The rich and famous have feelings too

If you mercilessly mock someone about their age, appearance or perceived inadequacies, that would be bullying, right?

Or is it OK when it's the national press doing the mocking and the victim is famous?

The thought occurred to me recently when I spotted the Mail's "Night of the Living Dead" front page after  the Stones did Glastonbury.   It is remarkable how the band keep on performing despite their advanced years but most people celebrate it rather than harp on about how old and wrinkly "the boys" have become.

Jagger and co are big enough to take it and the weak ageist jokes ("Limpin' Jack Flash") have followed them around since before they really did get old.  Maybe it's the price of being rich and famous.

I am not asking the press and the online community to treat every one in the public eye with kid gloves. For example the furore surrounding Maurice Saatchi putting his hands around Nigella's throat was a legitimate examination of his conduct.  

Some famous people (they are usually known by a single name - Jordan, Cheryl etc) play the celeb game and make a fortune from it so they can't complain if they get bitten by the hand that feeds them.  

But there is a lot of public mockery that really is out of order.  A couple of examples:

• When Roy Hodgson gave his first press conference as England manager, the press was full of nonsense about his (mild) speech impediment ("Bwing on the Euwos!").  

• Former Lib Dem leader Menzies Campbell couldn't shake endless references to his supposed decrepitude.  This dignified former Olympic athlete was effectively forced out by a snidey media at the grand old age of 66!

Often women get a lot of personal comments based on their appearance which seems OTT and more than they would get if they were men - Rebecca Adlington and Cherie Blair come to mind.  Recently deposed Oz PM, Julia Gillard, took some disgraceful stick about her bust size among other things.

Apart from the unnecessary hurt caused to individuals by this sort of stuff, we have to consider the example it sets to kids. If they see public figures pilloried for having a hair out of place, carrying a few extra pounds or speaking with a lisp, then how can we then tell them it's not OK to bully the poor kids in their class with the same afflictions?

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The 10 least sincere phrases in the English language

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Since when did Ryanair get so expensive?

Labour HS2 the rescue?

There is light at the end of the railway tunnel.

The tide might just be turning against HS2, the nightmarish money pit of a plan to build high speed rail links between London, Birmingham and other Northern cities.

Currently only UKIP (see "The best and worst of UKIP") and a few MPs whose rural constituencies are in danger of being disfigured by the line against HS2.

With the Coalition seemingly wedded to the plan however much business case for it is discredited, the best hope for stopping HS2 is Labour.

Officially the Opposition support HS2, but Labour bigwigs like Lord Mandelson and Alistair Darling are voicing strong doubts and threatening to break up the big party consensus in favour of HS2.

Mandy even admitted that the last government's backing for the proposal was "politically motivated".  It certainly looks like the cost-benefit analysis done to back it up consisted of numbers picked out of thin air to justify a weak economic case.

The cost projections are clearly a joke.  They keep changing every week and no one seems to be factoring in any interest costs on the money that will have to be borrowed to fund the £50bn they now say is required.

There can be little doubt the real investment cost will be higher but also it is very likely to run at a loss as most high speed networks do.  This is mainly because the estimated passenger traffic never materialises as the public choose cheaper alternatives.  HS1 and the Channel Tunnel are used nowhere near half as much as was originally claimed.

The idea that HS2 will be good for the environment is highly debatable and essentially unknowable this far from its launch date (2026 although these projects are almost always delayed).  By then we could all be using driverless cars powered by algae fuel.

The worst element of the business case though is the tens of billions claimed for the so-called wider business and economic benefits.

The economy is supposed to benefit from spreading growth from London and the South East to the North but any objective analysis would allow that the benefits are just as likely to flow in the opposite direction.

Most of the business benefits are calculated by placing a value on every hour saved by the shorter journey times, as if businessmen don't work on trains.  This is clearly nonsense: given the rate of technical advance I imagine by 2026 businessmen will be able to hold virtual conferences in a toilet cubicle if they had to.

Finally there is the lie that the Coalition has been putting around - that tickets will be no more expensive, or maybe even cheaper, than regular fares.  This is completely implausible but if it is true then the line will run at a massive loss.  So the taxpayer will be on the hook for £50 bn, the inevitable cost overruns, interest on the debt and operating losses for decades.

I hope to God Miliband listens to his party grandees and turns on HS2.  It could be one more thing he could do to make Labour a shoo in for the 2015 election (see The bold policy that could put Miliband in No 10) but more importantly save Britain from a horrendous and costly mistake.

Nailing left wing austerity lies

Keynesians have been in confident assertive mood recently, claiming that the facts are bearing out their long-standing calls for more fiscal stimulus to "end this recession now", as their cheerleader-in-chief Paul Krugman put it.

They claim that the divergence between US and UK growth rates proves their case.

Until Osborne choked off growth with his reckless spending cuts in 2010, they say, the UK was on the path to recovery thanks to Labour's loose fiscal policy, including a temporary VAT cut.  The chickens of austerity are now coming home to roost, including a stubbornly persistent deficit.

Contrast this with the US, where Obama resisted calls to start cutting the deficit, and a recovery is gathering strength.

This Observer article is typical of the breed:

Gordon Brown at the helm, steered the world economy back on course, with the aid of a $1 trillion collective stimulus. Brown wanted to maintain the stimulus: the US government did, but the 2010 coalition did not, in the name of budgetary consolidation. The US budget position improved dramatically with economic growth while the British deficit, in the absence of decent growth, continues to be an embarrassment.

The problem is that the figures don't support this version of events.  Look at the chart showing UK and US public sector deficits as a % of GDP:

The supposed difference between austerity-obsessed Brits and spendthrift Yanks is all rhetoric and perception.  If anything the US has adopted a tighter fiscal policy than the graph suggests: there have been big cuts at state level which are not reflected in the Federal deficits shown here.

The reality is that the two countries have followed a very similar path.  They entered the recession with their public finances in remarkably poor shape given the boom that preceded it and the crisis sent deficits soaring.

Both started out with some Keynesian stimulus but eased off as political concerns over the scale of borrowing took hold.  In the last couple of years both countries have adopted a middling course, neither attacking the deficit or adding to it as Krugmanites demand.

In fact the US has made the first serious move to cut deficits dramatically as their "sequestration" law kicked in this year to lop $85bn from Federal spending.  But the US is still growing more quickly than Britain.

So, the idea that British growth is slower than the US because we went for austerity and they didn't is a myth.  There are plenty of other possible explanations for the US currently outperforming Britain.

I would highlight one - US house prices were allowed to fall back to their pre-boom levels and the banks purged a lot of bad debt in the process.  The process is widely believed to be over and housing is now contributing to growth.  By contrast the UK has done everything in its power to prevent this house price boom unwinding and is consequently stuck in low growth mode - plateauing rather than recovering (see The stalled UK economy in one chart).

There are almost certainly multiple factors at work.  Another UK-US contrast relates to energy: they have fracking and gas prices 1/4 of UK levels, we have declining North Sea oil production shaving a % point off GDP.

One thing's for sure - the simplistic nonsense about "it was austerity what did it" needs to be laid to rest.


From our website:  UK and Spanish tax implications of a rental property in Spain

The 10 least sincere phrases in the English language

Yes everybody lies, and it's not just little white ones "to save their feelings".  It's just easier and more comfortable to say what will get the job done rather than what we think.  Here is my selection of the least sincere phrases around:

10.  “I am in a really weird place right now”

• The modern equivalent of letting someone down gently with the it’s-not-you-it’s-me routine.

9. “Your call is important to us”

• Why don’t you answer the freakin’ phone then.

8. “How was football?”

• Non-sporty partners are not remotely interested in the reply.  Try answering “awful actually, someone broke their leg and had to go to hospital” and see if you get anything more than the stock “very nice dear” reply.

7. “A major motion picture event”

• Saying this in a deep voice at the start of trailers for “Smurfs 2” and “Hangover 3” does not make them events.

6.  “Regrettable”

• Always a phrase used by somebody blissfully unaffected by the announcement and thus with no reason for regret it e.g. a Chief Exec announcing redundancies or a utility company raising prices.  Regrettable, yes, but not by them.

5. “Sorry”

• As said by a child to a sibling they have reduced to tears. Usually only spoken under threat of water-boarding and so quietly that  NASA listening devices wouldn’t pick it up.

4.  “Injured in an accident that wasn’t your fault?”

• The real question that these ambulance-chasing sharks are asking is “long-forgotten incident which we can extort a few quid out of?” but they and their truth-dodging clients have to keep up the charade.

3.  “I like you … the audience loved it – you’re a breath of fresh air"

• TV talent show judges are apt to gush like this when someone has somehow got the sympathy vote and has to be put through to the next round despite being rubbish. Think of an 80 year old widower who can play “My Heart Will Go On” using his dead wife’s rib-cage as a glockenspiel. 

2. “Aaah…he looks just like you"

• Someone claiming that a baby looks just like Mum or Dad is not being sincere.  It’s a classic diversionary tactic when faced by a truly ugly new-born: simply pick a parent at random, point out the supposed likeness and a lively discussion will ensue, neatly obscuring the fact that you have failed to comment on the nipper’s appearance.

And the winner by a country mile ...

1. “Ryanair apologises for the late departure of your flight this evening”

• Even the screaming baby in row 23 knows that they don't really care about anything they put their passengers through.  Their slogan should be: “We don’t give a flying fxxk”

See also: What two years of flying Ryanair will do to you       When did Ryanair get so expensive?

Since when did Ryanair get so expensive?

UPDATE: a reader who books with Ryanair messaged me with some tips on how to avoid the highest fares.  In his experience, the fares are cheapest 3-5 weeks before the date of travel.  They quite often start expensive unlike on Easyjet, where the first price is usually the cheapest quoted and it's downhill from there.
He has also found that it is cheaper to book in Euros which is done by putting the Spanish destination first.

No one much likes Ryanair (What 2 years of flying Ryanair will do to you) but millions of us put up with it because it’s “the low fares airline” .  Well it used to be.

I visit Spain regularly and generally end up flying Easyjet or Ryanair because they are cheaper than alternatives like Monarch and BA.  In the past Ryanair has usually had the edge on price but I recently noticed a huge shift when booking flights for next Winter.  

Flicking between the two websites for the weekends I needed, Easyjet was invariably coming out on top.  In some cases Ryanair was almost twice the price of its rival:

I had a quick look at Monarch and BA.  BA was the most expensive but, as they are at pains to point out, are not a no frills outfit.  Monarch, was more expensive than Easyjet but they also easily beat Ryanair.

I booked my flights for this Summer ages ago and got a mixture of Ryanair and Easyjet flights.  Looking on the websites now for a couple of dates in the high season, they look very similar.

So maybe it is just the winter fares on this particular route that Ryanair have decided to put through the roof.  I would be interested to hear what other regular flyers have to say.

One thing's for sure, you can no longer take Ryanair’s boast of having “the lowest fares” at face value.  They have clearly decided to cash in on their dominant position.  Flyers should not simply assume that Ryanair is cheapest and need to shop around.

One pleasant side effect of booking with Easyjet is that their website is easy to use e.g. you can quickly click through to pay for your booking without having to say NO to pages of add-ons like transfers and carry on cases.

The bold policy that could put Miliband in No 10

Ed Miliband could transform the UK economy and his electoral prospects at a stroke by adopting radical tax reform policies.

The thought occurred to me during the Labour Leader’s spat with Google over its policy of routing profits to low tax Ireland.  Miliband attacked Google’s legalistic defence, proposing tougher rules and increased international cooperation to make multi-nationals “pay their share”.

He will no doubt be pleased by the ensuing headlines but I don’t think this rhetoric on its own will do much to improve Labour’s chance of a return to power in 2015. 

The public will see it like they do banker bashing.  They may agree with the sentiment but talk is cheap and not entirely convincing coming from Labour which toadied up to banks and business something rotten during the Blair/Brown years.

But what if Ed turned the issue into something more than speech-filler and put tax reform at the heart of his manifesto?  Rather than promise a few tweaks to transfer pricing rules and an international conference, he could propose to scrap the bulk of company tax reliefs in return for halving the corporation tax rate to 10%.

Although the Treasury would lose out from a lower headline rate they would gain from the abolition of tax reliefs and, more importantly, remove any incentive multinationals have for funnelling profits abroad.  Indeed the UK would gain from multinationals shifting revenues and profits in the opposite direction.

The knock-on benefits are potentially even more significant: more foreign investment in Britain, more home-grown start ups and billions saved in accountants’ fees.

And why stop at corporation tax?  A similar, although somewhat trickier, deal is begging to be done on personal tax: simplifying the structure, perhaps including NI abolition, lowering marginal rates and abolishing reliefs.  Tax receipts overall should hold up if enough new income is declared at the lower rates and the more efficient system feeds through to economic growth.

There’s a snag of course and that’s why it will almost certainly never happen.  

Labour is traditionally dead-set against lower tax rates and made a lot of political capital by raising the top rate of income tax to a damaging 50% and calling the Coalition “the millionaire’s friend” when it partially reversed the rise.  The left has never bought the argument about lower tax rates paying for themselves by reducing the incentive to avoid and boosting the economy.

But it’s the very unlikely nature of Miliband promoting such a policy that would make it a master stroke equal to anything Blair came up with.  Tony was the master of stealing his opponents’ clothes.  

When he adopted an apparently right wing policy he wrong-footed the Tories and used the resulting opposition from within his own ranks to his advantage.  Standing up to his internal critics made him seem strong and non-partisan to moderate voters.

That’s exactly what Miliband needs to bury the Red Ed tag.  Facing down some left-wing carping about tax cuts for the rich would do wonders for his standing with the majority of the country.  He would also have a substantial economic policy which isn’t just about spending and borrowing more which would finally distance himself from the Brown legacy.

Most importantly he would sew dismay and discord in the Conservative ranks.  They would be shorn of one of their key arguments (Red Ed’s is weak and has got nothing new) and the right wing of the party, including already wavering financial backers, would be further disillusioned seeing Cameron outflanked on their territory.

There are a myriad different ways of reforming the tax code on a lower-rates-less-breaks basis.  Ed Miliband could pledge to do it in a more Labour-friendly way by focusing more on the closing of loopholes than the lower rates.  But I don't suppose he will which is perhaps just as well because Labour's return to power would in general be a nightmare.

From our website:  Spanish maternity benefit

The best and worst of UKIP

I am delighted to see the continued rise of UKIP because it’s really rattling the established parties.   The big parties are so poor at the moment that the old joke “Don’t Vote – The Government Will Get In” keeps coming to mind (and the Worst government policy 2012).

What’s interesting this year is that UKIP has ceased to be just a home for Eurosceptics.  According to YouGov its anti-immigration stance is more attractive to supporters (76%) than its EU withdrawal message (59%).

UKIP has no chance of getting its hands on any levers of power, but it’s clearly going to be disruptive force in British politics for a while.  So it’s a good time to consider its wider policy agenda.

The BBC has published this guide to UKIP policies.  There are lots of things I would agree with but it’s more of a right wing “wish list” than a realistic policy platform.  Saying they’d like to double prison places and set a flat rate of tax signal their appeal to a certain sort of voter but have that other-worldly, we’ll-never-get-in-anyway feel that you get with minor parties.

But to be fair to UKIP, it’s really noticeable going down the list how many policies are unique to them and fly in the face of the combined big party consensus.  For instance, no one else is speaking out against the madcap energy policies that Labour and now the Coalition are pursuing.

I am particularly heartened to see that UKIP oppose HS2, the multi-squillion pound high speed railway project. 

If you speak to most people about HS2 they are really sceptical – about the build costs, the alleged benefits, the time to delivery, fare affordability and simply whether the government is being honest about the case it is trying to push through.   Unsurprising when you consider what happened with the much less ambitious HS1, a 68 mile line between London and Folkestone.  Passenger numbers have been 1/3 of what was predicted and the consequent revenue shortfall has left the taxpayer on the hook for £10bn!  People can wearily see HS2 going down the same track (sorry for the pun) but at much greater cost because it’s five times as long. 

So hats off to UKIP for at least trying to slow down the public sector money-wasting machine.

I am less impressed by their immigration policy which is under review but is currently a commitment to freeze immigration for 5 years.  That’s frankly ridiculous.  London is the UK’s biggest success story in recent decades and a relaxed policy to immigration has been a key component.  To think Britain can thrive while locking its doors to the rest of the world is very misguided.  To give an example of the harm this policy would do, we would become a much less attractive to multinational companies and high net worth individuals who come here to spend money, invest and start businesses.

That’s not to say there isn’t a problem – uncontrolled mass immigration of the kind Labour and the EU have foisted upon the UK has caused all sorts of legitimate concerns about crime, jobs and strain on public services. 

But the right way to go about it is leave the door open to immigration while simultaneously tightening the requirements for staying in the country: anyone not working for an extended period or who breaks the law should lose their right to stay.  

UKIP and the Coalition are at least making the right noises about immigrants having to pay tax for several years before having access to benefits and public housing.  As UKIP recognise, doing anything meaningful on immigration will require Eu withdrawal (EU's migrant rules prove the Referendum case).

All in all UKIP is a welcome breath of fresh aware and deserves to harvest the right of centre protest vote, but risks looking old-fashioned and intolerant without some more nuanced thinking on one of its flagship policies.

From our website:  Taxation of Spanish Rental Properties

It's easier than you think to give up news

Inspired by this article - News is bad for you - I gave up news last week: no news in print, online or on TV/Radio.  I included all sorts of media such as blogs, sports reports, free papers, magazines and finance websites.

I don't necessarily buy every argument in the article which sees our news-saturated lives as "toxic".  But I do accept that I generally waste a lot of time on news of dubious value and thought it might be an idea to see how it feels to be news-free.

Actually I got through the week fine with only one or two moments of weakness, the main lapse occurring on a flight to Spain when they handed me a free Daily Mail and I couldn't resist the sports section.

But essentially I did go news free.  First consideration - did I miss anything?  I still saw headlines occasionally and people talk, so I got the gist of the big things going on.  So I didn't feel in the dark or ignorant.

I did miss my news fix at certain times of the day when part of my routine involves news consumption e.g. looking at sports and finance websites when I eat my lunch.  I read more of my book instead but there are times when you just want to browse or flick through something.

Were there any positive benefits?  The article talks about too much news inhibiting your mental capacities, especially concentration and memory.  I can't say I noticed any positive side effects along these lines, although maybe a week isn't long enough to notice the effect.

All in all, the week taught me that I could quite easily survive with less news in my life.  In future I will cut out any aimless browsing and viewing and just check out a few news articles a day at the times which suit me. I suspect the main benefit is that I will get through more books.

From our website  - Spanish non resident taxes

The stalled UK economy in one chart

George Osborne might have avoided Triple Dip headlines last week when the UK registered 0.3% growth, but he and everyone else knows that the economy has stalled.

Critics like the IMF and Labour point to austerity as the cause and urge him to change tack.

Others wonder why the Bank of England's monetary shock and awe, including 4 years of 0.5% interest rates and £375 bn of QE, haven't done more to create a meaningful recovery.

So why is the economy stubbornly flatlining?  Although there are a ton of possible causes from the Eurozone crisis to high oil prices, I think my little chart explains a lot.

I have plotted 13 years' worth of UK household borrowings (basically mortgages plus credit card debts) to show how quickly they rose during the Brown boom, peaked in 2008 and have wobbled around the same level ever since.

Whether you blame the government, the banks or the borrowers themselves for the reckless excesses that preceded our current recession, it was a heck of a binge.  Every year up to 2008 the private sector was borrowing around £100bn net so no wonder the economy was growing.

And it's also no surprise that it had to come to a horrible end.  House price to income ratios just got too ludicrously stretched and the debts caught up with the weaker borrowers.  So after the Brown boom, the Brown bust.

It's a familiar tale but we have seen house price-related recessions before and they end.  I am sure most people were expecting things would pick up after a couple of years as the whole cycle started again, like it did in the mid-80s and again in the early '90s.   Why not this time?

Part of the answer lies in the sheer duration and scale of the boom.  My chart shows credit expanding from 2000 but the party had got started well before.  Look at this chart of house prices:

House prices took off in the mid-90s and had already risen mightily by the turn of the century.  If we had had a recession in the early 2000s, after the dot com boom ended, then things would have turned out differently.  However the Bank of England cut interest rates and kept house prices rising to avoid a recession but at the cost of an even bigger boom and bust to come.

So that is one part of the explanation - the UK is recovering from more than your ordinary cyclical house price boom and bust.  We are struggling to emerge from a 13 year phase of two booms without a bust in between.

The other reason why bust has stubbornly failed to give way to recovery is that, in a funny way, government and Bank of England policy has been too successful since 2009.  Brown and Osborne (I think of them pretty much as one person - see Oh No! Brown and Osborne have morphed into Geordon) have both thrown everything at efforts to prevent a deflation of house prices and an unwinding of the excess debt.

In the 80s and 90s there was the pain of unemployment, repossessions, bankruptcy etc before the scene was set for recovery.  This time there has been some pain but not on a scale to clear out the effects of the boom.  Both charts, house prices and borrowings, would have to show much sharper declines to reset the economy and make a recovery feasible.

To put it bluntly the UK could, and I would argue should, have chosen to mark a clean break with the Brown boom in 2009.  This would have had involved a deeper recession for sure but at least would have cleared away the excesses of the past and set the scene for future growth.

Instead, fiscal and monetary policy aimed at making the recession as shallow and painless as possible has left  Britain unable to recover.  All the old problems - an over reliance on debt to fuel growth, outsized and inadequately capitalised banks, overstetched households, unaffordable levels of public spending - are still with us.

This explains why government policy seems so perverse at times.  Things like the diabolical Funding for Lending Scheme ("The government scheme that's crucifying savers") are desperate attempts to get back to the £100bn a year borrowing days.  And also explains why these policies will fail - people can't afford to borrow more and finance house purchases at prices which are as high as in 2008 in many areas.

Think of my chart when you listen to Osborne, the Bank of England or the Opposition.  They all chose the "shallow recession" option and should not be too surprised now that recovery seems so unattainable.


From our website:  Spanish tax forms explained

Money to be made from the gold rush for the exit?

Shock horror for gold bugs: a two year low and the biggest two day decline in 30 years.

For the first time in more than a decade there is a genuine feeling that the gold price could collapse like it did in 1980 when the dollar price more than halved in a matter of months.

The equivalent today would leave gold south of $1,000 compared to its 2011 high of $1,920.  As of today, the price is hovering uneasily around the $1,375.

Plenty of people will have lost a packet but could now be the time to position yourself for a future profit?

Predicting the gold price short or long term is usually a thankless task.  How do you weigh up an asset class which offers no income and for which the real economy has little use for?

I would offer these observations, which suggest gold may not follow that 1980 trajectory below $1,000:

• The biggest source of demand for gold is Asian jewelry and Indian orders have apparently spiked upwards in immediate response to the recent falls;
• Despite all the talk of panic and rushing for the exits, most long term investors (as opposed to speculators) have stayed firm and there has clearly being some bargain hunting in the last couple of days;
• The main driver of the 1980 crash was a sharp increase in Fed interest rates.  And I mean sharp - up to 20%.  Such monetary tightening is not even the remotest prospect in the current climate;
• The 12 year bull run has been marked by substantial declines followed by steady recoveries.
• The underlying conditions that have supported the bull run - negative real interest rates and repeated but failed attempts to spark economic recovery by money printing - are firmly in place.
• Central bank buying reached a record high last year.  Once the dust settles Asian surplus countries wishing to diversify out of Western currencies will likely buy the dip.

 But these are just straws in the wind and you could probably make a list of bearish points easily enough.  And the short term is even more unpredictable with fear and volatility abounding. I won't be speculating on a gold comeback from these levels.

More interesting are gold mining shares which are unsurprisingly trading at multi-year lows.

Gold producers' profits suffer disproportionately from price falls as their costs do not fall in sympathy. Indeed runaway mining cost inflation, along with a hangover from over investment during the boom years, had already sent gold mining shares tumbling since before the latest crash.

FTSE constituent African Barrick Gold (ABG) has also disappointed the market by missing its stated production targets for three successive years.  In February ABG reported a. 70% profit decline even before the latest slide in the gold price.

But ABG has no debt and plenty of cash, some of which is due to be paid to shareholders in dividends shortly (it goes ex-div on May 1).  It has very large reserves compared to its much-diminished market value.  Its costs of production per ounce are about $975, sharply up over recent years but less than many in the industry.

A buy at today's £1.65 close (it was £4.50 at the start of the year)?

If you believe the gold price will recover at least partially then maybe.  However it had better recover quickly because otherwise ABG will be reporting losses and scrapping the dividend which will no doubt send its shares even lower.

From our website:  Spanish tax advice

The gym may be your best pension plan

Unsurprisingly there is a lot of pensions insecurity these days.

With economic prospects gloomy and government policy hell-bent on punishing savers, it seems only the really rich and those with a state-guaranteed pension can be confident about their retirement prospects (see Are public sector pensions really gold-plated?).

The odds are depressingly stacked against anybody trying to save for retirement.  There are at least four big hurdles:

1.      Ability to save

As real wages are actually falling that is a tall order for many people even with good jobs to save much at all.  Besides rising living costs, a lot of people these days also have mortgages set to last up to or beyond their retirement date.

2.       Generating investment returns

In the past pension projections used assumed rates of returns like 8% but they look highly unlikely from where we are now.    Take ten year gilts (British government debt) which currently yield 2%.  If inflation continues to run at 3-5% this implies a shrinking pension pot in real terms.

3.      Charges

Read the truth about fund management fees to find out about how layers of sometimes hidden charges can erode the value of your pension pot with devastating compound effects.

4.      Rock bottom annuity rates

These vary depending on a multitude of factors but typically will be around 5-6% without inflation protection or 3% with inflation protection.

From all this you can see how difficult it is to rescue a worrying pension situation in middle age.  Say you are 45, want to retire at 65 and have a pension forecast which falls £15,000 pa short of what you want.  You would need to build up a pot of £250,000 assuming an annuity rate of 6% is available when you cash in (at current rates that might just get you £15,000 pa but without inflation protection).

Assuming investment returns do no more than cover inflation and charges then you would need to save more than £1,000 a month out of post tax, post mortgage income.  Most people who can do this probably are not the ones worrying about their pensions!

What to do?  Certainly don’t put your head in the sand.  Try and maximise your pension contributions and take advantage of any employer-matching available.  Check  to see where the money is being invested and what charges are being taken out.  Twenty years is a long time so maybe inflation-beating returns and improved annuity rates will return at some point.

But another way to think about the problem is what sort of state will you be in when you reach retirement age, regardless of your finances?  

If you are mentally and physically fit and strong then, even if your pension plans have gone awry, you will be able to cope.  Most obviously you will be in better shape to carry on working and therefore earning and saving which is a double win for your eventual retirement as your pot increases and it buys a bigger pension.

You are more likely to feel like working a bit longer if you are in good health and more likely to be a desirable employee.  I know numerous people who work well beyond the classic 60-65 cut off and seem to get more out of the world of work than ever before, perhaps because they feel under less pressure or simply enjoy the continued routine or fellowship that work can offer.

If you are in good shape then you might be able to start a business, work part time (consultancy) or start a different career in a completely different sector (charity, public sector).  If you are feeling your age and in poor health then you are less likely to want to work any more and will not want to try something new.

My thinking is that if I invest time and effort in making sure I am fit and healthy well into my sixties and beyond then I will have options regardless of how my pension works out.

How to achieve this magical state of mental and physical wellbeing in later life?  I don't know but surely regular exercise and keeping the weight off have a big part to playing being "fit for purpose" if you need to work beyond retirement.  So invest in a gym membership as part of your retirement planning.

Spanish business expenses guide

The serious business of friendship

Friendship has been in the news.  An ONS report says people who value friendships are happier in old age.

This seems obvious when you think of the alternative - growing old without the company of good friends.  It doesn't sound appealing, hence the phrase "a lonely old age".

The benefits of having good friends are real and concrete.  I have heard friends described as "engines of happiness" and scientists claiming that friendships can prolong your life more than giving up smoking.

So if friendship is so important, do we take it seriously enough?  Most of us just take our friends (or lack of them) as a given and don't plan for or worry about them like we do things like work, property or pensions.

But arguably investing time and effort in your friends is likely to be much more important than the material stuff to your long term happiness.  What sort of things would you do if you wanted to be more business-like about reaping the benefits of friendship?  Here are three ideas:

Inventory.  If you going to actively manage your  friendships, you have to decide who they are.  Who do you want to be friends with?  It is surprisingly easy to waste time on people who you don't really like and alternatively neglect those you do.  It might see cold but make a mental list of who your close friends are but it is vital if you are going to put "invest" in the right relationships.

Investment.  However strong the original basis for a friendship, it will decline over time if neither party invests time and effort in maintaining and renewing the bond.  Again it sounds clinical but you might have to keep a note of when you last called or met your friends to make sure you don't neglect them.

Marketing.  Adding friends can obviously grow your "relationship capital", with the proviso that you don't want to spread your time among tenuous friendships. So maybe start a new activity where you can meet people or enjoy with existing friends. Many studies of human nature have named joining a group as the best single thing you can do to make yourself happier  as I discussed in How to be happy: 3 books, 1 answer.


From our website - Spanish tax advice from €35

Could Spain "do a Cyprus" and raid Spanish bank accounts?

Last year I posted "Are Spanish bank accounts safe?" but its assessment of the risks is now out of date because of the crisis in Cyprus.

Could Spain also start confiscating money from bank deposits in the country?

Will Spanish bank customers be effectively be blocked from accessing their accounts or moving money in  a crisis?

Is the €100,000 deposit guarantee offered on Spanish banks safe?  It didn't count for much in Spain where even tiny accounts were raided by the government and are now locked.

The Spanish government have point-blank denied there is the remotest chance of this happening in Spain and there is certainly no need to panic.

On an optimistic reading of current events you would say that Spain has already sorted out its bank recapitalisation and, even if a further bailout were needed, would learn from the Cyprus episode and not take a slice of its citizens' cash to do it.

However the crisis is a stark reminder of three worrying points for anyone with Spanish assets:

- the Eurozone crisis is still very much unresolved and will keep coming back in nasty and unpredictable ways
- the real powers that be, such as the IMF and Germany, carry all the clout and will happily trample all over Spanish national interests when there is a risk to their money
- governments are getting desperate and no liberty is too sacred to be trampled on.

I never thought I would see a European country locking its people away from their own money, but its part of pattern of governments getting increasingly aggressive and intrusive in attempts to raise cash.  In Spain we have already seen the forced declaration of foreign assets which surely is the forerunner of more punitive taxes on them.

However some of the recent reports of Spain already planning a raid on deposits is alarmist (example - Cyprus copycats: NZ and Spain).  They refer to the "moderado" levy which is being introduced at 0% (!) initially but will rise to something like 0.1-0.2%.  The key point though is that this is a pre-announced tax on the banks themselves and not a preemptive raid on deposits of their customers.

Call me naive but I don't think the "moderado" and the Cyprus levy are comparable and there is little likelihood of it mutating into a serious government bank account attack.  Not to say that the government will not get their hands on their people's cash in other ways of course - ever higher taxes on spending and income or a big increase in the wealth tax that was brought back recently.

All in all though I would say it is unlikely that the Spanish government will "do a Cyprus".  Most likely nothing will happen so long as the government debt crisis doesn't start flashing red again.  If that happens, and I think it probably will because the Spanish economy can't survive the measures announced last year to cut the deficit, then all bets are off and the fears I spoke about in my original article may be realised.

From our website:  Autonomo Guide

EU withdrawal is losing its appeal

I have been a Eurosceptic for decades so it might seem strange, with an in-out referendum promised and anti-EU sentiment at an all time high, I am cooling on the idea of a UK exit.

Don't get me wrong, I have not suddenly learned to love Brussels.

Just last week, the British government was overruled on bankers' bonuses.  Regardless of what you think about our friends in the City, the effects of this move will overwhelmingly be felt in Britain and yet we have no right to say no.

The Eurozone shambles has reduced pro-European voices to a whisper and not just in Britain.  Any notions of being better off "at the heart of Europe" are now widely derided as those who warned about the single currency are  completely vindicated (Euro doubters are being proved doubly right).

Consequently the Europhiles have adopted fear tactics.  Fear of lost trade, jobs and inward investment.  Fear of declining influence and isolation. Fear of retribution from Brussels, Berlin and Paris.

I would liken the situation now to a spousal abuse victim finally plucking up courage to leave her husband.

Britain has been marginalised, overruled and bullied by the EU for a long time but only now, when the resolve to do something about it has hardened, do the doubts creep in...

She thinks: "What will I do for money?", We think: "who will we trade with?"

She worries: "What if he comes after me?". We fear regulatory retaliation.

She worries:"What will our friends say?".  Will Obama still take the PM's calls?

The temptation is to dismiss the Europhile fear-mongering and marginalise the downside of leaving the EU.  That would be a mistake because some of the issues are genuine and could easily turn a referendum in favour of remaining in the EU.

It is obviously true that leaving the EU will have downsides. Yes we will lose a measure of influence in the world and particularly in trade negotiations.  Of course our spurned partners (especially France) may try and put the knife in and, for example, stack the regulatory cards against the City of London.  Multinationals will certainly be worried about the security of access to the giant, albeit, shrinking market across the Channel.

None of this means that the UK should just lump it in the EU, like the victim who keeps giving their abuser another chance.  And that old reform-it-from-within line is starting to sound pretty lame.  The Eurozone countries have their own existential struggle going on and are not going to listen  to Britain however polite and obedient we are.

Besides some of the fears can be dealt with by securing guarantees in exit negotiations which could take years and in which we hold some cards, a big trade deficit prime among them.

However to make a case for withdrawal, EU opponents must do more than try and talk away the negatives. They must present a positive case for being a free and independent country once again.  How would we use that room for manoeuvre?

Theoretically the UK could reap massive economic and social advantage from being fully sovereign again: a more rational immigration policy, a massive reduction in red tape and converting saved budget contributions into tax cuts aimed at growth.

But there is a big difference between being offered an opportunity and taking it.  Given that the two main British parties are both firmly wedded to the high spending, high taxing, bank bashing, welfarist, interventionist consensus that currently prevails, EU withdrawal would be unlikely to usher in a new era of economic liberal radicalism.

And without hope of turning into the Hong Kong of Europe, why take the risk of leaving?

The best quote I ever read about withdrawal was from a Europhile who said "Britain has a competitiveness problem not a Europe problem".   Germany out-exports us handily under exactly the same regime of EU regulation.

Much as you might loathe the EU, without serious commitment to reform Britain is in deep trouble whether it leaves or not.


From our website:   Spanish non resident tax

Is Corte Ingles really the Spanish Disneyland?

I have never rated the Spanish retail sector with its poor service, over-priced and uninspiring product lines and old-fashioned stores.  But apparently they are the next big tourist attraction.

According to this article - Spain's retailers reboot to pull tourists from shore to store - a big effort is underway by the likes of Mango, Corte Ingles and others to offset falling local sales by attracting more foreign tourists with translators, discounts and targeted advertising.

I find it unlikely that tourists will take the bait.  I certainly don't recognise the description of El Corte Ingles quoted in the article: "it's like a Disney theme park for us ... we spend a whole day in here".

The shopper said that he was Colombian, which makes me think if I ever visit Colombia not to expect too much of their department stores.

I can't think many British visitors would be so impressed with El Corte Ingles.  It's not awful by any means but seems expensive to me and will feel even more so to tourists getting little more than €1 for their pound.

And Spanish shops seem to rarely offer great discounts, especially the supermarkets which I see as a couple of decades behind the British ones that everyone moans about so much.

I have already had a go at Spain's bargain stores (Spanish pound shops need to raise their game).

Perhaps clothes shops might get some joy.  Spanish fashion chains such as Mango and Zara enjoy strong international reputations and might attract some more business with a concerted push.  At certain times of the year their sales can feature meaningful cuts in prices too.

Beyond that I don't see Spain's shops becoming its next tourist attraction.  To get a sorely needed boost to demand from more tourism the country would be better sprucing up tired looking tourist infrastructure, improving the beaches and prioritising good service (see Spanish tourism feels the heat).


From our website: Employing staff in Spain

Why the best TV show is not on TV

TV critics are calling House of Cards "seriously addictive" and "as good as Mad Men".  One gushed "I love this series" and confessed to watching all 13 episodes back to back.

And he could because, as the world knows by now, the new US series is being shown exclusively on Netflix, the movie and TV steaming service, rather than TV.  They released the whole first series on 1st Feb all in one go for their £5.99 a month subscribers.

I am sure it will reach TV screens eventually and will certainly be out on DVD box set soon.  But for now it's only online and you could watch it all for free by taking out a free 1 month trial of the service.

I haven't seen House of Cards but I like the quality US drama series generally and Kevin Spacey in particular, so maybe I will give it a go.  I am more interested in the fact that Netflix is investing a reported $100m in a series which is not being distributed in the "normal" way.

Quite a risk.  What if it had been a flop and critics had hated it?  That was unlikely given the stellar cast and super-talented David Fincher (se7en, The Social Network) directing early episodes.  Nevertheless $100m is a lot to recoup in subscriptions and, later on, DVD sales.

For me though it is a brilliant move and has already paid off regardless of the final tally of dollars recouped in subs and sales.  Netflix has already reaped some enormous intangible benefits.

Look at all the free publicity Netflix has received.  More than that, they have made a bold statement about their service - "We are not just about making other people's content available on your laptop.  We are creative, we back talent and we deliver it in the way you want".  In short they are saying "we are more like HBO than an online Blockbuster".

Think about your own perception of Netflix before House of Cards.  If you are like me you probably thought it was a fairly low cost way of getting some modest entertainment (old TV shows and not-that-recent films).

Now you might take a second look and see what else they have got up their sleeve.  For instance, in May all episodes of the new series of comedy show Arrested Development will be released at once.

As for the price tag, $100m is small change versus the company's $10 billion market valuation.  That is about $4 billion higher than it was only three weeks ago.  Thanks Kevin!


From the website: Guide to Spain's Autonomo system

Ryanair gets something right

UPDATE:  I think I might have been a bit premature praising Ryanair's replacement for Captcha.  I was greeted with this when I went on Ryanair totally illegible security screens this morning:

Original post in praise of Ryanair:

I am a bit conflicted about Ryanair.  I fly with them a lot and can't help feeling that, as a passenger, I am just a big nuisance getting in the great money-making machine.  However I recognise that there are pros as well as cons when travelling with The World's Least Friendly Airline - What two years of flying Ryanair will do to you.

But this week they have ditched that awful Captcha security step on their website to replace it with a user-friendly alternative where you just type in a simple and LEGIBLE phrase.

Ryanair bending over backwards to make life easier for their valued customers?  Don't be silly, it's all about money, as everything is with Ryanair.  The inconvenience of Captcha deterred customers and cost them sales from the website, maybe up to €24m as this expert explains - Ryanair and captchas


From our website  What to do if you get a letter from the Spanish tax office

The government scheme that's crucifying savers

Dismay is growing over the government's Funding for Lending Scheme (FLS) which is driving down already-depressed savings rates down to record lows just to prop up an inflated property market.

The FLS was announced by George Osborne in 2011 and sold as a practical way of freeing up credit and boosting the economy.

The real effects are now becoming clear to anyone looking for a savings account.  Only a few months ago 3% + was possible particularly for 1 or 2 year fixes.  But now savers are being "slaughtered" in the words of one expert and you have to shop around to get 2% - see this Telegraph article if you haven't read about (or experienced) this.

One of the worst aspects of FLS is the impact on passive savers, that is the people who just leave their cash on deposit without checking the rate and moving money when necessary.  Their rates are often slashed to almost nothing as the banks and building societies will only pay out even the miserly 2% to savers who constantly hawk their money around looking for bonuses and new deals.

And what's it all for?  How much of this promised "growth in the economy" can we expect?

A bit in the short term maybe.  Some lenders are offering better fixed rate mortgage deals so the housing market will stay inflated for longer, thus putting off the day when the banks have to write down their home loan portfolios properly and recapitalise.

Not much sign of the banks lowering variable mortgage rates though and these are what most people pay after 2 year deals run out.

Also little sign of the promised cheaper business loans.  Most reports I have seen have suggest there has no real change in business lending levels or the terms available.

The chart I have posted with this article is the HM Treasury's way of describing the scheme.  As government always do with their funny money policies the government portrayed it as a  painless "win-win" with no victims. When he announced this supposed "good news" Osborne never mentioned anything about the disastrous effects on savers.

But savers spend money too.  Many pensioners for example pay their basic bills with the pension and use the interest on their savings for discretionary spending.  That income has just been slashed by 30-40%.  How does that help demand?

This is yet another awful government policy (they keep on coming - see And the winner of the worst government policy of the year is...) that makes me despair that Britain will ever get back on the right track.

From our website - the latest VAT (IVA) rates in Spain 

Government figures cast doubt on the minimum alcohol pricing push

I recently nominated the proposal for Minimum Alcohol Pricing as the worst government policy of 2012 (there was plenty of competition).

I don't want to bang on about it too much but a couple of things have come to my attention which reinforce the sentiment of the original post: the policy is unfair to the vast majority of people who are not "problem drinkers" and the government is trying to push it through with some dodgy stats (see Cameron's dodgy dossier).

Firstly I read David Cameron's defence of the policy he is championing so strongly, contained in the forward to the Government Alcohol Strategy.  He claims that half of all alcohol consumed in the UK is "binge drinking" (apparently 2 glasses of wine qualifies as a binge).

He writes that something must be done and the "root cause" is cheap alcohol which we must "come down hard on". Well thanks to massive pub-closing, job destroying alcohol duty rises we have seen drinks prices soar in recent years.  And perhaps this is why alcohol consumption has fallen.

Although this was mentioned nowhere in Cameron's statement or the entire government strategy document, which gave the impression of a sozzled Britain out of control on binges of epic proportions, there has been a big shift towards lower consumption even by the government's own figures (produced by HM Customs and Excise) which show a 13% fall in alcohol consumed between 2005 and 2010.  Sales have declined further since.  Alleged binge-drinking among men under 24 is down by 10%.

Presumably the PM leaves out this inconvenient information to leave us all under the impression that an extra £96 in the average couple's drinks bills is a price we all have to pay to crack down on the hardcore drunks who are causing so much concern.

And there is a problem.  Alcohol-related hospital admissions have climbed steadily from 500,000 in 2002 to over a million in 2009. Grim stats but not ones that were improved by the fall in average consumption.  In fact the evidence suggests that whacking up prices for normal people merely reduces their enjoyment and disposable incomes while doing nothing to deal with the complex social problem of alcohol abuse.

The other stat I saw was reported in the Telegraph - the Treasury have forecast that alcohol consumption will continue to fall (by 2.4 billion units!) over the next 6 years.  And these forecasts explicitly do not take account of Minimum Alcohol Pricing.

In summary the government wants to bring in higher drinks prices by law on top of big tax rises to achieve something which its own figures say is going to happen any way.  The stats on hospital admissions also seem to show that punishing moderate consumers does nothing to stop alcohol abusers harming themselves and society.

The government should look at its own statistics and withdraw the Minimum Alcohol Pricing proposal.

From our website:  Contracting in Spain