long before we look at why Brown's comments are not true, we should be asking why did the last crisis cost so much. Brown tries to tell us that as recessions go we have not fared badly on unemployment and repossessions. I think sometimes he must be reading different reports than the rest of us as unemployment is now higher than at any point in the last 12 years and if you add those who have been on long term benefits for whatever reason, then Britain is at its worst in terms of Welfare strain for a long, long time. As for repossessions, when those who have opted for the deferred payment schemes and when the interest rates start to pick with those in negative equity, it is arguable that we have yet to see the full effects of the housing crash.

As before, Brown seems to think the financial situation in Britain is far better than it really is.

The stark facts are there to see. We have spent £1.4 trillion on saving the financial system and to this day we have no idea whether that is too little, too great or enough. The bankers remain unscathed by our generosity and the best we can do is to threaten their bonuses in the future while at right now headhunting, sign on fees and massive profiteering on written down debts are bolstering earnings greatly. Under our noses, the very machinations that brought about our ruin are going on and the best our ministers can do is to write a few rules that banks and their lawyers are adept are getting around.

The actions by Darling and Brown are superficial and treat only the symptoms of a flawed banking system that is working in exactly the same way as it did before. We have printed £200bn of new money and given it to the banks to shore up their finances and play the markets - none of it has got into the real economy whereas the exact same QE in the US was put into the asset backed securities markets and guess what? They emerged from recession and we didn't.

At every turn and juncture this Government has got the financial calls wrong. We have spent far too much money rescuing a system that did us no good to act the same way again. None of what these two goons have done or said will make an iota of difference and at every point they called the situation wrong and estimated its extent wrongly too. It has been a process of escalation all along of reacting to the crisis, trying numbers and then spending much more as the guesses made were never right. How much we could have avoided paying, we will never know.

If you believe this cod's wallop they have spouted this week, you may as well believe pigs can fly.

The Welfare Time Bomb

Last week I mentioned that we are sitting on a massive Pension issue here in the UK and that it isn't going to get any better as this year, for the first time in the last 10, our population grew because the rate of births exceeded that of deaths and overtook immigration as the primary cause of population expansion in Britain.

We now have 61.4m living here and 791,000 births took place in the UK last year, with a trend, for the first time in a while, that younger people are contributing more. As an increasing share of the population gets older and so drains the Welfare State on health grounds and burdens us with paying state pensions for longer, we have other issues at the new born end to contend with.

Not least, that many births puts its own strain on the NHS and other parts of the Welfare System. But an interesting fact is that a quarter of all those births were from parents who were not born in Britain so immigration was, in fact, again the largest contributor to population growth after all. William Hague famously fought and lost an election campaign on the immigration issue and tried to make it a political, not racial, debate. He failed and was laughed out by the Blair spin merchants who claimed he was barking up the wrong tree. But how wrong was he?

Studies show that the optimum population for Britain to get sensible well being is between 17m and 27m and this is based on studies, albeit mainly subjective, across the globe of countries who enjoy relatively low density pockets of population. The US came top rather oddly as you wouldn't think their inner cities showed a great deal of social well being or the murder rate wouldn't suggest such either. As with many pieces of Government funded, utopian work, the study is a bit previous unless we want to embark on a program of selective extermination as there are roughly 2-3 times the optimum number of people here already. And the population is rising - at around 0.7% per annum and this is three times the rate of the 1980's.

So as our tax take drops, in recent months by as much as 20%, as corporates currently make less and less people are working, and this figure is expected to fall further as unemployment homes in on 3m, we have a massive time bomb ticking at both ends of the spectrum. More babies are being born at a faster rate than before while we are living longer. The Welfare State as it stands and is funded today, simply will fall over in the very near future. Oh, and there is another, minor problem, that may disappear in 2032 - we have much increased borrowing as a nation as we have pledged so much into the failed banking system, which wasn't exactly planned for.

Put in those simple terms, we have a major problem facing Britain. It's all very well to moan about immigration being an issue but it's a done deal. In fact, if anything, more people are leaving than arriving now. Perhaps they can see the problem better than the rest of us. The Welfare System will implode - and we are not that far away.

We talk, this year, of a lost generation of youth as young people have been disproportionately been hit harder by the recession in terms on unemployment than older people. We are also talking of raising the retirement age, as we cannot afford the state pension payments for longer living people, to 68 and even 70, which only postpones the problem. But it creates a huge problem for young people arriving on the job market - what chances do they have of getting a good start to their career and what chance do they have of progression if older people stay in senior roles progressively longer?

The answer may actually see Britain suffer a 'brain drain' much as Ireland experienced some years ago. But it is different for Britain as we have a dense and ageing population and we don't have generous payouts by the EC to help incentivise companies to relocate here. In fact, we are becoming a less attractive proposition as our employment laws fall into line with Europe and greater strain will go on employers to retain, potentially, less flexible staff for longer who will require senior levels of pay and benefits. Meanwhile, at the bottom end, we will see a greater onus on employers to put greater provision aside for pensions for new staff as time goes on. What happens next may already be occurring as this week BT, one of the largest employers in Britain, announced that it had suspended its graduate entrant scheme - while many others have cut back the number of graduate entrants.

There is now the standing joke that the best prospects of a career start for many new graduates are call centres - what a training ground for Britain's best talent.

What the credit crunch and recession has done is to bring the underlying issues into stark focus for us all but we have yet to understand the implications. It comes to stupid things like this - as we fight two major wars in Afghanistan and Iraq, we have stopped our Army Reserves, the TAs, from training with live rounds while regulars also have seen their training with live ammunition be cut back in order to cut costs. We have systematically reduced the Armed Forces and its capability at a time when it has been most utilised since WWII. But such stupidity is now prevalent at all levels with retirement ages increasing while unemployment in the young is peaking.

What it all boils down to is that the Master Plan set out by this Government, underpinned by a Fiscal Policy that relied out a banking system that had to continue to grow way beyond the actual growth of the nation, was fundamentally and catastrophically flawed. I don't know if any other Political Party could have done or will do any better - in fact, I severely doubt it given their absurd utterances - but I do know that the whole New Labour Project was built on bright ideas by 'champagne charlies' who thought if they talked a good story rather than execute the plans sensibly, the whole world would just go along with them.

Well, they have got us into a hopeless situation that isn't going to get any better until they get their priorities right and they address the real issues of this nation rather than pandering to the whims of a small number of incredibly wealthy people because they only want the world set up to serve them.

It could not be further from the make up of the Labour Party. It could not be further from what this country needs.

Why Should I Care?

You may be a sceptic or a true non-believer but let's assume for the moment that climate change is happening and that due to human intervention things are not going too well for the future for Planet Earth. The question is: should we modify or change our behaviour accordingly?

I read a letter in New Scientist from a Tom Dixon of Bristol in the UK. It was concise and well written - his answer was basically, why should he sacrifice his lifestyle for the good of the future when he has only a small window of time in which to live? In short, why should he care? And for the record, he doesn't.

It's an interesting point as I am a believer that in the brief history in time that man has lived on this Earth, we have impacted the environment in an extraordinary and unprecedented way. I am sure in my own mind that since the dawn of industrialisation we have done things to our environment which have profound and long-lasting effects on the Earth and particularly its atmosphere. I also believe that it is likely that we are actively shortening the potential opportunity for life, as we know it, to endure on Earth.

An asteroid may hit tomorrow. Super volcanoes may erupt in California and lay a black cloud over this earth for a century. The poles may swap ends. Something natural will occur to wipe us out anyway or change the environment we live in so profoundly that we will not survive. Or the incredible 'balancing act' that is nature is going through one of her long cycles and will 'right herself' again and the effect that humans have within it will be but a pimple on a gorilla's backside.

Both assessments could be true. One argues that we should look at how we live as it is humans who are having some kind of effect on the Earth while the other argues - hey, that's nature so make the most of what you can while it all lasts.

To have a concerted effort to change the way in which humans live would be a monumental task and it also pre-supposes that everybody agrees with the changes, thinks there is a problem and feels any kind of conscience that implores them to join in. This assumed 'Brotherhood of Man' may well not exist and it will be very hard to get widescale support to drive any such large-scale 'Green' policies to be implemented effectively to make the changes we think will help.

One thing that cannot be argued with is that we are depleting the earth's resources very quickly. Fossil fuels, on today's estimates, will last less than a few decades. There are no really good alternatives on offer - wind energy harnessing is both unsightly and equally damaging to the environment as well as not yielding enough energy to suit our needs. Nuclear energy has been descaled and now contributes less than 20% of the electricity to the National Grid. Solar energy is seen as the domain of cranks who deface their homes for no real gain.

Yet so much of our time, effort and brain power goes into sustaining or bettering our lifestyle in the present at a time when wealth in the developed world is at it a new height - and after a minor technical blip, will be back on course to grow. Profit and growth comes from exploiting the needs of the people now - having long term 'Green' strategies will inevitably mean that profit opportunities decrease and economic growth is limited, even negative. Many economists believe that you can sustain economic growth and have 'Green' policies but I am as sceptical about that as most climate change denyers.

Of this 'Brotherhood of Man' that Tom Dixon talks of which he asserts does not exist, you do not have to look far to see stark evidence of what he means. As the gobal financial crisis unfolded, it was pretty much every man for himself despite talk of concerted global action. Countries pumped varying amounts of money back into a system they understood as much about as they do nature itself and hoped for the best while other countries focused their cash on specific things that they estimated would help sustain them through the crisis. The results have been obvious - those who invested less in the global money system and more on their internal economy, have survived this crisis better. Look after yourself and things will get back to normal in a while.

When 9/11 occurred, almost without thought of the enormous financial, environmental and human impact the West engaged in two major wars which it still fights, eight years later. People will argue the reasons for the war but one obvious comment about Iraq was control of the region which supplies the most oil globally at a time when China is about to overtake the United States as the largest consumer of fossil fuels. It was 'aggressive' protectionism as Iraq's ability to wage war on anyone other than its own people had all but ended. Conflicts arise because countries believe their interests are compromised - there is no collective consciousness when it comes to seeing your lifestyle or freedom being threatened.

And as the developed world clamoured to pile trillions of dollars into sustaining its way of life into a system that had nearly ruined it, the developing and undeveloped worlds sat there and looked on incredulously as a mere fraction of all that wealth might have helped feed its starving inhabitants.

When it comes to understanding human nature rather than nature itself, we are still basically animals for all our intelligence. Survival of the fittest is the underlying culture and for all our altruistic ideals and thoughts, in reality there are very few of those who extoll them who are prepared to really sacrifice their way of life to ensure that everybody benefits. Indeed, from a political viewpoint even those with a scocialist ideal believe there is no issue in having people incredibly wealthy while others suffer. They have no issue with the exploitation of the less fortunate when it becomes personal but their ideas and ideals win votes and give them power because 'spin' is just plain old marketing when you analyse it and has little to do with real values and ways of life.

Yesterday, between meetings, I took a trip on a boat around the harbour in Hamburg and saw the vast empty dry docks of one of the former largest shipbuilders in the world. One new boat was being built of any consequence - it was 170m in length, had its own submarine and cost to date around €500m to build. It was a private yacht, commissioned by one man, who already has one of the largest private yachts in the world plus his own football club in the Premier League. There is incredible wealth in the hands of an incredibly small percentage of the population of the world while billions are below the poverty line, are mired in disease and can't feed themselves. And we just went out and saved them by propping up a financial system that rewards exploitation and penalises those that stop growing to look after others.

In the US some 47m people cannot afford medical care at all. The President is having to tour his country to persuade people it would be a nice idea to somehow provide for them when the same people are happy to pump $billions into sustaining a foreign policy that has made the US look like the world's school bully rather than the prefect.

I could go on but frankly when we live in a world where the impact of non-delivery of the latest iPod will have a more dramatic effect than more food to starving Africa, then you know that Tom Dixon in Bristol is right. 'The Brotherhood of Man' is no more than a former Eurovision pop group - a totally dreadful concept at that.

I could ask Tom Dixon and his followers why do we change anything? He did not invent the IPod yet he has one. He would not be pleased if he used a toilet where the previous users soiled the seat and did not clean up after them. He would not be pleased if there were no laws in this country stopping people just walking up and taking your possessions whenever that person feels like it. He would not be best pleased if Sky Sports was not made available to homes in the UK because Rupert Murdoch suddenly thought only Australians were worthy of it. He would not be happy if when run over by a car and he lies bleeding in the gutter that an ambulance is not available to help him.

All these things actually come from a collective drive to make the place in which we live a better place - without them our lives would not be the same and we would be worse off. Taming the Wild West was necessary for everyone to get a fair crack of the whip but Jesse James might have disagreed.

So what of the future? Do people like Tom Dixon not have children? Maybe not - if so, there is no point in providing education for them as well as nuturing them and giving them rules and culture if we do not believe that we have a role to play in the future. What is the point of doing all that and even providing them a legacy in a Will if we really do not care? The fact is that we actually do care. As animals, our biggest instinct beyond survival is to procreate new life. In fact, just about everything in nature prepares current life to create new life. Nature understands that our time in this world is very short and so it has set itself up as a long-term survival mechanism and each unit of life has a function to create new life while it lives.

Tom Dixon is not right - humans have enough intelligence to know that we can change our ways and it will have an effect on the chances of survival of our offspring. We can change the conditions in which we live today to make a future for our next generations - our own descendants.

In fact, as any good parent, it is our responsibility to do so as we owe our children the same chance to live as we got, if not more.

Would it kill us if we did not get the latest iPod every year or more of our fantastic brain power which goes into to designing ever greater and more complex risks in the financial market were channelled into finding the cure for cancer? Would it kill us or him if Roman Abramovich did not have so much money that he can commission the biggest private yacht in this world and the money were sent to Africa to help feed people? Would it kill us to have less lights on at night, less electrical devices in general, slower but more efficient cars, to not have electric advertising hordings in Times Square or Piccadilly Circus or Virtual Reality?

It probably wouldn't kill us. But it may kill our children if we don't do something about it.