Rip-off News round-up. Our pick of the last week's media (Thu 29th October)

Average UK living standards return to pre-recession levels, thanks only to soaring pensions. Workers are still waiting

The Office for National Statistics (ONS) has published the latest snapshot of household incomes. It shows that, more than seven years after the financial crisis, the losses suffered in the most severe downturn of the modern age had finally been recouped. But the ONS said the recovery since the trough in living standards reached three years ago was entirely due to the improved financial state of retired households, adding that working households still had ground to make up to return to pre-recession levels. Retired households are almost 10% better off on average than they were before the recession, their incomes having risen to £21,100 – £1,800 above their pre-downturn peak of £19,300. The incomes of non-retired households also rose in 2014-15, but remain £800 below their pre-recession high of £28,900, at £28,100. Britain’s pensioners have seen their spending power safeguarded by the triple lock, which guarantees that pensions rise by the rate of inflation, growth in average earnings or 2.5%, depending on which is the highest in any given year. Non-retired households, by contrast, have been affected by wages increasing more slowly than prices. The ONS said its preliminary estimates suggested income inequality had been broadly unchanged between 2013-14 and 2014-15, but was slightly lower than it had been before the recession. The Gini coefficient, one yardstick for calculating income inequality, was 34.2% in 2007-08, but has since fallen to 32%. (A Gini coefficient of zero would indicate that income was shared equally, while a Gini coefficient of 100% would mean the entire income of the UK was taken by one individual). GUARDIAN

Energy firms defiant after big suppliers are slammed for failing to pass on plunging wholesale gas and electricity costs

Although there was a round of gas price cuts between January and April, British Gas is the only one of the Big Six to reduce tariffs since then, with a 5 per cent gas reduction in August - and no major energy supplier has cut electricity. Four out of the 'Big Six' suppliers snubbed a June letter from Energy Secretary Amber Rudd demanding they pass on a 20 per cent reduction in gas and electricity costs. Ms Robinson said, 'Single digit reductions fall well short of the double-digit drop in wholesale energy prices. With the global oil surplus expected to continue into 2016, suppliers have no excuses left for refusing to pass on double-digit bill reductions to hard-pressed consumers.' Earlier this month, analysts at ICIS revealed that 'the gas price finished September down 29% from the same time last year, at 40.713p/th.' DAILY MAIL

Monsoon named and shamed for not paying 1-in-4 staff minimum wage

Monsoon short-changed 1,438 workers – more than a quarter of its UK store staff – a total of £104,507.83. The company has been forced to reimburse staff and pay a fine of £28,147.81. The retailer previously required all staff to wear Monsoon clothes on duty, after buying them at a discount. The compulsory expense meant in effect many staff were taking home less than the minimum wage. Monsoon has since started paying a clothing allowance and raised wages. 115 companies have been caught in the latest swoop by HM Revenue and Customs (HMRC), which oversees implementation of the pay regulations. The government introduced the practice of naming firms in October 2013 to raise pressure on companies to stick to the rules entitling workers to a minimum of £6.70 an hour. This year’s list includes hair salons, car repair shops and a riding centre for disabled people. Workers at the 115 companies were owed more than £389,000 in arrears. After years of falling real wages since the financial crisis, campaigners have piled pressure on employers this year by highlighting that the government was topping up low pay through the benefit system. They targeted the annual shareholder meetings of major retailers, including Morrisons, Next, Sainsbury’s and Tesco, with protests to demand the adoption of the full living wage, which is set by independent analysts and is £7.85 an hour, or £9.15 in London. GUARDIAN

Channel 4 FactCheck: Pre-election Cameron DID say tax credits are “not going to fall”

The Treasury is proposing cutting the income thresholds for tax credits – that’s the amount of money you can earn before your tax credits begin to be withdrawn. If a new piece of legislation is passed, people will start seeing their Working Tax Credit reduced after they earn £3,850 instead of £6,420. The Child Tax Credit threshold will fall from £16,105 to £12,125. Once households reach the threshold, the credit will be removed at a faster rate – by 48p in the pound instead of 41p. And the amount of extra income you can earn in a year without affecting the payments is being cut from £5,000 to £2,500. There is no transitional protection to soften the blow for people who will see their benefits cut. The proposed changes come on the back of other reforms to benefits and tax credits already voted through in the summer Budget and the Welfare Reform and Work Bill. Ministers have said that the Conservatives were upfront with voters about wanting to slash Britain’s benefits bill. But there was no specific mention of tax credits in the party’s 2015 manifesto. In the party leaders’ edition of Question Time just before the election, an audience member asked David Cameron if he would “put to bed rumours that you plan to cut child tax credit and restrict child benefit to two children”. He replied: “No. I don’t want to do that. This report that was out today is something I rejected at the time as Prime Minister and I reject it again today.” Asked if the child tax credit payment was going to fall, Mr Cameron said: “It’s not going to fall.” CHANNEL 4 FACTCHECK

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New lyrics for our national anthem. To make it a little bit harder for new governments to lie

Fee, Chris and KJ have the answer...

SOURCE Channel 4FactCheck: the tax credit crunch explained

The Treasury is proposing cutting the income thresholds for tax credits – that’s the amount of money you can earn before your tax credits begin to be withdrawn. If a new piece of legislation is passed, people will start seeing their Working Tax Credit reduced after they earn £3,850 instead of £6,420. The Child Tax Credit threshold will fall from £16,105 to £12,125. Once households reach the threshold, the credit will be removed at a faster rate – by 48p in the pound instead of 41p. And the amount of extra income you can earn in a year without affecting the payments is being cut from £5,000 to £2,500. There is no transitional protection to soften the blow for people who will see their benefits cut. The proposed changes come on the back of other reforms to benefits and tax credits already voted through in the summer Budget and the Welfare Reform and Work Bill. Ministers have said that the Conservatives were upfront with voters about wanting to slash Britain’s benefits bill. But there was no specific mention of tax credits in the party’s 2015 manifesto. In the party leaders’ edition of Question Time just before the election, an audience member asked David Cameron if he would “put to bed rumours that you plan to cut child tax credit and restrict child benefit to two children”. He replied: “No. I don’t want to do that. This report that was out today is something I rejected at the time as Prime Minister and I reject it again today.” Asked if the child tax credit payment was going to fall, Mr Cameron said: “It’s not going to fall.”

SOURCE EVENING STANDARD: Cameron orders review of Lords after they vote down Tory tax credit cuts

David Cameron today threatened to clip the wings of the House of Lords after suffering a humiliating defeat over tax credits. The Prime Minister ordered a constitutional review to stop the Upper Chamber “wrecking” the Government’s legislative programme. Commons Leader Chris Grayling vented the Government’s anger at peers, accusing them of breaching a century-old convention that the Lords do not block the government’s financial measures. But Labour and Liberal Democrat peers deny that they broke convention as the tax credits reforms were not in a bill but in secondary legislation and had not been detailed in the Conservatives’ election manifesto. Senior Tory David Davis played down claims constitutional traditions had been broken by the tax credit votes. He said: “The simple truth is that this was an incredibly important, possibly harmful, thing to three million people — hard-working families, the people we are supposed to support — and somebody had to tell the Government to think again.”

SOURCE THE SUN: Tax credits cut ‘bonkers’
MORE than three million lower-paid households will lose an average of £1,350 a year under planned tax credit cuts, a new report has found. To add to the insult, letters informing struggling families exactly how hard they will be hit are due to arrive just before Christmas. A new National Living Wage of £7.20 an hour is designed to offset the cuts, but the Resolution Foundation found that for 3.2million families it will be nowhere near enough to fill the shortfall. The think-tank’s analysis found a two-parent family — where one adult works full time and the other does 20 hours a week on the minimum wage — will get a £1,100 annual pay rise, but be £1,800 out of pocket overall as tax credit cuts bite. A single parent working full time on the minimum wage will get a £700 pay rise in 2016 but be £1,500 worse off overall due to the cuts. Resolution Foundation senior economic analyst David Finch said: “The Government needs to re-think its welfare cuts which will hit the wallets of many hard-working people.” A poll yesterday found more than one in four voters would be less likely to vote Tory at the next election because of the cuts. Many Tories also joined calls for the Chancellor to ease the pain. Self-employed telemarketer Judith, 44, works flexible hours to care for daughter Niamh, 12. The single mum, of Wellingborough, Northants, said: “I’m going to have to cut back hugely. “I can’t afford to run a car, I haven’t had one for nine years. This means even more cutbacks. It is like a punch in the teeth. £1,300 is a lot of money to cut from what I have.”

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Rip-off News round-up. Our pick of the last week's media (Thu 22nd October)

Students win £100,000 after going on rent strike over rat-infested homes

The 87 tenants of Campbell House West had refused to pay rent to University College London since May and were initially threatened with academic sanctions and exclusion from their courses. But after an inquiry, a university complaints panel has now ordered the institution to pay the tenants  £1,300 each, the equivalent of a full term’s rent rebate. Students had complained that demolition work near the property had made it impossible to sleep, study, and revise and that the building was infested with rats and mice. In May, research by the charity Citizens Advice published found that tenants in the private sector spend £5.6bn in rent every year to live in homes that can make them sick or kill them. An inquiry by the charity found 740,000 privately rented homes across England contain serious risks to health including severe damp, rat infestations, and risks of explosion. Privately rented accommodation was in a significantly worse state to council and housing association property. Sixteen per cent of all privately rented homes were found to physically unsafe, compared to just six per cent in the socially rented sector. Eight per cent of private homes were found to have serious damp, which can contribute to chronic illnesses such as bronchitis, eczema, and asthma. Six per cent were excessively cold and ten per cent risked a risk of dangerous fall; both of these factors present significant hazards for elderly people. INDEPENDENT

EU to force Starbucks and Fiat to pay back millions of Euros in unpaid taxes

The European Union said it will require Starbucks Corp. and Fiat Chrysler Automobiles to pay tens of millions of euros in back taxes after ruling that tax deals they negotiated with two European governments were illegal, in an unprecedented decision by regulators that risks blowing open thousands of corporate tax structures across Europe. The investigations are technically aimed at the governments, which have been ordered to recover the unpaid taxes. The sums to be reclaimed are modest—amounting to between €20 million ($22.6 million) and €30 million for each company. And Wednesday’s decisions are widely expected to be appealed at the EU’s courts in Luxembourg, a process that can take years. But experts said the probes have already created a chill in corporate board rooms across the continent. Hundreds, possibly thousands, of companies have used Luxembourg’s holding-company rules to reduce their tax burden from the country’s official 29% rate to almost nothing, according to documents disclosed last year by the Washington-based International Consortium of Investigative Journalists. EU regulators are working on three similar investigations involving Apple Inc. in Ireland and Amazon.com Inc. in Luxembourg, as well as the Belgian tax discount involving AB InBev. The tax probes are a high priority for the commission and have been repeatedly widened in recent months, as regulators requested hundreds of tax agreements from all 28 EU countries. EU policy makers are eager to close loopholes in the fragmented tax system that allow international groups to sidestep billions of euros in tax at a time of tough national austerity. The scrutiny of complex tax structures may help level the playing field for startups and smaller firms that cannot afford to engage in such arrangements. One fallout from Wednesday’s rulings, experts said, may be to bolster interest in financial centers in the Far East, the Middle East or the Caribbean, away from the watchful gaze of EU regulators. WALL STREET JOURNAL

Tory MP attacks George Osborne's tax credit plans in maiden speech

A Conservative MP has used her maiden speech in the House of Commons to lambast George Osborne for planning to penalise low-paid workers with cuts to tax credits. In a pointed address, Heidi Allen said the cuts fail David Cameron’s “family test” and are driven by the chancellor’s mistaken decision to run an overall budget surplus. Allen, the Tory MP for Cambridgeshire South, was heard in silence as she tore into the government over its tax credit plans. Allen, who said she decided to enter parliament after she feared that Britain was on the verge of a break up during the 2011 London riots, accused the government of naivety in claiming low-paid workers could easily earn more by working extra hours. The MP also challenged ministers’ claims that workers will not lose out if all tax and benefit changes are considered over the lifetime of this parliament. The chancellor faced further pressure to water down his plans after Conservative MPs David Davis and Zac Goldsmith signed a cross-party motion calling on the government to do more to protect low-paid workers. GUARDIAN

Bank regulation: Treasury abandons senior bankers’ accountability rule

One of the most contentious parts of a tough new accountability regime for top executives in the financial sector is to be excised in a move that will be welcomed by Britain’s banks. Just as the Senior Managers Regime is to be extended to the entire financial sector, the Treasury has abandoned the “reversal of burden of proof” rule that would have held senior managers to account for failings on their watch, with the threat of a fine or a ban. Banks were so concerned by the proposal they had high-level meetings with the Bank of England about it as recently as last week, according to people familiar with the situation. Instead — as part of the Bank of England and Financial Services Bill to be introduced to the House of Lords — senior managers across the financial sector will have a statutory duty of responsibility to take all appropriate steps to prevent a regulatory breach from occurring, but it will be up to the watchdog to prove that such steps were not followed. The Bank of England said in a statement the change was one of “process rather than substance” and urged firms to comply with both the spirit and letter of the law. Abandoning the reversal of the burden of proof is one move in a series of recent steps to appease banks, some of whom have threatened to move their headquarters in response to regulation that they regard as too heavy-handed. FINANCIAL TIMES

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Why did so many low paid workers vote for the Tories and their welfare cuts?

SOURCE GUARDIAN: Tory MP attacks George Osborne's tax credit plans in maiden speech

A Conservative MP has used her maiden speech in the House of Commons to lambast George Osborne for planning to penalise low-paid workers with cuts to tax credits. In a pointed address, Heidi Allen said the cuts fail David Cameron’s “family test” and are driven by the chancellor’s mistaken decision to run an overall budget surplus. Allen, the Tory MP for Cambridgeshire South, was heard in silence as she tore into the government over its tax credit plans. Allen, who said she decided to enter parliament after she feared that Britain was on the verge of a break up during the 2011 London riots, accused the government of naivety in claiming low-paid workers could easily earn more by working extra hours. The MP also challenged ministers’ claims that workers will not lose out if all tax and benefit changes are considered over the lifetime of this parliament. The chancellor faced further pressure to water down his plans after Conservative MPs David Davis and Zac Goldsmith signed a cross-party motion calling on the government to do more to protect low-paid workers.

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The Free Market in executive pay is Phoney. ONS data shows top execs pay themselves more even though the free market values them less.

"the richest are rich not because they are gaming the system but – by and large – because they’re very talented, took risks and worked their guts out."

At least, that's what an article in the Spectator magazine would have us believe.

No doubt many of the richest are very talented, take risks, and work their guts out. But 'richest' is a relative thing: to be 'richest' you have to be more rich than other rich people, who themselves have to be richer than not rich people. By correlating 'richest' with 'talent' and 'hard work' the Spectator, and they are not alone, suggests - by and large - the richest are more talented and hard working than everyone else.

So is talent and hard work the real reason - by and large - for richness? Whether the richest bankers have more talent, take greater risks and work their guts out so very much more than a professional soldier, scientist, or surgeon is open to a scrutiny we won't conduct in this particular post. 

In any case Free Marketeers, among the greatest advocates of high pay, would say none of that talent, risk and guts stuff matters. Free Marketeers would say Merit doesn't define Pay, Pay defines Merit. The Free Market, they assert, may not be infallible but it quickly corrects itself. A Free Marketeer would assert if you are regularly paid a lot over the medium term - i.e. not just a spot of luck with the National Lottery - then you must be meritorious. 

Is that actually true? Or has the Market for Pay been captured by those being paid the most to ensure they continue to be paid the most? Has the Free Market in executive pay become a Phoney Market?

Consider top executives of companies listed on the London Stock Exchange. The Free Market puts a value on their companies by pricing the shares. In a large and liquid market, such as the FTSE100, the price set is a genuine attempt by investors to make themselves richer. Driven by selfish motives these investors' valuation of companies is an honest one. 

On the other hand, the pay of the top executives in these companies is set by their Remuneration Committees. Committees which to a large degree are made up of other top executives who themselves depend on their own Remuneration Committees for their pay. According to a report by the TUC, "A Culture of Excess", there is a huge cross-dependency of top executives setting one another's pay:

"Remuneration committee members are drawn from a narrow constituency, consisting mainly of other board members. In 2014, 246 out of 383 FTSE 100 remuneration committee members (64 per cent) held at least one other position on another board. Over a third of FTSE 100 companies have an executive director from another company on their remuneration committee. Two thirds of FTSE remuneration committees share one member with another remuneration committee from the FTSE 100."

We can see how executive pay has ramped up from a report, "How to make high pay fairer", published in July 2014 by the High Pay Centre think tank. The report stated:

"Typical annual pay for a FTSE 100 CEO has risen from around £100,000-£200,000 in the early 1980s to just over £1 million at the turn of the 21st century to £4.3 million in 2012.1 This represented a leap from around 20 times the pay of the average UK worker in the 1980s to 60 times in 1998, to 160 times in 2012 (the most recent year for which full figures are available)."

Contrast this rocketing pay with the declining value placed by the Free Market on companies traded on the London Stock Exchange. The Office for National Statistics (ONS) provides some handy graphs to help us out here:

1) In nominal terms (not adjusted for inflation) the value of the FTSE All Share in 2014 (which had done better than the FTSE100) was over 13 times higher than the 1980 level, while FTSE100 CEO pay has gone up over 28 times in nominal terms:

2) However:
a) The inflation adjusted values show the total value of the market in 2014 is well below its value in 2000.
b) Compared to the UK GDP, the value of the stock market is well below what it was in the 1990s.

Comparing this with the bosses' multiple of average pay (effectively boss pay indexed to average pay), we see even as the Remuneration Committees value themselves more, the Free Market values their companies less.

Why is this important? Two of the reasons are:

1) It is said that burgeoning top pay does not hold down bottom pay. That may be true if the question is simply diversion of bottom pay into top pay packets. 
At Barclays, a favourite dartboard of high pay protesters, it wouldn't make much of a difference to it's lowly employees by taking a chunk out of top pay.

But top pay is justified by profits. And according to Gavyn Davies, economist and hedge fund manager and former chairman of the BBC, two thirds of company profits come from holding down bottom pay.


2) As those at the top, who direct the government of Britain, no longer need public services they don’t feel the pain when those  services are cut. Those who can afford private health, private education, and those who don’t live in areas that need strong policing, don’t notice when what they don’t need is not there.

And I suppose it would be churlish of me to mention the taxes of the 1% contribute to the welfare state that allows them to keep their staff on low wages knowing they will be topped-up with benefits, and keeps their staff healthy and educated enough to turn up to work without having to pay them enough to buy those services themselves. 

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Rip-off News round-up. Our pick of the last week's media (Thu 15th October)

Rise in UK jobs that fail to pay a living wage, now totalling 6m

The Office for National Statistics says there were 6m jobs paying less than the living wage across the UK in 2014, of which more than half were part-time roles. The living wage, an independently set hourly rate, is based on the cost of living and is currently set at £7.85 outside London and £9.15 in the capital. It is higher than the minimum wage, which from October starts at £3.87 for under-18s, rising to £6.70 for workers aged over 21, and above the national living wage announced by George Osborne in the July budget. The ONS said that in London, the proportion of jobs paying less than £9.15 an hour hit 19% in 2014, after remaining stable at around 13% between 2008 and 2010, while in the rest of the UK the proportion below the £7.85-an-hour threshold rose from 21% in April 2012 to 23% in April 2014. Northern Ireland was the country with the most low-paid roles, with 29% of jobs paying below the living wage. In contrast, London, the south-east and Scotland had the fewest low-paid jobs, each with 19%. In retail, the ONS found that 1.5m jobs around the UK paid less than the living wage. Alison Garnham, chief executive of Child Poverty Action Group, said low paid workers were already struggling to get their families out of poverty, and changes to tax credits announced by the government would make matters worse. GUARDIAN

NHS crisis deepens as hospitals rack up £1bn debts in 3 months

The figures, which cover the period April 1 2015 to June 30 2015, show hospitals running up a combined deficit of £930m, with more than three in every four hospitals unable to balance their books. The main reason cited by hospitals for overspending was higher than expected pay costs due to an over-reliance on expensive agency staff to raise nurse numbers. The Healthcare Financial Management Association (HFMA), which represents finance directors, said it had been “182 days since the government vowed to inject £8bn of much-needed extra funding into the NHS and we still await confirmation as to where and when this investment will be made”. The British Medical Association described the deficits as “staggering” and said the NHS was facing “a funding crisis the likes of which we have never seen”. BMA representative Dr Ian Wilson said the extra funding promised by the government was “barely enough for the NHS to stand still. The result is a health service that is buckling at the seams, relying on emergency bailouts and with no real solution to the £22bn funding gap facing it”. “With winter just around the corner, there is a real risk to the quality of patient care as pressure on services and staff will only intensify,” added Dr Wilson. The data, covering all hospitals — including foundation trusts, which are generally regarded as the service’s higher performers — will test George Osborne’s determination to avoid a further bailout for the service. FINANCIAL TIMES

Half of world's wealth now in hands of 1% of population

The middle classes have been squeezed at the expense of the very rich, according to research by Credit Suisse, which also finds that for the first time, there are more individuals in the middle classes in China – 109m – than the 92m in the US. Tidjane Thiam, the chief executive of Credit Suisse, said: “Middle class wealth has grown at a slower pace than wealth at the top end. This has reversed the pre-crisis trend which saw the share of middle-class wealth remaining fairly stable over time.” The report shows that a person needs only $3,210 (£2,100) to be in the wealthiest 50% of world citizens. About $68,800 secures a place in the top 10%, while the top 1% have more than $759,900. The report defines wealth as the value of assets including property and stock market investments, but excludes debt. About 3.4 bn people – just over 70% of the global adult population – have wealth of less than $10,000. A further 1bn – a fifth of the world’s population – are in the $10,000-$100,000 range. Each of the remaining 383m adults – 8% of the population – has wealth of more than $100,000. This number includes about 34m US dollar millionaires. About 123,800 individuals of these have more than $50m, and nearly 45,000 have more than $100m. The UK has the third-highest number of these “ultra-high net worth” individuals. A year ago, the the UK had been singled out as the only country in the G7 where inequality had risen this century. In this year’s report, the authors say:  “[In the UK] wealth inequality has risen since 2000, as the gap in wealth per adult between the lower segment and rest of the population has increased.” GUARDIAN

Water companies pocket £800m windfall, NAO finds

The National Audit Office (NAO) estimated that between 2010 and 2015, water companies gained £410m from lower corporation tax rates and a further £840m from lower than expected interest payments. Over the same period the companies absorbed costs and provided water bill discounts worth up to £435m, leaving them with a net gain of £800m. However, customers' bills had not fallen because Ofwat had not properly "balanced the risks" between water companies and consumers, blaming poor regulation by Ofwat. Ofwat rejected criticism of its price control regime. Water prices will fall by 5% in real terms over the next five years, Ofwat said earlier this year. Bills have risen by 40% in real terms since privatisation in 1989, with the biggest rises coming between 1990 and 1995. Water bills accounted for about 2.3% of average household spending in 2013 and more than 5% for the poorest households. BBC NEWS

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Facebook paid just £4,327 tax on UK revenues of £105m

Fee and KJ get a tour of one of the global tech giants...

SOURCE GUARDIAN: Facebook paid £4,327 corporation tax despite £35m staff bonuses

Facebook made an accounting loss of £28.5m in Britain in 2014, after paying out more than £35m to its 362 staff in a share bonus scheme, according to the unit’s latest published accounts. Operating at a loss meant that Facebook was able to pay less than £5,000 in corporation tax to HM Revenue for the year. The level of tax contribution by Facebook, which claimed in 2013 that at least a third of UK adults visited its site every day, will add to the debate about how to ensure that multinationals make fair tax payments in each country in which they operate. Last year, Facebook made a profit on its worldwide operations of $2.9bn (£1.9bn), on revenue of $12.5bn. UK revenues were £105m last year. John Christensen, the director of campaign group the Tax Justice Network, said: “it’s very likely they’re using all the usual techniques to shift profits around.” George Osborne, the chancellor, has pledged to crack down on tax avoidance by global firms by swiftly legislating to enact a new set of rules drafted by the Paris-based Organisation for Economic Co-operation and Development (OECD), which has become a hub for global tax reform in recent years. The so-called BEPS rules are aimed at cracking down on “base erosion and profit-shifting”: the practices used by many global firms to minimise their tax liabilities by recording profits in low-tax jurisdictions. “Taxes should be paid where profits are made,” Osborne tweeted from the International Monetary Fund’s annual meetings last week. Separately, the chancellor has introduced a diverted profits tax, known as the “Google tax”, aimed at preventing hi-tech international firms from minimising their tax liabilities in the UK.

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Rip-off News round-up. Our pick of the last week's media (Thu 8th October)

Tory tax credits cut is ‘bonkers’: The Sun launches campaign to aid low-pay workers

MORE than three million lower-paid households will lose an average of £1,350 a year under planned tax credit cuts, a new report has found. To add to the insult, letters informing struggling families exactly how hard they will be hit are due to arrive just before Christmas. A new National Living Wage of £7.20 an hour is designed to offset the cuts, but the Resolution Foundation found that for 3.2million families it will be nowhere near enough to fill the shortfall. The think-tank’s analysis found a two-parent family — where one adult works full time and the other does 20 hours a week on the minimum wage — will get a £1,100 annual pay rise, but be £1,800 out of pocket overall as tax credit cuts bite. A single parent working full time on the minimum wage will get a £700 pay rise in 2016 but be £1,500 worse off overall due to the cuts. Resolution Foundation senior economic analyst David Finch said: “The Government needs to re-think its welfare cuts which will hit the wallets of many hard-working people.” A poll yesterday found more than one in four voters would be less likely to vote Tory at the next election because of the cuts. Many Tories also joined calls for the Chancellor to ease the pain. Self-employed telemarketer Judith, 44, works flexible hours to care for daughter Niamh, 12. The single mum, of Wellingborough, Northants, said: “I’m going to have to cut back hugely. “I can’t afford to run a car, I haven’t had one for nine years. This means even more cutbacks. It is like a punch in the teeth. £1,300 is a lot of money to cut from what I have.” THE SUN

Trade Union Bill - All Scottish councils say they will ignore controversial new anti-union law

All 32 Scottish councils will refuse to implement the conditions of the bill when it becomes law. Those conditions include removing the process of check-offs whereby union subscriptions are deducted from the salaries of workers who are members of a trade union. Unions have complained that this is a cynical ploy to reduce their funding and will waste their resources in renewing subscriptions. They are also infuriated that the bill constrains the amount of paid time off that public sector union representatives can take for those responsibilities, a move the authorities will also oppose. Union leaders believe the move could help turn opinion against the bill across the country, in a repeat of Margaret Thatcher’s Poll Tax debacle. Opposition to the hated levy started in Scotland, where trials were run in 1989, before it was dropped and replaced by the Council Tax four years later. INDEPENDENT

Revealed: how AstraZeneca avoids paying UK corporation tax

AstraZeneca, one of Britain’s largest businesses, is using a multimillion-pound tax avoidance scheme in the Netherlands, set up months after the UK relaxed its tax laws for multinationals in 2013. AstraZeneca’s top tax accountant, Ian Brimicombe, sat for several years on a Treasury committee advising the government on the changes in the law. A Guardian investigation has found the pharmaceutical giant created the tax avoidance scheme using $2.7bn (£1.8bn) of internal group loans routed through its Dutch subsidiaries. The company paid no corporation tax in the UK, despite having made global profits in 2013 and 2014 totalling $4.5bn. It was legally able to do so partly by securing some UK tax deductions from the Dutch lending structure as well as by offsetting high running costs and investment at its UK operations and using other tax breaks, some relating to new medicine research and development. The Organisation for Economic Cooperation and Development (OECD) has warned that current rules are so abused – both by multinationals and by countries competing for investment – that they are close to breaking point. But British diplomats, while supportive of many OECD reforms, have battled behind the scenes to protect prized tax policies that helped make Britain a favourable environment for the location of international business. GUARDIAN

End of the road for PPI mis-selling claims? Bank watchdog considers 2018 deadline for compensation

The Financial Conduct Authority (FCA) has proposed that Britons who have been missold payment protection insurance could have to get their claim in within the next two years or else miss out on compensation. Banks have always complained that allowing customers to make complaints indefinitely makes it difficult for them to plan and move on. However consumer groups argue that if compensation is due, customers should not have their right to claim it curtailed. While the number of complaints made is starting to slow, 883,043 cases were still opened in the first half of this year. The FCA added that it would also look into another PPI scandal, which some have suggested could be even bigger than the first. When customers were sold PPI policies by their banks, many may have unknowingly been charged big commissions by the branches or brokers who sold them the products. If it is decided that this is unfair, PPI compensation claims that were previously rejected could now be valid and due for a payout. It could mean that loan insurance that was otherwise fairly sold could now be deemed mis-sold. The FCA proposed new rules today to suggest that a failure to disclose a commission of 50 per cent or more could be deemed ‘unfair’. The move comes after a court ruling in November 2014 held that Susan Plevin was treated unfairly because she wasn’t told about the commission taken from her PPI payment. A number of new claims could fall in this category; the average commission on PPI was around 67 per cent for the 12 large distributors between 2002 and 2006, the FCA said today. However the majority of these claims would already have received a payout for mis-selling. The proposed two-year deadline would also apply to this new type of claim. DAILY MAIL

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Trade Union Bill: New 50% turnout law for strike ballots may backfire on the Tories, as 3m working poor get poorer

SOURCE INDEPENDENT: Trade Union Bill - All Scottish councils say they will ignore controversial new law

All 32 Scottish councils will refuse to implement the conditions of the bill when it becomes law. Those conditions include removing the process of check-offs whereby union subscriptions are deducted from the salaries of workers who are members of a trade union. Unions have complained that this is a cynical ploy to reduce their funding and will waste their resources in renewing subscriptions. They are also infuriated that the bill constrains the amount of paid time off that public sector union representatives can take for those responsibilities, a move the authorities will also oppose. Union leaders believe the move could help turn opinion against the bill across the country, in a repeat of Margaret Thatcher’s Poll Tax debacle. Opposition to the hated levy started in Scotland, where trials were run in 1989, before it was dropped and replaced by the Council Tax four years later.

SOURCE THE SUN: Tax credits cut ‘bonkers’

MORE than three million lower-paid households will lose an average of £1,350 a year under planned tax credit cuts, a new report has found. To add to the insult, letters informing struggling families exactly how hard they will be hit are due to arrive just before Christmas. A new National Living Wage of £7.20 an hour is designed to offset the cuts, but the Resolution Foundation found that for 3.2million families it will be nowhere near enough to fill the shortfall. The think-tank’s analysis found a two-parent family — where one adult works full time and the other does 20 hours a week on the minimum wage — will get a £1,100 annual pay rise, but be £1,800 out of pocket overall as tax credit cuts bite. A single parent working full time on the minimum wage will get a £700 pay rise in 2016 but be £1,500 worse off overall due to the cuts. Resolution Foundation senior economic analyst David Finch said: “The Government needs to re-think its welfare cuts which will hit the wallets of many hard-working people.” A poll yesterday found more than one in four voters would be less likely to vote Tory at the next election because of the cuts. Many Tories also joined calls for the Chancellor to ease the pain. Self-employed telemarketer Judith, 44, works flexible hours to care for daughter Niamh, 12. The single mum, of Wellingborough, Northants, said: “I’m going to have to cut back hugely. “I can’t afford to run a car, I haven’t had one for nine years. This means even more cutbacks. It is like a punch in the teeth. £1,300 is a lot of money to cut from what I have.”

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The real reason the top 1 percent pay a vast share of income tax is the rest of us do not get enough income to chip in more! Do not be grateful to them for their taxes, get them to pay us more wages!

Writing in the Daily Telegraph in 2013, Boris Johnson said in a piece titled "We should be humbly thanking the super-rich, not bashing them":
"Now, the top 0.1 per cent – about 29,000 people – pay an amazing 14.1 per cent of all taxes."

Boris’ figure seems to come from a Freedom of Information (FOI) response from HMRC [which we have looked for but can’t find it where it is supposed to be published – we would be grateful for a link to this]. However Boris was mistaken. The Daily Mail, clarified this as 14.1 percent of Income Tax, not of All Tax. Boris' mistake is often heard in the media, with people claiming and some actually believing the top 1% pay for most of public spending.

So, what difference does "Income" versus "All" make? Actually, a lot.

HMRC doesn't publish the top 0.1% tax normally, except in FOI responses. However HMRC estimates for 2015/16 show the top 1% do pay over a quarter, about 27.5%, of Income Tax. HMRC figures also show Income Tax for that year made up 31.7% of "All Taxes". 

Therefore the top 1%'s income tax makes up just 8.7% of "All Taxes" (31.7% x 27.5% = 8.7%).

It has been a common tactic to use the enormous share of Income Tax the very rich pay to throw a smokescreen of eye-lowering "don't look too hard" gratitude over the enormous amount of income they receive. And yet it is true, the top 1% do pay a share of Income Tax disproportionate to their population. 


The reason for this is low pay in Britain has meant most people couldn't afford to pay a greater share of Income Tax even if they wanted to. Far from having spare cash to contribute in Income Tax, a report by the Resolution Foundation think tank in 2012, "Gaining from growth: The final report of the Commission on Living Standards" shows the bottom 50% actually have to borrow money to cover their living costs. The "Savings Ratio" in the graph below shows what percentage of income each group can save. A negative Savings Ratio indicates they are borrowing.


In a separate press release the Resolution Foundation stated by the 2020 General Election the number of workers on the legal minimum wage will have doubled to more than 10% of the working population. It's due to free-market set wages falling behind the government set minimum wage (laughably renamed by George Osborne as the National Living Wage). If you look at specific sub groups of workers, the proportion on minimum wage in 2020 will be even higher than 10%:

• 15% of female employees
• 25% in micro businesses (businesses with fewer than 10 employees, who had over 8 million employees in 2014)
• 40% in the hospitality sector

It is said by some that burgeoning top pay does not hold down bottom pay. That may be true if the question is simply diversion of bottom pay into top pay packets. However top pay is usually justified by profits. According to Gavyn Davies, (hedge fund manager, former Goldman Sachs partner, and former chairman of the BBC) two thirds of corporate profits 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."

So while the 1% may not be directly siphoning off the wages of the 99%, they use holding those wages down to boost their profits and boost their resulting rewards. We can see an example of how executive pay has ramped up from a report, "How to make high pay fairer", published in July 2014 by the High Pay Centre think tank. The report stated:

"Typical annual pay for a FTSE 100 CEO has risen from around £100,000-£200,000 in the early 1980s to just over £1 million at the turn of the 21st century to £4.3 million in 2012. This represented a leap from around 20 times the pay of the average UK worker in the 1980s to 60 times in 1998, to 160 times in 2012 (the most recent year for which full figures are available)."

Creating a growing economic distance between the few and the many creates a deeper problem. As those at the top, who direct the government of Britain, no longer need public services they don’t feel the pain when those  services are cut. Those who can afford private health, private education, those who don't rely on subsidised public transport and subsidised housing, and those who don’t live in areas that need strong policing, don’t notice when what they don’t need is not there.

And I suppose it would be churlish to mention the taxes the 1% contribute to the state allow them to keep their staff on low wages (subsidised by in work benefits) and keeps their staff healthy (NHS) and educated (Schools) enough to turn up to work on subsidised public transport. 

So we should not, as Boris suggested, be "humbly thanking" the super-rich. On the contrary, they should be humbly thanking the rest of us: not for our generosity but for our incomprehension of what is happening. The Golden Rule, "Those who have the gold make the rules", held until relatively recently. When rule-makers began to be chosen by Parliamentary Elections, those with the gold have relied on the rest of us not really noticing they aren't fairly sharing it.

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Rip-off News round-up. Our pick of the last week's media (Thu 1st October)

Government abandons plans designed to counter corporate wrongdoing

In a surprise U-turn, the Justice Minister, Andrew Selous, said the Government was no longer considering creating a new criminal offence as “there was little evidence of corporate economic wrongdoing going unpunished.” The Conservatives had pledged in their manifesto to strengthen powers to curb corporate misbehaviour, following widespread criticism of the failure to hold major companies such as international banks and other global financial institutions to account for scandals such as rigging the Libor index, tax evasion and insurance mis-selling. Critic Susan Hawley, policy director of Corruption Watch, said: “Companies in the UK are rarely brought to justice and are often effectively above the law because of the UK’s outdated corporate liability laws. It appears that the government is allowing its pro-business deregulation agenda to derails its anti-corruption commitments.” The decision is a blow to the Serious Fraud Office (SFO), whose director David Green QC, has championed reform to improve his department’s ability to tackle economic crime.In a speech earlier this month, he said: “If the public interest, in terms of public confidence, demands more prosecutions of corporates, then such change is surely necessary.” The Law Commission, which advises the government on law reform, criticised existing corporate liability laws four years ago, describing them as “inappropriate and inadequate” but a full scale review has been dropped. INDEPENDENT

Sky boss gets 250% pay and perks increase to £16.9m after customers get price hikes

According to the satellite giant’s annual report, CEO Jeremy Darroch saw his pay and perks package rocket by nearly 250% last year. His bumper deal included an £11.8m bonus, through a “long term incentive plan”, for hitting targets in previous years. He also got a near £2m annual bonus, £960,000 salary and £147,000 instead of a pension. It took the amount Darroch has earned since 2010 to £57m. Yet it came as Sky customers were landed with price hikes in June. The broadcaster confirmed subscription fees would rise, just weeks after announcing their record breaking £5.1billion Premier League rights deal. Deborah Hargreaves, director of the High Pay Centre, slammed Darroch’s pay deal , which would take the average UK worker on £27,200 a staggering 620 years to earn. Hargreaves said: “I am sure he has done a good job but it is not just one person driving the firm’s success.” MIRROR

RBS facing inquiry amid accusations it 'falsified' customer records

RBS is accused of editing customer emails and call transcripts and how it presented its 'central file' record of correspondence. The Times newspaper reports the Financial Conduct Authority and the Information Commissioner's Office have been made aware of the claims raised by RBS business customer Andy Keats, who claims RBS forced the closure of his pet tag business Keepsafe after withdrawing its debit and credit card facilities. Keats claims to have uncovered discrepancies in records held by the bank which he says show his customer data had been “falsified to suit RBS”. He claims in some cases entire paragraphs were deleted in correspondence as opposed to being redacted from text and email records, including punctuation changes, with no acknowledgement changes had been made. Keats also claims to have seen the banks' central file records which shows a key exchange between himself and the bank in 2012, relating to mortgage and personal account issues, was missing a key passage in which Keats states he was under no contrafactual obligation to make monthly capital and interest payments. Under Data Protection rules, data-holders are permitted to summarise customer data under certain conditions, though deletions or edits which would change the meaning of the correspondence are forbidden. DAILY RECORD

After the VW scandal, EU probes TV makers over dodgy energy efficiency test scores

Software used in TVs may be skewing their energy rating scores. One study indicates that some Samsung TVs nearly halve their power consumption when a standardised test is carried out. Another accuses a different unnamed manufacturer of adjusting the brightness of its sets when they "recognise" the test film involved. Samsung has denied any wrongdoing. However, one environmental campaign group has likened the accusations to the Volkswagen diesel scandal, in which the German car firm admitted to programming its cars to deliberately cheat emissions tests. Manufacturers run the test themselves and then file the results. Some of these are then double-checked by various countries' energy regulatory bodies. ComplianTV, a consortium that represents various non-governmental organisations including the UK's Energy Saving Trust (EST), found that the power demands of one of the South Korean firm's LCD TVs dropped from 70 watts to about 39 watts within a minute of the test video starting. "That's not normal, it's an anomaly," explained Richard Kay, an EST spokesman. But he added: "We don't have any evidence to back up the accusation that Samsung has a technology to recognise when it is tested." The European Commission says it is "following up" two reports. BBC NEWS

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