Graphs at a glance: Financial regulation in the USA and the UK: Federal Marshal versus Sleeping Policeman

Winston Churchill said of America:

“You can always rely on America to do the right thing once it has exhausted all the alternatives”

Sadly, the same can’t be said of Britain.

London and New York have fought for the top “Global Financial Centre” spot for years. According to the March 2014 “Global Financial Centres Index” produced by Z/yen, who describe themselves as “the City of London’s leading commercial thinktank”:

“New York is now the leading centre, although its lead over London is statistically insignificant – two points on a scale of 1,000.”

What is it about crusty old London that keeps it head-to-head with glitzy New York? According to a puff-piece by the City of London Corporation the key elements to a Global Financial Centre are:

• Critical Mass; Connectivity; People; Regulation; Domestic Market Infrastructure; Business Environment

Six solid gold attributes that New York and London can both offer. But London offers something even more valuable! In March 2014 the Financial Times reported that the total fines paid since the Banking Crash by banks to US regulators hit the US$100 billion mark:

"Wall Street banks and their foreign rivals have paid out $100bn in US legal settlements since the financial crisis, according to Financial Times research, with more than half of the penalties extracted in the past year."

Figures show that in 2008 both UK and US regulators were fining banks a similar amount - reflecting the fact that the US regulation was then just as spineless as the UK. But by 2013 UK regulatory fines were only one fiftieth US fines.

Exchange rate US$1.6 = £1

Read More

Operating a profiteering cartel is a criminal offence. So if 6,000 die from fuel poverty each year, will manslaughter charges be next?

Fee, KJ and Chris wonder what will happen next to the "Big 6" energy firms...

Read More

Rip-off News round-up. Our pick of the last week's media (Thu 27th March)

Defaults mean student fees hike likely to cost more than the system it replaced

New official forecasts suggest the write-off costs have reached 45% of the £10bn in student loans made each year. The 48.6% mark is the threshold at which experts calculate that the government will lose more money than it would have saved by keeping the old £3,000 tuition fee system. The coalition's decision to introduce higher fees of £9,000 shortly after it formed led to rioting on the streets and forced a dramatic decline in the Liberal Democrats' poll ratings, from which the party has never fully recovered. Lower pay for young adults, an over-supply of those with degrees and the worsening economic outlook have all contributed to the revised civil service forecasts which conclude that far fewer graduates will earn enough to pay back their loans over their working lives. Four months ago Willetts notified parliament that the rate had risen to 40% from 35%. In 2010 the estimate was 28%. GUARDIAN

Big Six energy firms face full-scale probe as watchdog finds profits QUADRUPLED to more than £1billion in three years
The Big Six energy companies face a full-scale competition investigation amid widespread public distrust of the industry, soaring profits and evidence of possible ‘tacit’ coordination. Months of building distrust and debate around the energy market came to a head this morning as the regulator Ofgem announced the market will face a full investigation. The investigation would be the first full-scale competition probe into the energy market and would see the UK’s biggest suppliers come under an unprecedented level of scrutiny, with the threat of being broken up. Despite the rising profits, the damning report from the regulator said there was ‘no clear evidence of suppliers becoming more efficient in reducing their own costs’ and that further evidence would be required ‘to determine whether firms have had the opportunity to earn excess profits’. DAILY MAIL

Tory, LibDem and Labour MPs approve annual welfare cap in Commons vote

Welfare spending, excluding the state pension and Jobseekers allowance, will be capped next year at £119.5bn. The idea, put forward by Chancellor George Osborne in last week's Budget, would in future see limits set at the beginning of each Parliament. With Labour supporting the idea, the measure was approved in the House of Commons by 520 to 22 votes. However, eleven Labour backbenchers defied their leadership by voting against the plan. Diane Abbott, one of the Labour rebels, said the cap was a blunt mechanism that would not take into account changes in people's circumstances and economic factors such as rising rents. BBC NEWS

Cameron: You may have to pay for your own social care if you cash in your pension early

Prime Minister David Cameron has warned those who choose to cash in their pension early under Government reforms that they could end up paying more for their care later in life. It comes after George Osborne announced in the latest Budget that savers would be allowed to withdraw money from their pension pots as they wish when they retire. Osborne said his shake up of the pension annuity market was to end the stranglehold the insurance industry has on people’s pension savings. But anyone who has assets worth more than £118,000, including their own homes, will have to pay for their own social care. Cashing in your pension may push you above that limit. DAILY MAIL

Read More

Opening up the Annuities market is good news for pensioners? How about fixing the annuities and pension fee rip-offs in the first place?

Read More

Graphs at a glance: Easy mortgages and PPI compensation taught Osborne handing out cash boosts the economy. Is that why he is giving us our pension pots to spend?

Chancellors of her Majesty's Exchequer are programmed to produce fists full of lolly in the year before an election. John, Norman, Ken, Gordon and Alistair did it. George Osborne was no different in the 2014 Budget. Chancellors in the year before an election produce lolly like the Child Catcher from Chitty Chitty Bang Bang.



The biggest lolly George is handing out in the 2014 Budget is our pension pots. Up until this brightly wrapped idea we were required to give at least 75% of our pension pots to pension companies, by buying an annuity. Now Osborne says we can take the money ourselves and do the right thing with it for our old ages.

This is of course a change of heart from Osborne. In the 2012 Budget Osborne thought pensioners were just simple souls. He said:

“We should also simplify the age related allowances - which the Office of Tax Simplification have recently highlighted as a particularly complicated feature of the tax system…The National Audit Office points out that many pensioners don't understand them."

Osborne's idea of ‘simplifying’ the age related allowances was to scrap them completely. A move Ros Altmann, the pensions expert, described as follows:

“This Budget contains an enormous stealth tax for older people. Over the next five years, pensioners with an income of between £10,500 and £24,000 will be paying an extra £3 billion in tax while richer pensioners are left unaffected.”

So why has Osborne decided that pensioners who are befuddled by a "tax doesn't have to be taxing" self-assessment form are astute enough to set up an investment programme to provide an income for themselves for the remainder of their lives? It is undoubtedly true that pension companies have been ripping off pensioners for years with rotten annuities. The financial services regulator the FCA reported in 2014 that pension companies swipe £230 million a year from pensioners in this way. But that scam has persisted because successive governments have allowed it to, having skipped every opportunity to legislate and sanction. 

Does Osborne think the best way to get the pension company wolves away from the pensioners’ doors is to take away the doors?

Read More

Graphs at a glance: The great middle-income tax hustle: Since 2010 1.4 million people earning over £42k have had their marginal income tax rate doubled from 20% to 40%

“Find the pea” is a favourite street hustler trick. A pea is openly placed under one of three walnut shells, the shells are shuffled, and the pea reappears where it wasn't before.

“Find the tax” works in the same way. You are shown the tax, then it disappears to return somewhere unexpected. A Taxpayers’ Alliance report produced in January 2013 stated the Conservative-LibDem government has implemented 2.5 times more tax rises than cuts since it came into power in 2010 (299 rises and 119 cuts). These include everything from cutting the highest rate of income tax from 50% to 45%, to adding VAT on to the rental of a chair in a hairdresser’s salon. (As the report was published in January 2013, subsequent tax changes aren’t included).

It is evident from these 479 tax shuffles that George Osborne is a pretty adept hustler. He knows it is best to do some things openly so people don't look too hard for the things he does under cover. He openly stated the VAT rise would bring in an additional £13 billion a year (a regressive tax, hitting the poor harder than the wealthy). 

He was more-or-less open with his speedy cut to the 50% top tax rate. A cut made in time to enable the people affected to shift their income – moving it before and after the year of the 50%. A report by HMRC shows that billions of the “affected group’s” income disappeared in 2008-09 to reappear in the year before and the year after the life of the 50% rate.

Somethings George does with curtains drawn and the lights switched off. The much trumpeted increase to £10,500 before people start paying income tax was the shuffle covering a doubling in the tax rate for people earning over £42,285. It had been the custom, between 2004 and 2010, for the threshold for higher rate tax to rise a bit faster than inflation. 

"Inflation Linked" means the threshold if the 2004-05 level had increased with inflation.

Read More

Pension pots 'can be used to buy Lamborghinis', says pensions minister

KJ, Fee and Chris get their heads round annuities...

Read More

Rip-off News round-up. Our pick of the last week's media (Thu 20th March)

FirstGroup to be handed Great Western mainline on the cheap

FirstGroup looks set to run the Great Western mainline until the next decade without facing a franchise competition – having earlier handed back its contract to avoid hundreds of millions of pounds in premium payments to the government. Last September the government sparked outrage by awarding first a six-month extension and then a two-year direct award to First for rail services west of London for an annual sum of £32m – a fraction of the £800m due under the terms of the original franchise. The shadow transport secretary, Mary Creagh, said the deals would leave a £300m hole in the DfT's finances. She said: "Ministers have now quietly announced another sweetheart deal with First Great Western Group, no doubt at rock-bottom prices, in stark contrast to their unwanted refranchising of the east coast line, run by a not-for-profit public operator which last year returned £191m to taxpayers." GUARDIAN

UK Statistics Authority says Government claim that Legal Aid barristers earn £84,000 is 'misleading'

In a critical letter to the Ministry of Justice, Sir Andrew Dilnot said the government ignored lower estimates to justify £220m cuts to the legal aid budget in England and Wales. The government figure was published days before a protest by barristers in January. The government said it stood by its figures. On Tuesday, Sir Andrew - who leads the body which monitors the integrity of official statistics - wrote to Legal Aid minister Shailesh Vara and courts saying the report did not specify how the government figure was reached. He said the sum was "potentially misleading" as it was not made clear barristers would have to pay costs and tax out of this. Using a different way of calculating the figures would have produced a lower average, he added. The Criminal Bar Association (CBA) disputes the claim, saying barristers actually earn an average of £37,000. BBC NEWS

Income inequality leads to slower economic growth - IMF economists

Income inequality can lead to slower or less sustainable economic growth, while redistribution of income, when measured, does not hurt and can even help an economy, IMF staff found in a research study. Although the study by International Monetary Fund economists does not reflect the Fund's official position, it is another sign of a shift in its thinking about income disparity. "It would still be a mistake to focus on growth and let inequality take care of itself, not only because inequality may be ethically undesirable but also because the resulting growth may be low and unsustainable," according to the study. It has traditionally advised countries to promote growth and reduce debt, but has not explicitly focused on income inequalities. But in the past year, IMF Managing Director Christine Lagarde has said that creating economic stability is impossible without also addressing inequality. REUTERS

Osborne plans to take 'pay now, argue later' approach with rich tax avoiders

More than £5bn in disputed tax liabilities will be dragged out of the bank accounts of tax avoiders and restored to Treasury coffers, the chancellor claimed. George Osborne hopes a tougher "pay now, argue later" approach to more than 30,000 of the richest and most sophisticated tax avoiders in Britain will help HM Revenue & Customs deal with its costly backlog of dispute cases, while generating revenues to fund measures announced elsewhere in the budget. Among the highest profile avoidance schemes in HMRC's sights are so-called film partnership investments – popular with celebrities, footballers and investment bankers – which generate losses which can be offset against income. GUARDIAN

Read More

Councils using lie detectors to catch benefit fraudsters? How about using them in parliament!

Read More

Graphs at a glance: Wholesale energy price data from OFGEM and NPower show the key excuse for energy price hikes has been a fib

The Financial Conduct Authority (FCA, previously the FSA) and OFGEM are the pantomime twins of regulation in Britain: Tweedle-dumb and Tweedle-dumber. 

The FCA waving its Vorple Sword is regarded by the banks as no more threatening than a cheer-leader wielding a furry pom-pom. The litany of bankers' interest rate rigging; pension annuity scams; insurance scams etc. goes on with no sign of any banker swapping his pure wool pinstripe suit for an acrylic stripey prison jersey.

At least the FCA can claim it is getting tricked by different scams all the time. OFGEM, evidently the dumber of the twins (it must be truly mortifying to be dumber than the FCA!), has managed to be deceived for years by one central fib: the soaring wholesale price of energy. 

For years energy companies have blamed consumer price hikes on World energy markets. Data published by OFGEM in October 2013 (why did it take them so long to do something so obvious?), and by NPower in January 2014 (why did they do it at all?) show wholesale prices simply have not been shooting up.

Combining this data from OFGEM and NPower, and retail prices from Consumer Futures reveal:
 
a) Using NPower's figures (in real terms) since 2007, customer bills have increased by 18% in 2013, and predict a 40% increase by 2020, while wholesale costs have actually fallen. In this NPower report instead of blaming wholesale prices NPower blames everything else except profits:

Read More