Human Capital - British government puts a value on Britons

At the end of December 2011, the Office of National Statistics (ONS) published a report on what we are worth: "Human Capital Estimates 2010" 


This is not about what we own minus what we owe, but what we as animate objects, are worth. Our "Human Capital". The ONS' definition of Human Capital is:


“the knowledge, skills, competencies and attributes embodied in individuals that facilitate the creation of personal, social and economic well-being.”


You may be flattered to know that:

• "The UK’s human capital stock was worth £17.12 trillion in 2010."
• "This is more than two-and-a-half times the UK National Accounts estimated value of the UK's tangible assets - buildings, vehicles, plant and machinery etc - at the beginning of 2010."

It may, or perhaps may not, give you a warm fuzzy feeling to know that you are valued at an average of just over £425,000:

Read More

Liebrary: Pension costs are ballooning out of control? Actually, the share of GDP going in pay and pensions has been DROPPING!

"Never waste a good crisis". Who first said it - I don't know. But using a crisis as a smokescreen to push through changes irrelevant to the crisis itself is a tactic used by leaders great and small. A golden chance to quickly make changes that under normal non-crisis conditions they could never get away with. From the head of a household cutting pocket money, to the head of a company cutting jobs and pay, to the head of a government cutting pension entitlements.

Pensions are part of employees' compensation - that is "pay" to the likes of most of us. Far from ballooning out of control, employees' compensation has been falling as a percentage of Gross Domestic Product for years. 

What this means is that as the country gets richer, the share paid to ordinary ripped-off Britons has fallen, as can be seen from this data from the Office of National Statistics 

(The ONS defines "Compensation of employees" as wages, salaries and social contributions made by employers).

A phenomenon that really kicked off in 2000, during the last Labour government, and being followed through with a vengeance by the current Tory-LibDem coalition. The jump in the employees' share of GDP seen in 2008-10 has nothing to do with greater fairness, and everything to do with the slump in GDP. Current government policies to freeze pay and cut pensions (public and private) aim to get things back to abnormal.

Ordinary Brits get their share of the nation's wealth mainly as pay and pensions. Reducing the pay and pensions share means increasing the share that goes to dividends, capital gains, and other forms of wealth that are all for the less than ordinary Briton.

"Something has got to be done!"; "Just get on with it!"; "Carpe diem!". Panic the people into accepting drastic action. Panic MPs into voting for it, panic unions into submitting to it, panic the citizens into lying back and thinking of England.

Read More

Ripped-Off Britons Quiz - without answers

We present the Ripped-Off Britons Quiz.

With forty multiple-choice questions on the rip-offs of the year, we aim to provide half an hour of fun and provoke half a pint of bile. 

Use the quiz at your next party or social gathering, or in a lesson at school. 

In this post the questions are given in a form that is easy for you to print off or display on your computer screen for all to see. We also provide the answers in a separate post - >>>>click here<<<<.

Those that rip us off are confident that we will not hold it against them. Not because we forgive, but because we forget. Their scams make the news for a couple of days, and then fade away. From banks to energy companies to political parties, they all let us down with total predictability and total impunity.

In the words of Adam Smith, the great icon of capitalism,

"The real and effectual discipline which is exercised over a workman is that of his customers. It is the fear of losing their employment which restrains his frauds and corrects his negligence."

Our forty questions will help the participants in the quiz remember the frauds and negligences we ripped-off Britons have suffered. With links to our stories, giving the details behind the rip-offs. 

Read More

Ripped-Off Britons Quiz - WITH ANSWERS!

This post gives the answers to the Ripped-Off Britons Quiz. If you want to see the quiz without answers then click  >>>HERE<<<

Read More

European Central Bank unlimited loan facility - apres le deluge, encore un deluge

And so, in December 2011 the expected deluge of money from the European Central Bank arrived. Loans at a fixed rate of 1% for 3 years, to stave off, more likely only postpone, the dénouement of the Euro crisis. But, as is often the case with the weather, the deluge of money didn’t fall where it would have done the most good.

The ECB showed a bit of Christmas spirit, and offered unlimited funding for 3 years at a fixed 1% interest rate. A few days later, nearly €500 billion had been borrowed. Who were the borrowers of this cheap money? Where did the money come from? Are we all saved?

In reverse order:

Question:             Did this wall of cash relieve nations imposing draconian cuts on their citizenry? Nations that were haemorrhaging money paying up to 18% interest on their borrowings from the banks?

Answer:             No. This loan facility was not open to national governments. This makes no difference to the loan burdens on governments. In fact, it extends the burden as it prolongs the time before the lending banks demand their money back, leading to some countries defaulting.

Question:            Where did all this lending money come from? Is this a resurgence of confidence, with investors around the world at last putting their hands in the pockets of their hanfus, kimonos, and saris?

Read More

HMRC complicit with £25bn of tax dodged by corporates?

Chris discusses the revelations

Read More

Christmas is a time for giving bankers their bonuses. A festive guest blog from a trading floor in the City

By Honestly Banking, undercover banker

Hooray! We the bankers of Britain will soon be getting our richly deserved  Christmas Bonuses! You ripped-off Britons should be grateful. Without our bonuses, we would have already abandoned you and emigrated to Switzerland to flash our cash in the milk bars, get drizzled with premium chocolate, and ski. Competitor banks are always waving their wads under our noses. We’re not greedy. If we were greedy, we’d have gone already.  Of course every silver lining has a cloud. The biggest problem with the bonus is how to spend it. A new Porsche? Mega-flat, school fees, credit card bill, something shiny from Tiffany's? And if some slackers don’t get a bonus, at least there is a free cup of coffee and some drama too (see later).

Much has been written about the bonus culture and the excesses of the banking system. How is it that in these austere times banks are making so much profit they can pay huge bonuses again? Without doubt being a banker can be one of the most lucrative jobs going. Not only is there a healthy salary, lots of fringe benefits, but also the motivation of the juicy bonus.

There are long hours and lots of stress, but there’s also a nice air conditioned office and a subsidised canteen. Not really a hardship spending long hours in this environment.

Many bankers are there for the intellectual stimulation, but really most are not there for charitable reasons or to make the world a better place – it’s all about profit.

Pay in the fancy lingo of Human Resources is known as compensation. This starts to give an insight into the motivation of workers in general and bankers in particular. Compensation in this context is payment for the bankers’ skills and time. The fixed element of a banker’s pay is the salary and the bonus is the variable part.

The salary is the agreed rate for the job. This is driven allegedly by ‘market conditions’, but it’s really about how much the banker has been able to negotiate, or in reality how much the headhunter has over sold the banker in order to increase their fee (typically up to 40% of the salary). Even better if they have negotiated a ‘guaranteed’ bonus. This means that a banker will be paid a bonus regardless of performance - nice work if you can get it!

Guarantees are used as sweeteners to aid the pain of moving from one bank to another. The reality is you may have to give up your bonus at one bank when you leave, so it’s a bribe really. Signing bonuses are another nice wheeze - new job, fancy title, a big pile of cash upfront. You don’t even need to perform for a couple of years by which time you will be ready for another move anyway! Wow, Christmas has come early!

Just as Santa is hard at work in the workshop with the elves making toys and deciding who gets them, the banks’ bonus committees are doing the same thing.

Typically the bonus committee is made up of senior bankers and departmental heads with input from HR, compliance, legal etc. It’s actually a totally pointless exercise as it will have been decided who is getting a good bonus and who isn’t. The point of all the hangers-on at this bloated meeting is firstly ‘inclusion’ - makes people feel important - and secondly to ensure that there is the appearance of a rigorous process in place.

This appearance of process is actually important. If it can’t be shown that there is rigor, the bank is leaving itself open to claims of discrimination. In fact most banks have now put some weasel words into their employment contracts about bonuses being discretionary. They also go to great lengths to emphasis the rigor of the process, but also to make it as opaque as possible. They go even further by prohibiting staff from discussing bonuses and making doing so a sackable offence.

The criteria that are really used are as follows:

·        Do we want to retain them?

·        Have they made us money?

These two things decide your bonus. If you’ve had a huge year but they want to get rid of you, you will get a ‘price signal’ by a small or zero bonus and thence a free cup of coffee at your ‘exit interview’. Alternately if they want to retain you, you may get a better bonus that you expected. All the other criteria, rankings, scoring systems are just smoke and mirrors and people justifying their jobs.

So what has your average banker done to earn a bonus?

Read More

Liebrary: Is cutting pensions needed for the country to recover from the Banking Crisis?

Pensions are deferred pay. Pensions are not charity, nor a handout, nor any other form of benevolence. Your employer, private or public sector, holds back some of what it owes you for your labour and pays it to you when you are retired.


Pensions are paid for by corporate profits (private sector) or taxes (public sector).


Cutting pensions is a pay cut on employees which allows companies to increase their profits or hand them to shareholders, and governments to cut taxes.


Is the current Banking Crisis a reason for special measures on pensions? The reality is mature economies recover from crises. To see the evidence, take a look at what happened to the US economy in the last century, particularly after the two World Wars.


Two World Wars required massive spending, first to destroy and then to rebuild nations. But government spending quickly returned to its original trend.


The Banking Crisis required massive spending to bail out the banks. There is no reason to think that cutting pensions is needed for the recovery to happen. Apart from anything else, the reduced pensions costs will not have any impact in time for the current crisis.


Are pension being cut because they were ballooning out of control? The government's own figures show this is not the case.


Pensions are being cut to reduce the cost to companies in the private sector, and to reduce taxes for the public sector.


The Banking Crisis is being used as a smokescreen to increase inequality in the most unequal country in western Europe. 



Reducing pensions would be a rip-off that is imposed on current and future generations. 

Read More

Liebrary: FSA fines don't penalise, but are actually used to subsidise the financial services industry

If you thought the £millions in fines the FSA imposes on naughty financiers goes to help their victims, you clearly haven't been paying attention to the fact that this is Ripped-Off Britain.

• The FSA is funded by fees levied on financial services companies.
• FSA fines go towards paying FSA costs.
• This reduces the amount of the fees paid by financials services companies.

An FT report quotes Which?, the consumer organization, saying
"The industry's record fines this year will result in a huge discount on its annual levy to the Financial Services Authority (FSA)"


In the FSA's 2011-12 annual report, it is stated 
"During 2011/12 we collected penalties of £70.7m (2010/11 £86.2m), 

which will be used to reduce the fees levied by us across relevant fee blocks in future years."

i.e. reduces FSA fees paid by the financial services industry.


The FSA claims that the real penalty on firms is the compensation they have to pay their customers. For instance, victims are receiving 8% interest on the refunds they are getting for the banks' payment protection insurance (PPI) scam. 8% is way more than they could get keeping the money in a savings account.


But think on this. Many of the people who had money swiped by the banks use credit cards and other high cost loans. The interest on these loans that they could have otherwise paid off is typically 20% or more. By having their money pinched by the banks, they will still make a significant overall loss even after getting 8% interest on the refunds.


And in the case of PPI, some estimates claim £4.5 billion of ripped-off money has been held by the banks over the years. That's £4.5 billion the banks were lending out at interest rates well in excess of 8%. Netting a further profit for the bankers. 


As we have said before, fines are one of the most lucrative investments the banks can make.

Read More

Liebrary: Raising pensions by CPI is the right and fair thing to do, fibs the Government.

The UK government says that raising pensions by the Consumer Price Index (CPI) instead of the Retail Price Index (RPI) is the fair thing to do. This is inspite of the fact that pensioners, who are already struggling financially, will lose a large chunk of their income.

So what would have happened if MPs' pay and perks had been linked to inflation?:

An MP’s allowances in 1975, of £3,200, would have risen by 2007 to £19,367 if RPI inflation had been applied. In fact the actual figure was £90,505.

Read More

Estate agents – a question of trust

Fee dishes the dirt on an unscrupulous estate agent

Read More

Mary Portas reveals her high street rescue plan

Chris and Fee hit on a way for small retailers to survive

Read More

More tax-avoidance loopholes for the ultra-wealthy may provide a boost for Brit-Art manufacturing

“The hands of a healer”, those blessed appendages of gifted individuals whose mere touch can make all sorts of maladies simply go away. Brit-Artists have joined the saints, gurus and fakirs. The malady our arty countrymen can cure by the application of their hands is tax flu. Like alchemists turning lead into gold, they can turn rubbish into multimillion pound objets d'art of tax dodging.

As Britain gradually slips back to “Victorian levels of inequality”, loopholes are being opened for the wealthy to avoid tax by exercising their gracious patronage. It is not from benevolence, but for tax avoidance that they can making donations to charities, the nation, and to eager entrepreneurs looking for startup investment. And, as a welcome relief from the usual government policy of taking from the poor to give to the rich, some of these tax changes take from the rich to give to the extremely rich.

Make no mistake, in spite of their protests the wealthy have been very well served by our tax system. This is evident from the graph produced by the IFS, showing that tax on the wealthy has been slashed by nearly 40% between 1978 and 2011.

It is not just the income tax burden that has been lifted from the rich. Other taxes the rest of us pay have been waived through circuitous bypasses. The Daily Telegraph reported that a third of houses sold for more than £1m dodge paying stamp duty, costing £1billion in lost taxes (i.e. saving the wealthy £1billion in taxes). This wheeze is pulled off by placing ownership of the house into a company. Instead of selling the house, paying 5% stamp duty on the property transfer, you sell the company and pay just 0.5% stamp duty on the equity transfer. And for an annual fee of £30,000, the government sells around 5,400 non-doms the right to avoid tax on overseas income that the rest of us have to pay. These 5,400 each paid an average £1million in tax on their UK income according to the Treasury, a tantalising reflection of the amount they manage to avoid by paying what is to them a paltry £30k protection money to the treasury. All strictly legally.

However, in this time of national crisis, when every tax-pound goes to digging the nation out of its mire of debt, our taxmen have striven to shave back the tax-avoidance privileges from the merely wealthy to benefit only the extraordinarily wealthy.

Read More

Liebrary: Hedge funds consistently deliver higher returns, NOT

As we pointed out in an earlier post, the maths shows that overall bankers' performance is no better than a monkey can do picking stocks at random - effectively like an index tracker. 


An academic study has found that Hedge Funds, who justify massive remuneration to their staff by their superior performance, actually perform only a teensy bit better than the market average. The industry gets away with this fib simply by not including their bad performances in their figures.


If premier league football clubs could rank themselves this way, they would all be champions with 100% wins - because they would not report the times they lost or drew.


Alpha is the posh term for the profit an actively managed fund earns over the index linked market average. Hedge Fund managers justify their vast remuneration by claiming consistent average returns of 3%-5% above the market. And they have managed to fool academics, regulators, and most importantly investors for years. The study shows that average returns are closer to 0.05% per quarter above the market.


Extracts from report:

Read More

Giving private healthcare costs a bypass

KJ and his father weigh up private healthcare over NHS treatment

Read More

HSBC investors: death becomes them

And it could be before their five-year bonds have matured

Read More

Why tackling high pay is in the national interest

By Deborah Hargreaves, Chair of the High Pay Commission

British business is facing a crisis. The public has lost faith in the corporate sector, which it sees as monolithic, money-grabbing and uncaring. Excessive pay for company bosses has added to the malaise. As those on middle and low incomes face a sharp squeeze in their living standards, corporate leaders are awarding themselves 49% pay rises. These bosses see little irony in then lobbying to repeal the 50p top rate of tax paid by those on £150,000 or more. These are the same leaders who are arguing for real-term cuts to the minimum wage, because, after all, aren't we all facing times of unparalleled austerity?

Directors' hypocrisy over pay reinforces the view among the public that businessmen are "in it for themselves". It is worrying that trust in big business has sunk to this extent when there is so much emphasis on the private sector leading us out of the economic crisis. In polling for the High Pay Commission, 79% of those questioned said pay and bonuses were out of control.

Our year-long inquiry has led us to believe that excessive top pay levels are not only corroding trust in business but also damaging society and the economy as a whole. In the last 30 years we have seen rewards channelled upwards. The top 0.1% of earners have pulled away from the rest at a rapid pace. In 1980, for instance, the boss of Barclays was earning 14.5 times average pay at the bank; the current boss, however, is on 75 times the average, representing a 4,899% rise over that 30 years.

During the same period average UK wages have gone up threefold and pay for a senior policeman or schoolteacher has risen sixfold. Of course, leading Barclays today is a different proposition, but the lives of a policeman and headteacher have also changed beyond recognition in that time.

Since the mid-1970s the general workforce's share of GDP has shrunk by 12%. For years, this sleight of hand went unnoticed – we all felt we were getting richer on the back of a rising housing market. But as the economic crisis has started to bite, the fact that company bosses seem to be living in a different world has become increasingly apparent.

Read More

Liebrary: Are public sector pensions ballooning? The government's own figures show this is not true.

A succession of government reports have shown that public sector pensions are not ballooning out of control, as is shown by this summary of government figures produced by the Institute of Fiscal Studies: 

And yet all the main political parties - Conservative, LibDem and Labour - are united in continuing to spout the opposite. 

Even without the shenanigans currently being fought over – raising retirement age; changing inflation link from RPI to CPI; changing from final salary to career average – the cost would stabilise (as shown by the Treasury 2004 forecast). This is inspite of the overall population aging, as is shown by the Office of National Statistics graph below. 

The ONS population pyramid graph shows how the population will age between 2010 and 2035. ONS figures state that the number of retired people in the UK will grow by 28%, from 12.2 million in 2010 to 15.6 million in 2035. 

Inspite of this growth in numbers of pensioners, there is still no explosion in pension costs as a share of national income. This is because national income is expected to grow more than enough to support this. The current proposals being pushed through actually bring the pensioners' share of national income below the current level, inspite of pensioners being a bigger share of the population.

The Hutton proposals will reduce the share of wealth, inspite of the share of pensioners rising. Why?

Pensions are paid for by company profits and tax. Cutting pensions is nothing about affordability, and everything about moving wealth from the poor to the rich. 

And that in a country that is already the most unequal in Europe, according to OECD stats:

Read More

A complex forecast over pension fees

Chris's pension fund manager chum chews over the obscenely large slice he takes from your savings pot

Read More