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Gordon Brown, the G20 is over, time to go

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Gordon Brown, the G20 is over, time to go


Gordon Brown has received a great deal of praise from world leaders at the G20, one assumes, because he managed to get so many leaders together in one place to discuss the global economy. But talks of a breakthrough or global deal are a bit strong, lets face it, all we have been given is a set of guiding principles. Nothing is binding and, as we all know, when the dust settles, things are rarely as they at first appeared. For example, tax havens will be named and shamed, but that won’t stop them doing what they have been doing for years, threatened sanctions are unlikely to have any real impact, even if they are implemented, which is a very big IF!

Everyone has agreed that banking and financial market regulation has to be tightened, but this is meaningless, because no-one will agree that there can, or should be a world regulator. Therefore, all we will see is each country implementing their own regulation, presumably based on the guiding principles agreed by the leaders. But rest assured, someone will be a little more flexible, so that they can attract the ‘banking and financial services business’ to their shores, stealing it away from London. The primary reason that London was the banking and financial services centre of the world, was Gordon Brown’s own “light touch regulation“, now it is likely that we will toughen regulation so much, that we will lose most of this trade. Some will argue that this is okay given the circumstances, but, truth be told, banking will continue, just somewhere else and we will have to find something to take the place of the 20% of GDP that we will lose if London is no longer the banking and financial services centre of the world. Has anyone any idea what we have in our armoury to deal with this massive reduction in trade, tax receipts and jobs? Thought not? Talk about throwing the baby out with the bath water.

Sarkozy may be a little petulant, but he is not stupid, he wants more regulation, because he seeks a level playing field so that Paris can take over where London left off. Gordon Brown’s light touch regulation was a failed policy and we shall all pay the price, however, if we now over-regulate for political expediency, we shall lose future, better regulated business to other countries such as France and Germany. Surely it is possible to regulate without killing off this significant contributor to our massive balance of trade deficit? A failure to get the balance right will cost us all and that is another good reason why Gordon Brown has to go and go now.

It was Gordon Brown that coined the phrase light touch regulation and he even had the temerity to lecture other European leaders on the same subject. Now, this same man is telling everyone that there must be much tighter regulation of the banks and financial markets. Talk about turning on a sixpence! Under Gordon Brown’s light touch regulation, it was possible for the financial markets to introduce new financial products with such complexity, that few people understood them, or the associated risks. Everyone knew of these instruments, but no-one, not even the regulator, asked any (or enough) questions. This, together with an overheating housing market and increased personal indebtedness is what caused the crisis. Our ability to manage this crisis in the UK has been exacerbated by the fact that UK Plc is massively in debt, not necessarily based on the Government figures, but when taking account of all the off-balance sheet debts that ought to have been included such as PFI, pension liabilities etc

Of course, Gordon Brown cannot be held responsible for the world economic problems, but he can and must be held culpable for the problems that have become evident here in the UK on his watch. It was ultimately his job as Chancellor to ensure that the financial markets were kept in check, Government borrowing was accurately reported and kept under control and that the availability of credit be actively managed, both secured and unsecured. The fact that our economy and housing market was overheating was known to Brown, he received plenty of warnings, he chose to do nothing. He was in denial, but he could no longer pretend everything was okay when the world banking crisis forced government intervention here in the UK. Let’s not kid ourselves, whether or not the world banking crisis happened, this country would have gone into recession. It was Gordon Brown’s job as Chancellor to ensure that boom and bust was at an end, he failed and in a spectacular way.

History will prove that Gordon Brown was a poor Chancellor and that he missed or chose to ignore every sign that our economy was running into trouble. It is only the world crisis that has diverted attention from his full culpability. What we must not do however, is allow this inept former Chancellor to continue making financial decisions that will affect each and everyone of us. His past judgements have been seriously and catastrophically flawed and by his own admission, we are now in “uncharted territory“, therefore how can any of us have any confidence in this man? Gordon Brown has been universally praised for his decision to make the Bank of England independent. However, the tripartite system that was introduced as a direct consequence was not clearly thought out given it has spectacularly failed, with The Treasury, Bank of England and the FSA blaming each other for the mess we are in. Therefore, I would argue that the jury is still out on whether or not Gordon Brown’s stated objectives were achieved when he gave the Bank of England independence, whilst stripping them of other fundamental responsibilities. Take this ‘achievement’ away and what other positive legacies has Gordon Brown given us…none that I can see? But there are literally hundreds of failures, I won’t name them all because it would take too long, but a short list would include a decimation of the private sector pension schemes through the removal of tax breaks, whilst allowing public sector pensions to get out of control with an unfunded liability of around £900bn; The introduction of a overly complicated ‘Tax Credit’ scheme which still ‘loses’ £2bn every year through errors and fraud; A massive public sector debt, much of which has been hidden from sight through fancy footwork and an insistence that certain debts remain off-balance sheet; a huge increase in environmental and other stealth taxes which are then funneled into non-related pet projects rather than being used for the purpose stated at the outset; and, a massive increase in direct and indirect taxation.

The mainstream press are going on about an expected “bounce” in the popularity of Gordon Brown. That may be true, but then we deserve what we get, because this is a man who is primarily responsible for getting us into the mess we are in. No world leader, naive enough to praise Gordon Brown, should be permitted to sway public opinion from the harsh reality of Brown’s policy failures, rank incompetence and inability to heed warnings. Time to go Gordon Brown, maybe the public will then look upon your efforts at the G20 as an act of contrition and be more forgiving when we look at your legacy.

Posted in General, Labour, World | Comments (3)

Gordon Brown continues to fail the British people

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Gordon Brown continues to fail the British people


How on earth do we stop this mad man that is Gordon Brown. Not only was he the architect of the financial system and regulation that lead us into this disastrous mess, but he is also the man that believes, he is more qualified than anyone else, to get us out of it. This deluded man is convinced that he bears no responsibility for what happened, even though everyone else knows differently. This vain man even seeks to lecture the leaders of other countries on what they must do to overcome the economic meltdown that is happening around our ears. This inept little man constantly tells the people of this country that the problems that have beset the United Kingdom are a direct result of economic and commercial mis-management in other countries, such as the United States. This incompetent man has the temerity to inform us that we are best placed to “weather the financial storm“. Yet he knows that this is not true and, that notwithstanding, no other economic expert agrees with his assessment. No doubt this could explain why it is that Gordon Brown has never told us why we are in a better position.

Gordon Brown, the unelected the prime minister of this country is a fool. He was a very poor Chancellor, arguably one of worst in our history. He has built on that well earned description by becoming one of the poorest, most incompetent prime ministers in recent times and there are plenty of former PM’s that could have been considered for that award. Any good leader would not assume that only he has all the answers and yet, Mr Brown constantly spouts on about the fact that he has the solutions and is best qualified to lead us out of this deep recession. A good leader would surround himself with knowledgeable people, not loyal soldiers, yes men and women, or business people seeking a knighthood or peerage for their ‘services’. Any good leader would know that a top team would always challenge the status quo, keep them on their toes, ensure that they don’t start to believe their own publicity, question, cajole and nudge. Any good leader would not be cowed by strong people around them, but instead, seek their counsel, listen, question and heed. But, Gordon Brown has clearly demonstrated that he is NOT a good leader.

Let’s consider a few other things;

Gordon Brown, as Chancellor, was the architect of the tripartite arrangement formed between the Treasury, the FSA and the Bank of England. Yet it was the failure and inadequacies of this system which allowed interest rates to be reduced so low that a housing boom was inevitable. Each party failed to respond to the experts that had argued the housing bubble was unsustainable and there was likely to be a crash. It was the failure of this system that allowed banks to grow at a rapid rate utilising funds raised on the money markets rather than the more traditional route of saver deposits. It was the failure of this system that allowed banks to package new mortgage backed securities that were then traded, but so complicated; few people understood them or the associated risks. It was the failure of this system that permitted banks to create a culture driven by greed, short-term profits and rewarded with massive bonuses. It was this system, which was set up to control, regulate and manage the City and the economy that ultimately failed on all fronts. The architect of this tripartite arrangement was Gordon Brown and he is ultimately responsible, instead, each party points the finger at another in the triangle. Not one party has had the humility or honesty to admit any form of responsibility.

Yet Gordon Brown’s incompetence is every where, for example; In spite of experts advising him of the risks, it was Gordon Brown that raided private sector pension funds. Perhaps in the belief that private sector pensions were the preserve of the rich, rather than millions of ordinary hard-working people. In doing so, he has raised around £175bn in tax revenues. But, at what cost? Roughly two thirds of (private sector) final salary pension schemes have been closed to new members, large company pension schemes have ended up with massive deficits. Pension schemes have collapsed and, of course, those within the private sector that have not been protected by employers pumping more money in will receive much smaller pensions. Meanwhile, Gordon Brown has done nothing about the public sector final salary pension schemes, the majority of which are not funded through an annuity, but out of future tax revenues. The latest estimates put the public sector pension liabilities at a staggering £1,071bn, that is correct, BILLION. As a consequence on the government’s inaction, the ‘average’ pension enjoyed by someone in the public sector is nearly 15 times higher than that of the private sector. Another blinder from the iron chancellor that was supposed to be Gordon Brown.

Here are a few other things that Gordon Brown either presided over, or influenced as part of the government machine;

  1. Introduced more stealth taxes than any other chancellor in history, equivalent to an extra 10p in the Pound on the basic rate of tax (source: Grant Thornton).
  2. Solld the UK’s gold reserves at the bottom of the market ignoring expert advice not to.
  3. Introduced ‘green taxes’ in the full and certain knowledge that any revenues gained were not destined to be invested in green initiatives. Yet another successful stealth tax to add to the collection. If you are starting to feel a little duped, then read on, I haven’t finished with Mr Brown yet!
  4. Successfully achieved the goal of becoming prime minister without going through the inconvenience of being elected by the people. This in spite of the fact that New Labour gained their substantial commons majority with 57% of the voters supporting another party. So much for the benefits of our First Past The Post electoral system.
  5. Was party to the sell out of the UK’s sovereignty to an unaccountable foreign ‘parliament’, in spite of a manifesto promise to allow the public to decide through a referendum.
  6. Destroyed the union and in the process, ensured that his countrymen received more money per head than those in England and Wales.
  7. Missed virtually every financial growth target announced in each successive budget without so much as a murmur from the press.
  8. Successfully managed to dupe the press into believing that he was an iron chancellor driven by prudence, when in fact he was a spendthrift.
  9. As the architect and driver of the revised PFI initiative originally proposed by the conservatives, saddled the country with a bill of £170bn which must be paid by 2032. Without having to include the figure as part of the public sector balance sheet.
  10. Managed to keep the £780bn public pensions deficit off the books, even though this is equivalent to over £30,000 per household and must be paid out of future tax receipts. Estimates of this deficit have now been increased to over £1trillion.
  11. Managed, without any consideration of the irony, to lecture people on their level of borrowings, whilst building up nearly £500bn of debt on the governments own ‘credit card’. If other recent liabilities are taken into account, this figure would rise substantially over £1trillion.
  12. Introduced and supported a complicated tax credit programme that has managed to lose £2bn every year through fraud and errors.
  13. Left the taxpayer saddled with £1.7bn of Metronet’s debt having been the person that pushed through the Private Public Partnership initiative for the London Underground.
  14. Managed to convince the public that local authorities were responsible for the doubling of council tax. Meanwhile he was actually placing responsibility for all additional services firmly with the local councils.
  15. Managed a real blinder, by camouflaging the inflation rate by changing the measurement from RPI to CPI.
  16. Underwritten £17bn of debt for Network Rail, without having to include it on the public balance sheet.
  17. Survived the embarrassment of claiming in March 2006 that 31,000 government employees had been trimmed off the payroll, whilst the Office for National Statistics claimed one month later, that the headcount had actually increased by 62,000 a difference of 93,000!
  18. Managed to introduce such a complex set of rules and regulations, designed to extract maximum tax take that the annual Finance Act (summary of tax changes in the budget) has increased from 300 pages or so in the 1980’s to over 10,000.
  19. At a time when businesses are struggling and people are having to tighten their belts, presided over a government that boasts some 78 acres of empty space in office buildings and grace and favour homes.
  20. Managed to push another 3.5m people into the higher income tax bracket, using a favoured trick of ‘fiscal drag’, where the tax threshold is raised more slowly than earnings are rising, so that workers end up paying a higher proportion of their income in tax.
  21. Twice shifted the timing of the ‘economic cycle’ in order that the so called “golden rule” would not be missed, resulting in a brazen massaging of the figures.
  22. Ensured that there are now twice as many tax collectors as there are nurses, demonstrating firmly where the government’s priorities lie.
  23. Masterfully convinced people that they are “better off under Labour” even though each family now pays more than £5,000 in extra tax, compared to 1997.

Then let’s take a look at how he has ‘fixed’ things, telling us how at least he was “doing something” as opposed to the Conservatives, who are, according to the supreme leader Mr Brown, the “do nothing party“.

He invested £billions of our money into the Royal Bank of Scotland, who are now expected to report a loss of £28bn. What level of due diligence was exercised before our money was invested into a bank with such massive liabilities? Now, we have a similar story with HBOS, here, losses have been reported at £11bn, same thing, did the government complete any due diligence prior to investing our money? I am not so worried about Lloyds TSB, they must answer to their shareholders, government and Gordon Brown must answer to the taxpayers.

Yet still more £billions of OUR money has been invested into the banking system by Gordon Brown, with the specific aim of easing lending to consumers and business as well as freeing up inter-bank lending. But this has come to nothing. Not satisfied with spending this money, yet more £billions has been pledged or spent on a bank ‘insurance scheme’ and, as is the nature of insurance, we can never truly know the extent of that commitment, other than the fact that with Gordon Brown’s track record, we know it will exceed all expectations. Over £1trillion has been spent or committed, for nothing, we have not been able to see ANY tangible benefit, in terms of what Mr Brown TOLD us we could expect.

In other words, he told us that our money was going to be used to achieve a specific objective or goal and nothing has happened. This time however, Gordon Brown has outdone himself, because nowhere in history, has a single politician spent so much money for so little, or more accurately, no return. Yet he is still there, grinning like a Cheshire cat and snarling at anyone who would dare question his actions. Anyone with an ounce of commonsense, for example, would have known that a 2.5% reduction in VAT would have little or no effect, set against a backdrop of high street retailers discounting up to 50% off the ticket price. But this arrogant little man went ahead, and as a consequence, he has wasted another £12.5bn or our money.

In the last week, much has been said about the fact that many of our most senior bankers have no relevant, professional qualifications. But ask yourself this, what qualifications has Gordon Brown got, (or did he have) that would qualify him to determine our economic future? None, zilch. He would normally be considered to have been qualified by experience, but just look above and you will see what his ‘experience’ leads to. The appointment of an inexperienced politician to the position of Chancellor of what was the 5th largest economy in the world, is akin to asking an engineering apprentice to act as Finance Director of BP.

But we are in a democracy; surely we don’t have to put up with this?

How naive we are as a people, we have been told we are in a democracy and we believed them. What type of democracy allows the coronation of a new prime minister, without any reference to the electorate? What type of democracy allows a party that received just 43% of the vote to have such a massive parliamentary majority? What type of democracy provides the PM with so much power, that he can spend or commit £1trillion without even referring the matter to a commons vote? What type of democracy allows its prime minister to continue damaging the country, its economy and its prospects without any way for the people to put a stop to it? What type of democracy allows a government to renege on a manifesto promise, without any form of recourse from the electorate?

What type of democracy allows a government to force through intrusive and overbearing legislation designed to spy on its own citizens, monitor their travel arrangements, emails, telephone calls, vehicle movements, medical records and share that information with another 780 government and private agencies? What type of democracy allows its government to shatter long held rights to privacy and liberty virtually unchallenged, to the detriment of the people? What type of democracy provides its people with no opportunity to impeach its leader if that person is considered to be acting against the interests of the majority? IT IS NOT A DEMOCRACY, it is an authoritarian dictatorship that serves the government of the time and not the people. We all need to catch a wake up, our whole parliamentary system needs a radical overhaul and members of parliament need to be reminded that they are supposed to serve the people, not themselves. If ever there was a case for the people of this country to have the power to push an eject button, this is it.

We, the people of this country need a way of bringing down a government or removing any minister that fails to act in our best interests, lies, or bullshits, not at a time that suits them, but when it suits us. Better still, we need to be ruled by people like us, not the self-serving, inward looking, expense grabbing, ego driven, twats that are currently lording it over us all. This description is not, of course, limited to the Labour Party, there are many people within other parties that simply do not give a toss about the electorate, other than once every 5 years or so when they would rely on our votes.

Posted in Big Brother, Civil Liberties, Conservatives, General, Labour, Lib Dems, World | Comments (23)

Politicians need a history lesson from 1929

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Politicians need a history lesson from 1929


Though I am no expert on the stock market crash of 1929 or the Great Depression that followed, what a pity that senior bankers and politicians did not study this subject and learn some of the lessons. There are so many parallels that it is uncanny and implies that people who should know better never learn their lessons.

In the run up to the Great Depression, ordinary people were allowed to purchase shares, whereas in the past it had been an exclusive club. In doing so, they increased demand and share prices started their relentless rise. This started to encourage more and more people to buy shares and, you’ve guessed it, the prices started to rise even further. The inexorable rise in share prices encouraged people to start to borrow in order that they could take advantage of the wealth creation that the stock market appeared to provide. The vast majority of these ordinary people had absolutely no idea how the stock market worked, it just looked like a one way bet. Brokers extended credit to share purchasers, in what became know as ‘margins’ whereby the purchaser could buy for example, $60,000 worth of shares, with just $6,000 of cash, the rest was borrowed.

The people of America felt rich, lifestyles improved after the austerity of the first world war and few people raised any doubts, those that did, such as President Hoover, tended to keep it to themselves, rather than be see as the Cassandra. Millions of people were encouraged to invest in the new gold rush that was the New York Stock Exchange, with little or no knowledge of the risks and inevitably with a ringing in their ears that you have to be ‘in it, to win it’. Banks and brokers stoked the money fever by extending loans secured on the shares. Inevitably the bubble burst, some were smart enough or lucky enough to get out before the crash, but they were few and far between. The vast majority of people lost all of their savings. There followed
the Great Depression, which lead to mass unemployment and affected virtually every corner of the world and it lasted 10 years. Some would argue that it also encouraged fascism and communism, if true, then it could well have been a precursor to the second world war.

If we exchange shares for houses, the parallels are uncanny. Many people have jumped on the housing bandwagon for fear of being left behind and a concern that if they were not a property owner, then they were nothing. In fact, there is some irony with that last statement because, as we all know, if you went to a bank and were a home owner, even if you owed £300k on your house, you were more likely to be able to secure another loan, than if you had no such liabilities because you rented. Somehow, owning a home had become the primary goal of a good proportion of the people of this country, actively encouraged by the banks. Loan to Value (LTV) ratios increased from around 75% to, in some cases, 125%. This implied that the banks felt that their investment was safe, because house prices would continue to rise, which meant that in a relatively short period of time, their risk would be covered by the rise in house prices.

If the banks felt that way, why would the buyers not? The ratios were also increased, allowing people to buy a house with multiples or 5 or 6 times their earnings, where previously this had typically been 2.5 times joint, or 3 times a single income. If that were not enough, many of the banks introduced ‘buy to let’ schemes, which allowed people with little or no money to build up a property portfolio in no time and of course, lead to an even greater demand for properties, leading to a further increase in house prices. So, everyone was making money, homeowners, the banks, mortgage companies, estate agents and of course, your friend and mine Gordon Brown, in the form of the Treasury.

After the 1929 stock market crash, Hoover introduced the Securities & Exchange commision to regulate US markets, this had the desired affect. However, over the past 20 years or so, the rules and regulations have been relaxed, seen as no longer necessary and much of what we witness in the United States today can be attributed to the easing of those regulations. Similarly, the much vaunted deregulation of the City was also a pre-cursor to the problems we all face today. Light regulation and a hand-off approach by government and the regulators has allowed the banks to enter very high risk transactions which many people struggle to understand. Yet, in doing so, they have clearly bet everything on it, presumably because they also though they couldn’t lose. Now, clearly all of us must take personal responsibility for our respective levels of borrowings, but easy money is difficult to refuse especially when it is being rammed down your throat on a daily basis, in the newspapers, on TV, in the shops and via direct mail campaigns.

However, when people hold senior positions, in banks, commerce and government, we could all be forgiven for believing that they are well read, experienced, shrewd and knowledgeable. In fact, we tend to take it for granted, how else would they have secured senior positions with such huge responsibilities? As chancellor, Gordon Brown in particular and the Labour government in general have let us down, their collective naivety lulled us all into a sense of false security, with Gordon Brown using the oft repeated mantra that his government policies would lead to an end of “Tory boom and bust”.

We can be forgiven for believing that a man in such a position would be best placed to know whether that was true or not, but instead, we have all come to realise, that politicians do not earn their position because of their knowledge, but instead, where they sit in the party. In other words, they learn on the job. Imagine placing a 10 year old in charge of a London bus if you will! Similarly, bankers have created new financial products, which are so complicated, that few, if any, could actually understand the risks associated with bundling mortgage securities. At best their actions could be described as reckless, but a far better description maybe of a desperate gambler playing for high stakes.

The regulators appear to have either been overwhelmed at the scale of these new securities or, more likely, unable to understand the complexities. As a consequence, those that were entrusted with our financial security, government ministers, regulators and banks, have seriously let the people of this country down, as well as shareholders, many of whom are you and I with pension funds invested in the stock market.

What is particularly galling is the fact that no-one wants to accept responsibility. On top of that, the same people that got us into this mess are, for the most part, still in the same positions. Asking us to believe that they have all the answers. Even though, had they studied their subject matter better and read up on the stock market crash of 1929 and the Great depression, many of the problems we are facing today could have been anticipated and perhaps even avoided. Governments around the world want us to believe that their solutions will work, but how do they really know, what confidence can we have in their solutions? They are spending £trillions on propping up banks, business and economies, but all of this money is borrowed, have they learnt nothing?

The rest of us are having to tighten our belts, but our governments are spending our money in what appears to be a last throw of the dice. They are all frightened of another depression, aren’t we all, but sometimes it is necessary for a period of reflection, instead, governments around the world appear to be thrashing around, panicking in a last throw of the dice. We all find ourselves asking where will it all end, not when?

We must all learn lessons from this. But one fundamental lesson is that no member of parliament should be allowed to take up a position unless they have prior experience. For example, no current cabinet minister has ever run their own business, so what do they know of the problems being faced by business people? When was the last time that an experienced person was placed in charge of the second largest employer in the world, the National Health Service? Take a look at Miliband, he is wet behind the ears, lacks depth and credibility, he may be ‘smooth’ but he does not look like someone that is well read. In fact, he even managed to offend the Indian government on his last visit, are these the sort of people we want to be representing us on the world stage? What of Jacqui Smith, she finds it difficult to string a sentence together has allowed the police and other agencies to trample all over our civil liberties and lacks any obvious gravitas? Little wonder that we are in a mess.

In my view, government ministers and bankers must be called to account because they have demonstrated what appears to be a reckless disregard for the interests, respectively of the people of this country and the interests of their shareholders.

It is a time for change and this must include a look at how or on what basis members of parliament are given key cabinet posts. In no other business or industry I know of do people with little or no experience get elevated to such senior positions based on nothing other than a handshake. Never again should the people of this country be lead by donkeys. We will come out the other side, most likely in spite of this government intervention rather than because of them, but when we do, the people’s voice must be heard. We must demand change.

Posted in Featured, General, Labour, World | Comments (13)

Government bailout, take a breather and reflect

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Government bailout, take a breather and reflect


Now that Gordon Brown and Alistair Darling have committed some £500bn to the banks in loans, guarantees and shares, it is time to reflect, to allow the city, time to digest the level of this intervention before going any further. There is now a real risk that the government could become its own worst enemy, by saying they “will do whatever is necessary to stablise the UK economy”, they are sending the wrong message to the city. Yes, I mean the wrong message, city investors are not uninterested parties here. Whilst the taxpayer is shoring up balance sheets, buying up shares, rescuing companies and intervening in the money markets, the ‘city types’ have their own investment portfolios protected. The government is continuing to speculate at our expense, with limited or no risk to the investors.

As I have said before, I am no economist, I am no expert, but I have been blessed with some commonsense. This tells me that if you are constantly running at full pelt, you don’t have time to see what you have passed, what you have left behind and whether you are still in the race. The government must stop NOW, before they bankrupt this country. They have oiled the wheels and reduced much of the investor risk through these interventions and the substantial injections of cash underwritten by the UK taxpayer. No more open-ended promises.

Government must also look at which stocks are falling. For example, most people accept that we are about to face a world recession, therefore, you can expect organisations that are involved in commodities to see their share prices fall. And, of course, these are some of the largest companies, in terms of value, on the stock exchange. Add this to banking and financial stocks and of course we will see a massive fall in the value of the FTSE. On top of the so called banking crisis, a recession means that city experts will be looking at companies that will do well out of a downturn and those that won’t, this will then be reflected in their share price. So, given there is a recession looming, it is fair to assume that stock prices would have fallen anyway.

Virtually from day one, this government has used taxpayers money as if they had been given their very first credit card. They have gone on a spending spree, thinking they are rich and there is an endless money supply. Then, once they realised they had overspent or reached their credit limit, they simply came after the taxpayer for more money. As a consequence, this Labour government has set a poor example to everyone else, now we must all pay for our excesses…but that includes government who must haul back on their investment commitments, they must learn to live within their means, just like everyone else must do.

My concern, is that the current banking crisis has them on that road again, they think they can spend more and more of our future tax revenues in the name of saving us all from some type of doomsday scenario. Now I accept, some form of intervention was necessary, but this must have limits and I am worried that this government has exceeded those limits with an intervention that is worth at least as much as that provided by the American’s, who’s economy is 3 times the size of our own. It is also worth noting, that £500bn is more than double all tax receipts, based on the 2007 figure. Given we are likely to have much reduced tax revenues because of company losses (they can carry these forward to offset against future profits), falling employment and lower sales, this £500bn might end up being the equivalent of 3 years worth of tax receipts.

Now the government have told us there may be some upside for the taxpayer. I don’t like the word ‘may’, nor do I really trust this government to negotiate a good deal for the taxpayer. It has been suggested that this government has lost close to £110bn in poorly negotiated contracts, mistakes and failed projects. This record does not bode well for the taxpayer, when the same people are negotiating with experts. Lets hope, this time they have learned some lessons, though I will not hold my breath. But in the meantime, I would like to advice Alistair Darling and Gordon Brown to STOP, pause for thought, look at whether what you have done has had any positive affect and stop offering the city a blank cheque, no-one could blame them for taking advantage.

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Banking Crisis and the responsibility of the auditors

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Banking Crisis and the responsibility of the auditors


At the moment one day pretty much blends into another, but on one of the evening news programmes this week, another fat cat, fee-earner had the temerity to say, when questioned, that auditors had played no part in the financial mire that is the bane of every UK taxpayer. I have to admit, that I wanted to throw something at him, because I have been arguing for weeks that the auditors have failed in their duty to the shareholders and worst still, shall be one of the few ‘industries’ that will make money out of this fiasco, through company administrations, receivership’s, consultancy fees and so on.

Lets look at the generally accepted definition of a Finance Audit:
The process of verifying a company’s financial information. Auditors are certified public accountants who are independent of the corporation. An auditor examines a company’s accounting books and records in order to determine whether the company is following appropriate account procedures. An auditor issues an opinion in a report that says whether the financial statements present fairly the company’s financial position and its operational results in accordance with Generally Accepted Accounting Principles (GAAP).

And here is a common definition of an Auditor
Auditor is the person appointed to conduct an examination of the records, to form an opinion about the authenticity and correctness of such records, by verifying the correctness and reliability of the recorded transactions from the evidences available, opinion and inference reachable based on his expertise.

Most, if not all, stock market listed companies in this country and, for that matter, around the world, use the services of one of the so called ‘Big Four’ accountancy firms. These big firms charge huge sums for their audits, often running into £millions, and the audit teams are lead by high ranking ‘fee earners’. In other words, as the businesses, banks and financial institutions they audited expanded, so have the fees earned by the auditors and yet, not one audit firm appears to have asked any questions about what is now being described as “questionable accounting” practices within the financial services and banking sectors.

For example, do we know of any audit firm that qualified a set of accounts within the banking sector because of the heavy reliance on a particular financial model, such as in the case of Northern Rock? Has an audit firm raised any prior concern over the way that ‘bundled’ mortgage debt was traded, sold and then re-sold, with each party taking a profit or commission, without really knowing the risks or true value of the asset.

You would think that after Enron and Worldcom, auditors would be even more cautious, especially given investors and business people alike, will have increasingly come to rely on the expertise and the independence of the auditors before they make financial investment decisions related to the company being audited. It is absolutely essential that the audits of company’s that rely on external investors for funding are wide-ranging, thorough and probing, a failure to do this and ask questions, is, in my impinion a dereliction of the auditors responsibility to the shareholders. If an audit is not indepependent, or in-depth, why on earth do so many companies pay so much money out every year for their audits?

I personally believe that, when the investigation begins, as it surely will, the part played by company auditors also needs investigating. Given they will be the only party to have profited in the ‘boom’ as well as profited out of the ‘bust’, yet they were also the only party, other that the regulatory authorities, that had a duty to ensure that they reported the facts, discovered questionable practices and reported their findings in an open, direct and a frank manner. I do not say that any of these accountancy firms are culpable, because I would have nothing to back this up with (other than logic of course), but I can say that, I believe they have failed, for the most part, in their duty to appropriately and competently assess the risks associated with some of the more questionable practices adopted by the banking and financial industries.

I also believe that shareholders that have lost money should consider individual or class actions against any audit firms that are left wanting in this current mess. For them to be preening themselves in front of the cameras, whilst rubbing their hands with glee, behind the scenes, is stomach churning. If there job was not to highlight risks, operating and reporting practices, asset values and profit claims, what on earth were they charging such massive audit fees for? The Audit Firms must not be allowed to extract themselves from any form of responsibility whilst the rest of us are left to pick up the tab and the pieces of what is left.

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