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

The gang look on the bright side...

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

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

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

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

G4S chief predicts mass police privatisation

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

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

Financial Services Authority has warned that Britain's four largest banks face more questions over their sale of misleading and crippling interest rate hedges to small business customers. TELEGRAPH

Farepak "Christmas savings scheme" collapse case thrown out at the high court

Savers offered just 15p in the £1. Farepak directors made millions, although they did try to secure £4m for savers. But lending bank HBOS, now part of Lloyds Banking Group, blocked this move to ensure they got repaid in full. TELEGRAPH

'Two-tier fees' to call companies, Which? claims
New customers are given a free 0800 number to call, whilst "sucker" loyal existing customers have to pay premium rates BBC NEWS

France's finance minister has declared a crusade against executive pay at state-controlled companies
A wage cap of €450,000 (£365,000) a year for bosses is a matter of "justice and morality" GUARDIAN

Charity collector 'Chuggers' tricks revealed in investigation

High street charity fundraisers, known as "Chuggers", are facing questions over their use of increasingly aggressive, intimidatory and potentially unlawful tactics. The public is told the donation “buys 15 minutes of a nurse’s time” but in fact the cost of the operation can far outstrip the amount raised, and the real purpose is to collect mobile phone numbers. Donors are then telephoned from a call centre by a further set of fundraisers to be persuaded to give regularly by direct debit. TELEGRAPH

The prime minister has suggested that people under the age of 25 could lose the right to housing benefit
Part of moves to cut the welfare bill. BBC NEWS

Jimmy Carr row: No 10 set to shelve plan to publish ministers' tax returns

Ministers are not closed to idea of disclosing their tax details but it is 'not a very near-future thing', says No 10 GUARDIAN

Government stalls on banning ‘rip-off’ credit and debit card surcharges
WHICH

Mobile phone providers use 'roaming rip-off' loophole to pocket price cuts they should pass to customers
Phone operators are sneakily promoting a series of ‘bundled’ deals because they are exempt from the legal requirement to pass on the savings DAILY MAIL

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

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

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

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

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

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

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

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

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

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

Is this actually true?

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

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

b) Is the financial sector an important and growing provider of employment in the UK? 

Actually, figures from 1991 to 2007 show that financial sector employment in the UK has been stagnant at around 1 million staff. The collapse in manufacturing jobs in recent decades was taken up by other areas of the services sector, including business services, education and health; all sectors that are now being punished for the misdeeds of the Financial Sector.

c) Is the Financial Services industry a source of nationwide prosperity?

A separate paper by CRESC shows that 44% of financial services jobs are in London and the South East, while in other parts of the UK it is only a minor employer. It is these other parts of the UK that are bearing the brunt of the economic and social pain caused by the banking bust. As the Governor of the Bank of England said, "The price of this financial crisis is being paid by those who absolutely did not cause it".

So Financial Services are just another part of the economy. Not especially important nor especially unimportant. And yet successive British governments have gone extravagantly and ruinously out of their way to protect the Financial Services Industry:

• Allow their executives to evade personal sanctions for their misdeeds, by not having to admit wrongdoing.
• Impose any fines for bank wrongdoing that are a tiny percentage of their profits, making fines less a punishment and more a cost of doing business as usual.
• Use those fines to subsidise the self same financial services industry.
• Enable banks to avoid tax, with corporation tax from this so called 'engine' contributing just 2% of UK tax revenues.
• Allow banks to charge excessive pension fees that are among the prime reasons for the pension crisis and pensioner poverty.
• Do not force the banks to ensure customers are aware when interest rates and the like are cut. They are free to bury the bad news in the obscurity of the small print.
• Allow the industry to run a multi-billion tax avoidance industry, robbing governments around the world, including the British government, of their due taxes.
• Give the banking industry cheap loans, which they lend back to governments at higher rates who need to borrow money to bail out the selfsame banks.
• Avoid educating the nation's children, so they continue to fall prey to the scams the financial industry will try and trick them with.

So, why is it that politicians of all persuasions take such good care of the Financial Sector? Is it because the Financial Sector can be relied upon to return the favour?

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

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


Home ownership £200,000 cheaper than lifetime of renting

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

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

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

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

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

Tax avoidance scheme used by Jimmy Carr, and Take That pop band, investigated by HMRC

Authorities to challenge Jersey-based scheme that allegedly shelters £168m by creating offshore loans for UK earners GUARDIAN

Quantitative Easing "experiment" that channels new money to the banks is costing savers nearly £18bn, without any end in sight to the downturn
"QE is a monetary experiment that has not boosted the economy as intended but instead has boosted inflation and damaged pensions and savings"  DAILY MAIL


Wonga adverts dropped by Football League

Advertising for loan company that charges 4,000% APR will no longer be carried by league websites following fans' campaign GUARDIAN

National Audit Office gives blessing to sweetheart tax deals between HMRC and five mega-corps. 
Deals in which HMRC let companies off £millions in tax and penalties, generating public outrage and earning former HMRC permanent secretary David Hartnett accusations of lying to a parliamentary committee, were given the thumbs up by the National Audit Office. NATIONAL AUDIT OFFICE


British arms exporters refuse to co-operate with inquiry into the Export Credits Guarantee Department
ECGD is the government department that guarantees to cover losses if foreigners don't pay the exporters for their weapons. Think Mugabe GUARDIAN

Ministry of Defence accused of sacking soldiers, some within days of their full pensions start
One 40-year-old sergeant serving in the Royal Electrical and Mechanical Engineers was only three days away from serving 22 years and qualifying for an immediate pension pot worth £108,000. He will now have to wait until he is 65 to receive the pension. DAILY TELEGRAPH


Government ends Beecroft's "no-fault" dismissals plans
Adrian Beecroft's 'hire and fire' law shelved after majority of small businesses fail to get behind it GUARDIAN

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How best to honour the City?

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

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

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

The most important recommendation rejected by Osborne was:

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

(RWA - Risk Weighted Assets)


What this means in practice:

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


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


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

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

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

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

This includes

-         Retained profits

-         Equity capital.

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


Equity capital is the money raised by the bank by selling its own shares. A shareholder has no right to demand his money back from the bank itself. All a shareholder can do to get his money is sell his shares to someone else. He can’t force the bank to give him his money back in exchange for the shares.


Osborne accepted the recommendation for 'ring-fencing' banks. We explained what a 'ring-fenced bank' is in more detail in an earlier post. For now we focus on the amount these banks do and how much they can borrow.

Independent Commission on Banks

What a ring-fenced bank is for: Simply put, the bank borrows money from one group of people, and lends it to another group of people.

The people who lend money to the bank (including us: our bank deposits are effectively loans from us to the bank) expect

a)      some kind of interest payment (generally ranging between paltry and piffling).

b)      to be able to get our money back when we want it

The people who borrow money from the banks (including us, in the form of mortgages, credit card loans, business loans, etc.) expect to pay interest (generally ranging between excessive and extortionate). These borrowers are expected

a)      to make their interest payments on time

b)      eventually to pay back the loan

The bank makes its profit by paying interest on the money it borrows at a lower rate than it receives on the money it lends. The profit comes from this margin between the rates.

Shareholders: A bank has shareholders investing their money. This money is used as a buffer in case some of the borrowers can’t pay back their loans. If this happens, the shareholders’ money can be used to pay back the people who lend money to the bank. Shareholders expect

a)      to receive dividend payments for their shares

b)      to see the value of their shares grow as the bank grows

c)      to be able to sell their shares to someone

The profits of a bank are shared between

a)     the shareholders, in the form of dividends

b)     kept by the bank, to boost its buffer of reserves

c)     the bankers, in the form of bonuses

From the nation’s point of view

a)      Shareholders take the risk of losing their money, in return for the hope of earning dividends and capital gains.

b)      The more shareholders funds being held by the bank, the less likely the bank will run out of money and need a rescue.

c)      If a rescue is needed, then the taxpayer is forced to bail out the banks. So the bigger the shareholder buffer the safer we are.

d)      A bail-out was what happened in 2008 and continues to this day. That’s why the economy crashed.

From the bankers point of view

a)      Shareholders are a drain on profits, which should be paid to them in bonuses.

b)      Shareholders' money is easily replaced by cheaper borrowing (e.g. pay our depositors 0.1% interest, or less!), so long as the government lets us get away with it.

c)      Shareholders are unnecessary, because the nation will bail the bank out when required – as is happening now.

d)      Erm.  That’s it.

Bankers claim that increasing the capital ratio will make borrowing more expensive for us Britons and will generally be bad for the British Economy. However, the Bank of England, in a report from April 2011, stated

"We conclude that even proportionally large increases in bank capital are likely to result in a small long-run impact on the borrowing costs faced by bank customers. Even if the amount of bank capital doubles our estimates suggest that the average cost of bank funding will increase by only around 10-40bps [1bps =0.01%].  (A doubling in capital would still mean that banks were financing more than 90% of their assets with debt).  But substantially higher capital requirements could create very large benefits by reducing the probability of systemic banking crises."

Banks pretend that the prosperity of the nation depends on the banks being highly leveraged. The graph below from the Bank of England’s report shows that historically there is no link between how much the banks are leveraged (how much they borrow compared to core capital) and how fast the British economy grows. In spite of massive increases in bank borrowing the trend line for GDP growth has been flat.

From the politician’s point of view – Tory and Labour alike – the priorities are:

a)      Do what is necessary to get elected

b)      To get elected you need funding from friends with spare cash to donate

c)      Make friends, ensure they have plenty of spare cash to donate

d)      Then run the country.

e)      As for the people without money…well, they are all in it together!

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Tax havens boost their lobbying efforts in the UK and Brussels

by Melanie Newman, Bureau of Investigative Journalism

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

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

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

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

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

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

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

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

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

It has been touting the Territory as a safe haven for hedge funds under threat of European regulation; its annual financial services conference is due to be held in London next week, on April 24.

Henry Bellingham, the Tory Minister responsible for Overseas Territories, was quoted in the island press saying the Territory was not a tax haven.

‘I wouldn’t describe Bermuda as a tax haven,’ he said. ‘I’d describe Bermuda as being a very well run country that is able to have low taxes because it’s got a very strong economy.’ He added: ‘The UK could do well to observe very closely the successes of the Bermuda fiscal system.’

Guernsey
Closer to the UK, Guernsey and Jersey set up a joint PR office in Brussels last year. In September they also tendered jointly for a public affairs firm to ‘support the promotion and protection of the Channel Islands’ interests with influencers and decision-makers in the UK.’  The procurement was never completed, which a Guernsey government spokesman said was due to ‘internal factors.’

Separately, the Government of Guernsey has recently hired a director from PR firm Grayling, part of Lord Chadlington’s Huntsworth Group, which has been advising Guernsey for several years.

Steve Wakelin, the state’s new head of international relations, was formerly head of Grayling’s public affairs team. The appointment followed a visit to the UK by the Chief Minister Lyndon Trott during which he met, amongst others, Conservative peer Lord Sheikh. Will Wallace, a senior Grayling staffer who carried out ‘reputational management around sensitive economic issues of tax’ for Guernsey was a former speechwriter for Lord Sheikh.

Jersey 
The Jersey financial services’ sector has its own lobbyist, Jersey Finance, which is part-funded by the Government.

‘Massive liquidity [that] is pumped into London as a result of Jersey’s offshore status… Not enough is known in the UK about the hugely important financial benefits that we get from Jersey.’
Daniel Kawczynski Conservative MP for Shrewsbury 

In August last year Conservative MP for Shrewsbury Daniel Kawczynski visited Jersey at the expense of its government. He declared the trip on the Commons register of members’ interests and said it was ‘to meet officials to hear about the current political and economic situation faced with mainland Britain.’

While on the island he also met Islamic finance specialists, Jersey Finance and ‘representatives of the general financial services sector’, according to a Jersey government press release.

The Jersey Evening Post quoted him as saying: ‘I am staggered by the amount of support that the City of London has had from Jersey, the massive liquidity that is pumped into London as a result of Jersey’s offshore status and the work that you do here. Not enough is known in the UK about the hugely important financial benefits that we get from Jersey.’

The MP, who is parliamentary private secretary to two agriculture ministers might seem an odd choice for the invitation. But he is also chairman of the All Party Parliamentary Group for Saudi Arabia and of the Conservative Arab Network. Jersey holds more than £20bn in deposits from the Middle East.

Kawczynski’s visit to Jersey was followed by a meeting in London with Jersey’s then assistant chief minister, UK and international relations, Senator Freddie Cohen. The press release announcing the meeting said it would ‘focus on building relations between Jersey and Saudi Arabia’. It added: ‘During Mr Kawczynski’s recent visit to Jersey he extended an invitation to the Island to include a representative on a forthcoming official visit to Saudi Arabia.’

A Jersey Finance official accompanied the Lord Mayor of London on a trip to the Gulf the following February.

Isle of Man
Finally, the Isle of Man appointed its first director of European affairs in April 2011, with the remit of ‘lobbying on behalf of the government, strengthening relations with key decision-makers, promoting the Island’s economic and cultural interests, and gathering intelligence on relevant issues.’

Patrick Rourke was recruited from the UK Ministry of Justice where he was ‘the principal conduit for the Crown Dependencies’ relationship with the UK government.’

The Isle’s Department of Economic Development and Chief Secretary’s Office are represented by five consultants from public affairs firm Lansons, a contract recently revealed to be worth £450,000. The firm’s contract with the island was renewed in 2012 after an independent poll of the Manx public found 60% backed the use of a ‘well-connected lobbying company to put forward the Island’s perspective at UK Cabinet level and [to] senior civil servants’.

The island also has a long-standing supporter in Conservative MP Mark Field.  Field has increasingly made his voice heard, recently arguing that tax havens benefit the economy. He has also attacked Ed Miliband over his criticism of the Crown Dependencies.

Field, who is Conservative MP for the Cities of London and Westminster, was appointed adviser to Manx law firm Cains Advocates in 2011. The role, for which he earns up to £40,000 per year, involves ‘assisting the firm with its international strategy, ambassadorial work and advising on government and parliamentary aspects of financial services’.

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A return to Victorian inequality, says Oxfam

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

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Rip-off News round-up. Our pick of the last week's media (Thu 14th Jun)

UK graduates contribute to UK Plc almost 10 times what it costs the state to educate them

"In 2000 the UK had the third highest number of graduates among advanced industrialised nations. By 2008 it had fallen to fifteenth because competitor nations had been investing at a faster rate" BBC

UK Uncut allowed to challenge Goldman Sachs tax deal

'Sweetheart' deal between HMRC and Goldman Sachs can be reviewed for legality, judge rules.  GUARDIAN

Fury as top bosses' pay soars yet again: Average rise of 12% for FTSE 100 fatcats
Manifest/MM&K survey shows under 'remuneration awarded' measure, executive pay rises in the top 25 FTSE 100 firms topped 41%. Overall, bosses of FTSE 100 companies enjoyed an average 12% rise in their take home pay last year, while their employees received 1%, well below inflation. DAILY MAIL

Housing shortage to turn under-30s into 'generation rent'

Study predicts 1 million more youngsters will be 'marginalised' as many face up to living with parents well into their 30s. GUARDIAN

Impending pensions scandal forces FSA to tighten rules for paying employees compensation to transfer out of Defined Benefit pensions

An FSA report says advisors, who sold their services to companies based on their ability to get a high transfer rate, were overstating the investment returns and understating longevity. This artificially kept compensation costs down. The FSA report states "If current take-up rates are maintained, KPMG estimate that around 750,000 transfers could be instituted that would release £100 billion of liability from DB schemes." FINANCIAL TIMES

Pensioners in work double as elderly turn to property, taxi driving and cleaning to makes ends meet

The financial crisis and our ageing population combine to double the number of workers above the official retirement age since 1993, according to ONS figures. DAILY MAIL

WPP shareholders vote against £6.8m pay packet for Sir Martin Sorrell

Nearly 60% of disgruntled investors vote against the WPP directors' remuneration report. GUARDIAN

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What's the difference between the Food Standards Agency and the Financial Services Authority?

The Financial Services Authority has always let banks get away with murder. Will its replacement, the Financial Conduct Authority, do any better?..

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Compulsory Financial Education in Schools - can the government continue to dodge its responsibility?

"We're a financially illiterate nation, with millions caught by misselling, overborrowing and being ripped off. Is it any surprise we’ve just had a debt imbued financial crisis. This must change. Companies spend billions on marketing and teaching their staff to sell – it's time we got buyers' training. The most cost effective way to start is to ensure every child in the country gets a basic understanding of personal finance & consumer rights before leaving school."
Martin Lewis, Moneysavingexpert.com

Of all the iniquities we Britons have to endure, perhaps the most fundamental rip-off, the most insidious betrayal, has been perpetrated by successive governments of the UK. It is the continuing failure to provide compulsory and robust financial education in schools.

After decades of foot-dragging by the authorities, Martin Lewis of MoneySavingExpert.com gave the campaign for financial education a push forward in 2011 when he collected in excess of 100,000 names on a petition to Parliament. The government’s initial response to Lewis’ petition was that it is already included in PSHEE (Personal, Social, Health and Economic Education) lessons. In a previous post we at Ripped-Off Britons pointed out the inadequacy of this. Lewis too commented:

"The petition is about compulsory financial education. PSHE, which it mentions, isn't compulsory, nor is personal finance a substantial part of this.”

The government also points to the Money Advice Service, formerly called the Consumer Financial Education Body, set up by the Financial Services Authority (FSA) in 2010. The government has handed control of this body to the Financial Conduct Authority (FCA), the successor (same snake, new skin) of the anaemic and discredited FSA.

The members of the board [of the Financial Education body] must be persons appointed, and liable to removal from office, by the FCA (acting, in the case of the chair or chief executive, with the approval of the Treasury). 

Could the government be planning that this FSA/FCA controlled "Financial Education Body" will be responsible for Financial Education in Schools? This would be the equivalent of putting Herod, infamous in biblical times for the slaughter of the infants, in charge of British childcare policy. What with the FSA’s reputation for protecting consumers being about the same as Herod’s for protecting children. (To be fair, Herod had nothing against children in principal – he had fourteen of them though he did execute three). The FSA has admitted it has a poor record for regulation. The level of fines it has imposed is no deterrent, being a miniscule fraction of bonuses (zoom into the graph above, and you may just be able to spot the fines). And it was exposed by the consumer organisation Which? for shielding mis-selling financial institutions. Which? complained in May 2012 that the FSA had banned 327 misleading adverts in 2011, but had refused to identify which adverts they were. Which means if you bought something based on one of these misleading adverts, the FSA won’t tell you.

We should be appalled but not astonished if the government does plan to hand financial education in schools over to the financial industry and its regulators.

We should be appalled because, whether directly or not, this would become a marketing exercise for the finance industry. In 2008 HM Treasury, the UK finance ministry, commissioned a report by Otto Thoresen, then CEO of the insurer Aegon UK and now Director General of the Association of British Insurers. The report, on how best to deliver generic financial advice to the nation, stated:

  

The Review’s research also indicates that an effective Money Guidance service can drive behaviour change. Eight out of ten users of the prototype [money guidance] services surveyed went on to take at least one action within a week or so of using the service. Of these, over half took specific action such as buying a new product or speaking to a regulated adviser

In case you were wondering, “regulated advisor” = “salesman”. Already the Royal Bank of Scotland boasts that its Moneysense programme is “the largest personal finance education programme in the UK, and has a presence in 65% of secondary schools”. Financial education, when in the hands of the financial services industry, is as much about selling new products as it is about education

We should not be astonished because successive governments of all complexions have regarded us Britons as the gift that keeps on giving. Whether monarchic (the likes of King John handed our ancestors to the likes of the Sheriff of Nottingham) or democratic (Labour, Liberal, and Conservative governments hand us over to the directors of banks, energy companies, rail operators, etc. etc.). The barons show their appreciation by ripping us off and giving a cut back to the government and its ministers in the form of taxes, party political contributions, and other nice things.

Donations to political parties 

So, what happened after the success of Martin Lewis’ petition to parliament, raising the 100,000 signatories that would require Parliament to debate compulsory financial education in schools? :

21st November:

Formal request for a 3 hour debate in Parliament. It was agreed the debate would be held on 15^th December.

14th December 2011:

Prime Minister’s Questions, David Cameron commented

  

“I strongly support teaching young children about the importance of financial education, but the point of having a proper review of the curriculum is to make sure that we know what is absolutely essential and core and what can be included as extra lessons.”

15th December 2011:

Debate held in Parliament on the following motion:

  

“That this House notes that young people today grow up in an increasingly complex financial world requiring them to make difficult decisions for the future, often without the necessary level of financial literacy; believes that financial education will help address the national problem of irresponsible borrowing and personal insolvency and that teaching people about budgeting and personal finance will help equip the workforce with the necessary skills to succeed in business and drive forward economic growth; further believes that the country has a duty to equip its young people properly through education to make informed financial decisions; and calls on the Government to consider the provision of financial education as part of the current curriculum review.”

The motion was duly passed. It is perhaps worth noting that while there were 227 members wanting to be associated with this campaign, for the actual debate the chamber was rather sparsely attended. Giving comfort to the government that MPs on the whole would not get out of bed to protest if the matter was once again quietly ignored.

20th December 2011:

Exchange of letters between the Prime Minister and Martin Lewis:

"Dear Martin…
As you will know, schools use personal, social, health and economic (PSHE) education as a framework within which to teach young people about personal financial management. The PSHE non-statutory programmes of study include elements aimed at ensuring that, by the time they leave school, pupils should be able to manage their money, understand and explain financial risk and reward and identify how finance will play an important part in their lives and in achieving their aspirations….
Yours,
David"  (lol)


"Dear Prime Minister…
So far, your government's only commitment has been Schools Minister Nick Gibb saying: "It'll be looked at in the curriculum review." That's good, but please ensure this isn't political double-speak for being filed in the bin.
Kind regards
Martin Lewis
MoneySavingExpert.com"

23rd January 2012: 
There was a written answer by Nick Gibb, minister for schools, relating to the provision of financial education in schools:

"Financial education is currently taught as part of the non-statutory framework for personal, social, health and economic (PSHE) education.

In July 2010, Ofsted published a report on PSHE education in schools, based on evidence from inspections of 165 maintained schools in England between September 2006 and July 2009. Inspectors found that students in those schools that were successfully developing personal finance education showed a good understanding of personal finance, used financial terms correctly and were able to apply their knowledge in making financial decisions….We are reviewing PSHE, including financial capability, to determine how we can improve the quality of all PSHE teaching and support teachers to teach the subject well. The review will allow the Secretary of State for Education, my right hon. Friend the Member for Surrey Heath (Michael Gove), to consider the place of financial education in the curriculum."

15th March 2012: 
The topic resurfaced during a debate on the Finance Bill, with the MP Chris Leslie expressing regret that the bill

  

“does not contain provisions to extend financial education to the compulsory part of the national curriculum….The issue has been debated on the Floor of the House and the point ought to have been accepted by the Government by now. ”

And there we have it. If anyone knows of any further progress on this, please do let us know (email us at financialeducation@rippedoffbritons.com)

If Financial Education is ever made compulsory, the GCSE should have two papers:

a)      How we Britons can use financial services.

b)      How financial services can abuse us Britons.

As a bit of fun last Christmas, Ripped-Off Britons posted a Rip-Off Quiz. We thoroughly recommend some of this as the basis for the Financial Competency GCSE. If the Education Secretary would like someone to produce the exam paper, we are ready to help!

Make no mistake: used properly financial services would be a font of prosperity for the many. Regrettably, in today's Britain financial services form a cornucopia siphoning wealth away from the many to the few. 


If our children understand this, and if they help their parents understand this, and if they become adults (including becoming bankers) who understand this, then we will all be more prosperous at every stage of our lives. 


To be precise, we would all be more prosperous except the executives who currently pocket the profits of ripping off us Ripped-Off Britons.

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