I have stayed away from writing too many blogs recently about politics as I was getting feedback from some readers that I was writing far too much about politics rather than about business. I think that was a fair point, but it is hard to ignore the events going on in England at the moment.
My parents were from India and the thing that you realize very early on when you try to get anything done in India (even trivial things like getting a phone connected or a driving license issued) requires the greasing of palms (or bribes being paid). It is accepted in countries like India that corruption is a way of life. And it is not a ‘third world thing’ either. Italy celebrates its corruption. The size of the black economy there is estimated to be a staggering 30% of GDP. There is honesty to this approach though.
What I have always found disconcerting is the British approach that we are somehow above reproach when we ask ‘do male cats spray’. With the publication of the MP’s expenses in the British media this week, we have found out exactly how greedy our politicians have been up to this point.
It is simply disgraceful that the politician in charge of law and order thought it was OK to have the taxpayer pay for pornographic movies, or for her sister’s house to be paid for as she claimed to have been living there. The Minister in charge of the Police was claiming to be living at his parent’s house (when his own home was only 12 miles away) so that he could claim a second home allowance. The whole thing stinks. What about the Foreign Secretary who thought it was OK for the state to be paying for his baby’s pram?
The defense that all politicians have jumped to has been that what they were doing was within the rules. How many of these same politicians were lambasting Sir Fred Goodwin for doing the same thing? The other difference is that somewhere along the line, something must have kicked in which made the politicians realize they were doing something wrong.
The Inland Revenue has a good and robust test for allowing business expenses. You have to demonstrate that your expenses are wholly, exclusively and necessarily for the purpose of your business. For example, a barrister can claim the cost of a wig, but not the cost of a black suit as that can be used for other purposes other than wearing in a court of law. I would like to know how Keith Vaz MP felt it was in the interests of the taxpayer to purchase leather chairs worth £2600 at their expense.
There is a business point here. It is about moral leadership. You cannot respect a CEO or an entrepreneur who is cutting back on staff pay or numbers whilst enriching themselves at the companies expense by for example having moles removed from their garden (yes – it is true!). How hard will it know be for the government to ask us to pay more in taxes and ask us for restraint in the public purse when they themselves have been showing no such restraint.
I have always had a very low regard for politicians and this episode of how to cure cystic acne has done nothing to change that opinion. There are some notable exceptions such as Hillary Ben and David Cameron (you may argue that he does not need to because of his private wealth – but the richest MP in the Cabinet still felt compelled to claim £1.09 for a Pizza)
What this episode has demonstrated is that although business people make a good target to attack for politicians, we as a group can rightly claim to have a higher ethical code that the one that has been demonstrated by them over the last few years.
Britain is a great country with a very generous and liberal people, but do not think there is no corruption here. There is – it is just a very British version of it – legal, organized but still utterly wrong.
Between 2004 and 2007 I made about 16 Angel investments. Between 2007 and last year I made three more. Since June last year I have not made a single investment. My decision not to invest was driven by two factors. Firstly, I did not have any money (which is a pretty big bar to investing when you think of it) and secondly, I think the outlook has been lousy.
A lot of the businesses I have invested in have really struggled (I have only six still alive). I have written recent blogs about the dire state of the economy. I note that almost a year ago I argued that what the economy really needed was a dose of inflation – and that seems to have been the right call.
Well, I am pleased to make another call to try and get a Borg Warner S366. I believe we have reached the bottom of the market in terms of asset prices. I have just concluded my first deal in almost a year and am therefore putting my money where my mouth is. Although it is the bottom of the market in my view (and I admit that I have been heavily influenced by Anthony Bolton – President of Fidelity Investments and the closest British version of Warren Buffet, calling the end of the bear market last week), the symptoms will still lag on.
I do expect unemployment to rise further in the UK and for house prices to simply stabilize before they start to rise again next year. Nonetheless, it is pleasing to know that we are probably at the beginning of the end of what has been a terrible period.
Many people have seen their fortunes wiped away and savings eroded. The meltdown has particularly affected people about to retire as the stock market had simply given up all the gains made over the last ten years or so.
It will still be sometime before the green shoots filter through to the high street. A lot of spending on a good treatment for cystic acne is psychological and people have been left spooked by the turn of events. Low mortgage rates will be used as an opportunity to repair badly damaged household finances rather than being used as an opportunity to go out spending. I think only once unemployment has peaked and shows signs of recovery, along with house prices, will the Great British shopper return with force.
And no doubt, we will end up where we are again in ten years’ time! The difference with the next boom will be that the US and UK governments will have to use the tax receipts to pay down the simply gigantic levels of debts they have left us saddled with. This may be a bigger task than it seems at first, because there really is a lot of debts that we need to worry about. But hopefully we can get things sorted out promptly.
These are worries for another day – let’s just enjoy the hope that this is the end. It does feel great to be back doing deals!