Liebrary: PFI saves us virtually nothing, if you believe the NAO’s figures. If you believe the Commons Treasury Committee, it costs us a vast amount that nobody has yet quantified

Private Finance Initiatives (PFI) were first used by the Conservatives in 1992, were enthusiastically embraced by Labour when they came into power in 1997, and continue to be cuddled and kissed by the coalition government of 2010. PFI involves the government entering into contracts with the private sector, where public infrastructure (hospitals, schools etc) are handed to the private sector for development and management and effectively rented back. A report by the National Audit Office (NAO) helpfully explains this:

"The private finance initiative (PFI) is a way to finance and provide public sector infrastructure and capital equipment projects. Under a PFI contract, a public sector authority pays a private contractor an annual fee, the ‘unitary charge’ for the provision and maintenance of a building or other asset. The unitary charge may also cover services such as cleaning, catering and security in relation to the asset."

Government ministers of all odour promised better services and greater savings from PFI. The reality, stated in a House of Commons Treasury Committee report in 2011 is very different:

"Private finance has always been more expensive than government borrowing, but since the financial crisis the difference between the costs has widened significantly. The cost of capital for a typical PFI project is currently over 8%—double the long term government gilt rate of approximately 4%. The difference in finance costs means that PFI projects are significantly more expensive to fund over the life of a project. This represents a significant cost to taxpayers."

The same Treasury Committee report complained that analyses justifying PFI contracts made unjustifiable assumptions without which the contracts would never have been signed. These included:

• Understating the internal rate of return (IRR), i.e. the profit the private sector partner would extract.
• Overstating the cost of the government simply borrowing money to pay for capital investment, instead of paying rent to a private sector partner
• Underestimating the whole life cost of the contract.
• Overestimating the cost of keeping the work in the public sector
• etc. etc.

A seperate inquiry into PFI in 2011 by the Commons Public Accounts Committee heard that private companies do not only profit from government payments, but also from selling shares in the subsidiary companies they create to run the contracts. The evidence stated that while construction companies took an average 1.5% profit on their normal operations, they typically made 50% profit on selling stakes in the PFI companies they created to build and run public infrastructure:

MAJOR SELLERS OF PFI EQUITY IN UK BETWEEN 1998-2010 (BASED ON TABLE 5)

Company	No. of PFI projects	Sale value (£m)	Profit (£m)	%
Carillion plc	24	278.8	114.1	40.9%
John Laing	22	170.3	100.6	59.1%
Interserve plc	15	70.3	37.9	53.9%
Lend Lease Corporation	11	14.7	11.5	78.2%
Costain Group plc	8	37.1	16.2	42.9%
Serco Group plc	7	79.9	16.0	20.0%
Balfour Beatty plc	5	37.8	27.0	71.4%
Kajima Partnerships	6	30.2	18.0	59.6%
Kier Group plc	4	26.1	14.7	56.3%

Source: ESSU PPP Equity Database, 2011

Putting aside bumper profits the private sector made by selling PFI companies, Tory and Labour governments alike promised great operational efficiency and savings. A report by the National Audit Office shows this never happened. The biggest users of PFI were the Department of Health and the Department of Education:

Overall, the NAO reported remaining charges to be paid by the government departments on these contracts at £206.5 billion, and total savings at £1.6 billion = less than 1% saving.

The report commented on the Department of Health and the Department of Education thus:

The total reported signed savings of £174 million on health projects (including those reported prior to the start of the savings initiative) amounts to just one quarter of 1 per cent of the remaining unitary charge payments for operational PFI contracts in the health sector, which stands at over £69 billion.

 The total reported signed savings of £5 million on education projects (including those reported prior to the start of the savings initiative) amounts to just twohundredths of 1 per cent of the remaining unitary charge for operational contracts in the education sector, which stands at over £24 billion.

Significant savings were reported by the Foreign Office, who entered into just 2 PFI contracts, and HM Treasury who entered into just 1.

Savings obtained by the Department of Health are pretty pathetic. But they are ten times more than the Department of Education. The Department of Education is obliged to pay £24 billion on Private Finance Initiative contracts in the expectation of £2million of savings. A percentage so tiny it makes no mark at all on the above graph.

Even these "savings" are dodgy. As the Treasury Committee inquiry heard, the justifications for PFI involved exaggerating the costs of keeping contracts within the public sector. If the true public sector costs were used it is a matter for speculation how much of the 'savings' would disappear and reappear as 'losses'. 

On the other hand, with private companies expecting a return of 10% or more, we can be pretty certain that PFI put at least £2,400 million of profit into private sector bank accounts.

It seems that private initiatives, whether outsourcing or capital investment projects, do little more than put public money into private pockets.

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U-turn: Osborne will, after all, cap the cost of payday loans. What’s made him change his mind?

Fee and Chris explain it all to KJ...

SOURCE GUARDIAN: U-turn: cap on Payday loans unveiled by George Osborne
Announcing a major and politically significant U-turn, George Osborne said the cap on the overall cost of credit was the next logical step as the coalition sought to regulate what had been a wholly unregulated market. The timing of the U-turn led observers to conclude that politics as much as policy had driven the decision. Both the government and the regulator the Financial Conduct Authority (FCA) had been resisting the move despite strong pressure from Labour and individual Tory MPs eager for their party to be doing more to be seen on the side of hardworking people. Only last month, the FCA said there was no need for a cap and the issue had been referred to the Competition Commission for further discussion.

SOURCE SPECTATOR: Budget 2013: Six Scary GraphsThe Chancellor started by saying the debt would plateau by the 2015 election. But debt is up 38 per cent under the coalition so far, and is set to double.

OUR RELATED STORIES:

Graphs at a glance: Government wants you to think we made a profit on sale of Lloyds Bank shares. Actually we made a thumping loss!

Graphs at a glance: see which government departments spend more than half their total staffing budget on consultants: it's outsourcing in all but name

Graphs at a glance: how cuts have slashed the number of available hospital beds since 1987

Graphs at a glance: How we are being conned about the cost of pensions

Read More

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

Energy row erupts as winter deaths spiral 29% to a four year high of 31,000

Campaigners say Government should be "ashamed" as official figures reveal thousands of over 75 year-olds perished in Britain during the coldest winter for nearly 50 years. Dot Gibson, national secretary of the National Pensioners Convention, said "How can colder Scandinavian countries avoid this annual toll while we simply wring our hands?” Ed Matthew of the Energy Bill Revolution campaign group said it was mystifying that Germany could "retro fit" a quarter of a million homes a year while in the UK only 219 homes had been insulated under the Government's 'Green Deal'. The figures came a day after Ofgem, the energy industry regulator, said profits at residential supply arms of the Big Six energy suppliers leapt 75% last year after a near 20% increase in gas and electricity prices. TELEGRAPH

Hospital A&Es swamped by 500,000 elderly diverted from failing community care services

Half a million elderly people a year are being unnecessarily admitted to hospital as emergency patients because of stark failings in community care, an official Government report has warned. Almost one in 10 over 75s had been taken to hospital with avoidable conditions – a rise of over 20 per cent in just five years. The conditions include malnutrition, pressure sores and urinary tract infections. The findings suggested that some GPs, care homes and community health services were failing to treat vulnerable people “in the way they deserve”. Inspectors found safety concerns in one in five nursing homes. Problems included failing to give out medicines safely, not carrying out risk assessments and understaffing. The report also identified a link between high staff turnover and number of reported deaths of residents. INDEPENDENT

U-turn: cap on Payday loans unveiled by George Osborne

Announcing a major and politically significant U-turn, George Osborne said the cap on the overall cost of credit was the next logical step as the coalition sought to regulate what had been a wholly unregulated market. The timing of the U-turn led observers to conclude that politics as much as policy had driven the decision. Both the government and the regulator the Financial Conduct Authority (FCA) had been resisting the move despite strong pressure from Labour and individual Tory MPs eager for their party to be doing more to be seen on the side of hardworking people. Only last month, the FCA said there was no need for a cap and the issue had been referred to the Competition Commission for further discussion. GUARDIAN

Half-blind woman crippled with back pain killed herself after benefits bosses stopped her disability payments - following a TWO MINUTE assessment

Despite being in almost constant agony, Jacqueline Harris, 53, was told she was told fit for work in November 2012 following a Government health assessment. Widow Ms Harris was only able to walk with the aid of sticks after she suffered slipped discs in her back and neck. Her sister Christine Norman says arthritic Ms Harris was asked just one question in the 'lightning-speed assessment', carried out by private firm Atos Healthcare. Mrs Norman said they asked her one question: "Did you get here by bus?" Jacqueline replied with one fateful word - "yes". Her assessment lasted just two minutes. In January her benefits were stopped. But Ms Harris had contested the ruling and her first appeal against the decision failed.  A second Department for Work and Pensions tribunal hearing in Cardiff was due to take place on November 15. However, Ms Harris was found dead at her home on November 2, having taken a suspected overdose. DAILY MAIL

One in five struggle with serious debt

Almost nine million people in the UK are in serious debt and in some areas, such as as Liverpool and Nottingham, over 40% of adults are struggling to pay their bills. Almost 9 million people are in serious debt. The survey of 5,000 people showed in some areas of the UK, including Kingston-upon-Hull, Nottingham, Manchester, Knowsley and Liverpool, over 40% of adults are struggling to pay for basic goods. Earlier this month the Centre for Social Justice, a think tank founded by Iain Duncan Smith, the Work and Pensions Secretary, warned household debt has doubled in the last decade as rising numbers of families fall into a borrowing “trap”. British households now owe an average of £54,000, an increase from £29,000 a decade ago. It found more than 5,000 people are being made homeless each year because of rent or mortgage debts. The rising cost of energy bills was also among the factors contributing to increasing debt among poorer households. TELEGRAPH

RBS accused of pushing small businesses to the edge to boost profits

City regulators have been handed a dossier of evidence compiled by an adviser to Vince Cable, the business secretary, which claims that Royal Bank of Scotland was deliberately wrecking viable small businesses to make profits for the bailed out bank. Cable – a long-time critic of the banking industry's lending practices – said some of the allegations were so serious that he had handed the report, compiled by businessman Lawrence Tomlinson, to the regulators and the bank. The report also calls for RBS and Lloyds Banking Group to be broken up into six banks with a 10% market share to foster competition on the high street. GUARDIAN

Student unions condemn government sale of loans for £160m

The government has sold a student loans book (i.e. the student debts of a large group of students) with a face value of £890m for just £160m, angering student union groups. A consortium called Erudio Student Loans bought the book of mortgage style loans which were taken out by around 250,000 students between 1990 and 1998. Toni Pearce, the NUS president, said the sale effectively meant the public is subsidising a private company to profit from government debt. She added: "The impact of this sale won't only affect borrowers, but will affect everybody. The simple fact is that having these loans on the public books would be better off for the government in the long run. Selling off the loan book at a discount to secure a cash lump sum now doesn't make economic sense." GUARDIAN

Buy-to-let landlords' profits artificially boosted by 'upper middle-class perk' of tax breaks that cost us £5bn a year

The long-standing ability to offset mortgage interest payments and wear and tear against income tax bills on rent, combined with the loopholes that allow many to avoid paying capital gains tax, have been branded an ‘upper middle-class perk’ by an Intergenerational Foundation report. Ed Howker, of the campaign group, said: ‘Britain has spent more than a decade encouraging a form of housing investment that builds very few new homes, rinses the taxman, raises the cost of housing and prices-out first-time buyers.’ The situation is doubly unfair, according to the report’s authors, as much of the benefits from buy-to-let tax breaks go to an older, wealthier generation that has already reaped large gains from high house price inflation. DAILY MAIL

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Graphs at a glance: the regional impact of excessive debt

In November 2013 The Money Advice Service, set up by the UK government, released a report on the debt burden. The report states:

Across the UK approximately 8.8 million people are over-indebted. These are individuals who have been at least three months behind with their bills in the last six months or have said that they feel their debts are a heavy burden. This large and diverse group represents 18% of the UK adult population

Most startling is the concentration of debt stress in certain cities and certain regions. In areas more than 4 in 10 people (more than 40% of the local population) are over-indebted.

Money Advice Service

It may also be surprising that only 1 in 5 (20%) of over-indebted people are those dependent on benefits. The great majority are working people earning salaries.

Money Advice Service

It is said that a drowning man will grab at any straw. "Austerity" is the straw our government enthusiastically waves like a cheer-leader's baton because it is not their own voters who are drowning.

Money Advice Service

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RBS accused of making money by forcing small and medium-sized businesses into bankruptcy

SOURCE GUARDIAN: RBS accused of pushing small businesses to the edge to boost profitsCity regulators have been handed a dossier of evidence compiled by an adviser to Vince Cable which claims that Royal Bank of Scotland was deliberately wrecking viable small businesses to make profits for the bailed out bank. Cable, the business secretary – a long-time critic of the banking industry's lending practices – said some of the allegations were so serious that he had handed the report, compiled by businessman Lawrence Tomlinson, to the regulators and the bank.

OUR RELATED STORIES:

Interest Rate Swap mis-selling to small businesses: See how the banks have hijacked the compensation procedures

Did Royal Bank of Scotland seize assets of small business debtors and sell them, well below true value, to its subsidiary?

Graphs at a glance: Government wants you to think we made a profit on sale of Lloyds Bank shares. Actually we made a thumping loss!

Graphs at a glance: How re-mortgaging covered up the theft of Britain's growing wealth in the boom, and helped cause the bust

Liebrary: Do we have to maintain exorbitant pay for bankers because everybody else does? See the data that shows we've been suckered

Graphs at a glance: Legal usury in the high street. How high street banks push people into the hands of payday lenders

Graphs at a glance - banker remuneration per head is now even higher than before the banker induced Credit Crisis

Read More

Graphs at a glance - Who do MPs represent? What did they do before becoming MPs?

In an earlier post we published graphs showing the unrepresentative number of private school and Oxbridge types among our MPs. One could argue that going to private school and Oxbridge is largely an accident of birth. Your parents need to be able to afford the fees to get into private school, and that gives you a great advantage getting into Oxbridge (UK students from private schools (6% of all students) make up 42.5% of undergraduates at Oxford and 36.7% at Cambridge). 

On the other hand, what you choose to do for a living is down to you.

According to a Parliamentary report, there has been a great leap forward in the number of "political organisers" (local politicians and other political creatures) becoming MPs. At the same time there has been precisely equivalent collapse in the number of people the report classes as 'manual workers'. 

Former "political organisers" now outnumber those coming from other professions as follows:

• 10 times more political organisers than doctors
• 3.7 times more political organisers than school teachers
• 2.8 times more political organisers than manual workers

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Liebrary: Does Government "Help To Buy" help house buyers on modest incomes get 95% mortgages? Shelter, the housing charity, reveals that people on average incomes can't actually afford repayments on 95% mortgages.

The Conservative led government's "Help To Buy" provides £12 billion of guarantees allowing people to buy houses with just a 5% deposit. This government guarantee enables them to take out a 95% mortgage. 
We pointed out in an earlier post that this subsidy is available to people buying homes for up to £600,000 - i.e. not aimed at those on modest incomes, nor at first-time-buyers.

We were scolded by some, who said that while £600,000 was the upper limit the subsidy was also available for those on modest and low incomes aspiring to less than a 4 bedroom detached house in Surrey. 

Shelter's "Homes for Forgotten Families" report

A report by the housing charity "Shelter", released in August 2013 shows this is actually not the case.

Their report shows that in almost three quarters of England families on an average (median) income could not afford the repayments on a 90% mortgage (let alone a 95% "Help To Buy" mortgage) for an average 3 bedroom home in their area.

Shelter's "Homes for Forgotten Families" report

Shelter's "Homes for Forgotten Families" report

"Help To Buy" is available to everybody, but useless to most average people. For them the "Help To Buy" scheme is about as much use as the government handing out free ski passes for Verbier (a Swiss ski resort). No point having a free ski-pass if you can't afford to fly there, stay there, and hire some skis.

Rather like the multitude of tax avoidance loopholes the governments past and present provide: they are available to everyone of us, but only accessible to a very few.

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Tory leak says the prime minister is going round Number 10 saying: 'We have got to get rid of all this green crap!'

SOURCE GUARDIAN: No 10 pours cold water on claim David Cameron wants to 'get rid of green crap'Downing Street has said it does not recognise reports that David Cameron ordered aides to "get rid of all the green crap" from energy bills in a drive to bring down costs. According the Sun, the prime minister used the direct language to dismiss green levies, which go towards paying for renewables and helping the poor cut their usage. He has already promised to roll back green costs, which currently make up £112 of the average bill, over concerns about the record energy prices. owning Street denied the "vague" report, saying they did not recognise the language when asked about the phrase "green crap". However, they did not appear to deny the sentiment, pointing out Cameron has repeatedly promised to roll back to green taxes.

OUR RELATED STORIES:

Energy firms say the wholesale gas price rise is the cause of our bills being hiked yet again? OFGEM pricing data reveals this cannot be true

See how the Big Six energy firms' price hike tactics make switching futile

What Miliband and Cameron surely know already: how the energy firms hide their profits

Read More

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

Government admits fiddling figures to hide failings of fit for work test

Work and Pensions Select Committee member Sheila Gilmore MP has today revealed that the number of sick and disabled people wrongly declared ‘Fit for Work’ by a Government benefits test could be far higher than previously thought. This followed a letter from Tory Work and Pensions Minister Esther McVey in which she admitted figures are ‘not clear’ and promised to ‘ensure greater clarity in future’. Gilmore said: “Up to now we thought that the assessment was getting about one in ten fit for work decisions wrong – far too many in most people’s eyes – but now we know the Government have been fiddling the figures, the reality could be much much worse.” SHEILA GILMORE MP

Top Executive pay rises by 14% as awards linked to shares soar

FTSE 100 executive pay increased by 14% last year to £2.1m.  Companies are accused deflecting public scrutiny of directors' spiralling pay by moderating rises in the well known and more widely quoted salary and bonus figures, but quietly increasing share-based awards. While basic salaries rose 4.1% and annual bonuses fell by 8.8%, the total pay package for an average FTSE 100 director rose sharply by 14% through a 58% surge in the value of long-term incentive plan (LTIP) awards being cashed in. Latest labour market statistics show average UK annual wage increases of 0.7%. Frances O'Grady, TUC general secretary, responded: "The time has come for legislation to put ordinary workers on the pay committees of companies. This is the only way to bring some sanity to the way in which directors are paid." GUARDIAN

Boris Johnson says super-rich are ‘put-upon minority’ like homeless people and Irish travellers

Mr Johnson accused “everyone from the Archbishop of Canterbury to Nick Clegg” of bullying the group he defined as “zillionaires” – and said the most rich of all should receive “automatic knighthoods”. INDEPENDENT TELEGRAPH

JP Morgan Chase agrees record $13bn settlement in the US over toxic mortgages, and opens door to criminal prosecutions

The fine in the US, the biggest civil settlement with any single company, ends several investigations and lawsuits brought by the US authorities related to the sale of home loan bonds between 2005 and 2008. Crucially, and unlike settlements and fines in the UK, the bank’s admission of wrongdoing is a major victory for the US Justice Department. Banks have fought shy of such statements fearing yet more legal actions from investors. The settlement leaves open the possibility of potential criminal charges. While this agreement ends a troubled chapter for the bank, other issues remain. A criminal investigation of the bank over mortgages will continue. The bank is also under scrutiny for its hiring practices in China, its massive “London Whale” trading losses and its relationship with Bernie Madoff, the Ponzi scheme fraudster. GUARDIAN

Which? report exposes the big banks using premium rate customer service lines

They included HSBC, Lloyds Bank, Nationwide and TSB Bank, credit card providers American Express, Capital One and Tesco Bank and insurers Aviva, Churchill and Direct Line. Which? called on the Financial Conduct Authority (FCA) to act to stop banks using them. The EU Consumer Rights Directive will ban the use of expensive numbers for customer helplines from next year but financial companies are excluded. A British Bankers Association spokesman responded: "All banks are actively looking at how they can reduce costs for customers. We expect to see many banks changing to use local numbers for complaints in the near future.” BBC NEWS

Half of recent UK graduates stuck in non-graduate jobs, says ONS

The percentage of recent graduates working in jobs which do not require a degree has risen sharply to 47% from 39% before the 2007/8 financial crisis. John Philpott, director of The Jobs Economist consultancy, added a further warning: "The public sector is by far our biggest employer of graduate skills but is currently in the process of major job downsizing. College students expecting investment in higher education to pay them a decent career dividend must therefore hope that our private sector businesses become far more skills intensive in the coming years." GUARDIAN

Ministers reject G4S offer to pay back £24.1m in “phantom billing” prisoner tagging scandal

The Ministry of Justice has rejected an offer of £24.1m from G4S which the security firm says it owes after over-charging for the tagging of offenders. It comes after an audit suggested the firm had been charging to tag criminals who were either dead or already in jail. In July, the Ministry of Justice (MoJ) revealed that G4S and a second security company, Serco, had overcharged the government by "tens of millions of pounds" on their electronic tagging contracts. The investigation by the Serious Fraud Office into G4S and Serco continues, and both firms have said they are "co-operating fully". G4S CEO Ashley Almanza told MPs on the Public Accounts Committee: "It was a judgment that was flawed. It was just a flawed judgment... I don't think we did correctly tell the difference between right and wrong. We got it wrong." BBC NEWS

A FIFTH of UK households feel the pinch as numbers struggling to make ends meet soars 30% in a year

The number of households that they are struggling to make ends meet each month has risen by more than 800,000 compared to a year ago, research shows. The soaring cost of living has left an estimated 3.5m households without enough income to cover all their bills every month - a rise of 30% from 2.7m last year, according to a report from Legal & General. The figure is now equivalent to almost a fifth (18%) of all households compared to one in 8 just a year ago, adding weight to claims that Britain is facing a cost of living crisis despite the recovery in economic growth. A report yesterday from financial information firm Markit claimed four times as many families, 29%, said their finances had deteriorated during November compared with the seven per cent who have seen an improvement. DAILY MAIL

Two inquiries launched into Co-op Bank and ex-chairman Paul Flowers

The prime minister described Flowers as the "man who has broken a bank" following questions about his financial competence, drug-taking and resignation as a Bradford councillor over adult material on his computer. Effectively, the inquiry will be another look into a discredited supervisory system headed by the now defunct Financial Services Authority (FSA). The Co-op Bank's merger with Britannia in 2009 and taking on its bad property loans was blamed in part for the £1.5bn capital shortfall revealed at the bank earlier this year. GUARDIAN

Royal Mail float: paying bankers “success” fees would be 'mad', MP says

The government would be "mad" to pay more than £4m of deferred fees to the banks (including Goldman Sachs and UBS) that advised on Royal Mail's privatisation because they undervalued the company, said Adrian Bailey, who chairs the Business, Innovation and Skills (BIS) Select Committee. He added that paying the fees, on top of more than £12m already handed over, would reward highly paid bankers who set the float price too low at the expense of the taxpayer. The government sold 60% of Royal Mail at 330p a share last month, valuing the company at £3.3bn. But the shares leapt 38% on their first day of trading and closed on Wednesday at 550p, giving Royal Mail a market value of £5.5bn. GUARDIAN

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At the lavish annual Lord Mayor's Banquet, Cameron says Britain needs cuts. Permanently

SOURCE GUARDIAN DAILY MAIL: Has Cameron just admitted Austerity is a cover for permanent cuts?
David Cameron said, in his speech at the Lord Mayor's Banquet, that the government is to forge a "leaner, more efficient state" on a permanent basis. He signalled he had no intention of resuming spending once the structural deficit has been eliminated. This is a clear change to claims made after the last general election. In his New Year's message issued on 31 December 2010, he said: "I didn't come into politics to make cuts. Neither did Nick Clegg. But in the end politics is about national interest, not personal political agendas. We're tackling the deficit because we have to – not out of some ideological zeal. This is a government led by people with a practical desire to sort out this country's problems, not by ideology." 

OUR RELATED STORIES:

Graphs at a glance: Government wants you to think we made a profit on sale of Lloyds Bank shares. Actually we made a thumping loss!

Graphs at a glance: see which government departments spend more than half their total staffing budget on consultants: it's outsourcing in all but name

Graphs at a glance: how cuts have slashed the number of available hospital beds since 1987

Graphs at a glance: How we are being conned about the cost of pensions

Liebrary: Do tax deals with tax havens deal with tax dodging? Here's how the UK's hoped for £3.2billion tax haul from the UK- Switzerland deal disappeared

Read More

Graphs at a glance - Who does Parliament actually represent?

As we watch the government make our lives harder with cuts in pay, pensions, benefits, the creation of 'two tier' services and generally soaring inequality we tend to forget that it is we who put them there. They are not our rulers, they are our representatives.

Rulers rule in their own interests. They hold their power and wealth by force of law and arms. The spoon belongs to them, and they ladle out goodies to whom they wish.

Representatives in a democracy rule in the interests of those they represent. They hold their power because we give it to them in elections. The spoon belongs to us, and we trust them to ladle out goodies in all our interests.

Inevitably, whether it is Ruler or Representative holding the ladle, it is the closest people who get served most generously and those furthest away who get the dregs.

We provide some graphs using data from a House of Commons report to show who is closest to our representatives in Parliament. Perhaps they provide a clue why successive Tory and Labour governments have steered Britain back to Victorian levels of inequality:

a) According to Department of Education data, just 1% of England's school leavers in 2009/10 went to Oxbridge, compared to a quarter of MPs. 48% of England's school leavers did not go to university at all.

b) 6% of children are privately educated. In contrast, over half the Tory MPs and over a third of all MPs from the three main parties went to private schools.

c) As Margaret Thatcher said, "Advisers are there to advise, Ministers are there to decide". For all the hundreds of MPs in Parliament, it is the twenty or so people in the Cabinet who actually decide policy. Historically UK cabinets have been dominated by Oxbridge:

Sir John Major, a non-Oxbridge non-University former Conservative Prime Minister,  condemned the "truly schocking dominance of the privileged". He fumed that "Britain is run by a privately educated elite", the effects of which have been evident for decades.

We have previously written about the rocketing share of treasure going to the top 1% and the plummeting share going to the 90%. A phenomenon that has never happened faster in recent times than under the last Labour government. The wages of 90% of Britons has stagnated for decades.

http://g-mond.parisschoolofeconomics.eu/topincomes/

Our representatives in Parliament have been put there to represent us. It is hard to have true compassion for people you have never known. Most of our parliamentarians have never known people like most of us. 

We need our representatives to be more representative.

Remember we have the power to put them there, and throw them out. Sadly in our democracy we are constrained in who we can vote for. Candidates are selected by local constituency parties who are easily swayed by shallow polish and charm. Perhaps it is time to introduce USA style 'Primaries', where ordinary Britons would get a chance to choose the candidates.

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On election, Cameron said the cuts were temporary, and not ideological. Now he’s saying they’re permanent, and ideological

Chris meets an enthusiastic supporter of the lean state...

SOURCE GUARDIAN DAILY MAIL: Has Cameron just admitted Austerity is a cover for permanent cuts?
David Cameron said, in his speech at the Lord Mayor's Banquet, that the government is to forge a "leaner, more efficient state" on a permanent basis. He signalled he had no intention of resuming spending once the structural deficit has been eliminated. This is a clear change to claims made after the last general election. In his New Year's message issued on 31 December 2010, he said: "I didn't come into politics to make cuts. Neither did Nick Clegg. But in the end politics is about national interest, not personal political agendas. We're tackling the deficit because we have to – not out of some ideological zeal. This is a government led by people with a practical desire to sort out this country's problems, not by ideology." 

OUR RELATED STORIES:

Graphs at a glance: Government wants you to think we made a profit on sale of Lloyds Bank shares. Actually we made a thumping loss!

Graphs at a glance: see which government departments spend more than half their total staffing budget on consultants: it's outsourcing in all but name

Graphs at a glance: how cuts have slashed the number of available hospital beds since 1987

Graphs at a glance: How we are being conned about the cost of pensions

Liebrary: Do tax deals with tax havens deal with tax dodging? Here's how the UK's hoped for £3.2billion tax haul from the UK- Switzerland deal disappeared

Read More

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

Has Cameron just admitted Austerity is a cover for permanent cuts?

David Cameron said, in his speech at the Lord Mayor's Banquet, that the government is to forge a "leaner, more efficient state" on a permanent basis. He signalled he had no intention of resuming spending once the structural deficit has been eliminated. This is a clear change to claims made after the last general election. In his New Year's message issued on 31 December 2010, he said: "I didn't come into politics to make cuts. Neither did Nick Clegg. But in the end politics is about national interest, not personal political agendas. We're tackling the deficit because we have to – not out of some ideological zeal. This is a government led by people with a practical desire to sort out this country's problems, not by ideology." GUARDIAN DAILY MAIL

Energy customers are not “cash cows”, says Energy Secretary

Lib Dem Energy Secretary Ed Davey said: "Profits cannot come at the expense of the elderly, the vulnerable, and the poorest in our society. Customers are not just cash cows to be squeezed in the pursuit of a higher return for shareholders." He asked the energy firms to open their books to prove they were not just profiteering. But industry body Energy UK complained that a "tit-for-tat Punch and Judy show of insults" was developing. BBC NEWS

UKFI (responsible for our stake in the bailed-out banks) refuses to cut bonuses at RBS and Lloyds

Robin Budenberg, chairman of UKFI, told the Treasury Select Committee that the proposed reductions were not ‘commercially acceptable’ and had stepped in to limit the cuts. RBS and Lloyds were bailed out with £66billion of taxpayers’ money and are now part-owned by the taxpayer. Pay curbs at RBS and Lloyds have limited cash bonuses to a maximum of £2,000. But many have still received handsome share bonuses and long-term performance-related payouts. Last year 95 RBS staff were paid at least £1million, despite the bank slumping to a £5.2billion loss. The equivalent figure at Lloyds was 25. DAILY MAIL

Benefit caps and housing shortage push families from London

Figures show 129% rise in number of families housed by London boroughs outside capital, more than double the same period last year. Figures for the 12 months to June 2013 showed that 789 households were placed in 69 local authority areas outside London, including Manchester, Bedfordshire and Hastings. GUARDIAN

HSBC abolishes £25 fee for bounced transactions.

HSBC is to abolish its "most complained about" banking fee – the £25 charge it makes for bouncing a direct debit or cheque. A £25 fee will still be applied if HSBC agrees to pay a bill, such as a direct debit to the gas or electricity company, that takes the customer beyond their agreed overdraft limit; the fee that is being axed is the £25 for stopping a payment going through, leaving the bill or cheque unpaid. HSBC said their customers "could understand being charged a fee for processing a transaction that had gone through, but not a charge for something that hadn't." Lloyds currently charges the highest rate, at £35 for each "unpaid transaction fee", while NatWest charges £6 and Barclays £8. GUARDIAN

No rest until 2030: Energy and water bills will keep soaring for 17 years

The National Audit Office predicts that the average household energy bill will rise by 66 per cent – from £1,290 this year to £2,135 by 2030. The NAO blamed the price rises on the Government’s decision to load two-thirds of the £310bn cost of infrastructure projects needed to maintain energy and water supplies on to customers’ bills rather than fund them through taxation. The NAO said the investment projects are needed but criticised the Government for not coming clean about the impact on bills. It expressed concern that the poorest families would not be able to cope with the rising cost of energy and water. Some 8 per cent of average household spending now goes on energy and water, but for those in the bottom 10 per cent of the income scale, the proportion is 15 per cent, said the NAO. INDEPENDENT

Unite launches credit union scheme to take on 'rip-off' payday lenders

Credit unions have received a major boost from Britain's biggest trade union. Unite is partnering with a selection of credit unions in a bid to take on "rip-off" payday lenders and give its members access to affordable finance and savings products. Credit unions are co-operatives owned and controlled by their members that distribute their profits in the form of dividends, which means the money stays in the community rather than going to shareholders. GUARDIAN

Barclays' Sir Hector Sants resigns citing stress

Sants’ employment by Barclays was controversial because he had just finished his term as the head of the bank regulator, the FSA. During his time there the FSA failed to anticipate the global banking crisis, and was therefore considered complicit in poor regulation and bank misbehaviour. On his resignation, Barclays said: "Hector Sants has been on sick leave since the beginning of October, suffering from stress and exhaustion. He has concluded that he will not be able to return to work in the near term. Consequently he has decided to resign from Barclays and not return from sick leave." Sir Hector's role at Barclays was to take responsibility for ensuring the bank's 140,000 staff obey the law in the 50-plus countries in which it operates. BBC NEWS

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Bedroom Tax: Cuts to the Spare Room Subsidy (might!) save £470m. But the new Help To Buy subsidy costs £12bn. That means it’s not about cutting the deficit

SOURCE INDEPENDENT: Bedroom tax: Families trapped with nowhere to move face penalty for having spare room

The policy means that tenants have their housing benefit reduced by 14 per cent if they have one spare bedroom, and 25 per cent if they have two or more spare bedrooms. Yet more than 19 out of 20 families hit by the bedroom tax are trapped in their larger homes because there is nowhere smaller within the local social housing stock to take them.

SOURCE BBC NEWS: Strong start for Help to Buy, say lendersTwo major lenders have reported a strong uptake in the first month of the government's extended Help to Buy mortgage guarantee scheme. But critics are concerned it could help to create a UK housing bubble.

OUR RELATED STORIES:

Graphs at a glance: Government's "Help To Buy" won't help those struggling to buy a house. But it will help people with rich parents

Graphs at a glance: See how the government caps benefits for the poor but subsidises "affordable housing" for people on £80k

Bureau of Investigative Journalism reveals scale of UK housing crisis

Liebrary: "If it isn't hurting, it isn't working". How Austerity works for the few by hurting the many

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

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The Home Office's GREAT Club helps top foreign business executives avoid...what exactly?

In November 2013 the Home Office launched a GREAT Club. Yes, the capitals in GREAT and C are appropriate - the name of the club is "GREAT Club", as you will see from the Home Office press release below. Clearly the Home Office has access to some really great minds to think up a great name like that. Or have they mispelled GREET, as in greeting visitors to the UK? Or perhaps GREED, as in greedy (see hypothesis below)?.

Anyway, the birth of the GREAT Club was proclaimed in a Home Office press release is:

"the launch of the GREAT Club, an invitation only service providing top business executives with bespoke support from UK Visas and Immigration (UKVI). The Club will start in the New Year as a 12 month pilot aimed at around 100 global business leaders who use the visa service and have strong links to the UK. They will be provided with an account manager to ensure their journey through the visa and immigration service is swift and smooth. The account manager will also be able to arrange visa services tailored to each individual’s needs at no extra cost during the pilot."

Now I suppose the immigration process can be frustrating. But you can be pretty sure that the 100 "top business executives" invited to join the GREAT Club will be well served by their own Personal Assistants, and their Personal Assistants' Personal Assistants (when you get to be PA to a truly top executive you don't have to make your own coffee) to lap up all the tedium and frustration of the visa application process. The Home Secretary won't be finding prospective members to invite into her exclusive GREAT Club sitting on their suitcases in Heathrow.

The reason top business executives shift their businesses to the UK has little to do with how easily they themselves can pass through immigration. It is not to avoid the inconvenience of getting a stamp in their own passports that they hesitate from relocating. However, there are other things they may be more keen on avoiding that may lure them to our shores.

And here we are persuaded to show some sympathy for tax accountants. This is not without precedent - Ripped-off Britons has already been nice to estate agents and to bankers. Now we consider the plight of the tax accountant.

The poor things are getting beaten up by MPs for helping their clients through dodgy-but-legal loopholes. And then they are getting beaten up and severly fined by a High Court Judge for not helping their clients through dodgy-but-legal-at-the-time loopholes.

First, here's the sort of beating they get from MPs from a session of the Public Accounts Committee (PAC) of the UK Parliament looking into tax avoidance schemes. In this session MPs questioned Aidan James, a director of a tax consultancy advising those who want to avoid tax:

Q103 Ian Swales: How many of the schemes you have marketed are now illegal?

Aiden James: Most of them.

Ian Swales: Most of them?

Aiden James: All of them, I suspect.

Q104 Ian Swales: All the schemes you have marketed are now illegal, so you are now looking for the next loophole-is that a fair description of your business?

Aiden James: That is how it works, yes.


.....
Q110 Stephen Barclay: The model, if I am understanding correctly, Mr James, is that most of the schemes that you introduce get closed down within a relatively short period of time.

Aiden James: Yes.

Q111 Stephen Barclay: So then you aggressively target a client base and get as many as you can through in a short period of time on the basis that HMRC cannot pass retrospective legislation. Therefore, your clients will get a tax window where they can reduce their tax until HMRC wake up and close that scheme down, by which time you have moved the game on to the next scheme. Is that a fair summation?

Aiden James: I would agree with all that you said apart from "aggressively market". 

Then, having been hounded thus by the legislators from Parliament, a member of the tax planning fraternity was penalised by the High Court for not helping his client through dodgy-but-legal-at-the-time loopholes. In this case the judge condemned a tax accountant who "erred by failing to advise the Claimant to take the advice of a non-dom specialist".

The High Court judgement, made in June 2013, related to the following:

In October 2004 the condemned accountant in this case had failed to advise his client to consult a tax expert specialising in devious "non-domicile" loopholes. The loophole in question was the Bearer Warrant Scheme (BWS). Available only to non-doms (such as members of the GREAT Club), this scheme involves exchanging shares for bearer warrants, sending the warrants overseas, and selling them there where a non-dom would not be liable for Capital Gains Tax. A clearer description is available in this article by Mike Ward. This "Bearer Warrant Scheme" was blocked by a change in the law in March 2005. Had the accountant referred the client to the non-dom specialist in October 2004, the client would have been able to slip through the loophole before March 2005 when it was made illegal. Instead, the client tried another avoidance scheme - a Capital Redemption Plan sold by the tax planners Montpellier - which was later declared invalid.

For this transgression the Court imposed the following penalties, being monies the accountant would have to pay his client:

        a. £763,658.00 in respect of CGT that he has had to pay after giving credit for the sums that he would have had to pay if he had embarked on BWP [the other tax avoidance scheme that was legal at the time];

        b. The outstanding balance of the cost of entry to the Montpelier scheme of £180,000;

        c. A sum in respect of interest charged by HMRC including the cost of borrowing money to buy tax certificates; and

        d. Interest where appropriate.

Perhaps this judgement will one day be overturned on appeal (it hadn't been at the time of writing this post, but please let us know if it is). But at least it shows willing!

Tax avoidance is possible because of loopholes in the law. The Office of Tax Simplification identified over 1,000 'exemptions' that have been explicitly placed in UK tax law, and form the backbone of the multi-billion pound avoidance industry. Perhaps the Home Office's GREAT Club will have this list of exemptions as part of their WELCOME Pack?

Tax advisors are berated by lawmakers (i.e. our MPs)  because they help their clients slip through these loopholes put in the law by our MPs. If the tax advisor fails to help clients through the loopholes, then the Law lands on them like a ton of bricks.

In the words of Mr.Bumble, tax law is an ass. A very deliberately designed ass.

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