Rip-off News round-up. Our pick of the last week's media (Thu 9th July)

Is Britain sitting on a £200bn buy-to-let time-bomb? Landlords borrow vast sums to fund property empires

More than two million people are now private landlords. That’s up by 600,000 since the financial crash. In 2000, less than two per cent of mortgages in Britain were buy-to-let. Now there are an astonishing 900 BTL mortgages available, and they account for 15 per cent of all home loans. That’s roughly – wait for it – £200 billion of borrowing. That’s close to the national debt of Greece. And it’s borrowed by private individuals to buy not a home for their family, but to speculate on house prices. And it’s still growing. New buy-to-let mortgages account for 18 per cent of all new mortgages. What’s more, it’s given a helping hand by the tax system – it allows the interest payments on a buy-to-let property to be tax deductible. You pay tax on the rental income you receive, but MINUS what your mortgage payments cost you. That costs the Treasury about £5 billion a year. It is, in effect, a subsidy to landlords which people just trying to buy a house to live in do not enjoy. It’s all aided the boom, which prompted the Bank of England last week to raise its own red flag about the BTL bonanza. In its Financial Stability Report – designed to highlight early the potential risk to the financial system that could fuel a 2008-style crash – the Bank said buy-to-let ‘could pose a risk to financial stability’. One sign it highlighted was ‘a growing appetite for risk’ among lenders. Days later, reports emerged of a new price war among banks, cutting mortgage rates to lure new landlords. DAILY MAIL

Budget 2015: Benefit freeze to hit 13m families, costing some thousands, claims IFS

Thirteen million UK families will lose an average of £260 a year due to the freeze in working-age benefits, says the Institute for Fiscal Studies (IFS). Tax credit changes could hit three million families, which are likely to lose an average of £1,000, it said. George Osborne said anyone working full-time on the National Minimum Wage - taking into account taxation changes - would be better off. Under his new National Living Wage, all workers over the age of 25 will earn a minimum of £9 an hour by 2020. But even taking into account higher wages, people receiving tax credits would be "significantly worse off," said Paul Johnson, director of the IFS. The biggest impact on families will come from the freeze in working-age benefits and the changes to tax credits, said Mr Johnson. "It will reduce the incentive for the first earner in a family to enter work," he said. The number of families affected under the IFS analysis includes those who claim Child Benefit - which will be frozen from April 2016. The majority of families claim the benefit. The Resolution Foundation - a think tank that campaigns for low and middle-income families - said some families moving on to Universal Credit, or applying for tax credits after April 2017 could face much bigger losses. For example, a low-earning couple with with three children making a new claim would be £3,450 worse off, following the tax and welfare changes set out in the budget. BBC NEWS

Scrapping Inheritance Tax on homes worth up to £1m overwhelmingly benefits Londoners

George Osborne announced changes to the inheritance tax system (IHT) meaning a couple can hand a £1m estate on to their children without being taxed for the privilege. Currently, a couple has a tax-free allowance of £325,000 a person (£650,000 a couple).  But Chelsea, Westminster and the City of London, Westminster North, and Hampstead and Kilburn are the only four constituencies where the average selling price of a property last year fell between the two lines, and will therefore benefit from the change. No other boroughs come close. The highest-ranked constituency outside London is Esher and Walton, with an average price of £465,000. According to ONS data, only five constituencies in the UK have an average house price above the old threshold – and they’re all in London. Three are Tory-held seats, and two are held by Labour. Overall, Labour constituencies (including Scottish Labour and Labour co-op) have a median price (£127,500) only 61 per cent that of Conservative constituencies (£207,625). CITY AM

Osborne’s tax-cutting rhetoric masks £47bn increase in taxes overall

When you heard George Osborne say six times in his Budget speech that he had moved Britain towards a “lower tax society”, he made a small but important mistake. He really meant “higher tax”. The independent Office for Budget Responsibility was crystal clear on the issue. Robert Chote, its chairman, said that the whole Budget contained “a package of tax increases that will raise £47bn”. There were some cuts to corporation tax, inheritance tax and a rise in the tax-free personal allowance, which the chancellor dwelt upon in his speech. But Mr Chote pointed out that: “the tax increases are roughly twice the size of the tax cuts in aggregate”. The big revenue raisers are the new dividend tax regime, the 3.5 percentage point rise in insurance premium tax, higher rates of vehicle excise duty, restrictions in income tax relief for pension contributions for those earning over £150,000 and a huge one-off boost in corporation tax revenues as companies are forced to pay their bills earlier, helping revenues in 2017-18 and 2018-19. Meanwhile, the “tax avoidance, evasion and aggressive tax planning” clampdown that Mr Osborne highlighted in his speech has not been going to plan. Instead of raising £5bn a year from such measures from 2017-18 as promised in the Tory manifesto, the chancellor has found only £1.3bn. FINANCIAL TIMES

Businesses pocket £93bn in subsidies and tax breaks

Taxpayers are handing businesses £93bn a year – a transfer of more than £3,500 from each household in the UK. The total emerges from the first comprehensive account of what Britons give away to companies in grants, subsidies and tax breaks. Many of the figures, especially on direct payments, are hard to unearth, as they are scattered between various arms of the state. The government admits: “There is no definitive source of data about spending on subsidies to businesses in the UK.” Many of the companies receiving the largest public grants over the past few years previously paid little or zero corporation tax, the analysis shows. They include some of the best-known names in Britain, such as Amazon, Ford and Nissan. For example, in 2012, Amazon was attacked by MPs on parliament’s public accounts committee for avoiding UK tax. Yet in the same period, the online retailer was awarded £16.5m in grants by the administrations of Scotland and Wales to help build distribution centres. To link the Wales plant to the transport network, the Welsh assembly built the mile-long “Ffordd Amazon road” at an additional cost of £3m. The main subsidies include: £14.5bn in subsidies and grants (rail, defence, etc); £44bn in Corporate tax exemptions (mainly write-off expenses, and investment incentives); £15bn in hidden transport subsidies (rail, airline); £3.8bn to energy firms. GUARDIAN

Biggest banks welcome budget that spreads “bank crash” taxes from guilty big banks to small

So far, the bank levy has raised over £8bn for the exchequer, imposed after the global financial crisis. The shock changes to the bank levy announced by George Osborne following sustained lobbying by the industry. Major lenders will be the largest beneficiaries. The change to the bank levy follows a series of complaints by the major banks, particularly those such as HSBC and Standard Chartered, which are based in London but do much of their business overseas. Responding to complaints from banks that the levy has been hiked too often and without warning, Osborne set out a timetable of reductions from 0.21% to 0.18% from January 2016 and 0.17% from January 2017, before reaching 0.10% from January 2021. But the chancellor’s move to scale back the levy, which has raised £8bn since 2010, came alongside a new 8% surcharge on bank profits that experts said would spread the tax burden more widely across the sector, rather than just the biggest banks. Shares in HSBC and Standard Chartered, which had sunk this week on concerns about the situation in China, were lifted off their lows. But smaller banks fell following the surprise announcement because they will be hit by an industry tax for the first time. Matthew Barling, banking tax partner at accounting group PwC, said that while banks with large overseas operations would welcome the reforms, the overall tax burden on the sector was rising. GUARDIAN

Big 6 energy firms overcharge households by £1.6bn and businesses £500m

Prime Minister David Cameron is ‘to consider’ temporary cap on high UK energy bills. A cap was one of the remedies unveiled by the Competition and Markets Authority (CMA) after a year-long probe into the energy market — to prevent people who fail to switch to cheaper deals from becoming stuck on expensive products. Households paid £1.2bn a year too much, while small and medium-sized businesses paid £500m more than they should. However, Centrica-owned British Gas, EDF Energy, Eon, RWE Npower, Scottish Power and SSE escaped more serious censure and any prospect of an industry break-up after the watchdog found no evidence of market abuse or tacit co-ordination over price moves. The CMA pointed to “widespread consumer disengagement” as a key barrier to the proper functioning of the market.  “Lack of awareness of what deals are available, confusing and inaccurate bills and the real and perceived difficulties of changing suppliers all deter switching — and the higher price levels reflect that suppliers can charge higher prices to these disengaged customers,” it said. Dual fuel customers, those buying gas and electricity from one supplier, could save an average £160 a year by switching to a cheaper deal. The watchdog also wants to reform the “four-tariff rule”, a limit introduced by Ofgem, on the number of tariffs suppliers can offer. This had not had the “desired effect of increasing engagement” and instead had limited discounting and reduced competition. The CMA is to publish its final recommendations by the end of the year. FINANCIAL TIMES

Told you so!... Osborne to get £700m tax windfall following pension freedom change

A surge in the number of people pulling money out of their retirement funds will give George Osborne a £700m windfall this year, more than double the sum predicted at last year’s budget, when the new pension freedom rules were first announced. The new rules allow people over the age of 55 to take money out of their pot without any constraint on how they spend it. Financial adviser Hargreaves Lansdown said analysis of current trends showed that around 450,000 people will pay around £700m extra in tax on private pension incomes compared to a forecast of £320m. Anti-poverty campaigners have warned against dipping into pension pots without taking advice on the tax implications, which can result in large bills. GUARDIAN

New rules will make top bank execs responsible for frauds committed by their staff

The new rules follow a public outcry after a series of scandals in the industry, including Libor rigging and foreign exchange rate fixing. City regulators have published final rules that make top bank executives responsible for the misconduct of their employees -unless they can show they took steps to stop it. The rules will also apply to less senior staff who could nonetheless do serious harm to a bank. It comes two years after a parliamentary commission proposed a shake-up of the UK banking industry in the wake of the financial crisis. The new regime will take effect from March. Earlier today, the former UBS and Citigroup trader Tom Hayes, who is accused of manipulating the Libor rate, told a court at his trial that senior managers knew what he was doing. "I acted with complete transparency... My managers knew, my manager's manager knew. In some cases the CEO [chief executive] was aware of it," he said. Mr Hayes is the first person to be prosecuted over the Libor scandal which cost Barclays Bank a then record £290m in 2012 before Royal Bank of Scotland £390m for its part in the scandal. The new rules will place the "burden of proof" on top banking executives in incidents of wrongdoing within their companies. The rules replace existing arrangements that require regulators to prove senior executives were responsible for wrongdoing. The British Bankers' Association, which speaks for the banking industry, said: "This new framework will help to restore trust and confidence in the banking industry damaged by the events of the last decade”. BBC NEWS

Manipulating Libor inter-bank interest rates: it was so commonplace an offer of a Mars bar could get it changed, court hears

Tom Hayes, who worked for UBS and Citigroup, told a fellow trader: "Just give the cash desk a Mars bar and they'll set wherever you want." Mr Hayes is the first person to face a jury trial for manipulating the key interest rate, used to set trillions of pounds of investments. He denies eight counts of conspiracy to defraud between 2006 and 2010. Throughout Wednesday's session, the court was shown dozens of pages of transcripts of exchanges between traders using UBS's internal messaging system. The conversations - matey in tone - all related to moving Libor rates, said Mr Hayes, to assist the traders' and banks' commercial interests, something he said he found it hard to see as wrong. In one chat, Mr Hayes suggests the market is rife with dealers attempting to influence rates: "Very, very hard to price stuff with the fixes so manipulated and inconsistent." His correspondent replies: "The fixes are manipulated?" "Yes, of course they are," says Mr Hayes. "Just give the cash desk a Mars bar and they'll set wherever you want." Another chat session described Libor as "literally a joke". He has alleged throughout his trial that rate-rigging was rife and said on Tuesday that senior managers, even the chief executive of the bank, knew all about it. My Hayes told the court on Wednesday that only once had anyone expressed any concern about the matter. Libor, the London inter-bank lending rate, is considered to be one of the most important interest rates in finance, upon which trillions of financial contracts depend. BBC NEWS

EU says Mastercard overcharges consumers and retailers

The EU is focusing on what is known as 'interchange fees' - the fees retailers pay banks to process card payments. Officials say they are concerned that Mastercard violates competition rules by requiring retailers to pay artificially inflated fees to process credit card transactions. They say this practice leads to higher prices for retailers in the EU, which they then pass on to consumers. "We currently suspect Mastercard is artificially raising the costs of card payments," said the EU statement. Those fees harm consumers and retailers in the EU, competition commissioner Margrethe Vestager said. The charges from the EU are part of a long-running investigation. A separate investigation into Visa's interchange fees is also being carried out by the EU. BBC NEWS