The bureaucratic maze of the Economic Crime Act

If there is one generalisation I would extract from the political science literature, it is that it is no good passing legislation without considering issues of implementation and enforcement.   How much will the legislation cost to put into effect?   Will it impose time and money costs on actors outside government?

It is very tempting to act as a legislative factory: I well remember sitting in on the last few days of a California state legislature cycle and seeing a blizzard of bills passed, some of them contradictory and others devoid of any real content.   The EU is sometimes at risk of being a legislative factory, particularly as it is largely reliant on member states to implement and their willingness and capacity to do so varies considerably (even before we begin to consider the issue of corruption).

I do not think that company directors and even shareholders have taken fulyl on board the implications of the Economic Crime and Corporate Transparency Act 2023.  Indeed, two company directors of a property management company I spoke to had never heard of it.

Let me try and briefly describe my 'journey' with this legislation.   I am the (unpaid) director of a niche publishing company.   Fortunately we have an on the ball company secretary who alerted us to this legislation.

Essentially it is intended to combat the use of corporate arrangements in the UK for illicit and illegal purposes.

I then tried to comply online and was unsuccessful despite providing my passport number, home address etc.. So much for Tony Blair's assertion that everything can be digitised.  In the meantime our company secretary had contacted Companies House (the enforcement body).  It took about an hour to speak to a human and it is evident that they were overwhelmed.

I was advised to go to Warwick Post Office with a print out sent to me online and my passport.  Having managed to find a parking place in Warwick, I was told that the QR code had not printed successfully. A fellow director was told in London that there was a fault with the chip on her passport.

With a deadline looming, I decided to have a second attempt at Warwick Post Office, this time using the bus.  Driver S Gonzalez gave me a whirlwind tour of the extensive Warwick suburbs and industrial estates.

Once again my QR code was rejected, but a kind lady took pity on me, used my passport to generate a new code and then took my photograph.  I was verified as a bona fide UK citizen!

Much to my surprise I then got a letter from a heritage railway company in which I have shares.  They stated that they were now required to keep a full record of all their (many) shareholders.   Fortunately they provided a disclosure form I could scan and send back, but they did warn me that failure to provide the required information 'was a criminal offence'.

I am quite busy so the time spent on this was an unintended consequence of the legislation and many of those affected have clearly not heard about it.

I should caution that I am not a lawyer and you may need to seek legal advice if you are affected by this legislation.  

The magic money tree is back

One of the unfortunate consequences of the restoration of winter fuel payments is that voters' faith in the magic money tree has been restored.   Shake it hard enough and it will deliver!

Pensioners, of course, are much more likely to vote and those over 55 voting exceeded those under 55 at the last general election.    

The Government has suffered political pain for little fiscal gain.  Ironically, although I will be (rightly) taxed on the payment I receive, my partner will receive it tax free.

The policy change encouraged more pensioners to apply for pension credit which is a good if unintended outcome but it reduces the fiscal benefits even further.

Why did the Government do it?   I think they were genuinely spooked by the state they found the public finances in and thought this would be a current financial year win.

It also means that no one is likely to challenge the triple lock although it has delivered pensions £800 higher than they would otherwise be because of the earnings link.

Its defenders will say that state pensions are lower in the UK than elsewhere in Europe, but private pensions are higher.   Not everyone has them, but that is why we have pension credit.

This policy change will encourage backbench Labour MPs to demand retreats on benefit payments and qualifications which means that it will be difficult to avoid tax rises in the autumn.

Two big challenges for the Chancellor

Those who admire David Smith's balanced and sensible assessments of the British economy are spoilt for choice in the Sunday Times this morning as he has two articles.

One points to the increasing cost of financing government debt as coupons on gilt edged stock increase.  Part of this is the result of the uncertainty created by Donald Trump's policies with interest on US Treasuries also rising.

However, UK gilt edged interest rates are also higher than in comparable economies.   Like the US we are running a twin deficit: on our spending and on our balance of payments.

More generally, Smith draws attention to the political reluctance to rein in public spending.   (My words) UK taxpayers continue to think that they can have American levels of taxes and Nordic standards of public services.   As for soaking the rich, the top one per cent already pay nearly one third of income tax receipts.

If I had been Chancellor, I would not have scrapped the winter fuel allowance, although I would have made it taxable for the one million or so pensioners who (like me) are higher rate taxpayers.   I would also have ended the emergency 5p Ukraine war cut in fuel duty introduced by Rishi Sunak.

Reeves is now hemmed in by Labour's election pledge not to increase the three main sources of tax revenue while welfare benefits continue to increase.  She is also hamstrung by her fiscal rules: breaking them could provoke a market panic.

I dislike the 'Rachel from accounts' misogyny from the right-wing press, but she has just two more chances to get it right: the impending spending review and the autumn budget.

The popularity of populism

The picture is really rather mixed.   Canada returned a centrist internationalist as its prime minister, although the margin wasn't large and hotheads in Alberta are talking of seceding.

Rather unusually Australia elected a left of centre government for a second term, rejecting the hard right opposition.  Now Romania has chosen a centrist liberal president over a hard right choice.

But then in Portugal far right Chega has broken the two party duopoly to become the second largest party in the legislature.     In the Netherlamds and Austria far right parties have received the largest share of the vote in the last two years.  They are also strong in Germany, Belgium, Sweden and Finland.   Italy offers an example of right-wing pragmatism, while the picture in France is currently confused with the Republicans choosing the hard right interior minister as leader.

In the UK Reform made substantial gains in the local government elections, albeit on low turnouts and focused on certain parts of the country.   However, it was enough to encourage right-wing newspapers to big up Nigel Farage as the next prime minister, not to forget the platform he is given by the BBC.

In my own ward the Liberal Democrats swept home with nearly 2,000 votes with every other party getting a few hundred each.   Reform got 370.

I know only one lady who backs Reform.   Somewhat paradoxically, she volunteers in a Global South charity shop.   However, she complains that going to the shop she hears people speaking other than English.

I don't generally eavesdrop on conversations as I walk along the street.   I doubt whether most foreign speakers are abusing me, but if they are saying 'Look at that fat, stupid Gammon' I wouldn't understand anyway.

The available evidence suggests that there is a hard core of Reform voters who also voted for UKIP, the Brexit Party and Leave in the referendum.   Typically, they are older working class white males living in deprived areas.   Thus Reform made big inroads in North Warwickshire, but made little headway in the south of the county.

However, it is evident that Reform also attracted some younger voters and more women than in the past.  In many ways this was a 'none of the above' vote.   There is plenty of evidence of failing public services and a lack of confidence in the mainstream parties to fix these problems, albeit it seems a bit hard to expect Labour to fix problems in ten months that have built up over 14 years.

More specifically, Reform have filled an unoccupied space in an increasingly complex political spectrum: conservative on social issues, especially immigration, but leaning left on standard economic issues, e.g., public ownership of public utilities and 'national champions'.   It was a space the remnants of the Social Democrats such as Rod Liddle - but they lacked a charismatic, high profile leader.

Anyway one can't predict 2029 general election results from 2025 local elections, although Nick Clegg may have a point when he says that the Lib Dems could face another coalition challenge.

Letters to a great-granddaughter (6)

My great-granddaughter currently lives in Spain with her mother and grandparents.  Spain has its own housing crisis, as evidenced in recent demonstrations and measures taken by the government.

However, today I want to focus on the UK and Generation Rent.  I am going to start with a fictionalised case of a couple who are distant relatives by marriage of my great-granddaughter.   They are in their mid-twenties and are both qualified to postgraduate level.  Consequently they have relatively well paid jobs, bur are subject to a 'graduate tax' of 9 per cent which eats into their disposable income.

For work reasons they live in the London outer commuter belt, although they work locally.  However, the area itself is very prosperous with many well-paid employment opportunities.   They are paying £1,500 a month rent for a two bedroom property.   They are relatively fortunate in that they have some funds for a deposit, but it may not be enough in the expensive local market.

Many graduates are finding it difficult to find jobs that reflect their qualifications and various reports I have seen indicate that the 'graduate premium' is probably decreasing.   Many graduates are living at home with parents while they seek suitable work.

In Germany, the AFD appears to have won some support from younger people who are disgruntled because their standard of living is below that of their parents.   This was particularly the case in the former DDR, but also applies to some industrial areas in the west.

Reform in the UK draws a lot of its support from Brexit voters who have supported other hard right parties such as UKIP in the past.   In particular, it is popular with older white males.   Of course, in time, this support base will naturally decline.  However, there are indications that Reform is making headway with younger males in particular.

I would like to give some stylised facts from family history about the changing housing market.   Go back to the 1921 census and my maternal grandfather, having lost his good wartime job in the defence industry, was renting privately and taking in lodgers to make ends meet.   My paternal grandfather was shortly to move into some of the first social housing provided by the Co-op.

In the late 1930s, my parents and all my uncles were in skilled manual or junior non-manual occupations.  They were all able to get mortgages to purchase terraced modern properties aimed at people like them.   One uncle who had a small business was able to pay cash for a semi-detached property.   There was effectively no planning system which did produce some sprawl and inefficient use of land.

When I got my first post in 1971 I was fortunate enough to be given rent free accommodation with all utilities and local tax covered.   In three years I was able to save enough for a substantial deposit on a flat.  The only problem I had was that I was single, having broken up with my then girl friend, and the Halifax was reluctant to lend to me, but I got an insurance broker to intervene on my behalf.  Following my marriage in 1978, we were able to purchase a large Victorian terrace needing some TLC for £16,250.   I still live there.

Clearly today's twenty somethings face a much tougher environment.   The ratio between incomes and house prices has exploded.   The Government is trying to increase supply by facing down Nimbys and freeing up planning permission, but the construction industry has shortages of skilled labour.   It is going to take time to turn things round and in the meantime it is easy to blame migrants.

Letters to a great-granddaugher (5)

I sent a card today to Spain for my great-granddaughter's 2nd birthday.   It is three weeks away, but the time post takes to reach rural Spain is unpredictable.   I am looking forward to seeing her when I get married in May.

I think that parenting is much more difficult today than in the analogue world of the 1970s and 1980s.  Social media poses challenges for parents that I didn't have to deal with and my great-granddaughter will live in a world in which AI will probably rule supreme.   Like all technologies, it has benefits and disadvantages, but it will be challenging to regulate effectively.

I also think that a lot more is expected today of parents in terms of intervening in the lives of their children.  My approach was rather laissez-faire, 'whatever'.   There were scrapes along the way, but that is unavoidable with teenagers.   It's also easier to deal with them when you are relatively young yourself which is why I was pleased when my granddaughter had her daughter at the age of 22.

Unfortunately, though, I was still hard at work when my grandchildren were growing up which meant I wasn't able to give them as much time as I would have liked.  

One threat in the modern world that I haven't really been able to deal with (I am not a criminologist) is the rise of global criminal organizations.   Of course, they have been around for a long time but one increasingly sees them challenging the power of the state in Mexico and increasingly in France, for example.

I am not convinced that drugs policies that focus on the supply side rather than demand really work, but lifting prohibition has its many risks.  However, is cannabis really more dangerous than alcohol?  Interesting that the younger generation consumes much less alcohol, but zero or law alcohol beers have improved considerably.

All these challenges demand better political leadership and the trend towards populist authoritarian regimes is worrying and will be the subject of my last letter.

Voters do believe in the big money tree

A survey published in the Financial Times ahead of the Spring Statement is rather concerning as it shows that many voters do believe in the big money tree: https://www.ft.com/content/1581a348-41b4-4a01-b900-b7310522794e (unfortunately it is behind a pay wall, although some universities have access).

As Rob Ford of Manchester University, it shows that voters have a 'cake and eat it' approach to tax and spending.  It has long been observed that British voters want Scandinavian levels of public services and American levels of taxes.   The result is public debt at 100 per cent of GDP and a £20 billion a year bill just to service that debt.

47 per cent of voters believe that it is possible for government to reduce taxes and debt while increasing spending.  This suggests an alarming level of economic illiteracy.

What is more alarming is that younger voters are more inclined to believe this is possible: 63 per cent of 18-24 year olds and 62 per cent of 25 to 24 year olds.   The figure for those over 65 is 35 per cent as against 50 per cent who this is not possible.

What this suggests is an increasingly ungovernable country whoever is in office as voter expectations clash with economic reality.   Inflation would be one partial way out but has all sorts of economic and social costs.