Posted by Hari on Thursday, June 30, 2016 with No comments | Labels: Roundup
Brexit vote shows
need for reform of executive pay, says top fund manager
A senior executive at Hermes Investment Management, which
manages £24bn of funds and advises 42 investors holding almost £170bn, said
runaway executive pay had probably contributed to the alienation felt by many
people in marginalised parts of Britain who voted for Brexit. The average FTSE
100 chief executive earns £5m, compared with £27,600 for all UK workers, a pay
gap that underscores wider divisions between the populace and the elite,
Hans-Christoph Hirt, co-head of Hermes’ stewardship arm, Hermes EOS, said. Hirt
said: “There is a big gap between people on the street and the people who do
voting on remuneration and that is not sustainable. Fund managers are waking up
to the fact that they work for pension funds and the man on the street.” He
added: “There is a similarity between the two situations. The pay gap is
growing and growing and it is comparable to the situation in north-east and
east England where people feel out of touch and not represented.” The
Resolution Foundation said on Tuesday that weak income growth and rising
housing costs had caused living standards to stagnate for low- and
middle-income families over the past decade. The squeeze on living standards
helped spur disillusionment with the political and economic status quo, the
foundation said. Hermes’ comments expand on a warning from another big British
fund manager, Standard Life, which said on Tuesday that Brexit underlined the
dangers posed by the gap between the rich and poor. It said the effect would be
felt in the US, where populist resentment of political elites has risen, as
well as in the UK. “The vote has highlighted deeper fault lines in the global
economy. Increasing income inequality over recent decades has fostered populist
anger across many economies. A failure to address these challenges raises the
risk of these types of political shocks,” Standard Life said. Brexit also
prompted the US financial houses Bank of America and Pimco to turn their
attention to inequality. Bank of America, the second-biggest US bank, said
Britain’s economic recovery had been unequal and that the vote to leave the EU
was the biggest rejection so far of the age of inequality. Pimco, the $1.5tn
(£1.12tn) fund whose advisers include Gordon Brown, said if populist or
nationalist parties did not come to power, Brexit would still increase pressure
on governments to address inequality and adopt protectionist policies. GUARDIAN
Energy bills U-turn:
plans for blanket ceiling on how much firms can charge is ditched
The competition watchdog has overridden the concerns of one
of its key experts by ditching plans for a temporary cap on how much energy
firms can charge, opting instead for helping customers switch to cheaper deals.
A final report – two years in the making – on energy market reforms has also
rowed back on its estimates for the scale of overcharging by the big six
suppliers, but still believes it amounts to £1.4bn annually. The Competition
and Markets Authority report gives only a tiny footnote to the fact that the
panel was divided over one of the most important issues, whether to impose a
price cap on all energy bills. Instead, the ceiling will only be imposed for
those on pre-payment meters. A raft of independent suppliers and industry
experts reacted with anger to the final review, saying the CMA had “completely
missed the mark” and wasted a golden opportunity to properly restructure the
industry. The CMA has also recommended the dismantling of a system under which
suppliers could only offer four tariffs, only introduced in January 2014, that
was meant to stop confusion for customers. Darren Braham, founder of First
Utility, the largest of the new independent suppliers, complained: “Rather than
acting quickly to make the market simpler and fairer for customers, the
opposite has happened. With the remedies proposed, we are in real danger of
being back where we started 10 years ago. This means a baffling array of
tariffs, even more exploitation by the big six [energy companies] and customers
continuing to pay much more than they need to.” Centrica, the owner of British
Gas and the largest of the big six suppliers, welcomed the final CMA
recommendations. It said: “We have reviewed the executive summary of the final
report and believe many of the remedies will further enhance the market and
benefit customers.” GUARDIAN
Nurofen TV ad banned
over painkilling claims in landmark ruling
The ruling by the UK’s Advertising Standards Authority
follows a separate action by Australia’s Federal Court which fined Reckitt
Benckiser, the manufacturer of Nurofen, A$1.7m (£940,000) for misleading
customers by claiming its products targeted specific pains, such as migraines. The
ASA received 18 complaints about an ad for Nurofen showing a woman who fixed
her back pain by taking its Nurofen Joint and Back product. The complainants
argued that it was misleading to imply it could specifically target back pain. “Viewers
were likely to infer that the product had a special mechanism or contained an
active ingredient which made it especially effective for back and joint pain in
comparison to other painkillers,” said the ASA. “We understood the product was
absorbed by the stomach and distributed to sources of pain wherever they may be
located around the body via the bloodstream, and that there was no mechanism by
which the product actively sought out the source of pain in a user’s back or
joints.” The ASA banned the ad in a landmark ruling that is likely to set a
precedent that will see a crackdown on the large number of pharmaceutical
products in the market that are advertised as being able to target specific
pain ailments, when in fact they are just general painkillers. GUARDIAN
Poor pupils 'are
still let down', warns Ofsted boss
Ofsted boss Sir Michael Wilshaw warns of the widening gap
between poorer pupils in northern England and those in the South, but he will
also highlight how disadvantaged pupils in wealthy areas are being let down. "Through
no fault of their own, many simply aren't aware of what is possible. Why should
they be? Few of them have had access to the life-enhancing opportunities a good
education brings... Middle-class children always have a head start. Their
cultural hinterland is usually rich. Their parents are usually well educated...
They tend to do well in school. And when they don't, their parents can always
hire a tutor." In a speech at the Festival of Education, at Wellington
College, Sir Michael said the failure to improve the educational chances of the
poor "disfigures" England's school system. "The needle has
barely moved... In 2005, the attainment gap between free school meal [FSM] and
non-FSM pupils in secondary schools was 28 percentage points - it is still 28
percentage points now," he said. BBC NEWS
UK consumer borrowing
rises at fastest rate in more than a decade
The amount of credit extended to borrowers, which includes
credit cards, personal loans and overdrafts, rose by 9.9% compared with a year
earlier. This was the fastest annual rate in more than a decade and up from
9.6% in April. Over the month consumer credit rose by about £200m to £1.5bn in
May. The figures suggest the appetite among British consumers for borrowing
money – and the willingness of banks to lend – was strong as the 23 June
referendum on Britain’s membership of the EU drew closer. Economists warned,
however, that Britain’s decision to leave the EU would weigh on lending in the
coming months amid uncertainty over the country’s economic and political
future. Consumers’ appetite for borrowing on plastic has picked up markedly
since the months after the financial crisis, when borrowing slumped and on some
occasions repayments outstripped new debt. The Bank of England data showed net
borrowing on credit cards rose by £418m over the month in May, and outstanding
debt on cards is now £1.3bn more than at the beginning of 2016. The figures,
published exactly 50 years after the first credit card was issued in the UK,
are likely to concern debt charities. Mike O’Connor, chief executive of
StepChange Debt Charity, said: “Although credit cards can be a cost-effective
way to borrow, for many people they have become very expensive, long-term
debts.” He added: “The average credit card debt we see is now at £8,403, about
half our clients’ average annual take-home pay, and there is a clear need for
change.” GUARDIAN
VW owners in US to
get up to $10,000 in emissions deal
Last year, US regulators discovered that some VW cars were
fitted with software that distorted emission tests. The German giant
subsequently said 11 million cars worldwide were affected. The total compensation
deal will cost Volkswagen $14.7bn. It is expected to spend up to $10bn on
buybacks and compensation, and will put a further $2.7bn into an environmental
fund operated by the Environmental Protection Agency (EPA), as well as invest
$2bn over the next decade into zero emission technology. Separately, the car
firm has agreed to pay $603m to 44 US states, the District of Columbia and
Puerto Rico to resolve existing and potential state consumer protection claims.
However, it is still facing billions of dollars more in potential fines with
lawyers currently working on settlements for 80,000 three-litre diesel engines.
The huge settlement will affect 475,00o owners of the 2009 to 2015 Volkswagen
diesel models of Jettas, Passats, Golfs and Beetles as well as the TDI Audi A3.
Customers can choose to sell back their vehicle to Volkswagen, for its price
last September before the scandal was revealed, or terminate their lease
without incurring any penalty charges. They can also choose to have their
vehicle modified free of charge and keep it. Customers who select any of the
options will still receive compensation of between $5,100 and $10,000. They
would also still be able to decline the VW offer and sue the firm on their own.
Last September, the EPA found that many VW cars being sold in America had a
"defeat device" - or software - in diesel engines that could detect
when they were being tested, changing the performance accordingly to improve
results. The German car giant has since admitted cheating emissions tests in
the US. Some models could have been pumping out up to 40 times the legal limit
of the pollutant, nitrogen oxide, regulators disclosed. The provision VW made
for the scandal pushed the car maker into its biggest ever annual pre-tax loss
of €1.3bn for 2015, compared with a profit of €14.7bn the previous year. BBC NEWS
Aldi sale adverts
banned for being misleading
Two TV adverts compared a weekly shop at Aldi with the likes
of Tesco, Asda, Sainsbury’s and Morrisons.
It claimed that a weekly £70 Aldi shop would cost £98 at the big four
grocers, an increase of nearly 40 per cent. The small print at the bottom of
the page included text that stated: “Comparison of Aldi products vs products
shown. Morrisons may sell ‘own brand’ products at different prices.” Morrisons
and two members of the public said the price comparison was misleading as
Aldi’s did not make clear it compared its own-brand products and branded
products as opposed to the supermarkets own-brand products that are likely to
be cheaper. Aldi disagreed saying that consumers who saw the commercials were
likely to interpret the comparison as intended. The supermarket added that it
had demonstrated this with small print shown on screen and at the bottom of the
printed adverts. But the watchdog ruled that the commercial was misleading as
consumers would understand that by swapping from shopping at their usual big
supermarket to shopping at Aldi they could make significant savings. The
combined share of discount retailers Lidl and Aldi has hit a record high of
10.5 per cent, with each holding 4.4 per cent and 6.1 per cent of the market
respectively. INDEPENDENT
Regulator to
investigate accountants PwC and KPMG over BHS and HBOS failures
The regulator that monitors UK financial reporting is to
investigate two of the big four accountancy firms over their role in the
failures of the retailer BHS and the banking group HBOS. The Financial
Reporting Council, responsible for overseeing UK accounting standards, began an
investigation into PricewaterhouseCoopers over its audit of the collapsed high
street chain BHS when it was owned by Sir Philip Green. It has begun a parallel
investigation into whether KPMG should have signed off on the accounts of HBOS,
which was bought by Lloyds as the banking crisis gathered pace in September
2008. BHS fell into administration in April, with the loss of 11,000 jobs, 13
months after Green’s Arcadia group sold it to the businessman Dominic Chappell
for £1. The chairman of the Commons Treasury committee, Andrew Tyrie, said:
“The HBOS report exposed the staggeringly poor quality of HBOS’s loan book. The
role of the auditors – for years left unexamined – is to be subject to thorough
investigation. Not before time.” HBOS was among the first British casualties of
the UK banking crisis and was bought by Lloyds for £12bn in September 2008 to
prevent it from collapse. The government eventually had to spend £12bn on
bailing out Lloyds, partly because of toxic loans on the HBOS balance sheet
that it acquired in the deal. The FRC’s decision to investigate PwC intensifies
scrutiny of the stewardship of BHS before Green sold it to Chappell, a former
racing car driver with no previous retail experience who has been declared
bankrupt three times. GUARDIAN
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