NHS reforms: is there a doctor on board? (3-part series)

Chris and Fee have more faith in GPs than perhaps the GPs do themselves

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Getting heated about heating - energy company ripoffs

Rip-offs come in all shapes and sizes:

• Crippling inescapable pilfering that ruin you and offer no hope of recovery. Pensions and investments, with their high charges and low returns, fall into this category, leaving millions spending their final years in reduced and poverty stricken circumstances.
• Discretionary scams, such as purchases of goods and holidays. A few hundred, or thousand, pounds lost on a non-recurring and avoidable ‘low cost’ flight or fridge or time-share holiday home.
• Periodic kicks in the gut, such as servicing your car, and your gas and electricity utility bills. Made more awful by the knowledge that they are coming, and will come again and again.

Of the periodic kicks in the gut, the hardest hitting are utility bills. Rent or mortgage probably costs more, but is predictable. The cost of staying in your home stays the same most of the time, and it turns up on the dot each month. You use your house for a month, and you pay for a month.

But with utility bills everything is fluid. What you pay depends on how much electricity and gas you use, what time of the day you use it, and what the latest cost is. The cost is dependent on whether you pay by meter, by direct debit, by cheque, by paperless billing, by papered billing. And also on the prices of fossil fuels, the projected prices, the cost of the hedging done a year ago to mitigate price risk in the year to come. Which is all highly dependent on the crazies in Venezuela, Iran, Iraq, Saudi Arabia, and whether the Americans wants to test their latest hardware by dropping it on someone somewhere. And, just as importantly, it depends on how much the energy companies want to rip you off.

Ordinary Britons are on the whole painfully reasonable people. If we possibly can, we tend to give the benefit of the doubt and take the pain. The scamsters rely on this. Where there is uncertainty and confusion about the apparent scam there is resigned tolerance. Without a forensic examination we can’t be sure whether that gasp-inducing gas bill was because we left the thermostat too high a month ago. Or if we can do something about the shocking electricity charges by running the washing machine at night during off-peak hours. If at all possible, we put the blame on ourselves – mainly as an excuse for not taking any action against suspected rip-offs.

Tolerance is generally found in the list of ‘good things’ – but whether tolerance is good depends on what is being tolerated. Of course, the last thing this blog aims to do is to make ordinary Britons unreasonably intolerant! So, to give you reason to get just a bit narked, here are some details.

With so many variables, the utility companies have more opportunities to bamboozle you than you can shake a chequebook at. This assumes you are using a chequebook, and haven’t been blackmailed into setting up a Direct Debit – which is a rip-off in itself, allowing the utility companies to ‘borrow’ at zero cost hundreds of millions from their customers by simply drawing it from your bank account. But more on that another time.

With years of experience exploiting these opportunities, and having learned long ago that the government watchdogs are not just toothless but are dog-less, the utility companies are merciless in their rip-offs.  Ofgem, like a disappointed but indulgent primary school teacher, gently reproves the utilities with words such as

“It has come to our attention that suppliers may not be conducting due diligence while executing some of the new provisions of SLC**.  Therefore, we have decided to issue this guidance to help clarify certain issues.”

“ Given the history of the marketing licence condition and the extensive consultation exercises previously carried out (e.g. during the Probe), Ofgem firmly takes the view that suppliers should already be fully aware of, and fully capable of understanding, the spirit and letter of the obligations contained in SLC **. In the absence of exceptional circumstances or compelling evidence of genuine uncertainty, Ofgem is unlikely to consider it appropriate to provide any additional clarification on SLC **. It remains the responsibility of suppliers to ensure compliance with all licence conditions and relevant provisions of consumer protection law.”

Extract of an Ofgem ‘guidance’ letter, where SLC** is a Standard Licence Condition.

In summary, this says:

a)         We know you are doing the wrong thing.

b)         We’ve already told you what the right thing is.

c)         We know you know what the right thing is.

d)         We’re not going to tell you again.

e)         You should be doing the right thing.

f)          Erm… that’s it. Yours Sincerely etc.

Ofgem plays the part of a broken schoolteacher standing in front of an out-of-control class of adolescents. The children have worked out that there is nothing the teacher can do. “Stop Talking!” says the teacher, “I wasn’t talking!” replies the student, hardly pausing between instalments of playground tittle-tattle.

Just like the naughty student, the energy companies’ standard response to suggestions that they are profiteering is that they are not. A brief dismissal of the suggestion, daring the accusation to be made of lying – relying on the truth being obscured by a whole lot of smoke, hot air and, more recently, CO2 emissions. If you want to know whether companies are profiteering, don’t look at the statements they make to the regulators and the public, but look at what they say to their investors. 

When the energy companies made huge price increases in 2008, their excuse was the spike in the price of oil. Centrica is a UK energy supply company. Their graph shows how the price of power followed the price of oil. Which would be reasonable if electricity was actually generated by burning oil. However, in the UK oil is used to generate less than 2% of the electricity. In the land of Ripped-off Britons electricity is largely generated by coal, gas, and nuclear. While there was undoubtedly a huge jump in the price of oil around 2008, the rise in gas prices was little more than a bout of mild flatulence.

To avoid all doubt, and see how we are ripped off in the starkest terms, take a look at the gas prices over the five years between 2005 and 2010. In this period the retail gas price (what we pay to power our homes) increased by 80%, while the wholesale price (the cost to, for instance, Centrica to buy the gas) fell by 35%. The collapse in the cost to the energy companies of wholesale gas in the first part of 2009 was ignored by them, having no significant effect on the price paid by consumers.

Figures from the Department of Energy and Climate Change

http://www.decc.gov.uk/en/content/cms/statistics/source/prices/prices.aspx

http://www.ofgem.gov.uk/Consumers/CI/Documents1/Direct%20Debit%20Report%20March%202009.pdf


Energy supply companies justify their high price with the high price they pay to buy energy from the generating companies. However, they omit to mention that five of the 'big six' supply companies run their own generating companies.  According to OFGEM,  "The five former electricity incumbents can meet all of their domestic and SME requirements from their own generation." This OFGEM graph shows how, since 2005,  energy companies have switched their profits from supply to generation, providing cover for their rip-off retail prices.

http://www.ofgem.gov.uk/Markets/RetMkts/ensuppro/Documents1/QPR%20final%20feb.pdf

If you wanted to get hot under the collar without switching on your central heating, take a look at the Centrica 2010 Interim Results presentation to investors - and their statement that they intend to double their profits over the next 3-5 years!

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Compensation culture

Spread the word on how to avoid paying compensation to cheated citizens

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Banking on Payment Protection Insurance

Our three heroes, Fee, Chris and KJ, bet on the banks coming out best in the BBA's high court challenge on PPI

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Self-assessment deadline looms

KJ's attempt to complete his online tax return is not going well

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Public spending cuts - how the poor subsidise the rich

There is a widely held falsehood that the rich subsidise the poor. The poor are poor because they don’t have enough money, and therefore it is supposed that the rich give them handouts via their taxes.  There are various fig-leaves to justify this disparity in cashflow. A few truly talented executives justify bumper payrounds for the mediocre herd. And a few truly awful pieces of trash justify the pitiless treatment of all the other poor. But the reasons for who gets what is not my current purpose. My purpose is the question of inequality, subsidies, and public spending cuts.

Subsidies, including those that come from public spending, are about personal spending, made up of discretionary and mandatory spending. For those who have all the money they can toss around, there is only discretionary spending. They have no need to mandatorily put aside money before they can splash their cash.  Even after all the splashing, they have plenty to pay for their housing, health and education.

Next come the less well endowed who have to make crucial budgetary decisions to choose whether or not to take the state subsidies. Whether to buy a new car every two years or pay for private education; whether to spend a few thousand on a family holiday, or take a mortgage to buy a home; whether to purchase the all-encompassing phone-internet-cable tv deal for hundreds of pounds, or buy private health insurance.

And the rest, well, they have no choice but to rely on “subsidies”. Their income is simply not sufficient to pay market rates for those must-have things such as housing, schooling, and doctoring. Hence some of the main “subsidies” in Britain come in the form of the National Health Service, state schools, and social housing. Societies that don’t ensure there is enough money for health, housing and education can be seen all over the world. They are ghastly morasses with all the bad stuff that comes with that, together with strong walls and fierce militias to keep the haves separate from the have-nots.

For countries such as Britain that wish to stay above the morass, the option of actually paying everyone enough not to need subsidy is considered way too expensive. Relying on people to choose would mean paying them enough money to take all the more appealing choices and still have enough left over to pay for the mandatory stuff.

Therefore, in order to force ordinary people to buy those mandatory things – healthcare, housing, and education - a society like the UK withholds their pay.  Not as a deduction from their salaries, but by not putting it in their salaries in the first place. And it uses this withheld money to pay for the services such as the NHS, social housing, and government schools.

Together with their withheld money decisions on priorities are taken away from ordinary people. As an example, the NHS is prepared to provide treatment based on its valuation of a quality year of life (measured by the NHS as a “QALY”) being worth about £20,000. If your treatment costs more than that then you are not a priority – unless you have bought private health insurance. The National Institute of Clinical Excellence states:

“A QALY gives an idea of how many extra months or years of life of a reasonable quality a person might gain as a result of treatment..


Cost effectiveness is expressed as ‘£ per QALY'.


Each drug is considered on a case-by-case basis. Generally, however, if a treatment costs more than £20,000-30,000 per QALY, then it would not be considered cost effective.”

Social housing too aims to provide little more than a roof overhead, and a brick wall between neighbours. And for many families, state schools provide not much more than a place to keep their children during the day.

It is not the taxes of the rich that pay for the subsidies. Subsidies are paid for by the poverty of the poor, using their withheld money. To add insult to injury, the wealth of the rich is also paid for by the poverty of the poor – company profits puffed up by low wages and high prices.

The reality is that public spending cuts take away from ordinary people their own withheld wages. Leaving the rich relatively unscathed.

We are where we are, and these cuts maybe necessary.  But they are also very revealing. The rich don’t subsidise the poor. The poor subsidise the rich.

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Banking is a muggers game (4 of 4)

Chris directs the long arm of the law to the City of London

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Banking is a muggers game (3 of 4)

Chris tries to cut a deal with his mugger, who is a ruthless negotiator

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Banking is a muggers game (2 of 4)

Chris sees a career opportunity for his mugger

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Take care of excessive banking profits, and the excessive bonuses will take care of themselves.

The City operates like the feudal barons of the middle ages, who oppressively taxed their peasants but once a year would give away a roasted ox at the village fete. The dimmer citizens would be greatly appreciative of this annual generosity, forgetting that it was paid for by the oppressive taxes imposed by the generous barons. In the twenty odd years that bankers started robbing their own banks by carting out cash in bonus-bags,  politicians - in a state of distracted incomprehension - have claimed that the banks should be allowed to make profit because they contribute so much tax. But lets look at the figures here.

Whole Financial Sector total corporation tax in 2007 = £12.17 billion (from a report done by PWC for the City of London Corporation in Dec 2008).

In a press release in October 2010, Which?, the consumer magazine, reported "Savers are missing out on £12 billion a year by keeping their money in accounts that pay miserly rates, according to new Which? research."


With this single scam reported by Which?, UK banks cover virtually the entire the cost of their corporation tax. This lets them pocket the proceeds of all their other excessive charges (e.g. pension fund charges) and penalties (e.g. unauthorised overdrafts). 

The problem with the banks is not the level of bonuses, but the level of profits that pay for the bonuses. The entire economy is oppressively taxed by the banks by their high charges, which bring them their huge profits. High charges imposed on people saving for the pensions, companies buying financial services – you need look no further than the recent escapade by Prudential failing to buy AIA, in which it was charged £297.4m by banks in advisory, underwriting and other fees related to the aborted transaction. Smaller companies would typically cede a much greater percentage. And for ordinary citizens, the maths will show you that someone saving for 40 years for their pension can lose almost half their investment in bank charges by the time they retire.

No doubt the banks provide a vital service, but as there is no competition comparable to that between the supermarkets, they charge way too much. As a direct result, the high cost either discourages people and companies from using the service, or provides extremely poor value to them – such as the dreadful returns on personal pensions.

Woe upon woe, the inflation of the top bankers' salaries provides an excuse to the top executives of other sectors to pay themselves more – putting their prices up, and leaving less for the shareholders and for the less exalted staff. Why, they ask themselves, if the bankers can earn salaries with all those zeros after the first few integers for doing nothing special, can’t I?

The much repeated lie that it is the shareholders who should influence the banks was exposed when the protests of the 70% shareholder of RBS, i.e. the Government, were ignored as no more important than pips squeaking. If the 70% shareholder can be ignored, how much influence would even a pension fund holding a couple of percent have?

And why on earth are we relying on the pension funds, impotent though they would be? Fund managers, regularly interviewed on broadcast media, sagely agree with the show’s presenter that pensions funds should press the banks to behave more soberly. Only once have I heard a radio presenter with sufficient economic literacy to point out that the fund manager is a wolf in wolf’s clothing – and is hardly likely to try very hard to pull down his twin's pay as it would bring down his own with it.

The problem with the banks is not the level of bonuses, but the level of profits that pay for the bonuses. The government should allow market forces to bring down the level of profits.

How? Well, the government owns large parts of major banks. Requiring these banks to bring down their charges will bring market forces to bear on the other banks. The benefits will be seen by pensioners getting better returns, industry being able to afford the banking services to help them thrive, and sanity being brought back to boardrooms around the world.

Of course, this won’t make things right by itself. But without this, things will never be right.

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Banking is a muggers game (series)

Chris encounters a mugger, but he's already had recent experience of theft

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VAT's the way to do it (3 of 3)

KJ's struggle to revolutionise the masses is checked

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VAT evasion as a non-violent protest (2 of 3)

KJ finds himself in exalted company when he refuses to pay VAT at the new 20% rate

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Who pays for the "top talent"?

The ‘tussle for talent’ is the favourite justification given by companies, bureaucracies, and parliaments for generous perks, privileges, and pay. To say the “talent” takes the credit is obvious – that is how they are identified as “talent”. However, whether they deserve all the credit they take is a matter of opinion.

The people who allocate the ‘credit’, and thereby define who the ‘talent’ is, are the bosses of organisations. A report released in October 2010 by Income Data Services demonstrates that the bosses are sure of one thing – they themselves are enormously talented, and they tussle vigorously to reward themselves. In a time when wages are generally stagnating, the bosses determination to tussle for their own talent is evident:

“FTSE-100 directors saw their total earnings boosted by an average of 55% while across the FTSE 350 as a whole total board pay went up by an average 45%, according to the latest Directors Pay Report, published by Incomes Data Services. (Year to June 2010)”

Even boosting the pay of fellow employees, by declaring how talented they are, is not always a matter of generosity or admiration – it can also be to provide a smokescreen. Massive rewards to bankers distracts attention from even more massive rewards to banking bosses. The bankers may be wolves in sheep’s clothing, but in that galloping herd of talented sheepskins there are many sheep in sheep’s clothing getting away with gratifying levels of pay and perks. The degree to which this smokescreen has worked can be seen from the fact that in the years between 1980 and 2007 the pay per worker in the financial sector – i.e. all of them, not just the “talent” – rose from about par to over 1.8 times  the average pay per worker. These figures on pay are from the US,  which the UK strives to match.

Do bankers deserve this largesse? Not if you are listening to Andrew Haldane, Executive Director of Financial Stability at the Bank of England. His 2009 speech explained that the stellar annual returns of 16% in bank shares between 1986-2006 can be attributed solely to gambling with borrowed money. Banks made profits on money they had borrowed, which was fine so long as the roulette wheel was kind. When the bets turned bad, borrowed money had to be paid back. Banks went cap in hand to the taxpayers for bailouts or simply went bust. In the 85 years between 1900-1985 banks produced an average return of 2%. In the 110 years between 1900-2009 the return is a boring 3%.


Where the bankers go others follow. Bankers justify their pay based on the 16% returns they produced, hoping nobody notices its transitory nature. Others, executives and MPs and GPs and more, justify their pay because they work harder and are brighter than the bankers, and so need to keep up.

In a time when the “massively talented” have driven organisations into ruin and bankruptcy – banks, insurance companies, car companies, construction companies, quangos, and entire nations – who is actually best placed to say who the talent is, and how they should be rewarded?

Directors’ pay is set by fellow directors, sitting as non-execs on each-others' remuneration committees. Was the meaning of “quid” in “quid pro quo” ever more apt? Perhaps the ‘talent’ should have their rewards set by their customers? But they would never let that happen in any meaningful way. No matter how dim a light is hidden under the bushel of pay and perks, it is not so dim as to expose their talent to that assessment.

We have a very recent example of this in a survey conducted by the Independent Parliamentary Standards Authority (IPSA) on MPs’ expenses. The Parliamentary Expenses Debacle, let’s not use the ‘scandal’ word, demonstrated in stark terms how talented our MPs decided they themselves were. And how important, in the tussle for their own talent, it was for them to supplement their incomes. And how vigorously they would put their talents into that tussle. IPSA asked the public, the MPs’ “customers”, questions including how much they trusted MPs to regulate themselves (they don’t trust them), and whether they should have first class travel and taxis paid for even if cheaper alternative are available (no).

In the end, it is not the "companies" that are obsessed by paying what is needed to hold on to the "vital few", but the "vital few" who are self-obsessed, and tussle to hold on to their image of “talent” and the associated benefits.


And who pays for these benefits? You do, making your contributions every day through inflated bank charges, wretched returns on your savings, rampant gas bills, excessive taxes, and just about every other transaction you are party to.

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Paying in cash is VAT avoidance by any other name (series)

KJ seeks a justification for avoiding paying VAT

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Cuckoos In The Nest Egg - As we approach Banking Bonus Season, consider how top bankers manage to pay themselves so magnificently, and get away with it.

“And, being fed by us, you used us so

As that ungentle gull, the cuckoo's bird,

Useth the sparrow--did oppress our nest”

William Shakespeare, King Henry the Fourth, Part I

Money is the key to releasing all the skills and assets in a nation. Which is why those who manage the flow of money, the bankers and financial traders, have been able to enrich themselves in a way no other non-criminal profession has. Possession, after all, is nine tenths of the law. And once you’ve put your money into a bank or an investment, it is de facto in the possession of the banker.

You can do a lot of things with money. In fact, that is the entire point of money – you can do a lot of things with it. Money, after all, is the physical manifestation of liquidity. The economy is ultimately based on people exchanging goods and services produced by their own labour and assets for goods and services produced by other people’s labour and assets. Money is nothing more than the token used to conduct this exchange.

If money didn’t exist, the only way a carpenter could get his teeth fixed would be by finding a dentist who happened to need some carpentering. The carpenter would build the dentist some shelves, and in return, the dentist would fix the carpenter’s teeth. The dentist too would only be able to employ those tradesmen who happened to have a toothache. All our skilled carpenters, bakers, butchers, doctors, dentists, computer programmers, and everyone else would spend virtually all their time finding a counter-party who not only needed their particular skill but could also provide the particular skill they needed in exchange.  And have very little time left to use their actual skills. Imagine, if the dentist’s house was burning down and the fire truck arrived, only those firemen with bad teeth would take the trouble to fight the flames!

Under these circumstances, the only way to have a Rapid Response fire brigade would be to have literally thousands of firemen waiting at the station. When there is a fire at, say, a butcher’s shop, it would require a show of hands of those fancying a pork chop for dinner to raise a crew.

Money is the token that enables people to offer their skills to anyone with money. The dentist pays the fireman, through his taxes, with money – so even those fire fighters with good teeth will save his house, chattels, and loved ones. The dentist fixes the teeth of tradesmen he has no need of, providing his dentistry skills in exchange for their money. And he uses that money to pay for, among other things, his taxes which makes sure firemen are available regardless of the state of their molars.

There is a limited demand for everything except money – because money enables the possessor to demand everything. A baker may refuse to sell his bread, but there will always be another baker who will take the opportunity to fill the gap. The stubborn baker is ultimately left with a heap of unsold mouldy bread. Similarly, a dentist who refuses to fix teeth for a day is unable to horde that day. The dentist’s asset is his skill and the time to use it – and time flies. But holding onto money is its own reward.

While there is an unlimited demand for money, there is a limited demand for bankers. It is this limited demand that enables bankers to create a rigged market for their own services. And by calling this rigged market ‘free’, they justify their excessive pay. 

The free market is a wonderful thing – making many things possible, including incentivising firemen to enthusiastically save dentists’ houses. The principal is that in a free market people get paid what they are worth, because if they charge too much they won’t get any business and won’t get paid at all. The financial services industry, however, is in a unique position. It has no problem getting money, because that is what it is for – it exists to manage other peoples’ money. The top executives of the industry, finding themselves in the happy possession of the pot of money with responsibility for ladling it out, can see little reason not to serve themselves first. The limited demand for top bankers means there is no need to admit to the summit of the profession those who see otherwise.

There are three main forces constraining excess - the free market, morality, and regulation. The most effective of which is undoubtedly the free market, so long as it actually is free. Having rigged the free market and bred out, by selective recruitment, the morality, is the financial services industry now only left with regulation?

The reality is regulation is the final refuge to which we do not quite yet have to resort. We need look no further than our own FSA to see how ineffectual regulation can be. Now that governments, particularly in the USA and UK, own a substantial portion of the financial services industry the opportunity exists, for a limited time, to break the rigged market in executive pay. Vince Cable, Business Secretary in the coalition government, minister, said it himself, in his interview on the Andrew Marr Show on the 19th December 2010

“But in terms of bonuses specifically, I mean the responsibility actually lies with their owners, it's often you and me through our pension funds,”

Dr.Vince Cable, Secretary of State for Business, interviewed in the BBC’s Andrew Marr Show on 19^th December 2010.

If we are expecting the bankers who manage our pension funds to push down the pay of bankers, then we must be bonkers. On the other hand, the British and American governments are owners of a large slice of the financial services industry following the bailouts. What are they going to do, not as legislators but as owners? Will they take the action Mr.Cable recommends, or will they divest themselves of this embarrassing power by quite literally selling out? As the US government did in early December 2010, by selling its remaining shares in the rescued Citigroup? The British government is still the controlling shareholder in Royal Bank of Scotland Group (84%), and the largest single shareholder in Lloyds Banking Group (41%). Will the UK government bluff its way through with impotent pronouncements until it too can sell out? Or will it allow the taxpayers of the UK to exert the market power that comes from this ownership in our name?

The question is, will excellent professionals work their guts out for less than £1million a year, including perks? They do in every other area of endeavour, from running major organisations, commercial and governmental, all the way to being brilliant doctors and academics, and excellent accountants and policemen. It is only in the financial services, so they tell us, that £1million isn’t enough. Will a bond trader refuse to work for £250,000 a year?  If that is the rate the banking industry offers him, then what is his alternative? Do so many of them have Beckham like football skills such that they can disdain this reward, flounce away from the banking industry altogether, and earn a better salary on the pitch at Wembley?

Top bankers, shedding crocodile tears, point out that the main reason they pay themselves so outlandishly is to help themselves resist the temptations of other banks’ outlandish benefits packages. The great power of democracy, so great that it is astonishing it is allowed to survive, is that even bankers need to be able to provide some justification for what they do to the ordinary man on the street. Not to provide themselves with cover directly, but to provide a smokescreen for government inaction to avoid the judgement of the voters. The great limitation of democracy is it is vulnerable to the short attention spans of the voters. Money can buy anything. Even now we can see money being spent on public relations and obfuscation consultants with the objective of filibustering the attention spans of the voters. The chances are they will succeed, and will continue their excessive pay with scarcely a hiccup. Something the bankers and the government are smugly confident of.

Why do the bankers get away with it? Like cuckoos in the nest, feeding on the deposits of small investors and savers? In October 2008 appearing in front of a US congressional committee looking into the collapse of the banking sector, Alan Greenspan, former chairman of the Federal Reserve and former evangelist of light regulation, admitted

“those of us who have looked to the self-interest of lending institutions to protect shareholder’s equity (myself especially) are in a state of shocked disbelief.”

Testimony of Dr.Alan Greenspan to the Committee of Government Oversight and Reform, October 23 2008.

Cuckoos live their parasitic existence by disguise, making their hosts believe they are part of the family. The reality is the cuckoos push all aside, taking the largest share of what is brought to the nest – the others only get to eat once the cuckoo is full. The regulators and governments all fail, either through stupidity or wilfully, to recognise that the self-interest of powerful individuals in an institution is rarely the same as the self-interest of the institution. Even less so when they can quickly make themselves independently wealthy, as they have done in the financial services. Like cuckoos, they are just passing through.

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Cuckoos In The Nest Egg - As we approach Banking Bonus Season, consider how top bankers manage to pay themselves so magnificently, and get away with it.

“And, being fed by us, you used us so

As that ungentle gull, the cuckoo's bird,

Useth the sparrow--did oppress our nest”

William Shakespeare, King Henry the Fourth, Part I

Money is the key to releasing all the skills and assets in a nation. Which is why those who manage the flow of money, the bankers and financial traders, have been able to enrich themselves in a way no other non-criminal profession has. Possession, after all, is nine tenths of the law. And once you’ve put your money into a bank or an investment, it is de facto in the possession of the banker.

You can do a lot of things with money. In fact, that is the entire point of money – you can do a lot of things with it. Money, after all, is the physical manifestation of liquidity. The economy is ultimately based on people exchanging goods and services produced by their own labour and assets for goods and services produced by other people’s labour and assets. Money is nothing more than the token used to conduct this exchange.

If money didn’t exist, the only way a carpenter could get his teeth fixed would be by finding a dentist who happened to need some carpentering. The carpenter would build the dentist some shelves, and in return, the dentist would fix the carpenter’s teeth. The dentist too would only be able to employ those tradesmen who happened to have a toothache. All our skilled carpenters, bakers, butchers, doctors, dentists, computer programmers, and everyone else would spend virtually all their time finding a counter-party who not only needed their particular skill but could also provide the particular skill they needed in exchange.  And have very little time left to use their actual skills. Imagine, if the dentist’s house was burning down and the fire truck arrived, only those firemen with bad teeth would take the trouble to fight the flames!

Under these circumstances, the only way to have a Rapid Response fire brigade would be to have literally thousands of firemen waiting at the station. When there is a fire at, say, a butcher’s shop, it would require a show of hands of those fancying a pork chop for dinner to raise a crew.

Money is the token that enables people to offer their skills to anyone with money. The dentist pays the fireman, through his taxes, with money – so even those fire fighters with good teeth will save his house, chattels, and loved ones. The dentist fixes the teeth of tradesmen he has no need of, providing his dentistry skills in exchange for their money. And he uses that money to pay for, among other things, his taxes which makes sure firemen are available regardless of the state of their molars.

There is a limited demand for everything except money – because money enables the possessor to demand everything. A baker may refuse to sell his bread, but there will always be another baker who will take the opportunity to fill the gap. The stubborn baker is ultimately left with a heap of unsold mouldy bread. Similarly, a dentist who refuses to fix teeth for a day is unable to horde that day. The dentist’s asset is his skill and the time to use it – and time flies. But holding onto money is its own reward.

While there is an unlimited demand for money, there is a limited demand for bankers. It is this limited demand that enables bankers to create a rigged market for their own services. And by calling this rigged market ‘free’, they justify their excessive pay.

The free market is a wonderful thing – making many things possible, including incentivising firemen to enthusiastically save dentists’ houses. The principal is that in a free market people get paid what they are worth, because if they charge too much they won’t get any business and won’t get paid at all. The financial services industry, however, is in a unique position. It has no problem getting money, because that is what it is for – it exists to manage other peoples’ money. The top executives of the industry, finding themselves in the happy possession of the pot of money with responsibility for ladling it out, can see little reason not to serve themselves first. The limited demand for top bankers means there is no need to admit to the summit of the profession those who see otherwise.

There are three main forces constraining excess - the free market, morality, and regulation. The most effective of which is undoubtedly the free market, so long as it actually is free. Having rigged the free market and bred out, by selective recruitment, the morality, is the financial services industry now only left with regulation?

The reality is regulation is the final refuge to which we do not quite yet have to resort. We need look no further than our own FSA to see how ineffectual regulation can be. Now that governments, particularly in the USA and UK, own a substantial portion of the financial services industry the opportunity exists, for a limited time, to break the rigged market in executive pay. Vince Cable, Business Secretary in the coalition government, minister, said it himself, in his interview on the Andrew Marr Show on the 19th December 2010

“But in terms of bonuses specifically, I mean the responsibility actually lies with their owners, it's often you and me through our pension funds,”

Dr.Vince Cable, Secretary of State for Business, interviewed in the BBC’s Andrew Marr Show on 19^th December 2010.

If we are expecting the bankers who manage our pension funds to push down the pay of bankers, then we must be bonkers. On the other hand, the British and American governments are owners of a large slice of the financial services industry following the bailouts. What are they going to do, not as legislators but as owners? Will they take the action Mr.Cable recommends, or will they divest themselves of this embarrassing power by quite literally selling out? As the US government did in early December 2010, by selling its remaining shares in the rescued Citigroup? The British government is still the controlling shareholder in Royal Bank of Scotland Group (84%), and the largest single shareholder in Lloyds Banking Group (41%). Will the UK government bluff its way through with impotent pronouncements until it too can sell out? Or will it allow the taxpayers of the UK to exert the market power that comes from this ownership in our name?

The question is, will excellent professionals work their guts out for less than £1million a year, including perks? They do in every other area of endeavour, from running major organisations, commercial and governmental, all the way to being brilliant doctors and academics, and excellent accountants and policemen. It is only in the financial services, so they tell us, that £1million isn’t enough. Will a bond trader refuse to work for £250,000 a year?  If that is the rate the banking industry offers him, then what is his alternative? Do so many of them have Beckham like football skills such that they can disdain this reward, flounce away from the banking industry altogether, and earn a better salary on the pitch at Wembley?

Top bankers, shedding crocodile tears, point out that the main reason they pay themselves so outlandishly is to help themselves resist the temptations of other banks’ outlandish benefits packages. The great power of democracy, so great that it is astonishing it is allowed to survive, is that even bankers need to be able to provide some justification for what they do to the ordinary man on the street. Not to provide themselves with cover directly, but to provide a smokescreen for government inaction to avoid the judgement of the voters. The great limitation of democracy is it is vulnerable to the short attention spans of the voters. Money can buy anything. Even now we can see money being spent on public relations and obfuscation consultants with the objective of filibustering the attention spans of the voters. The chances are they will succeed, and will continue their excessive pay with scarcely a hiccup. Something the bankers and the government are smugly confident of.

Why do the bankers get away with it? Like cuckoos in the nest, feeding on the deposits of small investors and savers? In October 2008 appearing in front of a US congressional committee looking into the collapse of the banking sector, Alan Greenspan, former chairman of the Federal Reserve and former evangelist of light regulation, admitted

“those of us who have looked to the self-interest of lending institutions to protect shareholder’s equity (myself especially) are in a state of shocked disbelief.”

Testimony of Dr.Alan Greenspan to the Committee of Government Oversight and Reform, October 23 2008.

Cuckoos live their parasitic existence by disguise, making their hosts believe they are part of the family. The reality is the cuckoos push all aside, taking the largest share of what is brought to the nest – the others only get to eat once the cuckoo is full. The regulators and governments all fail, either through stupidity or wilfully, to recognise that the self-interest of powerful individuals in an institution is rarely the same as the self-interest of the institution. Even less so when they can quickly make themselves independently wealthy, as they have done in the financial services. Like cuckoos, they are just passing through.

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