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Saturday, 22 November 2014

Graphs at a glance: Will fracking bring cheap energy to Britain? The evidence suggest not.

There has been a lot of talk about fracking the UK. Our government is so keen it has considered changing the law on trespass to make it easier for companies to frack under our properties. 

Would it be a good thing? Even if there is absolutely no risk bits of our green and pleasant land  may disappear down multiple sinkholes?

The graph below from a parliamentary report, "The Impact of Shale Gas on Energy Markets", shows how fracking caused the price of gas to plummet in the USA. Benchmark natural gas prices in the USA (Henry Hub) and the UK (National Base Point (NBP)) were about the same until the Americans got down to some serious fracking.

Thursday, 20 November 2014

Rip-off News round-up. Our pick of the last week's media (Thu 20th November)

Tuition fees: Three quarters of students won’t be able to pay off their debt
Student debt is now so high compared to average salaries that many graduates in respectable public sector professions will be unable to repay their fees even by the end of the 30-year repayment period, the Higher Education Commission warns. This funding "black hole" is forcing the Government to indirectly subsidise higher education writing off billions of pounds in student debt - even though the point of £9,000 a year fees was to make universities less reliant on the taxpayer. The commission, an independent body set up to monitor higher education, concludes that the current university fees system offers the “"worst of both worlds" to students, universities and the Government - and warns that some institutions are now at risk of "failure". According to the Institute for Fiscal Studies, the average student debt will be £44, 015 - higher even than the US. "The Commission fundamentally questions any system that charges higher education at a rate where the average graduate will not be able to pay it back... We are deeply concerned that the Government may have created a loan repayment system where, for example, a teacher is unable to secure a mortgage at age 35 because of the high level of monthly loan repayment." INDEPENDENT

Government dismisses study linking use of food banks to benefit cuts
The study was commissioned by the Church Of England, the Trussell Trust food bank network, Oxfam and Child Poverty Action Group. The study found that cuts and changes to Britain’s increasingly threadbare social security system are the most common triggers of the acute personal financial crises that drive people to use food banks. At least half of all food bank users are referred because they are waiting for benefits to be paid, because they have had benefits stopped for alleged breaches of jobcentre rules or because they have been hit by the bedroom tax or the removal of working tax credits, it finds. The study, the most extensive research of its kind yet carried out in the UK, directly challenges the government’s repeated insistence that there is no link between its welfare reforms and the huge increases in charity food aid. There are no official statistics on the use of food banks, but the Trussell Trust, which runs more than 400 food banks in the UK, says 913,138 people were given food parcels by its volunteers in 2013-14 – almost a threefold increase on the previous year, and likely to be a fraction of the total numbers of people experiencing food insecurity. The Department for Work and Pensions (DWP) dismissed the report, claiming the research was inconclusive. But the report was welcomed by Jeremy Lefroy, the Conservative MP for Stafford, who hosted its launch at the House of Commons on Wednesday. He said it was an important study that chimed with his experience as an MP in his surgery. GUARDIAN

US fast-food workers visit UK to show us how to protest against poverty wages
The US fast-food workers who protested in New York and 100 other US cities over the “poverty wages” paid by multinational burger chains are preparing their British counterparts to launch a similar direct action campaign in the UK. Two months after the wave of US strikes and demonstrations that saw hundreds of arrests, Flavia Cabral, a McDonald’s worker from New York City who earns $8 (£5.10) an hour, said she had come to the UK to “teach workers here how to rise up and fight”. Cabral is part of a band of US fast-food workers travelling to the UK, France, Argentina, Brazil, Japan, Denmark and the Philippines as part of plans to form a global alliance of fast-food workers and organise a day of coordinated international protest in April to demand that workers get paid a living wage. “To take on global companies, the protest needs to be global. We need to take to the streets, unite together and stand up. If you ask for a raise, the management are going to say we haven’t got any money,” Cabral said at the rally. “We have to unite. We have to make it global, then it is not just you asking [for a pay rise], it is everyone around the world – and they will have to listen.” The protest plans come as McDonald’s marks 40 years since opening its first UK store in Powis Street, Woolwich, on 13 November 1974. There are now 1,249 McDonald’s outlets in the UK. The company recently announced it would hire an extra 8,000 people, mostly on zero-hours contracts – taking the UK workforce to more than 100,000 for the first time. The firm admitted last year that 90% of workers are on zero-hours contracts. McDonald’s pays under-18s a minimum starting rate of £4.35 an hour, rising to £5.15 for those aged 18-20 and £6.51 an hour for those aged 21 and over. The UK’s hourly national minimum wage rates are respectively £3.79, £5.13 and £6.50. GUARDIAN

Premier League TV rights to be probed by Ofcom
Under the current deal competition between BSkyB and BT Sport, a new entrant, pushed the overall value of its TV deals at home and overseas to a record £5.5bn over three years. It was £191m in 1992. Ofcom’s probe follows a complaint from Virgin Media, which said more matches should be available for live broadcast. Ofcom said: "Virgin Media argues that the proportion of matches made available for live television broadcast under the current Premier League rights deals - at 41% - is lower than some other leading European leagues, where more matches are available for live television broadcast." Virgin argues that by effectively limiting the supply of matches the Premier League has inflated the price that broadcasters have to pay and that cost is then passed on to consumers. Tom Mockridge, Virgin Media's chief executive, said: "The fact remains that fans in the UK pay the highest prices in Europe to watch the least amount of football on TV.” BBC NEWS GUARDIAN

Saturday, 15 November 2014

Graphs at a glance: Who's afraid of the big bad bankers? Apparently, the regulator.

According to the Guardian newspaper between 2009 and 2013 banks paid £166 billion in fines and compensation for sins ranging from LIBOR fixing, to PPI mis-selling, to money laundering, to gold price fixing, et cetera. This figure doesn't include fines from 2014 onward including FOREX fixing et cetera.

According to the Office for National Statistics £136 billion was paid in bonuses to UK staff in the financial services sector between 2004 and 2013, when much of the dodgy dealing was being done.

Fines are paid by shareholders (for Lloyds and RBS that includes us taxpayers), but bonuses are paid to individual staff. Does the UK regulator require individual naughty bankers to hand back some of the bonuses they gained doing things that earned £166 billion in fines? We hope the next graph will make this clear:

Thursday, 13 November 2014

Rip-off News round-up. Our pick of the last week's media (Thu 13th November)

300,000 more people live in poverty than previously thought
The study by the Institute for Fiscal Studies (IFS) for the Joseph Rowntree Foundation said the government method for calculating absolute poverty – the number of people living below a breadline that rises each year in line with the cost of living – incorrectly assumed that all households faced the same inflation rate. But in the six years from early 2008 to early 2014, the cost of energy had risen by 67% and the cost of food by 32%. Over the same period the retail prices index – a measure of the cost of a basket of goods and services – had gone up by 22%. Therefore, the soaring prices for food and fuel over the past decade have had a bigger impact on struggling families who spend more of their budgets on staple goods. The IFS report said the poorest 20% of households spent 8% of their budgets on energy and 20% on food, while the richest 20% spent 4% on energy and 11% on food. In contrast, poorer households allocated 3% of their budgets to mortgage interest payments, which have fallen by 40% since 2008 due to the cut in official interest from 5% to 0.5%. Richer households spend 8% of their budgets on servicing home loans. As a result, the IFS concluded that since 2008-09 the annual inflation rate faced by the poorest 20% had been higher than it was for the richest 20% of households. That meant the official measure of absolute poverty understated the figure by 0.5% – or 300,000. GUARDIAN

Six banks fined £2.6bn by regulators over manipulation of foreign exchange rates
HSBC, Royal Bank of Scotland, Swiss bank UBS and US banks JP Morgan Chase, Citibank and Bank of America have all been fined. A separate probe into Barclays is continuing. The fines were issued by the UK's Financial Conduct Authority (FCA) and two US regulators. FCA boss Martin Wheatley told the BBC: "This isn't the end of the story... The individuals themselves will face the consequences." Several senior traders at the banks have already been put on leave and the Serious Fraud Office is in the process of preparing potential criminal charges against those alleged to have masterminded the scheme. The fines follow a 13-month investigation by regulators into claims that the foreign exchange market - in which banks and other financial firms buy and sell currencies between one another - was being rigged. The massive market, in which $5.3 trillion worth of currencies are traded daily, dwarfs the stock and bond markets. About 40% of the world's dealing is estimated to go through trading rooms in London. The FCA said the "tight knit groups" formed by traders at the different banks had described themselves as "the 3 musketeers", "the A-team" and "1 team, 1 dream". However, Professor Mark Taylor, a former foreign exchange trader and now dean at Warwick Business School, said the fines were "relatively small beer for banks that regularly report billions of dollars in annual profit... The interesting thing is that there are no individuals named as yet, and no individual prosecutions. This is still a possibility and it will be interesting to see how that pans out. At the moment, it's really only the shareholders - which in the case of RBS means British taxpayers - who suffer from these fines." BBC NEWS

Greencore: Sandwich maker to hire from Hungary, despite government funding for UK job creation
Greencore, which makes 430m sandwiches a year for Marks & Spencer, Waitrose, Sainsbury’s, Tesco, Asda and others, said very few local people had applied for jobs at its new £30m Northampton factory so on Monday executives began a recruitment drive in Budapest, Hungary. This is despite Greencore, the UK’s biggest sandwich-maker, benefited from a slice of £107m in government funding designed to create more jobs for the people of Northamptonshire. The new recruits –sandwich makers, cleaners, porters and quality controllers – are being hired for Greencore’s new £30m factory, which is due to open in 2016. Its adverts say recruits will be required to work nights and weekends as the factory makes sandwiches round the clock. About 10% of the jobs will pay the minimum wage of £6.50 an hour for those aged 21 and over. Margot Parker, Ukip MEP for the east Midlands, said: “Why is Greencore recruiting 300 workers from Hungary to open a factory in Northampton, when 500 people in Corby lost jobs doing same job this year? ...It looks like a prime example of job displacement, facilitated by our membership of the EU and a company which wants the cheapest labour available. It is hard to justify saying there is lack of skilled people in the area when 500 workers just up the road doing the same job recently lost their jobs and are willing to work.” GUARDIAN

100,000 attend Brussels anti-austerity protest, ends in clashes
Belgian police used tear gas and water cannon against violent anti-austerity protesters in central Brussels after a largely peaceful march by about 100,000 workers. Several vehicles were set alight by protesters who also hurled stones and flares at police. About 50 people were hurt and 30 detained, officials said. Belgium's new government plans to raise the pension age, freeze wages and make public service cuts to meet EU targets. Thursday's march was one of Belgium's biggest labour demonstrations since World War Two. Steelworkers, dockers and teachers were among the thousands who took part, protesting against government austerity policies. The march marked the start of a month-long campaign by trade unions and is to be capped with a national strike on 15 December. The centre-right government of Prime Minister Charles Michel says the tough austerity measures are necessary to keep the budget deficit down. But Marie-Helene Ska, secretary general of the union CSC, said the government had to look elsewhere for the cash. "The government tells us and all of the parties tell us that there's no alternative. We don't contest that they have to find 11bn euros (£8.6bn; $13.6bn) but we've been saying for a long time that it's possible to find this money elsewhere, rather than in the pockets of the workers." BBC NEWS

Saturday, 8 November 2014

Graphs at a glance: Governor of the Bank of England said the housing boom is the greatest threat to the UK recovery. So what are we doing about it?

Does the UK Housing Boom really exist? It's common knowledge that London house prices have ballooned, but is the rest of the UK bubbling up too?

Figures from the Office for National Statistics show this is actually not the case. Since the banker induced economic crisis of 2008 London house prices have rocketed by 40%. UK house prices too have grown by a not insignificant 12%. However this average UK house price rise has been greatly inflated by including London's figures. 

Look at it this way: a company reviews the pay of two staff:
  • Joe Minimus gets no payrise
  • Felix Maximus gets a £10,000 payrise
  • Their average payrise is £10,000 ÷ 2 = £5,000
The company can say it gave its staff an average £5,000 payrise. But strip out Felix's hike, and the reality is Joe got nothing.

If you strip out London house prices, as the ONS has kindly done in the graph below, you discover that in the five and a half years from January 2008 to July 2014 the average house price in the UK excluding London has risen by just 4%. That is about the same as if you put your money in a rip-off deposit account paying less than 1% for the same period of time.