Is it time to stop bashing bankers? Continuing revelations of "cringeworthy behaviour" suggest not.

Is it time to stop bashing bankers? Have the crooks already been biffed out of the ring? Are we just hindering the new saintly bankers? As they clean up after the few bad apples who spoiled it for everyone else?
Of course not. And in saying this we are in good company:

Even the Governor of the Bank of England no longer believes in the "few bad apples" theory of rotten bankers. In November 2014 the Governor, Mark Carney, said:

"The succession of [banking] scandals means it is simply untenable now to argue that the problem is one of a few bad apples. The issue is with the barrels in which they are stored."

The Bank of England tweeted Carney's sentiments to its 120,000 or so Twitter followers to make sure as many as possible heard. Here it is, so you can retweet it too:

#FinancialStabilityBoard’s Carney says untenable to argue that problem is a few bad apples. It is the barrels in which they are stored
— Bank of England (@bankofengland) November 17, 2014

The Treasury minister responsible for the City of London said in July 2014:

"I think there's quite a long way to go to really change the culture.... I think we are still going to see a lot of cringeworthy announcements."

A report on "The Culture of British Retail Banking" in November 2014 by the Cass Business School and the think tank New City Agenda (founded by cross-party luminaries) stated banking suffers from:

"A toxic culture decades in the making [that] will take a generation to clean up."

This same report refers to an ethics study done in June 2013, several years after the banking crash, showing the big retails banks still swimming in a red sea of bad ethics.

The report helpfully provides a catalogue of scandals, starting when the banks started to crumble in 2007, that shows no sign of abating:

 

 

 

 

We end the list with "et cetera" because the report was written before the £2.6 billion in fines for FOREX rigging were imposed in November 2014.  

Doubtless there are more skeletons waiting to emerge from the banks' vaults. For example, the banks are still in denial about the destruction of small and medium businesses by the Interest Rate Swaps scam. Though thanks to pressure from the Bully Banks organisation and reportage including television documentaries by the BBC's Panorama and Channel 4 News and others it is likely the banks will be brought to account.

Sadly even the highly critical "Culture of British Retail Banking" report we referred to above has a dangerous seed of delusion in it, stating:

"The good news is that banks have made a positive start. The ‘tone from the top’ is there. But this alone is not enough. There needs to be a sustained focus on driving change down through all levels of the organization."

The "tone from the top is there"!? Really? Do they really think there is an officer class of saintly bankers struggling bravely against a host of sinning lower ranking staff? Certainly it would be easier for the authorities to believe they have put "decent people" in charge, so the authorities can sit back and relax. However even if the people at the top now weren't at the top during the worst banking excesses, they were certainly at the next level down. Promoted over decades of banking rip-offs, up through the ranks for being really good at all those banking rip-offs.

Their presence was made felt when in 2014 RBS was reported to have paid bankers in its Global Restructuring Group (GRG), accused of profiting by killing off UK businesses, £17million in bonuses. £17million for activities RBS bosses tried to smoke-screen when raised by Parliament's Treasury Select Committee. Resulting in a letter of abject apology from the RBS Chairman when the RBS top bosses were caught out.

Bankers' dodgy behaviour is driven by excessive pay. Does anybody with power want to do anything about pay? The banks themselves don't: the Parliamentary Commission on Banking Standards report published in June 2013 stated average pay per head in 2012 was actually much higher than it was at the height of excessive pay in 2007 just before the crash:

Nor does the British Government, who fought long and hard against EU plans to cap bankers' bonuses, only giving up in November 2014. Holding the trough up to bankers' noses wouldn't go down so well with the voters in the 2015 General Election.

Willie Sutton

Why do crooks go to banks? Slick Willie Sutton, American bank robber, explained "because that's where the money is". As it was then, so it is now.

People will be crooks if the rewards are great enough. Deal with the rewards, and the crooks will deal with themselves.

Until that happens, it will be too soon to 'move on' from bashing bankers. 

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Potentially lethal food poisoning bacteria in 70% of supermarket chickens? That's not the big story...

Fee explains the real story to KJ...

SOURCE DAILY MAIL: Named and shamed: The supermarkets where up to 78% of fresh chickens are contaminated with potentially lethal food poisoning bacteria

The bug is responsible for an estimated 280,000 cases of food poisoning each year and as many as 100 deaths.  The study revealed that Asda was the worst performer, with a contamination rate of 78 per cent. More than one in ten of its packs – 12 per cent – carried the potentially lethal bug on the outside. The second highest contamination rate was for a group of smaller retailers including independent butchers and budget chains like Lidl, Aldi, Iceland and Budgens with a contamination rate of 76 per cent. The Co-op came next followed by Morrisons, Sainsbury’s, Waitrose, Marks & Spencer and Tesco. Earlier this year, retailers mounted a fierce lobbying campaign against the FSA survey. Specifically, they wanted to block the naming and shaming of stores because of the risk to sales and profits. Initially, they were successful after winning over ministers and officials in the Department of Health, DEFRA and even the Prime Minister’s office. However the FSA decided to publicly shame the stores following pressure from consumer groups, academics and the public. Critics have argued that the FSA and the Government have failed to ensure supermarkets sell safe food – with the commercial interests of stores, processors and farmers given greater priority than consumers’ health. The illness associated with the bug has enormous economic costs in terms of lost days at work and NHS treatment. Some estimates put this bill at £900million a year.

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Rip off News round-up. Our pick of the last week's media (Thu 27th November)

300,000 paid less than minimum wage. Yet in the past year, no companies were prosecuted

The Annual Survey of Hours and Earnings for the Office for National Statistics recently found that about 287,000 workers were paid at less than the minimum wage in 2012, although the TUC puts the figure closer to 350,000. But despite ministers’ claims that the government is getting tough on under-payers, the last successful criminal prosecution was in February 2013. That was one of only two prosecutions during the government’s entire term of office to date, according to figures given to parliament. The cases involved the imposition of fines to the value of £3,696 on an opticians in Manchester and £1,000 on a security company in London. Failing to pay the minimum wage was made a criminal offence in 2007. Under Labour, seven organisations were prosecuted, including Torbay council. HM Revenue and Customs (HMRC) said that only the most serious breaches of the national minimum wage are prosecuted. But because the average cost of a successful prosecution was around £50,000 HMRC believed it was preferable to focus on recouping wages for workers through civil penalty powers. HMRC conducted 1,455 investigations in 2013-14, securing over £4.6m in wage arrears for over 22,000 workers. The number of HMRC staff enforcing the minimum wage now stands at 194, which is 40 more than in 2009-10. GUARDIAN

Business organisation IoD attacks 'excessive' £25m pay deal for new head of BG Group (British Gas)

A proposed £25m pay package for the new head of oil and gas giant BG Group has been branded "excessive" and "inflammatory" by the Institute of Directors (IoD). Simon Walker, director general of the IoD, said Helge Lund's deal would damage the reputation of UK business. The IoD acknowledged its criticism was strong, coming from a body whose job is to promote the interests of UK firms. Speaking to the BBC, Walker said: "We think in any terms this £25m pay settlement is grossly excessive, it will inflame public sentiment , it will be a red rag to the critics of capitalism." He added that the timing of the deal, so close to a general election, could put executive pay on the political agenda. "It damages the reputation of British business as a whole to behave in this cavalier fashion, that has no regard for strongly held public sentiment... this is six months before a general election, in which you have an opposition that is already campaigning vigorously against big business." Mr Walker said the £25m sum was especially excessive given BG's size. Chief executives at the much-larger Royal Dutch Shell and BP have smaller pay packages. The IoD has raised eyebrows before with criticism of pay and bonus issues at Barclays and Sports Direct. But an IoD accepted that this BG criticism was its strongest yet of a major company. Some BG shareholders have also voiced concern about the size of the annual pay package being offered by the FTSE 100 company. The Investment Management Association, a body representing shareholders, issued a "red top" alert - a warning about potential corporate governance breaches. BBC NEWS

European Commission boss Juncker on defensive over Luxembourg tax deals, struck when he was PM

Jean-Claude Juncker’s fitness to head the EU’s executive for the next five years came under lacerating attack in the European parliament on Monday evening, with British, French and Italian far-right and populist leaders denouncing his record in facilitating massive corporate tax avoidance when  he was Prime Minister of Luxembourg for almost two decades. The details of Luxembourg’s record as a centre for tax avoidance came in leaks of more than 28,000 documents that revealed how the authorities, headed by Juncker, reached agreements with more than 300 global companies allowing them to minimise their liabilities.  But despite the damage to Juncker’s credibility the leaders of the biggest caucuses in the parliament, the Christian and social democrats, made plain that they supported him and sought to use the debate to turn their fire on the anti-EU far right. Meanwhile, Luc Dockendorf, a Luxembourg diplomat with the United Nations, emerged as one of the few figures within the Grand Duchy establishment to voice criticism of the country’s record on taxing multinationals. Writing in the Luxembourger Wort, a paper traditionally supportive of Juncker, he and Benoît Majerus, a historian at the University of Luxembourg, said: “We’ve been living at the expense of others. Not just other states, but other people, like ourselves, who have been paying their taxes, while corporations in their own countries have been dodging them. It is no longer possible to pretend that the Luxembourgish model has no negative consequences for other countries.” Gabi Zimmer of Germany’s hard-left Die Linke pointed out that 22 of 28 EU countries operated tax avoidance schemes similar to Luxembourg’s, if not on the same scale. But she blamed the commission chief for encouraging the practices: “It’s the Juncker system, that’s the problem.” GUARDIAN

MPs back opposition bill in attempt to limit NHS 'privatisation'

Under the bill, compulsory tendering for NHS contracts would end and NHS hospitals' income generated by private patients would be restricted. It would restore ultimate responsibility for the NHS to the health secretary, stop NHS hospitals earning up to 49% of their income from private patients, and would exempt the NHS from an EU-US trade treaty known as TTIP. Critics fear TTIP could lead to American companies suing future governments for reversing privatisation. Those who voted in favour of the bill included two Conservative and seven Lib Dem rebels. The bill also drew support from newly elected UKIP MP Mark Reckless, saying he had previously been "guilty of having believed the undertakings I was given by those on the government frontbench" about the NHS reforms. Although MPs backed it in a vote by 241 to 18, as a private member's bill – brought by Labour MP Clive Efford -  it has only a slim chance of becoming law. But shadow health secretary Andy Burnham promised that even if the bill did not become law, Labour would repeal the 2012 Act. BBC NEWS

Pensions hoodwink: New rules to help workers save for retirement will leave them worse off than they are told - by up to £90,500

Employees are being hoodwinked over the amount of money going into their workplace pensions because of the way the contributions are calculated – and as a result will retire on smaller sums than they expect. Under auto-enrolment, the flagship scheme launched two years ago by the Government to encourage nine million workers into saving for retirement for the first time, employees are routinely told that contributions worth 8 per cent of their annual pay will eventually be diverted into their savings pot. But what many savers fail to realise is that contributions are typically worked out on a specific band of their earnings, not their full pay. Chief executive of NOW Pensions, Morten Nilsson, says: ‘The 8 per cent contribution rate is regularly quoted but the reality is nobody will actually get a full 8 per cent – the most anyone gets is 6.9 per cent if they are exactly at the top of the earnings band, with somebody earning £10,000 only receiving a total contribution of 3.4 per cent, which is woefully inadequate.’ This method of calculation means an average earner on £27,000 a year will lose out on the benefit of up to £90,500 in pension contributions by the time they retire. DAILY MAIL

Credit card firms probed on fears they profit from keeping borrowers in debt and offering them credit they don't want

A probe into whether credit cards are being sold in a way which exploits people’s tendencies to take on too much debt is to be launched by the City regulator, the Financial Conduct Authority (FCA). A key concern of the FCA is that companies make excess profit from those who over-borrow and under-repay - meaning they remain in a level of debt that creates interest and other fees for the lender, but without making the repayments to clear the debt. Credit card firms must require borrowers make minimum repayments, but these are only set at a level to cover the interest and fees, plus 1 per cent of the balance. Repaying any debt at this rate would take more than eight years. A worry is that card firms target more of these customers so they can subsidise others for whom using a credit card is free because they repay borrowing in full each month. Another area of interest will be how credit cards are sold, and whether firms are made to compete on price. The FCA is concerned that even those who compare cards through price comparison websites do not really know the fees and interest rates charged because this is only confirmed once they have been accepted and offered the card, and is often different from the headline rate. Additionally, customers may search for a credit card for one purpose, for example to transfer an existing balance, but then be offered a card that could lead them into more debt. For example, if it included and period of interest-free purchases. The practice of offering a higher credit limit unsolicited to borrowers will also be looked at. The regulator said: 'We will look at whether credit cards are marketed and sold in a way that exploits or exacerbates consumer behavioural tendencies with respect to over-borrowing.' DAILY MAIL

Scotland 'should set own income tax', says Smith Commission. Tories, LibDems, Labour agree

The Scottish Parliament should have the power to set income tax rates and bands, the body on strengthening devolution has concluded. The Smith Commission also said a share of VAT should be assigned to the parliament, and Air Passenger Duty fully devolved. The commission was set up by Prime Minister David Cameron in the wake of the vote against Scottish independence. Its findings will form the basis of legislation on more Scottish powers. The UK government welcomed the report, but Scottish ministers said it fell short of what the nation needed to flourish. The Scottish government said any new powers were to be welcomed, but First Minister Nicola Sturgeon argued the Smith Commission package was ultimately disappointing because many powers, like the personal tax allowance, corporate taxation and child and working tax credits, would remain with Westminster. Speaking at Holyrood, she said: "70% of our taxes continue to be set at Westminster, 85% of social security controlled at Westminster - this parliament responsible for less than half of the money we will spend.” The Smith Commission recommendations are being backed by the three major parties. Shadow Scottish secretary Margaret Curran said the Smith report was, "a promise kept and an agreement delivered." BBC NEWS

Forcing small businesses out of business: RBS apologises for 'incorrect' evidence to MPs

RBS was facing allegations that its global restructuring group (GRG) forced customers out of business so it could buy their assets and make a profit. Giving evidence in June to the Treasury Committee, senior directors Derek Sach and Chris Sullivan denied it was run as a profit centre. However, in a July letter, Mr Sullivan admitted it was run in this way. In a letter to Andrew Tyrie MP (the treasury Committee chairman), written in August but released yesterday, RBS chairman Sir Philip Hampton wrote: "This lack of clarity on a very important point is very disappointing to the committee, as it is to me, and I apologise for it." The apology caps a difficult few days for RBS. On Friday, it said it had miscalculated the results of a stress test by the European Banking Authority. A day earlier, RBS was fined £56m for a 2012 IT failure. TELEGRAPH

Boycott Amazon over Christmas: campaign gathers momentum

The anti-Amazon campaign group Amazon Anonymous says that more than 2,000 people have pledged not to shop at the online retailer this Christmas, just one day after it launched its latest drive. “They don’t pay their workers a living wage,” claim Amazon Anonymous in their appeal to join the Amazon-free challenge, which launched on Tuesday. “They dodge their tax. They take money away from our local shops. So this year, let’s take our money away from them.” The campaigners are asking supporters to avoid shopping at Amazon from 1-25 December, because “Christmas is Amazon’s busiest time of year – and it’s also our best chance to disrupt their business”. The retailer paid £4.2m in tax last year on sales worth £4.3bn, a situation described as an outrage by Margaret Hodge, chair of the public accounts committee. Amazon Anonymous previously gathered more than 65,000 signatories to a petition calling on Amazon to “deliver the living wage in 2014”, at the time set at £7.65 an hour outside London. Amazon has said on its website that “in the UK, permanent associates start at a minimum of £7.10 per hour increasing to a median of £8.00 per hour after 24 months”. Amazon Anonymous also launched a dummy book on Amazon’s own site protesting about the company’s treatment of its workers. GUARDIAN

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Graphs at a glance: Will fracking bring cheap energy to Britain? The evidence suggest not.

There has been a lot of talk about fracking the UK. Our government is so keen it has considered changing the law on trespass to make it easier for companies to frack under our properties. 

Would it be a good thing? Even if there is absolutely no risk bits of our green and pleasant land  may disappear down multiple sinkholes?


The graph below from a parliamentary report, "The Impact of Shale Gas on Energy Markets", shows how fracking caused the price of gas to plummet in the USA. Benchmark natural gas prices in the USA (Henry Hub) and the UK (National Base Point (NBP)) were about the same until the Americans got down to some serious fracking.


Cheap energy has evidently been a great boost to US industry. According to The Economist newspaper:

"European industry pays around three times as much for its gas as its American counterpart, and Japanese firms pay more than four times as much….. the International Energy Agency, a think-tank backed by energy-consuming rich countries, predicts that by 2015 America’s energy-intensive firms will have a cost advantage of 5-25% over rivals in other developed countries."

Would fracked gas provide a similar boost to British industry, where the price of energy is significantly higher than in France and Germany, which themselves are significantly higher than the US? The boss of the fracker Ineos, keen to get fracking, said:

“I don’t think the UK is in a great place for energy – nor for manufacturing … we are buying the most expensive electricity in Europe. Shale has the ability to change that,”

http://www.publications.parliament.uk/pa/cm201213/cmselect/cmenergy/785/785vw.pdf

Actually, probably not. A report for Parliament's Energy & Climate Change Committee stated:

"The large quantity of shale gas coming onto the US market, combined with an inability to export the gas has seen the US gas price reduce from around $12 to $3 per million British thermal units (Btu) in just a few years."

The key words here being "inability to export". For the US to export gas it has to liquify it so it can put it on a ship sailing to foreign ports. Add the sizeable cost of liquification and you don't have 'cheap gas' to sell to foreigners anymore. 

http://commons.wikimedia.org/wiki/File:LNGtanker.jpg

The difficulty to export creates a glut of gas bringing down the price in the US, benefiting US industry and domestic consumers.

Britain is not in the isolated position of our American friends. Lord Browne, former boss of BP and current chairman of another fracker, Cuadrilla, says fracking won't drop prices:

"We are part of a well connected European gas market and, unless it is a gigantic amount of gas [fracked in the UK], it is not going to have material impact on price,"

The map below shows the gas pipelines (purple lines) that move gas around Europe:

http://www.gie.eu.com/index.php/maps-data/system-development-map

So we would depend on our government forcing energy companies not to sell to the European market if we expect to reap the benefits of fracking the ground beneath our feet. Not much chance of that.

Fracking could bring great profits to the frackers. As for the rest of us, we are well and truly...

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Rip-off News round-up. Our pick of the last week's media (Thu 20th November)

Tuition fees: Three quarters of students won’t be able to pay off their debt

Student debt is now so high compared to average salaries that many graduates in respectable public sector professions will be unable to repay their fees even by the end of the 30-year repayment period, the Higher Education Commission warns. This funding "black hole" is forcing the Government to indirectly subsidise higher education writing off billions of pounds in student debt - even though the point of £9,000 a year fees was to make universities less reliant on the taxpayer. The commission, an independent body set up to monitor higher education, concludes that the current university fees system offers the “"worst of both worlds" to students, universities and the Government - and warns that some institutions are now at risk of "failure". According to the Institute for Fiscal Studies, the average student debt will be £44, 015 - higher even than the US. "The Commission fundamentally questions any system that charges higher education at a rate where the average graduate will not be able to pay it back... We are deeply concerned that the Government may have created a loan repayment system where, for example, a teacher is unable to secure a mortgage at age 35 because of the high level of monthly loan repayment." INDEPENDENT

Government dismisses study linking use of food banks to benefit cuts

The study was commissioned by the Church Of England, the Trussell Trust food bank network, Oxfam and Child Poverty Action Group. The study found that cuts and changes to Britain’s increasingly threadbare social security system are the most common triggers of the acute personal financial crises that drive people to use food banks. At least half of all food bank users are referred because they are waiting for benefits to be paid, because they have had benefits stopped for alleged breaches of jobcentre rules or because they have been hit by the bedroom tax or the removal of working tax credits, it finds. The study, the most extensive research of its kind yet carried out in the UK, directly challenges the government’s repeated insistence that there is no link between its welfare reforms and the huge increases in charity food aid. There are no official statistics on the use of food banks, but the Trussell Trust, which runs more than 400 food banks in the UK, says 913,138 people were given food parcels by its volunteers in 2013-14 – almost a threefold increase on the previous year, and likely to be a fraction of the total numbers of people experiencing food insecurity. The Department for Work and Pensions (DWP) dismissed the report, claiming the research was inconclusive. But the report was welcomed by Jeremy Lefroy, the Conservative MP for Stafford, who hosted its launch at the House of Commons on Wednesday. He said it was an important study that chimed with his experience as an MP in his surgery. GUARDIAN

US fast-food workers visit UK to show us how to protest against poverty wages

The US fast-food workers who protested in New York and 100 other US cities over the “poverty wages” paid by multinational burger chains are preparing their British counterparts to launch a similar direct action campaign in the UK. Two months after the wave of US strikes and demonstrations that saw hundreds of arrests, Flavia Cabral, a McDonald’s worker from New York City who earns $8 (£5.10) an hour, said she had come to the UK to “teach workers here how to rise up and fight”. Cabral is part of a band of US fast-food workers travelling to the UK, France, Argentina, Brazil, Japan, Denmark and the Philippines as part of plans to form a global alliance of fast-food workers and organise a day of coordinated international protest in April to demand that workers get paid a living wage. “To take on global companies, the protest needs to be global. We need to take to the streets, unite together and stand up. If you ask for a raise, the management are going to say we haven’t got any money,” Cabral said at the rally. “We have to unite. We have to make it global, then it is not just you asking [for a pay rise], it is everyone around the world – and they will have to listen.” The protest plans come as McDonald’s marks 40 years since opening its first UK store in Powis Street, Woolwich, on 13 November 1974. There are now 1,249 McDonald’s outlets in the UK. The company recently announced it would hire an extra 8,000 people, mostly on zero-hours contracts – taking the UK workforce to more than 100,000 for the first time. The firm admitted last year that 90% of workers are on zero-hours contracts. McDonald’s pays under-18s a minimum starting rate of £4.35 an hour, rising to £5.15 for those aged 18-20 and £6.51 an hour for those aged 21 and over. The UK’s hourly national minimum wage rates are respectively £3.79, £5.13 and £6.50. GUARDIAN

Premier League TV rights to be probed by Ofcom

Under the current deal competition between BSkyB and BT Sport, a new entrant, pushed the overall value of its TV deals at home and overseas to a record £5.5bn over three years. It was £191m in 1992. Ofcom’s probe follows a complaint from Virgin Media, which said more matches should be available for live broadcast. Ofcom said: "Virgin Media argues that the proportion of matches made available for live television broadcast under the current Premier League rights deals - at 41% - is lower than some other leading European leagues, where more matches are available for live television broadcast." Virgin argues that by effectively limiting the supply of matches the Premier League has inflated the price that broadcasters have to pay and that cost is then passed on to consumers. Tom Mockridge, Virgin Media's chief executive, said: "The fact remains that fans in the UK pay the highest prices in Europe to watch the least amount of football on TV.” BBC NEWS GUARDIAN

Private firms on course to net £9bn of NHS contracts

Analysis by the NHS Support Federation, an independent campaign group, reveals that profit-driven companies such as Bupa, Virgin Care and Care UK have so far won a total of 131 contracts worth a combined £2.6bn to provide NHS services since the Health and Social Care Act came into force in April 2013. They have won two out of three of the 195 contracts awarded by NHS bodies in England in the 19 months since that legislation dramatically extended the enforced tendering of services in the NHS. Those 131 contracts represent about half the value of the 195 deals that have been agreed. Researchers say that if the private sector continues its 50% win rate by value, it will earn a potential £6.6bn more of the £13bn of other contracts which have been advertised but not yet awarded. That would result in private firms earning £9.2bn as a direct result of the changes ushered in by then health secretary Andrew Lansley’s restructuring of the NHS, which a cabinet minister recently described as the coalition’s biggest mistake. The £18.3bn of services tendered include more than £1bn worth of contracts for elective surgery, diagnostics (£1.2bn), community care services (£1.9bn), musculo-skeletal care (£785m), ambulance and patient transport services (£583m) and pharmacy (£558m). Dr Mark Porter, chair of council at the British Medical Association, said the deepening privatisation exposed by the figures proved that ministers had not told the truth when they denied that Lansley’s shakeup would produce more of it in the NHS. The new figures underlining the rapidly increasing scale of NHS privatisation come just after it emerged that G4S and the arms manufacturer Lockheed Martin have shown an interest in bidding for a £1bn, 10-year NHS England contract to provide support services to local GP-led clinical commissioning groups. GUARDIAN

RBS faces new row over share bonanza for ex-chief Hester

The Mail on Sunday reveals today that Stephen Hester was handed £1 million in RBS shares in March this year as part of a long-term incentive plan, but RBS will also consider offering him almost £2 million worth of shares early in the new year. Hester was entitled to the three potential pay-outs under a long-term incentive plan agreed when he left in June of last year. The second will have to be decided early in 2015 and could be worth a further £1.9 million. A third payment could also come in 2016 worth another £800,000 at today’s share price. The bank is set to reduce its investment bank’s bonus pool as a result of the foreign exchange rigging, and it will release an accountability review later this year detailing what action it is taking on traders responsible. But politicians are likely to demand the clawbacks go all the way to the top. A report on the rigging scandal, compiled by City watchdog the Financial Conduct Authority, slammed RBS’s management for its failure to police its traders and stop them from manipulating foreign exchange rates. The regulator’s settlement with the bank – which is 79 per cent owned by the Government – covered failings from 2008 until October 2013. Hester joined in November 2008 and left in June 2013. DAILY MAIL

Private rental costs set to nearly double by 2040 while wages rise just 40% sending millions into poverty

The Joseph Rowntree Foundation said private rents could rise 89 per cent by 2040, but expected household income to rise by just 40 per cent. This could mean poverty rates among private renters in England rising from 43 per cent in 2008 to 53 per cent by 2040, according to the study. Focusing on the relationship between poverty and housing, the JRF said the UK’s housing system was changing, as private renting grew and social rents, at least in some parts of England, rose towards market levels. The report reads: ‘The ability of housing benefit to protect tenants from higher rents has already been reduced in response to rising cost pressures and this seems set to continue.” Real household income could rise on average to £45,500 a year by 2040 from 32,300 in 2008, according to the JRF. But the average price for renting a two-bedroom property could rise from £132 to £250 a week during the same period. DAILY MAIL

HSBC's private banking arm accused of tax fraud by Belgium

Belgian prosecutors allege that hundreds of clients - including diamond dealers in Antwerp - moved money to offshore tax havens with the help of the bank. They said it resulted in hundreds of millions of euros in lost tax revenue. In August, HSBC warned that the penalties in relation to such allegations "could be significant". In a statement, Belgian authorities accused HSBC of "having knowingly eased and promoted fiscal fraud by making offshore companies available to certain privileged clients". These companies, which are based in Panama and the Virgin Islands, exist for the sole purpose of tax evasion, they added. Over 1,000 taxpayers are alleged to have been involved in the fraud, which saw funds amounting to several billion dollars transferred out of Belgium since 2003. In October, Belgian police raided the homes of approximately 20 people with private bank accounts at HSBC's Swiss subsidiary, to gather evidence against the lender. Banks operating in Switzerland are bound by the European Union Savings Directive to counter cross-border tax evasion, by collecting information on the savings income foreign residents receive outside their resident state. BBC NEWS

MPs vote to end stiff rules that force their pub tenants to pay higher prices than non-tenants for their drinks

The amendment would affect the 20,800 of Britain's 48,000 pubs that are subject to beer "ties". Tenants of "tied" pubs pay lower rents than non-tied pubs, but higher prices for their beer and other drinks. Campaign for Real Ale (CAMRA) research found a pub company may charge £150 for an 11 gallon keg of Fosters, for example, compared with a wholesale price of £84. It welcomes the change. The Federation of Small Businesses said it was "a historic day for tied publicans" and would lead to a more open and competitive marketplace. But the British Beer and Pub Association (BBPA) said the move was "hugely damaging" and spoiled a practice that had done well for 400 years. A spokesman said that the tie model was the most popular model and allowed tenants and owners - pub companies and brewers - to share the risk. The association said that the Government's own research found that 1,400 pubs would close and 7,000 jobs would be lost if the tie model was abandoned. There are a further 7,500 pubs that are managed by pub companies and brewers, and almost 20,000 independents, according to the BBPA. The number of pubs has fallen by almost 13,000 since 2000. BBC NEWS

Christmas suffers from diminishing returns as festive fare gets smaller

Seasonal treats ranging from boxes of chocolates to packets of cheese crackers and bags of salted nuts have all shrunk, according to research carried out for the Observer by the price comparison website mysupermarket.com. Across a basket of 10 seasonal goodies – including Cadbury’s Roses, KP Dry Roasted Peanuts and Asda’s chocolate coins – every single item weighed less than it did this time last year. Even the Advent calendar we compared had lost weight. Yet, of eight items, only two had been reduced in price; one cost the same; and five had actually gone up, despite being smaller. On cost per unit, which is a more accurate measure of value as it shows how much you pay for 100g, all the products cost more this year. Manufacturers don’t want shoppers to notice that they are getting less for their money, so they have become particularly crafty at concealing their shrinking products. While some brands simply reduce the external size of the product and hope no one will notice, many others retain the same packaging but reduce what is inside it – or change the shape of the product. “Manufacturers will do things like give their product a more round and curvey shape to cut off the edges of chocolate bars, for example, or they will use a more concave-shaped bottom for bottles,” said Dr Dimitrios Tsivrikos, a psychologist at University College London (UCL). “There are a number of regulations and guides regarding retailers’ price practices, but none regulating the content of the product. Reducing product size is a form of invisible price increase.” At the same time many brands are now producing a wider range of different-sized boxes to introduce “size complexity” to further baffle shoppers. GUARDIAN

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Our sky high energy and food inflation hits the poorest hardest. Our rock bottom mortgages hardly benefit them at all

SOURCE GUARDIAN: 300,000 more people live in poverty than previously thought
The study by the Institute for Fiscal Studies (IFS) for the Joseph Rowntree Foundation said the government method for calculating absolute poverty – the number of people living below a breadline that rises each year in line with the cost of living – incorrectly assumed that all households faced the same inflation rate. But in the six years from early 2008 to early 2014, the cost of energy had risen by 67% and the cost of food by 32%. Over the same period the retail prices index – a measure of the cost of a basket of goods and services – had gone up by 22%. Therefore, the soaring prices for food and fuel over the past decade have had a bigger impact on struggling families who spend more of their budgets on staple goods. The IFS report said the poorest 20% of households spent 8% of their budgets on energy and 20% on food, while the richest 20% spent 4% on energy and 11% on food. In contrast, poorer households allocated 3% of their budgets to mortgage interest payments, which have fallen by 40% since 2008 due to the cut in official interest from 5% to 0.5%. Richer households spend 8% of their budgets on servicing home loans. As a result, the IFS concluded that since 2008-09 the annual inflation rate faced by the poorest 20% had been higher than it was for the richest 20% of households. That meant the official measure of absolute poverty understated the figure by 0.5% – or 300,000.

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Graphs at a glance: Who's afraid of the big bad bankers? Apparently, the regulator.

According to the Guardian newspaper between 2009 and 2013 banks paid £166 billion in fines and compensation for sins ranging from LIBOR fixing, to PPI mis-selling, to money laundering, to gold price fixing, et cetera. This figure doesn't include fines from 2014 onward including FOREX fixing et cetera.

According to the Office for National Statistics £136 billion was paid in bonuses to UK staff in the financial services sector between 2004 and 2013, when much of the dodgy dealing was being done.

Fines are paid by shareholders (for Lloyds and RBS that includes us taxpayers), but bonuses are paid to individual staff. Does the UK regulator require individual naughty bankers to hand back some of the bonuses they gained doing things that earned £166 billion in fines? We hope the next graph will make this clear:

After all the tough talk of 'clawing back' banker bonuses, what happened? The UK's financial watchdog the Prudential Regulation Authority (PRA) bravely decided clawback would only apply to bonus awards made from 1st January 2015! 

The PRA explained:

"many firms would not have the capacity to introduce such a requirement into existing employment contracts without employee consent and/or might be open to challenge for doing so. In order to ensure a consistent and even application of the clawback requirement across industry, the final rule requires the application of clawback only to awards made on or after 1 January 2015."

The PRA couldn't impose bonus clawbacks because the bankers didn't want to give the bonuses back.


The FCA's statement on "Tackling the root causes" of Forex rigging again shows its complete inability to tackle the root cause:

"The remediation programme will require firms to review their systems and controls and policies and procedures in relation to their spot FX business to ensure that they are of a sufficiently high standard to effectively manage the risks faced by the business."

In its analysis of 'root causes' the FCA does not mention bad bankers. Which sounds rather like advice for a failing school. It is right that schools must seek "systems and controls and policies and procedures" to understand and help the most wayward children rather than simply punish them with lines and detentions. Bankers are not children. The most wayward bankers do need lines (i.e. writing cheques to return their bonuses) and lengthy detentions (i.e. jail time).

If the UK authorities still think new "systems and controls and policies and procedures" will prevent the bankers behaving badly, they are wilfully mistaken.

The FCA's press release on its record £1.1 billion fines for FOREX rigging, imposed in November 2014, stated the punishment was for misbehaviour between 1 January 2008 and 15th October 2013:

"Between 1 January 2008 and 15 October 2013, ineffective controls at the Banks allowed G10 spot FX traders to put their Banks’ interests ahead of those of their clients, other market participants and the wider UK financial system. The Banks failed to manage obvious risks around confidentiality, conflicts of interest and trading conduct."

You will have noticed this particular period started AFTER the great banking crash, and continued for a year AFTER banks had been caught out with their LIBOR rigging shenanigans. Evidently there were no lessons learned, and no new systems, controls, policies nor procedures that made any difference.

The attitude of the excessively paid with respect to regulations and controls can be seen in this exchange about tax avoidance schemes between a tax consultant and MPs in a parliamentary committee:

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

Aiden James [tax consultant]: 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 [MP]: 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". 

So long as people are offered massive rewards with no real personal risk they will without a shadow of a doubt find a way to beat the "systems and controls and policies and procedures".

The solution:

• Reduce the reward: eliminate bumper pay.
• Increase the risk: go to jail.

The reality: George Osborne spent yet more taxpayer money paying for lawyers to fight the EU cap on, you guessed it, banker bonuses!

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Rip-off News round-up. Our pick of the last week's media (Thu 13th November)

300,000 more people live in poverty than previously thought

The study by the Institute for Fiscal Studies (IFS) for the Joseph Rowntree Foundation said the government method for calculating absolute poverty – the number of people living below a breadline that rises each year in line with the cost of living – incorrectly assumed that all households faced the same inflation rate. But in the six years from early 2008 to early 2014, the cost of energy had risen by 67% and the cost of food by 32%. Over the same period the retail prices index – a measure of the cost of a basket of goods and services – had gone up by 22%. Therefore, the soaring prices for food and fuel over the past decade have had a bigger impact on struggling families who spend more of their budgets on staple goods. The IFS report said the poorest 20% of households spent 8% of their budgets on energy and 20% on food, while the richest 20% spent 4% on energy and 11% on food. In contrast, poorer households allocated 3% of their budgets to mortgage interest payments, which have fallen by 40% since 2008 due to the cut in official interest from 5% to 0.5%. Richer households spend 8% of their budgets on servicing home loans. As a result, the IFS concluded that since 2008-09 the annual inflation rate faced by the poorest 20% had been higher than it was for the richest 20% of households. That meant the official measure of absolute poverty understated the figure by 0.5% – or 300,000. GUARDIAN

Six banks fined £2.6bn by regulators over manipulation of foreign exchange rates

HSBC, Royal Bank of Scotland, Swiss bank UBS and US banks JP Morgan Chase, Citibank and Bank of America have all been fined. A separate probe into Barclays is continuing. The fines were issued by the UK's Financial Conduct Authority (FCA) and two US regulators. FCA boss Martin Wheatley told the BBC: "This isn't the end of the story... The individuals themselves will face the consequences." Several senior traders at the banks have already been put on leave and the Serious Fraud Office is in the process of preparing potential criminal charges against those alleged to have masterminded the scheme. The fines follow a 13-month investigation by regulators into claims that the foreign exchange market - in which banks and other financial firms buy and sell currencies between one another - was being rigged. The massive market, in which $5.3 trillion worth of currencies are traded daily, dwarfs the stock and bond markets. About 40% of the world's dealing is estimated to go through trading rooms in London. The FCA said the "tight knit groups" formed by traders at the different banks had described themselves as "the 3 musketeers", "the A-team" and "1 team, 1 dream". However, Professor Mark Taylor, a former foreign exchange trader and now dean at Warwick Business School, said the fines were "relatively small beer for banks that regularly report billions of dollars in annual profit... The interesting thing is that there are no individuals named as yet, and no individual prosecutions. This is still a possibility and it will be interesting to see how that pans out. At the moment, it's really only the shareholders - which in the case of RBS means British taxpayers - who suffer from these fines." BBC NEWS

Greencore: Sandwich maker to hire from Hungary, despite government funding for UK job creation

Greencore, which makes 430m sandwiches a year for Marks & Spencer, Waitrose, Sainsbury’s, Tesco, Asda and others, said very few local people had applied for jobs at its new £30m Northampton factory so on Monday executives began a recruitment drive in Budapest, Hungary. This is despite Greencore, the UK’s biggest sandwich-maker, benefited from a slice of £107m in government funding designed to create more jobs for the people of Northamptonshire. The new recruits –sandwich makers, cleaners, porters and quality controllers – are being hired for Greencore’s new £30m factory, which is due to open in 2016. Its adverts say recruits will be required to work nights and weekends as the factory makes sandwiches round the clock. About 10% of the jobs will pay the minimum wage of £6.50 an hour for those aged 21 and over. Margot Parker, Ukip MEP for the east Midlands, said: “Why is Greencore recruiting 300 workers from Hungary to open a factory in Northampton, when 500 people in Corby lost jobs doing same job this year? ...It looks like a prime example of job displacement, facilitated by our membership of the EU and a company which wants the cheapest labour available. It is hard to justify saying there is lack of skilled people in the area when 500 workers just up the road doing the same job recently lost their jobs and are willing to work.” GUARDIAN

100,000 attend Brussels anti-austerity protest, ends in clashes

Belgian police used tear gas and water cannon against violent anti-austerity protesters in central Brussels after a largely peaceful march by about 100,000 workers. Several vehicles were set alight by protesters who also hurled stones and flares at police. About 50 people were hurt and 30 detained, officials said. Belgium's new government plans to raise the pension age, freeze wages and make public service cuts to meet EU targets. Thursday's march was one of Belgium's biggest labour demonstrations since World War Two. Steelworkers, dockers and teachers were among the thousands who took part, protesting against government austerity policies. The march marked the start of a month-long campaign by trade unions and is to be capped with a national strike on 15 December. The centre-right government of Prime Minister Charles Michel says the tough austerity measures are necessary to keep the budget deficit down. But Marie-Helene Ska, secretary general of the union CSC, said the government had to look elsewhere for the cash. "The government tells us and all of the parties tell us that there's no alternative. We don't contest that they have to find 11bn euros (£8.6bn; $13.6bn) but we've been saying for a long time that it's possible to find this money elsewhere, rather than in the pockets of the workers." BBC NEWS

Payday loan companies face 'annihilation' as tough new rules introduced

The Financial Conduct Authority (FCA) has announced fees will be restricted to £15 as well as an interest limit of 0.8 per cent a day on unpaid balances. The decision was initially unveiled in July, but it has been confirmed after a consultation period. Dr John Gathergood, of the Nottingham School of Economics, carried out the research that underpinned the FCA's landmark announcement. He predicted many would now go out of business, and said the moneylenders face "annihilation" if they do not change their ways. The £2.8 billion sector has come under intense scrutiny amid outrage over the way that some consumers have been treated. Many of the problems found by regulators have revolved around people taking on payday debt they cannot afford, meaning the loan is then rolled over and the original cost balloons. FCA chief executive Martin Wheatley said: "For people who struggle to repay, we believe the new rules will put an end to spiralling payday debts.” The moves have been welcomed by consumer groups, although the industry has raised concerns that the crackdown will limit choice for borrowers who will be forced to turn to loan sharks or lenders operating outside the UK. EXPRESS

Spread the Warmth: Age UK launches campaign, revealing one older person dies needlessly every seven minutes from the cold in winter

Age UK estimates that 1.7 million older people in the UK can’t afford to heat their homes, and over a third (36%) of older people in the UK say they live mainly in one room to save money. Cold weather adds to the financial worries of older people. 30% say they avoid heating rooms like the bedroom, bathroom or living room because they are worried about the cost. The UK has some of the worst levels of home energy efficiency in Europe, and other much colder countries have much lower death rates in winter than the UK because their homes are better insulated. With high quality insulation and modern technology, millions of UK homes could be made much warmer. And the Government could pay for this using the billions of pounds they already raise in carbon taxes. This would bring down bills, and above all, help millions of older people keep warm and healthy through the winter. AGE UK

CBI conference: Increase free childcare, cut taxes for the low paid, business leaders urge

The CBI said the slow pace of the UK's economic recovery had "hit people's finances hard", and "immediate help" from the government was needed. The CBI's director general, John Cridland, said the UK needed to "face up to some real long-term challenges" including greater competition from abroad, and changing demands for skills from industries. But he said shorter-term measures were needed alongside long-term plans to help low-paid households still struggling in the wake of the recession. He said: "To ease the pressure on families and people on low incomes, we want immediate action, including cutting employee National Insurance and making childcare more affordable." The average couple with two children saw their income fall by £2,132 a year in real terms between 2009-10 and 2012-13, the CBI says. CBI deputy director general Katja Hall told the BBC: "The package we have put out in the report is completely affordable within the next parliament". She added that the childcare proposals the CBI was making would cost £0.3bn. Also speaking at the CBI conference was the Archbishop of York, John Sentamu, who is chair of the Living Wage Commission. Dr Sentamu said that most businesses could afford to pay the Living Wage - which is calculated at £9.15 an hour in London and £7.85 outside. "It has become clear that the minimum wage (£6.50) is inadequate," he said. Dr Sentamu said that income inequality in Britain was dividing the country into have and have-nots, with people living in separate worlds. He told business leaders at the conference that "income inequality is a giant we must slay together". BBC NEWS

Luxembourg tax files: how tiny state rubber-stamped tax avoidance on an industrial scale

An unprecedented international investigation into tax deals struck with Luxembourg has uncovered the multi-billion dollar tax secrets of some of the world’s largest multinational corporations. A cache of almost 28,000 pages of leaked tax agreements, returns and other sensitive papers relating to over 1,000 businesses paints a damning picture of an EU state which is quietly rubber-stamping tax avoidance on an industrial scale. The documents show that major companies — including drugs group Shire, City trading firm Icap and vacuum cleaner firm Dyson, who are headquartered in the UK or Ireland — have used complex webs of internal loans and interest payments which have slashed the companies’ tax bills. These arrangements, signed off by the Grand Duchy, are perfectly legal. The documents also show how some 340 companies from around the world arranged specially-designed corporate structures with the Luxembourg authorities. The businesses include corporations such as Pepsi, Ikea, Accenture, Burberry, Procter & Gamble, Heinz, JP Morgan and FedEx. Leaked papers relating to the Coach handbag firm, drugs group Abbott Laboratories, Amazon, Deutsche Bank and Australian financial group Macquarie are also included. GUARDIAN

London Oyster users 'charged more' to travel in capital

London Assembly Member Val Shawcross said a discrepancy had arisen between pay as you go (PAYG) Oyster cards and contactless bank cards. While Transport for London (TfL) has introduced weekly caps on contactless cards, only daily caps apply on Oyster. Analysis from the Labour party found passengers using PAYG fares travelling between zones 4 and 7 during peak-time seven days a week would pay £121.20. Passengers travelling between the same zones but using contactless would spend £29.40. Similarly, commuting through zones 1-4 on a seven-day basis would cost PAYG commuters £68.40 while contactless payment users would be charged £45. Transport for London's director of customer experience Shashi Verma said: "The same fares apply to both contactless and Oyster”. But he admitted that you have to buy an Oyster Travelcard to get that same weekly fare cap:  "If a customer uses contactless for a week within zones 4 to 7 they will get their fare capped at £29.40.If a customer buys a weekly Travelcard on their Oyster card for zones 4 to 7 they will also pay the same fare of £29.40... We are looking at introducing weekly capping on Oyster when the current technology can be updated. This is a complex process as it requires changes not only to the card readers but also to our back office and retailing systems." A TfL survey found only 26% of Londoners had made a payment with a contactless card and, according to Ffrees Family Finance, 440,000 Londoners do not have bank accounts and would be ineligible for contactless payment cards. BBC NEWS

Remembrance Day: UK's armed forces face new spending crunch

The chancellor, George Osborne, will have to make even deeper cuts in the army as savings needed to meet his austerity targets would have to nearly double to £48bn, the Financial Times reported on Monday. Unlike health, education, and overseas aid, the UK defence budget, currently £36.4bn, is not ring-fenced. The chief of the UK defence staff, General Sir Nick Houghton, over the weekend hinted at serious trouble to come. "I think we are good value for money and I will quietly, from inside the system, fix my bayonet and fight to the last," he warned. The government announced in 2010 it would reduce defence spending by about 8%, slashing the size of the army by 20%, to 82,000, and hoping to increase the size of the reserves by more than 10,000 to 30,000. In his first annual Christmas lecture at the Royal United Services Institite as chief of the defence staff, Houghton last December warned, in what he called "an outing of professional conscience", that Britain was being left with hollowed-out armed forces. GUARDIAN

An end to bank bailouts? 'Too big to fail' bank rules unveiled by global regulators

The rules, created by the Financial Stability Board (FSB), a global regulator, will require big banks to hold much more money against losses. Mark Carney, FSB chairman and governor of the Bank of England, said the plans were a "watershed" moment. He said it had been "totally unfair" for taxpayers to bail out banks after the financial crisis of 2008 and 2009. "The banks and their shareholders and their creditors got the benefit when things went well. But when they went wrong the British public and subsequent generations picked up the bill - and that's going to end," he told the BBC. Mr Carney explained that the new system would ensure that bank shareholders, and lenders to banks such as bondholders, would become first in line to bear the brunt of future losses if banks could not pay out of their own resources. The proposed new rules, which are up for consultation and should take effect in 2019, require "global systemically important banks" to hold a minimum amount of cash to ensure they will be able to survive big losses without turning to governments for help. The capital set aside should be worth 15-20% of the bank's assets, the FSB said. That is a far bigger cushion against losses than is required by current banking rules. BBC NEWS

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