Ouch!

Yesterday saw the presentation of Alistair Darling’s budget, a budget that sees Britain sink into about £1 trillion in debt next year. Yes! Ouch! In his budget speech Mr Darling was forced to admit that his previously predicted ‘mild downturn’, to the tune of 1.25%, would in fact be a plunge of about 3.5%. Double ouch! The scary bit is that the IMF shortly after announced that Mr Darling had got his numbers wrong. Mr Darling’s forecast is based on an assumption of growth in Britain for next year to be between 1.0% and 1.5%. Wrong said IMF and predicted a shrinkage of the economy of 4 – 4.5%. Triple ouch! So brace yourself and hope for the best.

It is easy to start blaming the bankers and their big bonuses and those who have failed to give the full picture when advising people on their finances. But with the risk of being called a killjoy, or worse, can I ask you to look closer to home? Did you max your credit card and maybe several of them? Did you live the high living because you expected that the home that you bought at an already inflated price would continue to rise and thus pay for it? Did you take out a mortgage (maybe you were advised that it would be OK by less than frank advisers) that was five or six times your annual salary? Or more? Well then you have contributed to the situation. Collective Britain has overspent for a long time and now we pay the price.

Ouch! Ouch! Ouch! Ouch!

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Will this work?

Yesterday, Chancellor Alistair Darling unvelied his rescue plan for the British economy.  The miracle oil that is to set the wheels in motion again is a cut in VAT from 17.5% to 15%.  Will this work?  Well, it will give everybody a few more pounds but is it enough to make us trust the ‘system’ again or will we continue to sit on every penny we can lay our hands on?  I think so because we are still to see the full consequences of the credit crunch.

It is also interesting to see this in the light that business activity needs a serious boost. Especially small businesses who struggle both because large businesses seem to delay payments to small businesses that can’t do anything about it, and also because banks (finally having learnt from the past) now deny overdrafts and ‘survival type’ loans, etc.  But won’t it also mean that scarce resources need to be spent on changing business procedures?  Will the VAT reduction be spent on the implementation of this?  On adjusting and adapting financial systems.

Yes, it is easy to be critical and I couldn’t have done better but I would really have liked to see this propped up with a promise that all will be done to avoid this happening again.  And how this might be done.  Because isn’t it a lot to do with lack of regulation?

Enough of this scaremongering.  There are things that can put a smile to your face.  The Christmas lights are coming up in Edinburgh and even if the presents will be much smaller this year, isn’t it all about family anyway?

The World has changed

For many Scots the World will be a different place if Bank of Scotland, set up by an Act of Parliament in 1695, ceases to exist.  This is more than likely with Lloyds TSB’s expected take-over.  It is reported that some sort of merger has been discussed over the year but it is of course the raid on HBoS shares that has prompted this now and let’s face it: a take-over is VERY different from a merger.  Otherwise, HBoS might well have suffered the same destiny as Lehman.  The Chancellor mentions on BBC News that they “were on to their problems for several week” but what is the nature of these problems exactly?  Are we talking real poor business practice issues or are we seeing the effects of speculators seeking a quick win?  Reputation is so important in the world of finance, even more so than in the past, but if someone decides to destroy that then this can be the road to a quick exit.

Closer to home, I’m still enjoying the arrival of “my” new MBA class.  Earlier today I hosted the Partners Reception during which I gave a brief presentation to the MBA husbands and wives so that they would know what to expect in the year to come.  For me personally it is important to meet the families of the students but I think the partners also enjoy meeting other people in the “same boat” so to say.  We’ve had the first Careers input today and tomorrow we will conclude Induction Week with our Innovation Event and the ceilidh.