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Saturday, 20 December 2014

Saturday, December 20, 2014 Posted by Jake No comments Labels: , , , , ,
Standing watch over the British Consumer
"No good deed ever goes unpunished": A cautionary tale from the Financial Conduct Authority (FCA) for Christmas and beyond. 

In December 2014 FCA heads rolled and FCA bonuses were cancelled. Was it due to a failure to show adequate Authority over a firms' Financial Conduct? To find out, we travel ten months back in time.


In February 2014 the FCA published a review of the pensions annuities market. It had noticed there was something rotten going on, and it thought it was about time it thought about looking into doing something about it. But more of this later.

On 27th March 2014 the FCA briefed newspapers, about another insurance industry scam saying:

“We want to find out how closed-book products [products that are no longer being sold afresh but still have existing customers, such as long term investment products] are being serviced by insurance companies, as we are concerned insurers are allocating an unfair amount of overheads to historic funds. 
As firms cut prices and create new products, there is a danger that customers with older contracts are forgotten. We want to ensure they get a fair deal. As part of the review we will collect information to establish whether we need to intervene on exit charges.

"Intervene on exit charges"!? The prospect of regulators actually doing something to protect consumers shocked the market. There is a sacred covenant in the financial industry that regulation in Britain is the thin end of a thin wedge. Was the covenant being broken? Fearing for their dividends, investors started selling and insurance company share prices plummeted. 

Friday, 19 December 2014

Friday, December 19, 2014 Posted by Hari No comments Labels: , , , ,
KJ learns how the world really works from Fee and Chris...

Thursday, 18 December 2014

Thursday, December 18, 2014 Posted by Hari No comments Labels:
British household debt is £1.7bn: we are living further beyond our means than at almost any time in the last 20 years.
The head of the Office for Budget Responsibility (OBR), Robert Chote, told a panel of MPs that consumers have been upping their spending, which in turn helps improve the growth of the economy. But the increased expenditure does not mean that households have more cash to spare – they are just using their savings. He added: ‘We have assumed that it is not plausible [that this could continue].’ Consumer spending grew by 2.1 per cent in the first nine months of this year, even though wages continued to stagnate, figures from the OBR show. The economists estimate that the huge gap between earning and spending is the second largest since the mid-1990s. Total household debt stood at £1,670billion as of the second quarter of this year. The OBR has increased its forecast of unsecured household debt as households continue to spend beyond their means. The forecasts come as debt experts warned that as many as one in four credit card customers are paying the minimum every month or struggling to pay at all. One in five respondents with a credit card said they only made the minimum payment in October, while a further one in 20 said they made no payment or paid off less than the minimum. DAILY MAIL

Luxembourg tax dodge whistleblower charged with theft, says he acted out of conviction
28-year-old Antoine Deltour has been charged in Luxembourg with a string of criminal offences including theft, violation of professional secrecy, violation of trade secrets and illegally accessing a database. Deltour joined PwC from business school in 2008 and resigned two years later. He said: “Normally auditors are a bit like regulators. It is a useful profession, we verify the accounts of companies... But I wasn’t feeling at home in that environment [at PwC]. Bit by bit I discovered how extreme the system was in reality – it was a massive tax optimisation practice. I didn’t want to be part of that.” Last month the Guardian and more than 20 news media around the world, in conjunction with the International Consortium of Investigative Journalists (ICIJ), published detailed investigations into the tax affairs of several multinationals, based on leaked tax rulings secured by PwC for large clients. Luxembourg’s finance minister Pierre Gramegna has described the affair as “the worst attack Luxembourg has experienced in its history”. But his counterparts in France, Germany and Italy suggested the revelations had brought Europe to an “obvious … turning point” in the international debate on unfair tax competition. “Since certain tax practices of countries and taxpayers have become public recently, the limits of permissible tax competition between member states have shifted,” they said in a letter to Pierre Moscovici, European commissioner with responsibility for tax. “This development is irreversible.” The Guardian and other media working with the ICIJ had this month published more revelations and further confidential tax rulings secured by Ernst & Young, KPMG and Deloitte. GUARDIAN

It’s expensive being poor: Poorest households face fastest cost of living rise
The Office for National Statistics (ONS) said that households in the bottom 10% of the income scale had an average annual inflation rate of 2.9% each year from January 2003 to October 2014. This compared with an inflation rate of 2.6% among the wealthiest 10% of UK households. Caroline Abrahams, charity director at charity Age UK, said: "Because older and lower income groups spend a greater proportion of their income on essentials such as food, fuel and energy, they are far more vulnerable to the price increases we have seen to these items since 2003... With 1.6 million pensioners living in poverty and a further one million just above the breadline, many are struggling to afford the basics, let alone anything else." When categorising households by how much they spend, rather than their income, the top 10% of households saw prices rise, on average, by 2.3% over the same period. This compared with 3.7% among the 10% of households which spent the least. Households with children saw the cost of living rise by 2.4% on average each year, compared with 2.7% for those without children. Non-retired households saw prices rise on average by 2.5%, compared with 2.8% for retirees. BBC NEWS

The average UK property price rose more in 2014 than the average worker earns in a year – and London is the worst
The average worker took home £27,271 this year, having seen their wages grow just 0.6 per cent – or £169 - compared to 2013, the study by the Centre for Economics and Business Research for the Post Office found. Yet steep property inflation means the average house price now stands at £272,952, up £29,339 from £243,613 last year. Therefore, more than three in five workers earned less than the average house price rise. To give some examples, starting salaries for junior hospital doctors, graduate nurses, teachers, police officers and soldiers are all less than £23,500. Homeowners in the East, South East and London saw their homes earn far more than average wages in the area. Property values in London, for example, have added an average of £80,452 - almost twice the average salary of £41,095 earned in the capital. In fact, booming property in London earned more than the average fully qualified doctor. Elsewhere, estate agents Marsh and Parsons predicts a slowdown of growth when it comes to prime London property next year, but says London rents will soar by around 10 per cent during the course of 2015. DAILY MAIL

Saturday, 13 December 2014

Saturday, December 13, 2014 Posted by Jake 3 comments Labels: , , , , , , , ,
J.P.Morgan, in his time a successful banker, said:

“A man always has two reasons for doing anything. The good reason, and the real reason”.

Doing”: The Tory led government is squeezing benefits by freezing, cutting and capping them.

They claim “the good reason” is to push the feckless unemployed off their dependency on benefits into jobs. Make them economically productive, thereby boosting their own incomes as well as our national GDP.

Now we at Ripped-Off Britons like to think the best of people. It is just about plausible that Tory policy makers actually don’t realise that benefits go mainly to the low paid not the unemployed. Benefits are far more a subsidy to low paying employers than a subsidy to the unemployed. But for this post let’s not go there – we go there in other posts.

For now we take a closer look at whether cutting benefits actually does improve the prospects of the poor and boost Britain's GDP. The Organisation of Economic Cooperation and Development (OECD) published a report in December 2014 which provides a helpful insight.

Benefits are paid by taxes. It is a transfer of money from the richer to the poorer, and therefore reduces the income inequality gap. Office for National Statistics (ONS) figures show UK inequality is reduced by these transfers from a Gini of over 50 (like Brazil, Bolivia, Botswana) to under 35.
ONS Figures

Thursday, 11 December 2014

Thursday, December 11, 2014 Posted by Hari 1 comment Labels:
Blackmail: Premier Foods promises to rethink controversial 'pay-and-stay' fees imposed on suppliers after widespread condemnation by business leaders
Last week, the BBC's Newsnight disclosed that Premier, one of the UK's biggest food manufacturers, had asked for money from its suppliers, otherwise it would end their contracts. One supplier called it "blackmail", and the government said it was "deeply concerned". The employers' association, the Institute of Directors, said the scheme risked adding to the public's loss of faith in business. The Federation of Small Businesses warned that small businesses were being crippled by such practices. Now Premier has said it is willing to alter the scheme, which was part of its Invest for Growth programme, launched last year to revive the company's ailing finances. The practice of pay-and-stay is not unusual in manufacturing and retailing. After a competition inquiry, tighter rules were issued for the supermarkets under the Groceries' Code. But that applies to the relationship between supermarkets and suppliers, not to manufacturers like Premier. BBC NEWS

British workers suffer biggest real-wage fall of major G20 countries
The International Labour Organisation reports that in the three years to 2013 UK wages fared worse than most of the eurozone’s crisis hit economies. According to recent data released by the Office for National Statistics (ONS), wages in the UK fell 1.6% this year compared to 2013, marking a sixth straight year of declining levels of pay. The Bank of England said in its latest quarterly inflation report last month that the fall in pay, while acutest among lower skilled workers, has been registered in most parts of the labour market. Weaker-than-expected pay growth in Britain has generated lower than expected tax revenues for the government. This is a main reason why Chancellor George Osborne did not meet his deficit reduction target. GUARDIAN

MPs accuse PriceWaterhouseCoopers chief Kevin Nicholson of lying over tax dodge deals
Kevin Nicholson is PwC UK’s head of tax, and worked as an HM Revenue and Customs tax inspector in the early 1990s. In January 2014 Nicholson told parliament’s Public Accounts Committee that PwC did not “mass market” tax products or sell tax avoidance “schemes” to clients. But in November this year, new evidence revealed that PwC wrote hundreds of letters - 548 letters relating to 343 companies –to Luxembourg tax authorities to agree on how their clients structured their businesses for tax purposes. “It’s very hard for me to understand that this is anything other than a mass-marketed tax avoidance scheme,” said the committee’s chair, the Labour MP Margaret Hodge. “I think there are three ways in which you lied and I think what you are doing is selling tax avoidance on an industrial scale.” Nicholson denied lying to parliament, and added: “At the heart of the Luxembourg economy now is an economy that is based around businesses going there to finance [and] to hold investments… I’m not here to change the Lux tax regime. If you want to change the Lux tax regime, the politicians could change the Lux tax regime.” Last month’s analyses of the way multinational companies establish businesses in Luxembourg were based on a leaked cache of hundreds of tax rulings secured by PwC Luxembourg that showed major companies – including drugs group Shire Pharmaceuticals and vacuum cleaner firm Dyson – using complex webs of internal loans and interest payments, which have greatly reduced tax bills. GUARDIAN

Lords refused to cut costs by sharing catering services with MPs because they feared the quality of champagne "would not be as good"
Sir Malcolm Jack, the clerk of the Commons between 2006 and 2011, told MPs that there was a proposal to merge the two catering services when he was in office to save taxpayers' money. He said: "It [the proposal] was eventually thrown out because the Lords feared the quality of champagne would not be as good if they chose a joint service." Since 2010, the House of Lords has spent £265,770 on 17,000 bottles of champagne – equivalent to just over five bottle of bubbly for each peer. As of March this year, the house had 380 bottles in stock worth £5,713, predominantly held in its main cellar. The most expensive, the Chassagne-Montrachet premier cru, costs £26 per bottle. The House of Commons has spent even more on champagne, buying a total of 25,000 bottles at a cost of £275,221. As of March it had 582 bottles in stock, worth a total of £6,513. TELEGRAPH

Tuesday, 9 December 2014

Tuesday, December 09, 2014 Posted by Hari No comments

Saturday, 6 December 2014

Saturday, December 06, 2014 Posted by Jake 1 comment Labels: , , , , , , , , ,
The Office of Budget Responsibility's "Economic and Fiscal Outlook 2014", published in December 2014, stated that by 2019-20 public spending as a share of GDP will fall back below its lowest level since the Second World War. 

When questioned about this on BBC Radio4's Today Programme George Osborne retorted "Has the World fallen in? No it has not!". If Osborne's measure of economic success is the World not "falling in", perhaps he isn't doing so badly. Others may use other measures.

We are in a 'low wage recovery', where the rewards of relatively strong GDP growth are being kept by the few. Lower wages for the many and lowering tax rates for the few (top rate income tax and corporation tax) means no increase in government receipts.
The OBR put this planned collapse in spending in pounds and pence:
"Between 2009-10 and 2019-20, spending on public services, administration and grants by central government is projected to fall from 21.2 per cent to 12.6 per cent of GDP and from £5,650 to £3,880 per head in 2014-15 prices."  

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