Rip-off News round-up. Our pick of the last week's media (Thu 30th August)

Pension companies finally pledge to come clean on hidden fees

The industry admits that it has not given “straight answers” to savers

Millions of savers are being misled by pension fund managers about hidden fees that can almost halve the value of their pensions. The DG of the Association of British Insurers said "The industry has taken too long to recognise the fact that people expect transparency now. They expect to ask a question and get a straight answer. We haven’t been very good at giving that straight answer." TELEGRAPH
("That straight answer will be posted to all our customers some time next year in an unmarked envelope and buried in sheathes of other marketing bullshit, as per usual," he added )

Power NI has announced a 14% cut in electricity bills, the day after SSE announces 9% hike for its customers 
SSE's excuse is that wholesale prices have gone up. Power NI says wholesale prices have come down. How can both be true? BBC NEWS

Deutsche Bank has become the first global bank to  strip staff of bonuses they earned at previous employers
The largest European lender has significantly tightened its bonus rules this year: it will claw back shares given in exchange for stock earned at another bank by newly hired staff. One recruitment expert warned this could make it harder for Deutsche Bank to attract senior talent as they might not be willing to put at risk stock earned at their previous bank. FINANCIAL TIMES
(When asked for his definition of 'talent' the recruiter said "Easy. The ability to lose billions of everyone else's money")

Emergency wealth tax could hamper recovery, Osborne warns
Chancellor responds coolly to Nick Clegg's proposal to impose a time-limited emergency "mansion" tax on Britain's wealthiest. Tory MP Bernard Jenkin rubbished Clegg's attempts to tax the rich more, saying "We've got to be very careful we don't strangle the goose that lays the golden egg." GUARDIAN

(When told that this particular goose had eaten all the corn but hadn't laid any golden eggs in quite a while, Jenkin replied "Well, I can clearly see something coming out its bottom.")

Scientists dispel 'Miserable Monday' myth

We may say we hate Mondays, but research suggests Tuesdays, Wednesdays and Thursdays are equally loathed. Professor Arthur Stone says it is the contrast in mood from Sunday to Monday that has led to Mondays being unfairly singled out. 
BBC NEWS
(When asked what really made him happy, Professor Stone said "Devoting my life to the careful measurement of how miserable you all are.")

Easy access savings accounts drop interest rates by 60% 

The interest rates for easy access savings accounts have plunged over the past year and a half. The only way to have more than a pathetically low return is to change your account every year. LOVE MONEY

Unilever to adopt marketing strategies used in developing countries to sell goods in "poverty" Europe
The head of its European business warned that poverty will rise in the region as a result of the debt crisis. In Spain, the company already sells Surf detergent in packages for as few as five washes, while in Greece it now offers mashed potatoes and mayonnaise in small packages, and has created a low-cost brand for basic goods such as tea and olive oil. TELEGRAPH

Christmas comes early as Asda opens Santa's grottos in August

Supermarket chain says it is trying to encourage people to start saving for the festive season. Staff dressed as elves have been handing out Christmas savings cards. But exasperated critics say the mystery and magic of Christmas should be kept for December. GUARDIAN

("The whole country has been living in a land of make-believe for four years already. I don't see what the problem is," said ASDA) 

Read More

Runaway Premier League football wages are damaging the national game

Our guest post from the High Pay Centre summarises their full report "Football Mad: are we paying more for less?", which is well worth a read too. You can see data that shows how money is being sucked away from grassroots football and into the pockets of players in the top clubs. No wonder our national team hardly ever gets beyond a quarter final, if that!

It's also an example of how one business sector can end up dominated by a small handful  (think Man U, Man C, Arsenal, Chelsea) so powerful that all the others are crowded out. Other clubs can only hope to rise above them by paying their players massive amounts of money.

Much of that money is borrowed. In UEFA’s 2010 benchmarking report, the UK Premier League’s cumulative debt was £3.5bn, 56% of the combined debt owed by the 732 top flight clubs across Europe. Manchester City (a club that currently spends more on players than it earns) won the league on the last game of the season with two goals scored during injury time, scored by players with a combined purchase price greater than the entire turnover for half of the teams they were playing against in the league.

In the last 20 years of English football over half of its professional clubs have been insolvent. When clubs do go into insolvency the rules are that the players’ salaries must be honoured first, after which everyone else gets paid what's left over. So, for example, when Portsmouth entered its first administration in 2010, local business lost £400,000 in unpaid debts. At Darlington in 2009, unsecured creditors like local businesses received 0.0009% of what they were owed, and HMRC (that's you and me!) were owed £404,376 but got just £3.64– not even enough to buy a couple of pints to celebrate. In its 2012 windup CVA, Portsmouth's unsecured creditors were offered 2p in the pound.

There are other sectors that are totally dominated by a small handful of companies. Think banks, energy, telecoms, and rail. As the full report says, when it comes to football the game is really over before its even begun, and regardless of the outcome, we already know who the real winners will be.

Football Mad: are we paying more for less?

Research from the High Pay Centre shows how dramatic wage escalation in football has made the game less competitive and more expensive to watch, while also channelling the vast sums of money coming into the game from TV money to casinos and Mercedes dealerships, rather than grassroots coaching.

Clubs competing in the Champions League receive in excess of £200 million in revenue, more than double the amount earned by smaller Premier League clubs. Most of this money goes straight into the pocket of expensive new signings, with Manchester City, for example, spending 114% of turnover on players' wages.

The net result is that the supposedly exciting and unpredictable Premier League has become depressingly uncompetitive. In the past three seasons, a club finishing in the bottom three has beaten a side finishing in the top three on just four occasions out of 54. Statistically, last season’s Bolton Wanderers team could have played their Manchester United counterparts 10 times and would not expect to beat them once.

It’s a similar story between the divisions. Prior to the establishment of the Premier League, 50% of TV revenues were distributed across all 92 football league clubs. Today far smaller payments are made at the discretion of the Premier League, with the money again being spent on players' wages instead. Premier League players earnings have risen by 1508% since 1992, compared with 518% in the second tier, 306% in the third and 233% in the fourth (not to mention 186% across the population as a whole).

As a result, only one team, Norwich City, achieved promotion to the top flight in the last five years without either receiving the ‘parachute payments’ available to ex-Premier League clubs or running at a desperately unsustainable wages to turnover ratio of over 100%. Half the professional clubs in England have been insolvent at some point in the last 20 years.

The most depressing thing about all this is that the negative effect of pay escalation on the England football team is not insignificant. The bi-annual navel-gazing over the poor technique of English footballers that greets our early exit from every major tournament can be traced back to our lack of investment in coaching. In England there are 812 registered players to every qualified coach. In Germany, it’s 150, despite the fact that German league rules dictate that clubs must run on a breakeven basis, and their ticket prices are lower, meaning there is less revenue to invest in coaching.

It hardly needs saying, that Germany – and Spain, Italy and France, where the number of qualified coaches is also much higher – have consistently outperformed England at World Cups and European Championships. In English football, as in many other industries, excessive wages are draining resources that could be used for genuine investment.

The High Pay Centre is an independent non-party think tank established to monitor pay at the top of the income distribution and set out a road map towards better business and economic success. 

Follow them on Twitter: @HighPayCentre

Like them on Facebook

RELATED STORIES:

Massive CEO pay packages and the high price for failure

Do income tax cuts for the rich make us all richer? Part 2: more dismal evidence to the contrary

RELATED CARTOONS:

A return to Victorian inequality, says Oxfam

Aviva fat cat CEO stumbles on the magic number

SOMETHING COMPLETELY DIFFERENT:

Liebrary - Train fare price increases capped? Oh no they're not...

Build more affordable homes, reverse the property bubble, and we'll save billions

Read More

Runaway Premier League football wages are damaging the national game

Our guest post from the High Pay Centre summarises their full report "Football Mad: are we paying more for less?", which is well worth a read too. You can see data that shows how money is being sucked away from grassroots football and into the pockets of players in the top clubs. No wonder our national team hardly ever gets beyond a quarter final, if that!

It's also an example of how one business sector can end up dominated by a small handful  (think Man U, Man C, Arsenal, Chelsea) so powerful that all the others are crowded out. Other clubs can only hope to rise above them by paying their players massive amounts of money.

Much of that money is borrowed. In UEFA’s 2010 benchmarking report, the UK Premier League’s cumulative debt was £3.5bn, 56% of the combined debt owed by the 732 top flight clubs across Europe. Manchester City (a club that currently spends more on players than it earns) won the league on the last game of the season with two goals scored during injury time, scored by players with a combined purchase price greater than the entire turnover for half of the teams they were playing against in the league.

In the last 20 years of English football over half of its professional clubs have been insolvent. When clubs do go into insolvency the rules are that the players’ salaries must be honoured first, after which everyone else gets paid what's left over. So, for example, when Portsmouth entered its first administration in 2010, local business lost £400,000 in unpaid debts. At Darlington in 2009, unsecured creditors like local businesses received 0.0009% of what they were owed, and HMRC (that's you and me!) were owed £404,376 but got just £3.64– not even enough to buy a couple of beers to celebrate. In its 2012 windup CVA, Portsmouth's unsecured creditors were offered 2p in the pound.

There are other sectors that are totally dominated by a small handful of companies. Think banks, energy, telecoms, and rail. As the full report says, when it comes to football the game is really over before its even begun, and regardless of the outcome, we already know who the real winners will be.

Football Mad: are we paying more for less?

Latest report from the High Pay Centre on pay in football published

Optimism is a pre-requisite for supporters of football clubs outside the Premier League’s top three or four. And the opening day of the season affords the opportunity for fans to indulge their dreams of free-flowing football, victories over local rivals and an inexorable march to title-winning glory unfolding over the next 9 months.

But new research from the High Pay Centre shows how dramatic wage escalation in football has made the game less competitive and more expensive to watch, while also channelling the vast sums of money coming into the game from TV money to casinos and Mercedes dealerships, rather than grassroots coaching.

Clubs competing in the Champions League receive in excess of £200 million in revenue, more than double the amount earned by smaller Premier League clubs. Most of this money goes straight into the pocket of expensive new signings, with Manchester City, for example, spending 114% of turnover on players' wages.

The net result is that the supposedly exciting and unpredictable Premier League has become depressingly uncompetitive. In the past three seasons, a club finishing in the bottom three has beaten a side finishing in the top three on just four occasions out of 54. Statistically, last season’s Bolton Wanderers team could have played their Manchester United counterparts 10 times and would not expect to beat them once.

It’s a similar story between the divisions. Prior to the establishment of the Premier League, 50% of TV revenues were distributed across all 92 football league clubs. Today far smaller payments are made at the discretion of the Premier League, with the money again being spent on players' wages instead. Premier League players earnings have risen by 1508% since 1992, compared with 518% in the second tier, 306% in the third and 233% in the fourth (not to mention 186% across the population as a whole).

As a result, only one team, Norwich City, achieved promotion to the top flight in the last five years without either receiving the ‘parachute payments’ available to ex-Premier League clubs or running at a desperately unsustainable wages to turnover ratio of over 100%. Half the professional clubs in England have been insolvent at some point in the last 20 years.

The most depressing thing about all this is that the negative effect of pay escalation on the England football team is not insignificant. The bi-annual navel-gazing over the poor technique of English footballers that greets our early exit from every major tournament can be traced back to our lack of investment in coaching. In England there are 812 registered players to every qualified coach. In Germany, it’s 150, despite the fact that German league rules dictate that clubs must run on a breakeven basis, and their ticket prices are lower, meaning there is less revenue to invest in coaching.

It hardly needs saying, that Germany – and Spain, Italy and France, where the number of qualified coaches is also much higher – have consistently outperformed England at World Cups and European Championships. In English football, as in many other industries, excessive wages are draining resources that could be used for genuine investment.

The High Pay Centre is an independent non-party think tank established to monitor pay at the top of the income distribution and set out a road map towards better business and economic success. 

Follow them on Twitter: @HighPayCentre

Like them on Facebook

RELATED STORIES:

Massive CEO pay packages and the high price for failure

Do income tax cuts for the rich make us all richer? Part 2: more dismal evidence to the contrary

RELATED CARTOONS:

A return to Victorian inequality, says Oxfam

Aviva fat cat CEO stumbles on the magic number

SOMETHING COMPLETELY DIFFERENT:

Liebrary - Train fare price increases capped? Oh no they're not...

Build more affordable homes, reverse the property bubble, and we'll save billions

Read More

Distribution of household financial assets - half of us have zero

The Treasury Select Committee, seemingly one of the less ineffectual organs of our Parliament (though we wait to see whether their bite lives up to their bark), asked the Bank of England to explain the costs and benefits of its programme of Quantitative Easing (printing £375 billion of new money to rescue the economy from the banking crisis).

The Bank of England's report states

"the total increase in household wealth stemming from the Bank’s £325 billion of asset purchases up to May 2012 of just over £600 billion... In practice, the benefits from these wealth effects will accrue to those households holding most financial assets."

The Bank helpfully commissioned a survey to show how these financial assets, and the £600billion boost to household wealth, has been distributed:

The survey asked the question:

‘How much do you (or any member of your household) currently have in total, saved up in savings and investments? Include bank /building society savings accounts or bonds, stock and shares, ISAs, Child Trust Funds, NS&I account/bonds and premium bonds. Please exclude any pensions you may have.’

It produced the following result, which shows that half of households actually have no financial assets, and therefore had no share of the £600billion bonanza. The £600billion went “to those households holding most financial assets”.

Read More

Rip-off News round-up. Our pick of the last week's media (Thu 23rd August)

Woman forced to pay £200 to print out Ryanair tickets

A holidaymaker says she was forced by Ryanair to pay more than £200 for a "piece of paper" after she arrived at an airport without printing her boarding passes in advance. TELEGRAPH

(A Ryanair spokesperson said "We overdid it. So we've given her £200 worth of coupons to spend on all the things we currently charge for: using our loo, standing up, sitting down, and crying with joy when the whole Ryanair ordeal ends.")

Top bosses' pay rockets whilst everyone else's drops

For the first time, the total pay package for the typical FTSE 100 CEO hit £3m in 2011. This is an average rise of 8.5% despite the FTSE 100 falling. The average pay rise for workers nationally was 1.6%, less than half the pace of inflation. FTSE 100 CEO pay rose 23% in 2010. INDEPENDENT
(Said one CEO, "This is the politics of envy and I reject it... except when it comes to the fat cat pay of cats more fat than me")

Young graduates stuck doing lower skill jobs increases to 1 in 3

35.9% of those with a degree or higher education qualification, who graduated in the last 6 years, end up employed in lower skilled jobs, up from 26.7% in 2001. OFFICE OF NATIONAL STATISTICS
(Meanwhile this year's GCSE results fell for the first time in 24 years. As teachers claimed that grades had been deliberately suppressed, thousands of school kids across the country celebrated the news that they won't be wasting their time and money going to university.)

Five million homes face 'shock' energy bill rise

5 million customers of SSE, the UK’s second biggest energy company, face increases in their fuel bills of up to £100-a-year despite rising profits for energy companies. Ofgem, the energy regulator, said energy company profit margins were due to rise by almost 14 per cent.  TELEGRAPH
("What shock? We pull this scam every year. You should be used to it by now," said their spokesperson)

Britain's richest 5% gained most from quantitative easing, admits Bank of England

Bank reveals wealthiest boosted by printing £375bn and giving it to the banks, and keeping the borrowing base rate at a historically low 0.5% for so long. But they insists it spared UK from even deeper slump. GUARDIAN

Mitt Romney, multimillionaire US presidential candidate: "Never paid less than 13 percent" in taxes
"But every year I’ve paid at least 13% and if you add in addition the amount that goes to charity, why the number gets well above 20%" HUFFINGTON POST
(Sorry - we have to concede: can't out-satirise Romney on this one)

Tap water straight from the mains sold on shelves at Asda and Tesco
Supermarkets and their suppliers are enjoying a mark-up of around 2,500% for selling nothing more than filtered tap water. However, there is no explanation on the label of these supermarket brands that the contents are simply tap water. The water mains suppliers say filtering is totally unnecessary. DAILY MAIL
("This has left a bad taste in my mouth," said one customer)

The government is sitting on £1bn of TV licence fees

If you are one of the millions who pay for their TV licence by direct debit or cash payment plan, you are giving a £1billion interest-free loan to the government. WHICH?

("That's tens of millions in interest! They could at least invest that in flagship quality programmes like mine," said the producer of Strictly Come X Factor Millionaire Get Me Out Of Here)

Revealed: MPs' earnings from second jobs and TV work

MPs earn tens of thousands of pounds, on top of their £65,738 pay, from second jobs as lawyers, doctors and consultants. Others earn thousands from media appearances and advisory roles with companies. STANDARD

(SHOCK NEWS: lawyers, doctors and consultants exposed as earning £65,738 on the side as 'MPs'. One said "Calm down. I only ever spend a couple of hours a week running the country.")

No criminal case likely in $1bn loss of customers' money at MF Global

Criminal investigators into the disappearance of US$1bn of customer money are concluding that the money disappeared due to chaos and porous risk controls at the firm, but not fraud. Paying top money to bankers for 'excellence' apparently buys only incompetence. NEW YORK TIMES

("We try the 'porous risk control' defence every time but it never works for us. How come?" said our contact in the Mafia)

Read More

Liebrary - Banking is free? OFT report shows even excluding penalty charges banks take £billions for holding our money

Which?, the consumer campaigner, has claimed free "free banking" is a myth. The British Bankers Association (BBA) has called Which? disingenuous, claiming that "Charges can be avoided completely simply by not going overdrawn". 

Let’s put to one side for the moment the massive fees and sky high interest that borrowers are charged. The point the BBA hopes to blind us to is that they also take money from savers. Banks lend out money deposited by savers. Banks pay interest to the saver that is a tiny fraction of the interest they take by lending the savers' money to borrowers. Banks keep that difference - called the "net credit interest" - when they should be paying much more to the savers.

An Office of Fair Trading report in 2009 showed that banks took £4billion in "net credit interest":

“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”

These figures were for 2006, since when interest paid to us on our deposits has fallen further, and the cost of our loans has risen. The staggering size of this rip-off can be seen from these figures from the Bank of England.

Let's say you are £1,000 in credit, and the bank pays you 0.5% interest. In one year you will get £5.

The bank lends your £1,000 to someone with an overdraft, charging them 15% interest. The bank takes £150 by lending your money to this person.

The bank gets to keep £145 of the interest earned by lending out your money, and gives you £5. 

The banks are effectively charging you 96% of the money earned by lending out your money.

If an estate agent rents out the flat you invested in, they may take 15% commission. When banks 'rent out' your money you have saved, they can take 96% commission!

And they claim personal current accounts are free! The scoundrels!!

Read More

Liebrary - Banking is free? OFT report shows even excluding penalty charges banks take £billions for holding our money

Which?, the consumer campaigner, has claimed free "free banking" is a myth. The British Bankers Association (BBA) has called Which? disingenuous, claiming that "Charges can be avoided completely simply by not going overdrawn". 

Let’s put to one side for the moment the massive fees and sky high interest that borrowers are charged. The point the BBA hopes to blind us to is that they also take money from savers. Banks lend out money deposited by savers. Banks pay interest to the saver that is a tiny fraction of the interest they take by lending the savers' money to borrowers. Banks keep that difference - called the "net credit interest" - when they should be paying much more to the savers.

An Office of Fair Trading report in 2009 showed that banks took £4billion in "net credit interest":

“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”

These figures were for 2006, since when interest paid to us on our deposits has fallen further, and the cost of our loans has risen. The staggering size of this rip-off can be seen from these figures from the Bank of England.

Let's say you are £1,000 in credit, and the bank pays you 0.5% interest. In one year you will get £5.

The bank lends your £1,000 to someone with an overdraft, charging them 15% interest. The bank takes £150 by lending your money to this person.

The bank gets to keep £145 of the interest earned by lending out your money, and gives you £5. 

The banks are effectively charging you 96% of the money earned by lending out your money.

If an estate agent rents out the flat you invested in, they may take 15% commission. When banks 'rent out' your money you have saved, they can take 96% commission!

And they claim personal current accounts are free! The scoundrels!!

Read More

Liebrary - Train fare price increases capped? Oh no they're not...

If you thought the inflation linked RPI + 3% is the worst fare increase you face in January, you’d be wrong (in a bad way). 

The media has already pointed out that this formula only provides the average increase. The real upper limit is an additional 5% - i.e. RPI + 3% + 5% = RPI + 8%.

But even that is only the half of it. Other ways rail companies can increase their income include:

a)      The fares cap only applies to ‘regulated fares’. Unregulated fares, which can go up by any amount, include

– all first class fares;

– all ‘advance purchase’ fares;

– tickets (other than Travelcards) which include through travel to destinations served by bus services, light rail services or London Underground;

– tickets which include a non-rail element such as entrance to a museum, theme park or other attraction;

b)      Changing the time of ‘off-peak’ travel is not controlled by regulation. In 2010 the Daily Telegraph reported some fares had quadrupled overnight!:

Some fares have effectively quadrupled overnight after the extension of what are classed as peak hours for travel. A survey found more than 180 services a week have been rescheduled by South West Trains and Virgin Trains alone…..On Virgin services an additional 75 trains have been redesignated as a result of extending peak hours by 35 minutes in the morning and 28 minutes in the afternoon. It means, for example, Virgin's 0915 from London Euston to Manchester, returning at 0855 the next day, which would have cost £66 last year will now cost £262.

c)      The constituents of the fares baskets were defined in 2003, and re-weighted in 2010. Any fare that didn’t exist in 2003 is unregulated, which perhaps explains the number of ‘new offers’ that were born since then. The following is from a 2012 Department of Transport consultation:

“the definition of each fares basket continues to be that established in 2003 following the last fares review.  From time to time operators may introduce new fares to cater for a new demand for travel e.g. an increase in commuting from a particular station, or travel to a new shopping centre. It would not be practical to re-define their fares basket each time this happened, so any new fares remain unregulated, at least until the next re-definition of the baskets.”

Extract from Department for Transport “Rail Fare and Ticketing Review” published in March 2012. 

d)      For regulated fares, the formula sets a maximum increase for each year. If a train operator does not use the maximum one year then it is permitted to use the extra ‘headroom’ in the next year.  So when George Osborne found £290m to keep the 2012 increases at RPI + 1% instead of RPI + 3%, could it be that the other 2% became ‘headroom’ to be applied later (if you know, please tell us)?

“Operators do not have to increase their fares by the maximum permissible amount in any given year, and some choose not to do so, leaving the actual value of their fares basket below the maximum level permitted by the cap in that year. This gap between the actual value of the basket and the maximum permitted by regulation is usually called ‘headroom’. The following year, such an operator can use up this headroom as well”

http://www.rail-reg.gov.uk/upload/pdf/sra-fares-conclusions-2003.pdf 

It is also the case that train companies have gained a huge revenue boost as the  number of passenger journeys has soared by 35% since the ‘fares baskets’ were defined in 2003. All credit to the companies for winning more customers, but it dents their arguments for fare increases. We will cover this in more detail with a separate post in the next few days – but just as a taster:

The Office of Rail Regulation statistics show that since 2004 the number of timetabled kilometres run by the trains has increased by only 15%, while the increase in the number of kilometres travelled by passengers has increased by 36% and passenger revenue has increased by 74%. 

Small increase in train kilometres and large increase in passenger kilometres must be achieved by packing them in tighter. 

Figures from the Department for Transport show nearly 20%, one in five, of peak time commuters into London don’t have seats! In my experience, travelling in to London Bridge and Victoria, it's far worse than that!

Read More

Phone shop staff misleading customers over ‘fixed’ mobile phone contracts

Guest post by Which? the consumer rights campaigner. Consumer mystery shopping carried out by Which? shows sales staff giving inaccurate information about the possibility of price increases.

 

Do you think fixed mobile contracts should be at a fixed price? Pledge your support at www.which.co.uk/fixed

New undercover research carried out by Which? revealed that the vast majority (82 %) of staff in mobile phone shops we visited gave incorrect information about potential price rises on ‘fixed’ phone contracts at the point of sale.

Astonishingly, 82% of shop assistants maintained that the price was fixed even when asked if it would stay the same throughout the length of the contract. All shop assistants, when prompted, claimed that the features will stay the same throughout the contract.

Which? recently launched the ‘Fixed Means Fixed’ campaign, which has already received almost 20,000 pledges of support from consumers, calling on phone companies to ensure that the price, and all aspects of fixed deals, remain the same for the full length of mobile phone contracts.

In the past year, four out of the five main phone operators have taken advantage of a hidden clause that allows them to increase prices on contracts that appear to be ‘fixed’, a practice potentially netting the industry up to £90m in a year.

Which? executive director, Richard Lloyd, says:

"It's totally unacceptable that people aren’t being told the full story about potential price rises when signing up to contracts in mobile phone shops. Shockingly, even when we asked directly about price increases, the vast majority of staff denied this could happen."


"There should be no nasty surprises after signing a mobile contract. People must be confident that fixed really does mean fixed."

Which? research found that 70% of people on fixed contracts did not know that mobile phone companies could increase prices during the length of their contract. Recent price rises by mobile phone operators:

• Vodafone: 11 Oct 2011 - rounded up contracts to nearest 50p; doubled out of bundle internet rates
• Orange: 8 Jan 2012 - 4.34% price rise
• T-Mobile: 9 May 2012 - 3.7% price rise
• Three: 16 July 2012 - 3.6% price rise

Mystery shopping was conducted by Which? in July 2012, in 39 phone shops in the Midlands, North West, South, North East, South East. The shops were from the five biggest network providers – O2, Orange, Three, T-Mobile and Vodafone – as well as the two biggest independent chains, Phones4U and Carphone Warehouse. Sample conversations between mystery shoppers and shop assistants:

Mystery Shopper: Will it stay that way for 2 years? 
Assistant: ‘Everything will stay exactly the same the whole two years’ (when pressed on whether the price is fixed) ‘Yes, It’s fully guaranteed’.

Mystery Shopper said they’d seen news about some of providers putting their prices up. 
Assistant: (looked confused) ‘We’d never do that!’

Assistant: ‘We legally can’t [raise the price] because you sign up for that contract for 24 months’

Assistant: the contract should give ‘total peace of mind’ because the price can ‘never change’.

The Which? Fixed Means Fixed campaign is calling on operators to advertise upfront the possibility of price rises and, if prices do increase, to allow people to switch contracts without penalty. Which? has also complained to the regulator, Ofcom.

Do you think fixed mobile contracts should be at a fixed price? Pledge your support at www.which.co.uk/fixed

Read More

Rip-off News round-up. Our pick of the last week's media (Thu 16th August)

Thousands of rail passengers to be hit by 10 PER CENT increase on season tickets 
The government's rules allow train companies to raise prices 3% above the Retail Price Index (RPI) for July, estimated to be 2.7%, giving average fare increases of 5.7%. But the increase does not have to be "per ticket": glaring loopholes in the rules allow higher increases on some (i.e. popular) routes so long as smaller increases are made on other (i.e. not busy) routes. DAILY MAIL

The Bank of England governor urges bankers to learn from the selfless dedication of Team GB athletes and Olympics volunteers

In a humiliating rebuke Sir Mervyn King said: ‘As recent scandals have shown, banks could learn a thing or two about fair play from the Olympic movement. Again the financial sector has done us all a disservice in promoting the belief that massive financial compensation is necessary to motivate individuals.’ DAILY MAIL
("We have nothing to learn from them. The banking sector regularly wins more gongs, knighthoods and peerages than the whole of Team GB put together," puffed and wheezed one particularly fat cat.)

New Barclays chairman says all the mis-selling to consumers and businesses was "the consequence of not charging for bank accounts"
But critics say Sir David Walker is mistaken if he thinks charging for bank accounts mean bankers won't try other scams. Sir David is seen as a banking industry grandee. He has worked variously at the UK Treasury, the International Monetary Fund, the Bank of England and a host of commercial banks. TELEGRAPH

(..."but it is my time as chairman and chief executive of cloud cuckoo land that I remember most fondly and made me the man I am today," said Sir David.)

Claim by banks that banking is free is ridiculous, says Which?

"It is a complete myth that banking is free. Consumers pay over £9bn a year in fees and lost interest on their current accounts and the suggestion that if banks charged more they would stop mis-selling is completely ridiculous," said Richard Lloyd, Which? executive director. BBC NEWS

Forgotten your tax return? You'll be fined £1,200 this week
Half a million ordinary taxpayers will receive fines of at least £1,200 from HMRC this week. This could raise £600m for HMRC. People can appeal against it if they think they have a reasonable excuse for not sending in their tax return, such as a family illness or bereavement. TELEGRAPH
(Other reasonable excuses include "My wife lives in Monaco" and "I am Vodafone.")

Payday loan firm, MCO Capital, shut down because it chased victims of identify theft to repay the cash
Fraudsters impersonated more than 7,000 people and stole £1.5m from MCO Capital, which traded as Help Loan. This happened within a month of the launch of the business. Nevertheless, MCO Capital chased the innocent victims for the money. BBC NEWS
("Off to a bad start, we stuck to what we do best. Chasing innocent victims for money," said a spokesperson for the company)

National Audit Office accounts reveal government support for the banks reached £1.2 TRILLION at its peak
In March 2012, the total outstanding support stood at £228 billion, down from the total a year before of £456 billion and a peak of £1.2 trillion. The amount continues to vary according to how vulnerable banks are to collapse as market conditions change. NATIONAL AUDIT OFFICE

Google says it would pay more tax in UK if it was legally required to do so
Google's Executive Chairman Eric Schmidt blamed the Government's weak tax laws for the fact it paid just £8m corporation tax despite making more than £6bn in revenues in Britain in the six years to 2010. "If Britain changes its tax laws, we will pay taxes in accordance with those laws. I can't be clearer than that," he said. He justified Google's tax avoidance by pointing out that companies have a legal obligation to minimise tax and maximise shareholder return. "To go back to shareholders and say 'We looked at 200 countries but felt sorry for those British people so we want to [pay them more]' . . . there is probably some law against doing that," he said. TELEGRAPH

Standard Chartered pays £217m out-of-court settlement over Iran money laundering allegations
Weeks after the bank robustly denied the allegations, they agree to pay a fine. They therefore avoid another public dressing-down by the US regulators. Barclays has already been fined for similar breaches, and HSBC is under investigation. DAILY MAIL
("But no one goes to jail. Once again it's one rule for the banks and another for the rest of us," said the Mafia)

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Build more affordable homes, reverse the property bubble, and we'll save billions

Today's guest post is by Toby Lloyd, Head of Policy at the housing and homelessness charity Shelter. It explains how we can cut the £22bn spent on housing benefit. The main reason why it's that high is because of the high cost of rent caused by this country's housing bubble. If we build more homes we'll bring down the overall cost of housing, and therefore bring down the housing benefit spend. We already know we can afford to build more houses: that £22bn housing benefit spend is around twenty times more than we currently spend on building affordable homes. We'd actually end up saving money.

So why is the government pumping a further £80bn into loans, including mortgages, which will keep the housing market overpriced?

Housing charity Shelter says "Let's spend less on housing"?!

By Toby Lloyd, Head of Policy, Shelter

The news has been worryingly free of house price stories of late, forcing some papers to fill pages with minor distractions like the Olympics, Leveson and the great summer weather.

Thankfully the IMF has come to the rescue of editors everywhere, with its annual report on the UK economy suggesting that house prices still need to fall by 10-15% now-ish – and by up to 30% to get back to trend.

Inevitably, the response from some quarters will be for the Government to do something, which always comes with a price tag.

With budgets everywhere being slashed, you don’t get many charities calling for their patch to be cut. We tend to make the case for why our bit should be spared the axe.

But I reckon we should be spending far less than we currently do on housing ourselves as a nation.

Firstly, there’s the fact that we spend £22 billion a year on housing benefit – about twenty times what we spend on building affordable homes. As we’ve argued before, this is a ridiculous state of affairs – but you won’t fix it by cutting housing benefit for those who have the temerity to be unable to afford sky-high private rents.

You fix it by ensuring more people don’t need benefit just to keep a roof over their heads, which means building more affordable homes, and by making the homes we already have more affordable.

Calling for more public investment into home building runs straight into the arguments about whether more public borrowing is a good idea (it’s cheap right now, there’s lots of spare capacity and unemployment) or economic and political suicide (there’s a public debt crisis out there, polling shows the public support deficit reduction).

So the consensus seems to be that we need more private investment – and more private borrowing. On 5 July there was a further £50bn of quantitative easing, then a few weeks later the new Funding for Lending scheme was launched, promising to pump £80bn of credit into loans, including mortgages. And this is where it gets worrying.

What both sides of the debt debate ignore is the fact that private debt is still astronomically high. More borrowing for productive enterprise – i.e. to create real growth – may be needed, but mortgage borrowing doesn’t do this. As this natty animation below shows, most of it goes into inflating the price of existing homes – ensuring that all those rentysomething wannabe first time buyers remain priced out for good, unless of course they have family rich and generous enough to help them. Do we really want to go back to a model of property ownership based strictly on inheritance rather than earning? The cunning plan to pump more credit into mortgages seems more orientated to promoting a new house price boom than stimulating economic growth.

When our housing costs are already the third highest in Europe, why should we want to make it worse?

 The IMF report also shows that UK household debt is the highest in the G7 at over 100% of GDP – and the vast bulk of that is mortgages. As the IMF pointed out in April, the countries that are suffering the worst recessions are those that built up lots of household debt though housing bubbles. The new report includes some truly scary graphics on p23 of the role of the housing market in our current economic woes.

So there you have it: we need to spend much less on buying homes in future – not only would this enable us to spend the money on growth-fuelling investment, it might even allow us to buy, rent and build more homes without busting the bank, literally.

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