EXPENSIVE MISTAKES..

Another day, another MP's expenses claim leak. Today's include Bill Wiggin, a Shadow Minister who claims to have put down the wrong address on his expenses form by mistake and therefore claimed mortgage interest on his family home that he hasn't even got a mortgage on the lucky man (lucky for having no mortgage obviously, not so lucky for being found out!). Of course Bill, we all know you meant to put the London apartment address down but got confused by the oh-so-difficult PAAE form filling exercise (see common sense in my last blog). He seems to have claimed up to £20k a year since 2001/02 based on the info at theyworkforyou.com. Useful error to have made.

On the subject of this mistake, let's have a look at Bill's past life - might he be an ordinary bloke from the street that found himself elected as an MP and therefore prone to making adminstrative mistakes? Here's his wiki entry:
Wiggin is the son of former MP Jerry Wiggin.. He attended Eton and later read Economics at the University of Wales, Bangor. He also served in the Royal Welch Fusiliers in the TA, being a platoon commander for Holyhead, Bangor and Caernarfon. Following this, Wiggin worked as a Trader in Foreign Exchange Options for UBS from 1991-3, then was an Associate Director of Kleinwort Benson from 1994-98, then as a manager in the Foreign Exchange department of Commerzbank from 1998..

But, just one minute! It might not be Bill's fault! This is from the House of Commons guidance on filling out PAAE2 forms: If you have a mortgage, a copy of your annual statement of interest must be provided each year to the Department. If it is not clear from this documentation what the amount of interest payable is on the property, further evidence may be required. You must also inform the Department of any alterations to the terms of your mortgage.

How could this mistake have gone un-noticed if he was being asked to provide a mortgage statement of interest based on a home that had no mortgage on it? The system was not exactly well policed? Maybe we have been paying an extortionate amount to some private consultancy company (insert any big name here) to 'audit' the process. Maybe this is the next scandal? One whose Board is made up of senior former MPs or is advised by current MPs?

At the moment it would seem the whole UK political stack is about to tumble. Some of my more left wing friends are calling for the next Guy Fawkes and looking forward to an entirely new political process to replace what can only be described as the pile of poo that we have right now. I'm not so optimistic about it all really. If you scan the websites of the popluar newspapers - NOTW, Sun etc they do mention political troubles. But todays for example also mention in as many column inches, if not more;

1. Some guy off The Apprentice who allegedly swallowed a hamster at a party?
2 Some woman off The Apprentice who stripped for some photos?
(note: both of the above come above the MPs expenses story)
3 Some woman with fake tits (who Polko actually likes for her menipulation [sic] of the media) who has thrown out her husband and his personal chattels - including a first copy of his CD single, Mysterious Girl - what's he going to do without it I ask?

etc

etc

And of course, there's a whole dollop of football news in there too.

God save us all. If only you were real God.

Which brings me to football. Well, almost. This Friday sees the release of a movie that is based on a book that has been wallowing around for some years. The movie is called Away Days. Great website. Really well thought out write up about football hooligan fashion at the turn of the 1980s. Shame that the fashion world is trying to jump on the bandwagon and re-release all those clothes all over again. Don't get me wrong, I would love to buy another blue benetton rugby shirt, but people are going to look prize dicks walking around in Sergio Tacchini tracksuits and Kappa roll-necks in the 21st Century. I cannot believe the amount of people that have started speaking about various items of retro dresser wear - like the book's author I find it hard to talk about the cult as 'football casuals' as there was nothing casual about the £200+ Valentino and Armani jumpers I was wearing in the early 80s, or the trainers that cost then what they do now. How did we all afford it? That's for another blog methinks :-)

So, to all those people who claim to have been there in the thick of it - you weren't there mate, you couldn't have been, otherwise I'd know ya! (my sense of humour knows no bounds?)

Anyway, it was great. It is over. Let's leave it at that. And a picture.

THANK CREDIT CRUNCH IT'S FRIDAY

..and so it is. The end of another relatively flat working week. But, at least Polko's got some work to do? Feel more sorry for the investment bankers that are now sat at home twiddling their thumbs. Or don't, as the case may be.

I was sent a bunch of Friday jokes (joke emails are constrained to Friday's in Polko's office - if you send me them any other time of the week, they get binned instantly!). Some are worth setting down in this blog for longevity.

Q: What's the capital of Iceland?
A: About £3.50

Q: Why have estate agents stopped looking out of the window in the morning?
A: Because otherwise they'd have nothing to do in the afternoon

This second one brings me neatly to an observation I made last night. There was nothing on TV, nothing at all. Quite a feat given we have Sky TV and about a zillion channels to choose from. As I flicked through high number channels (don't ask me why we have Sky as we tend to stick to the first 6 channels or so anyway - that way you don't wear out your thumb on the remote?) I noticed two channels called..

Real Estate TV & Real Estate TV+1 (Sky 262 and 263 if you're sad enough to be interested)

Now come on, I know there's been a fair bit of interest in property in the UK in the last five years or so - a lot of it by misguided individuals who call themselves 'property developers' because they've bought or have been left a second house to rent out - they should meet some of my clients. The ones buying up 100+ acre sites or blocks of city and town centres to build billion pound shopping centres and office parks - you know, property developers... get it? I don't think some of you do...

Anyway, I digress. Now, I'm not in TV but if ever there was a flawed business model in the media world it has to be to start a digital TV channel specialising in property, or 'real estate' as they seem to want to call it (it'll never catch on in the UK?), at around the time of peak property prices, over-inflated loan to value deals, rising re-possessions, increasing unemployment/uncertainty in the jobs market and zero liquidity in the financial system?

A quick browse to their website reveals that this so called TV company is just another part of the investment scam that has been driving the market in the past few years - the only real content on there is a search engine for finding property for sale - and this appears to be pretty much tied to major new build developments with explanations such as, "Hot new apartments at Celsius, Bracknell's new landmark development". Who are they trying to kid, £180,000 for a 1 bedroom apartment (and note that's from £180,000). On the old model (3.5 times your salary lending) that would need an income of £51,250 (and I am assuming a 100% mortgage here too). Which first time buyer is going to be earning that then?

Of course, in the real world (away from Real Estate TV's domain) new build developments are full of such stupidity - developers have been paying crazy money per acre for their land, the cost of materials has been rising rapidly and therefore end prices have been on an upwards spiral since 2000. We all know this. Yet, many people have jumped in and bought houses on new developments to try and rent them out and become 'property developers' - thus falling unfairly and squarely into the waiting hands of the real developers who've cashed in, closed out most remaining residential schemes and are sat waiting for the next circus to hit town. If I see it coming down the road I'm sorely tempted to change profession and become a ringmaster. Watch this space.

..and so to finish on a high note, another one of those Friday jokes..

Gordon Brown, Alistair Darling and Peter Mandelson are flying to a world economic summit. Peter looks at Alistair and chuckles: 'You know, I could throw a £50 note out of the window right now and make one person very happy.'

Alistair shrugs his shoulders and says: 'Well, I could throw five £10 notes out of the window and make five people very happy.' Gordon says: 'Of course, but I could throw ten £5 notes out of the window and make ten people very happy.'

The pilot rolls his eyes, looks at all of them, and says: 'I could throw all of you out of the window and make the whole country happy.'

Here. Here.

WHAT DID YOU SAY YOUR NAME WAS?

As if Alistair Darling isn't a silly enough name, now the man in charge of the UK's public finances is trying to be Clark Kent aka Superman too. He has made a statement that he is not prepared to let the recession in the UK take its natural course... New Labour to the rescue! Who on earth does he think he is? Does he honestly think he can beat the effects and moves of the international financial system. At best a naive thought, at worst a very damaging one indeed.

November's Pre-Budget speech was launched (officially at least) on Monday 24 Nov. It contained a lot of nothing much as far as many economists were concerned and seemed to go round in circles in many parts. The obvious targeting of a few smoking guns in a rise in income tax for those earning over £150,000 - netting little of the necessary finances that the government are going to need if their plans for boosting the economy are to be realised. Good headlines for middle England. Takes their attention off the 0.5% rise everybody will pay in National Insurance contributions! Realistically, it looks like everyone earning somewhere between £20,000 and £35-40,000 a year or more will be worse off through the package of measures announced in the speech. But the headlines of hitting high earners look good dont' they? I'm not even going to discuss the Manifesto pledge of not raising income taxes that New Labour once promised - they've decided to raise income tax, but not until after the next election, this they maintain is not really technically raising taxes in their government is it? is it? what do they take people for?

VAT down from 17.5% to 15% for 13 months - an ominous choice of term if you're superstitious! More worryingly, not even a bold or educated policy shift. Interestingly, my local landlord simply said last night that this was good as he wouldn't pass the reduction on to his customers, pocketing an extra bit of profit instead. I suspect this is pretty much what almost all businesses will do. Net result: lower tax receipts (of around £12.5bn) + no change in consumer behaviour = own goal Labour. Nice one. Again.

As others are pointing out there really is a more simple solution to help the average person in the street and therefore help everyone in the economy. People do not ponder hard over the rate of VAT and buy more items when it moves a few percentage points downwards (assuming of course that price changes are somehow related to changes in the rate of VAT, see my point about our local landlord above!). Vince Cable of the Liberal Democrats hit the nail on the head with the following statement, "What I fail to see is how the economy gets a major stimulus for, for example, a £5 cut in a £220 imported flat screen television or a 50p cut in a £25 restaurant bill," he said. Here, here.

The key indicator for the average householder's budget is the size of their largest debt payment - their mortgage - and therefore what money they have left over after its payment.

The government in my opinion should be focusing on maintaining pressure on banks to keep interest rate reductions being passed on to those with housing debt problems, thus helping the average person's net income position. Secondly, work with the banking system to ensure liquidity between them and commercial borrowers. If personal borrowing dries up people tend to spend less, a proportion of which is always on imported TVs and the like anyway. When commercial borrowing gets difficult or in this case stops altogether, businesses are more directly affected and jobs are lost much quicker across the economy than when consumer spending starts to wane.

But then, what would I know? I only have a First Class honours degree and a Masters in economics.

Leave it to the former teachers in the New Labour project. We'll be alright. Won't we?

FREDDIE AND FANNIE, THE NIGHTMARE ON WALL STREET..

Today the US government seems to have provided what might be a short term rally to the financial markets - just when the savings and loan problems were largely swallowed and discounted into the lower price of shares - by announcing a takeover of two large American mortgage lenders, Freddie Mac and Fannie Mae (you couldn't make it up if you tried!). My main concern is that the UK government don't see this as a rally call for themselves to do something similar in the UK!

As a consequence the UK stock exchange index has started with a 3.6% rise this Monday morning..



But, wait and see the impact over the time period it takes for the market to work out just exactly what difference a government, even the US government! can make to international capital markets??? Later chart planned for posting on Tuesday or in a week's time..

Remember the Northern Rock indecisions?

Please Gordon & Co. in the words of Grandmaster Flash 'don't do it!'

THE BUY TO LET MIDDLE CLASSES GET A KICK IN THE ARSE!

Today the Royal Institution for Chartered Surveyors (RICS) published a paper titled:

Government must act on property market now
RICS Proposals for the Housing Market

Now don't get me wrong, some of the content makes a lot of sense, but I take real exception to the idea that it is down to the UK government to sort out the housing market mess that this country currently finds itself in. It's not like the government have caused this particular problem now is it?

The paper calls on the Government to adopt a ‘comprehensive set of measures which will both kick start the market now and significantly improve the consumer’s experience of buying, selling and occupying property in the future’.

What on earth role of government is being thought up here to support the view that the government should be playing a part in helping consumers of the property market - when the naked greed of many consumers (and sheer ignorance of others) and the greed of the suppliers of various products should really be the centre of attention as the housing market slows down and reverses itself. Just list what you know about poor value for money housing units - sorry apartments - higher and higher risk mortgages over longer and longer terms, highly geared buy to let loans based on over-valued new build stock, the hard sell of equity release schemes and financial planning that basically ignores the individual's ability to pay to see what I mean. These individuals and organisations and not the government are largely the ones to blame for the mess we are in right now..

So, here's Polko's take on how the consumer could have significantly improved their experience of property ownership in those very same three areas mentioned by RICS in recent years:

buying: for those buying to live in, think about what you are buying rather than getting caught up in some dream of how fast the value is going to change, and above all ignore the pitfalls of 5%/10% deposit paid by the developer deals - all that they have done is got a dodgy (and sometimes not so dodgy but certainly inexperienced) surveyor to over-value the property in the first place.

selling: stop being greedy, sell the house at its true worth rather than asking too much for too little. This also goes for investor sales at auction and sales triggered by house repossesions - just look at the % unsold at auctions in the last 2 years..

occupying: if you are buying a new build property realise that it is built to a profit (the developer's not yours!) and not a price or value, and that new housing units are essentially designed to be renewed/refurbished on a faster schedule than something built in the pre-War period - hence, if you pay too much for it you are going to have to borrow again to refurbish it later (this kettle of cod hasn't even set into the woes of the housing market yet - but for evidence look at all that grey concrete, glass and fancy cladding at an apartment block near you now - not weathering very well in the UK climate is it? Then inspect the insides of a new build property and see how generally poor quality the internal wall structures, plasterboarding and finishes are.. more expenditure coming to a town near you soon - and it's not the developer that's going to pay second time around but the owner).

If you are an occupier don't be tempted by all those juicy equity release schemes until you have truly evaluated what you are going to do if the value of your home goes down or stays the same rather than increases... and keep in mind it is never an attractive option to borrow on a 20+ year loan to go on holiday or buy a depreciating asset like a new car. Your neighbours might like the new car but you're going to pay dearly for it in the long run.

Rant over. Hope you agree (at least a little bit?).