5th January 2009

Nationalisation at Christmas

Given the desperate state of the UK economy, the Government has decided to introduce some exceptional measures and to extend its nationalisation plans. It has proposed that it needs to have a greater and direct involvement and to take more prescriptive decisions with regard to the potential recovery in the economy. Despite huge amounts of money having been injected into the banks for both capital and lending, it still seems that many are still proving somewhat recalcitrant in passing the money out. With a lower level of lending both corporately and personally, including mortgages, the speed of monetary spending has slowed up dramatically. Therefore something must be done.

Dramatic times need dramatic actions say the Government and certainly their latest proposals fulfil that statement. For this year only direct Government intervention has been introduced by Orders in Council so that the effect can be felt immediately.

The proposals fall into various categories:- 

Retail economic stimulation 

The Bank of England will be issuing a new Gilt programme where discounted bonds will be issued for purchase directly by and marketed to private investors (including charities and trusts) however attached to each bond will be short term Sterling Currency Notes. These will be almost identical to current denominations but will have a restricted time limit for their value as each note will have an expiry date after which it will be valueless.

The aim of these, already nick-named “Crimble Bonds”, will be not only to encourage saving into Government bonds, but also increase the rate of short term retail expenditure before the end of February. This date limited note issuance has proved a successful method of encouraging spending in Zimbabwe – a model for the UK Treasury to copy perhaps?

• Compulsory Present Purchase. This is aimed at higher rate tax payers to ensure that those able to spend are encouraged to do so. Therefore it has been decided that for those with a combined annual income of £100,000 couples will be expected to have purchased £1000. If proof of purchase of “vat-able” items is submitted then 50% can be claimed back through the tax system; however if no purchase is made then an additional tax levy will be made.       
• UScratch – In order to make the purchase of Government bonds more popular, Gilt certificates are being redesigned and will be offered to the public with a scratch corner for purchasers to rub off to see if they have won a tangible financial prize. These will now be available in smaller denominations and can be purchased through newsagents and supermarkets.
• UGARP – the Unwanted Gift Asset Relief Programme. This will enable recipients of unwanted gifts to claim back 50% of their value so long as proof of additional purchase is made. Satsumas, white sugar mice, and that annoying packet of dates will, however, be excluded.
• UStrip – Unwanted old bank notes which have been shredded into strips will be sold off in lots as a Christmas alternative to the 1000 piece jigsaw of Constable’s Haywain. This will not only help recycle old notes but provide a potentially profitable pastime for children once the Wii has been broken.

Additional Tax raising

• Christmas tree lights will attract an additional 10% VAT. This will have the additional benefit of discouraging excess usage of lights and thus have an environmental impact as well as power reduction benefit.
• Christmas tree recycling fee. An additional charge, which can be retrospective, is being introduced. A further £5 charge is being added to each tree sale, or charged at time of disposal unless a suitable receipt can be produced. This charge will rise to £10 for those trees over 6 feet at time of purchase.
• Brand licensing fees – various terminology about the Christmas period will also now attract a usage fee. This will include the term “Christmas” itself, but also to avoid any charges of religious discrimination references to both Eid and Hanukkah will also be included.

As a result of the global credit crunch and the incompetence of our politicians and leaders I suppose we are left to enjoy a grey and damp “Winterval”. Yuk!

Merry Christmas.

Justin A. Urquhart Stewart
Director
Seven Investment Management Limited