Pirate Enterprise: Britain's sponsorship of offshore tax avoidance

Unremitting doom and gloom in this blog would get anyone down. A little while ago we celebrated a salesman who is on our side – the estate agent. It’s time to cheer ourselves up again, that we Ripped-Off Britons aren’t being vindictively picked on. We should remember that Britain doesn’t only rip-off Britons. Britain has for centuries had an enriching tradition of offshore private, or should that be pirate, enterprise. Britain rips-off our foreign brethren as well as us ordinary Britons.

Like a mother doting on her wicked children, the British Government over the centuries has licensed pirates, sailing under the euphemism of ‘privateer’, to loot Spanish treasure ships, and incorporated private companies to invade foreign countries. The private British East India Company invaded India, and the Virginia Company took the first colonising steps into North America. “What can you do?” says Mother Britain with faux-exasperation, “Pirates will be pirates.”

Anyone who thinks this is all ancient history has missed the still thriving ‘offshore fleet’ of our financial services industry.

• HMS Antigua
• HMS Bermuda
• HMS British Virgin Islands
• HMS Cayman Islands
• HMS Gibraltar,
• HMS Turks and Caicos Islands
• HMS Guernsey
• HMS Isle of Man
• HMS Jersey

“HMS” of course standing for Her Majesty’s Shifty Cayman Islands etc. Sir Francis Drake (picture courtesy of New York Public Library, http://digitalgallery.nypl.org/nypldigital/id?831578) would be spinning in his grave, knowing his heirs purloin vast foreign treasure showing no more derring-do, no more courage, than facing dinner schmoozing a tax dodger of tedious conversational skills. For what else are tax havens for, other than to deprive countries of their tax revenues. Just the same as Sir Francis and his fellow sea-dogs who were licensed by the British Government to deprive the King of Spain of his treasure.

According to the Economist magazine, the modern-day UK is second only to Switzerland as an offshore financial centre. Switzerland secreting approximately $2 trillion, with Britain & the Channel Islands squirreling away around $1.4 trillion of foreigners' money, both well ahead of the rest of the pack. This money only includes the savings of High Net Worth Individuals, not taking into account the activities of the corporations.

Taking into account examples of all tax evasion:

• A report by the Tax Justice Network estimates that tax havens are costing governments US$255 billion per year.
• The US Senate Permanent Subcommittee on Investigations estimated US$ 100 billion is lost each year due to offshore tax abuse.
• The US Government Accountability Office reported 18,857 registered businesses at one address in the Cayman Islands presumably for the purposes of tax dodging.

Of course, even Britain loses tax money via these havens. So what makes it all worthwhile? A report on British Offshore Financial Centres done for Her Majesty’s Revenue and Customs (HMRC), shows that it is not just individuals and companies that are dependent on these ‘offshore financial centres’ to dodge tax. Business done by banks with these offshore privateers runs into trillions of US dollars:

“2.4 International financial flows through the banking system are captured on a point in time basis by data collected by the Bank of International Settlements (BIS)…. Most claims are in the form of loans made by banks to these individuals and entities.

2.9 The aggregate claims [loans made by banks to the offshore centres] by BIS reporting banks on the nine jurisdictions covered by this Review amounted to $2.3 trillion at the end of the fourth quarter of 2008, about 63 per cent of the total claims on all offshore centres.

2.20 Claims by the nine jurisdictions [loans made from the offshore centres to the UK banks] on banks resident in the UK (the latter’s ’liabilities’) totalled some $670.9 billion at the end of June 2009 (see table below). The largest creditors were Jersey ($314 billion), Cayman Islands ($172.5 billion), Guernsey ($92.1 billion) and the Isle of Man ($56.6 billion).

2.23 ....At end-June 2009, UK banks had net financing of approximately $218.3 billion from Jersey, $74.1 billion from Guernsey and $40.1  billion from the Isle of Man. 

2.24 ‘Up-streaming’ allows deposits to be gathered by subsidiaries or branches in a number of  different jurisdictions and then concentrated in one centre, in this case the UK, where the bank has the necessary infrastructure to manage and invest these funds.  This model is followed by many large banks around the world and is not confined to ‘British’ jurisdictions.   All the major UK clearing banks have significant deposit-gathering capacity in the Crown Dependencies” 

The report “tentatively concluded that the Crown Dependencies and Overseas Territories [differentiated themselves from other territories] sometimes through tax rates but more often through the absence or near absence of certain forms of taxation…..

With the exception of Gibraltar, the  Overseas Territories have not introduced income taxes, corporation taxes, or value added tax  (VAT) or goods and services tax (GST)…. The tax regimes in the Crown Dependencies [the Channel Islands and the Isle of Mann] and Gibraltar have developed to include  income and corporation taxes, with the latter consistently levied at a lower rate than the main  rate in the UK. 

There is no stronger lobby in Britain than the Financial Services industry. Benefits to the banks are counted as much more important than benefits to the rest of us Britons. So long as offshore tax havens bring net benefit to Financial Services, then that outweighs an overall detriment to the nation. Neither the spoils nor the detriments are shared equally. 

So, as we Britons count our meagre pensions, despair at our excessive energy bills, pick up our jaws having seen the pathetic returns on our investments, grind our teeth as we wait for compensation for missold insurance and mortgages, scowl as we see how the wealthy avoid taxes we have to pay, and generally feel ripped-off - perhaps we can take some small comfort from the knowledge: it's not just us getting ripped-off, it's the whole world!

Actually - it's no comfort at all. It's all still damn annoying!

Read More

NHS IT chaos

Chris, Fee and KJ discuss the NHS's infamous patient IT system

rip-off rip off aircraft carrier patient care record system

Read More

Sticking it to the airlines by getting stuck

KJ seeks to exploit the airlines as volcanic disruption looms

Iceland volcanic ash cloud airports airlines holiday travel disrupts flights cancellations UK grounds

Read More

Doom and gloom around the dinner table

Will the moribund housing market bring a change in dinner party conversation?

Read More

Pay for performance – Lloyds, RBS, Annual General Meetings and UK Government cowardice

The Centre for Policy Studies, a leading think tank, has proposed that the UK Government should hand its stake in Lloyds and RBS to the citizen taxpayers. If this happens then, for the first time in decades, a bank would actually be majority owned by ‘small shareholders’. The banks would only accept this if the shares were handed over without any voting rights, for fear of what would ensue at their Annual General Meetings (AGM).

AGMs are traditionally stitched up between the big financial companies who hold the bulk of one another’s shares in the pension and investment funds they manage on our behalf. Scratching one another’s backs, they follow an iron-clad policy of “no pay package left behind”. I'll vote for your package if you vote for mine.

One reason for the Government’s hurry to get rid of its shares in RBS and Lloyds is holding them is so embarrassing – showing up the fact that all its heroic talk about reining in excessive pay is nothing but hot air. No more evidence is needed than the dismal performance of UK Financial Investments Limited (UKFI), the government body that manages the shareholdings, at the RBS and the Lloyds Banking Group Annual General Meetings in the last month.

• PRESS RELEASE 18th May 2011: Statement re: Lloyds Annual General Meeting UKFI has lodged votes in favour of all resolutions at the bank’s Annual General Meeting on 18 May. 

• PRESS RELEASE 19th April 2011: Statement re: RBS Annual General Meeting UKFI has lodged votes in favour of all resolutions at the bank’s Annual General Meeting on 19 April.

If one more shareholder had voted against the Lloyds Banking Group’s executive pay proposal then there would have been a 49.11% against. As it was, the contrarians mustered just 8.11%. If one shareholder had voted against the RBS executive pay then it would have been thrown out. Who was this weighty shareholder? The UK government, with its 41% stake in Lloyds Banking Group, and its 83% in RBS bank.

“Payment for Performance” – what does it actually mean? These are the details of how performance is rated, taken from the Lloyds Banking Group’s Annual Report:

Lloyds Banking Group, allocation of bonuses in the form of share options (which allow executives to buy shares at subsidised prices):

• Options granted up to March 2001: “Lloyds Banking Group plc’s ranking based on total shareholder return (calculated by reference to both dividends and growth in share price) over the relevant period should be in the top fifty companies of the FTSE 100.” You have to come in worse than fiftieth out of a hundred to lose your bonus.
• Options granted from August 2001 to August 2004: “The performance condition was linked to the performance of Lloyds Banking Group plc’s total shareholder return… against the comparator group was required to be at least ninth.”  There were 17 companies in the comparator group.  Come in ninth out of seventeen, and you were in the money.
• Options granted in 2005: “the performance condition was linked to the performance of Lloyds Banking Group plc’s total shareholder return… If Lloyds Banking Group was ranked below the median (ninth or below) the options would lapse.”  There were 15 companies in this comparator group – so long as Lloyds was better than ninth position, they were in the money.

And what happens when company performance is really dire, failing to meet even the test of coming better than 9^th out of 15?  In March and September bonuses were offered as a separate “TSR Award”:

• “Where the Group’s total shareholder return was below the median of the comparator group, the TSR Award would lapse. The relevant period commenced on 8 March 2007 and ended on 7 March 2010.” To lose your bonus, the bank would have to be in the bottom half of the comparator group.

Now, as everyone knows, things went a bit pear shaped for Lloyds in 2008, when its share price crashed from over £2 to under 25p. So, what did the Remuneration Committee decide? They moved the date back from 7^th March 2010 to 17^th September 2008, just before the deepest collapse of the shareprice, to calculate the company’s performance:

• “As a consequence of the acquisition of HBOS and the general market turmoil, in March 2009 the Remuneration Committee decided that the performance test for the 2007 awards should be based on the performance of the Group up to 17 September 2008, the date prior to the announcement of the HBOS acquisition.”

When the companies crash, the rules for bonuses are changed!

The story at RBS, where the government owns 83% of the shares, and voted in favour of the pay and bonuses, is just as tragic. Bonuses are paid not for “excellence” but for “better than average”.

• “To receive any of the LTIP awards subject to this performance measure the [RBS] Group’s performance must be at least as good as the median of the comparator companies”

The RBS comparator group comprises twenty companies – if RBS comes tenth then bonuses are paid.

In a time of economic crisis, with people losing jobs, services being cut, and the nation’s very security being compromised (unless it really is a good military idea to have an aircraft carrier with no aircraft), pay in the highest echelons continues to grow unabated. As Mervyn King, governor of the Bank of England, stated:

“The price of this financial crisis is being borne by people who absolutely did not cause it.”

And, as can be seen from the graph below, rewards are being paid to people who absolutely did not earn them. People who drove Britain into one of the deepest recessions on record, as shown in this graph by the Low Pay Unit:

To be fair to bankers, its not just them. All the FTSE firms thrust money at their bosses regardless of the performance of the companies. The High Pay Commission report shows that CEO pay has soared, while the value of their companies has stagnated.

As a final rearguard action, the apologists of excessive pay accuse critics of a tinge of green envy. But the FSA, in a rare moment of lucidity, puts it well

• "There is widespread concern that inappropriate remuneration schemes, particularly but not exclusively in the areas of investment banking and trading, may have contributed to the  present market crisis.  In the private sector, bodies such as  the Counterparty Risk  Management Group (CRMPG) have identified remuneration structures as one of the possible  driving forces behind current problems. The International Institute of Finance (IIF) reached a similar conclusion.."
• "The FSA shares these concerns.  It would appear that in many cases the remuneration structures of firms may have been inconsistent with sound risk management.  It is possible that they frequently gave incentives to staff to pursue risky policies, undermining the impact of systems designed to control risk, to the detriment of shareholders and other stakeholders, including depositors, creditors and ultimately taxpayers."

That wise old bird Will Shakespeare put it most succinctly:

"Be not afraid of greatness; some are born great, some achieve greatness, and others have greatness thrust upon them."

As is said of greatness, so it is with wealth and the three ways of achieving it.

• Be born to it
• Achieve it, by talent and hard work
• Have it thrust upon you

Great leaps have been made in the science of genetically selecting the embryos that become your children. Do you prefer a boy, a girl, an intellectual, green eyes – millions are invested producing new and better ways of being a little bit more certain that your heirs will be just so. However, as far as I know, there has been no progress at all in genetically selecting your parents. Arranging to be born rich is still beyond our reach. You just have to trust to the lottery of birth.

Achieving great wealth, on the other hand, is mainly about hard work. It helps to have an excess of many of those good characteristics – talent, perseverance, self-belief and the like. It helps even more to have a superfluity of many of the worst characteristics – greed, ruthlessness, selfishness. And, quite frankly, it helps a lot to be born rich in the first place.

But having wealth thrust upon you! Those who became rich at the point of a sword, or built their wealth by owning the means of production, or simply inherited their money, are now being joined by those whose targets are set at achieving mediocrity. Executives who have managed to convince remuneration committees to thrust money at them for achieving "median" (i.e. average) performance..

Read More

Bankers have enemies in high places

But it's not as bad as it sounds

Read More

Where are the CEO poachers when you need them?

Fee convinces KJ that CEOs aren't worth their huge salaries

Read More

An alternative to switching energy supplier

Chris and his wife find a way to make all family members contribute to household bills

Read More

Pensions – the monstrous truth about the inflation indexation change from RPI to CPI

The financial competence of Gordon Brown, the former Chancellor and Prime Minister until the ejection of the Labour government in 2010, was exposed with hindsight by his government’s failures in protecting the British economy from the Credit Crisis that started in 2008. However, the evidence of financial dizziness in the rarefied atmosphere he once sucked up was there in his earlier statements.

When, in 2008, Brown was pushing for a long-term pay settlement with public sector workers, he stated

"What people all round the country want is certainty moving forward, greater stability in their family finances and the knowledge that they have a longer-term pay settlement that can meet their bills, particularly the mortgage. I know that many of the people representing teachers, nurses, other groups in the public services are interested in securing long-term pay deals."

It seemed that Brown hadn’t got to the chapter in his economics book that would have taught him: it is not only certainty on your pay that provides stability, it is certainty on the cost of your bills. To be charitable we must assume this was simply too difficult for Brown to comprehend – as the alternative would be that he was being, shall we say, misleading. 

The Bank of England’s own inflation projection – its estimate of what inflation is likely to be over the next few years – shows that nobody really has much idea where inflation is going. Bank of England estimates for the next few years show inflation is likely to be anything between –0.5% and 4.5%.

Just as Labour pulled a fast one with inflation back in 2008, so are the Conservatives in 2011 with their change in the indexation of pensions from a link with the Retail Price Index (RPI) to the Consumer Price Index (CPI).

The sheer uncertainty of inflation can be seen in the Bank of England's historical record.

Which in itself can be misleading. Between 1790 and 1900 there was chronic volatility. But the large upswings were quickly followed by large downslides. In contrast, after 1900 it was a pretty continuous upswing. Which can be seen in the Bank of England’s “inflation calculator”, showing how prices changed in 50 year steps

• from 1750 – 1800           -           prices went up by 2.7 times
• from 1800 – 1850           -           prices went down by 0.6 times
• from 1850 – 1900           -           prices went up by 1.1 times
• from 1900 – 1950           -           prices went up by 3.6 times
• from 1950 – 2000           -           prices went up by 20 times

What this means is:

• In the two hundred years from 1750 to 1950, goods & services that cost you £10 in 1750 would have gone up in cost to £65.
• In the next 50 years, to 2000, the price would have gone up to £1,317.

After 1950, inflation has been on a one-way upward road. This is why indexation is important to everyone – and particularly important to those who have no control over their income, such as pensioners who rely on their purchased annuities and the state pension. The Retail Price Index (RPI) was created to provide a way of protecting workers and pensioners from price increases. In 1996 the government created a new measure of inflation, the Consumer Price Index (CPI), which by its design is lower than the RPI. Having these two measures of inflation provides wiggle room to discriminate on how quickly government taking (e.g. taxes) and government giving (e.g. pensions) should inflate.

According to the government’s Office of National Statistics, the two measures of inflation represent different groups

• The RPI is representative of the majority of private UK households, but excludes the highest earners and pensioner households dependent mainly on state benefits. It includes expenditure both within the UK and abroad by UK households.
• The CPI is representative of all private UK households, and also includes the expenditure of institutional households (nursing homes for example) and foreign visitors to the UK.

You may have thought from this that RPI is more representative of an ordinary British pensioner's living costs than CPI. Apart from tourists, CPI also includes “institutional households”, which are defined by the OECD as

1. Educational institutions

2. Health care institutions

3. Institutions for retired or elderly persons

4. Military institutions

5. Religious institutions

6. Other institutions.

After all, the requirements of nuns and squaddies billeted in cloisters and camps are not typical of your average pensioner. However, CPI is lower than RPI. So the Conservative led government in 2010 changed the link for pensions from RPI to CPI – to reduce the amount paid to pensioners.

CPI is a grand simplification of prices. It is made up of a basket of goods and services, each of which has its own inflation rate.  The price of clothing has been dropping for well over a decade, while the price of fuels (electricity and gas) has been spiralling.

However while the CPI basket of goods tracks the spending of people who are still working, it doesn’t match the pattern of spending of an average pensioner. People over 65 spend a bigger part of their budget on food & non-alcoholic drink, and less on clothing.

Pensioners have been particularly hit by swingeing increases in fuel costs – electricity and gas – with the number in “fuel poverty” doubling from 463,000 in 2003 to 967,000 in 2007. 

Fuel poverty is just one facet of pensioner penury. In a speech in the House of Commons in February 2011 the Conservative MP Bob Stuart stated that in the UK:

• 1.8 million pensioners live in poverty
• between 20,000 and 25,000 pensioners a year in this country are said to die from hypothermia
• 28% of all pensioners have less than £1,500 in savings
• The Department for Work and Pensions estimates that 39% of pensioners fail to claim their benefits. That amounts to between £3.1 billion and £5.4 billion a year unclaimed.

If you are still not sure what the impact of the change from RPI to CPI will have on you, then the graph below ought to make things a bit clearer. If you are going to retire anytime in the next couple of decades, and the levels of CPI and RPI are about the same as the last couple of decades, then the loss in value of your pension, using government CPI and RPI data, will look like this:

The longer into the future you are going to retire, the larger the impact is likely to be.


But in times of crisis, governments need to save money. Pensioners are a powerless and easy target. The rest of us, thinking only of the present, forget that one day we too will be pensioners - assuming we live that long!

Read More

Diffusing the doorstep energy salesman

Chris turns the tables on an energy salesman who won't take no for an answer

Gas

Electricity

Utility

Bills

Read More

PPI leaves its mark on the population

Chris, Fee and KJ pay their respects to the PPI victims

UK banks won't appeal ruling to compensate customers missold payment protection insurance, Lloyds to settle PPI claims, PPI: 'Banks behaved disgustingly', Coming up: Jan. PPI, housing starts, Payment protection insurance complaints still rising, US core PPI falls in Oct, largest drop in 4 yrs, Payment protection insurance sale curbs approved

Read More

Beware of Greeks bearing public sector pensions

Fee and KJ discuss the Greek situation, with another bailout on the horizon

Germany powers eurozone economic surge

Portugal learns terms for $115 billion bailout

Osborne: eurozone crisis shows dangers to UK

Portugal seeks EU bailout

Portugal closer to bailout

Eurozone leaders meet to bolster euro

Eurozone retail sales up for first time since July

Read More

Beware bankers bearing Structured Products – the Great Dividend Robbery

Is investing in the stock market all it’s cracked up to be? Judging by this rocketing graph, it would seem so. But take a closer look and you will see how you can get ripped off by investing via a “Structured Product”. The worm on the Structured Product hook is the promise that you can invest in a risky market, but if even the worst happens you are guaranteed to get your money back.

“Structured Products” are yet another method used to bamboozle the public. In the last decade there has been an avalanche of products promising returns running into the tens and hundreds of percent with minimal risk. These have included investments such as “Equity Bonds” that promise the “chilli-hot” returns of the equity markets. These come not just from known shysters like the big high street banks and building societies, but even from our own dear United Kingdom government’s NS&I (National Savings and Investments):

“NS&I is an Executive Agency of the Chancellor of the Exchequer”

The agents of the Chancellor are perhaps not quite so shameless as those in the City, as NS&I haven’t been issuing these bonds since the election last year. But for the majority of us, who sometimes get a whiff of rumours that there are chilli-hot returns available from investing in shares, there are a multitude of similar rip-offs on offer from other providers.

The weasel words for this kind of bond are “may not get as high a return as they might through investing directly in the stock market” and  “will not be eligible for dividends”. 

So how important are the dividends to your overall investment return?  According to the Barclays Capital annual report on Equities and Gilts,

A £100 invested in equities at the end of 1899 would be worth just £139 in real terms without the reinvestment of dividend income, while with reinvestment [of dividend income] the portfolio would have grown to £17,571 [in real terms].

Figures from the Barclays Capital “Equity Gilt Study 2009”, in the graph above, show apparently mouth watering growth in the stockmarket. Sales and Marketing love graphs that shoot up like this. They are less keen on graphs showing what the value of that 1899 investment of £100 is in real terms – adjusted for the cost of living.

While your £100 invested in 1899 maybe worth £9,129 in 2008, the purchasing power of that £100 has just risen to £139 over that century. To put this in perspective, if the equity index over next 100 years performs pretty much like the last 100 years:

• If you spent your £100 today, you could buy a good meal at a decent restaurant for two people.
• If you invested your money for 100 years, without reinvesting the dividends, then the amount of money you had at the end of that century of waiting would buy you a good meal at a decent restaurant for two people plus a kid’s meal.

On the other hand, with dividends reinvested, your £100 invested in 1899 would be worth £1,152,994 – which is worth £17,571 when adjusted for the cost of living. To put this in perspective

• If you spent your £100 today, you could buy a good meal at a decent restaurant for two people.
• If you invested your money for 100 years, and you reinvested the dividends, then the amount of money you had at the end of that century of waiting would buy you a pretty decent car, or put down a 5% deposit on a nice flat in London. 

So how much is the “guarantee” that in the worst case you won’t lose your money? The "guarantee" for which the banks took your dividends? 


For someone with the bad luck of investing £10,000 for five years between 2003 and 2008, when the market crashed:

• If he had bought a Guaranteed Equity Bond he would have got his money back.
• If he had bought an index tracker and reinvested the dividends, even with the crash he would have made a profit of over £1,700.

“Leave your shame at the door”. Banks must have “executive shame rooms”, rather like “cloak rooms” – a place to leave your shame until you are ready to go home after work. “Don’t forget your shame, sir!” the attendant calls out to the departing executive, in the hope of a couple of coins dropping into his plate.

Rather than admit to deliberately misleading their clients, bankers shamelessly claim, without admitting wrongdoing, to be incompetent. When Goldman Sachs, in July 2010, was fined US$550million by the US Securities and Exchange Commission (SEC), like the UK’s FSA but less useless, the SEC’s judgement seems to state what anyone with an ounce of shame would regard as being obvious:

“IT IS HEREBY ORDERED, ADJUDGED, AND DECREED that Defendant and Defendant's agents, servants, employees, attorneys, and all persons in active concert or participation with them who receive actual notice of this Final Judgment by personal service or otherwise are permanently restrained and enjoined from violating Section 17(a) of the Securities Act of 1933 (the "Securities Act") [15 U.S.C. § 77q(a)] in the offer or sale of any security by the use of any means or instruments of transportation or communication in interstate commerce or by use of the mails, directly or indirectly:

(a) to employ any device, scheme, or artifice to defraud;

(b) to obtain money or property by means of any untrue statement of a material fact or any omission of a material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading; or

(c) to engage in any transaction, practice, or course of business which operates or would operate as a fraud or deceit upon the purchaser.”

The judgement further on states that Goldman Sachs staff must undertake training in the law, “that covers, among other matters, disclosure requirements under the Federal securities laws applicable to offerings of mortgage securities. The first training seminar shall take place not later than sixty (60) days following the date of this Final Judgment.”

Translating from all the legalese: the SEC felt it necessary to remind the bankers that

• they should not defraud
• they should not mislead
• they should not deceive
• they should find out what the law is, that they shouldn’t defraud, mislead, or deceive

Apparently Goldman Sachs bankers had been doing all these naughty things through incompetence rather than mischief. They didn’t admit to any wrongdoing, which must mean they didn’t know any better! Therefore the US$550million penalty must have been to pay for their incompetence. And to solve the incompetence issue, the SEC felt it necessary to remind them what they weren’t supposed to do.

It is a short step from Wall Street to the British High Street, where they sell misleading products with the same cheery enthusiasm as a pub sells beer.

Read More

Fear of financial services outguns terrorism

After a historic victory over the banks on mis-selling Payment Protection Insurance (PPI), our heroes discover why the FSA is now investigating the banks' newest idea: ID Theft Insurance

[KEYWORDS: Three million bank customers ripped off over payment protection insurance in line for payouts worth £4.5bn after High Court victory, Payment protection insurance complaints still rising

Payment protection insurance sale curbs approved, Payment protection insurance complaints soar

Lloyds stops selling payment protection insurance, Complaints over payment protection insurance on the rise, says FOS, New rules on payment protection insurance are delayed, PPI, refund, compensation, rip-off

income protection, income protection insurance, ppi, redundancy insurance, unemployment insurance, mortgage payment protection, mortgage protection insurance, mortgage protection, mortgage insurance]

Read More

A better alternative to the Alternative Voting system

Fee comes up with a novel political solution.

[KEYWORDS: UK Votes 'No' To Alternative Vote, Alternative Vote 'Would Have Kept Brown In', David Cameron ignores calls to rearrange alternative vote referendum over royal wedding date Electoral reform: The case for alternative vote Alternative Vote: the wrong referendum on the wrong question What exactly is fairer about the Alternative Vote? Would the alternative vote have changed history?]

Read More

Forget ELECTION reform! It is EJECTION reform that really matters

Forget whether “First Past The Post” or “Alternative Vote” is the best way for you to elect your politicians. With the imminent referendum on the voting system in the UK, politicians, journalists, activists, and even ordinary voters interested enough to have any opinion at all are focusing on the procedure of “elections”. Getting terribly heated, calling each other rotters and liars, threatening legal action for dishonesty in politics (!), they are being successfully distracted from the real issue. Not "Elections", but “Ejections”.

The question should be, “What is the most effective way to eject our politicians”. In short, “First Past The Post” is probably the most effective Ejection System for the very same reasons it is a poor Election System. Just as an MP doesn’t need more than 50% of the vote to get elected, his opponent doesn’t need more than 50% to boot him out.


Reforming the Election System is as futile as reforming the shape of clouds. Clouds form to other winds than your or my whistling. “Elections” are stitched up long before it comes to Election Day, and the stitching continues in a continuous seam long after that day. Stitched up not in the result, but in the choice.



The reality of elections is we choose from a shortlist of careful sieved individuals that has been selected by carefully sieved local party committees who themselves are not infrequently over-ruled by handpicked parachutists dropped in directly by political head offices. In Britain, according to a report by the Electoral Reform Society, only 32% of the electorate “strongly or fairly strongly” identify with one of the main parties. Which means that 68% don’t. And yet the only electable choices come from those loyal party members who slavishly follow their party line. Out of 650 members, only one MP in the current British parliament, representing a constituency in Northern Ireland, declares themselves as “Independent”.

In Britain two thirds of MPs in 2010 were elected by a minority of their voters – with the lowest winning with 29.4% of votes cast. And so we end up with a bunch of fixated individuals, with a loyalty to one or other party that doesn't even reflect the wishes of the people who did vote for them, let alone represent a majority of voters. 


Whatever electoral system we have will not change this.


Once in Parliament, these fixated individuals are further fascinated by the job prospects on offer. There are 119 individuals holding office in the current government, for which they are entitled to payments in addition to the basic £65,738 parliamentary salaries received by MPs (on top of which they have generous expense allowances running well over £100,000). These range from a tasty top-up £26,624 for a junior “whip” up to an entitlement of £41,370 for an ordinary minister, £79,954 for a Cabinet Minister, and £132,923 for the Prime Minister (though the current batch of Cabinet and Prime ministers don’t draw their full entitlements).


With 119 paid posts to play for, is it a surprise that our MPs loyalty is as fixed as a rat staring at a cobra? The statistics for how often MPs vote against their party suggests either


a) They don’t dare annoy the party leadership, and jeopardise their political careers.


OR


b) They vote sincerely, but are a bunch of clones

Figures on voting collected by publicwhip.org reveal that one year since the 2010 UK election, 327 MPs have never voted against their parties.




It is clearly pointless worrying that our MPs don’t represent us. In Winston Churchill’s opinion,


“Democracy is the worst form of government, except for all those other forms that have been tried”


Politics everywhere is funded by special interests. It is easier for this to happen in the UK because politics is actually pretty low cost here. A handful of millionaires and a business/union lobby or two can adequately fund a party. We may have a certain pride that our politics is so low cost – believing it means it hasn’t been captured by the robber barons. According to the Electoral Commission, the total spend for the 2010 UK General Election by all candidates was a little over £25million. Compare this with the US$8 billion (billion, US$8,000,000,000) over two elections, 2004 and 2008, held in the 4 year US electoral cycle to re-elect their president, Congress, and two thirds of their Senate. American elections cost 40 times per head of population more!


The reality is keeping costs down means the robber barons have an even tighter control. Politicians in the UK don’t need to satisfy quite so many special interests, nor sell quite so many knighthoods and peerages, to raise the money they need – which means their money comes from an even narrower and less representative group. In 2010, the Conservative Party received over 50% of its funding from the bankers and hedge funds in the City of London.

The real question should not be how to put elections into the hands of the people. That is something that is not achievable. The real question is how to keep EJECTIONS in the hands of the people.


In practical terms we have very little choice of who gets into parliament. But we have significant power over who gets thrown out. Witness the parliamentary expenses scandal – never has there been a wider clearout of MPs who decided not to even try and defend their dodgy personal accounting in the face of voter anger.


One of the key rip-offs in Britain is the electoral system. The rip-off doesn’t happen on election day, but long before that and long after that. What we must be concerned about is not how we select MPs – as our choice is hopelessly rigged. What we must protect is our ability to throw MPs out.


When ticking the box for First Past The Post or Alternative Vote, think carefully about which option allows you to throw a rascal out. Because you will still have no choice about which rascals get in.

And if any politician ever proposes introducing “party lists”? Lists on which he can find safe “rotten slots” for his acolytes and their relatives? Well, that’s a good reason to head for Trafalgar Square with a packed lunch, a good book, and an empty bottle (for when the cops “kettle” you).

Read More