Ban cold calling and base fines on income: clever financial laws from around the world
Britain has its problems when it comes to financial law. Do other nations like Sweden and Denmark have anything to teach us?
Wherever you go, you'll find unusual laws - some more useful than others.
There are all sorts of objectives that governments around the world would like to achieve, but they fall into the ‘too difficult’ category. It would be good if everyone paid the child support they had agreed to, if international billionaires could be stopped from pushing property prices up, and if we could all retire comfortably.
When faced with these challenges, the vast majority of ruling parties simply shrug their shoulders and remind people that we don’t live in a perfect world. Others, meanwhile, have decided there is something to be done, through the crafting of the right financial laws. And some of the solutions they have devised are bordering on brilliant.
Fines that everyone fears
In Sweden, the Government has come up with a way of ensuring that everyone feels the pain of a criminal fine to the same extent – regardless of their income. When someone is facing a fine for anything from speeding to minor burglary or less serious assault, the amount they pay is determined by the severity of the crime – which is rated on a scale of 1-120 – which is then multiplied by their daily income (minus some costs).
The process, which is also in place in Finland, means there have been instances when the mega-wealthy have had to pay tens of thousands of pounds for a speeding fine. It’s more likely to put them off than a standard fine – which they might consider a small inconvenience for the opportunity to drive as fast as they like.
It also has the effect of reducing the number of people in prison on short sentences. The Swedish courts deal with 60% of crime through the imposition of fines, and a study at the University of Helsinki by Dr Tapio Lappi-Seppala found that this was more likely to stop someone reoffending than either a straightforward fine or a jail sentence.
Rules that stop international billionaires pushing up house prices
London is awash with money from overseas property buyers. This year Knight Frank revealed that 49% of all London properties worth over £1 million had been bought by foreign buyers - and 28% of buyers weren’t even based in the UK. It makes sense for the buyers, many of whom hang onto the properties largely to profit from price rises. However, for Londoners, it simultaneously pushes prices up, and creates ghost towns.
In Denmark, the Government doesn’t like this idea, so it keeps a much closer eye on who is buying property than the Government in the UK. EU nationals can buy a home in Denmark without asking for permission from the Government, provided that it is lived in all year round. Non-EU citizens must get express permission from the Ministry of Justice - and again must confirm they will live there all year.
Around coastal areas, where traditionally German nationals have bought a lot of summer holiday homes, there are additional restrictions. Unless someone has lived (and paid tax) in Denmark for five years, summer holiday homes are only for rent.
Rules that ban cold calling
In the UK at the moment, financial advisers – backed by former Pensions Minister Ros Altmann – are circulating a petition calling on the Government to ban cold calling about pension investments, in a bid to protect people from pension scams.
In Germany, this system has been in place since 2009. There, cold calling is illegal, unless someone has specifically opted into being contacted by the company. The rules also state that during any call, the caller ID must be truthfully displayed, so that people can screen calls. If they don’t comply, the telemarketing company faces a fine of up to €300,000.
Check your credit report with loveMONEY
Laws that mean child maintenance always gets paid
In the UK, it is entirely up to the absent parent to pay child support in full and on time. At the end of last year there was £3.9 billion outstanding, and the Child Support Agency calculated that £2.9 billion of that would never be paid. According to Gingerbread, the majority of single parents don’t receive child maintenance payments. It means that 44% of children in single parent families live in relative poverty – around twice the level of those in two-parent households.
In Sweden, the Government wanted to avoid this situation, so if parents cannot come to a working arrangement themselves over child maintenance payments, it pays the child support itself. It’s then up to the Government to collect the cash from the noncustodial parent. As a result, in Sweden, 95% of single parents get child support payments.
Rules that mean everyone retires on a good pension
Every year, Mercer publishes a Global Pensions Index, comparing the pension systems in various countries. In the most recent survey, The Netherlands took the joint top spot with Sweden - while the UK was ninth. This shouldn’t come as a huge surprise, because in The Netherlands, people retire on more than 70% of average earnings.
The major difference between the two systems is that in The Netherlands, it’s effectively compulsory to join a defined benefit workplace pension, and contribute a meaningful amount of money to it. Some 90% of all employees are covered by one, which means by far the majority of people in The Netherlands retire on robust pension incomes.
Read: How to get a State Pension forecast
Rules that mean dads share baby care
In the UK, fewer than 10% of men take more than the two-weeks of statutory paternity leave, despite the fact that the law allows men to take up to 26 weeks off if they share parental leave equally with their other half.
In Sweden, the Government is encouraging men to take more parental leave. In total, parents can take 480 days off after the birth of a child, while being paid 80% of their salary. Either parent can take this leave, but 90 days of it are specifically allocated as paternity leave. If the dad chooses not to take leave, then this portion is simply lost. In addition, if the parents decide to share leave equally, they get an equality bonus.
Although currently only 14% of men share the leave equally, and in 2014 they took 25% of the total parental leave, this is still streets ahead of their international counterparts. This isn’t just having a positive impact on men, it is encouraging more gender equality in the workplace too. After men started taking more parental leave, women started seeing their incomes rise.
Laws that reduce our sugar intake
It is notable that in many instances, these rules are Scandinavian, where it is generally accepted that the Government will take a much more hands-on role in people’s lives. Taxes are much higher and benefits more generous and wide-ranging than in the UK. Arguably, we are not as happy in UK for the ‘nanny state’ or ‘big brother’ to be telling us how we ought to live our lives.
Nevertheless, the Government is giving it a go, with a new sugar tax - due to come into force in 2018. This was announced in the Budget in March, and set two levels of sugar tax. Drinks with more than 5g of sugar per 100ml will face one levy, and those over 8g will face a higher one. These will be imposed on manufacturers - but are expected to be passed on to shoppers.
The Government hopes that this will encourage people to shift to options that are lower in sugar. In addition, the Government has left a long lead-in, in the hope that manufacturers will make gradual changes to reduce the levels of sugar in their products. The likes of Red Bull, Pepsi, 7-Up and Coca-Cola are currently over the 8g limit, but a reduction of 20% would be enough to bring them in under the threshold.
There continues to be much debate around the subject - with some highlighting reduced consumption in Mexico after a sugar tax was introduced, while others claim fizzy drink consumption was falling anyway before Mexico introduced the tax. They add that manufacturers may choose not to pass the cost onto shoppers, which would mean it had little effect. Alternatively, they may pass it all on, which will lead to inflation, and a tax that hits the poorest the hardest.
This is the age-old problem of introducing financial laws designed to change behaviour for the better: you cannot know whether you will succeed or whether you’ll spark entirely different and unexpected reactions. We will have to wait and see whether the British are as compliant as the Scandinavians in this respect, or whether we simply devote our attention to getting around the rules and finding a way of doing whatever we were going to do in the first place without paying the price.
Go Swedish with Ikano Bank - get a personal loan at a market-leading 3.1% APR
Don't miss:
UK Autumn Statement 2016: date, predictions and rumours
Why the UK tax system needs to change now
Comments
Be the first to comment
Do you want to comment on this article? You need to be signed in for this feature