We all want this dreadful recession to end.  Many of us have friends who have been affected by this harsh recession be it, losing their job, falling into debt, having their house re-possessed, destroying their marriage/family life, through the stress of potential redundancy / working longer hours to hold their jobs.  The sooner we see ‘green shoots’ the better.  Alastair Darling has been more encouraging lately as he sees those green shoots emerging and that the UK is back into recovery mode.  He has to be positive to talk up the markets but economic data paints a darker picture and one which shows that whilst the economy is fighting to get out of recession, the dangers of a double dip recession are serious and real.  For that we must all be worried.

Politics is currently in suspended animation.  Everything on hold until the next election.  The Government are deferring key decisions until after that election.  Tough medicine the economy needs NOW is being held until post election….why?….because tough decisions are unpopular and this Government wants to win the next election.  The lack of decision making, total procrastination at the heart of Government is damaging the economy still further.  Let’s have that election today and get on with the job of getting people back to work and this great economy on its path to recovery and prosperity.

Key economic data yesterday painted a worrying position.  Government debt is far worse than expected and spiralling.  Government revenue received through tax receipts is dropping like a stone whilst benefit payments are shooting skywards.  Bank lending, seen as key to small businesses rejuvenation, is again falling.  Banks, several of which this Government now own, (ie we do as British tax payers), are failing in their duty and stated promises to push bank lending again and get the economy moving.  These stated goals are not being implemented and not evident.  Many small businesses are delaying on investment decisions because they cannot get bank funding, (we heard that story from a recent post by Russ Rec).  In the meantime, whilst banks don’t lend, they are grabbing with the other hand.  Credit card rates are rising.  Bank charges reappearing for minuscule errors.  Private household debt the highest of European nations.

Despite the abuse Gordon Brown threw at David Cameron over the Conservatives Spending plans ie branding DC Mr 10%, we now see from leaked Treasury papers that the Government are planning 10% across the board cuts.  Hypocritical is one word Mr Brown!  The politics of dishonesty is never attractive and this electorate have long memories.

Lets make no bones about it, tough spending cuts HAVE to follow.  For the sake of the economy.  Whoever wins power.  Cuts will involved public sector job losses, hence adding to the unemployment queues.  But if we don’t, we are in danger of having to go cap in hand to the IMF for a bail out by them….again!.  They will impose tough conditions to the bail out and cuts could be even more savage.  We all know that UK PLC is in danger of losing its ‘AAA’ credit rating on the world stage. 

Any public sector losses, especially job losses/pay freezes, WILL see the Unions swing into action.  A winter of discontent beckons.  The Post Office have balloted members for strike action.  The Tube Drivers have been striking this year already.  We can expect the nation grinding to a halt at various stages this winter due to Union protests, hence damaging the recovery.  Power workers have threatened walkouts, hence the return of black outs is a real possibility.

So a lot can undermine our economy.  Double dip recession is a real possibility.  But lets take a closer look at the stats……

Our debt situation is horrific.  No over word describes the cancerous, spiralling debt this country is storing up for our children.  Yesterday we learn that bankrupt Britain borrowed £6,000 every second last month.  The Government amassed a humongous £16.1 billion debt in one month…the largest on record.  This was a 63% increase borrowed in the same month last year.  The Government has borrowed £63.5bn since the beginning of the financial year in April.  Britain’s overall debt now stands at £800bn—heading for the £1 trillion mark. That is frightening.

Our nation’s finances are out of control.  This is shameful mismanagement of the economy on a criminal scale.  Quantative easing draws mixed responses from the world’s best economists and whether it is having any effect on the UK economy.  The IMF even stated that they could not assess whether any impact had been made by pumping a huge amount into the economy.  Bank of England data shows that broad money supply grew by just 0.1% in August, after a 1.3% increase in July.  This dragged the annual growth rate down to 12.6% from 14.4% a month earlier, hence demonstrating quantative easing’s limited/zero effect.

It now looks like we are on track to amass a debt of over £200bn by the end of the fiscal year, some predicting an overshoot of Govt Spending targets by £50bn.

With the economy still seeing dire unemployment figures, predictably total tax take over the first five months of the year to the end of August was 11.4% lower compared to the first 5 months of last year, while benefits spending was 9.5% higher.

Net lending to British businesses also fell in July, (by the largest amount since records began).  it fell by £15.5bn, even more sharply than the £3.6bn drop in June.  Why?  Companies paid back more than banks lent.  The figures for August are projected to worsen.

We cannot gamble our nation’’s future any more….for the sake of our children let’s have that election now and let the people decide.

Worrying quote of the day…given we are heading for a debt of £1.2 trillion. 

Chancellor Alistair Darling has said the Government will spend “whatever we can” to keep people in work – as he predicts an end to the recession in the next few months.

Carrying on spending Alastair…grind this country further into the ground!

But…..Let us know how you intend to pay this money which you are merrily spending….but please tell us before the election.  The people deserve some Labour honesty.  Tax rises?  Labour’s tax bombshell returns?

The next election is still a long way from being won.  We cannot be complacent.  But it is interesting to start reflecting, should the Conservatives win, what Gordon Brown’s legacy will be.  What has he achieved?  How will history judge him?

All big questions.  Historians would say it is too early to judge as Prime Minister’s have to be viewed after a passage of time.  But there is no harm looking at what Gordon will potentially bequeath an incoming Conservative Administration.

So let’s do this succinctly and look at the major policy areas.

Economy

- Britain is in a deep recession.  It has been savage.  Brown claims this is due to Global economic shocks but the IMF has stated in their most recent report:  ‘Imbalances and balance sheet strains had emerged even before the recent global shocks triggered a sharp decline in economic activity’.  ie we were heading into recession BEFORE the Global shocks took place. 

- Changes made by Gordon Brown, as Chancellor, to the way banks regulated, widely credited for the severest banking crisis in the history of the UK.

- Unemployment of nearly 3 million, (official figures), (in reality closer to 6 million).

- Unprecedented National Debt of £2.2 trillion – just under 150pc of gross domestic product. This would be the worst debt total since the 1950s, when Britain was in the process of paying back its war debts.

- Bailing out a banking system.  Cost of the bailouts - broken down. Total: £904bn or 63% of GDP. A few highlights:

Northern Rock — £14.6bn.
Bradford & Bingley — £24bn
Kaupthing Singer & Friedlaender — £3.3bn
Landsbanki — £4.5bn
Heritable — £500m
Dunfermline — £1.6bn
All bank recapitalisation — £78.1bn
Credit Guarantee Scheme — £250bn
Working Capital Scheme — £11.5bn
Asset-Backed Securities Guarantee Scheme — £50bn
Asset Protection Scheme — £466bn

TOTAL TAXPAYER EXPOSURE: £904bn or 63% of GDP.

- UK Households severely in debt.  In the run-up to the crisis household debt increased to 175 percent of disposable income—one of the highest levels among advanced countries

- House prices have dropped by more than 20 percent from their peak and commercial real estate prices are down by 40 percent.

- Endemic Fraud.  HM Customs and Excise looks odds on to miss its stated target of reducing fraud and error to 5% by 2011.  It has been revealed that mistakes had risen to 8.6%, (from 7.8), in 2007 – 08, which are the latest figures available. This means that fraud and errors in the tax credit system cost £2 billion last year, which amounts to £1 in every £10 paid out.

- Falling tax receipts… Tax receipts have fallen by £32 billion according to the National Audit Office.  This includes a £6.4 billion drop in VAT income following Alastair Darling’s decision to cut the rate to 15% last November. 

- The policies that Brown has employed no-one knows if they are working.  The IMF cannot make any judgement on the effects of Quantative easing.  Is it working?  Has it had any effect?  Who knows?  The IMF don’t

- Lack of support for Small Business.  Claim:  This Government has offered more support to small businesses in the recession. Reality:  Official statistics show that it has guaranteed fewer loans in the year to march 31st. Businesses received 2,360 loan guarantees worth £177.8m under the Small Firms Loan Guarantee (SFLG) scheme and its successor the Enterprise Finance Guarantee (EFG) scheme, launched by Peter Mandolsen. Please remember…….This was a central plank in the Governments economic strategy for the recession. But this total, which includes loans approved before April 3rd is significantly less than the £205 guaranteed in the previous year, (taken from the Department for Business, Innovation and Skills report). This is also far below the scheme’s £360m budget set by the Government in March 2008, which was raised to £1.3bn in January.  This lack of lending under the schemes runs contrary to the banks’ pledges to make more use of the SFLG and EFG schemes.

Defence & Afghanistan

- An ongoing war, with no end date in sight.  No clear, measurable, objectives.

- A British Army with insufficient resources, including manpower and equipment eg helicopters.

- 207 dead soldiers and rising

- With a stated aim of helping democracy Helmand’s province, a region with a potential electorate of 80,000 voters….only 150 voted.  That’s a turnout of 0.18% .

 A dis-United Kingdom

- Between 1998 and 2003, for example, economic growth across different local areas of the UK ranged between the drastic extremes of minus 1.2 per cent and 9.6 per cent, expanding the gulf between the poorest and the most prosperous. These marked trends have persisted through the rest of the decade, further aggravating the national divide. The latest data for the 12 principal regions of the country show that total GDP growth from 2004 to 2007 ranged between 13 per cent in the West Midlands and in Wales to more than 20 per cent in London. The divergences of performance become ever greater, too, as one considers smaller localities. The consequence is that the gap between the standard of living in the most affluent parts of the nation and its poorest areas is now wider in Britain than in any other developed economy.

Politics

- Politicians with no respect and distrusted by the electorate following the expenses scandal.

- Brown’s team closely associated with the politics of smear and lying, the Damien McBride affair typifying the lows of Brown’s closest aides.

- Lack of Leadership.  Ducks the big issues eg whether he agreed with Megrahi release

Education

- 50,000 A-level students will miss out on a place at university.  This year 52,000 more people applied to University but only 13,000 extra places were made available.

- The number of young people not in employment, education or training (Neet) has leapt by more than 100,000 in the past year.  Government statistics show there are now almost 960,000 16- to 24-year-old Neets in England, more than 230,000 of whom are aged between 16 and 18. 

Welfare dependency

- NEARLY two-thirds of council housing tenants get all their rent paid by the taxpayer.  dip their hands in their pocket to pay a total of £10billion a year.  That is the equivalent of £476 every year for every privately-owned home in Britain.  How do you feel paying £476 of your money to this cause?

 Health

- A society ill prepared for Swine Flu.  Call centres manned by non medical professionals prescribing Tamiflu to everyone that calls.  Children advised not to take Tamiflu.  Vaccine in full production but untried and untested.

- Almost 1 in 4 adults in England are currently obese, and if we carry on as we are by 2050, 9 in 10 adults will be overweight or obese.  Did you know about 46% of men in England and 32% of women are overweight (a body mass index of 25-30 kg/m2), and an additional 17% of men and 21% of women are obese (a body mass index of more than 30 kg/m2 ).  The cost of overweight and obese individuals to the NHS is estimated to be £4.2 billion and is forecasted to more than double by 2050. The cost to the wider economy is £16 billion, and this is predicted to rise to £50 billion per year by 2050 if left unchecked

- Britain has the worst cancer survival rate in Western Europe.

Immigration

- MigrationWatch UK has provided an estimate that the population of the UK, (which is already the most overcrowded country in Europe), will hit………a massive 70 million in the next 20 years, (whoever is in power). Yes that is 9 million more than today.

- Keith Vaz, Chairman of the Home Affairs Committee has announced that tens of thousands of illegal immigrants have entered Britain posing as students at bogus colleges and coupled with this the Government is doing nothing to track them down.

Going Green

- Going Green ….at a cost and massive debt.  It is reported that Britain faces a bill of up to £1.2 trillion to meet the agreed target set by G8 nations to cut carbon dioxide emissions in each country by 80% by 2050. This is made up of £600bn from the estimated cost of making all transport low-carbon by switching to electric or furl efficient vehicles.  £350bn which is the estimated cost of moving the majority of industrial and domestic energy needs to low carbon electricity. £250bn estimated cost of moving all heating from gas boilers to low carbon equivalent.

I could go on…and on…..please let me know what you would add to this.

Not a great legacy Gordon.  How can you sleep at night?

Remember the arrogance of Gordon Brown, standing bolt upright in the House of Commons, and saying with all the conviction he could muster, that the UK was best placed to lead the world out of recession?  Well what happened Gordon?  Surely not spin?

The IMF has published a paper by the Chief Economist, Oliver Blanchard, that ‘the recovery has started’. ‘Sustaining it will require delicate rebalancing acts, both within and across countries’.   

His comments followed the news that Japan became the latest major economy to return to growth in the second quarter, following a recovery in German and French GDP.   How did Britain compare? We shrank 0.8%. So much for being best placed to lead the world out of recession.

Continuing the theme of economic misery, David Cameron, warns that the Government will be unable to honour it’s debts.   With Labour planning to borrow an extra £700 billion over 5 years and hence the national debt will hit £1.4 trillion that exposed Britain to economic risks.

Cameron, outlined that, in the past governments could borrow more cheaply that other institutions because investors are confident they will get their money back. Given that the government was borrowing so much, some investors may ask for higher interest rates, to reflect a higher risk of lending. Hence not repaying debt.

So Gordon, want to retract your comments?  You worry about your legacy….well it is clear….an economic legacy of mass unemployment, an economy in debt that may need to be bailed out by the IMF, downgraded by Standard & Poor from a ‘AAA’ credit rating…….how do you sleep at night?

Today we learn more of the shocking state of our nation.  We are in one hell of an economic mess.  It’s time for radical thinking and ‘workfare’.

First up, official figures show that the number of 18-24 year olds Not in Education, Employment or Training (NEET) have hit a record highof 835,000, (equivalent to 17.6% of that age bracket).  Graduates, fresh from their studies, find themselves winding their way in a queue for state benefits.  Put yourself in the shoes of a graduate.  Just finished your Degree, the purpose mainly being to give you a head start in life, and you have no where to go.  The wasting of a generation of talent.

This follows hot on the heels of a report by Policy Exchange think-tank which puts the actual number of Britons out of work and living on benefits at 5.96 million – (note Official Government figures state 2.44 million).  The UK is creating a generation dependent on welfare.

Policy Exchange calculates the figure based on the number of those of working age living off the following state benefits:

• 1.58 million on Jobseeker’s Allowance
• 2.6 million on incapacity benefit and the new Employment and Support Allowance
• 736,000 on lone parents’ benefits
• 400,000 on carers’ benefits
• 363,000 on disability benefits
• 95,000 on bereavement benefits
• 182,000 on other income-related benefits 

So this begs the question about the cost to us tax payers and the value society receives from paying blanket benefits.  The cost of the benefits system has risen from £93 billion in 1997 to £193 billion today.  That is a huge tax burden on the system especially given the cancerous debt burden which is spiralling daily.

So, it is time for Conservatives to think the unthinkable and enter a period of blue sky thinking over welfare and particularly unemployment benefits.

We are facing an unparalleled National Debt and hence a new approach is needed.  Workfare, whilst derided by the Left, should be on the table for debate today.  What is workfare?…. well…..it’s a scheme in which the long-term unemployed, in return for welfare payments, are required to undergo either skills training or work, in jobs supported by state subsidy or in community-service activities.  One of the most successful ‘workfare’ schemes has been employed in the USA, in the State of Wisconsin.  Workfare was the key principle behind the 1996 US federal welfare reforms which, with the threat of a loss of benefits after two years, led to a sharp drop in welfare recipients.  Welfare to work programs aim to break the cycle of poverty where welfare dependence can become a way of life.

So, Conservatives should include a Manifesto promise to introduce a system which obligates able – bodied unemployed people, not in re-training schemes, who are looking to work, to undertake work that is beneficial to their community in return for unemployment benefits.   This would be popular for two reason.  Firstly, taxpayers may feel that they get “more value for their welfare pounds” when they observe welfare recipients working for benefits.  This helps add to the political popularity of such schemes.  Secondly, putting unemployed people into a workplace-like environment attempts to address the argument that one of the biggest barriers to employment for the long-term unemployed is their lack of recent workforce experience.

There is plenty wrong with this country and where ‘workfare’ help could be utilised.  Imagine, if companies or the public sector were presented with extra workforce, at no extra charge to them, to help them in their business life.  Consider these ares for example:

-  Call Centres.  Rather than outsource all the call centre work to India and other Asian countries, why not staffed via workfare?

-  Schools:  Help at schools, after passing background checks, classroom help, help with PE, cleaning, making school dinners etc.

-  Manufacturing Industry:  Why not provide a stream of workers in our manufacturing plants.  This ‘free labour’ would help some of the struggling industries like the car industry.

-  Post Office:  Again, if the Post Office is to be privatised, why not utilise workfare for Post deliverers.

-  Hospitals:  Help with general work around the hospital eg the Hospital Superbug MRSA is due to dirty wards, why not have more cleaners in the hospitals instead of people sitting at home

-  Building:  with a boom in building contracts eg Olympics, more manual labour

-  Civil Service:  With so much bureaucracy, plenty of paperwork could be finally completed

-  Street cleaning & refuse collection:  (why should council pay full time salaries when this could be a workfare role?)

-  Help in Supermarkets/retail:  Be it Customer Service or managerial.

This is but a few examples of where labour can be directed.  Yes some is skilled, some unskilled.  But there are plenty of areas of opportunity to get Briatin working and ensure welfare dependence does not creep in.

To be successful a ‘workfare’ system has to include a number of elements:

- Applies to all able bodied unemployed

- Has time limits  (eg people need time to apply for new jobs etc and therefore workfare may exist for 4 days a week work or maybe all afternoons, as mornings are spent job seeking.

- Possesses Tiers of payments.  For those working more hours, they reach a higher level of state unemployment benefits.  Those who choose to work less or not participate get lower benefits.

-  Those who wish to re-train or get extra skills, receive a lower benefit as the state invests more into their future.  But this can be buttressed back up by workfare projects. 

- After 2 years, an individual would no longer receive state support.  Hence, they have the motivation to seek work, which may involve retraining. 

These ideas, obviously are fairly radical for the UK.  Again, desperate times, call for stronger measures.  We are faced with an unparalleled debt.  We have to maintain a work ethic amongst the population.  We have to ensure that the UK does not embed a welfare dependency culture.

Great guest blog today.  The return of John Laity who makes some sound observations about Bank profits.  (Thanks John).  Again, if any of you want to write a guest blog, please let me know, as you see, all is fully attributable to you.

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The billion dollar question – Who’s assets are being protected?

To address the “Global Downturn” the Government rushed through packages of support for UK Banking Institutions. Under the support plans, about £200bn was made available to banks under what is known as the Special Liquidity Scheme. This was set up by the Bank of England earlier this year. The Bank of England will, according to the Treasury, will “extend and widen” its facilities for banks to stablise the financial system. There is then an Additional £50bn security for banks:

The Treasury made available security to a number of banks should they need it to repair their balance sheet. The banks involved in the plan were listed as: Abbey, Barclays, HBOS, HSBC, Lloyds TSB, Nationwide, Royal Bank of Scotland, Standard Chartered. The Government took stakes in the banks through so-called Preference shares.

The Government also committed to help banks refinance short and medium term debt. The Government guarantee this to the tune of £250bn.

Today Barclays published it’s Pre-tax profits (for the first six months) at £2.98bn ($5bn).

Immediately there was much press talk about a return to the “Bankers Bonus Culture” and the press quickly pointed out that such profits are only possible due to the £ bn’s spent by the tax payer. One of the most interesting comments came from the BBC, who pointed out that it is unfair that Barclay’s Investment operations should benefit from tax payer security as in effect it means the tax payer is underwriting the investment risk to the benefit of investors…So who might they be?

According to the 2007 Accounts for the Parliamentary Contributory Pension Fund (2006-2007) – Barclays Global Investments manages 50% of the pension funds assets. (15%  being held in Multi Asset Equity and 35% in Overseas Equity) …

According to the Governments Actuary’s Department On 01 April 2008, 634 MPs were active members of the Parliamentary Contributory Pension Scheme (PCPS). The equity (share) holding for the scheme being 67%.

Across the period April 2007 – March 2008 the investment return was – 4.0 %…So MP’s did suffer from an fund investment downturn. However, the PCPS is exempt from the Statutory Funding Objective (2004 Pensions Act) and benefits levels are guaranteed by legislation…

In all the rush to publish MP interests and expenses, certain things seem to remain unlisted by the Register of Members interests. Is there a listing buried away behind “employed relations” for personal investments, savings or share ownership?

I appreciate that such information could be deemed confidential…But the £ BILLION questions are these:

Have individual MPs benefited from investment returns handled by bailed out banks?

Will members of the Government receive shareholder dividends or returns of investments from Barclays?
We will probably never know, but 634 MPs have a safe bet for at least 50% of their pension provision in Barclays.
It is YOUR tax money being spent to provide bank stability, what are you going to see out of it?

This is the next in our series of Guest Blogs.  RussRec is an entrepreneur, with his own small business, the very person that forms the bedrock of this great nation.  But whilst he takes risks and works all the hours he can to help his business survive and grow, the Government is not…NOT…helping entrepreneurs and small businesses like Russrec’s….small businesses who create employment, create investment and will help pull this economy out of recession.  This is a personally written blog and one I think you will find very powerful. 

Thanks RussRec. 

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I run a small business specialising in recruitment. As early as December 2007 we saw that there was a likely credit crunch coming as the world owed trillions of dollars, and that the level of credit was unsustainable. Despite our continued success we downsized our office space, delayed decisions on replacing IT infrastructure and reduced our overheads. We increased our margins, and enjoyed a very successful period of trading from January 2008 through to July, we did begin to question our judgement but held firm as interest rates, inflation and the price of food, oil and energy were continuing to rise.

Around September 15^ththe business world literally stopped. Within a week the job briefs we were working on went ‘on-hold’ and no new ones came in. In one respect we were relieved as we were proved right but the lack of job briefs was increasingly worrying. We were busy though with hundreds of middle managers being made redundant – so we helped them the best we could. We setup new services, looked at new ventures with third parties and spoke to hundreds of our contacts, seeking briefs to fill. Whilst there were roles, there were not enough to sustain the business  so we had to make some decisions. Recognising that we were going to run out of money by the last quarter 2009, we set about radically slashing our overheads. We took pay cuts, and reduced our other overheads significantly. Our efforts in generating new business was beginning to pay off, however, people were very wary about hiring  so we spoke to our bank (Barclays) with whom we had been with for almost 20 years about a business loan – just in case. We were ‘allocated’ an Account Manager – Darren, who we met and seemed confident that we would be applicable, if not from the bank but via the Government’s much lauded Working Capital Scheme. We provided young Darren, with information, then more information, and even more information. His positive demeanour turned increasingly cautious.  Some 6 weeks after we had approached our bank, Barclays Bank he said our application had been declined, as our sector is ‘too high a risk’.  Part of the money was to pay Corporation Tax for the previous financial year, where our prudence resulted in greater profit which meant more tax. We have now applied to defer the tax payment and are waiting for a decision. In the meantime we have had to reduce our overheads further, moving out of our office, taking an even bigger pay cut and not making pension payments.

As I write this I worry for the future. The current government have failed people like me – at a time when I should be really planning for my long term financial security, I find myself in a situation where all my savings, assets, and income which I have built up steadily have decreased significantly in the past 18 months. The blame lies with this government’s, indeed the current Prime Minister’s inability to manage the financial services industry. The world followed the UK, bought into Brown’s eulogies about prudence and was duped by Gordon Brown’s fiscal policy that allowed greedy bankers to make millions, creating a credit bubble that burst.

The schemes to help small businesses the Government have created are nothing but hot air as far as I am concerned, even deferring of tax is a rigmarole. I have to pay  some income tax ‘on account’ for this year’s earnings! I can ill-afford it and my salary has been reduced by 30%, yet my accountant is not confident I will be able to defer it – if the Inland Revenue demands his Corporation Tax, we will put the business into voluntary liquidation and they can be our other creditor (Barclays!). Even though we are hopefully over the worse – as I wtite this in my makeshift office in my kitchen at home it makes me VERY angry that I am here as a direct result of bad Government.