Wickham's musings from Chalke

There’s so much fighting in the world today. Perhaps colonial power should be reinstated. Most regions where fighting is endemic had a colonial power in charge until some form of independence was achieved and usually links have been retained culturally or by trade. Colonialism wouldn’t be the same as a hundred years ago. It could be formally approved by the UN with firm guidelines.

There would be benefits to both parties as there were a hundred years ago. The poorer country with the fighting would have the benefit of a police force backed up by soldiers from the rich colonial power but under the control of the poorer country’s government. Trade would be safer, the soldiers would spend some of their income, tourism could improve.

Most poor countries experiencing fighting have their agriculture totally wrecked by populations moving about to avoid bloodshed, returning later to ruined farms.

The richer country providing the security would of course expect some payment. At present I believe they get paid by the UN if they provide troops, but of course they are contributing to the UN too. The alternative would be access to resources such as crops and minerals as it was a hundred years ago, but with UN guidelines to ensure fair payment.

At present when fighting occurs somewhere, there is often a long delay before the UN manages to persuade some country to provide troops to quell the problem. The countries providing the troops have no long term interest in the area, they come in late, get substituted by troops from another country and probably leave too early so that fighting erupts a few years later.

A continual association with the previous colonial power might be advantageous for both parties provided they could forgive the heavy-handed colonialism of the past.

One of the constant problems in our society has been inflation, boosted by wage and salary increases, often assisted by trade unions threatening or taking strike action.

A really right-wing solution would be to pass a law requiring everyone to tender their salary each year. Some sections of society are well insulated from the cold winds of market forces, notably the civil service. Many people running small businesses such as building sub-contractors have to tender their work. Their income depends on winning work and making a profit. Why not extend this principle to everyone?

In practice everyone would have guaranteed continuity of employment at the same salary. They would only need to tender if they wanted an increase. This would cause employees to consider their worth to their employer. If they asked for too much he might get someone else from the job market. From the employer’s point of view he would have to consider the disruption caused by employing someone new against the benefits of accepting the tender from an existing employee.

No doubt negotiation would take place but the risk would be more with the employee and inflation reduced. More employees would be prepared to continue at the same salary or a small increase if they thought their employer might get new employees.

There’s no chance of such a law at present of course, it wouldn’t be a vote-winner. However, if inflation returned in force it might have to be considered.

Whistleblowers have been much in the news over the last few years, often working in government departments and exposing wrongdoing there.

One recent example was a man who said employees had been told to short-circuit immigration checks on people coming from east European countries and to let them all in so that the backlog of applications that was an embarrassment to the government could be reduced.

Advice for potential whistleblowers is to discuss the matter with superiors to see whether it can be resolved without becoming public. This won’t work of course if the superiors are guilty of something.

It would seem that a whistleblower should ensure that something is illegal before going public, possibly getting confidential advice from a solicitor first. Whistleblowing when something might happen or relating to something that is not illegal is risky for the whistleblower as his job would probably be at risk and he could not justify his action so easily.

The Penrose Report has been published recently. He only had a brief to find out who did what and make recommendations; he was not allowed to apportion blame.

The various government departments and regulatory authorities have been busy denying all responsibility for the problems that caused Equitable Life to over-bonus and under-reserve for the guarantees in some policies.

However, Penrose reports that the government regulators during the early 1990s were aware of the lack of reserves and had meetings with Equitable Life’s chief executive (who was also their appointed actuary). He was an aggressive character and basically told them to shove off. They stayed silent and probably hoped that everything would turn out alright as equities rose during a bull market. Over-bonusing meant that the society was building up a black hole in the early 1990s, long before two problems made everyone aware of the problems.

The first blow was the House of Lords decision that Equitable Life could not pay a low final bonus to a person who chose to take the guaranteed annuity or a normal one (the same as for policies without a guaranteed annuity) if he decided not to take the guaranteed annuity (many people did choose not to as the guaranteed annuity was usually only for the policyholder, if he wanted a spouse’s annuity he had to forego the guarantee and take a current annuity). They had to pay the same bonus whether or not a person chose to take the guarantee.

As interest rates fell the guarantee suddenly made annuities two or three times more valuable than the current market annuity so a lower final bonus if the guarantee was chosen was designed to equalise the guaranteed and current annuity available to a policyholder.

The society might have been able to set a much lower bonus for all guaranteed annuity policies and a higher one for non-guaranteed annuity policies but this would have meant lower guaranteed annuities for important policyholders such as barristers, judges and other professional people who were Equitable’s main clients and who were coming up to retirement. It would have been a loss of face and would have looked bad in the performance statistics so the society decided to carry on regardless and hope that income from new policies would keep them solvent. The regulator knew this and allowed the society to continue to trade.

The next blow was the equity market downturn in 2001.

The Parliamentary Ombudsman has said that the regulation was only supposed to be “light touch” regulation. Many policyholders assumed that regulation meant that life assurance companies were under careful scrutiny and told in no uncertain terms to get their house in order and are appalled at the attempt to avoid responsibility.

One policyholder group, Equitable Members Action Group, is requesting £2 million of assistance from the society to see whether a claim against the government for misfeasance is possible. The society's new board of directors does not think there is much chance of a successful action against the government and suggests that individuals or groups complain again to the Financial Ombudsman Service which has not been any help so far.

I read that an artist had set up fluorescent tubes vertically in the ground under high voltage power cables and they all lit up! There was no cabling, they were just stuck in the ground. The photo showed them all lit up at night, quite a sight. It makes you realise how overhead power cables could be affecting our brains or bodies.

The proposal to fund most or all of Council Tax by income tax is probably a good idea in principle. Pensioners are finding the increases in Council Tax far higher than the increases in their pensions and they are often the poorer section of the community.

However, how would it work? At present the Council Tax is levied on property values. These do not change much except for a few new properties coming into the equation and a very few being revalued. Consequently the Council knows the total property value fairly precisely and when setting a rate can predict the revenue with a fair degree of accuracy, apart from non-payers.

If the tax is to be an income tax most people will have an income adjustment during the year and people will leave or enter the Council area, so how will the council be able to predict its revenue?

One answer would be to fix the date at say April 5th if it is considered appropriate to tie it in with tax returns. Each person would therefore pay Council Tax based on their tax return and their residence at the time, even if they moved to a different Council area on April 6th. There would still be difficulties though as it takes months for the Inland Revenue to work out the tax payable and most people only pay tax at six monthly intervals on account, some not paying the full amount for years. So the ability of a Council to set a rate might have to be on a person’s tax return for the previous year, making it always out of date regarding income and address.