Tuesday, February 26, 2013

UK AAA Downgrade - Falling Sterling pounds - Role of immigration policies

The loss of triple A credit rating has started showing some really adverse things for Britain as early as in past 2 days.

UK pound touched a 2 and a half year low of 1.5073 (1.50772) against US dollar on Sunday, 24 Feb 2013, 22:00 UTC. Undoubtedly the downgrade of credit rating is showing its effects big time, however the even worse may be yet to appear, as other credit rating agencies have formed a negative sight on UK at this moment.

Source: XE.com
Britain's "highly-abled" ministers are pushing harder and harder on austerity measures, and Mr. Osborne keeps saying that "The credit rating is an important benchmark but it is just one benchmark."

There are also blames on banks across the United Kingdom for not facilitating proper growth due to improper or reduced lending that is not allowing companies to grow and ignite growth in the economy through more jobs.

While this all might seem true, but on a personal opinion, it still stands non understandable as though why exactly is Britain seeing what it is facing today, the bankers are still earning tremendously huge bonuses, for sure much much larger than annual household incomes of a middle class family in the UK at this moment,.

Lets discuss the impact on overall UK's economy due to the immigration policies and ever face turning companies that are going on closing their offices in the Britain in search for a better and politically as well as economically stable country to set up their offices and their workforce.

While Britain has been turning off immigration routes for students, highly skilled migrants and professionals by announcing more stricter immigration rules and policies, it seems to have been failing to understand the impact on the overall finances of the country as a result of this introduction of newer stricter measures that seem to be rather backfiring on the UK and its ministers.

THE VICIOUS CIRCLE - BRITAIN IS FALLING INTO

Britain has a system that pays those who are needy, something called Benefits, these are tax benefits, job seeker allowances, child benefits, disability benefits and so on... in recent times as unemployment is growing, there have been probably more job seeker allowances claims, and claims for all other kind of benefits, while government can try and reduce these benefits in various categories but overall the number of claims are rising at an alarming speed.

The money that is paid for these claims, on a very broad-level comes from the tax-payer's pockets, these people are mostly the middle class people who earn and pay taxes every year on whatever their earn, mostly through PAYE system and hundreds of thousands through direct tax payments to HMRC.

If companies are closing their offices, shutting down their branches that are based in the UK, there is likely to be less number of jobs available out in the market, the more lesser these jobs become, the less is the income generated by those who used to pay tax, and so the less they pay tax now.

Not only do they pay less tax, but because they are losing jobs or are earning less than what they used to earn, they find ways to claim more benefits from their local councils to be able to maintain their living standard or at least be able to survive with their needs.

HERE BEGINS THE VICIOUS CIRCLE;

What more, as these international students who used to turn up to the UK for education start ditching UK in favour of other nations (obviously due to worse and worsening immigration policies), universities start losing millions of pounds in income, which means hundreds of thousands of tax collected by HMRC is vanishing away over night, not only is the tax vanishing away, but also the jobs, the professors / lecturers / admin staff / IT Staff / security staff / office peons and office boys and so on who were previously employed by these institutes / colleges and universities are now losing their jobs as these education bodies don't have enough students to be able to pay salaries to their existing number of staff, and so even these private institutes and education bodies are doing spending cuts internally.

This again means more claims for benefits and less taxes earned by the government.

Now this was just the part of students, lets think of professionals, more professionals are leaving the UK due to various reasons, some are unable to renew their visa, many are leaving as their companies are closing UK operations and many are leaving as their loved ones can't stay in the UK anymore due to increased immigration restrictions, UNOFFICIALLY, on a ratio (relative) basis the number of illegal immigrants to legal immigrants is at all times high, thanks to the wonderful immigration policy.

This means, illegal immigrants who live by CASH, earn and spend in cash are increasing, such activities is taking off money from the books of the UK banks as they normally send money to overseas (to their families and loved ones) through HAWALA (Black money transfers), I am sure we all are aware of street side money transfer service, that take cash and for a very little fees transfer that cash to any part of the world in as less as few hours time.

On the other hand, the legal immigrants who were earning legally, were getting paid on a legal basis and were hence paying full taxes every near are now going off the UK - this is another loss of tax income for the UK.

ENTREPRENEURS VISA:

These all are the losses that we "MAY" be able to quantify, but what about the losses of brains and creative minds, those recent qualified ones and the fresh graduates that have great business minds but are unable to secure any visas to stay in the UK as they either don't have enough money to invest, can't convince some investor to invest for them or for Entrepreneurial visa route or other various reasons that you and I could probably not even imagine...

Entrepreneurs section on the internet in various social media platforms and websites clearly suggests that the businesses that are starting up these days, specially those that are technology oriented businesses are hardly in need of any seed investment in the initial phase.

These businesses are thriving with amazingly low up front investments, thanks to availability of huge high scale technology made available to each of us these days through the internet.

Lets take example of a developer, a developer often builds something on his / her laptop, tries to sell it online and offline to people and if its a hit that one software / app makes a big time success for that developer, these apps could be anything and everything.

Hundreds and thousands of such apps that have made developers millionaires out of nothing are on sale in various apps stores like Windows / Mac / iOS / Android / Blackberry and so on..

Such successes are laundering around on the internet these days, mostly due to freely available education and access to internet to young teenagers these days.

These kids are using their creativity at their best to come up with something that is amazingly low investment or sometimes no other investment except a laptop and an internet connection and they create a giant success out of thin air just by their creativity.

Now may be UK's government officials are not competent enough to understand the process that goes in developing such softwares or mobile applications or web applications but they must at least be aware that requiring at least £50K as an initial available funds for getting an entrepreneur visa is just ridiculously awful as that much investment is often not even given up by venture capitalists very easily, they scrutinise a hell lot before agreeing to such investments.

These all and other similar stuff that often creates headache in any sane person's mind is hard to digest that the UK government and those who decide policies are not able to understand.

All that I have mentioned in this article is purely a piece of my own opinion.
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