Bob Diamond's Barclays rigged LIBOR interest rates. What's next?

The gang look on the bright side...

Read More

Rip-off News round-up. Our pick of the last week's media (Thu 28th Jun)

Bob Diamond shamed into giving up bonus after Barclays fined £290m for attempting to rig money markets
By repeatedly submitting artificially low figures, Barclays gave a false impression of its financial strength. DAILY MAIL

Mis-selling scandal set to destroy thousands of small businesses and jobs

Britain's big banks were today accused by MPs and the Federation of Small Businesses (FSB) of a huge new mis-selling scandal that could destroy thousands of small firms and cost 80,000 jobs. FEDERATION OF SMALL BUSINESSES

G4S chief predicts mass police privatisation

Private companies will be running large parts of the police service within five years, according to security firm boss GUARDIAN

The £705,000 'affordable' home
Some housing associations are stretching the meaning of 'affordable home' to the limit GUARDIAN

Read More

Is it immoral not to pay tax using perfectly legal loopholes, Prime Minister?

Chris asks if tax avoidance is a moral issue...

Read More

Liebrary: Do massive pay packages compensate CEOs for the high price for failure?

A report by the High Pay Commission stated: "It is commonly argued that executives receive high levels of remuneration to compensate them for the high-risk nature of the job…… In a survey conducted by the High Pay Commission of CEOs in the current FTSE 100 between 1 January 2009 and 31 December 2009, only six CEOs left the company, giving a turnover rate of 6%, compared with the national average employee turnover rate of 13.5%. Thus it appears that CEOs experience significantly lower rates of labour market risk than other employees. Of the CEOs that left, two went into retirement. A further three resigned voluntarily and received severance packages. In the sample only one CEO experienced involuntary redundancy in the period….This is equivalent to a rate of involuntary turnover of 1%; the national average for the same period was 0.9%."

The Economist newspaper's graphic showed that in Western Europe a mere 1% of CEOs were forced out.

Read More

Liebrary: Is the Financial Sector really the engine of prosperity and growth for the UK?

If you repeat a lie often enough, people will believe it to be true. If there was a GCSE, or O'Level, in Propaganda this would be in Chapter 1.

Particularly since the banks crashed the World economy, we have been told by bankers and politicians alike that in spite of the financial sector's misdeeds we should leave it with light regulation, allow its executives to extract excessive salaries, and pump in billions of pounds taken from the rest of the economy to rescue it. 

We are told that the job cuts, pay freezes, reduced pensions, cuts to the armed forces, the police, health and education are all sacrifices well worth making in order to save the banks.

Why should we be so generous? We are told that the Financial Services Sector is the greatest engine of growth in employment and wealth in the United Kingdom. 

Is this actually true?

Figures presented in a report on banking reform by the University of Manchester's Centre for Research on Socio-Cultural Change (CRESC), titled "An alternative report on UK banking reform", suggest that this is a lie worthy of a place in our Liebrary.

a) Has the financial services industry actually made a huge contribution to the national coffers?
The CRESC report shows that in the five years before the crash in 2008 the financial services industry contributed £208 billion in taxes (including taxes paid by its staff). However the bailout cost was £289 billion, (i.e. over £80 billion more, up to when the CRESC report was written in 2009).

Read More

Rip-off News round-up. Our pick of the last week's media (Thu 21st Jun)

Rule change: you cannot bring a spouse into the UK unless you earn above £18,600. The price of love?
Unless you have an annual income of at least £18,600 per year the government proposes that you will not be allowed to bring a spouse into the UK (regardless of whether you are foreign born or you are a direct descendent of Boadicea). According to Oxford University's Migration Observatory, These changes mean that, of British citizens in employment:
- 47% will not qualify to bring in a family member.
- 58% of people aged between 20 and 30 will not qualify to bring in a family member 
CHANNEL4 NEWS and OXFORD UNIVERSITY MIGRATION OBSERVATORY


Home ownership £200,000 cheaper than lifetime of renting

Barclays researchers say figure is a conservative estimate and does not factor in high inflation or resale value. Another reminder of how expensive it is to be poor GUARDIAN

Will banks hold on to £140bn of new government cash intended for small businesses?

Federation of Small Businesses warns against banks simply using the money to shore up their own finances DAILY MAIL

Work is not a way out of poverty for millions of working families

3.6m working households have little or no savings, nor equity in their homes, and struggle at the end of each month to feed themselves and their children adequately GUARDIAN and DAILY MAIL

Read More

How best to honour the City?

The gang try to win a conservation competition to name a British species

Read More

As Osborne ignores advice on how much banks can borrow, has the government decided to protect bank profits and bonuses rather than protect Britain?

In June 2012, John Vickers who headed the Independent Commission on Banking was very upset that some of his recommendations were rejected by the Chancellor, George Osborne. Was it just his hurt pride? Or does he spot another rip-off being pulled over our heads while we aren't comprehending?

The most important recommendation rejected by Osborne was:

"All ring-fenced banks with a RWAs-to-UK GDP ratio of 1% or more should have their minimum leverage ratio increased on a sliding scale (to a maximum of 4.06% at a RWAs-to-UK GDP ratio of 3%)."

(RWA - Risk Weighted Assets)


What this means in practice:

Never forget, the Credit Crisis was caused by banks borrowing too much. This leverage ratio refers to the ratio of how much a bank can borrow (and then lend on to its customers, or play with in the banking casino) relative to its Tier1 Core Capital. The higher the permitted leverage multiple the more the bank can borrow.


The banking industry claims that setting the higher requirement would be bad for the economy - higher prices and lower growth. The Bank of England, in a report from April 2011 (see later), says this isn't true. Who should Osborne believe? The City which provides 50% of Tory party funding, or the Bank of England which doesn't?


The Future of Banking Commission, set up after the Credit Crisis hit, reported in 2010 that bank executives have every reason to maximise the money they can borrow as it boosts the return on equity and net revenue. Page 60 of the report (scenario: banks can borrow at 4% and lend at 5%) provides some figures illustrated on this graph:

"The FSA has noted that prior to the financial crisis, many investment banks calculated net revenue and then determined the total size of their employees' bonuses by reference to a compensation ratio (typically between 40% and 50%). As Sir Martin Taylor has noted,

'Paying out 50% of revenues to staff had become the rule, even when [because of accounting rules] the ‘revenues’ did not actually consist of money.'"

The “Tier1 Core Capital” is money held by a bank that nobody has the right to take away.

This includes

-         Retained profits

-         Equity capital.

Retained profits are those profits that are not paid out as bonuses to staff or as dividends to shareholders. Retained profits belong to the bank, held as reserves. 

Read More

Tax havens boost their lobbying efforts in the UK and Brussels

by Melanie Newman, Bureau of Investigative Journalism

Britain’s Overseas Territories and Crown Dependencies have been boosting their lobbying strength in the UK and Brussels in recent years amidst growing criticism of tax havens.

NGOs such as Christian Aid have argued that the Territories’ image as tax havens puts them at ‘serious reputational risk’ and if they continue with their current policies ‘then their international profile as facilitators of corruptions and tax evasion will increase’.

Jersey, Guernsey and the Isle of Man have also come under fire, most recently from Labour leader Ed Miliband, who said the Dependencies must reveal the identities of tax evaders with money hidden on the islands.

‘I wouldn’t describe Bermuda as a tax haven. I’d describe Bermuda as being a very well run country that is able to have low taxes because it’s got a very strong economy.’ 
Henry Bellingham, Conservative Minister for Overseas Territories

In an attempt to counter such attacks, these offshore jurisdictions have been ramping up their PR and lobbying endeavours. They have also been lobbying in Brussels on European financial regulation.

Cayman Islands 
One recent example of this stepping up of ‘reputation management’, as revealed by the Bureau this week, was the hire of Lord Blencathra by the Cayman Islands as its UK representative.  Appointed in November 2011, his remit was to lobby in Westminster and Brussels and to fight off attacks on ‘tax neutral jurisdictions’. He told a press conference the financial services industry had to ‘justify its existence’ and that European financial regulation posed a threat to the Islands.

The Islands’ financial services industry lobbyist, Cayman Finance, has been represented separately by PR firm Media House International since April 2009. Chairman Jack Irvine is regularly quoted in the island press attacking critics of tax havens such as the Tax Justice Network and Labour MP John Cryer.

Media House has also employed Lord Blencathra as a public affairs consultant since 2008, though the peer told the Bureau his work for the firm did not involve the Caymans.

Bermuda
Business Bermuda, an organisation working with Bermuda-resident companies and the government, has also made moves to deflect criticism.  It hired financial PR and lobby firm Pelham Bell Pottinger in February 2011 with a remit to ‘develop and promote Bermuda internationally as the jurisdiction of choice’.

Read More

A return to Victorian inequality, says Oxfam

As FTSE 100 bosses' pay continues to rise, Chris and his wife come to terms with growing inequality in the UK

Read More