DIY Investor Magazine
| August 2017
53
WHAT COULD BE THE COST IN HUMAN LIVES?
Another of GO’s initiatives was the Innovative Finance
ISA to accommodate peer-to-peer loans – dreaming of
replacing traditional lenders.
The P2P market has grown exponentially with a
surprising diversity as each lender tends to favour
certain asset classes, a specialisation of knowledge of
sectors that arguably banks did not.
P2Ps match investors with borrowers, so don’t take a
direct hit for any losses which banks have to capitalise
themselves for;the Bank of England now requires banks
to capitalise for a 1 in 200 year event - an awful lot
of tied up capital which comes at a cost in terms of
margins.
For the P2P players the numbers are quite simple – a
fee is deducted against the lending margin for the
platform (which performs due diligence on borrowers
and provides administration) and a contribution is made
into a contingency fund which provides cover for loan
losses. It seems an efficient way of matching borrowers
and investors.
What else is Spreadsheet Phil going to do? He
could shave pensions more on the pensions life time
allowance; some predict a further raid on tax free lump
sums, but GO left him few places to go.
And what of GO’s legacy? Certainly flamboyant,
certainly innovative. But is his greatest legacy the
destruction and erosion of confidence in the pensions
industry?
I hate the word ‘austerity’ but there is no doubt cuts
in future expenditure and even real ones have been
ongoing; this could yet stimulate the economy via
savings but where police forces, fire services et al are
pared back what could the cost be in human lives.
For years farming has been pooling expensive
equipment, and there may be opportunities for pooling
capital resources across a range of industries and
sectors of the economy.
It is reported that local councils are now combining their
pension funds into risk rated solutions rather than trying
to individually set up investment mandates.
So GO’s legacy will be mixed; Spreadsheet Phil is
now in charge, safe after the election as Mrs May is so
weakened, and combining with Brexiteers to ensure a
safe exit from the EU even if there is a transition period.
I find the language of the European negotiators quite
extraordinary – all punishment and not concord. But that
is my personal view.
Sterling for now has been trashed but should recover;
if it does not then we have an export margin to absorb
WTO Tariffs which is essentially the fall back position.
So, yes in the short term there are inflationary pressures.
So I admit, I got the call wrong; we should have had a
strong TM leading a strong Brexit but she continues to
wobble. GO and David Cameron long gone, it is now
about Labour and Corbyn.
They upset the election with a siren call to students;
the same students that never forgave Nick Clegg and
the Liberal Party. Will they be as forgiving of JC and his
Marxist party? I doubt it.
I am going to fully investigate on behalf of DIY Investor
the full story of student loans; the principle might be
right but the execution may have flaws and some people
are making big bucks at the expense of much worry for
students. There were many flaws in the previous system
of students getting grants and not performing.
So this is not a question of one version is better than the
other. It needs proper evaluation including the effect on
university funding.
