Saturday 28 December 2013

Saturday, December 28, 2013 Posted by Jake 2 comments Labels: , , , ,
There are a number of differences between those who indulge in tax fraud and those who indulge in benefits fraud. The most basic is money: to dodge tax you probably have money, to steal benefits you probably don't. 

Is it this basic financial distinction that accounts for the differences we describe below? Do well paid legislators and prosecutors feel more empathy with tax dodgers then benefits cheats? 

The following graphs suggest perhaps so:

7.4 times more money is lost through Tax Fraud than through Benefits Fraud:

10 times more in percentage terms is pinched by tax dodgers than by benefits cheats according to the NFA report:
  • Benefits: 0.7% of all benefits are taken fraudulently
  • Taxes: 6.7% of all taxes are not paid fraudulently (i.e. doesn't include 'avoidance' which uses legal loopholes).
Saturday, December 28, 2013 Posted by Jake 1 comment Labels: , , , , , ,
The Joseph Rowntree Foundation's report "Coping with the cuts? Local government and poorer communities" shows that spending cuts in more deprived local authority areas are systematically greater than in affluent local authority areas. The difference between most affluent and most deprived being about £100 per head.

"Figure 3 illustrates this, but also highlights a key finding relevant to this study: that the scale of the cutback has been greater in more deprived local authorities than in more affluent ones. Figure 3 expresses this in terms of per capita spending power, where there is a difference of over £100 per head between the most and least deprived. Deprived authorities were previously more grant-dependent and have suffered disproportionately. However, even in percentage terms, deprived areas have seen a greater reduction in spending power (-21.4 per cent) than affluent areas (-15.8 per cent)."

Here is a brief definition of "Specific" and "Formula" grants in the graph above. They are the two main sources of money from central government and represent around 70% of all local authority funding.

Specific grants pay for individual services, such as key government priorities. This money is ring-fenced and must be used in the way specified by those priorities.

Formula grants are calculated using mathematical formulae based on, among other things, the local council tax base and how many people rely on local services.

For a fuller definition of how local authorities are funded, see and

Friday 27 December 2013

Friday, December 27, 2013 Posted by Hari No comments Labels: , , , , ,

Tuesday 24 December 2013

Tuesday, December 24, 2013 Posted by Hari No comments Labels: , ,

Monday 23 December 2013

Monday, December 23, 2013 Posted by Jake 1 comment Labels: , , , , , , ,
Public policy is a classic instance of the tail wagging the dog. For a tail to wag a dog it is not necessary for the dog to be in cahoots with its tail. It is enough that the dog doesn't resist its nether extremity. 

Most people pay little attention to things that don't affect them directly and immediately. Even when those things inevitably will in the future, or inescapably did in the past, they are likely to swallow any lazy assertion. The unemployed are portrayed as living high on the hog with their overly generous benefits. A lack of interest in whether this is true or not allows public policy to be driven by the prejudices and interests of whichever cabal is wagging the government.

The Marmot Report of 2010 showed statistics from the Office of National Statistics (ONS) comparing the death rates per 100,000 of two cohorts in the period between 1981 and 1992. The first cohort was made up of people who had a job in 1981. The second cohort was made up of people who were unemployed in 1981.

The impact on mortality of being unemployed is clear, and provides no evidence of the unemployed having it easy. The "lower orders" have a higher death rate within both cohorts. However it is also evident that being unemployed has the greatest impact on the highest Class I, where the unemployed in that group had a 65% higher death rate than their employed peers. A matter that should be of interest to the highest as well as the lowest in the land. 

Saturday 21 December 2013

Saturday, December 21, 2013 Posted by Jake 4 comments Labels: , , ,
A graph on page 63 of the Bank of England's end of year report might raise an eyebrow, if not your blood pressure.

Loan to Value (LTV) tells what percentage of the value of your home you owe on your mortgage. For instance, if you have a £150,000 mortgage and your home is worth £200,000 your Loan To Value ratio is 75%.

LTV in 2013 is actually higher than just before the Credit Crash, blamed by many on people borrowing too much on mortgages. In 2007, just before the crash, around 10% of borrowers owed more than 75% of the value of their homes. In 2013 this had risen by a half to 15% of mortgage borrowers. The percentage of borrowers in negative equity in 2013 (they owe more than the value of their homes) quadrupled to 4% of mortgage borrowers. 

Bank of England Quarterly Bulletin, 2013 Q4

Saturday, December 21, 2013 Posted by Jake 2 comments Labels: , , , , , , , ,
These graphs are from the Joseph Rowntree Trust:
In 2015 almost 6 million people were paid less than a living wage, at the time £9.15 per hour in London and £7.85 per hour in the rest of the UK. This is about one in five of the UK workforce (made up of approximately 30 million people in 2015 according to the Office of National Statistics). 

Nearly 80% of jobs done by the 18-21 year age group in 2013 were 'low paid'. 

Most low paid jobs in the Public Sector were held by those over 40 years of age.

Friday 20 December 2013

Friday, December 20, 2013 Posted by Hari No comments Labels:

Thursday 19 December 2013

Thursday, December 19, 2013 Posted by Jake No comments Labels:
Government lost £13bn to fraud and error
MPs are demanding action after £13.2bn was written off the government balance sheet in 2011-12 due to fraud, financial error and legal claims. The numbers are found in a new annual report called “Whole of Government Accounts”, first published in 2011. But the figures do not include local government or public corporations, and the National Fraud Authority estimates the true cost of fraud to the public sector was £20.6bn. Other omissions include HMRC’s "tax gap" - the difference between what the authorities were owed and what they were collecting – which now totalled £35bn. Overall, the accounts showed net public liabilities - the difference between the government's assets and liabilities - rose from £1.19 trillion to £1.34 trillion over the period. BBC NEWS

Osborne: £12bn more in welfare savings needed
"You are going to have to find billions of pounds more in welfare savings if you want to reduce the deficit, eliminate the deficit and get our debt falling," he said. The comments indicate that if the Conservative Party wins the next election, welfare may be cut to protect spending on public services. Conservative MP Brooks Newmark cited figures produced by the Institute for Fiscal Studies think tank, which said that welfare cuts of £12bn would be required after the next election to keep departmental budget cuts at their current rates. BBC NEWS

NAO contradicts Osborne on Lloyds share sale: Taxpayer lost £230m on rushed sale of bank
The National Audit Office findings shatter Chancellor George Osborne’s claim that the sell-off delivered “a profit for taxpayers.” A rushed sale of Lloyds shares left the taxpayer another £230million out of pocket, a report reveals today. The Government raised £3.2billion by selling off a 6% stake in the bank to major institutional investors in September. But that’s before taking account of borrowing costs to bail out Lloyds at the height of the financial crisis. The taxpayer pumped a colossal £20bn into saving the bank following its disastrous takeover of Halifax Bank of Scotland. A report from the National Audit Office found that once you’ve included the cost of financing the mega-deal, the taxpayer ended up £230m worse off from this summer’s share sale. MIRROR

Probe into gold price scam extended to Deutsche Bank
Germany’s financial regulator has demanded documents from Deutsche Bank as part of an investigation into potential manipulation of gold and silver prices. The probe from the German watchdog comes as regulators around the world step up their scrutiny of benchmarks after the recent Libor interbank lending scandal led to hefty fines for banks. The UK’s Financial Conduct Authority has also been looking at precious metals as part of a broader review of financial benchmarks. With an estimated 175m ounces of gold, worth $215bn at today’s prices, changing hands daily on the over-the-counter market, London is the global centre of gold trading. However, the FCA has not launched a formal investigation. FINANCIAL TIMES
Thursday, December 19, 2013 Posted by Jake 1 comment Labels: , , , ,
Updated on 22/3/2015: We first posted this in December 2013, reporting that between 2011-12 and 2012-13 the number of people resorting to foodbanks close to tripled. Since then the Trussell Trust issued new figures showing this leap happened again between 2012-13 and 2013-14, with yet another close to tripling of users (up 2.6 times). We have updated the graph to show this.

According to a report by the Trussell Trust, a charity running foodbanks the number of people resorting to foodbanks nearly tripled in 2012-13:

"Trussell Trust foodbanks have seen the biggest rise in numbers given emergency food since the charity began in 2000. Almost 350,000 people have received at least three days emergency food from Trussell Trust foodbanks during the last 12 months, nearly 100,000 more than anticipated and close to triple the number helped in 2011-12."

Tuesday 17 December 2013

Tuesday, December 17, 2013 Posted by Hari No comments Labels: , , , , , ,

Sunday 15 December 2013

Sunday, December 15, 2013 Posted by Jake 3 comments Labels: , , , , , , , ,
One almost has sympathy for our MPs. They are being tantalised mercilessly by IPSA waving wads of cash at them. IPSA's proposed pay-hike is as cruel as leaving a diabetic Billy Bunter locked in a dorm with a plate of lemon meringue pies and lashings of ginger beer. Shame on you IPSA! Is this revenge for when all but one of your predecessors were de-facto sacked in January 2013 for refusing to be MPs' doormats? Though we do appreciate the black comedy of MPs protesting through clenched teeth "I couldn't possibly".

MPs have convinced themselves they are underpaid. Even though the supply of politicians has in all our recorded history wildly exceeded the demand. Even though:

Saturday 14 December 2013

Saturday, December 14, 2013 Posted by Jake 3 comments Labels: , , , ,
A National Audit Office (NAO) report published in December 2013 reported that 'free schools' were costing twice as much (on average £6.6 million per school) as expected to build. On the day of publication the media herd wallowed in this cost-doubling story. 

What was less talked about is the report's observation that even though the schools' costs were double the original estimate, they still cost 45% less than building a traditional school. The NAO report stated:

Costs have been lower partly because the Department has taken an innovative approach to providing premises for Free Schools. It has used significant numbers of existing buildings to reduce costs, including properties not traditionally used for schools (Figure 13).


the Department also used less extensive building specifications than on its previous building programmes, such as Building Schools for the Future. It also adopted new space standards, which were approximately 15 per cent smaller for secondary and 5 per cent smaller for primary Schools than existing standards.

Free Schools are 45% cheaper on average to build than traditional schools, helped by having less space per student (15% less in secondary schools!) and by moving into unused former hospital, police, office and retail buildings.

With all the evangelical talk of a 'free school revolution' could grubby cost-cutting be the real motivation? Or was the cheapness just collateral to improving educational standards? The same NAO report sheds some light on this. 

Thursday 12 December 2013

Thursday, December 12, 2013 Posted by Jake No comments Labels:
Rise of 'closet borrowers' who hide debts from their partners
An estimated 11 million people are not telling their partners or family the truth about their borrowing. This secrecy poses a risk to both their relationships and finances, warns the Debt Advisory Centre (DAC). One in ten of these "closet borrowers" owes more than £10,000. The DAC warns that keeping debt secret makes it impossible for households to manage their budgets, and borrowing through credit cards and payday lenders increases the risk. Londoners are the "most duplicitous", with nearly one in three hiding the true scale of their borrowing. But their neighbours in the wider south east were either more open with their families - or less honest to survey takers - with only 16 per cent admitting that they had secret debts. Younger borrowers keep more secrets than older, with around third of those between 25 and 44 holding hidden debt. TELEGRAPH

Lloyds fined record £28m for mis-selling: 100,000 may get compensation
The Financial Conduct Authority said that incentive schemes created a failure in its sales process between 2010 and 2012 where staff across the group's high street brands - Lloyds TSB, Bank of Scotland and Halifax - were put under pressure to hit targets to avoid being demoted. It said such incentive plans "can create a culture of mis-selling". The products included critical illness, income protection, life cover and "expenses on death" cover. Investments included personal investment plans, Individual Savings Accounts (Isas) and Open Ended Investment Companies (Oeics). The regulator said the banks persuaded customers to take out more protection cover than they needed. It could also be that customers were urged to invest in funds when this wasn't suitable for them. Salespeople got commissions as high as £1,600. TELEGRAPH

RBS fined $100m by US for deliberate Iran sanctions violations
The Royal Bank of Scotland has been fined $100m (£61m, 73m euros) by US regulators for deliberately violating US sanctions against Iran, Sudan, Burma, and Cuba. The settlement follows from a 2010 internal investigation by RBS into its historical US dollar payment processes and controls. The violations took place between 2005-09. Bank procedures removed location information on payments made to US financial institutions from countries like Iran and Cuba. RBS employees in the UK "received written instructions containing a step-by-step guide on how to create and route U.S. dollar payment messages involving sanctioned entities through the United States to avoid detection". In total, more than 3,500 transactions, totalling approximately $523m, were routed through New York banks in violation of US sanctions. BBC NEWS

Ofcom says TV payday loan adverts have risen sharply to 400,000 a year
Television viewers were exposed to nearly 400,000 payday loan adverts last year, according to the regulator, Ofcom. In 2011 there were 243,000 such adverts, increasing to 397,000 in 2012, a rise of 64%. On average, each adult viewer saw 152 such adverts in 2012, while children watched 70. Labour has already called for all such adverts to be banned during children's TV programmes. BBC NEWS

ONS figures show families spending more on heating and maintaining homes, with those on lower incomes cutting spending on food
The Office for National Statistics said a decline in disposable income since the banking crash had tightened the financial screw on the average household, which had £489 to spend in 2012, compared with £526.40 in 2006 after accounting for inflation. The ONS said the harsh winters of 2011 and 2012 were also likely to have played a part in driving up energy bills. For the lowest-income families the jump in costs meant they spent 25% of their income on housing, compared with 9% among the richest households. Overall, the richest 10% of homes spent an average of £1,065.60 a week and the poorest 10% spent £189.30 a week. Some of Britain's biggest retailers said the continuing squeeze on family budgets meant they were braced for a difficult Christmas. GUARDIAN

Tuesday 10 December 2013

Tuesday, December 10, 2013 Posted by Hari No comments Labels: , , , , , , , , ,
Fee explains it all to KJ...

Sunday 8 December 2013

Sunday, December 08, 2013 Posted by Jake 3 comments Labels: , , , , , , , ,

In a previous post we complained about the coalition government's plan to reduce spending on public services to the lowest level since before 1948

The Ministry of Justice (MoJ) provides a good (i.e. dreadful) example of this blind rush to cut costs. 

Rather like someone looking for a miracle diet, the MoJ showed it was prepared to swallow anything to lose costs. Sadly this is the same with all the ministries chasing the government's strategy of cutting costs. They measure success by the number of pills they take, and not by the effectiveness of the resulting 'body shaping'. They rush because they know the pill-box may be taken away from them at the next election (though Labour say they will pop the same pills, so it is doubtful us ripped-off Britons will be any less ripped-off).

Outsourcers tempted by this careless slopping out of public sector contracts claim they improve services and lower costs by deploying their ninja-like private sector skills. In practice, their bright ideas are focussed on extracting profits.

Probably the key innovation the private sector brings is cutting staff pay and benefits. Cutting the pay of public sector staff is a very blunt instrument that could be done without outsourcing to the private sector. However governments dare not do this directly because the public sector workforce is better organised by unions to resist. Privatised employees are broken off from this mutual support and become easier prey. A report by IDS, who do independent research on employment issues, shows that the private sector pays worse in general, and exceptionally worse when it comes to female employees:

Saturday 7 December 2013

Saturday, December 07, 2013 Posted by Jake 7 comments Labels: , , , , , , ,

A train is dangerous if you run into its path or you refuse to get out of its way. Otherwise trains are perfectly useful and amiable. Rather like our amiable chancellor, George Osborne, into whose path the country placed itself when fleeing from the previous Labour government. George Osborne whose boyish smile eloquently smirks “How come they haven’t found me out yet?”

A graph from the Office of Budget Responsibility (OBR), a body created by the government in 2010 to provide independent economic forecasts, shines a light into a dark corner of Osborne’s mind. This graph shows Osborne’s current economic strategy will bring government consumption to the smallest share of GDP since before 1948. 

Office of Budget Responsibility "Economic and Fiscal Outlook December 2013"

“Government Consumption” includes money spent buying goods and services. It does not include transfers of money from one group of people (taken in taxes) to another (e.g. paid in benefits and pensions). Government Consumption includes paying for public services such as health, education, transport, justice, defence and the like.

Friday 6 December 2013

Thursday 5 December 2013

Thursday, December 05, 2013 Posted by Hari No comments Labels:
Serious Fraud Office called in over Royal Bank of Scotland’s role in High Street collapses, including Peacocks, Clinton Cards and HMV
The taxpayer-controlled RBS was accused in a Government-backed report last week of ‘systematically’ profiting from vulnerable, mainly small, business customers placed in a division called its Global Restructuring Group (GRG). The SFO is already considering a criminal investigation into the treatment of these small businesses. A whistle-blower has provided the SFO with a dossier of what he claims is evidence that RBS conducted alleged ‘systematic institutionalised criminal fraud’. In a letter sent to SFO director David Green, the whistle-blower says: ‘Officers of RBS deliberately acted contrary to interests of other parties ... to maximise their own interests at RBS to [the bank’s] unjust enrichment.’ DAILY MAIL

Paying below the minimum wage: HMRC has prosecuted ONLY TWO companies in four years
Paying less than the National Minimum Wage (NMW) is illegal, yet over 300,000 people in the UK earn less than the NMW. HMRC has investigated 10,777 firms since 2009 for allegedly breaking the law on low pay, collecting £15.8m in arrears payments and imposing £2.1m in fines. However, only two firms have been prosecuted, and despite ministers' repeated pledges, only one has ever been named and shamed: Treena Professional Hair and Beauty in Leicester, which in 2010 paid a member of staff £342 for 20 weeks' work when she was entitled to £3,703. GUARDIAN

EU fines banks £1.4bn over rate-rigging
The European Commission has fined eight banks - including RBS - a total of 1.7bn euros (£1.4bn) for forming illegal cartels to rig interest rates. The rates are used to set the price of trillions of dollars of products, including mortgages. The record-breaking fines cover yen Libor and Euribor, the European equivalent of the rate set in London, and follow similar fines by financial regulators in the UK and US. UBS and Barclays stood to pay the largest fines of 2.5bn euros and 690m euros, but avoided paying anything because they assisted the investigation. Aside from RBS, Barclays and UBS, the other organisations involved were Deutsche Bank, Societe Generale, JP Morgan, Citibank and the brokers RP Martin. Banks that have not yet settled fines but are being investigated are HSBC and Credit Agricole. A handful of individuals are facing criminal charges. BBC NEWS

British Gas under fire for insulation plan lobbying
After it failed to meet existing mandatory targets for solid-wall insulation, British Gas persuaded ministers to lower industry targets by two-thirds . Rival energy firms say British Gas's lobbying has put up to 10,000 jobs at risk and may jeopardise the fledgling solid-wall insulation industry. Some firms created large teams of home insulators and were on schedule to complete the work on time. But British Gas insulated only one in six of the solid-walled homes it was supposed to. British Gas said there were cheaper ways to save on bills and cut carbon emissions, and denied that they supported lowering the target because cold homes would mean more sales of gas. An industry source pointed out the Old Etonian link between Mr Cameron and Sam Laidlaw of Centrica, which owns British Gas. BBC NEWS

Tuesday 3 December 2013

Tuesday, December 03, 2013 Posted by Hari No comments Labels: , , ,

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