EU: Out - Was Mr Cameron's Premiership a Disaster?

David Cameron lost his job almost a year after winning a general election with an outright majority.  He resigned because in his words "The British people have made a very clear decision to take a different path and leave Europe".  More than 17 million people rejected not only his, but almost every other senior politician, economist and expert's advice to vote to stay in Europe.

In the eyes of many, David Cameron and the previous Labour government made many questionable decisions.  These decisions lacked common sense and understanding of the needs and expectations of many of the electorate.   As a result of these bad decisions, many electors lost their confidence in the judgement of these political leaders and decided to disregard their advice and vote to leave the EU.

Underestimating the level of anger that resulted from UK tax payers having to share the already limited resources of public services is a good example.  There are not that many places in the world where immigrants, having paid no tax, can end up receiving free health, education, housing and a passport not long after they arrive.  It is of course a wonderful human quality to be kind  to others.  Unfortunately, however, it's not the job of a responsible Government  to be over-generous at the expense of the people who elected them.

Mr Cameron stated that he had fought "the only way I know how... head, heart and soul to stay in the EU".  The decision to leave or stay in Europe was a complex matter that needed detailed and expert knowledge.  The question therefore again and again would be, if the option of leaving was so frightening why did he gamble and allow the referendum to happen?

His  explanation is simple: " I don't regret holding the referendum - I think it was the right thing to do," .

In the opinion of many, his ill-thought plan for an EU referendum caused one of the biggest political instabilities ever seen.  It's therefore bizarre and shocking for many to hear that the referendum was the right thing to do.  Gambling with the reputation and future  of Britain could never be the right thing to do.  Growing numbers of overseas investors considered Britain to be one if not the most politically stable country in the world.  This was one of the major reasons for attracting an ever increasing amount of foreign investment.

The Prime Minister and his team managed  many complex political issues well and most of their economic policies have been beneficial to us all. It's therefore unfortunate that his achievements could now be overshadowed by his monumental mistake of allowing the EU referendum to take place.  His premiership could be remembered as a disaster for the UK, and nothing else.  It is a shame that common sense is not that common even amongst Old Etonians.

MKA

EU: In or Out? Is referendum a good Idea?

We have been given a chance to decide whether the UK should stay in the European Union or not.  At first glance, this sounds wonderful.  After all, it's important to have a say in a major decision that could affect the future of Britain. 
However, after analysis, it becomes difficult to understand the rationale for allowing us to decide.  It's quite difficult to vote to leave when the elected government is so desperately against it.  In their campaign, David Cameron and George Osborne have taken every opportunity to scare people into believing that leaving the EU would result in chaos and economic disaster.

Electorates elect their representatives and trust them to make good decisions.  It is therefore reasonable to ask the Prime Minister if leaving the EU is such a disaster;  why allow people to have a choice in the matter?  It's ironic that the UK Government makes important decisions that affect the future of its people on a regular basis, so why should the decision to stay in the European Union be any different?

The explanation could be simple.  The Prime Minister is a shrewd politician.  He knows how to play the game and take advantage of every situation.  He cleverly included the promise of the EU referendum in his manifesto, enabling him to make peace with members of his party who never accepted being part of the EU.  The appearance of a united party helped him - against all odds - to win the general election with an absolute majority.

It was also a clever way for David Cameron to increase his popularity. Threatening his counterparts in Europe with the possibility of leaving has forced small concessions out of them. This has shown him as a competent international negotiator. 

Whatever the reason for the referendum, it's clear that neither the government nor any one else has any idea of what to expect if people decide that Britain should leave the EU.  It is therefore utterly irresponsible to give people an option to gamble with the future prosperity of their country. 

Whatever the result, the important question is whether people should ever trust a Prime Minster who is asking them to decide their future by throwing the dice.  Perhaps he has never heard the expression "there is but one good throw upon the dice, which is, to throw them away". 

Mamad Kashani Akhavan

Have the UK politicians become too sophisticated for their own good?

In the eyes of many, few politicians would ever come close to being as successful as Tony Blair. He was a skilled communicator, charismatic and eloquent. He knew what to say and more importantly how and when to say it. Undoubtedly, these are really important credentials for politician to have. After all, politicians are required to sell themselves and ideas to the electorates.

Tony Blair became leader of the Labour Party in 1994 when his party was in turmoil. Labour was considered anti-business and too left with no real chance to get into power. In 1997, Tony Blair - with the help of massive American style marketing campaign - ended 18 wilderness years and formed a New Labour government. He achieved this by distancing his party from socialism and its left wing ideology and convincing voters that the old Labour was dead and the New Labour was friend to business.

To achieve power, there was a hefty price of losing the party's identity. In the name of unity, Mr Blair silenced all his critics and their left wing Socialist ideas. The New Labour Party in fact became the new Conservatives in everything but the name.

Tony Blair was the pioneer of the new style of politics in the UK where politicians only ever say what they believe the public want to hear. It's therefore quite understandable to witness his anger and frustration with Mr Corbyn, the frontrunner in the Labour leadership race.  Corbyn's style and opinion is exactly what in Blair's opinion kept Labour from power before his creation of the New Labour Party. Andy Burnham, who is challenging Mr Corbyn for the Labour leadership, agrees that the Labour party should  listen to Mr Blair, a hero who won three general elections for them. Andy Burnham wants to follow Blair's legacy for success and win the next general election.

The irony is that Mr Blair's way is no longer a guarantee for success. The fact is that even if one did not agree with their views, it was always interesting to listen to pre New Labour era politicians such as Tony Benn. He was a former Labour politician and cabinet minister. His speeches were always passionate and from the heart. In contract, listening to Tony Blair and Andy Burnham's carefully prepared speeches is like listening to a well rehearsed professionally delivered feel good advert and nothing else.

In my opinion, the popularity of Mr Corbyn and Donald Trump (a candidate for US presidential election) is not because all of sudden electorates have decided to love extreme views. It is in fact, a strong NO vote to sophisticated modern day politicians' insincerity, lack of conviction and their empty promises. Unfortunately, for Mr Blair and his supporters and in the words  of Abraham Lincoln "you cannot fool all the people all of the time". 

DO BANKERS REALLY DESERVE THEIR HIGH REWARDS?

Right wing politicians and the press are quick to  accuse anyone criticising the high earner with the label of jealousy, ignorance and envy. They are adamant that in 21st century Britain, only  those who are prepared to work harder or are more talented could receive higher rewards. 

However, if this was true then the question would be how could an average salary of a senior banker be as much as ten times more than a nurse? Do they really work ten times harder or are they ten times more talented?

 It’s difficult to justify their high salary with the number of hours they work. Many nurses do more hours and are arguably doing a more difficult and worthwile  job. So it must be because of their talent that these bankers earn such high rewards.

Given the fact however that bankers’ many mistakes resulted in one of the biggest financial crises  known to man kind, it's difficult to argue that bankers are more talented or deserve their higher rewards. Below is a good example of bankers’ inability to control costs and squandering of other people's money.

One of the UK’s leading banks lent £2.5 million to the owner of two small hotels in the south of England. They then decided to call in their loan and put these two hotels into administration. Our "talented bankers" - without any negotiation or bargaining - decided to appoint a large expensive team to sell these two hotels.

 Recently, the hotels were sold for  £1,015,000. After the deduction of absorbent administrator's fees, the agent's commission and other expenses, the bank received £36,000. This equates to less than 2% of the original loan amount. 

In most other industries the people responsible for this fiasco would lose their jobs. In banking, they probably get promoted. After all, these bankers have shown results by successfully removing two non-performing hotels from their books. 

The fact that the bank lost so much money and paid fees that in any stretch of the imagination was not appropriate, does not seem that important. It's not worth getting upset over.   

The reality is that there are many in the banking and other industries that do not deserve their high rewards but continue to make easy and excessive money. Whilst in the same country  an increasing number of hard working, talented people such as nurses, police officers and teachers struggle to have a decent standard of living.To many the idea of fairness and the notion that in 21st century Britain only those who are prepared to work harder or are more talented could receive higher rewards is nothing but a fairytale.

Mamad Kashani Akhavan

Is a 3-fold increase in stamp duty an act of absurdity?

Overseas buyers spend billions of pounds every year purchasing UK properties. This has immensely benefited the UK economy and created jobs and prosperity for so many. Some of these buyers legitimately use offshore companies to protect their privacy about their worldwide assets.

It was therefore surprising, when the Chancellor increased stamp duty from 5% to 15% for properties over 2 million pounds bought in the name of offshore companies. No local tax payer would ever find it acceptable to pay 3 times more tax, so why did the Chancellor risk undermining the attractiveness of UK properties by scaring foreign investors away?

It is of course absurd to argue that offshore companies are only used by morally repugnant people trying to avoid paying stamp duty. Even if a small minority abuse the system, surely there are better ways of stopping them rather than risk damaging one of Britain’s best sources of foreign investment.

It is equally absurd to believe that the increase in stamp duty and threats of other punitive measures is a small change for wealthy foreign investors and one that would not deter them from purchasing properties in the UK. On the contrary, these hostile measures could easily convince some purchasers that UK bricks and mortar are no longer the world’s best and safest investment in the hands of this government.

We all heard the Chancellor saying that he is a good friend to business. We also heard him saying that he understands the difficulties facing the business community better than most, having witnessed first hand, his father’s hard work in building one of the world’s leading names in wallpaper design. I am sure the Chancellor would forgive people in the property industry if they were to say that with friends like him who needs enemies.

Mamad Kashani Akhavan

Is racial tension escalating out of control in the UK?

Successive British governments have been generous to an ever increasing number of immigrants choosing to make Britain their home. There are not that many places in the world where immigrants can end up receiving free health, education, housing and a passport not long after they arrive.

The influx of immigrants has resulted in UK tax-payers having to share the already limited resources of public services. In the fear of being called racist, they say nothing but grin and bear the increasing waiting time for hospital beds, social housing and a place in a local school for their children.

A gentleman I met recently said “Mr. Cameron’s government is lecturing its people to be hospitable and generous”. He continued by saying “Mr. Cameron would never share his house with strangers so what right does he have to force others to share their public services. It is not racist but just bloody unfair for the government to allow immigrants to receive benefits that they have not paid taxes for!”

The response of previous governments has been simple; they increase the expenditure on public services making the situation bearable. However, now that there is less money available – due to the economic crisis – it would not be difficult to for see that there could be increasing resentment and anger towards foreigners in the UK.

The majority of people enjoy and understand the benefits of living in a multicultural UK. However, the continuation of the current economic crisis could escalate racial tension to a level never seen before in the UK. In my opinion, it is now more important than ever for the British Government to allow people to freely discuss their resentment towards the government’s over – generosity to immigrants. As Shakespeare taught us in King Lear, punishing people for expressing their true opinion could end in disaster.

Is this a good time for investors to sell their prime London properties?

The world is going through a turbulent and difficult time.This has resulted in the collapse of property prices in many countries. In a recent auction in Dublin, a well-known seaside hotel in Ireland that was previously on the market for 4.5m euros, was sold for only 650.000 euros.

In contrast, London’s prime property market has remained defiant and strong. In fact, prices have increased substantially since the start of the Credit Crunch. This has in large part been due to foreign investors’ continued aspiration to own prestigious London properties.

There are those however, who are convinced that prices have become so inflated that they can no longer be sustained. They believe a downward correction in property prices is inevitable. This argument is tempting savvy investors to sell now and wait for the prices to go down so that they can buy similar properties for less at a later date. I agree that prices have increased too quickly and a cooling off period in demand is likely.

However, given that there are a small number of prime properties in London most of which are owned by wealthy owners who have the ability to wait for demand to recover without reducing their asking prices, it is unlikely in my opinion, that this reduction in demand shall result in reduced prices. It could lead to a period of stagnation or slow growth but not reduction. During my recent visit to the Middle East, it was easy to see the continued unshakeable confidence that large propertyinvestors - including sovereign funds - have in the London prime property market.

 Before selling I believe it is also important for investors to consider lessons from the past. I have sold many London properties for myself and others during the last 30 plus years. All of these properties were bought well and sold with a good profit. Nevertheless with hindsight, I would have done much better by holding and not selling any of these properties. The fact remains that investors who tried to time the market by selling high in the hope of buying low later have done very badly in comparison to investors that never sold.

To illustrate: in 1981 I sold a prime mansion flat over looking Hyde Park for £300,000. This worked out at almost £85 per sqft, which represented a great selling price for its time. However, at no time since selling this flat did I manage to purchase a similar flat for £85 per sqft or less. The present value of a similar flat is now approximately £10m.

In my opinion if long-term investors do not need to sell for financial reasons, there is a never a good time to sell London prime properties. As the old saying goes, "learn from other people's mistakes”………. mine included. I wish you all every success.

Mamad Kashani-Akhavan info@glfinance.co.uk