Fat Cat News - the Puppet Show: Our news anchors meet the minister responsible

The government has regularly given assurances that they will curb top pay by giving shareholders the power to veto excessive pay packages. But the pay of the average FTSE 100 Chief Executive has increased by nearly £500,000 in the last year. FTSE 100 bosses are now paid an average £4.72 million, equivalent to hourly pay of well nearly £1,200. It takes them just around 22 hours work to surpass the UK average earnings of £27,200. 

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Office for National Statistics reports show Conservative Party claims of lowering personal taxes are an illusion. Personal taxes actually increased since 2010!

One month before the UK General Election in May 2015 David Cameron, warming up for a post prime ministerial career as a game-show host, announced it was "Money Back Monday". 

On that first day of the 2015-16 tax year Cameron declared: 
"Today is a big day for our country. It's 'money-back Monday' - a day when, quite simply, hard working taxpayers get to keep more of their own cash. A whole host of changes to our tax, benefits, pensions and savings systems come into effect today."

Promising** a handout to the nation one month before the General Election clearly didn't do him any harm. But who actually took the money Cameron promised to give back? 

We get an insight by looking at data from the Office for National Statistics (ONS) annual report on "The Effects of Taxes and Benefits on Household Income". Comparing data from financial years ending in 2010 and 2014 (the report for 2015 won't be out until June 2016), we see the personal tax burden actually increased during the last Conservative led coalition government.

How is this possible? Surely the Tories have been lowering some income tax rates and raising allowances? Yes they have. But they take back significantly more than they give via other taxes. 

Personal taxes come in two forms:
1) Direct Taxes including: Income Tax; National Insurance Contributions; Council Tax.
2) Indirect Taxes include: VAT; Duty on tobacco, alcohol, fuel; car tax; TV licence; Stamp Duty; etc.

Between 2010 and 2014 (charts show percentage of gross income taken in tax):
a) Direct Taxes decreased

b) Indirect Taxes increased

c) Overall Direct + Indirect Taxes increased

Because the poorest pay most of their taxes as Indirect Tax they were hit hardest by Tory tax rises. Nonetheless, the richest also paid a higher rate of tax in 2014 than they did in 2010. 

Indirect and Direct Taxes for richest and poorest [click on picture for better view]

How do the Tories manage to be seen as the "party of low taxation"? They do it by saying it with such confidence people believe it is true without checking. In a speech in March 2014, David Cameron said:
"We believe in helping people keep more of the money they earn. It’s the right thing to do. Let’s be clear: there is no such thing as government money. It’s your money – taxpayer money. It’s not my money, not George Osborne’s money, not the government’s money - it’s your money. Hard-working people’s money."

In the same speech Cameron went on to promise: 
"A bit of extra cash that can help a Dad afford those trainers for his son or help a Mum celebrate her daughter’s birthday with a meal out."

The reality is those who depend on a tax reduction to buy trainers and pizza for their children were far less able to afford those treats. Even those at the other end of the income scale found themselves with more tax taken from what they have to invest or to spend on a whim.

The Conservatives warn us the Labour Party can't be trusted with the UK's economy and security. And yet five years of a Tory led government brought higher taxes, increased national debt, cuts to the military, and cuts to the police. 

The real puzzle in Britain is not what the Labour Party has to do to be trusted. It is what the Tories have to do to be distrusted.

[** Cameron's promise of "money back" in this April 2014 speech was based on an analysis the Tories hadn't published. Sir Andrew Dilnot of the UK Statistics Authority complained about this in a letter that stated:
"Reference to the analysis was made in the Conservative Party press release, but the analysis has not been published and is neither available to all other parties nor to members of the public. We regard this as unsatisfactory because of the significance that we attach to the principle of equal access to statistics and underlying analysis."]

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Rip-off News round-up. Our pick of the last week's media (Thu 24th September)

CBI chief backs green economy, says government’s U-turns will cost business hundreds of billions

John Cridland, director general of the CBI and the most senior voice of British business, has blasted the government’s performance on the “green economy”, warning that UK companies will lose out on hundreds of billions of pounds in opportunities for overseas exports if ministers do not reverse direction. Cridland said the UK’s green economy alone was already worth £120bn a year, and that between 2010 and 2013, the green economy grew at more than 7% a year, compared with less than 2% a year for the UK economy as a whole. The green economy is a new “emerging market”, comparable to the existing emerging economies of China and India, according to the business leader, but the UK’s previous success in capitalising on such opportunities is at risk: “Over many years, the UK has built up real credibility on climate leadership and low-carbon investment. This is hard won, but easily lost.” Since coming to power, the Conservatives have aimed a series of blows at the green economy, including: slashing support for solar power; effectively ending the building of new onshore wind farms; scrapping the flagship “green deal” insulation scheme, with no replacement; and part-privatising the Green Investment Bank. There has also been a stream of rhetoric from senior ministers that has attacked green aims, including pledges that the UK would hang back on cutting emissions, compared with other major economies. GUARDIAN

Low prices, high pay! Lidl becomes first supermarket to offer Living Wage and vows not to increase cost of goods to fund it

It's already known for its low prices – now Lidl says it’s going to pay the highest supermarket wages. The discount chain will be the first grocer to adopt the so-called Living Wage for its staff. And it has vowed not to push up the cost of goods to fund the £9million cost of the increase. Lidl will give workers at least £8.20 per hour across Britain – some £1 more than the minimum announced by George Osborne in the summer. The firm, which has 620 stores and a 4.1 per cent share of the UK grocery market, will pay £9.35 per hour in London. It represents an average wage increase of £1,200 per year, with more than half of the grocer’s 17,000 workforce of all ages benefiting from the rise. In July, the Chancellor stunned firms by revealing plans to introduce what he dubbed a ‘National Living Wage’. From April 2016, firms will have to pay all workers over 25 at least £7.20 an hour, up from the current national minimum wage of £6.50. It will rise to £9 by 2020. However, the move has been controversial. Last week, Costa Coffee faced a backlash for threatening to hike the price of a cappuccino to pay for the cost of higher wages. Pub chain JD Wetherspoon said the National Living Wage would put ‘financial pressure’ on the already-strained sector. And clothes retailer Next claimed they will have to increase prices to pay for the rise in staff costs. But German-owned Lidl, which made record sales of £4billion last year, said it would absorb the wage increase itself. It’s UK boss Ronny Gottschlich said employees will be amongst the best paid in the supermarket sector. DAILY MAIL

New NHS contract will worsen shortage of junior doctors

The warning comes from the trainee doctors group (ATDG) of the Academy of Medical Royal Colleges, which represents the professional interests of all the UK’s 240,000 doctors. It puts extra pressure on Hunt to reconsider his decision to impose new terms and conditions on the NHS’s 53,000 junior doctors in England, which has sparked angry protests. The new contract will extend the normal working week in which doctors can be told to work their 48 hours from 7am-7pm Monday to Friday to 7am-10pm Monday to Saturday. Many will also see their pay cut because they will no longer be paid overtime for working evenings and Saturdays. The ATGD claim the new contract will deepen existing shortages in areas which already require doctors to work a lot out of hours, such as A&E units, acute medicine, children’s services and general practice. Recent official NHS figures, covering the arrival of the latest round of new junior doctors in August, show that acute medicine was still short of 48% of the new recuits it needed, as was renal medicine (48%) and geriatrics (14%). The proposed changes have already raised fears of an exodus of expensively trained medics to other countries, such as Australia, after figures showed 1,644 young doctors had already began the process of applying for the certification needed in just three days last week. GUARDIAN

Tory MP Andrew Tyrie demands proof that taxpayer is getting value for money in RBS sale

Treasury Select Committee (TSC) chairman Andrew Tyrie MP is demanding to see what advice the government received from UK Financial Investments (UKFI) - the agency that manages the public stake in bailed-out banks - before it started to sell off shares in Royal Bank of Scotland last month. UKFI sold around 600m shares, reducing the government's 79 per cent stake in the lender. The shares went on sale at a £13bn loss. Tyrie, who has been chairman of the TSC since 2010, noted that Osborne has since commissioned "an independent report from Rothschild to verify the work of its own advisers", saying this "could be taken to cast doubt on the quality of this advice". Tyrie said: "UKFI exists to develop and execute an investment strategy for disposing of the government’s shares in RBS and Lloyds in a way that protects value for the taxpayer. This is its overarching objective, set out in its framework document." It follows concerns about why UKFI had paid Goldman Sachs and UBS just £1 for services that otherwise would have brought in millions for the investment banks, a fact revealed earlier this month. CITY AM

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The government promises 200k new houses a year? We’ve only ever come close to hitting that figure once since the 1970s

KJ, Fee and Chris desperately seek diversion from the nation's never-ending property nightmare...

SOURCE BBC NEWS: 'Million' new homes by 2020 target declared by minister Brandon Lewis

Housing minister Brandon Lewis said the government aimed to see one million new homes in England over this Parliament. But the National Housing Federation (NHF) said about 245,000 new homes were needed each year in England. Figures from 326 councils showed only 457,490 were built between 2011 and 2014. The NHF estimated 974,000 homes were needed during that period. Gill Payne, NHF director of policy and external affairs, said: "Skyrocketing rents and ballooning house prices are eating up more and more of people's wages and forcing people out of their local communities or into smaller, lower quality housing... We haven't built enough homes in this country for decades.” In 2012, the government introduced changes to the National Planning Policy Framework, aimed at making the planning process simpler and quicker. But numerous other factors have also been blamed. A shortage of land has also been cited by homelessness charity Shelter, while criticism has been levelled at developers who build slowly rather than progressing quickly. By keeping the number of new homes available at any one time low, the price of those houses can be kept high, said Matthew Pointon, property economist at Capital Economics. A shortage of skilled labour, a big drop in the number of councils building new homes and regulations restricting housing associations have also been blamed. Shelter's chief executive Campbell Robb added: "We are past the time for another grand statement of ambition. To give ordinary families back the hope of a stable home, we need to see investment and a comprehensive plan that can actually get these homes built."

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Twice as many LibDem voters went to Labour than to Conservative, but three times as many LibDem seats went Conservative than Labour. The LibDem collapse unintentionally handed the Tories victory in 2015. A LibDem "comeback" could hand Labour a victory in 2020.

The Conservative victory in the 2015 General Election has rightly been described by just about everyone as "stunning". However with the continuous repetition of this accurate assessment it is gradually being forgotten why it was stunning. And it has been forgotten what the immediate result of being stunned is.

The victory was stunning not because of its size, but because it happened at all. In fact Cameron's victory was smaller than any in recent decades except for his own performance in 2010, which forced him into coalition with the Liberal Democrats.

A report in September 2015 by the Institute for Public Policy Research (IPPR) throws some light on what caused this stunning event. In terms of changes in voter support, the report finds:

a) About the same number of voters shifted from Labour to Conservative as shifted from Conservative to Labour. Effectively cancelling each other out.

b) About the same number of voters shifted from Conservative to UKIP as shifted from the LibDems to the Conservatives. Effectively cancelling each other out in terms of number of votes, though not in terms of number of MPs.

c) Labour gained far more votes from the LibDems than the Tories did. But the Tories gained far more MPs from them. [Of the 49 seats the LibDems lost in 2015: Tories took 27; Labour took 12; SNP took 10].

David Cameron could well have quoted Henry V's not so famous speech in the Shakespeare play of that name. Not "Once more unto the breach dear friends, once more..", but the one at the end of the Battle of Agincourt:

"O God, thy arm was here;

And not to us, but to thy arm alone,

Ascribe we all! When, without stratagem,

But in plain shock and even play of battle,

Was ever known so great and little loss

On one part and on the other? Take it, God,

For it is none but thine!"

Though instead of "God", the credit would go to the "Electoral Arithmetic". The vast migration of voters (pictured in the IPPR graph below) crossing political borders to find a better life resulted in gifting the election to the Tories. The large number of votes the Tories lost to UKIP did not cost them any seats, nor gain UKIP any. While the small number of votes the Tories gained from the LibDems won them 27 additional MPs.

Many have forgotten what "stunning" and "being stunned" actually mean. The thing about stunned people is they tend not to see clearly. Jeremy Corbyn becoming leader of the Labour Party elicited terror from the Left and glee from the Right. Both were convinced that the Conservative's stunning victory proved the Labour Party needed to move Right in pursuit of electoral success. Both concluded a Leftier Corbyn-led party would hand the Tories power for a decade.

In stark contradiction to this belief, the IPPR report showed Labour would actually be noticeably less attractive to voters if it moved to the Right. Moving further to the Left would apparently make Labour marginally more popular.



What about the great tide of voters when the angry wind for UKIP and against the LibDems changes? Will it recede, and where will it recede to? The graphs below relate only to constituencies lost by the LibDems in the 2015 General Election:

a) Tories to UKIP:
Traditional Tory voters who moved to UKIP will be faced with months of derision from their former party. They will be told insisting on leaving the EU is a task for fools and buffoons. Will they return in the 2020 general election to the Tory party having been treated so scornfully by it? 

b) Lib-Dems to Tories:
The Liberal-Democrat party conference hall, in September 2015, echoed with promises of a great come-back. This is not so impossible. Now traditional Lib-Dem voters know that not voting Lib-Dem to punish the party for being too Tory, they ended up with actual Tories as their MPs. Perhaps next time they will be more careful what they vote for. With Labour a distant third in many of these lost seats, the voters would have to return to the Lib-Dem fold to eject their Tory MP. The Lib-Dems are not without consolation in their 2015 desolation, and have 20,000 extra shepherds to herd their lost sheep back into their fold:

We've had 20,000 new members join us since the beginning of the election campaign - why not join them too? http://t.co/uhtmkgT1D2 #CallClegg

— Liberal Democrats (@LibDems) June 25, 2015

The Conservative victory in 2015 was stunningly narrow. The 2020 election is for the Tories to lose as much as it is for Labour to win. Something the Tories are more likely to do if they continue to repel voters with their "Nasty Party" tendencies.

If the Tories truly believe Corbyn will be a disaster for Britain, then they owe it to save Britain by being less repellent even if it goes against the instincts of their current leadership. 

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Rip-off News round-up. Our pick of the last week's media (Thu 17th September)

Revenue & Customs 'winding down' inquiries into HSBC Swiss tax evaders

HM Revenue and Customs (HMRC) reopened its investigation into British customers of HSBC Suisse in February, but has failed to add to the single prosecution of a tax cheat from the bank. The disclosures have dismayed MPs who had pressed for further action over the HSBC files, which were first handed to HMRC five years ago. The tax office has been criticised for offering an amnesty to hundreds of the 3,600 UK customers it identified as potentially hiding money in Switzerland. Jennie Grainger, HMRC’s director general (enforcement and compliance), said: “We have collected more revenue, we now have £142m, but we have just about exhausted what we have from the data.” Conservative MP Stephen Phillips, a member of the public accounts committee, said: “HMRC’s view that it’s OK for people who illegally hid their money in Swiss bank accounts just to pay the back tax and a small percentage penalty without being prosecuted sends an appalling message. Rightly, it makes everyone who abides by the law and pays all their taxes very angry.” GUARDIAN

G4S and Serco, caught and banned for overcharging, are still being paid for prisoner tagging

G4S and Serco were referred to the Serious Fraud Office for overcharging the Ministry of Justice for tagging offenders, some of whom were back in prison or who had already died. Following the scandal, Capita won the contract — worth £400m over six years — to manage the electronic tagging of offenders in 2014. But the secondary contract to supply the new generation of GPS satellite tags has so far failed to deliver, forcing the government to rely on tags supplied by G4S and Serco anyway. As a result, G4S was paid a total of £8.7m between March 2014 — when it lost the tagging contract — and February 2015. Serco was paid £4.5m during the same period. Michael Gove, the justice secretary, told a recent select committee that the procurement had “been deeply unsatisfactory.” According to the think-tank Reform, prison places are nearly five to six times more expensive than tagging, costing £73 per prisoner a day compared with the new GPS tags, which will cost £8 to £16 a day. It also pointed to US research indicating that the use of tags could reduce reoffending rates. FINANCIAL TIMES

Trade Union Bill: Recruiters warn against new strike laws that allow their agency workers to step in

As part of its Trade Union Bill, the government wants to end the ban on using agency workers to replace striking staff. The government says its reforms will end unjustified disruption to working people's lives. There has been a ban on using agency workers in strike action since the 1970s. But Kate Shoesmith, head of policy at the REC, said: "We are not convinced that putting agencies and temporary workers into the middle of difficult industrial relations situations is a good idea for agencies, workers or their clients." The big recruitment agencies work in countries around the world. Most have signed up to the International Labour Organisation's convention on private employment agencies. It states that "private employment agencies should not make workers available to a user enterprise to replace workers of that enterprise who are on strike". The UK has not signed up to the convention. But it is understood that many employment firms are keen to ensure that they are not seen to be sidestepping their international obligations. TUC boss, Frances O'Grady, said: "Everyone knows that if you can just replace strikers overnight, that undermines all the power that workers have to bring their employers to the table... Imagine the impact on the safety of whole workplaces run by untrained, inexperienced temporary staff. Think about what that would mean in education, energy or border control." BBC NEWS

Berlin to push for bank financial transactions tax to cover all of EU

German Finance Minister Wolfgang Schäuble will push for a planned European tax on stock and bond trading to apply in all EU countries in spite of firm UK opposition to the scheme and warnings from banks it would hurt their business. While only 11 nations — including Germany and France — are planning to participate in the financial transactions tax, Mr Schäuble said that this should be seen only as a first stage, and that efforts should then be made to convince other nations to join. The European Commission first proposed the tax in 2011, as politicians sought to quell public anger over massive bank bailouts. Advocates of the measure — which has been strongly pushed by France — argue that it would force banks and other financial firms to make a fair contribution to the public purse. Another motivation is to discourage speculative trading that is not linked to the real economy. But the mooted tax has become a bogeyman for Britain, which has warned that the original blueprint for the measure would see UK-based traders hit even though the country has ruled out participating. FINANCIAL TIMES

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What's the catch? MPs discover investment banks charged only £1 to “help” Treasury re-privatise Lloyds and RBS

SOURCE GUARDIAN: What's the catch? MPs warn UKFI over banks' £1 privatisation fees

UK Financial Investments (UKFI) is the company established by the Treasury to hold the taxpayers’ stakes in RBS and Lloyds. It has been warned to remain “ultra-vigilant” after it was revealed some of the City’s biggest investment banks – including Goldman Sachs and UBS – are charging the government as little as a £1 fee for work that would normally cost tens of millions of pounds. Representatives of UKFI told the Treasury select committee it had paid just £15 for help and advice related to the sale of shares in Lloyds Banking Group and RBS which would normally have cost around £38m. Oliver Holbourn, head of market investments at UKFI, said some City firms had even offered to pay the government to work on its privatisations. The banks, however, eventually concluded that such arrangements could be an offence under the US foreign corrupt practices act. James Leigh-Pemberton, the boss of UKFI, said he assumed the banks worked for £1 because of the caché associated with such high-profile work. But Conservative MP, Chris Philp, warned UKFI to proceed with caution: “I’ve never encountered an outfit like Goldman Sachs or Morgan Stanley acting in a charitable manner,” he said. Steve Baker, another Conservative MP on the committee, said UKFI needed to give clear answers about where the investment banking advisers are making money, given the low fees. “I feel sure that many of my constituents would join me in regarding in the utmost astonishment that the same organisations that have been fined for repeat rapacious misconduct are now the jolly good chaps we imagine from the past and now charging just £1 for their services”.

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Taxes up! Public spending up! Government borrowing up! No, these aren't Corbyn's future plans. They are Osborne's 2015 Budget pledges

“tax increases raise £47.2 billion over the Parliament…various tax and spending decisions have indirect effects that raise a further £14.2 billion.”

“Budget decisions also imply £3.5 billion of extra borrowing over the Parliament, on top of the £14.6 billion increase implied by our pre-measures forecast.”


“Government’s provisional spending assumptions imply that Resource Departmental Expenditure Limits (RDEL) – which cover day-to-day central government spending on public services, grants and administration – would be £83.3 billion higher in total over the current Parliament”

Premonitions of a Leftist Corbynite cataclysm? No, the above quotes are taken from the Office of Budget Responsibility’s (OBR) independent analysis of the Conservative government’s July 2015 Budget. The first pure Conservative budget, undiluted by their late LibDem coalition partner, since Kenneth Clarke had his last dram in the Commons in 1996, 19 years earlier.

Those fearing Jeremy Corbyn's tax, borrow & spend proclivities would find him in surprising company: George Osborne. Perhaps they have failed to notice because the Tory Chancellor has repeatedly proved to be a master of misdirection. Not in the way of a top hat and tailed king of conjuring, more like an emperor with no clothes. Both Osborne and Emperor could parade in their nakedness not because the people were convinced they were covered, but because those who should have said they were bare didn’t dare. Like the people in the fairy tale praising the Emperor's dress sense, the 2010-2015 Labour Party didn't dare oppose Austerity for fear of seeming too economically stupid to love it. In both stories it takes someone considered to be a naïve nobody to expose the streakers. 

To misdirect attention from his overall large tax hike Osborne flourished £24.6 billion in tax cuts. The OBR report stated these were “primarily cutting corporation tax rates, raising the income tax personal allowance and extending inheritance tax relief for main residences”. In 24.6 billion bounds, the Chancellor escaped notice yet again!

To misdirect from massive welfare cuts to the poorest, Osborne waved the risibly named “National Living Wage” (NLW) wand. The Tories set the NLW at £7.20 per hour from April 2016, promising it will rise to 60% of the national average (median) wage by 2020. Risible because:
a) 60% of the median income is a common definition of Poverty.
b) By having a single "National" living wage, Osborne ignores wide regional variations in living costs and incomes. According to the Resolution Foundation even by 2020 the NLW will only be 47% of the median income in London.
b) The “living wage” is already a well defined and considerably higher amount calculated by the long established Living Wage Foundation. For 2014-15 the Living Wage Foundation set this at £9.15 per hour in London, and £7.85 per hour outside London.

Osborne’s high-jacking of the “Living Wage” was his icing on what turned out to be a cow-pat (or was it bull s**t?). The report "Higher ground: who gains from the National Living Wage" by the Resolution Foundation points out what Osborne gave with one hand he took back and more with a wheelbarrow. 

Cuts to working age benefits, which have mainly been the government subsidy for low paying employers, wiped out many times over what those on low pay gained from the new “National Living Wage”. The Resolution Foundation report states "The NLW only partially offsets the losses low-income households face after the Summer Budget". The graph below shows that this Summer Budget, with its National Living Wage, left the poorest 40% of households hundreds of pounds a year worse off representing a cut of up to 9% in their incomes. The richest 10% are also hundreds of pounds worse off but that represents a tiny fraction, less than 0.5%, of their incomes.

Not only did Osborne pick the pockets of the poor, he also managed to discombobulate employers with his National Living Wage caper. According to Gavyn Davies, hedge fund manager, former Goldman Sachs partner, and former chairman of the BBC, two thirds of corporate profits since 2008 have come from holding wages down:

"[If the] decline in the wage share had not occurred, and everything else had (implausibly) stayed the same, then gross profits in the developed economies would have been about one-third lower than they are today and net profits (after depreciation) would have been about two-thirds lower."

From this we can understand the bleating about the cost of National Living Wage from top executives of the care sector and the retail and relaxation industries. They fear the profits in their pockets may leak back to their staff in higher wages. 

http://visual.ons.gov.uk/interactive-how-well-does-my-job-pay/

Doubtless some will assert we are all in it together; it's all done for their own good; and the only way the poor can escape being poor is by staying poor.

The President of the Institute of Chartered Accountants chimed in with a piece for the CityAM newspaper titled “The National Living Wage could make eradicating the deficit a three Parliament problem”. He provides a reminder that the way things are the prosperity of the nation depends greatly on the poverty of the poor. 

https://curvedroad.files.wordpress.com/2011/08/donquixote.png

But things only stay the way they are until they change. 

The Tories comfort themselves that Corbyn as Labour leader is absurd. The Spanish author Miguel de Cervantes, author of the novel Don Quixote, wrote: "To attain the impossible one must attempt the absurd". 

Another author, Arthur C. Clarke, commented on the evolution of revolution: 
"Every revolutionary idea seems to evoke three stages of reaction. They may be summed up by the phrases: (1) It’s completely impossible. 
(2) It’s possible, but it’s not worth doing. 
(3) I said it was a good idea all along."
Perhaps this is how it will be with those Labour MPs who scurried for cover for fear of Corbyn's "impossible dream".

For a political balance that provides representation for the widest range of people in Britain it was necessary for Labour to move back to the Left. Will Jeremy Corbyn have what it takes to bring positive change first from opposition and perhaps later from power? Now we will have a chance to see. But even if he doesn't, cracks are surfacing in the self-serving assumption of the few that the left-behind are happy to be left behind.

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Rip-off News round-up. Our pick of the last week's media (Thu 10th September)

What's the catch? Investment banks charged only £1 to “advise” on Lloyds and RBS sell-off

UK Financial Investments (UKFI) is the company established by the Treasury to hold the taxpayers’ stakes in RBS and Lloyds. It has been warned to remain “ultra-vigilant” after it was revealed some of the City’s biggest investment banks – including Goldman Sachs and UBS – are charging the government as little as a £1 fee for work that would normally cost tens of millions of pounds. Representatives of UKFI told the Treasury select committee it had paid just £15 for help and advice related to the sale of shares in Lloyds Banking Group and RBS which would normally have cost around £38m. Oliver Holbourn, head of market investments at UKFI, said some City firms had even offered to pay the government to work on its privatisations. The banks, however, eventually concluded that such arrangements could be an offence under the US foreign corrupt practices act. James Leigh-Pemberton, the boss of UKFI, said he assumed the banks worked for £1 because of the caché associated with such high-profile work. But Conservative MP, Chris Philp, warned UKFI to proceed with caution: “I’ve never encountered an outfit like Goldman Sachs or Morgan Stanley acting in a charitable manner,” he said. Steve Baker, another Conservative MP on the committee, said UKFI needed to give clear answers about where the investment banking advisers are making money, given the low fees. “I feel sure that many of my constituents would join me in regarding in the utmost astonishment that the same organisations that have been fined for repeat rapacious misconduct are now the jolly good chaps we imagine from the past and now charging just £1 for their services”. GUARDIAN

Housebuilder Barratt profits surge to £566m thanks to housing shortage and Help to Buy scheme

Britain’s largest homebuilder, Barratt Developments, has reported a 45% surge in profits, as a result of the acute mismatch between housing demand and supply, as well as the government’s help to buy scheme. Barratt said it had been “another year of excellent progress for the group” with pre-tax profits having risen to £566m, compared to £391m the previous year. Revenues were up by 19% to £3.8bn, in a year when Barratt completed the largest number of homes since 2008. The company, which is the UK’s largest housebuilder by volume, said its average selling price had risen 8.7% to £262,500, largely driven by house-price inflation.  The homebuilder has also been boosted by the greater availability of mortgage finance, as well as government support. The government’s Help to Buy scheme, which was unveiled in the 2013 budget, allows homebuyers with just 5% of a property’s price to buy a newbuild home with the help of an interest-free loan or an existing home with a government-guaranteed mortgage. The scheme has been extended to 2020. But very few first-time buyers have benefitted, partly because the scheme has helped to drive house prices out of their reach. However, the scheme has been a boon for housing companies, which have seen an upswing in profits against a backdrop of intense demand for housing and record-low interest rates. The previous chief executive of Barratt Developments, Mark Clare, cashed in £11.8m worth of shares when he stepped down in July, after nine years at the top. GUARDIAN

Britain is sitting on a new £173bn debt time bomb - and with rates set to rise it's ticking even louder

The startling rise in debt levels is due to people splashing out on new cars, TVs, conservatories and home improvements. But with a rise in interest rates imminent for the first time in more than eight years, fears are growing that many families will be left struggling with repayments. The total outstanding bill in consumer credit on the High Street is a staggering £84.4 billion — made up of the record £41.4 billion on credit cards, £6.7 billion on overdrafts and £36.3 billion on personal loans. A spokesman for MBNA, one of the largest credit card lenders, said: ‘We’re optimistic about the economy and its future. Are we fuelling debt? Well, after the credit crunch, governments asked lenders to help get people spending again.’ Of particular concern are car buyers with a history of bad debts, who are being offered loans with few financial checks for new or second-hand vehicles — a return of so-called sub-prime loans. Car financing debt now stands at £28.7bn. Analysis of debt levels shows the amount being taken out by homeowners remortgaging to pay for an extension hit £477 million between April and June — a five-year high. Bank of England governor Mark Carney has sent a letter to all fund managers asking for reassurance they are able to deal with an anticipated rush of investors making emergency cash withdrawals to cover their mortgages, should interest rates rise. DAILY MAIL

Lloyds trader, fired over Libor rigging, sues for unfair dismissal

Andrew Reed, who inputted the bank’s submissions to the yen London interbank offered rate, will have his case heard at a London employment tribunal on Sept. 16, according to the court schedule. He was fired a year ago after Lloyds was fined about 226 million pounds ($345 million) by U.S. and U.K. regulators. The case is one of a spate of unfair-dismissal lawsuits to reach London courts in recent weeks following investigations at the world’s biggest banks into the rigging of foreign-exchange markets and benchmarks related to Libor. Four former Citigroup Inc. currency traders, Carly McWilliams, Perry Stimpson, David Madaras and Robert Hoodless have all filed claims in a London employment tribunal. Former HSBC Holdings Plc foreign-exchange trader Serge Sarramegna sued the bank after he was dismissed. At least 30 traders at a number of banks have been fired, suspended or put on leave in the last two years after it emerged the world’s biggest lenders had attempted to collude to rig currency benchmarks. Banks have paid out more than $10 billion in fines over the scandal, with criminal investigations in the U.S. and the U.K. still active. BLOOMBERG

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Our banks aren't lending to the real economy. Maybe Corbyn’s QE and National Investment Bank will

KJ get's there in the end, with help from Fee and Chris...

SOURCE TELEGRAPH: Five good things about Corbyn (even if you're not a Labour supporter)

Did you ever wonder why the banks and the City (who caused the great recession) were also the largest beneficiaries of re-inflating the economy with quantitative easing? And did you not perhaps feel a little aggrieved that, once they’d got what they wanted, they carried on as if nothing had happened, displayed no gratitude whatsoever and changed their ways not a bit? Anyway, history has shown that there is alternative in the form of a massive public works programme. You know, like the New Deal. A response to an economic calamity that benefits everyone, not just the people who caused it. Imagine if, instead of a few new towers in the City we had new jobs, new ports, new roads and new railways. Imagine, if instead of austerity, we had government spending. You wouldn’t even need to print money to do it. Rather, governments could borrow it - and at the lowest rates for decades. The Economist recently described the failure of governments to borrow to build as a “missed opportunity”, while Standard & Poor’s reckons that, for every 1% of GDP spent on infrastructure the UK’s economy would grow by 2.5 per cent.

SOURCE STANDARD & POOR'S: Global Infrastructure Investment: Timing Is Everything (And Now Is The Time)

Standard & Poor’s sees clear economic benefits to G20 countries’ increased public spending on infrastructure–with the so-called “multiplier effect” of an increase in spending of 1% of real GDP running as high as 2.5 in a three-year period. The multiplier effect is generally greater in developing economies than for more developed countries; for example, China, India, and Brazil would all enjoy a boost to GDP of at least double the increase in investment. For Europe, it’s clear that a concerted effort across the region would have a greater effect than country-specific increases in spending. For developed nations, the increase would boost employment substantially–adding more than 700,000 jobs in the U.S. and about a million in the EU. In addition to the short-term boost to jobs and aggregate demand, infrastructure investment often yields long-term benefits by enhancing efficiency.

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The British people are highly engaged in everything except politics. Politicians need to understand the Jeremy Corbyn phenomenon instead of dismissing him as a mistake.

In the run up to the Labour Leadership Election, a greater mystery than Jeremy Corbyn's unfathomable popularity was the leap in public declarations of loyalty to the Labour Party. On the day applications to vote for the new Labour leader closed, on 12th August 2015, the Labour Press Team tweeted:

Verification process continues, but total figs of those who applied for a vote: Affiliated: 189,703, Registered: 121,295, Members: 299,755

— Labour Press Team (@labourpress) August 12, 2015

The Labour List blog stated 400,000 additional people had signed up in time for the leadership election:

"Labour had roughly 200,000 members by election day in May [2015], meaning that membership, which now stands at 300,000, has risen by 50% in just three months. In that time, 120,000 people have paid £3 to become registered supporters and 190,000 have signed up to vote through their trade union. That means of the 600,000 eligible to vote, 400,000 have signed up to do so over the summer months."


In an attempt to de-rail him, Left-ish politicians and commentators tried to ridicule Corbyn's candidacy. When that didn't work they turned their attention to denigrating the entire election process, claiming the cohort of newly registered voters was packed with mischief makers from the far left and right. They presumed British apathy meant the idea that 400,000 people genuinely wanted to step forward and help decide the Labour Party's future direction was impossible.

Are the British really so very apathetic? After the 2015 General Election the BBC reported only 66.1% of registered voters had turned out to vote. This compares with turnouts in general elections before 1997 hovering around 75%.

As a result the Conservatives won the 2015 election with the votes of fewer than one quarter of registered voters! [Tories got 36.9% of the vote, therefore 36.9% x 66.1% = 24.4% of all registered voters].

These figures don't even include about 7 million eligible people who, according to the Electoral Commission, weren't registered to vote in 2015. The graph below from the Electoral Commission shows since 1998 the number registered to vote has rapidly fallen behind the number of people of over 16 (the age when one should register to vote).

The fall in voter registration and turnout was surpassed by the fall in membership of political parties. Between the 1970s and 2013 membership of political parties as a percentage of eligible voters fell:

• Conservative: 3.1% down to 0.3%
• Labour: 1.7% down to 0.4%
• Liberal/LibDem 0.5% down to 0.1%

A report by the UK Parliament in January 2015 stated that:
“Membership of the three main political parties is at a historic low: less than 1% of the UK electorate is now a member of the Conservative, Labour or Liberal Democrat Party, compared to 3.8% in 1983.”

Do these dismal figures prove we Britons have become apathetic? 

Actually, a report by the Joseph Rowntree Reform Trust (JRRT) suggests not. This report provides many examples of us increasingly engaging in community, charity and other civic activities. The report states:

• 50 per cent of British adults – over 20 million people – volunteer formally or informally at least once a month
• Amongst the supposedly most apathetic – those who do not vote in general elections – 37 per cent were members of, or active in, a charity, community group, public body or campaigning organisation

Another report, "The Citizen's Audit of Britain" done in 2005, found over a twelve-month period:

• 62 per cent donated money to a political or campaigning organisation, 
• 30 per cent helped raise money for a political or campaigning organisation, 
• 31 per cent boycotted a product
• 25 per cent contacted a public official.

The increase in participation comparing the 1970s with the 2000s shows, according to the JRRF report [NOTE: in the graph below multiples below 1 mean a decrease]:   

Apathy? In this same period when Britain was turning away from politicians:

• Proportion of population that took part in a demonstration rose from 6 per cent in 1974 to 13 per cent in 2000.
• The proportion that signed a petition rose from 23 per cent to 81 per cent.
• Friends of the Earth grew from 1,000 members in 1971 to 119,000 in 2002; 
• Greenpeace grew from 30,000 in 1981 to 221,000 in 2002.
• National Trust grew from 278,000 in 1971 to 3,000,000 in 2002
• Royal Society for the Protection of Birds grew from 98,000 to 1,200,000 in the same period

The reason for chronic low voter turnout isn't that we can't be bothered. It is because so many think nobody is worth voting for. 

The Tories have little to gloat about. Membership of the Conservative Party virtually halved during David Cameron's leadership. Not a problem financially, as in 2014 they received 38 times as much money from donations as they did from membership fees. 

The Tories too had their own leadership election hiccup in 2001, when constituency party members' votes resulted in Iain Duncan Smith seeing off Kenneth Clarke and Michael Portillo, their MPs' preferred choices for leader. The Tory MPs, who make no bones about who butters their bread, quickly ditched IDS. By Michael Howard running unopposed as IDS's replacement in 2003, they avoided giving the membership a chance to get uppity a second time.

Faced with three candidates they found impossible, voters in the Labour Leadership Election took Sherlock Holmes' advice: Once you have eliminated the impossible, whatever remains, no matter how improbable, must be the truth. 

However improbable Corbyn may be, the Parliamentary Labour Party needs to ditch the notion that he is a mistake. The Labour Party must understand why Corbyn rose so high, whether he wins the leadership or not. Understanding that will show them the way to return to government.

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Rip-off News round-up. Our pick of the last week's media (Thu 3rd September)

90 people a month died after being found fit for work and losing benefits, government figures show

Between December 2011 and February 2014 2,380 people died after their Employment and Support Allowance claim was ended. They had received Work Capability Assessments (WCA) to decide if they were eligible to receive ESA, which replaced incapacity benefit, income support and severe disablement allowance in 2008. 1,340 of them died after appealing against their decisions, though it is not known what proportion of those appeals were successful or failed. The figures - and the time frame they cover - were released after the Information Commissioner ruled the government should release the statistics, including mortality rates for benefit claimants, in response to Freedom of Information (FOI) requests. The data does not contain a breakdown of how the people died. Campaigners have called for the "tragic" figures to be investigated. The DWP said no link could be assumed between the deaths and claimants being deemed fit for work. BBC NEWS

Small banks v big banks: Small lenders to confront Treasury over huge tax hike to pay for big bank tax cut

The Government has introduced £40bn worth of new taxation aimed at the big banks over a decade, through five different taxes including the levy and the corporation tax surcharge. These bank tax raids on the big lenders are justified in terms of making them repay the debt to society they incurred in the crisis: but many of the challenger (i.e. new and small) banks did not even exist back in 2008 so cannot be blamed for the meltdown. The challenger banks – along with the building societies – say they are shocked and angry at the Chancellor’s announcement that lenders making profits above £25m will be forced to pay an 8 per cent corporation tax surcharge, whilst the levies on the big banks will be scaled back. The revolt is being led by Paul Lynam of Secure Trust bank, who chairs the British Bankers’ Association panel of challenger banks. Lynam said: ‘...the surcharge is an absolute victory for the lobbyists for big banks... The large banks enjoy a multi-billion pound a year subsidy by being too big to fail, which means they can fund themselves at a fraction of the cost of smaller ones. Reducing the bank levy means they will be subsidised not only by the taxpayer, but by the smaller banks.’ Some suspect the Chancellor, who is trying to offload the Government stakes in RBS and Lloyds, wants to cut back the levy to make shares in those two lenders more attractive. Back-of-the-envelope calculations by industry experts suggest one of the big banks, HSBC, may benefit to the tune of £470m over five years from the tax change. DAILY MAIL

Restaurant tipping abuse under investigation

The government investigation will look at how tips left by customers are handled after recent reports found that a proportion of tips at some restaurants were being spent on administrative costs. Most chains use a "tronc" system, where all the tips are collected together and distributed evenly through the staff, usually with around 70% going to the waiters, and the rest given to kitchen and other workers. There is no law regarding how a tronc is divided, however. Many high-street chains deduct fees from tips. These include: Ask (8%), Belgo (10%), Bella Italia (10%), Café Rouge (10%), Prezzo (10%), Strada (10%) and Zizzi (8%). Recently Giraffe has scrapped its 10% admin fee on tips, joining chains like Restaurant Group, Carluccio's, Garfunkel's and Jamie Oliver's who do not deduct a fee. Research from 2009 found that one in five restaurants did not pass tips to their staff, yet the vast majority of customers said they wanted waiting staff to receive the money left for them, the government said. The investigation will consider whether there should be a cap on the proportion of tips businesses can withhold. But Unite officer Dave Turnbull said: "Capping admin fees will simply legitimise the underhand practice of restaurants taking a slice of staff tips and be near enough impossible to enforce," he said. BBC NEWS

'National living wage' dodgers face higher penalties

Originally employers had to pay the amount they had underpaid workers, plus a penalty calculated at 50% of the underpayment, up to a maximum of £5,000. Under the coalition, the penalty was increased from 50% of the underpayment to 100%, up to a maximum of £20,000. Prime minister David Cameron has now said that the penalty would go up again, from 100% of underpayment to 200%. The maximum penalty will remain at £20,000. A new labour market enforcement director will be appointed to ensure that firms comply with the national living wage – effectively a higher minimum wage rate for workers over 25. From the autumn, anyone found guilty of non-compliance will be considered for disqualification as a company director for 15 years. In the past, relatively few firms have been fined for not paying the minimum wage but ithe Department for Business announced in February that a crackdown launched in October 2013 had led to 162 firms being fined for non-compliance, as well as being named and shamed. Cameron said the new measures were intended to send a message to “unscrupulous employers” that they would pay the price if they underpaid their staff. He claimed that the government initiative would ensure that “people properly benefit from the recovery.” The national living wage, the surprise announcement in the summer budget, will start at £7.20 an hour from next April, rising to at least £9 an hour by the end of the decade. GUARDIAN

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