TOP STORIES
CARTOONS
POSH GRAMMAR
OSBORNE KERCHING!!
PROMISES PROMISES
SOUTHERN FAIL
DUMB POLLSTERS
DON'T BLAME TRUMP!
£13bn APPLE TAX DODGE
SAFE SEATS = BREXIT?
UKIP v LABOUR
ALL OUT OF IT TOGETHER
EU IMMIGRATION
TORY v TORY
PRISON SUICIDES
LONDON LEAVES UK!
EU v TORY MANDATE
HMRC IS A TAX HAVEN
PANAMA TAX LEAK
IDS v IDS
RICH v POOR
POSH BOYS
HELP2BUY PROFITEERS
LLOYDS, RBS CEO PAY
HSBC DRUG MONEY
PM'S MUM FIGHTS CUTS
PEAK "STUFF" IS HERE
HMRC GOOGLY
PENSION TAX RAID

Thursday, 25 February 2016

Thursday, February 25, 2016 Posted by Hari No comments Labels: , , , ,

SOURCE GUARDIAN: RBS pays chief executive Ross McEwan £3.8m as it reports £2bn loss
The bank’s full-year results for 2015 follow its admission last month that it was on track to report its eighth consecutive year of losses because of a £2.5bn hit to profits for a string of problems, including having to pay compensation for payment protection insurance mis-selling. Shares in the bank, 73%-owned by the taxpayer, slumped 10% in early trading after the figures were announced. McEwan – who has received the highest pay for a chief executive of the bank since the bailout – said further problems lay ahead for the bank, particularly from “big conduct” issues. Among these is a penalty, yet to be determined and which could run to billions of pounds, for the way it sold US mortgage bonds in the run-up to the 2008 banking crisis. The results – which followed a £3.5bn loss a year ago – mean that the bank has incurred more than £50bn of losses since 2008, when £45bn of taxpayer funds was used to prevent it from collapsing. The performance of the bank was accompanied by disclosures about pay. It said 121 of its staff received more than €1m (£800,000) during the year while its former chief executive Stephen Hester, who was forced out in 2013, received £2.1m from bonus schemes that dated to his time at the bank.

SOURCE GUARDIANLloyds hands chief executive £8.5m pay package
Lloyds Banking Group has handed its chief executive an £8.5m pay deal and ignited its share price by announcing a special dividend – despite reporting a 7% fall in profits. António Horta-Osório’s pay was disclosed alongside 2015 financial results showing profits had been knocked to £1.6bn by a further £4bn charge for mis-selling payment protection insurance (PPI). The bank, bailed out in 2008, has now incurred a total bill of £16bn for the long-running scandal which drove it to a fourth-quarter loss. The government has been gradually cutting back its stake, from 43% to less than 10%, but despite Thursday’s rally the shares remain below the 73.6p break even price. He was also handed shares worth £3.6m in a long-term incentive plan, which could pay out in three years’ time. His 10-strong management team were handed shares worth £17m in the same scheme. The total bonus pool was cut to £353m from £369m. Sixty-six staff received total pay of €1m (£800,000) or more.


OUR RELATED STORIES:

As of 2014, the £20bn paid out by the banks for their PPI mis-selling is more than all their taxes paid since 2008

The bailout of our banks continues. Not from the taxpayer, but from your pathetic savings interest rates. See the BofE data

Financial Reporting Council says just 2% of bank and building society audits are up to scratch

The Interest Rate Swaps that screwed 40,000 small and medium sized businesses: how the regulator allowed the banks to be judge and jury for their own dodgy deals

RBS accused of seizing small business assets and selling them at knock-down prices to an RBS subsidiary

The government wants you to think we made a profit on sale of Lloyds Bank shares. Actually we made a thumping loss!

How re-mortgaging covered up the theft of Britain's growing wealth in the boom, and helped cause the bust

Thursday, February 25, 2016 Posted by Hari No comments Labels:
Help-To-Buy helps Barratt Homes profits rise 40%
Barratt Homes predicted continuing demand for its houses as it announced soaring first-half profits, fuelled by a shortage of homes and the government’s help-to-buy scheme. The government recently extended help-to-buy until 2021 and introduced it for buyers in London. Some critics have said the move will simply push up prices in the capital, making houses less affordable. Pre-tax profits at Barratt Homes, Britain’s biggest housebuilder, rose 40% to £295m in the six months to the end of December as revenues rose 19% to £1.88bn. Almost a third of Barratt’s sales were made under the government’s help-to-buy programme, which underwrites a portion of a purchaser’s mortgage for a newly built home. The government is trying to encourage private housebuilders such as Barratt to build more homes to deal with a housing crisis caused by decades of supply failing to meet the demands of a growing population. Shortage of supply lies behind soaring house prices, particularly in London, and fears are growing that the market is heading for a crash after overseas buyers snapped up property for investment or speculation purposes. GUARDIAN

Millions of workers still £900 worse off than before 2007 crash
The data from the Office for National Statistics raised fears of a “lost decade” for many families who had expected the trend in rising living standards to continue. Their figures showed that median disposable income for non-retired households rose to £28,300 on average in 2014/15 but this was still £900 below the £29,200 in 2007/08. However, many pensioners have fared far better than workers during the economic turmoil, benefiting from the Government’s “triple lock” for rises in the level of the State pension. The average disposable income of retired households grew by £1,500, or 7.7 per cent, between 2007/08 and 2014/15. It also highlighted that the average disposable income of the richest fifth of households fell the most during the downturn, by 7.9 per cent between 2007/08 and 2012/13. Since then it has increased but was still £2,000 below its previous peak. The poorest fifth of households were the only group whose average income did not fall between 2007/08 and 2012/13 and in 2014/15 the average income of this group was £700, or 5.8 per cent, above its level before the crash. EVENING STANDARD

Iain Duncan Smith refuses to set up freephone for families claiming benefits
Struggling families will be charged up to 45p a minute to claim benefits over the phone on government helplines. The work and pensions secretary, Iain Duncan Smith, is refusing to set up a freephone number for the estimated eight million people who are set to claim the new universal credit over the next four years. The decision contradicts the Department for Work and Pensions’ pledge, made back in 2013, to make calls for all major benefit claim lines free. The universal credit system is being phased in to replace all main in-work and out-of-work benefits, and anyone trying to make a claim over the phone must call an 0345 number, which can be charged at up to 45p a minute from a mobile or 12p a minute from a landline. A DWP spokeswoman said: “People who are unable to claim online and need to use the telephone service can request a call back to avoid call charges. Most vacancies are now advertised over the internet, and claimants are encouraged to apply online to help them prepare for the world of work.” Applying online is free. But almost six million adults have never been online, according to the Office for National Statistics. GUARDIAN

New energy bill row after British Gas reveals bumper profits
The simmering row over high energy prices has been reignited after British Gas’s residential supply business reported a 31% leap in annual profits to £574m. The soaring profit comes amid growing calls for the big six suppliers to cut energy bills for customers in line with falling wholesale prices. “It is absolutely sickening that British Gas has made bumper profits in a year when there were more winter deaths than at any time this century,” said Fuel Poverty Action’s Ruth London. British Gas, which holds about 40% of UK gas accounts, has announced three price cuts in the last 12 months, which it claims could lower a dual fuel bill by almost £100 a year. However, critics have always argued that the cuts have been small compared with the savings made from tumbling wholesale costs, partly caused by the collapse in the global price of oil and gas. GUARDIAN

Privately educated elite continues to take top jobs, finds survey
The Sutton Trust educational charity has been carrying out similar surveys for more than a decade, and though it reports “small signs” of progress, this year’s results confirm what has long been known – that if you have a private education, you are considerably more likely to get to the top of British public life. Just 7% of the population attend independent fee-paying schools, while comprehensive schools currently educate 88% of the population. Yet the survey reveals that almost three quarters (71%) of top military officers were educated privately, with 12% having been taught in comprehensive schools. In the field of law, 74% of top judges working in the high court and appeals court were privately educated, while in journalism, more than half (51%) of leading print journalists went to independent schools, with one in five having attended comprehensive schools. In medicine, meanwhile, Sutton Trust research says 61% of the country’s top doctors were educated at independent schools; nearly a quarter (22%) went to grammar school and the remainder to comprehensives. In politics, the picture is a little better, with under a third (32%) of MPs having been privately educated, though that figure goes up to half of the cabinet, compared with 13% of the shadow cabinet. Graduates of Oxford and Cambridge universities also continue to dominate the field, though they educate less than 1% of the population. In law, nearly three quarters (74%) of the top judiciary went to Oxbridge; 54% of the country’s leading journalists went to Oxbridge, and just under half (47%) of the cabinet attended Oxbridge, compared with 32% of the shadow cabinet. It reveals that award-winning British actors are more than twice as likely to have had a private education than award-winning pop stars. While 42% of British Bafta winners went to an independent school, just 19% of British winners at the Brit music awards were educated privately. While Eddie Redmayne, star of The Danish Girl; Homeland actor Damian Lewis; and Tom Hiddleston, now starring in the BBC series The Night Manager, famously went to Eton College, the Sutton Trust points out that British music stars like Adele, Imogen Heap and Jessie J found success after attending the state-funded Brit School in Croydon. GUARDIAN

Sacked “London Whale” trader claims he was just following JP Morgan strategy
Bruno Iksil was at the centre of trades that created $6.2 billion of dollars’ worth of losses for JP Morgan, resulted in $920 million (£657 million) in fines for the bank and cost him his job. He said: ‘Publicity surrounding the losses sustained by the CIO of JP Morgan typically refers to "the London Whale” in terms that imply that one person was responsible for the trades at issue. ‘In fact the losses suffered by the CIO were not the actions of one person acting in an unauthorised manner. My role was to execute a trading strategy that had been initiated, approved, mandated and monitored by the CIO’s senior management.’ Iksil and two of his supervisors lost their jobs as a result of the trades. Iksil was granted immunity from prosecution by US authorities in 2013 as it continued its investigation. In the letter Iksil claimed he had warned his bosses repeatedly in 2011 and 2012 about the risk involved in his trades. However he said they pressured him to continue. CITY WIRE

“Misleading “ Nurofen Express TV advert withdrawn by Reckitt Benckiser
The advert implied that the Nurofen Express capsules directly targeted muscles in the head. Viewers were shown a huge head, that highlighted the muscles which tended to come under strain and caused headaches. They were told that Nurofen Express "targets these muscles and gives you faster headache relief". The company now says it will not re-broadcast it following complaints that the ad was misleading. The product maker, Reckitt Benckiser, has now promised the UK’s Advertising Standards Authority it will not imply the product has a mechanism that makes it especially effective for headache pain. An earlier court ruling in Australia said although they were marketed to treat specific pains, such as migraine and period pain, they were actually identical to other products. The advert was launched in February last year and has not been aired since June. BBC NEWS

Friday, 19 February 2016

Friday, February 19, 2016 Posted by Hari 1 comment Labels: , , , ,
KJ and Fee explain...

SOURCE GUARDIAN: HSBC to keep its headquarters in London, after concessions from chancellor
HSBC is to keep its headquarters in the UK after a 10-month review during which time the government has made a series of changes regarded as favourable to the bank. After the May 2015 Conservative election victory the chancellor, George Osborne, has backed away from creating rules intended to toughen up the regime for holding senior bankers to account. He had said he would reverse the burden of proof but has reverted to the more usual system of bankers guilt having to be proven. He also changed the system for taxing banks. A bank levy on balance sheets, which hit HSBC hardest of all the banks, is being scaled back and an eight percentage point corporation tax surcharge on profits is regarded as hitting its smaller rivals harder. Analysts have calculated that the changes mean HSBC will pay £300m to the exchequer – down from £1bn under the previous bank levy system. 

SOURCE BLOOMBERG: HSBC sued over drug cartel murders after laundering probe
Families of U.S. citizens murdered by drug gangs in Mexico have sued HSBC, claiming the bank can be held responsible for the deaths because it let cartels launder billions of dollars to operate their businesses. The lawsuit brings fresh scrutiny to the Mexican activities of HSBC, which in 2012 paid $1.9 billion to resolve a criminal investigation into whether it violated U.S. sanctions laws and laundered at least $881 million on behalf of drug cartels. The new case recounts a series of murders in 2010 and 2011 in horrific detail, arguing that the bank should be held to account for them under the U.S. Anti-Terrorism Act. Lesley Redelfs was four months pregnant when she and her husband, Arthur, were shot by the Juarez cartel after leaving a children’s birthday party hosted by the U.S. Consulate in Ciudad Juarez, where she worked. Jaime Zapata and Victor Avila Jr. were special agents for Immigration and Customs Enforcement, driving to Mexico City when they were run off the road by two vehicles filled with hit men from the Los Zetas cartel, who then opened fire. Avila survived. Rafael Morales Jr. was abducted on his wedding day, as were his brother and uncle, and the three died of asphyxiation after members of the Sinaloa cartel wrapped duct tape around their heads. HSBC already is among banks facing a lawsuit from families of U.S. soldiers killed or injured by attacks in Iraq on accusations that the firms helped Iran process transfers and finance Hezbollah and other militant groups. 


OUR RELATED STORIES:

As of 2014, the £20bn paid out by the banks for their PPI mis-selling is more than all their taxes paid since 2008

The bailout of our banks continues. Not from the taxpayer, but from your pathetic savings interest rates. See the BofE data

Financial Reporting Council says just 2% of bank and building society audits are up to scratch

The Interest Rate Swaps that screwed 40,000 small and medium sized businesses: how the regulator allowed the banks to be judge and jury for their own dodgy deals

RBS accused of seizing small business assets and selling them at knock-down prices to an RBS subsidiary

The government wants you to think we made a profit on sale of Lloyds Bank shares. Actually we made a thumping loss!

How re-mortgaging covered up the theft of Britain's growing wealth in the boom, and helped cause the bust

Thursday, 18 February 2016

Thursday, February 18, 2016 Posted by Hari No comments Labels:
GSK fined £38m for stifling drug competition “at the expense of the NHS and taxpayers”
Drug giant GlaxoSmithKline (GSK) has been fined £37.6m by the Competition and Markets Authority (CMA). It relates to £50m of payments made to rivals for them to effectively delay the release of the anti-depressant paroxetine drug. GSK's branded version of the drug, Seroxat, was then able to continue its monopoly over the market for this "blockbuster" product. According to the CMA when the rivals were eventually able to enter the market at the end of 2003, average paroxetine prices dropped by more than 70% in two years. It is the largest fine since the CMA began operating nearly two years ago, and among the biggest in the UK competition law history. 4.2 million UK prescriptions of Seroxat were issued in 2000. Sales exceeded £90m in 2001. In that year, two smaller rivals GUK and Alphapharma made agreements with GSK which included terms banning their independent entry into the UK paroxetine market. The CMA found that these agreements infringed competition law. It has fined the companies involved a total of £45m - £37.6m for GSK and £7.4m in relation to the other two companies. SKY NEWS

UK first-time buyers will have already spent 'more than £50,000 on rent'
Figures from the Association of Residential Letting Agents (Arla) show that UK tenants spent an average of 22% of their wages on rent last year, and that buyers getting on the ladder this year will have previously paid out an average of £52,900 to landlords. In the north-east a typical tenant will have spent £31,300 on rent before they can buy, while in London the figure is £68,300. The Arla research is based on someone moving out of their family home at 18 and renting for 13 years. Rents have risen rapidly in recent years as would-be first-time buyers have struggled to afford to buy a home and been forced to spend longer in the private rented sector. Figures from estate estate agents Your Move and Reeds Rain recently showed that rents on new tenancies rose by 3.4% in 2015 to an average of £794 a month. On Thursday official figures showed that the number of tenants evicted from their homes had risen to a record high in 2015. GUARDIAN

Rail franchising: taxpayers lose out as fewer companies are bidding to run train services
Fears over dwindling interest and competition in rail were underlined last week when the DfT announced only two shortlisted bidders for the South Western franchise, Britain’s most lucrative commuter network. One of the bidders was the incumbent, Stagecoach, which has run it for 20 years. The number of bids has reduced on average from four to three since the rail franchising programme was restarted in 2013, the public accounts committee (PAC) report said. It found that the DfT was struggling to attract new operators and that some of the nine transport companies currently running trains in the UK could drop out of the market. Meg Hillier, the chair of the PAC, said: “We are particularly concerned about the effects of declining competition within the programme. By its own measure, the department requires at least three bids per competition to increase the likelihood of receiving high-quality bids.” But rail unions described the PAC report as “hopelessly inadequate”. The RMT general secretary, Mick Cash, said: “It attempts to create the impression that the great rail rip-off can be halted by a bit of tinkering with the franchising process when it is privatisation itself that has reduced our railways to a chaotic, moneymaking racket. The answer is to rip it up and return the whole rail network to direct, public ownership.” GUARDIAN

Hundreds of sheltered housing developments 'shelved due to benefit cuts'
The National Housing Federation (NHF) has calculated that nearly 2,500 units have so far been scrapped or delayed as sheltered housing providers face losing an average of £68 a week per tenant. The cuts - announced in Chancellor George Osborne's Autumn Statement - will bring housing benefit rates for social housing in line with the sums paid to landlords in the private sector. Mr Osborne said the move, which will affect England, Scotland and Wales, would deliver savings of £225m by 2020-21, and is part of a £12bn package of cuts from the welfare bill. The cap includes sheltered housing, which is more expensive to provide due to the additional support on offer - anything from canteens to round-the-clock care staff. At one sheltered housing complex in Harrogate, the need for new development is clear - there is only one lift and the corridors are narrow. "We need to move," said resident Frank Forkes. "It's very cramped. If the lift breaks down, it's chaos because you've people upstairs in wheelchairs." The housing association has spent eight years developing plans for a new complex a couple of miles away. But following the government's announcement in November, the board of Harrogate Neighbours delayed the scheme. Under the new rules, they would lose £100,000 per annum on it. BBC NEWS

Cameron ‘buying off’ Tory MPs threatening to rebel over council cuts
David Cameron has been accused of buying off Tory MPs threatening to block local government cuts, after it emerged that a new £300m relief fund will overwhelmingly help Conservative areas, including his own Oxfordshire council. The extra cash was announced after up to 30 Conservative MPs were poised to revolt against the local government finance settlement. A Labour analysis shows that 83% of the new £300m two-year fund will go to Tory-run councils, mostly in the southern shires. It found that the biggest beneficiary will be Surrey, which will get £24m, with £19m going to Hampshire, £16m to Hertfordshire, £14m to Essex, £12m to West Sussex, £11m to Kent and £9m to Buckinghamshire. Cameron’s county council in Oxfordshire will get an additional £9m to ease the cuts over the next two years. The council in Oxfordshire had been criticised by the prime minister’s own mother for its planned cuts to children’s services. Then Cameron’s aunt joined in the calls for the council to reverse its decision, saying it was a “great, great error” to allow 44 children’s centres to close. Clare Currie, sister of the prime minister’s mother, Mary Cameron, told ITV News that her nephew is a family man who she believes “doesn’t want them to be shut either”. While Conservative county councils will get the most relief, allowing them to slow the pace of cuts, major Labour-run urban areas will get no transitional funding at all. Labour pointed out that the five most deprived councils in the country – Middlesbrough, Knowsley, Hull, Liverpool and Manchester – will receive nothing under the grant, while the five least deprived – Hart, Wokingham, Chiltern, Waverley, Elmbridge – will collectively receive £5.3m. GUARDIAN

HSBC to keep its headquarters in London, after concessions from chancellor
HSBC is to keep its headquarters in the UK after a 10-month review during which time the government has made a series of changes regarded as favourable to the bank. After the May 2015 Conservative election victory the chancellor, George Osborne, has backed away from creating rules intended to toughen up the regime for holding senior bankers to account. He had said he would reverse the burden of proof but has reverted to the more usual system of bankers guilt having to be proven. He also changed the system for taxing banks. A bank levy on balance sheets, which hit HSBC hardest of all the banks, is being scaled back and an eight percentage point corporation tax surcharge on profits is regarded as hitting its smaller rivals harder. Analysts have calculated that the changes mean HSBC will pay £300m to the exchequer – down from £1bn under the previous bank levy system. GUARDIAN

HSBC sued over drug cartel murders after laundering probe
Families of U.S. citizens murdered by drug gangs in Mexico have sued HSBC, claiming the bank can be held responsible for the deaths because it let cartels launder billions of dollars to operate their businesses. The lawsuit brings fresh scrutiny to the Mexican activities of HSBC, which in 2012 paid $1.9 billion to resolve a criminal investigation into whether it violated U.S. sanctions laws and laundered at least $881 million on behalf of drug cartels. The new case recounts a series of murders in 2010 and 2011 in horrific detail, arguing that the bank should be held to account for them under the U.S. Anti-Terrorism Act. Lesley Redelfs was four months pregnant when she and her husband, Arthur, were shot by the Juarez cartel after leaving a children’s birthday party hosted by the U.S. Consulate in Ciudad Juarez, where she worked. Jaime Zapata and Victor Avila Jr. were special agents for Immigration and Customs Enforcement, driving to Mexico City when they were run off the road by two vehicles filled with hit men from the Los Zetas cartel, who then opened fire. Avila survived. Rafael Morales Jr. was abducted on his wedding day, as were his brother and uncle, and the three died of asphyxiation after members of the Sinaloa cartel wrapped duct tape around their heads. HSBC already is among banks facing a lawsuit from families of U.S. soldiers killed or injured by attacks in Iraq on accusations that the firms helped Iran process transfers and finance Hezbollah and other militant groups. BLOOMBERG

Sainsbury's scraps two-for-one and multi-buy deals in supermarkets
The announcement comes after the Money Advice Service (MAS) warned this week that confusing price promotions could actually be costing people an extra £1,200 a year. The supermarket chain’s Marketing Director, Sarah Warby, said: "Careful management of household budgets, a growing awareness of the cost of food waste and more health-conscious living has driven a trend away from multiple product purchasing towards more single item purchasing... We have listened to our customers who have told us that multi-buy promotions don’t meet their shopping needs today, are often confusing and create logistical challenges at home in terms of storage and waste.” Around half of its multi-buy promotions have already been axed, the company said, although there will still be the occasional seasonal deal after the summer. EVENING STANDARD

Morgan Stanley to pay $3.2bn for misleading investors
Morgan Stanley will pay $3.2bn (£2.2bn) to US authorities to settle claims that it misled investors about risky mortgage bonds sold before the financial crisis. In 2015, a tentative deal to pay $2.6bn was announced, but New York authorities pushed to increase that amount. Morgan Stanley acknowledged it had misrepresented the quality of the mortgage bonds. Morgan Stanley's settlement is far less than peers like Bank of America, which paid $16.65bn. This is in part because Morgan Stanley did not issue the original mortgages itself, but instead purchased home loans from other banks and packaged them together to sell as bonds to investors. Morgan Stanley admitted knowing the mortgages were risky, but was cleared of some culpability because it did not issue mortgages to home buyers it suspected would not be able to pay them. This is one of the last deals connected to pre-financial crisis mortgage bond sales that the Financial Fraud Enforcement Task Force -which originated that charges- is likely to bring. BBC NEWS

Companies to publish gender pay gap under new government initiative
Companies with over 250 employees will have to publish their gender pay gap under measures being announced by the Government to tackle inequality. New league tables will also be launched giving details of companies failing to address the problem. And ministers are taking action to make sure that thousands more girls study maths, engineering, science and technology at school. A £500,000 package was announced aimed at helping the 8,000 employers who will have to publish their average pay and bonus gap between men and women. The first league table will be published in 2018, making it possible for women to compare pay in different sectors. Women and equalities minister Nicky Morgan said the Government wanted to secure "real equality" for women and reduce the gap in pay between men and women, saying: "That's why I am announcing a raft of measures to support women in their careers from the classroom to the boardroom, leaving nowhere for gender inequality to hide.” The TUC said it was "shocking" that the gender pay gap was still over 19% for all workers and 9.4% for full-time employees, adding that at the current rate of progress it would take almost 50 years to close it. DAILY MAIL

Burberry faces U.S. lawsuit accusing it of deceptive price tags
British luxury fashion brand Burberry is to face a class action lawsuit in the United States, claiming it used misleading price tags at its outlet stores to fool shoppers into believing the goods were being sold at a hefty discount. Outlet stores typically sell excess or old stock at a discount. But some retailers, including Burberry, manufacture goods specifically for sale in their outlet operations. The company is accused of intentionally presenting false price information on products that have never been sold in its retail stores. The lawsuit is the latest in a long line of cases accusing luxury retailers of marking up goods sold in outlet stores with made-up manufacturer prices. Last year U.S. retailer Michael Kors (KORS.N) agreed to pay $4.88 million and change its sales practices to settle a similar class action lawsuit after it was accused of creating an "illusion" of deep discounts. REUTERS

Sunday, 14 February 2016

Sunday, February 14, 2016 Posted by Jake No comments Labels: , , , ,
Regulators in Britain, including OFGEM (energy companies) and the FCA (financial companies), are powerless to stop many rip-offs because Parliament has made them that way. 
Regulators have about as much right to stop bad behaviour as a cop has to pull you over for doing 29 mph in a 30 mph zone. You'd need to be shooting at pedestrians with one hand, leaving just your other hand on the steering wheel, for them to do that. Even then, if a British regulator was prosecuting, you wouldn't be done for the civilian casualties but would get a £100 fine for driving while distracted (by shooting at people) as if you were using a mobile phone.

Regulators are impotent because consumer law passed and maintained by successive parliaments, Conservative and Con-Dem and Labour, make it quite legal for traders to rip off the 'less than average' 50% of their customers. This premise forms the bedrock of British commercial culture from banks to pensions to mobile phones to estate agents to broadband packages. The Office of Fair Trading (OFT) even provides a helpful roadmap to guide crooked traders on reaching the below average consumers (our annotations are in red (and this chart really is an OFT roadmap, not us being satirical)):



Energy companies, for example, have traditionally hidden behind hedges to carry out their mischief. These are not the leafy hedges prized by small children with catapults. The hedges the energy companies lurk behind are financial. So what are these financial hedges about?

There are legitimate reasons to take shelter behind a financial hedge. For example, the average refrigerator contains 123 pounds of steel. When a fridge manufacturer publishes a catalogue of prices for the next year, it wants to be sure the cost of the steel it uses doesn't shoot up leaving it making losses on the fridges it sells (or having to randomly hike their prices). The fridge maker can hedge this risk by contracting to buy all the steel up front, but only to be delivered and paid for at various times in the future during the year (a "futures contract"). The steel can be delivered to the fridge factory monthly, just in time for it to be fashioned into that month's quota of fridges.

As a result of the hedging the fridge manufacturer won't suffer if the actual price of steel goes up, but neither will it benefit if the actual price of the steel goes down. It will just pay the price it agreed when it signed up to the futures contract hedge.

Energy companies, who generate and sell electricity and gas to households and industry, can also 'hedge' their purchases of the fuels they use: oil; gas; coal; uranium.

In January 2016 David Cameron complained again about energy companies, scolding them for not cutting their household bills at a time oil prices had plummeted. 18 months before Cameron's passing winge, in June 2014 Mr. Dermot Nolan, CEO of OFGEM, wrote a “letter calling on large energy suppliers to explain the impact of falling wholesale prices on customer bills.”


This resulted in a series of "Dear Dermot" letters. The Big Six consensus being that due to hedging it would be at least 18 months before wholesale prices would have any impact on retail energy bills to households and businesses. Scottish Power stated in its letter:

"Dear Dermot,....
we buy our fuel ahead in order to avoid price shocks from instability in the wholesale markets. This means that movements in wholesale spot markets up or down, are not immediately passed into our cost base: the majority of our energy for 2014 was bought before the start of the year. Unfortunately, the energy we are mainly buying now – for delivery in 2015 and later – is not falling much in price.”


The energy companies thought the drop in oil prices would be temporary. They thought oil prices would surely be back up well within 18 months. In its own Dear Dermot letter, NPower said:
 
"Dear Dermot...
The primary reason for the fall in [wholesale] prices is the exceptionally mild winter we have had" [i.e. the winter of 2013-14].

Low prices caused by the exceptionally mild winter in 2013-14? They never for a moment thought the price would still be low 18 months later, blowing away their 18 month deep smokescreen and ripping off all the 18 veils they were prancing behind.

To better understand what they were talking about, take a look at the graph below of the price of a futures contract to deliver crude oil in January 2016. The price of a barrel of oil delivered to your power station in January 2016 depended on when you bought your futures contract:
  • If you bought the futures contract in 2013 it would have cost around US$95.  
  • If you bought the same contract in mid 2014 it would have cost about US$100. 
  • From mid 2014 the price crashed. 
  • In January 2015 the price was down to US$60. 
  • By the middle of 2015 this futures contract for delivery of oil in January 2016 was down to US$50. For the remainder of 2015 the price continued to fall towards US$40.
https://www.quandl.com/data/ICE/BF2016-Brent-Crude-Futures-January-2016-BF2016

The next graph shows the price of futures contracts for delivery of oil in July 2017.
https://www.quandl.com/data/ICE/BN2017-Brent-Crude-Futures-July-2017-BN2017
With prices so low, the energy companies should be filling their boots with oil futures for as far into the future as possible. They should be promising households and employers much lower energy bills for at least 18 months. Sadly, past experience shows when oil prices go up households and employers will pay more pretty quickly.

Oil prices will go back up. The price can be moved on the whim of a small group of men in countries round the World not subject to shareholders nor democracy nor supply nor demand. Just as energy companies claim to have been stuck with high prices for 18 months after prices crashed, they should also be stuck with low prices for 18 months after the oil price rebounds.

Will our household energy bills stay low for that 18 months? OFGEM did once try to expose the energy companies' shenanigans by publishing wholesale and retail prices. However, they were quickly slapped down, presumably by OFGEM's political masters. The Daily Mail reported in January 2016:
"Power giants have won a secret battle to hide the scale of the profits they are making by refusing to cut prices.

Money Mail can reveal that last April the energy watchdog was bullied into ditching data that show whether households are getting a good deal.

These vital figures used to be published monthly. They showed the difference between what power firms were paying [wholesale] to supply energy to your home and what they were charging you on your bill."


Dear Dermot, OFGEM CEO, responded to the Mail's allegation saying it's not true any secret deal was done. Dermot completely avoided the question of why OFGEM stopped publishing these figures.

History shows that when oil prices go up consumer energy prices go up straight away. But when oil prices go down, even when they collapse, consumer energy prices just trickle down. In February 2016, following the oil price crash 18 months earlier, energy companies reduced prices by a puny 5%.

Whichever way oil goes the energy companies continue business as usual, barely able to stifle their chuckles. They are confident that those who can do something won't, and those who want to do something can't.

Which leaves poor old OFGEM standing impotently by looking to British consumers very much like buffoons.


Thursday, 11 February 2016


SOURCE BBC NEWS: David Cameron's mother signs anti-cuts petition
Mary Cameron, 81, has put her name to a campaign against plans by Conservative-run Oxfordshire County Council to close a number of the centres. Retired magistrate, Mrs Cameron, told the newspaper: "My name is on the petition but I don't want to discuss this any further." She reportedly signed the petition while visiting her son in Oxfordshire. Campaigners are trying to stop the closure of nearly all of Oxfordshire's 44 children's centres - the county council wants to keep eight hubs, to save £8m pounds. The petition describes the proposals as a "false economy", and says the early intervention services provide numerous economic and other long-term benefits. Campaign organiser Jill Huish said she was "not surprised" to have the Prime Minister's mother's endorsement. "It shows how deep austerity is cutting our most vulnerable when even David Cameron's mum has had enough," she said. The prime minister previously wrote to the local authority in his capacity as MP for Witney expressing "disappointment" at planned cuts to museums, libraries and day centres for the elderly. But council leader Ian Hudspeth hit back, saying the cuts were the result of reductions in funding from central government. Members of Unite employed in early intervention by Oxfordshire County Council will walk out on strike on February 16 after voting overwhelmingly for industrial action.

OUR RELATED STORIES:

Tory promises of "Low Tax, High Pay" has given us higher taxes & lower pay. See the stats

Is your Cost of Living crisis over?! Average wages are still back where they were 10 years ago

Graphs at a glance: Budget 2014 document shows we’re growing through borrowing. Again. That's why Britain needs a pay rise


Share This

Follow Us

  • Subscribe via Email

Search Us