Archive for the ‘Finance’ Category

Putting a negative spin on your marketing

You usually expect companies to put a positive spin on their products, even when they’re not so good so I try to downplay such messages in my mind to see what the true picture is.

So, I was a bit thrown by the recent car insurance renewal from Axa. They had their main marketing message in big letters (“10% discount for renewing online” and the usual promotion of the insurances that you don’t yet have with them). However, the insurance renewal at £78/month seemed a bit expensive and when I checked it certainly was as it was only £25/month last year. Net effect of that being that I was getting together the information I needed to get a quote elsewhere. After all, tripling the insurance was a bit much.

They are just lucky that I read a bit further though. It seems that the £25/month was actually over 9 months with an initial deposit bringing the total to around £275 whereas the £78/month is over three months with an initial deposit bringing the total to almost exactly the same total.

Talk about bad marketing! I wonder how many customers they’re going to lose by presenting an insurance quote that appears to triple the cost but actually leaves the total almost exactly the same?

 

Copyright © 2004-2014 by Foreign Perspectives. All rights reserved.

What’s going to happen with welfare reform in Northern Ireland?

For a very long time, the social security payments scheme in Northern Ireland was more or less identical but separate from the scheme in the mainland. Thus, for example, if you retired in Northern Ireland and then moved to England, your retirement pension would be paid from the English system but the amount would be the same.

However, up until the early 1990s there were separate computer systems to do this in Northern Ireland and in England. Then with the replacement of the English system in the 1990s, the running of the systems gradually moved to England and the various computer teams supporting the old Northern Ireland systems were disbanded.

Roll that forward 20-odd years and the reform of social security that is taking place in England, Scotland and Wales hasn’t, yet, been accepted.

Options as to how to proceed are quite limited.

Firstly, NI could carry on with the old system for a while. There are penalties of, at present, £5 million a month being applied and that’ll have consequences for the non-social security money i.e. there would need to be substantial cuts to balance the books. However, there’s only one computer system now, run in a number of centres across the country but supported centrally and that’s rather a bigger problem. Once the mainland change over to universal credit, support for the old systems will stop and those support teams will disband. The NI computer system is actually in England and, in principle, NI could buy that but what they can’t buy is the support team as that will be moving on to the new system. Outcome of this option? Well, something like 2 or 3 years from now the social security payments in NI will simply stop being paid because the computer system which is paying them now will either be switched off or, if it’s not, it will develop a fault and the team that currently fixes faults won’t exist. In practice, this is likely to end in chaos.

Second, continue on with the old system but get a replacement to avoid the consequences of the switch-off above. Again, there are the penalties to contend with. However, more significant is that 2 to 3 year deadline: it just isn’t long enough to train up a new support team, even if the will to do that were there (which it isn’t) and the GB teams were able to train up a backup team (unlikely in the timeframe). It would also be seriously expensive as the GB systems were written with much larger IT teams than are usual in NI (around 10 times as large) so running costs would be much higher per capita.

Third, agree the changes in welfare in NI. Best option probably, but seemingly rather unlikely to happen.

Fourth, give back the social security to direct rule. Not that different from the previous option but probably a whole lot better from the point of view of the local politicians as they’ll be able to argue that the cuts are imposed directly by London.

So what’s likely to happen? The possibility of social security payments simply stopping should focus the minds of the politicians but they don’t seem to believe that the computer system would be switched off – what they haven’t allowed for is that without support, it’ll just stop working sooner or later. Neither of the first two options are great for NI given the penalties that will be applied and the consequences for public services. Options 3 and 4 aren’t great politically so unlikely to happen before the upcoming elections.

 

Copyright © 2004-2014 by Foreign Perspectives. All rights reserved.

So another 100 billion euro was placed on “euro to win”

That’s the problem with the euro situation at the moment: it really is placing a bet on it surviving.

Spain is being given another 100 billion to bet on it’s banking system surviving the crisis. Greece, unless they elect a far left or right government, will probably be given a similar amount to bet on it’s banking system and not too long from now Italy and Portugal will follow with equally large bets.

All this is just fine if the bets win. If they don’t that money will need replaced and the amount remaining in the kitty will be rather low at that point. Moreover, if the bets don’t win there’ll be a whole bunch of real-world things needing financing at the same time that the bets are written off which is a nightmare scenario for everyone in Europe and none too good for anyone anywhere else for that matter.

Either way, it would appear that we’re in for an interesting second half of 2012.

 

Copyright © 2004-2014 by Foreign Perspectives. All rights reserved.

What way now for the euro and Europe?

An awful lot of people are now taking it for granted that Greece will be parting ways with the euro later this year. The only question now seems to be whether it’ll be an orderly exit or a total fiasco. Either way, it seems sure to be something of a roller coaster ride for everyone.

But, whether or not Greece exits the euro, there remains the question as to what to do in the rest of Europe. There are just too many major economies in trouble and needing to grow their economies at the same time as cutting their deficits. One country trying to do one of those choices is difficult but several countries trying to do both simultaneously seems an incredibly unlikely prospect. The result seems likely to be a little of one, a little of the other and overall nothing much happening that’s in any way positive.

In the midst of this the European central bank president sees the future as him taking over the position of the central banker for all the Eurozone countries. That would have been the sensible way to go 10 years back when the euro began. Now it brings forth the vision of Bankia writ very, very large: not the merger of seven lame-duck regional banks this time to create one bigger failing bank but rather the merger of a number of lame-duck central banks to create one bigger failing central bank. Even if he had the time and there were the political inclination to do it, it seems just a means of postponing the inevitable break-up of the Eurozone and, just as the collapse of Bankia will be more painful than the collapse of the individual banks that created it would have been, the collapse of the super central bank would be much, much more painful than the collapse of one or two smaller ones would (will?) be.

Painful as it may well be, it would seem that the best way forward would be to recreate the drachma, lire, peseta and perhaps the punt.

 

 

Copyright © 2004-2014 by Foreign Perspectives. All rights reserved.

To strike or not to strike for public service pensions

Pension payments for all but the lowest paid in the public sector are going up (mostly doubling) and they’re going to have to work longer before they are entitled to the maximum pension. Surely it must only be right that the well paid public servants in secure jobs pay more for their gold plated pensions? Why should the rest of us pay for their pensions anyway?

The snag with public sector pensions is that the employer is the government so therefore, yes, the rest of us do have to pay for their pensions. Unless you’d rather that they get no pensions at all (in which case, I hope you don’t mind doing without schools, hospitals, etc.) then the government (ie taxpayers) must act as responsible employers and pay for those pensions. The other snag is that, unlike private sector pensions, the public sectors operate on a pay as you go system which means that the current workers pay for the pensions of the current pensioners or rather taxes do (that’s how the normal retirement pension operates too).

OK, so we should pay them a pension, but surely we shouldn’t be paying the well-paid public servants gold plated pensions? Actually, well-paid public servants are very much in the minority with a considerable number getting close to the minimum wage. Courtesy of a number of changes in recent years, that “gold-plating” is looking distinctly tarnished with three separate schemes being introduced over the last 10 years, the prior schemes being closed to new members and each new scheme being markedly poorer than the one before. The latest offering is a lurch towards an average salary rather than the current final salary scheme which will be a major, major drop in the pensions that people will be eligible for though, as usual with pensions, a magnitude of a drop that most people wouldn’t realise until it was far too late.

In some ways it could be a good thing. The net effect, for public servants who realise it, is that their lifetime earnings is being cut quite dramatically so it might encourage more to leave for the private sector. The only snag with that is that we need those public services that the people most likely to leave provide. On the whole, those most likely to leave would be the higher earners. Do you really want to have an exodus of teachers, nurses, etc.? What about the well-paid Whitehall people perhaps? Surely they can be done without? Certainly, if you’re happy to have poor advice given to the government on all kinds of matters, you could do without them.

Should you strike? Despite being what I’d say was one of the most right wing union representatives ever, I think, yes, this is a time to show that you support your union negotiators.

Should you support the strike as a taxpayer? I think yes too as it’s really going to impact on the quality of public servants and hence public services that you get over the years to come.

Copyright © 2004-2014 by Foreign Perspectives. All rights reserved.
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