Before I add my views to the acres of comment on the Budget, a little word about myths. One of the most common is that the British Isles have not been invaded since 1066 when William, Duke of Normandy defeated our king Harold at the Battle of Hastings. This may have been the last successful invasion but there have been at least six others since then. Best known perhaps is Napoleon’s try in 1797 when he landed at Fishguard in Wales http://www.historic-uk.com/HistoryUK/Wales-History/Fishguard.htm If you want learn about the others, and are maybe looking for a juicy paperback for a holiday or long flight, then N A M Rodger’s tome The Command of the Ocean http://www.amazon.co.uk/Command-Ocean-History-Britain-1649-1815/dp/0713994118 is worth reading. More recently in WW2, there was a German invasion that went wrong in the village of Shingle Street in Suffolk http://www.shford.fslife.co.uk/ShingleSt/ officially explained away at the time as an exercise.

The above is not irrelevant in these interesting times either. In both the above times, taxes went through the roof, the Government printed money and in the case of the Napoleonic wars, Government debt in relation to GDP (the size of the economy) was the highest ever. Income Tax was originally introduced by William Pitt the Younger, as a temporary measure to help finance the war against Napoleon.

The one thing the new Budget will not do is revive the economy. Expecting an economy (that’s you and me folks) to get up off its back and motivate itself with higher taxes and endless regulation is about as realistic as expecting someone on a diet to benefit from an extra helping of dessert. Recessions (and this one is not the last either) are caused by a fall in spending. We will all be poorer as a result of the latest Budget so will spend less and if we can, save more for a rainy day. Less spending means many businesses out there will make smaller profits and more will go bust. This feeds through to other businesses so tax revenue falls, meaning that the Government will borrow more, print more money and basically pass the problem onto our grandchildren – giving me a great idea for a new poster. Instead of “What Did You Do in the Great War, Daddy?” http://www.uncp.edu/home/rwb/What_Daddy_WW1.jpg we might have “What did you do in the Great Recession, Daddy?”

One casualty here can be professional standards, and it is interesting to hear that HSBC and other bancassurers are now pushing life & critical insurance when people apply for credit. While some protection is usually better than none, the cover provided by these tied companies is usually more expensive than what an independent adviser could find, especially if one is in less than perfect health. Decades ago, lenders would insist on life cover for a mortgage for example, and write to the insurer informing them of their interest. This disappeared over 10 years ago even though the case for it was sound, mainly because they couldn’t be bothered with the paperwork. The cover recommended is often much more expensive than what an independent adviser could get and even double the alternative cost in some cases. www.in2consulting.co.uk would be happy to review existing cover here but do not lapse any existing cover until you have written confirmation that the new cover is in place.

Another example of the benefit of using a broker comes from Mike Nightingale at www.greenparkinsurance.co.uk fellow member of www.BRXBondStreet.co.uk The day before completion, a client phones him to get insurance for his new home as the on-line sites did not offer what he needed, in spite of the many options and boxes to tick. A more amusing example of human nature and leaving things to the last minute comes from resident jeweller Lewis Malka www.joseph-sterling.com who got a phone call last Thursday from a guy who was getting married on the Sunday! Usual reason is that people concentrate on things like the seating arrangements, the photos, flowers, getting two families to talk to each other etc so the ring purchase gets sidelined. It is not an unusual event either as Lewis has had a dozen similar cases in the last few years.

Perhaps most intriguing meeting of the week is with a new potential client referred by my marketing guru Rhidian www.r2m.info The new client has a website and blog which are very interesting reading. Like many people these days, he is totally disillusioned with pensions which gives him three choices:

a) invest in the pension again

b) do the Lottery

c) sell your business.

The pension choice is off the shelf, relatively simple, well known and cheap in terms of running costs. The Lottery choice is frivolous but there are plenty of people out there whose idea of pension planning is to spend £50 week on this. Selling your business is fine if it is in a state where somebody would pay a large cheque for it. But no one for example, is going to pay the full price for a business where the key person has just had a heart-attack, and many businesses will need grooming to make them investable for an outsider. People who still expect to sell their business might like to revisit a previous blog BIMBOs http://www.georgeemsden.co.uk/2009/04/bimbos/ But interestingly, my guest is ahead of me here and comes out with “If you haven’t got an exit strategy, you haven’t got a business. All you have is a structured wage arrangement!”  Serial entrepreneur Mike Southon’s weekly FT blog might be worth reading here http://www.ft.com/cms/s/0/b5ef55e8-22a1-11de-9c99-00144feabdc0.html?nclick_check=1

Let me close with the Budget of which there are actually three versions. First version is the live TV speech which is in two sections. First part is a review of the past year, how well the Government has done in difficult circumstances (sic) Second part covers the measures to achieve this etc. Second version is the paper one – hundreds of pages of legislation and schedules - The Finance Bill. The third version is what becomes law as The Finance Act which usually gets Royal Assent around July. It all gives me a busy weekend reading allowing me to forget for a while, the rumoured VAT rate of 20 per cent in the Autumn or Spring.

Enjoy your weekend!

Never mind the recession, financial crime seems healthy and can be incredibly sophisticated. One minute after paying a bill via my mobile using an automated system, I get 2 text messages. One is thanks for paying the bill with a 16 digit reference, while the other alerts me to a new Voicemail message. Calling 901, I hear a recorded message made by a well-spoken English lady from Abbey’s Fraud Department. My name is inserted into an otherwise standard recorded message quoting a number 0845 356 0024 asking me to call them urgently. It was reassuring on holiday in Europe last year, when Abbey called me in person or sent texts regarding what seemed to be unusual transactions, but never anything automated like this. Something sounds a bit strange, so I type the number into Google and surprise, surprise it is a phone spam number and there are two links to:  www.phonespamfilter.co.uk Out of curiousity, I type in my own mobile number into Google, but nothing matches – quite a relief. Most scary is the fact that the whole system is completely automated. No boiler rooms of villains trying to flog bogus shares or other scams. Everything from picking up the key numbers out of the ether, personalising the voice message, to sending me the text, is automated. Several times throughout the day I get a call from the same number even though I have not called it. N.B. If you fall for a scam like this, your bank will not reimburse you.

This type of scam works on a simple numbers principle that enough will be fooled by it. In the days before computers, there were Phone Booth Indians. You get a phone call “Hi, my name’s Joe and I’ve got a tip for the **** race on Saturday…Never mind if you don’t usually gamble, sir. Why not try your luck and if you win, would you please send US$5 (or a percentage of the winnings) to this address? Good Luck…..Ten people are called for the first horse, ten people for the next horse and so on, until all the horses are covered. More of this stuff in:  http://www.lybrary.com/telephone-booth-indian-p-4209.html

One very obvious point that is usually overlooked in these interesting times, is that the one commodity  which we have never had so much of, is Money. Note that I am not quoting Prime Minister Harold MacMillan in his famous speech “most of our people have never had it so good!” Even without the recent addition of Trillions to the world banking system, there are plenty of people sitting on piles of the stuff and willing to invest in good ideas provided the required financial information is presented in the usual (and preferably digital) format. A common mistake is not to ask for enough and spreadsheet programmes like the original Visicalc http://www.bricklin.com/visicalc.htm and ubiquitous MS Excel make playing around with the numbers child’s play compared to using a calculator, pencil & rubber* and handwritten figures on accountants columned paper.

People with an idea but no clue how to put a business plan together for example, could start with looking at  http://www.businesslink.gov.uk/bdotg/action/home?domain=www.businesslink.gov.uk&target=http://www.businesslink.gov.uk/ where there is a lot of help organised via local branches. Some of the help is free, some of it is subsidised by the Government and a small part charged at full rate for the professionals concerned, but the latter are unlikely to be needed until the business plan and everything is well developed.

It is a new tax year and there are rumours again that Higher Rate Income Tax Relief on pension contributions will be restricted to Basic Rate Income Tax. Interesting to see how this fits in with the already announced erosion of the Personal Allowance (the bit you can earn before you start paying Income tax) which currently is £6,035. From 6th April next year, if you earn > £100,000 this will be lost at the rate of £1 for every £2 earned over this amount up to one half of the Personal Allowance and if you earn > £140,000, the same loss for the second half of the Personal Allowance. As the tax partner at a firm of West End accountants explains, this is equivalent to a top Income Tax rate of 60 per cent – Old Labour lives and breathes. Simple ways to take advantage of this (sic) and get the tax back might be single pension contributions &/or Salary Sacrifice – not as daft as it sounds when the employer passes on some of their National Insurance saving.

The Budget itself will be the latest ever on 22nd April and just through my letterbox, HMRC reminds me that a new tax return is required for the new fiscal year. Deadlines are 31 October 2009 for paper returns and 31 January 2010 for on-line returns www.hmrc.gov.uk/sa/index/htm

Meanwhile, colleagues at www.in2consulting.co.uk are not letting the grass grow under their feet, and have joined up with 7 other firms to launch a new fee-based wealth management service called Aurora getting themselves a good write-up in the FT Personal Finance section http://www.ft.com/cms/s/2/957908dc-25c5-11de-be57-00144feabdc0.html

Another example of the slow but sure move from commission-based remuneration to fees is an announcement last week from Axa that they will no longer pay commission on group pension business so any employer setting up an Axa pension scheme for their employees is going to have to pay for the advice directly. Not much sign of this for protection business e.g. Death-in-Service benefit or ordinary life insurance, but a very clear trend in investment and pension business. Benefits like the former are often ignored when starting a new job, so employed people reading this might like to check their Staff Benefits Handbook or equivalent, to see exactly what their employers provide besides salary.

Apart from life insurance, the ultimate kind that one might not wish to claim on would probably be for cosmetic surgery which has gone wrong, but fortunately this can now be covered via   http://www.lloyds.com/News_Centre/Features_from_Lloyds/ and since there seems litle sign of a recession in this business, well timed.   http://www.telegraph.co.uk/fashion/beauty/5159931/Cosmetic-surgery-From-boom-to-bigger-busts.html

* eraser for my US readers

Pressures from the “credit crunch” continue to surface in business life or maybe it is a convenient excuse?? Continuing from the Abbey/Alliance & Leicester item in the previous blog  http://www.georgeemsden.co.uk/2009/04/soft-openings-budget-leaks/ it seems that Abbey are now contacting customers directly 6 months before a mortgage product is due to finish, to tell them what offers are available. Good customer management you might think but these are customers introduced by brokers. Perhaps I should hang around in the local Abbey branch and quietly hand out my own business cards?

There is still the odd surprise in the property market where one client finds that a commercial property goes for £250,000 against a predicted £210,000. The yield at the £210,000 figure is about 6 per cent and obviously less when you pay £250,000. Auction fever can catch any of us, but you wonder if the buyer remembered that Stamp Duty is 3 per cent over £250,000. Property cost £250,000 duty £2,500; cost £250,001 duty £7,500.

One step away, an estate agent with a very impressive track record finds that commision terms are suddenly halved on a juicy deal he introduces to a firm he has been working with for 7 months. No answer to his phone call to the office querying this. Next day he is unable to log in to check his e-mails which is all explained a few minutes later, when the employer informs him that their arrangement is terminated “as we cannot agree terms….”

Fortunately, there are still some people who do keep their word, as I get a phone call regarding an introduction I made in Autumn last year. The deal is about to close, and the call is to inform me that a cheque will be on its way to me shortly. We have no formal introducer’s agreement and the deal is below their normal minimum, but my business instinct told me that the two parties could do business and it did not take long for a willing buyer to be found.

New postal charges remind me of an interesting nugget from a review meeting with a client who has a very successful courier business. Much of their business is from the legal profession and where two Lever Arch files are required in another office in London for example, their courier price is often cheaper than using Royal Mail – not to mention being a lot quicker.

Faced with the choice of jam today or jam tomorrow which in pension-speak might translate as salary today or pension tomorrow, insurance broker Aon (UK) and Aviva (was NU) are reducing contributions to their own staff pension schemes. In the case of Aon, employer contributions are being reduced and in the case of Aviva, employees will have to start contributing something if they want their employer to contribute. Employers/HR people reading this who want to get up to the minute pensions info might wish to look at:  http://www.mycompanypension.co.uk/Employer-Zone

Further funding research reminds me that BIMBOs are not only two-legged creatures but can be Buy-In/Management Buy-Outs where the people buying into a business (MBI lot) may work with the people who are trying to sell out/exit (MBO lot). The latter might be an elder generation of a family business with no obvious succession, typically arising from: they have no children, the children aren’t interested or maybe live in another country. Funds for the purchase would be largely borrowed and the cash flow and profits used to clear the debt. At this point, the company would probably be sold or perhaps listed on AIM at a higher earnings mutliple than when they bought it – and so life goes on.

For those of you who find the financial BIMBO stuff a bit tedious, here is a short summary of the more popular human version which originally was male http://www.independent.co.uk/opinion/letters/words–bimbo-1271966.html

A regular topic in my monthly pension surgeries is transfers. Convenience is usually the driving factor whether for UK employees who have changed jobs several times or for ex-pat employees here who wish to return to say, India or Australia. For the former, transfer cannot be done on an execution only basis nor can the client get the forms from the pension provider and do the paperwork themselves – it has to be advice only. This will invariably be fee-based and not < £500 making the cost against a fund of a few £thousands, uneconomic. For the latter, pension benefits can be transferred provided the receiving scheme is on the QROPS list http://www.hmrc.gov.uk/pensionschemes/qrops.pdf

The list has been around for a couple of years and is basically a list of schemes where the laws in the receiving country are broadly similar to pension rules in the UK. This list used to be updated on an ad hoc basis but is now only valid for 24 hours, after last year when all Singapore schemes where removed http://www.telegraph.co.uk/finance/personalfinance/pensions/2792608/Expat-pension-schemes-Singapore-sling-may-sink-pensions.html

But in a final example of how life is changing with the credit crunch, thanks to http://www.ustaxonline.com/aboutUs.html for reminding me that the US IRS has anounced a six month amnesty for people who have neglected to declare overeas earnings etc – changing what some people might have thought of as cool to rather dangerous.

Leaked stuff ahead of the Budget 22nd April? Good news for small businesses, as rumour has it that the registration threshold for businesses to register for VAT will go up to £100,000 annual turnover, while the threshold for deregistration where this is falling, will be increased to £99,000. But reminding me that accountants do have a sense of humour, you can ignore the above as this was a classic April Fool from my friend & fellow ecademist http://www.bookmarklee.co.uk/ 

Good news from my mortgage colleague who tells me that Abbey and Alliance & Leicester are increasing the amount that they will lend to 85 per cent for First-time Buyers – thus improving chances for couples wanting to get onto the property ladder, from the practically impossible to extremely difficult. In all the years I did mortgages directly, the cases when buyers had a 20 per cent deposit would not use the fingers of both hands and none of them was able to save this deposit from income – most if not all all the deposit came from family. Both lenders here are part of the Banco Santander group where processing functions are being merged next week anyway (so why have two brands?) but let’s hope other lenders follow suit.

Near the end of the tax year, messages from professional introducers increase. Can my client get > 0.6% p.a. deposit interest? plenty around who will offer > 3% p.a. Want to invest a six-figure sum for 2 years and earn better than deposit rates? How brave are you?  Generally and in less stressed times, 3 – 5 years is usually considered to be the minimum for any investment with an equity content. Even a bond-based investment is high risk for that period as interest rates are bound to go up soon, as inflation kicks in. In another case, my client wants to retire overseas, will he have to pay UK tax in his pension (annuity) income? Not if he completes the necessary Form AF -  link here: http://www.hmrc.gov.uk/cnr/form_af.htm#2 but tax may be payable in the country he retires to.

A widow is in dire financial straits as her husband died without making a will and an uncashed cheque from us is found in her late husband’s papers. Getting Grant of Probate (Letters of Adminstration) which would enable a cheque in favour of her husband to be used by her will take months. Friends are helping her out financially while the benefits claim will be processed in its own sweet time. Can we issue another cheque? After advice, yes we can but we want the old cheque back and a letter of indemnity in case of any claims from the administrators.

The chat with one of the introducers reveals a new issue. An eye operation has not gone particularly well leaving him partially sighted. While we moan about the level of e-mails we get, not being able to read them is even worse and a real pain (literally) in this case, plus we need to have a catch up meeting. In a perfect example of the benefits of on-line social networks, my (anonymous) post of this situation to www.ecademy.com produces two answers within hours giving links to resources which will solve the problem and surprisingly gives some good news about MS Vista. This much maligned MS product has a built-in reader and  apparently has a feature which will read out e-mails.

With a new month, it is time for pension surgeries again with my hotel employees. There is time for a stroll through Green Park – so-called because it has no flowers and was only made into one after having been a burial pit for victims of the Black Death. Today, the north-east corner is spoiled with new diggers starting work on new lifts for the underground station. Buckingham Palace seems to have a lot of horse drawn traffic delivering among other things, the daily post. Until recently, the royal bank statements from Coutts & Co. used to be similarly delivered but are now delivered in a horseless carriage and this probably changed around the time they got rid of their frock coats – the nineteenth century equivalent of today’s pin-stripe business suit. The flags of the High Commission for Swaziland and Embassy of Albania indicate someone is at home although the offices do not seem open yet.

My 5 meetings are enjoyable as expected, but most notable is unscheduled and  with someone I almost bump into at the coffee machine, who signs up with a sensible monthly contribution. Later discussion of previous employment and future goals reveals a decades old common contact from The American Bar at The Savoy (six stages of separation??) and some sharp views on the catering business. Most go bust within two years and a common mistake is have a grand opening but then be unable to maintain the initial promise. Good journalists may get the business off to a grand start but if there is no follow through, it will not last in a very competitive industry. Much better to have a soft opening, get the wrinkles out and then have the grand publicity bash. Interestingly, the alley leading to The Savoy Hotel is the only street in the UK where it is legal to drive on the right - and why? So taxi drivers could reach back and open the passenger door without having to get up from their seats!

In keeping with these interesting times, newly redundant might like to look at http://www.dwp.gov.uk/publications/dwp/2009/jobseekers-handout.pdf and on a more cheerful note, for a pithy weekly view of the stock markets, don’t forget  http://www.wdebroe.com/OurLiterature.aspx 

Finally, it’s a new season at   http://www.shakespeares-globe.org/theatre/annualtheatreseason/  where my favourite London theatre opens with Romeo & Juliet on St George’s Day running until 10th October 2009. But if I plan things properly, I might pop into the above-mentioned hotel for a proper martini cocktail first.