Uncle Audley reviews Harman’s driving!

I’d given Uncle Audley a wide berth fearing he would be like a coiled spring over the Baroness Scotland case but when I called to see how he was he’d just read a piece about Harriet Harman that had re-stoked his boiler!

 “You know where to find me, ….know where to find me, well I ask you is this the sort of behaviour we should expect from our Government ministers?”

 “But it was in the Paper Uncle,” I said, “and they are not always accurate in their reporting” Big error on my part!

 “Now look here this was The Times (Harriet Harman faces quiz over prang)not some red top rag. And it suggests that it was an accident caused whilst driving using a mobile. What an example. The woman has never been able to stick to the speed limit and now drives away from a car she has hit. It makes you wonder whether she would have stopped if no one had seen her?  No doubt the book won’t be thrown at her by the Prime Minister just like the Baroness Scotland who I cannot fathom why remains in her post as our Attorney General.”

 “Oh dear,” I thought, “now I’m for it!”

 “Why someone in such high office would take into employment an illegal immigrant beggars belief. And what we don’t yet know is whether we as the tax payer have picked up the cost as part of an expenses claim? Granted she was fined the maximum sum of £5,000 but surely she and the Prime Minister have to accept that if you cannot set the right example and having failed so badly resignation is the only answer. What would happen if you acted for a large company with a decent sized board and the one responsible for employing the staff stepped out of line so badly. He would probably get the sack and the company would have to pay the fines. Am I wrong or have things changed so much from my day?”

I had to accept that Uncle was probably right – unless the Board had taken the risks together – but I kept that thought to myself for fear of another tirade.

“Unfortunately, it was the same with the Tories. The third term leads to all manner of misdemeanours and a failure to do the right thing. At least in May the Country decides – if we have the energy to vote for one or other of them when we get there!” and with a click he was gone. I hadn’t got as far as asking after his health but concluded that he was his normal self and therefore OK. Having dealt with my family duty I returned to the garden to prepare for the autumn.

Lambert Chapman LLP’s John Smith-Daye says, “I am not a gambling man but……”

As anyone who knows me will tell you, I am a typical male chartered accountant – I have been called “tight fisted”, “mean”, even “boring and unadventurous” – I prefer to call myself “prudent” and “cautious”, two words much used by our beloved (?) Prime Minister, particularly during his stint as Chancellor of the Exchequer.

However, there is an opportunity coming up that may to some be considered a gamble, but to me is all but a dead cert. I am willing to bet my monthly pocket money – yes, up to £2.50 – on the VAT rate remaining at 15% beyond the end of the year. I have heard rumours that the temporary reduction might be extended by a few days to help the retail industry with the January sales.

But – Lo! What is that on the horizon? Do I see an election in the very near future? And do I perhaps feel that the Government may try to win votes by currying favour with the Electorate At Large? And am I really a cynic?

Answers on a postcard please, with the usual £10 note stuck to it with sticky tape, to me at our Maldon office. Don’t send them to my home address, please – my wife might get hold of them.

So will John be right? If you haven’t got a postcard handy leave him a note below:

Paul Short looks at Take Home Pay

At little while ago I did an article for the web site trying to demonstrate that take home pay was not always a good indicator of someone’s pay package. It all depends on the extras. Since then, we have had the furore over MP’s expenses (cue my web article of 15 January 2007).

MP’s have been at it for a long time. Their base salary does not look anything super duper. But then add on the expenses and gross these up at their marginal rate of tax because they are tax free and then add on the copper plated pensions, provided out of the public purse, plus a few other perks and you have a formidable pay package, which if maximum allowances were claimed could be in the region of £355,000 a year.

Now there is something of a witch hunt on MP’s at the moment. We should remember that many of the expenses are authentic and justifiable and should not be regarded as part of their pay package but some are not. Even so, some MP’s pay package will come to a tidy sum. It is, of course, hugely tax efficient. All the benefits within and outside of Westminster are tax free, leaving some modest exposure to 40% tax on the top slice of their Parliamentary salary.

Now let us compare their situation with that of one of the purported high earners whom I shall call Gordon. I am still frustrated that MP’s define the rich and wealthy in terms of their income. They do not seem to be able to grasp that wealth and riches are a consequence of having capital. This takes me back to a web article I wrote in February 2006, comparing family A (zero income but huge capital) with family B (high income but no capital), with family A qualifying for all Brown’s welfare handouts. Anyway, back to Gordon. Gordon has an income of £200,000 a year and is reviled for being rich and wealthy. Gordon is self-employed, though. Out of his £200,000 a year (which he has only really been earning in the last year of so) he has to start funding for his retirement in around 10 years time.

To make up for lost time, Gordon is putting in £50,000 a year. It should give him a reasonable pension but nothing on the scale of an MP. Although Gordon has to pay tax on all of his earnings, the bulk of it at the current top rate of 40%, he has to retain at least £30,000 of post tax income in his business to help the continuing finance of its working capital. The alternative is to go to the Bank and become heavily geared.

Gordon is also having to finance his two children through university. They are in their first and second year respectively. It is expensive but Gordon doesn’t mind as he puts a premium on education and wants his children to graduate and have the best opportunity of securing a good job. Gordon lives in a reasonable four bedroomed house within commuting distance of London. It is very nice but far from a mansion. It was worth some £500,000 a year ago but Gordon thinks it might only be worth £425,000 now. He still has a mortgage of £150,000 on the property although he expects to clear this within the next 10 years. Nevertheless, it represents a significant monthly out going.

Gordon has always been strong on protection and having adequate insurance in place to safeguard his family and his house. That is another heavy out going. Gordon’s family run three modest cars and they do like to have one foreign holiday a year with possibly another in the UK. Gordon finds that all these commitments means that he does not have that much disposable cash left at the end of the year.

Gordon works 50 to 60 hours a week on average on his business and feels he needs the holidays to re-charge and refresh himself. Do you or I go and tell Gordon that he is rich and wealthy and that is why he is going to be paying three times as much tax as his struggling local MP?

Uncle Audley waxes lyrically about Public Enemy Number 1!

We had a family meal for Mother’s Day and Uncle Audley was present. Having enjoyed his meal and the wine and brandy afterwards he started to wax lyrically. 

 

“Who is public enemy no 1 in this country?  No prizes for putting Sir Fred Goodwin in the frame as the one most likely to.  Poor old Sir Fred must be reviled the length and breadth of the land.  Well, perhaps, not so much “poor”. 

 

He does make a convenient scapegoat, though, doesn’t he, least ways if you subscribe to the view that the current financial crisis is down to a few greedy American bankers with a bit of UK support.  We are a faithful ally not just in terms of the military. 

 

We should also ask a few more questions.  Who was it who recommended Fred for his Knighthood “for services to banking”?  Was Gordon Brown involved in this?  Sir Fred’s descent from hero to zero over four years or so has been pretty dramatic.  Perhaps, though, his services to banking were not quite so exemplary as people thought, though enough to dupe the best Chancellor over the last hundred years.  It looks like it. 

 

Sir Fred is not the only one getting a nice pension.  Gordon qualifies for a very tidy sum when the electorate finally eject him.  What is it?  £90,000 or so? 

 

Now you may not know it but the Government has put a block on the amount of pension fund the rest of us can build up.  It is frozen at £1.8million until 2015.  If a fund goes over that then there is a penal tax rate of 55% on the excess.  Do bear in mind we are talking about the value of the fund.  That fund has to be invested to generate the pension for you to take.  The annual pension is going to be an awful lot less. 

 

I believe Gordon is entitled to a pension fund of around £1.75million once he becomes an ex Prime Minister – not bad for what might prove to be less than three years work.  I think he will also get a useful supplement as a long term serving MP.  So how about Gordon giving back some of his pension in acknowledgement in his part in creating the crisis.  You might argue that Gordon is more culpable than Sir Fred.  Forget it.  Mr Prescott and Ms Harman are not going to leap into demand action.  Gordon, himself, is in self denial.  The Conservatives won’t do anything.  You can always be hoist on your own petard. 

 

I would not expect Sir Fred to give anything back.  He is a hard nosed Scottish banker.  There is as much chance as a hard nosed Scottish Prime Minister offering an apology for his part in the fiasco.” 

 

So is Uncle Audley correct – let him know your thoughts in the box below:

Uncle Audley says “it’s the (Global) Economy stupid!

Uncle Audley has been keenly following the credit crunch and recession, as you might well expect. You might know, from reading his comment that Uncle Audley has always been a fierce critic of Gordon Brown from day one. I was very surprised, then, to find that Uncle Audley seemed to be defending the “great Scotsman”.

“In fairness to Gordon Brown, I think he is right in saying that the current crisis is a global one. I think it might have been better for him if he did not keep continually stressing the point. People just think that he is playing the blame game and trying to shift any censure from what has happened away from himself. Thus, it may be a global recession, but it was made in America and therefore the fault of the US. What has happened over here in the UK, well that’s all down to the greedy bankers, including the ones Labour has given knighthoods to for their services to…er… banking (or was it for donating some of their bonuses to the cause?).

Let’s not dwell either on the failure of the regulatory system, introduced by Gordon, on its first test. It needs a global solution but Gordon has come forward with the blueprint for that to try and take all the credit. I could tolerate to all this but the only problem is you cannot have it both ways. In the late 90’s and early years of this decade, Brown kept trumpeting on about the success of the economy under his inspired stewardship. Our success was all down to him. He had banished boom and bust and you might be forgiven for thinking that it was done single handedly.

There was no credit given to Ken Clarke and his 4 years at the helm prior to Labour being in power. No UK Government has ever been given such a strong financial legacy in which to start their administration. Nor was the strength of the economy down to the power house US economy. This is despite the fact that any self respecting economist will say that the US economy is always the driver for the world economy.

You might well perhaps have attributed some of the success to the IT revolution and microchip technology which drove down costs. Well, you might have done but Gordon certainly didn’t.

Finally, one might have wondered whether the gradual emergence of the BRIC economies was a factor in establishing demand and helping our financial services industry, prosper. Gordon never acknowledged that any of these factors had any part to play in the well being of the UK in the 10 years or so he was Chancellor. The success was down to him and his prudent handling of the economy.

Well, I am sorry. You simply can’t have it both ways. If you want to take all the credit for success, even if your part in it was relatively minor, then you have to take the brick bats when something fails, even if it was not all your fault. Nevertheless, Brown will keep on repeating the mantra that it is a global crisis requiring global solutions in the hope that we eventually just accept this and forget that he deserves so much of the blame for what has gone on”.

So is Uncle Audley right? If you wish to comment please use the box below.

Has Government considered the business cost of its actions?

With all the concerns over the economy and keeping people in work was now the right time fro the Government to cost business an estimated £300 million to be able to reduce the rate of Value Added Tax by 2.5% on 1^st December 2008? Having had some time to reflect on the Pre Budget Report Statement many retailers are thinking that the VAT reduction will not necessarily get passed onto shoppers at the till without negotiation and so is it all really worth the aggravation being caused?

 

This Government has been good at wasting resources. In its first term of office its obvious inexperience of being in Government led them to creating many costly talking shops whilst trying to reach the right answer on policy decisions. Laudable maybe in trying to discover the right answers but if Gordon Brown’s zig zagging method of being Chancellor has been mirrored across the board then a lot of right answers were not reached making the spend uneconomic.

 

Gordon’s last error; the 10p tax rate withdrawal (as if you didn’t know) has proved particularly costly to the Nation. By compensating all tax payers in the way they did the Chancellor issued another tax coding notice to every tax payer to every employed person with the new personal allowance on it. This cost the price of a stamp, an envelope, labour or machine costs to pack it and at least one sheet of A4 paper to produce it within HMRC.

 

Upon receipt there were the extra professional costs to check them to ensure accuracy. But how could they be wrong you ask as only 1 item changed; the personal allowance from one sum to another. Ah yes, but you have to consider that other tax codes had already been issued in many situations which had had things changed that were not correct. We had checked these and advised of the revisions. In many cases these had either not been processed or returned to the incorrect figures again meaning further amendments. Some clients we have had 7 or more tax coding notices this year!

 

And if this was not staggering enough we had to use our working together links to access a computer programmer to understand how the program worked so that we could telephone a Manchester tax office to explain how to use the software. I think this is called training and probably unaccredited training at that as we had never seen the software and so offered it in virtual way. “When a blind man cries” I think was the name of the Deep Purple song!

 

Trading in a difficult economy requires care and attention over the overheads to keep spending at a minimum. I think we need to see some appropriate care and attention from our Government to ensure that they do not cost their customers too much money and at the same time keep their own overheads to a minimum whilst offering an efficient and well trained service.

 

Now there’s a challenge for the New Year resolution!

Lambert Chapman LLP consider the Pre Budget Report

On our main website we have a section containing the information set out in the Chancellor of the Exchequer’s Pre Budget Report Statement of 24 November 2008. It also includes comments on the statement by a number of Lambert Chapman LLP Partners. If you would like to be taken to the site please click on the link set out below to do so.

Having read the comments you might wish to make your own contribution to what the Chancellor or our Partners have said. To do this leave a comment at the foot of this article which will be posted after moderation considerations.  We welcome you adding to the debate that the Chancellor’s statement has created. Have we gone too far? Is there other policies he could adopt?

Let us know your thoughts.

http://www.lambert-chapman.co.uk/cgi-bin/iadmin.cgi?page=16&t=0&news_id=20946

Uncle Audley looks at Small Business help suggestions

I got a call from Uncle Audley last night. “Do me a favour,” he asked, “look up the word defer for me would you?” Not wanting to upset my favourite relative I took the book from its shelf.  The Chambers Concise Dictionary 2004 edition priced at £17.99 from all good book shops. “Why that word?” I asked. “

 

“Because that is what David Cameron asked the Government to do, in his Observer article of October 19 2008, when considering VAT payments for SME’s,” came the reply.

 

“His actual quote was, “And today we are calling on the government to allow small and medium-sized enterprises to defer their VAT bills for up to six months. That means a typical small business with 50 employees, revenues of £5m and an annual net VAT bill of £350,000, doesn’t have to find £90,000 to pay the taxman when the bank has just taken away its overdraft.” What does he mean? Does the £90,000 disappear never to return or does it stack up to be paid later if the business can? I’m not altogether sure – perhaps the devil is in the detail.”

 

“Chambers Concise suggests that defer means “to put off something or leave it to a later time” or “to yield to their wishes” I told him.

 

“Typical we’ll have to wait to find out. The Daily Mail are trying to get in on the act suggesting their wonderful 8 point plan to help save our small businesses with their Charter which includes some good points but some ill thought out ones too. Wherever we look there is lots of suggestions but they all point to one solution; a return to where we were. Is that not why we are in difficulty?”

 

Good point I thought and as I opened my mouth to tell him so I was forced to listen once more.

 

“Surely the problem here is a lack of saving and a long period of spend spend, spend coming home to roost. In my day boy you had to wait for what you wanted. None of this slap the plastic down. Nowadays we get more than we need before we consider whether we need it in the first place. Thatcher privatised everything and had nothing to show for that money now Gordon has himself in the same place. Maybe the Australians are giving handouts to help but is this the answer? Surely those who take it seriously and self help should be rewarded not those who have no intention of doing so. Maybe I’m too old for all of this but in my day it never worked like this. It was called cutting your cloth accordingly. Nowadays there is not much cloth worn let alone Waide and Pollard from which to buy a vest or two!

 

Savings, my boy, are the answer. Without them we’ve got nothing but too many have been allowed to get themselves in a muddle and it is this problem that needs sorting out. Not popular with small business though as to save we cannot spend at all to build them up and that will mean the mother of all recessions. To avoid this careful management is needed but this means telling people what they have to hear not what you think they want to hear. Reassurement does not work when hard lessons need learning. That is why the Bank bail out is difficult to implement. It seems the Government’s plan includes lending in areas deemed folly and the reason for the problems, so how can this provide a solution? What we need is a return to sense and this means property price falling further to allow new borrowers into the market. That will mean negative equity. Unfortunate but there you have it.

 

We’ve also got to put right some of the nonsense we have created. The 10p shenanigans should all be reversed to reduce corporation tax on small business – but that is for the long term as payments dates are later. The 10p back in would put right last years wrongs and put money in pockets but let us not forget the amount of money and paper that has been wasted printing and sending out all those tax coding notices before the year, after the budget, after P11d’s and then again for the extra allowances. No one seems to bring up this level of waste – but it is there and very real.”

 

“Uncle, you sound depressed” I said, having got a word in at last, “is there anything more certain than a recession in your mind?”

 

“Only Spurs to get relegated” he added with a laugh and he was gone. Oh dear I thought, how do I break the news to Nick in the morning…..        

Uncle Audley considers Enlightenment

Uncle Audley started to wax lyrical about the age of enlightenment and his scientific revolution. Knowing Uncle Audley, I guess that his journey to the 18th Century would have a resonance with some aspects of modern day life.  Sure enough it did.  “It was a momentous Century.  We had an age where there was a combination of deep intellectual thought and ground breaking scientific inventions and discoveries.  The barriers to human advancement were swept away by these twin movements.  I would say that no previous era has seen such an advance in the betterment of the ordinary individual human being on this island.  Ok, there was still oppressive poverty, brutality and injustice but the foundations were put down for the order of the Victorian Age.

 

What was also noteworthy was the Government just went about its business and let the philosophers and inventors go about theirs.  They did not seek to take credit for the advancements. 

 

One of the great figures of this age was Adam Smith, the great Scot, who wrote the Wealth of Nations.  I can now see that he is featured on the back of our twenty pound notes.  Adam Smith came from Kirkcaldy.  Another scion of that exalted parish is Gordon Brown. 

 

Compare Gordon’s sense of achievement with that of one of the great figures, Sir Isaac Newton.  When Sir Isaac was praised for his achievements, he replied “if I have achieved anything it is because I have been able to stand on the shoulders of giants”.  Our Gordon has shown no such restraint or modesty.  The successful performance of the British economy over the last decade was entirely down to him.  No credit given to the world conditions, the internet revolution driving down unit costs, or the demand from the BRIC economies.  Much less to his Conservative predecessor, Ken Clark, under  whose stewardship, the economy had grown consistently over the previous four years or so.”

Uncle Audley considers Mr Brown’s first year in office

I telephoned Uncle Audley the other afternoon to see if had been enjoying Wimbledon only to find him in an uncompromising mood. “First Anniversary this week”, he barked. Startled I wondered which card I had forgotten to buy before he continued.

 

“Brown. Mr Modesty, the chap who always told us as Chancellor what a brain box he was and went missing when trouble was afoot. He hasn’t been able to escape the floodlights in the last 12 months has he now and he hasn’t fared well. Mind you it’s not all his fault. Oil and Energy prices are a problem – as they were for Heath. Got him too when they went through the roof. You won’t remember them though my boy”  (Oh I don’t know I thought remembering primary school without heat and being taught to dance with the girls to keep up our warmth. I woke up to hear Audley still talking) Sorry, Audley what were you saying?

 

“Three day weeks, living by candlelight – I’d get out tomorrow and get a box before they go up as well if I were you. Mind you Heath won more votes than Wilson but lost the 1974 election – I doubt Brown will have the same luck. Fifth in Henley – I ask you. We knew he wouldn’t win but fifth.”

 

I appreciate you’ve never been keen on Mr Brown”

 

“How could I be – he’s never done anything worth praising. Any measure he introduced he removed at a later date, he robbed the utility companies and we have nothing to show for it and he gave the Bank of England independence and they messed up the Northern Rock thing when their first chance to shine appeared. The problem comes from Blair allowing them to be presented as a dream ticket, head and shoulders above the rest of the party, Gordon the only potential successor so that when the time came there was no room for manoeuvre. I reckon most senior Labour figures knew this would happen but were powerless to do anything about it. If they really want to lose the next election they should call it now before too much more damage has been done. The economy is slowing, house prices are falling it looks like it could be grim ahead. That calls for a strong leader. Trouble is – are there any out there?”

 

And with that he was gone, no mention of the tennis at all. I thought about what Audley had said and picked a Dire Straits CD off the rack and put on the title track,

 

You walk out on the high wire 
You're a dancer on thin ice 
You pay no heed to the danger 
And less to advice
Your footsteps are forbidden
But with a knowledge of your sin
You throw your love to all the strangers
And caution to the wind


And you go dancing through doorways
Just to see what you will find
Leaving nothing to interfere
With the crazy balance of your mind
And when you finally reappear
At the place where you came in
You've thrown your love to all the strangers
And caution to the wind

It takes love over gold
And mind over matter
To do what you do that you must
When the things that you hold
Can fall and be shattered
Or run through your fingers like dust