Is 20% VAT Fair?
There has been a lot of fuss about raising VAT to 20%. I‘m in favour though
- Most countries in Europe have a rate of 20% or over.
- There is no VAT on food, so perhaps instead of eating out all te time, it’s time to learn to cook. After all, there are masses of books and programs on the television. There is no VAT on books.
- There is VAT on fuel, so change your driving hsbits and use less. This a good thing as we will cut carbon emmissions. Osborne should have raised fuel taxes substantially, though!
- There is VAT On building work, so perhaps it’s the time to learn to do things yourself.
- There is VAT on consumer goods, such as telvisions, but then do you really need a four metre screen. I suppose it goves a better picture for those who watch Royle Family style with endless cans of lager. As large screen TVs use a lot of energy, there is a special case for taxing the larger screens heavily. But you can always buy one before next January. It could be argued that as virtually all consumer goods are imported , that a drop in demand would be a good thing.
- But my main reason for liking VAT is that everybody pays a bit. Remember that because of pension and income tax changes, many people will have a little bit more to spend.
A Budget To Create Jobs in an Unexpected Way?
One of the provisions in the budget is that if you start a business outside of the South East, you will get a discount of up to £5,000 on NIC for each of the first ten employees.
This is very generous compared to other parts of Europe, such as France and The Netherlands, where social costs are a big cost of starting a business. Remember that over the last twenty years, the French have been one of the larger groups to move to the UK.
So will it mean that entrepreneurs will look favourably on the UK, as a plsce to start a new business, especially as UK income tax is lower than many places in Europe. For instance we have a tax allowance of £7,400 before we pay tax.
The more I look at this measure, it sticks out as a very good idea. It will be interested to see what the rules are and how they are interpreted.
But just imagine, you are something like an Australian or American software company, who needs a European support office. Leeds, Liverpool, Newcastle or Manchester, all of which possess good air links to the rest of Europe, must have moved several steps up the list of where to site that office.
Zopa Rates Around the Election
Let’s assume that this election without a full outcome has put a lot of instability into the money markets. According to all the commentators it should. But then those traders in the City are in business to make money in the short-term and not place money for the greater good in the long-term.
So is there a real measure of what real people think about finance?
I lend money on Zopa, which is a peer-to-peer lending site. I’m not interested in short-term gains, but sensible and safe long-term growth. I get about 5.5% before tax taking everything into account. It’s also fun and a bit like gambling without the risk.
So how has Zopa performed over the last few weeks? And specifically what have their rates done?
Zopa Rates 2010 – 11th May 2010
If you look at the rates, the pattern appears to be very similar to the last few months. There has been a slight upward trend of rates, with a squiggle around the turn of the month. The latter is because most Zopa loans pay around the beginning of the month and this affects the rate as most investors reinvest their returned payments.
So does this mean that most Zopa users have just been carrying on as normal and letting the lunatics in Westminster and the City get on with their high-profile nonsense?
I shall report on this in about seven days time, as I think it will still be nice and stable despite the politics.
Taking Risks
In this article in The Times yesterday Carl Mortished was arguing that we need more risk-takers. He ends with these two paragraphs.
The solution to our economic problems is not to tie everything down but to unwind the screws, loosen the bolts. We want true risk-takers, those people who centuries ago might finance a ship destined for a spice island. Someone truly prepared to risk the shirt on their backs, who fears that his “monstruosity” might bite off his own head.
Financial capital is now fleeing Britain, heading to the Far East. A long queue of companies is chasing the money, including our own Prudential, which is floating a business on the Chinese stock market. The true venturers are over there, not in Britain.
He is absolutely right.
So am I still taking risks?
Yes!
For a start I’m going round the world. Not much you’d think, but I’ve lost my wife and youngest son in recent years, five weeks ago I had a small stroke and the medics have said I’ve got a leaky heart valve and the heart rhythm is up the creek.
So take risks and enjoy life. Live the quiet life and you’ll never understand what it’s all about.
Zopa and the Election
I am an inveterate analyser of data. After all it’s what I’ve done since I was about seventeen and I successfully explained the shape of the response I got when a small ferrous inclusion in a copper wire passed through an electromagnetic coil.
That was forty-five years ago.
So can all the data I’ve got from Zopa be used to explain how people feel about the election and show how Zopa is affected by what is going to happen on May 6th?
Here’s a graph of my returns since the start of the year.
Zopa Returns - 2010
The four lines on this graph are.
- The rate at which money is lent out in the A* Rate.
- The return on money in Zopa over the last six months. This takes account of any bad debts.
- The return on money over the last year. Bad debts as before.
- The return on money over the last year, adjusted for arrears. Bad debts are accounted for and if arrears are greater than a year ago, they are counted as bad debts.
Taking the last three it would appear that things have changed since the election was announced, as they have all dropped and then recovered slightly. This is solely due to an additional bad debt, caused by the death of the borrower. No system can take care of that very sad event.
Probably the best measure of the return is to look at it in the middle of the month. Today is the 13th, so the return on money over the last year is 5.42%, 5.35%, 5.38% and 5.18% for the last four months. So it has dropped 0.2% because of that bad debt. If that is eliminated then the return for April 13th would actually be 5.37%.
So the election has done what you’d expect and had no affect, as most deals were done whilst the date of the election was not known.
But look at the A* borrowing rate.
If you look at the graph, you’ll see that the rate often drops around the 5th to the 10th of each month. This is probably because most loans are paid around the turn of the month and the effect of that money being reinvested is to drop the loan rate slightly because of the supply of money being increased.
But this month it has dropped further than normal after creeping up slightly for the last month or so. Perhaps the rate has increased because of high demand for money.
Could this be that as reported retail sales have been high this month and people are borrowing at a rate they trust to finance it? Or are they worried about the new government increasing VAT?
But really there is no hard and fast evidence that Zopa is being seriously affected by the election.
I shall return to this as the elction approaches.
Harry Markopolos – 2
I bought the book from Waterstones yesterday and I have read the first few chapters on the train home from London.
Brilliant!
He spotted what Madoff was up to in 2000, but the SEC wouldn’t listen and took no action. He also alleges that others felt the same about Madoff, but were happy to take the money.
My respect for Harry grows.
Reading his book, just increases my distrust for financial advisers. I think it is why I like Zopa. There the money is under MY control and I live or fall by my decisions. I know nothing about stocks and shares, so I keep clear of them.
Harry Markopolos
Harry Markopolos is the sort of man I like.
In 2000, he was asked if he could find out how Bernard Madoff made such high returns. So he reverse-modelled Madoff’s results and concluded that he was either running a giant Ponzi scheme or he was illegally trading clients money.
He stuck at it and in 2005 to sent a document to SEC regulators stating.
Bernie Madoff is running the world’s largest unregistered hedge fund. He’s organized this business as “hedge fund of funds privately labeling their own hedge funds which Bernie Madoff secretly runs for them using a split-strike conversion strategy getting paid only trading commissions which are not disclosed.”
No action was taken and we all know now that he was right as in December 2008, Madoff confessed and he is now spending the rest of his life in jail.
Harry has just written a biography called No One Would Listen; A True Financial Thriller.
I shall be buying.
As to Madoff, he just proved that if something is too good to be true, it probably is. It’s just that when people do what Madoff did, no-one listens to the Harrys of this world.
How to Repossess an Aeroplane
I found this story on Popbitch.
It just shows that there are some funny jobs in this world.
But it also reminds me of a story about how to repossess a taxi, when the borrower is behind on the payments. You may know where he lives, but then you can never be sure whether he is in and if he knows you’re after him, he’s probably got the car and his livelihood securely locked away elsewhere.
So you go to a pub on an anonymous housing estate and phone his firm for a taxi. You say that you always have X and are prepared to wait. The firm are always happy to oblige if he’s working. If not, you say forget it.
Now taxi drivers usually pull up on the pub forecourt, leave the engine running and run into the pub shouting something like “Taxi for the Station”.
When they do, you just get in the taxi and drive away.
A Tax on Coeliacs – 2
It’s funny, but all the budget forums I’ve read so far have got coeliacs in them moaning about the tax on cider. There are three in this article in the Guardian for a start.
If nothing else, Darling has at least got coeliacs talking about their condition on the Internet.
As they make up one percent of the population, could they have an effect on the election? Probably not, but it does show how stupid Darling is. Surely, he needed to bring in a flat tax rate for drinks like cider, so that cheap crap was taxed heavily and the good expensive stuff wasn’t.
But then in most cases you have to be stupid to be a politician!
The Anonymous Widower 