Better Life In Fife - Glenrothes - Kirkcaldy - Dunfermline - Leven - Cupar - St Andrews

The British Banking Enigma

The Brown Stuff

There was a time when ordinary working people went to work on a daily basis and received their wages at the end of that week in a brown paper envelope. Written on the outside, were details concerning deductions like National Insurance and Income Tax were calculated and how the content, paid in pounds, shillings and pence, was issued. Armed with this knowledge and cash, people could budget and put aside savings. Once a week, a visit to the local Post Office with savings book in hand was all that was needed to change your financial status. Credit was an award for accomplishment at work rather than association with a plastic card. Banking holidays actually meant something and most businesses ceased trading on these days. High Street Banks commanded respect and reverance. The advice of bank managers, and the business advisors appointed by them, was regarded as sound and worthy of consideration. A lot of people lost a lot of money as a consequence. In short, they didn't have a clue and any invitation to invest in the stock market via the bank often meant loss rather than gain.

The ultimate test of confidence was shattered in the wake of the subprime housing market fiasco and where loans, granted to poorly paid working class families in America, backfired in fine style. It was a risky strategy from the outset and when these families found it impossible to make adequate repayments, some simply gathered their belongings and left the house they had aspired to own and disappeared. In Ohio, some city authorities were compelled to hire agents to check and seal premises to stop derelict properties from becoming drugs dens and to reduce the risk of fire raising. The effect of the housing market collapse left social problems in the region while banks pulled in their horns and stopped lending to each other. The 'credit crunch' had arrived and the first banking victim was Northern Rock, who found themselves stretched far beyond their means. When news of this became public, the first run on a British bank for 150 years took place with people desperate to salvage what savings they could. In the end, it was left to the British government, using taxpayer's money, to step in and save this institution; a situation orginally designed to be temporary and yet remains in place as prospective buyers backed off. In recent weeks, Northern Rock announced intention to maintain support of the local football team claiming 'commercial interest' to justify it. Other British banking participants of this financial adventure sought additional funds from shareholders in order to survive. One hundred percent loans were consigned to history books. Property values faltered in many parts of the United Kingdom yet remained solid and actually grew in Fife. Issues of affordable accomodation in Scotland were thus exacerbated at a time when local branches of the Shelter charity estimates there is a shortfall of thirty-two thousand homes in the region. Perhaps banks might have been better investing more locally rather than seeking 'fast bucks' abroad!

Whatever your political viewpoint, and it might well be unfit for publication, you can't deny Gordon Brown's first year as Prime Minister has been a rough ride with many social ills attributed to his former position within the government. Many current problems were becoming evident long before he assumed his current political status and long before Tony Blair wisely stepped aside. Issues concerning fuel prices, the drop in house values and the 'credit crunch' in banking were being discussed well before transfer of power and responsibility. Some have suggested how Gordon Brown inherited a 'whirlwind' of his own making.

Listening to radio, watching television and reading newspapers, it seems Gordon Brown is the man we love to hate with the New Labour Rose becoming closer to that of a Thistle! Recent elections results illustrate the switch of public opinion and the perception of a weak government. Once again, the threat of strikes has returned while the opposition parties remain strangely silent and offer no real answers to the looming crises. Naturally, they poured scorn on the removal of the 10p income tax level yet while planning cancellation of working tax credit upon return to power. In Fife, there are many citizens living on basic wage levels and whose life would be shattered if some opposition policies were implemented; and yet, many might feel obliged to vote for them in current circumstances in the fervent hope of financial salvation.

Sadly, it's convenient to forget how minimum wages became a necessary and essential part of employment leglislation, and while the level set was never likely to induce a feeling of wealth, it provided a far better alternative than if left to a free market economy. At the present time, prices across the board are soaring while wages in many areas are stagnant. The recent strikes by petrol delivery drivers was a revelation when people discovered how their average salary was over £30,000 with a few reaching a fairly prestigeous £45,000 per annum.

This comes at a time, when legal challenge about bank charges has been made and where banks have been found wanting and allegedly making illegal charges on their customers. This claim, backed by the Office of Fair Trading, was presented before a Court of Law and several major banks, representing the opposition, lost heavily in favour of judgement that such charges were illegal. Currently, it seems the banks are planning an appeal but in the meantime, the experiences of those who claimed and sunsequently received reinbursement are indicative of the 'sour grapes' mentaility of closed minds caught out by the law. In some cases, customers have been asked to withdraw their accounts and seek usage of other banking institututions. We're guessing opening new accounts may carry questions about past experience in the future and careful answering will be needed.

On interesting comment arose from this judgement with at least one banking individual openly proclaiming that if such a judgement were implemented then it might mean an end to 'free banking' in the United Kingdom. If true then what were they really saying? Were they implying that 'free banking' relied on allegedly illegal charges and banks needed to 'screw' some customers so the bulk could benefit? Obviously, that wasn't the intent or meaning but it sure sounded like that!

On May 26th 2008, a newer and faster way of clearing cheques was implemented within the British Banking System, not that many Scots immediately could note the change. On that day, roads were being swept, the bins were being emptied, local factories operated normal shifts and most shops were open for business. Beneath a cloudless sky, hospitals tended to the sick and elderly, while relatively few people were actually affected by the Bank Holiday. It prompts one to wonder why banking institutions have failed to move with the times when many of their business clients cannot afford such luxury? On Tuesday May 27th, we deposited a cheque and was able to see it cleared by Thursday so it seems this is an improvement but still far slower than Swedish and other banking systems.

Sad to say, cheques deposited late in the week are still taking far too long to clear and it might be Tuesday before a cheque deposited on Friday is finally cleared. It seems British banks still have some way to go before realising that weekends are often just another working day for a growing number of people.

It''s not long ago when some bankers promoted the notion of a card that might be used to make small purchases under the value of £10 and it was another of these crazy ideas in their drive to create a 'cashless society' and I, for one, am glad it never happened. Given the scale of fraud already in existence, the last thing needed was another tier available to the criminal elements within the community. If anything, we need less rather than more plastic; less credit and more savings.

At the centre of this argument is whether having a bank account actually contrbutes or leeches wealth from individuals and whether many of us actually need a bank account at all? Fifty years ago, it was so much simpler. You got paid in cash and bought goods in cash. You deposited savings in the Post Office and were armed with a neat book with handwritten entries and signatures. People budgeted and lived within their means. Thrift was admired while waste was frowned upon. Debt was relatively rare compared with current times.

In a sense, we've come full circle and reminiscent of the 1970s and 1980s. Banks are once again proclaiming better interest rates for savers and hinting at bad news for those in debt. Overall, it seems like the 'free ride' is over and there are tough times ahead.

Reading this prompted us to look into the whole issue of wages in more depth! The principal reason for strike action cited by union leaders borders on the ludicrous belief that if your employer is making good profits then workers, most of them sub-contracted, should share in the bounty! One wonders how others in different industries might fare if similar arguments were presented to their employers! In many cases, being escorted to the front door and kindly told you were no longer required is likely to bring sobering reality into the proceedings. Average truck driver earnings are about £22,000 in the 2007/2008 period.

Looking at wages overall, it's clear how doctors, dentists, plumbers, company directors, politcians and cabbies have done well in recent years while many wage levels have stagnated or declined in real terms. One third of households in Britain have no money left before the pay cheque arrives and more than a quarter have unsecured debt exceeding £9,000. The list of external services needed to run house and home these days is long and expensive with many people working about ten days a month just to meet these costs.

According to popular statistics, only a mere 2% of the populace actually realise their dreams during life and it's an interesting question to ask what they know and that most of us fail to understand. A survey of rich people conducted in the US several years ago provides a number of clues. They don't drink champagne, eat caviar, wear Rolex watches or even drive new or exciting cars - quite the opposite in many cases. They typically wore jeans and tee shirts, drove older cars and were hell bent on thrift rather than extravagance. Relatively few had university degrees but owned several properties they rented out and were often self employed in the trades! Children of immigrants from Hungary and Scotland were top in this league with both groups citing thrift as part of their profile! Overall, they saved more and spent less.

These results run contrary to what we currently regard as successful people. All Flash and No Dash might easily be the case. Flashy cars and penthouse addresses may conceal a deeper truth with loans and debt servicing current appearances. 'Keeping Up With The Jones' is a far more complex equation fraught with financial peril than ever before and accepting the challenge could seriously affect the course of your life.

Some economists are concerned about the possibility of British people cutting back on spending yet, in many cases, the people may not have a choice and it's easy to see how younger people are staying with parents longer and insulated from many costs are buying new cars on easy credit without really thinking about the longer term. In a similar vein, the emergence of cohabitation where two or more people flock together to rent accomodation is on the increase because it may take several incomes to afford a roof over their head.

Back in the early nineties, the fledging George stores opened in Birmingham and a few other locations with the intent of selling furniture by means of affordable weekly payments. It was not a new idea and an offshoot of the flailing television rental industry but it never really suceeded. The populace was not ready to accept paying 30% more for a sofa or dining table. Today's successor is Brighthouse and business seems to be brisk with an expanding number of stores throughout the nation.

Love him or loath him, Gordon Brown has a monumental task ahead of him and a limited time in which to deliver crucial changes in the local economy. Ultimately, the population at large will determine not only his fate but that of others in his political party at the ballot box. Scary thing is, what will we get as an alternative?

Did You Know?

Did you know America is currently spending $12 billion a month maintaining the Iraq occupation forces and this is mostly funded by money borrowed on the international market, mainly from China. Nobel Prize winning economist, Joseph Stiglitz, a former adviser to the US Clinton administration, fears future generations of US taxpayers will be paying this debt for many years.