Rip-off News round-up. Our pick of the last week's media (Thu 30th June)

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