Low-cost accommodation property scandal

KJ and Fee discuss the UK's housing shortage

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After sub-prime mortgages, how ripped-off Europeans (including us Britons) are back on the hook for the bankers with Euro-bonds

Euro debt is being passed around like a ticking bomb wrapped in gilt edged paper. In this explosive game of pass-the-parcel, governments and banks are colluding in leaving the prize in the hands of ordinary ripped-off Europeans, including us Britons.

Greece, Spain, and even Germany are having trouble borrowing money. But, to be clear, they are not borrowing money to pay their running costs – keeping public services going – but to pay off their bankers. 

Governments borrow billions. To try and keep the costs down, they borrow money for different lengths of time, typically between 3 months and 30 years, so they can negotiate better terms with different types of investors. This means they have to continually re-finance their debt. As one loan becomes due, they borrow another chunk of money to pay it off. The Economist newspaper shows the gory details: figures for France, Italy and Spain show they need to borrow fresh € billions each week not to fund fresh spending but just to pay back their existing loans.

Sometimes a government may find itself a little financially embarrassed and ask for more time. The bankers will tweak up the cost, pocket some fees, buy everyone a good dinner, and roll the loan over. 

The Greek government has for some time been in a position where it can't pay. Money isn't there, it isn't approaching, it isn't anywhere in sight, not a sniff of it. This is when the bankers get worried. It is no different to the sub-prime mortgage crisis, except the banks can't foreclose on Greece. Nor on Spain, Italy, and certain other embarrassing states.

When a state says it can't pay, it is because new lenders aren't willing to loan money to pay off old lenders. Bankers are now left with two options:

a) Write off the loan, and take a whacking loss

b) Find a sucker on whom the loan can be palmed off (guess who)

Investment banks make billions. It is their custom to hand approximately 40%-50% of their annual revenues to their bankers as bonuses and pay. One of the main revenue generators is the “2 and 20” model, quite common in the industry, by which the bank charges investors 2% of the amount invested plus 20% of fund profits. This means that even if the bank loses all your money, it still takes 2% of the amount lost in fees. Invest £1billion, and the bank could flush £980million down the toilet, and pocket the remaining £20million in fees. This is precisely what banks were doing lending money to governments operating beyond their means. Bankers focussed on their bonuses didn’t care if the loans would be repaid – two percent of €billions is enough to get by on for a lifetime. Of course, given the choice, the bankers would rather get the loan repaid if at all possible. And this is how they are trying to unload the bad debts on ripped-off Europeans:

• Governments borrow chunks of money for fixed terms, ranging from 3 months to over 10 years.
• At the end of the term, the government is supposed to repay the loan. It does this by borrowing money from another bank.
• If it can’t borrow money to repay the loan, the investment bank loses money.
• Alternatively, the Germans or the ECB could step in, and loan the government money.
• Investment Bank is repaid.
• Germans/ECB left with the bad debt.

Where does the European Central Bank (ECB) get all this money? They are probably already stocking up with ink, ready to get the currency printing presses rolling once Merkel has extracted the concessions she really wants. Europe following a more Teutonic fiscal policy, with Berlin holding the purse-strings, enjoying the economic benefits that inevitably flow to a centre from its hinterlands. 

Printing money isn't free. Apart from the cost of all that ink (actually, not much as these days money is created electronically by the click of a keyboard). It is paid for by all of us in the form of inflation. We have the same number of pounds and euros we used to, but they buy less. It costs us more to buy our groceries, fill our petrol tanks, take the bus. When the ECB bails out the banks the bill is picked up by all us ripped-off Europeans. We toil longer to earn the wages to buy less stuff, so the banks can be bailed out.

From Adam Smith (capitalist icon) to Alan Greenspan (bankers’ icon), the assumption has been that through the selfishness of individuals and organisations, and in spite of even their spiteful intentions, the ‘invisible hand’ will work for the betterment of everybody. Greenspan, who spent a career carried on the shoulders of cheering bankers grateful for his strong advocacy of weak regulation, stated to a US Congressional committee in 2008:

"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"

Alan Greenspan, former chairmanof the US Federal Reserve

Being a humble cartoon-blogger I suppose I should hesitate to cast aspersions on these famous men of economics. Adam Smith can be excused to a degree, as he comes from another era. His conviction had truth in his time and for a century and a half after. Talking about the pile of wealth held by the rich:

"The rich only select from the heap what is most precious and agreeable. They consume little more [in volume] than the poor, and in spite of their natural selfishness and rapacity, though they mean only their own conveniency, though the sole end which they propose from the labours of all the thousands whom they employ, be the gratification of their own vain and insatiable desires, they divide with the poor the produce of all their improvements. They are led by an invisible hand to make nearly the same distribution of the necessaries of life, which would have been made, had the earth been divided into equal portions among all its inhabitants, and thus without intending it, without knowing it, advance the interest of the society, and afford means to the multiplication of the species."

Adam Smith, "The Theory of Moral Sentiments"

You need only visit some of the stately homes of England, or more conveniently from your own sofa watch an episode of “Downton Abbey”, an aristocratic version of the 1980’s US tv series “Dallas”, to see how extremely hard the rich strived to consume all they possibly could. As Adam Smith observed, their bellies had only so much capacity for food, and their bosoms only so much space for jewels. Until the middle of the 20^th century, the rich...

a)      Depended on the labour of thousands of ordinary people. They had to keep them fed, clothed, and housed so they could turn up to work.

b)      Depended on these ordinary people labouring next year and on into the future, to maintain the wealthy in their wealth.

In the world of Adam Smith, the prosperity of the wealthy depended on the continued existence of everyone else. The wealthy may have been in the driving seat, but at least they were on the same bus as everyone else. If the bus crashed, the rich man at the front would suffer with everyone else.

In the world of Greenspan that is no longer the case. Bankers in particular have the ability to thrive with nothing more than a computer networked to other bankers. They are not in the driving seat, they drive by remote control. Playing with other people's money, they ‘win’ themselves the big bonuses. Snatching a lifetime’s wages in a couple of years means they no longer need their bank, they no longer need customers, and they no longer need other people's money. If they crash the bus they look on ruefully from a distance, and retire on their previous years’ bonuses. The true reason for bankers' bonuses has nothing to do with ‘attracting the best of the best’. It is everything to do with protecting them from the results of their own actions.

Smith and Greenspan assumed that the rich had to provide for everyone else for the selfish reason of staying rich. Bankers’ bonuses broke that link. When the rich owned the means of production, they looked after it like the owners of a house maintain their home. Bankers are just passing through – like irresponsible tenants, they are happy to leave the place a wreck, burn cigarette holes in the sofas, and steal the cutlery and ornaments.

We are told by government ministers it is the shareholders’ responsibility to control the bankers. When the majority shareholder of RBS, the British Government, told the bank to hold back on bonuses the government was told to f*** off. Which it did when it used its (that's our) shares in favour of all pay resolutions at this year's AGM. There, in spite of the grace of god, go all of us.

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Party funding the impartial way

The gang discuss how to eradicate the influence of donors on the major political parties

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Paying off the deficit - is there another option to cutting or borrowing? Time for a wealth tax!

The debate on reducing the deficit circles stubbornly around two options:

Option1:           Cutting spending

Option2:           Continuing spending with borrowed money

Neither the previous Labour nor the current Conservative led government wanted to waste a good crisis: both eagerly took the opportunity to reduce the circumstances of us ripped-off Britons by cutting salaries, pensions, benefits, and laying people off. Proposals have been made to water down the minimum wage and allow employers to dismiss staff without a reason. Borrow more, or cut benefits and sack the less well off. The repeated lie that "we are all in this together". Both political parties chose to ignore the third option staring us in the face. The third way may not be a pretty option, but in this crisis none of them are. The third way, whisper it softly, a well targeted tax aimed at the best kept open secret tax haven.

Tax avoidance has taken many of its tactics from the natural world, including running and hiding, with the British government licensing many of the hidey-holes in Britain and in British overseas territories around the world for anyone who can afford the fees.

Another effective method used by plants and animals is disguise. By disguising themselves as another dangerous creature, harmless tasty bite-size morsels can successfully avoid their predators. As an example, the otherwise succulent spicebush swallowtail caterpillar scares off predators by mimicking a snake. (Picture from wikimedia by Michael Hodge). Financial services are masters at this tactic, claiming to tax or regulate them more would make the whole economy feel distinctly unwell and fall over. Government ministers of all shades, perhaps looking forward to topping up their retirement incomes with the occasional £25k fee making speeches at professional dinners, find this argument highly compelling.

Intriguingly, however, it is the opposite tactic not much used in nature that has proved the single most successful tax avoidance ruse in the UK. Little beasts sitting in plain site with a “Here I am! Defenceless and Delicious!” sign was presumably a ruse extinguished early on in the evolutionary race. The practitioners were rapidly snapped up and digested.  And yet, as a tax avoidance tactic it has been a thundering success. Highly visible displays of wealth - property, jewellery and other valuables - elicit not a nibble from the hungry taxman. A tactic like this can only work for those creatures who sit at the top of the food chain. 

The wealth that comes to us in the form of salaries, interest on bank savings, and the few other sources of income most people have are quickly and pitilessly taxed.

In the UK, the predatory taxmen have been instructed by their political handlers from successive governments not to take a bite out of another source of our more privileged brethren’s growing wealth: “Unrealised capital gains”.

Unrealised capital gains mount up in a chap’s possessions. The capital gain is the difference between what was originally paid for it, and its current value. It comes in the changing value of the property and share portfolios, the collections of furniture, art, jewellery and other such movable and immovable property, and a well funded pension. 



So long as a fellow has no need to sell those possessions, and 'realise' the capital gain as a profit, he can keep the increase in his wealth untaxed. That’s the kind of lucre owned by the richest among us. People who tend to be the key donors and supporters of those who set tax and fiscal policy and who have supper with senior HMRC executives.

According to the ONS Wealth & Assets Survey published at the end of 2009, the assets of the wealthiest 20% approached £5.6 trillion. That's about three times the UK's Gross Domestic Product (GDP). Wealth built up, perhaps over generations, by the investment of surplus income. Perhaps hard earned, and often well deserved. 

For Britain is the most unequal society in terms of income among the large European countries.  The fortunes of many of the wealthiest burgeoned during the boom years before the credit crisis.

Growing inequality is a trick pulled off by those who hold the economic soup-spoon serving themselves generously (bankers and directors must be paid loads, otherwise they wouldn't work so hard), claiming that other workers don't really want more generous servings (teachers and nurses don't want to be paid more, they are following their calling), and the rest don't deserve any (hunger and cold is the best way to help the disabled and unemployed back into work). And the claim that the wealthiest pay the lion's share of income tax is as fatuous as a rustler who has stolen his neighbours cows expecting the neighbours to be grateful for providing them with milk.

In real terms, the wealth concentrated in the pockets of the wealthy has grown healthily. Even the 2008 dip in asset prices leaves asset prices well above historical levels in real terms. In France they already have a separate wealth tax they call  "L'impôt de solidarité sur la fortune", the solidarity tax by which the wealthy show their solidarity with everyone else. 


Income tax in the UK is a temporary tax, which expires and has to be voted back into law every year as a provision in the Finance Bill. It has been renewed every year since 1842. Similar provision can be made for a wealth tax, which would be imposed in times it is needed.

Would it mean some of the wealthiest having to sell off a carefully kept asset to pay their taxes? Perhaps be reduced to eating their cakes from crockery purchased from John Lewis instead of that inherited seventeenth century china tea set? Probably. But is that not a better option than adding to the estimated 2,700 who will die this winter because they can’t afford to switch on the heating as their benefits are cut? Is taking 1% from the unrealised capital gains of a wealthy person who can keep the other 99% not a better option than sacking someone leaving them with an 80% cut in income, facing unpaid bills, bailiffs, and eviction? Wouldn't it be better to have money to pay for some aircraft on our aircraft carrier, immigration officials at our airports, nurses in our hospitals, and police on our streets?


Do this, and the lie that "we are all in this together" would become just a little bit less of a lie.

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Fashion victims of the fashion industry

Fee and KJ discuss one of the worst offenders for unpaid internships

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Economic and weather forecasts collide

The gang discuss recent inflation figures and the best way to manage them down

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Compulsory Financial Education in schools – the government tries to dodge its responsibilities.

The government’s initial response to the petition to make financial education in schools compulsory is that it isn’t really necessary. All that is needed, claims the government, is to encourage parents to teach their kids, and to tweak an existing non-compulsory “Personal, Social, Health, and Economic” school course about which I will come back to below.

Martin Lewis, of moneysavingexpert.com, who started this petition has said "The petition is about compulsory financial education. PSHE, which it mentions, isn't compulsory, nor is personal finance a substantial part of this.”

Once again, our rulers see their prime responsibility as helping the companies help themselves. Successive governments have ensured weak laws, puny regulators, and now they would withhold education from children. After all, consumer law puts the responsibility of being "reasonably well informed" on the consumer. Keeping customers ignorant is a loophole in consumer law that bankers riding camels can canter through.

Times have changed so little, with the mass of the population regarded by our supposed guardians as lawful prey. Presumably they see themselves not as shepherds, but as game-keepers. 

The British ruling classes once had a simple formula when it came to their children. Knowing they needed a male heir and a couple of spares (in case of accidents) to ensure the inherited lands and chattels stayed in the family, they bred at least a brace and a half of sons. To keep the boys gainfully employed they plotted their career paths thus:

• The oldest inherited
• The second joined the army
• The third became a priest

Not only did this keep the purse strings in family hands, it also kept those strings tied firmly as a garrotte around the neck of the nation. In churches around the country congregations once enthusiastically sang:

All things bright and beautiful,

All creatures great and small,

All things wise and wonderful,

The Lord God made them all.

The rich man in his castle,

The poor man at his gate,

God made them high and lowly,

And ordered their estate.

To keep the poor at the first son’s gate, the third son would tell the population that god willed it so, and the second son threatened to thump them if they dared touch the railings.

Times change. Inheritance no longer goes automatically to the oldest male – not even the British crown. The priesthood and the army are no longer careers of choice among the wealthy. And that “rich man in his castle” verse has disappeared from the hymn in many modern hymnals.

However, “plus ça change, plus c’est la même chose”, the more things change the more they stay the same. From the way we Britons continue to be ripped off, it seems that the new mercantile gentry now dispose of their children thus:

• The oldest becomes a banker
• The second a regulator
• The third a judge
• The illegitimates become MPs

Land is not the cash-cow it once was - the cash-cow is now us ripped-off Britons. How else can we explain the series of ‘great escapes’ the financial services industry has pulled off? All passed with a cheery wave by the regulators and the courts: excessive overdraft charges; pillaging with-profits fund assets; excessive pension charges; the rip-off of teaser rates. Scams costing ripped-off Britons literally £billions that regulators, judges, and parliament have decreed to be just fine.

The illegitimates in parliament have given their initial response to the  petition to make Financial Education compulsory in schools, which successfully reached its target 100,000 signatures. Reaching this target means the government must consider debating it in Parliament. The government asserts that this task can be taken on by parents helping out their kids, plus tweaking the PSHE curriculum a bit.

They claim that “Parents can also play a crucial role in helping young people to become financially aware..” Really? Repeated corporate shenanigans have shown that companies from banks to telecoms to energy to supermarkets find bamboozling their adult customers a very easy challenge. One reason parents are so easily ripped off is because there was no compulsory financial education during their school days.

So let’s take a closer look at the government’s other assertion that improving the quality of “Personal, Social, Health and Economic (PSHE) education” will prepare the children for the world of finance. We assume, being the optimists we are, that the government’s idea of preparation doesn’t involve laying the sucklings on a silver tray with an apple in their mouths and sprigs of parsley between their toes. So what is PSHE is all about?

According to the PSHE Association, this course is intended “to help learners develop the knowledge, understanding and skills they need to manage their lives, now and in the future”. It covers topics that are of a far more immediate danger to children – drugs, nutrition, pregnancy, communicable diseases, crime – than bankers. The PSHE Association’s leaflet provides this description of "What does PSHE include?"

At a more academic level, the course of study by AQA, one of the main school examining boards in the UK, Section 9.6 states:

"Knowledge and appreciation of the need to develop skills associated with spending money, i.e. essential and non-essential spending, ways of budgeting, the use of hire purchase, direct debit, credit and debit cards, internet banking etc. The importance of money management, earning, spending, saving and the various forms of borrowing. The need for financial planning for the future, particularly pensions and investments. How to access financial guidance."

Which all sounds pretty good. But to crystallise what is taught and to what level, one has to look at the exam papers. Typically there was just one question about using financial services. In 2009 it was:

The examining board’s answer sheet for this question states:

As can be seen from this question and answer the ‘economic’ part of PSHE teaches children what financial services to use, which is a good thing. However, it does not teach how the Financial Services abuse their clients. It is like the government encouraging children to learn to swim by telling them where the sea is, but refusing to tell them that it is totally infested with sharks and the chances of them losing a limb are almost certain. 

Financial education in schools must not be about what financial products can be bought – youths and adults are constantly bombarded with advertising about this through their lives. Financial education in schools should be about understanding the traps.

An examination for Financial Education in Schools should have questions like these:

1) If your bank offers you an initial rate for the first 12 months of 5%, and then drops you to 0.1% (as they do), how much money would you lose over 10 years by failing to move your money?

ANSWER - 92% of your income is lost.

2) What percentage of your pension pot would your pension provider take from you in fees if it is charging at the following rates over a 40 year working life, assuming annual growth of 6%?

• 0.5%                                ANSWER - 18%
• 1.0%                                ANSWER - 33%
• 1.5%                                ANSWER - 45%
• 2.0%                                ANSWER - 55%

3) If you choose a pension that grows 3% each year instead of a ‘level’ pension, which stays the same for the rest of your life, then your initial income will be lower but it will grow as time passes.  How many years will it take for your total accumulated income growing at 3% per year to be equal to the amount you receive from the Level pension that doesn’t grow?

ANSWER - 29 years (bonus mark for stating this is 10 years after the average person is dead)

The correct place for this financial education is as part of the Maths curriculum. You don’t need a highly paid consultant to work this out. Sit a few maths teachers down with cups of tea and slices of cake, and they will tell you there are enough topics in the current GCSE (the exam children take at 16 years of age) that can be dropped and others that can be delayed into A-Level to make space for a financial module.

• Constructing a perpendicular from a point to a straight line may have grabbed the admirers of Pythagoras, but I ask you, when was the last time you had to do that in your adult life (other than doing your child’s homework)?
• Factorising quadratics may be useful to scientists, engineers, and academics, but it is a skill that won’t be missed by herds of well paid professionals who do not do maths beyond GCSE.

Creating space in the existing maths curriculum for financial education would be easy, would be relevant to the subject, and would build financial skills to make our young Britons less ripped-off.

Of course Financial Education in schools won’t solve everything. One of the most efficient ways of ripping off someone’s money is to not give it to them in the first place. To pull this one off, you need to be in a position of power or trust so you can abuse it. Typically this would be an employer, keeping pay down for all except friends and family, or a financial institution as custodian of the nation’s savings. Weaselly little scams like paying pitiful interest rates to savers afflict even the more sophisticated investors. For instance, people who invest their pensions themselves in SIPPs (Self Invested Personal Pensions).

There must be a lot of vertebrae littering the offices of the FSA. It would be unfair to say they were a spineless bunch. More accurate to say that their spinal chords are routinely pulled out. In February 2011 someone in the FSA showed enough spine to state:

A personal pension scheme operator will typically act as an agent of the customer. As such, they have a fiduciary duty not to act for their own benefit by making and retaining a secret profit from the customer’s money – which would otherwise be due to the customer – without disclosing this and getting the customer’s informed consent.

“Making and retaining a secret profit from the customer’s money” – strong words! It was bravely proposed by this courageous regulator that “there should be clear disclosure of the fact that interest is retained and the amount”.

It is a sign of our ripped-off times that this is not obviously the right thing to do. How the building must have echoed with the clatter of vertebrae hitting the marble floors at the FSA offices in Canary Wharf last week.  The FT reported that the FSA backed down when it published its final decision on 8th November, which had no sign of this requirement. Doing a document word search for “interest” finds just three instances all of which use it in the context “not boring”, none of which relate to secretly profiting from the customer’s money. According to the FT, the Association of British Investors claimed this would have “created significant practical and commercial issues” for the providers. Which presumably means:

-         Practical issue: How do we tell our customers we are secretly pocketing their investment income?

-         Commercial issue: How do we pay our bonuses if we don’t secretly pocket our customers’ investment income?

Why the banks and insurers do this kind of thing, and why the authorities allow them to get away with it, is not a subject for Financial Education in schools. More suited to the Religious Education class: if there is a god, and that god is benevolent, then why the devil does that god allow the world to be such a vale of rip-offs that impoverish us Britons?

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Get into the philanthropic spirit to take you minds off our economic troubles

Chris and his wife get their cheque book out

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Food waste and the seven deadly sins

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Personal bank accounts cost us £billions, the surprise is not only in the packaged accounts

So the Church lifted its threat to send in large padded men to throw the campers out, and the protest outside St. Paul’s Cathedral in London continued. In a conversion on the road to the High Court worthy of St. Paul himself, the clergy suddenly realised “what Jesus would do” if he were physically, as well as spiritually, in the Cathedral. Jesus would be applying the toe of his physical sandal to their highly embroidered clerical backsides. Who were the greater malefactors when Jesus threw the money lenders out of the temple in Jerusalem? The moneymen, who were suckering customers with every rip-off man’s laws and the regulators permitted? Or the priests who succoured the moneymen?

This blog has repeatedly stated: deal with the excessive profits and the bonuses will deal with themselves. For Ripped-Off Britons to be less ripped off, the amount of the bankers’ bonus in itself is irrelevant. It is the rip-offs that pay for the bonuses that are the problem.

Blocking bankers' bonuses can easily be dismissed as being envy driven. On the other hand, reducing rip-off profits is just good sense. Bankers will argue that their profits aren’t rip-offs, but are the fruits of their being extremely clever and courageous. The hilarious speech by Bob Diamond, the boss of Barclays Bank, on the BBC is a good example of what they want us to believe. Having said in January 2011 that the “period for remorse and apology” was over, his latest position is “we have to accept responsibility for what has gone wrong". “We know it's not enough just to apologise” says uncle Bob. 

Diamond pointed out that banks provide an important service, including putting together a pool of investors who can lend money to, among others, governments to service their debt. He said that government debt as a proportion of GDP is

“100% in the US and 83% in the UK. Ten years ago those ratios would have been roughly half that.”

He didn’t need to look back 10 years, 3 years would have been enough as the debt more than tripled in 2008 at one of the heights of the banking crisis, because governments borrowed money to bail out the banks. And the banks now make handsome profits lending money to governments to cover the loans taken by governments to bail out the banks.

 Diamond went on to talk about the people he had met, including

• When I was in Yorkshire earlier this year, I met R&R Ice Cream. R&R Ice Cream started as a small family business...
• I also met with Swann Morton in Sheffield, the home of steel manufacturing. They began in the 1930s making razor blades for the UK.
• Sukhpal Singh is an entrepreneur I met in Cambridge who came here as a refugee from Uganda in the 1970s. At the age of 18 he borrowed £5,000 - from his father and from a local bank - to buy a car parts shop in North London.

In the post-speech interview with BBC Radio4’s John Humphrys, Diamond said that Bankers can be cuddly. So lets take a closer look at how cuddly they are, in an area where just about every one of us is affected – our bank accounts.

With Which?, the organisation championing consumers, and the ironically named Financial Services Authority (FSA), whose purpose has never been clear, highlighting potential problems with Packaged Current Accounts, we shall look more generally at personal bank accounts which earn the banks £billions in charges. (The FSA’s hyperactivity in the final months before its abolition is akin to a drunken uncle who having disgraced himself at dinner insists on doing the washing up to try and leave behind a more positive memory.) We shall see whether the £billions of profits are the rewards of being extremely clever and cuddly, or just the proceeds of thuggish muggings.

Muggers come in various forms. Some with menaces, some with smiles, and some in suits. All have the same objective – to relieve you of your money. Uniquely among muggers, the banks use all three tactics.

The menace of penalties is perhaps the greatest example of the banks preying on the their customers. An Office of Fair Trading report, published in October 2009, stated; 

“the average daily unarranged overdraft balance [the average total amount of unauthorised overdrafts] over the year in 2006 was £680 million and yet the revenue raised by the PCA [Personal Current Account] providers in levying paid item and maintenance fees was more than double this - at £1.5 billion. This is a return of over 220 per cent on the balances.”

In plain English, the banks maintained a pot of on average £680m for a year to cover unauthorised overdrafts. They charged the borrowers £1.5bn in interest and penalties – a return of 220%. Some of the more hard-up Britons paid the banks 220 percent interest on their unauthorised overdrafts. The report found that it was the same group getting hit repeatedly, with 39% of them getting penalised more than 6 times in a year. Transferring £1.5 billion in a year from the hard-up to the banks.

Smiling at you from advertising in print, internet, and television, various animate and animated characters promise High, Extra, Gold, Reward, Plus, Premier, Advantage, and other hyperbolically named financial products.  Chief among these is the humble current account, yielding to the banks in 2006 a £4.1 billion bounty of “net credit interest”. The same October 2009 OFT study stated:

“The two main sources of revenue from PCAs [Personal Current Accounts] are net credit interest and unarranged overdraft charges. Although the perception of banking is that it is free, in 2006 PCA providers' total revenue from PCAs was £8.3 billion, equating to £152 per active PCA. Of this, £4.1 billion came from net credit interest”

http://www.oft.gov.uk/shared_oft/reports/financial_products/OFT1005.pdf

Net Credit Interest is money made from the difference between what the banks charge a customer to borrow money, and what they pay a customer to deposit money. The staggering size of this rip-off can be seen from these figures from the Bank of England.

Particularly since the crisis of 2008, the gap between what the banks pay savers and what they charge borrowers has gaped. Savers in ‘instant access’ accounts are effectively being paid nothing.

The Office of Fair Trading’s study on current accounts,published in 2008, illustrates how the Big Four banks (HSBC, Barclays, Lloyds, and RBS) have taken extreme advantage of this differential compared with the smaller and newer banks who are vying for market share.

And it is at the hands of the pinstriped gent, man or woman, that the quiet mugging takes place. To reinforce the illusion of ‘free bank accounts’, the banks created ‘not free bank accounts’ – more commonly known as Packaged Current Accounts. Accounts that are bundled with insurance products, including travel, mobile phone, and car breakdown.

Back in 2006 15% of accounts were fee paying Packaged Accounts, generating £560m in profits for that year. The FSA’s report in 2011 states that this had risen to 20% of all accounts, approximately 10 million accounts. Enough to trigger an enquiry by the FSA into potential mis-selling. The FSA observed:

Economic theory, our own experience and that of other sectoral regulators, tells us that bundling could potentially lead to consumer detriment in a market as it makes it more difficult for consumers to compare and switch products. This can then allow firms to charge excessive prices, and poor value for money can go unchallenged.

An investigation by the consumer organisation Which? found:

30% of Which? members with one as their main account had never used any of the benefits offered. As some packaged accounts now cost more than £300 a year, that’s a lot of money being wasted. In fact, we calculated that it could amount to between £240m and £320m in bank fees each year.

According to Defaqto, the financial research company, the top three packaged account incentives are:

• Travel insurance
• Car breakdown cover
• Mobile phone insurance

The average cost of these accounts is £15.44 a month

Which exposes a rip-off in itself.

• Average cost per month of £15.44
• £185.28 per year

However, if you looked around a bit (apologies for this uncharacteristic unavoidable, and unremunerated, advertising)

• Free bank account with travel insurance from Nationwide: £0, zip, zero.
• Mobile phone insurance from ‘protectyourbubble’: £17.88 per year
• RAC breakdown cover UK wide: £39
• Total £56.88 per year

Banks have successfully argued in court that it doesn’t matter if their charges are rip-offs, because they are specified in the terms & conditions which are understandable to the ‘average consumer’ – which is how they defeated the OFT in the Supreme Court over rip-off overdraft charges. However, the mendacity of this claim was exposed by the parliamentary Treasury Committee’s enquiry into “Competition and choice in retail banking” in November 2010.  In a session with Helen Weir (executive director of Lloyds Banking Group), Adam Phillips (Chairman of the Financial Services Consumer Panel), and Lord Turner (Chairman of the FSA), it was minuted that:

“76. Ms Weir seemed confident that consumers would know the cost to them of operating a current account, telling us that "most consumers would have a pretty good idea of what they are paying for their current [account] banking. However, when we pressed her to say how much she paid in terms of interest foregone herself, she was unable to answer.[90] Ms Weir was not the only witness who was unable to tell us the cost of their current account. Lord Turner explained that he did not know, although unlike Ms Weir he did not argue that most consumers would know.[91] Adam Phillips was similarly unable to tell us how much he was paying for his current account.[92]

Benny Higgins [CEO of Tesco Bank] stated "very few people" would be able to quantify the cost of their current account and concluded that the inability of most consumers to calculate such costs "strikes at the heart of the issues around competition within current accounts."[93]

77. The distinguished list of financial services experts unable to tell us the cost to them of their current account indicates a serious problem. If they cannot estimate the cost of their accounts, we hold little hope that members of the public are able to do so. Greater disclosure of information on cost is a pre-condition to greater competition in this market.”

Pretending to deal with excessive pay by increasing taxes on the bankers, such as the Tobin Tax to which certain clerics (who should really pay more attention to Jesus on the subject of taxes: render unto Caesar that which is Caesar's, don't involve me in tax matters) have given their blessing, just means bankers will increase their charges on us ripped off Britons. 

Clerics, regulators, parliamentarians, the media, the protesters, and the rest, should all focus on the rip-offs. Once the rip-offs are dealt with, the obscene profits of the banks will start to get under control, and bonuses that spur bankers to irrational and immoral behaviour will deal with themselves.

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