'Screw it - just do it!'

Having just had a fairly poor value-for-money experience on a Virgin Train going back and fore to Preston the other day, I picked up the copy of Richard Branson's Quick Read booklet of the title above to learn the secrets of running a truly over-priced rail franchise.

It was enlightening and I think everyone should 'Screw it - just do it!' and start their own train franchises as it has made 'Ricky' wealthy enough to buy not just one but two Caribbean Islands, don't you know.

The Virgin Engine

There is no doubt that spread over 200 companies and employing more then 40,000 people, the fresh faced, toothsome lad who started flogging advertising in his 'Student' magazine while still at school, has built up his business with a well-versed formula. And there are things to be learnt from such a booklet.

I draw the line at such pithy remarks from self-help gurus who tell you everything is possible, you just have to apply yourself. That is simply not true, as many are not born into a world of advantages - for many millions, a goal is to survive the day, to get their next mouthful of clean water or food.

Self-help books in the Third World are useful only for mopping up dysentery.

However, Ricky Branson has built a Virgin brand which does hold true to the original values. If you buy a Virgin product you can expect the slight maverick instinct, the understated emphasis on fun or entertainment and in general an expectation of value for money pervades. I wonder if Virgin Funerals could be a new business opportunity.

To some extent, I have felt that Virgin brands like Virgin Atlantic cocked a snook at the Big Guys like BA and rather than take them on as a cheap alternative, the focus was on providing competitive products, with a bit of flair and an eye to woo customers. They invented the concept of 'Premium Economy', the idea of having some more comfort and leg room but not over-paying for some plank of a bed and warm meals with semi-expensive wines. Upper Class struck at BA First Class yet at a Business Class fare, and together with in-flight massages, there was a real feeling of going that extra yard. In the spirit of fun, I was always surprised that membership of the 'Mile High Club' was not included.

We could go through business by business but each one took a swipe at the incumbents and gave a little extra zip that engendered great loyalty, even down to alternatives cans of cola although I really did not like the Virgin chewing gum found in toilets - dumb idea and tasted foul but blew great bubbles.

What I like about Richard Branson is that he was not experienced in any of the businesses he started beforehand. He was not a pilot nor an experienced manager of an airline, he never manufactured soft drinks, he never ran a bank or an entertainment company yet he started those businesses. His ethos of 'Screw it - just do it!' is a very real part of his being.

It's a lesson for all those companies out there who demand the next employee to have 'direct experience' of the job - you are almost certainly missing out on very capable people who apply business skills on a wider level and entrepreneurial types who can make things happen. But then again, no one ever got fired for just recruiting poorly, they do for not following procedures - another of my pet hates.

So What Happened To Virgin Trains?

The Virgin Train experience starts out nicely. There are always nice people at ticket counters, everyone looks smart in their tailored Virgin suits and coats, the trains themselves are modern, smart and fast. It looks and feels great. But then you you buy a ticket. You can feel the credit card crunch each time as you get nothing cheaply on Virgin Trains. Whether Standard Class or First, expect a severe lashing.

The onboard environment is good particularly in First Class - nice seats, power to laptops, lights for reading. Then comes the food. There was a time when Virgin travel franchises went to famous chefs for advice - well not many make good sandwiches by the looks of it. The ticket prices remain pricey after peak time but the food and drinks served are actually cold sandwiches and are very bad. I can't remember the last time I travelled with them and hot food was served, the rules are so daft - and that really hammers the 'Value For Money' experience you expect. On top of that, I cannot remember the last time the train left and arrived on time. Granted the fiasco at Milton Keynes the other night was beyond Virgin's control but I had asked a nice Lady at the Virgin Ticket Counter in Preston if I could travel on the earlier train and having already paid £271 for a return ticket, I was told to get the earlier train back would be a further £130! The train was virtually empty.

The Point of All This

Where the Virgin Brand has excelled is by providing the almost maverick alternative to the status quo products and services that epitomises what Branson himself modestly calls 'The Rebel Billionaire', his TV program (what, you don't have one of your own?). We buy because we too are two-fingering BA and the large airlines who have had to respond accordingly with better service and lower cost flights and it has revolutionised Trans-Atlantic travel, make no mistake.

BUT, when it comes to running a franchise, unopposed, Virgin has slipped into jobsworth mode. They can afford to charge what they like, make as much money as they like, provide whatever level of service they like, charge stupid money for transferring one train to the next - but wrap it all up in the Virgin livery and we think it's the same as before.

It isn't. When Virgin are unopposed and providing a service for which there is no real competitor, they are just as poor as the rest.

Competition Maketh The Man

So what Ricky's book did say is that Virgin is a maverick, fun-loving business that takes old and crusty services and products and provides an alternative which gives extra often for less with a bit of an air of fun thrown in when in competition with that old product or service, and it's good at that. But what it did NOT say was when it comes down to cashing in on a monopoly winner like a Rail Franchise, it operates like an old, crusty service provider itself.

It's a bit harsh as it started out so well with lovely, fast-rolling trains, but sometimes those who believe every word of their own bull need a short sharp reminder that not every aspect of their business is as smiley, shiny and maverick as they think.

I could start on Bill Gates next on this subject but maybe another time.

Time On My Hands

While idling between appointments and having some time both on my hands and mind, I am pondering the idea of time travel.

The Time Travel Conundrum

I find it an absurd notion that time travel is possible - not because I don't believe that if you splat particles together at incredibly high speeds in the space-time continuum you can't knock one backwards; if eminent scientists say this is possible, then it must be so and I have read 'In Search of Schrodinger's Cat' which is a fine read if you are of the nerd-orientation.

No, my feeble brain is more logical. If time is an infinite line that we travel along, albeit in one direction (due to the Entropy thingy after 380,000 years - see my earlier blog), if time travel was possible at some point in the future, then indeed we would know about it.

Much like 'The Terminator', starring a muscular US Politician, if people can already travel in time we would know about it. I know nit-pickers would say that maybe the time travellers have not travelled far enough back in time to tell us yet or indeed they have but they came and went unobserved, but I would suggest that's not the point.

The Loop of Time

Quantum Physics itself says that the mere act of observing an event changes the outcome - so the observer is part of the system that determines the outcome just by looking at it. In the same way, time travellers cannot enter the world unobserved as their presence has an effect. The Loop of Time mind bender says that if I should travel back in time to a point in the past where I existed, my very presence would interfere with my current self and therefore change the future and so all events leading up to the point I travelled back would be different - which means something would have changed before I travelled back. Which means I could not travel back in the same state I arrived there - oh you get my drift. You set off a loop of events that eventually disappear up ones own backside. By extending the argument, even if I travelled back in time to any point before I travelled back, I would alter the state of the world all the way back to the point I started to travel backwards - so I could not have travelled back in that state.

For this reason, time travel as we view it on TV could not take place - even consuming some air when you arrived back would forever change the world, just the act of arriving back would change the world. There are more plausible explanations that involve every event having an infinite number of outcomes and what we observe today is the continuum of one strand, so if we travelled back we might just as well end up on some other strand of reality. But events are occurring every micro-nano-milli second of time and so why do we ever observe the results of just one possible outcome? Don't look at me, I asked the question. But maybe it is to do with that nasty old 'Arrow of Time' again.

Anyway, there is another absurdity - should I ever travel back in time and change the world, theoretically I will forever be caught in that loop and live like Bill Murray in 'Groundhog Day' forever more, for each time I reach the point in my life I decided to travel back, I would indeed go back and start the loop again. The follow on question would be - do I age in the process? Of course the daft answer is that I would take with me a device to beam me back out again, but that poses equally illogical questions.

I Must Get Cleverer

The simple fact is I am not clever enough to understand all this but in my little world, the concept of time travel as in Sci-Fi TV or films is pretty much hokum. So as a supplementary point to my blog on 'The Arrow of Time', I would argue even if we cracked time travel, we could not use it to change events.

Pondering time over, it's time to travel.

The Arrows of Time

I could be talking about Phil 'The Power' Taylor's remarkable victory in the World Darts Championship (Hurrah etc) recently but my point tonight is sightly more cerebral.

On that note, where did Phil get his nickname 'The Power'? As a Welshman, I would have thought it denoted his industry or job as I grew up with Powell 'The Milk' and Jones 'The Dentist' (no, not Ivor 'The Engine' before you say it) and those people had fine jobs as milkmen and dentist accordingly. But shouldn't Phil 'The Darter' Taylor be his real name? My assumption is that he worked for Eon or British Gas before being famous and I'm sticking to it.

I digress.

The Arrow of Time

Inspired by reading a copy of 'The New Scientist' while stuck at Milton Keynes with no 'Power' as in Phil, I was interested to see that a certain scientist had hypothesised, 'elegantly' as they always seem to do (maybe while wearing furs or a natty suit) that the 'Arrow of Time' flows the way we observe it due to the effects of gravity coming into play around 380,000 years after the Big Bang occurred.

The article does sort of tackle why 380,000 years was important as that was the time taken for photons to stop behaving badly and allow matter to start forming lumps and hence gravity, a force we know to act over long distances, to take effect and start shaping the Universe as we know it. The simple explanation was that it's all to do with Entropy - you know that property that measures chaos or disorder.

This is the odd thing that says eggs break rather than unbreak, coffee grows cold rather than hot and we grow old rather than young. Such changes are associated with entropy or a measure of disorder of a system and this happens because there are more possibilities of a disordered state than ordered for systems to evolve into.

With me so far? Because this means that the likeliest outcome for us all is a state of disorder and an increase in entropy. I suppose this means entropy is the only index that always goes up and not down - perhaps we ought to have an 'Entropy-linked Unit Trust' launched for our pensions as inflation has failed us.

The Science Bit (Like the Advert)

This of course assumes that we started from a highly ordered or very low entropy state (entropy could not increase otherwise) and apparently physicists don't like this idea as it sounds spooky if nothing else. But Lawrence Schulman of Clarkson University, NY claims that after 380,000 years (that magic number) our Universe switched to that low entropy state which was the first time it was cool enough for atoms to combine. Prior to this the 10 billion or so badly behaved photons in each atom annoyed the electrons enough to keep them from 'mating' and so preventing gravity, which occurs when matter clumps together, taking any effect. At this crucial 'switch on' point, gravity takes a hold and starts the long process of forming clumps and eventually stars, planets, galaxies etc. Before you start griping, the glowing fireball of the Big Bang is known to have spread evenly throughout the Universe according to cosmic background radiation measurements - the afterglow of the Big Bang. Think on that a second - for the background radiation from the Big Bang to be the same in all directions, it must have been evenly spread at the beginning.

The thing is, as Americans would say, a high entropy state is most likely when no long range force is acting like gravity BUT when gravity came into effect, the Universe switched to a state of low entropy. At that point everything starts to tend toward higher entropy or indeed, as the argument goes, the 'Arrow of Time' started in the direction we observe it today.

For The Vulcans Among Us

I am not the world's most logical thinker but I understand the concept of Einstein's word 'Relativity' even if the rest of the theory is high brow. The fact is, we humans observe time as it is and call the future that which we have yet to see. So if the 'Arrow of Time' were reversed, would we simple beasts have labelled what we observe today still as the present but what we haven't yet observed as the 'past' and what we have observed as the 'future'? I doubt it. We might have thought it really daft that we rose from the grave and ended up in the womb or never have invented omelettes as every time you went to cook an egg it formed a shell or sued McDonalds for coffee so cold it it didn't scald your lips.

It's a bit daft to think about really.

Poo Poo

Of course, the Luddites amongst us, while accepting this is a highly 'elegant' if simple solution to the question, why does time go one way only, it does tempt to ask the question, 'Fine, so what about before 380,000 years after the Big Bang? Which way did the arrow flow then, matey, because logic would say it must have flowed the same way the whole time?'

That is not a stupid point. This period of what scientists call 'The Deep Arrow of Time' would be pretty controversial if it was found to have flowed the opposite way. If that were the case then we would have simply counted back from 380,000 years to the Big Bang and game over. Err, then we would never be here to ask such daft questions, arguably. It's a zany thought about a version of our world where things effectively appear in reverse if time flowed the opposite way as would entropy by the same argument.

The trouble with science is that the answer to a question is often a question. However, in many zillion parallel universes perhaps time does flow the other way and zombies are revered as we revere babies. Perhaps in the same universe bankers would vie to get rid of as much wealth as possible - nope that doesn't work as ours actually got rid of all theirs not before taking a good cut. It does have its advantages though -you would never lose any golf balls as they would suddenly fly at you out of nowhere, your car keys would miraculously appear and the Directors would make multiple cuts of film beginnings rather than ends plus the person at the counter would pay you for having watched it in reverse.

But it would make rubbish Horror Movies if nothing else.

Get Out of Your Cars And Use Public Transport

When New Labour swept to power, a certain blubber-mouth boasted we would have 'An integrated transport system'. Of course I am talking about John 'Judge me on my achievements' Prescott here and he is known for the odd word gaff - perhaps he meant 'disintegrated transport system'?

Trains - Don't You Just Love Them

OK, so you detect I have had a bad experience lately and that's true. I was one of those unfortunates who swept up to Preston yesterday having paid £195 (single) for a First Class Ticket to do some work. Not only was the power not available, the train some 45 minutes late and the 'breakfast' a sumptuous mixture of dried leather and glutinous Stilton between dry bread slices that tasted like a baby's nappy but I was comforted by the two people on the next table who bragged they always buy second class and sit in first because even if challenged they pretend to be foreign. Having arrived suitably late and angry so missing my connecting transport, I got to my meeting late and literally cheesed off.

No worries, I thought, the relaxing journey back, a snip at £76 (single) would ensure I arrived home content and unstressed as a celebrity in a rail advert. Not quite. The Pendalino ran out of juice at Milton Keynes, as had all other trains. I had been served exactly the same sandwich (probably re-packaged from the morning trip), a banana and a drink. At least the power worked - until we got to Milton Keynes, that is. It turned out that desperately close to my home, power line failure meant all trains had ground to a halt somewhere between North Wembley and Hemel Hempstead and we were stuck in the land of Concrete Cows.

Milton Keynes - The New Utopia

Maybe John Maynard Keynes was angry I had taken his name in vain recently and blighted me from beyond the grave but I was stuck in the town sharing his name - surely no coincidence when it comes to failed theories. They say that when the town planners were designing the layout for the New Town, they used the map as a table cloth and so wherever they put their tea cups down, Irish Navvis built a roundabout. It has a ring of truth to the story.

Having spent about an hour on the rapidly cooling train, I decided to seek advice and found helpful station staff shrugging their shoulders in a display of customer service worthy of Fawlty Towers. Having got to the message boards it became clear there were delays. After a further hour in the freezing station it became apparent that the trains were not going to move again and other transport would be laid on for the fairly quiet bunch of 200 or so commuters trapped in the Neverland that is Milton Keynes. Fortunately, I managed to get a family member to drive up to get me and my SAS survival training paid dividends when I found a nearby Indian Restaurant which allowed me to sit in their waiting area sipping a Cobra while I waited. When I left, still 200 slightly frozen commuters anxiously awaited their laid-on buses in the positively balmy temperature of minus 6 Centigrade.

Jokers Galore

Of course, it's not worth trying to claim back a penny as I haven't the energy or life expectancy to get an answer from the Complaints Dept at Virgin, so that's a total of £271 for a round trip of total dissatisfaction. And before you say it, Second Class would not have been much cheaper.

Tomorrow, as I often do, I will travel to London for £22.50 return plus £5.80 parking (plus annual price hikes) and have the privilege to stand for the 20 or so mile trip. Off to jail should I wait until 9.30am and get an off peak ticket and then travel back at the wrong time, even though there is no price option to do that. You get fined as you walk out at St Albans Station for the criminal you are.

Quite what makes any Government Minister think we are going to get people out of cars and into Public Transport at that level of price and service is beyond me. As Richard Branson laughs all the way to the Bank on his extortionate prices (they offered me a chance to go on an earlier train for a mere £120 extra one way) and the supposed 6% hike in prices are scorned on the nice-earning green belt servicing lines, and don't forget the car parks ramming up astronomically prices on pieces of land they pay peppercorn rents on, it turns out the commuting public are the jokers as we put up with it.

We will never solve the issues of carbon emissions and congestion this way. We have to somehow provide public transport at affordable prices and a good service, and join it all up. It can be done as others do it. I recently travelled from Verona to Milan - fully 220km - on a decent train, with a seat, in rush hour and all for €11.70. It was blissfully only 3 minutes late and arrived at one of the most magnificent buildings in Italy - Milan Central Station - complete with Christmas Market outside.

But we Brits love a moan and where would be without the railway, eh?

Would YOU Buy A Car, Mr. Brown?

As Superman Brown urges banks to lend and us to spend and contemplates saving the car industry, I guess the acid test is whether HE would buy a car or not in these current times.

Monday’s Telegraph reported that thousands of motorists are suffering from the concept of ‘negative equity’ much like home buyers. This phenomenon comes about when someone buys a car on lease with a deposit and monthly payments, with the idea of having the option to buy the car at the end of the lease with a single ‘balloon’ payment based on the estimated secondhand value of the car at the time when the lease was taken out. Such leases are known as Personal Contract Purchase which handily spread the cost of a car purchase over a couple of years.

In the old days, such schemes were reasonable value, and those on company car leases if offered a chance to buy their car at the end of the lease, often would be incentivised to look after their car. The reason was that the lease company estimates on the secondhand value of a company car at the end of a lease would be significantly lower than the average care car of the same age as the stigma of company reps driving cars into the ground usually made them only good for auction.

But, now that the bottom has literally fallen out of the secondhand car market after the failure of the new car sales market, cars coming to the end of their leases are actually worth a great deal less than the original estimates when the lease contract was taken out – leaving a considerable negative equity. The Finance and Leasing Association has confirmed that many people who took out such contracts are now handing their vehicles back. Both the person with the lease contract faces excessive balloon payments and the lease company also lose out as the cars are auctioned at considerably lower than the prices originally estimated

Bigger Wasn’t Better

Those who used such contracts to afford more expensive cars (perhaps this is why we have seen the glut of swanky high-end motors and 4x4’s on British roads in the last 5 or 6 years?) will suffer most as more expensive cars have been hit the most.

So, when Mr Brown dwells upon saving the car industry, there is an infinitely more complex situation at work. Car sales in the UK dropped 21% last quarter which is a far cry from the massive declines seen in the US, but there is always next quarter and a registration change to think about. Further, any bail out to the car industry will not be to help stimulate sales but to mothball production lines and prevent mass unemployment as there are an estimated 800,000 jobs associated with the UK car industry. This report shows that there is little point in people going out and buying cars if the lease contracts mean they will pay way over the odds or indeed to buy a fast-depreciating asset.

Utopian Britain

Once again, in the dreamworld that is Government these days there seems to be a vain hope that by borrowing more they can rekindle the excesses of the last decade. The nightmare that is reality in the country says no one has the appetite and confidence, let alone the money to make that dream a reality. Then again, I don’t suppose Brown, Mandelson and Darling have had to worry about paying for their own vehicle or transport since becoming Ministers which shows just how out of touch with reality they can be.

Old Habits Die Hard

As a footnote and on a different subject, I was little shocked to read in Private Eye that Goldman Sachs made a loss of $2.1bn last quarter and still paid out $2.6bn worth of bonuses (even though they said they would not). Good to see all that bail out money being put to good use then. Happy days for all the old gang too as the FSA has lifted its ban on shorting, which did not stop several culprits losing $30bn in a single day’s trading on a single share (VW) after the ban was imposed. It’s nice and official now and shows the system is getting back to its normal, shady self.

Roll on 2009 bonuses now the banks have been saved.

What Exactly Was That £800bn Bail Out Designed To Do?

When Gordon Brown 'Saved The World', as he modestly put it, he used taxpayers' money in an unprecedented way and volume to shore up a business sector that had used a flawed business model to go bust.

Make no bones about it - without Government putting up over £600bn in loans, guarantees and capital to banks, several would have failed fatally. Such decisive largess has been welcomed by the British Public who now view Gordon Brown as a saviour in hard times. But the question remains, what precisely was that vast sum of money meant to do? Was it ever going to be enough? And, having saved one vital industry from going belly up, which others will have to be saved? Have we just preserved the jobs and salaries of a few failed executives?

The Domino Effect

I have talked a lot about companies Hitting The Wall when in a comparatively short trading period, the recession bites so hard they quite literally fail. Starting with Northern Rock, we now have a whole spate of High St calamities from MFI to Woolies to Adams to Whittard to Savvis to Wedgewood. These are not just any old companies - these are household names. As the Car Industry struggles en masse against dropping sales and most companies see order books starting to dwindle, there is no doubt we are in for more bad news.

The problem is that as order books start to fail and revenues are impacted, companies need cash to survive. Meanwhile, banks are recovering from all that stupidity over the last 10 years and the last thing they want to do, Government urging or not, is to lend money just to pay salaries - that has never been their business model. And now that Government is meddling with their mortgage books and loans to give individuals more time to pay debts while the job situation worsens and house prices plummet, plus greater protection will be afforded to those who get into financial difficulty, it is highly likely that their lending policies will get even tighter to make sure their exposure to more debt failing is minimised.

Which all sort of flies in the face of what the Government's use of taxpayer money was meant to do.

Forces At Work

You see, banks have to get their books in order. They blew a lot of stupid money in the past and partied happily paying themselves and shareholders handsomely for their cleverness. Now it has all gone badly sour and so the priority is to get their balance sheets back in order, strengthen their policies and ensure their own credit ratings get back to normal so that they can start attracting new capital. And of course, we as taxpayers have a vested interest in that as a) we are now shareholders of several banks and b) we underwrite their balance sheets - totally. We WANT them to behave sensibly so that we can a) get our money back, b) hope we can actually have some benefit out of our 'investment' and c) the credit ratings of the banks will be a direct reflection on the UK plc's creditworthiness which reflects outsider confidence in our ability to repay our bills and so ensures the Government bonds used to raise all this cash are actually worth something.

The reality is that we, as 'shareholders' in the banks, do not want them to go out and starting blowing money the same was as before as effectively, as Robert Preston alludes to, WE are the banks for the foreseeable future.

So About that £800bn Bail Out

There are two diametrically opposed things at work, the way I see it. On the one hand we have protected the banks from collapsing and as we all are aware now, in many cases there were just matters of hours before banks could have gone bust. On the other, the Government want banks to behave in much the same way as before, albeit with a few constraints, and get lending levels back to August 2007 levels.

The two things are incongruous - you either save the banking system and get some sense into the business model so there is stability or you pump more and more cash into a system that is flawed with a potential of an even more spectacular failure in the future.

What if Hadn't bailed The Banks Out?

The resultant financial mayhem had the Government not stepped in would have been beyond imagination, I am sure. However, I also not sure that many really understood what might have happened if a number of banks had been allowed, as the USA did to Lehmans, to fail. It could be strongly argued that Northern Rock was a floating disaster with a ruptured business model and if it had to stand up to a Lord Mandelson Test of worthiness it would have failed dismally in terms of strategy. The mortgage book could have been saved as it was worth something and the deposits were largely guaranteed by the FSA schemes - all Government really had to do was to ensure all savings deposits were guaranteed.

Further, RBS has traded with a massive £161bn gap in funding as it had gone on a greedy spending spree that saw the CEO, Fred Goodwin, culminating in winning a bidding war for ABN AMRO that was probably more exposed to bad debt than most for massive £50bn+. If any other company had done the same, it would have been allowed to have sunk. But RBS is a flagship UK Bank now, gone are the days of sleepy backwater provincial bank. But isn't that the price you pay for monumental business cock ups? To save RBS firstly exposed us all to £1.3 trillion of liabilities (yes that's bigger than our GDP), and secondly exposed us all to the stupidity of a business that had failed.

Was the objective in all this just to stop collapse and sort out the mess or to preserve a status quo that either saved useless senior businessmen their jobs and continue their ludicrous lending activities?

The question is pertinent as the Government's Utopian view is that now they have saved the banks, they want them to lend more. The simple logic says that this cannot happen. There is a recession on for starters and secondly this is what got them into the mess in the first place.

You simply have to sort out the mess first before we can properly see how the system can progress again. And I think Mervyn King is right - ultimately, the £800bn bail out was a knee-jerk reaction without knowing if it was going to be enough, followed by a succession of costly nervous twitches to fiddle with taxes to try and stimulate a very alarmed population into behaving like before. There is no money out there for that to happen and with us all borrowed to our eyeballs already and fearful of our jobs, we want to hang on to our money for once - that makes sense.

The Cost of The Future

I ask this question because I am exercising my own 'Rational Expectations' as I face up to a business and personal future. I think the Government had little understanding of what it was doing in putting together the bail out package. By and large it has saved the skins of a number of executives who showed poor business acumen and were motivated by greed. I do not think the Government knew how much the whole thing would cost as applying old theory to modern times glosses over that the economy today is radically different from before and the financial system itself is far more complicated than ever. Globalisation has wrought a very complex structure into the world of business and finance and it is almost impossible to guess the real cost of saving the system as is.

I would argue, that by allowing some natural failures to have occurred, the Government and the rest of us could have got a better idea of how bad the situation was and I think that could have been done without hurting a single investor or borrower in the instance of Northern Rock. I think the merge of Lloyds TSB and HBOS was both stupid and downright uncompetitive as the Government intervened at the highest level to make it happen and then shored up Lloyds TSB's balance sheet to make it work - in other words they were in no financial position to have made an offer in the first place.

I also think that as a group of taxpayers we have had our future payments used as collaterals to fund vast loans for all this guesswork and we will all pay a very heavy price in the future. I think the path of huge Government borrowing is not right - you have to get some balance here. The British economy has changed drastically and only 15% of our GDP is from manufacturing and only a fraction of that from exports - so our weak currency does not help us despite the reverse bargain hunters from the continent buying our imports at a lower price.

I think the Government plan to kick start the economy is incongruous - you cannot save the banks and increase lending. The banks have to be far more prudent and no-one is going to lend against a falling economy and asset values. Spending on new industries and internal projects is all very well, but in a world where cheaper, imported labour has grown in the UK, will it actually provide jobs for British people or just cause another new influx from the EC countries of unskilled, lower cost workers?

Look At The Bottom Line

It would be sensible before we all get slap happy from patting Gordon Brown's back that we just stop and think. If a plan doesn't sound right it's probably because it isn't right - and half a plan implemented today rather than a full one tomorrow means we will always be stuck with the half plan. And rather than us sitting back and not really caring, we ought to ask these questions in earnest.

Why? Because we are the NEW BANKS that are providing the funding for it. The bill is right at our feet and we should ask about every penny spent and yet to be spent.

2009 - A Year of Debt Consolidation

I am sure I am not alone but I actually drastically reduced the amount of money I owed last year. By liquidating a few ISAs and realising a property investment, I reduced my credit card debt to zero and reduced my mortgage debt by over a third.

OK, so my wife is an IFA (Independent Financial Adviser) and thanks to her wise counsel we sold the ISAs when the FTSE was at 5400 but our property dream was soured by a small loss. However, overall, it means that between us, and thanks to her choice of a 0.49% above base tracker mortgage, our outgoings on debt servicing has collapsed to a small fraction of our income. Again, thanks to the clever mortgage my wife chose, we have a savings pot which we have bolstered from our debt-reduction to access in case of emergencies. Further, our plans this year are to forego expensive holidays and spend wisely on home needs. We had our most frugal Christmas for at least 5 years by my estimate although we had at least the same amount of fun and entertained friends far more.

My point here is that we have made conscious and, dare I say it, strategic efforts to weather a storm.

A Business View

I work with firms to help them grow and so I have a precarious existence at the best of times. In good times, I compete with companies investing in expanding their employee base and in tough times I compete against contracting costs. It means my Value Proposition as a Business has to stand both tests of scrutiny. In the last few months, I have been able to win new business and consolidate existing clients, and helped one whose business model is favoured in tougher times. So far, I have been able to not just maintain revenues but actually increase them.

That has come about from a very conscious and strategic change in my plans coupled with a sharp increase in work rate. It also focuses the mind. Some contracts and potential clients who I had hoped would do business with me, I have simply not worked on - there is always a whiff of reality over wishful thinking to be had in tougher times, something I have preached loudly to anyone who might listen.

Combining a Personal & Business Strategy

What my wife and I had done over the last few months, almost without discussing it in the same context, was to modify our personal and business outlooks to coincide. There was no point in me believing my business was recession-proof even if I can position the services as recession-busting or easing, the fact remains that businesses will have to cut cost and that often means rational thought about service value goes by the wayside. Reality says that I should not expect my business to continue to perform the same way in a recession and I would certainly have to modify my personal thinking about money and how I spend to match this. It came about without a sit down pow-wow, we just both thought the same way.

We may not feel more confident about the future at the moment but we are actually more prepared.

2009 - Poor Outlooks

There is no doubt we planned with the worst in mind and much of it made sense anyway - we have not missed out on anything as a result. However, the recent KPMG Report on 2009 outlooks with reference to personal debt has brought our decisions into sharp focus. The accounting firm predict there will be a big increase in Insolvencies this year with some 150,000 people going bankrupt or entering into arrangements - up from 104,000 in 2008.

For most of us, debt has become a way of life. If you are a student, you now start your working life with a long term debt and banks are instructed to treat this differently so that such students can still have access to more credit like loans, credit cards and even mortgages. As a nation we have an enormous amount of debt which is not secured on any asset at all beyond our mortgages, with over £1 trillion of it racked up on credit cards alone. We have been, for some time, a nation with a ticking bomb of debt.

Up until August of 2007, everything was fine. Most of that unsecured debt was more than covered by the equity in our homes. That has changed dramatically and we now know our homes are worth the same as they were in August 2004 and are still dropping in value. For a large proportion of all mortgage holders, the equity in their homes has collapsed to nothing and in many cases gone negative. The threat of personal insolvency is very much a reality as we move into 2009.

What the KPMG report illustrates is that most people are 'ill-equipped' to deal with the situation and for those heavily in debt, the costs of their day to day outgoings and debt servicing have not been sufficiently modified or possibly cannot easily be in order to meet their obligations going forward.

Debts Write-offs

In 2008 it was estimated that creditors had to write off some £1.1bn 2009 in debts to customers. For those entering what is known as Individual Voluntary Arrangements (IVAs), they had an average of £47,800 of debt which was agreed to be paid back at around 38% of its value. Over 2,500 people entered IVAs with over £100,000 of debt - and the predominant creditor is always credit card companies.

KPMG say that by the time people deal with the situation, the roll up of debt, interest payments, penalties and additional borrowing to meet minimum payments are so high as to make the only way out some kind of IVA or similar as they had no realistic hope of meeting payments. What KPMG say is that those with seriously high levels of debt are ill-equipped to deal with the hardships of recession and downturn - with the further risk and threat of job losses now a reality, many of these people will have little choice but to go bankrupt - meaning the loss of all assets including their house.

A Joint Plan

I don't assert that my wife and I were really clever but we have always had a sharp focus on our responsibility and accountability when it comes to money. It came as second nature to us to do something about our situation while we could so that if anything bad should happen, we could weather the storm without seeking Government handouts or help. Most people think the same way, I would imagine.

There are those though who had not understood what the boom of the last 10 years meant. When the Government keep standing up there telling us our Economy is stable and that Recession cannot affect us because of how clever the Ministers were, many believed it for what it appeared. I can really understand that even if I saw through the guff Gordon Brown and Tony Blair tried to make us believe. There is no doubt in my mind, they have led ordinary families into some kind of Utopian view of the world and how well off they were and it was simply not true. The cost could be very heavy for all thoe individuals.

My only advice - and most of it comes from my IFA-qualified wife - is that anyone who is either experiencing hardship from debt or who has heavy debts to start talking with creditors early - and to keep talking. The worst thing to do is to avoid the obligations as the Law favours the creditors especially if debtors make no effort to either pay or talk.

I also advise to get professional help as early as possible. Many IFAs, Lawyers and Accountants are fee-earners only and so advice can be expensive. There are many bodies such as the Citizens Advice Bureau that can offer some advice for free. However, if you do have a financial adviser, now is the time they should earn their fees.

I can offer my wife's firm, Haymarket Associates (www.haymarketifa.co.uk) as a source of help.

Formal Protection

One area the Government has helped on after helping create this 'Utopian Britain' is that there will be new legislation coming into being which will avoid the need for bankruptcy for relatively small debts - and that's a good thing as bankruptcy carries an awful and practical stigma.

There are several official levels of protection from debt as last resort:

• Debt Relief Orders (DRO) - Planned for April 2009 this will be a mechanism for those with debts of less than £15,000 to be protected from creditors if they have minimal assets or surplus income to service the debt. It can mean the debt will be written off.
• IVA - This is a deal between you and your creditors overseen by an Insolvency Practitioner. It has less associated stigma and can possibly mean you keep your home but does mean you pay some or all of your debts in one go or over an agreed period and plan.
• Bankruptcy - It's the traditional way of escaping overwhelming debt and in the US is actually not so bad. In the UK it has a terrible stigma and can blight your credit rating and more for a long, long time. It will also mean that you will certainly lose your house and other assets to pay as much as you can to creditors whether you like it or not.

Plan Now

My only practical advice is to sit down and plan now. Debt has a way of spiralling very quickly and getting out of control and don't be fooled by low interest rates. When debt gets hard to pay, creditors start charging penalties and they can be wholly out of kilter with base interest rates.

I would advise that you be sensible about prospects going forward. While all may seem pretty good now, job prospects OK, things can rapidly change. I have blogged about this incessantly and argued with people on the subject as people honestly say to me that the recession is not real. I am not proud or happy to say some of those people have been badly affected since.

Debt on a personal level and business-wise needs to be balanced. For many individuals and businesses, it has become a large source if not the only source of funding for day to day expenditure. If that is the case, do your planning now.