Election Fever

Letter Published in The Journal today.

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Everyone and his dog in the media is now claiming credit for breaking the news that the general election is off, though the actual truth is that it was never really on. It was all hyped up by political hacks in the national press bereft of something to write about once they no longer had a daily dose of the Blair-Brown soap opera.

For sure, speculation will now turn to a Spring election - which I suspect remains extremely unlikely, as the amendment to the European Communities Act (otherwise known as the 'Reform Treaty') will be going through Parliament. To hold a general election then would delay ratification of the new treaty. It is unlikly that that Gordon Brown would not want to do that, especially as it would catapault EU issues to the top of the political agenda.

Ruling out 2009 - which is when the EU parliament elections will be held - the best bet from this political pundit is that that our Gordon will "go to the wire" and hold the election in the Spring of 2010.

Peter Troy

The Great VAT Robbery

The piece reproduced below was published today in The Journal's in my view with series where the Editor is a regular contributor.

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By Peter Troy

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Back in April 1967, the European Commission issued a directive to launch a tax system unlike any seen before, which it described as "achieving the highest degree of simplicity". So amazingly complex did Value Added Tax (VAT) turn out to be that it has subsequently had to issue 35 more directives, which in practice has made the Tax even more complicated as most small and medium size businesses know to their cost.

Governments like VAT because that it turns the business community into tax collectors. To collect VAT from their customers, with all the accompanying paperwork, costs businesses four times more money than it costs the government to receive it; this ongoing cost of course particularly impacts on smaller businesses. Part of the price of forcing firms to collect the government's taxes in this way is that VAT has become a huge crime opportunity.

VAT fraud now costs the UK Treasury £4.75bn in 2005-06 and is estimated to be worth €250bn (£170bn) annually across the EU as a whole, according to a House of Lords report published last month.

The figures involved are of such staggering dimentions that they defy comprehension. Those of us, who are old enough, however, will remember the Great Train Robbery - committed 44 years ago. A huge £2.3 million was stolen - £40 million in today's money – and the publicity was huge, the crime is now a part of our national folklore.By comparison, UK is currently losses to VAT fraud in 2005-6 the equivalent of 120 great train robberies a year, or one every three days. At a European level, that number soars to a colossal 11 per day.

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For sure, more recently, the UK government has got to grips with some of the more obvious scams – involving computer chips and mobile telephones – through increased enforcement and tightening procedures.

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However the House of Lords argues that these measures are in the long term unsustainable.

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Simply carrying out the checks involves about 1,500 staff, at a cost of £95m a year, with some supply chains under scrutiny involving up to 600 companies. Better VAT enforcement carries the danger of withholding money from legitimate, smaller, importers and traders, possibly pushing some to the brink of going out of business.Furthermore, the House of Lords report warn that the system change will simply shift the fraud from goods like mobile phones to others instead - such as cosmetics, precious metals, and computer software. Thus the fraud "will continue to migrate and mutate.''

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The only way we can get to grips with this fraud, therefore, is to change the VAT system, ideally to a return to a simple Purchase Tax and that – as even the Lord's Committee who identified the huge fraud cost acknowledges – is not going to happen. The reason is that VAT is a European Union (EU) tax, it requires unanimity of all 27 member states to change, and the majority are very much against any fundamental changes.

In the meantime small Businesses and indeed their representatives will continue to despair at the complexity and draconian enforcement of VAT regulations and collection methods brought about because of the depredations of organised criminals.

The UK's largest member based Business organisation the Federation of Small Businesses (FSB) will continue to support its 205,000 members who come under VAT investigation whilst at the same time demanding simplification of the EU tax, but there is there is absolutely nothing that can be about it, short of leaving the EU. Which is probably one of the reasons why FSB representative members voted (by over two thirds) to do just that back in 2001.

In My View

The Aricle above is from The Northern Echo in January this year.

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The piece below was published in The Journal on Wednesday 14 March.

Credit where credit is due – by Peter Troy

Rarely these days are the words, bank charges, bank profits, credit, and debt out of the headlines. What is very rarely in headlines is – what are the alternatives to high street and internet banks as well as high interest rate doorstep lenders.

Enter 'credit union' into Google and an amazing 44,800,000 entries are flagged up. So what are Credit Unions and why is the Government so keen to offer support? They are democratically - run co-operatives - which appeals to Labour’s traditional activists - they offer low-interest loans encourage their members to save regularly and also borrow at affordable rates. Importantly Credit Unions refresh the financial needs of people that the high street banks can't or won't refresh.

One key function of Credit Unions is to significantly reduce the influence of 'doorstep lenders' which were comprehensively criticized in a report last year; a £300 loan over 30 weeks would involve paying back around £450. A credit union loan would require paying back around only £320.

Credit Unions are well regulated and thus safe. Regulated by the Financial Services Authority they are co-operatively owned and run by the savers who are also members. Loans can be taken out for as little as £10 pounds or much larger amounts depending on how much has been saved. The system works because by members making regular savings they form a pool of money which is then available to be lent out to members who they have been saving for a qualifying amount of time (usually about 8-12 weeks).

Credit Union's are not new, their history dates back to 1864, when one Fredrich Raffiesen founded the first credit union in Heddesdorf in Germany. By the time of his death in 1888 credit unions had spread to Italy, France, the Netherlands, Austria, and North America and to a lesser extent Britain.

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In recent years the concept has grown considerably to 560 across the UK - 16 of which have been established in recent years in the North East.

To establish a Credit Union there needs to be a common bond which determines who can join. For the Durham City and District Credit Union, which was launched in 2003 and has over 160 members, people have to live and work within the boundaries of the City of Durham but the common bond can be a place of work, church or community group. The essential ingredient in the establishing of a Union is the considerable efforts and dedication of groups of local volunteers.

In the North East, Credit Unions have received a welcome boost of publicity thanks to Durham MP Dr Roberta Blackman-Woods. The tenacious MP recently joined the City of Durham Credit Union and then immediately asked a question in the House as to what extra help Credit Unions can expect from the Government in the wake of the collapse of the huge savings club organized by Fairpark which was forced into liquidation at the end of last year causing much misery to thousands.

The prompt reply from Ed Balls, the enigmatic Economic Secretary to the Treasury stated that a Growth Fund of £36 million to boost coverage, capacity and sustainability of credit unions was being made available. The Government is also shortly to announce further funding to support the training requirements of staff and volunteers working for such organizations.

So there we have it the growth of co-operatives filling a role as much needed in the 21st Century as in the 19th. Clearly there is such a thing as society.

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More information on Credit Unions can be obtained from the office of the Durham and City Credit Union 0191 375 7677.