On The Purpose Of Money

“The man who dies rich, dies disgraced.” Andrew Carnegie, US robber baron and philanthropist.

“Oh my friend, why do you… care so much about laying up the greatest amount of money and honour and reputation, and so little about wisdom and truth and the greatest improvement of the soul, which you never regard or heed at all? Are you not ashamed of this?” Socrates, ancient Greek philosopher.

Let us suppose, as a pure thought experiment, that you have £3,000 in your bank account. The mortgage is paid, the grocery bills are met. You have no real pressing need of the money, and plenty more is coming in. You have the option of paying £500 to a good cause, which would be a moral and decent act benefiting those much worse off than you.

If you do not, you stand to be reviled and hated by all. What else is money for but to ease your way through life and make your relationships with those around you better? No pockets in shrouds.

I know Philip Green, whose finances are pretty much as above, if you multiply them by a million. I have had the chilling experience of taking a call at about 9.30 in the morning, when a female voice says: “I have Sir Philip Green on the line.” He does not often ring you to compliment you on something you have just written.

I know that the one thing that would distress him above all else, aside from the loss of that £3 billion that is his net worth which isn’t going to happen, or the loss of one of his three yachts, ditto, is the stripping from him of his knighthood, which he believes he has earned for services to the high street. I know nothing of his faith, if he has one, or his personal morality. He gives a lot to charity. He is not keen on paying tax.

 I knew him in the early 1990s, when he ran Amber Day, a quoted company, and was perforce required to interact with journalists like me. It was not a mutually agreeable relationship.

I just think that if it were me then I would part with £500 million of my £3 billion personal fortune to pay off the BHS pension deficit and see those pensioners all right, and regard it as a price worth paying for my rehabilitation into society. It is too late to do anything for those 11,000 employees who have lost their jobs, and frankly, that was not of Green’s doing. As I say, what else is money for, if not to make your life better? Perhaps it will happen.

I started this blog almost three years ago, at a time of some personal conflict, in an attempt to make sense of the manners and morality of the business world on which I write elsewhere. The blog may have wandered off into other, more arcane areas, but that central question remains. When is enough finally enough? What is money for?

Advertisement

On Tax, And Thucydides

As the story about mass tax evasion via Panama was running, I was reading a review of the book by Yanis Varoufakis, former Greek finance minister, the other day. Not terribly good, by all accounts, but the title struck a chord.

Varoufakis uses the second half of a quote from Thucydides. The full phrase is, The Strong Do What They Will And The Weak Suffer What They Must.

Thucydides was talking about a war two and a half millennia ago. Today the strong pay what tax they will, and the weak what they must. The weak, that’s us.

None of us with any experience of finance will have been remotely surprised about Panama. We know that there is a booming industry in London and elsewhere, but much of it in London, that allows the rich to pay as little as possible in tax.

“What do you do for a living?” “I help rich people get off paying tax.”

On Antibiotics

Thank God for antibiotics.

I am four days into a course of them for a chest infection that, in earlier centuries, would have hung around for a lot longer and could possibly have killed me.

I know all about the threat of growing bacterial resistance to antibiotics because of their overuse. If they are diagnosed too often, they come into more contact with pathogens, providing more opportunity for the latter to develop immunity.

This is simply a matter of evolution, and the fewer such opportunities are given, the fewer the chances for resistant bacteria to evolve.

I did the proper thing, and waited four weeks before I approached my doctor. He said it was usual to wait two or three weeks to see if the infection was viral, and would clear up by itself, or had developed into a bacterial one which needed penicillin.

The problem of immunity is getting worse. According to the EU Commissioner for Health and Food Safety, about 25,000 people in Europe die every year from resistant disease strains, which seems an extraordinarily high figure.

The incidence of resistance varies widely between different countries, which indicates that some are more sensible in doling out antibiotics than others. In Germany, resistance to a treatment for food poisoning is growing because something similar is widely used there in poultry farming.

The notion that we should be in future succumbing to super-bugs because greedy farmers are raising their production by feeding their stock antibiotics as a precaution is a truly shocking one.

Three suggestions. You and I should not go to the doctor demanding a pill for every cough and sniffle. Doctors should not hand out antibiotics to get annoying patients out of their surgeries. Many already do not.

Farmers should not feed them to livestock – and we should not buy their produce if they do. East less meat, and buy free range or organic every time.

End of lecture.

On Debt Collection

Read this and see if it makes you as angry as it does me.

http://economistadentata.tumblr.com/

The process of debt collection by councils, I read elsewhere, has largely been outsourced to outside agencies. And this is how they behave to the most vulnerable in our society.

As it happens, I have had experience of dealing with such agencies at one remove, on behalf of someone who was also vulnerable and was put, through an accident, at their mercy. The debt was not owed to a local authority but to a credit card firm, which had hired a debt collecting agency. Believe  me,  these people are vile and there is no scummier way of making a living.

In this  case, the writer appears to have been able to communicate with them. That was more than I managed, when I was trying to help. They refused to talk to me. “Data protection”, one man  sneered down the phone to me. And they continued to hound their victim.

Evil, evil bastards.

On Google, Tax, And Ageing Relatives

Someone I know who is self-employed has just asked, via Twitter, why she has to pay tax at a rate of 20% and Google, which is significantly richer, has to pay at 3%. Let me explain.

It is because it is easier for HMRC to extract tax at 20% from a private individual or small company than it is to extract it, at any rate at all, from a global corporation. Such corporates pay tax on a largely voluntary basis, at a rate they calculate is the barest minimum level to prevent consumers from becoming so disgusted that they boycott their services. Or burn down their head office.

Let me explain further by example, though for reasons of privacy I will hedge around some of the details. Several years ago I took over the financial affairs of an Ageing Relative. Said AE had become incapable of looking after these for themselves, and those finances were in a mess.

To do this requires obtaining something called a Lasting Power of Attorney (LPA). This takes some months, because there are certain understandable safeguards put in place by the law to stop the young raiding their Ageing Relatives’ bank accounts. The process was made more difficult by the incompetence of the solicitor involved.

One of the AR’s problems was the lack of a tax form for some years, partly because of carelessness and partly, more recently, because of lack of the necessary ability. As a result, HMRC wanted a form filled in by the deadline that year, even though AR’s financial incomings and outgoings were awfully simple and easy to track, consisting of two private pensions and one state one.

I could not fill in that tax form until I got that LPA. Also, I needed some information about those pension payments for the relevant year from HMRC. There was a delay on the LPA. HMRC was unhelpful, to say the least, in providing that information.

As a result, I missed the tax deadline by some months. Once the form was in, HMRC issued a notice fining me £800, to come out of AR’s assets.

I rang and explained the reason for the delay. It was physically impossible for AR to fill in the form, and once this became obvious, it took me some time to put myself in a position to do so for him. In part because of delays by HMRC.

The tax man I spoke to said, quite fairly, that I had a good point and should appeal. Now, guess to which body appeals against the actions of HMRC go? Indeed, to HMRC, which in its wisdom decided its earlier decision was the correct one. Odd, that. The fine was paid.

It is easier for the tax authorities to extract money from someone who was, during part of this process, literally on their death bed than to extract it from the likes of Google, Amazon, etc, etc. This is why we pay and they don’t.

On Tax, and Greed

Amazing, the things you overhear on public transport. I was sitting listening to a man, I assume an accountant, droning on and on to his companion about how he could help his clients avoid on capital gains tax. On and on. I am not sure which struck me more. Was it the horrifically boring nature of his job, finding technical loopholes that allow rich people to avoid paying the amount of tax they should? It must be soul-destroying to devote your life to anything that dull or unrewarding.

Or was it the fact that he appeared not to possess a shred of moral awareness, or the realisation that the way he had chosen to earn his substantial salary might be deemed wrong and shameful by many right-minded people. Doubtless professional torturers, drug dealers and people who work for tobacco companies feel the same.

I doubt any of the above occurred to him. I have, by the nature of my work, known many very rich people, and a surprising number are extremely mean when it comes to paying their way in society. Many give to charity, often as ostentatiously as possible. They show off at charity auctions; their publicists ensure their generosity does not go unnoticed. The parable of the widow’s mite comes to mind.

Then they employ accountants like my fellow passenger to ensure their contribution towards the way of life they expect in the country they have chosen to live in is as small as possible. If not, in some cases, non-existent.

This week we learnt of a huge tax avoidance scheme benefitting a number of very rich people, many of them show business types. They include a pop group with a studiedly anti-establishment image. There seems to be at least one who genuinely did not know of the benefits the scheme provided, presumably having been enrolled unwittingly by accountants, and who seems to have paid back the tax saved.

We also learnt that, through the incompetence of the tax man, several of the beneficiaries cannot be pursued to repay the tax they avoided. This probably doesn’t square with the experience of ordinary people, certainly not with my own experience, which is that the tax man does not give up, whether right or wrong.

I can’t believe anyone likes paying tax, though oddly enough a small minority, if questioned in an opinion poll, claim to. If I were as rich as some of these people, though, I would feel a deep sense of shame if caught avoiding it, however legally, by employing expensive accountants like our friend above. When is enough really enough? When does greed, and the love of money, more money, more, more, expunge any sense of shame?

On Bankers, And Bashing

The days are getting longer, the magnolia blossom is on the trees and it is time for the annual banker bonus bashing season. This comes around every year as the banks publish their annual reports, which are required to detail the transcendentally huge amounts their senior staff are paid

Meanwhile, a survey only this week suggests 40 per cent of City workers are dissatisfied with their bonus. One question I am often, as someone who knows a few bankers, asked is, how can they? Have they no sense of shame?

Here is a clue. One of the most successful investment bankers of his generation, and one of the best remunerated, is called Rich Ricci. Pronounced “Ritchie”. An American, he has a number of horses running at Cheltenham this week. Like you do.

Now, if you or I were a fabulously rich banker called that, you and I would probably use the Richard form of our name. It might seem a little less provocative.

It is also a weirdly hermetically sealed industry, more so, I guess, than lawyers or engineers or dentists. We had a couple of bankers for neighbours for a couple of years. They invited us to their housewarming. Pleasant enough people. But as I made polite small talk about the City, I was greeted with the same question over and over. Which bank did I work for?

It seemed inconceivable to those in the room, all bankers save neighbours like us, that anyone could do anything else for a living. They don’t get the criticism because they don’t meet anyone, or hardly anyone, who hands it out.

Then there is simple human nature. The row over executive pay really kicked off after the privatisations that started in the 1980s. Former civil servants, on appropriate salaries, were suddenly transformed into titans of industry with pay packages to match.

Every week some former regional electricity board chairman or someone of that ilk would be dragged, blinking, through the press and pilloried for their “obscene” salary. One paper even went to the trouble of sending a photographer down to the modest  French holiday home of one miscreant and snapping it though a fish-eye lens, to make it look larger and more palatial than it was.

You had to ask whether it was worth it. Until you think, here is the bargain. You get to spend a week or so in the public stocks, in return for riches that would have seemed unimaginable in your earlier, civil service job. Then the dogs stop barking, the caravan moves on, and someone else gets their turn.

If I were to find myself earning, ooh, twenty million a year, I would probably work until about mid-August, bank the lot, and then never work again. But I am not a banker.

Banks 2, Regulators nil

This has been another bad week for the reputation of our banking sector. Some may wonder, given the moral cesspit they now occupy, how much further they can fall. Watch this space. There is more to come, I suspect

An industry that was once a by-word for being dull, sometimes pompous, fuddy-duddy but deeply moral – think Captain Mainwaring, or Frank Capra’s “It’s A Wonderful Life” – has been taken over by spivs, get rich quick merchants and hucksters. You have to be a certain age to find this worthy of note.

Royal Bank of Scotland has been fined $100 million for cheating on US sanctions and supporting some pretty evil regimes, like Iran and Libya. For money, pure and simple. Blood money, given some of those regimes’ fondness for killing their own citizens and citizens of other countries of which they disapproved.

Lloyds Banking Group has been fined £28 million, a record, by the UK regulator for a strategy of utter dishonesty whereby staff were rewarded if they sold customers who had placed their trust in the bank, thinking it to have their best interests at heart, policies they did not need. Staff were penalised if they refused to do so. It does not get any worse, except that somehow, somewhere, I suspect it will.

Fining Lloyds £28 million is a bit like thrashing the car, Basil Fawlty-style, for breaking down. It might make you feel better, but it does not punish those at fault.

To put it another way, fining Lloyds £28 million, a miniscule sum given its worth, is a bit like fining you and me a fiver – with the proviso that we can ask our employer to make the sum up. The money will come out of shareholders’ funds or loaded onto customers’ bills. In this case, you and I pick up part of the fine, because we, as the state, are shareholders in Lloyds.

One of the weaknesses of UK law, and the Americans are a bit ahead of us on this one, is that you can hold a corporate responsible for some breach of the law. This applies in cases such as corporate manslaughter, after those accidents on the railways at the turn of the last decade. This is the equivalent, as I said, to beating the furniture.

It is extremely hard to hold to account those who run that corporate. Offences take years to come to light and be investigated. By then, the perpetrators have long gone, and cashed in their bonuses.

It must be possible, and I speak as one with some training in the law, to hold such people to account ex post facto, that is, after the event, and exact an appropriate financial penalty.

Suggest such a thing and the business pressure groups such as the CBI and the Institute of Directors will whine about a “constraint on entrepreneurs’ efforts” or a “tax on business”. So will their lickspittles among the press.

But I rather suspect that any political party that suggest such condign punishment of those actually responsible for such outrages might find itself all of a sudden rather popular with the voting public.

Christmas Does Not Come In A Delivery Van

An extraordinary flyer flops through the door, glossy and obviously expensive. There is a company that will select, buy and then decorate my Christmas tree for me. Price unspecified.

I had always assumed, though I am fairly unsentimental about Christmas, that part of the fun of a tree was choosing it, dragging all the old, familiar and battered ornaments down from the attic, and then dressing it en famille. Ideally with the odd decent glass of something.

Apparently there are some people for whom this is too onerous a task. They probably get someone to choose, buy and wrap their presents too. It reminds me of the classic 1977 episode of “The Good Life” when Margo orders Christmas over the phone, and some of it fails to arrive. Margo recoils with horror. “Christmas hasn’t been delivered to our house.”

Except that the firm in question obviously hasn’t seen that episode. “Designer Christmas Delivered”, the flyer promises, without apparent irony.

We live in a part of town where there is the Rich Bit, and the Other Bit. The Rich Bit has houses worth multiple millions, inhabited by investment bankers, City lawyers and their pampered wives. It contains two or three of the most expensive streets in the London suburbs.

The Other Bit, inhabited by ordinary people, used to be affordable, just. Such is the unstoppable march of London house prices that the last home to sell in our road changed hands for almost a million. Presumably the company thought that if anyone could afford that, they might be interested in paying some ludicrous price for a decorated Christmas tree.

The people who live in the Rich Bit are just the sort to want an overpriced, designer Christmas tree. You can imagine the scene. “Blue and white is rather last year, madam. This year, the colours are gold and green.” And God forbid, when you invite your fellow investment bankers and City lawyers around for Christmas drinks at your multi-million pound mansion, that your Christmas tree should be decorated in last year’s colours.

Some people have too much money.

A Hand in the Cookie Jar

In an ideal world companies we have control over, like Government departments we fund out of our taxes, we should be able to compel to behave in a moral manner. This is not an ideal world. Royal Bank of Scotland, which is about four fifths owned by the state, that is, the taxpayer, has been revealed by two separate reports as behaving in an entirely immoral manner.

The bank pulled lending on a large number of businesses so it could buy them on the cheap after they collapsed. This is disgusting, shocking behaviour by anyone’s standards. It is tantamount to theft. We will never know how many homes were lost, how many marriages collapsed, how many of RBS’s lenders were driven to suicide, as a consequence. But this will have happened. It always does.

Listen to this response, from an RBS spokesweasel. “GRG (the part of the bank involved) successfully turns around most of the businesses it works with, but in all cases is working with customers at a time of significant stress in their lives. Not all businesses that encounter serious financial trouble can be saved.”

This is the sound of a corporate caught with its hand in the biscuit barrel. No apology, just obfuscation and lies. “I didn’t really mean to steal any biscuits, Mum, I was just checking how many were there. Honest.”

I have suggested before that corporates will behave with absolutely no morality whatsoever, if they are allowed to. Corporates like RBS and all the others have no conscience, no sense of right and wrong. They have to be controlled, and regulated, to prevent them behaving in such a deplorable manner.

But to whom does this task fall? If we have learnt anything over the past few years, it is that the system of regulation and oversight over the financial services industry has failed utterly and is not fit for purpose. Those same regulators who allowed a coke addict and expenses cheat to run our most “ethical” bank. If we cannot compel moral behaviour on a business we control and own a majority of, how can we expect to control any of the others?