Fool me once, shame on you. Fool me twice, shame on me. Fool me every five years - that's democracy!

What's in a manifesto? Politicians make their careers more promising by promising more. Most of all during a closely fought general election where no party expects a majority. In these tight contests a goon with a gatling couldn't fire off promises faster nor more recklessly. 

Party manifesto writers confidently disregard truth because win or lose politicians will get away scot-free with failure to deliver their pledges:

• Lose and they don't even need an excuse. With no power to fulfil the promises, nobody would know if they were fibbing.
• Win to be the biggest single party in a coalition, and they blame their coalition partners for their broken promises.

In the weeks before the May 2015 general election we saw many promises from the various parties, a few of which we have retrieved from the BBC's collection. There is little point attributing them by party, so we just list them. To paraphrase the poet Catullus, what is promised in an election should be written in the wind and the running water:

• Raise £1bn from extra corporation tax on banking sector
• Increase charges to “non-doms”, raising £130m
• Support weekly bin collections
• No rise in VAT
• Take family homes out of Inheritance Tax
• Keep mortgage rates low so families are more financially secure
• Make big businesses pay their fair share of tax 
• Make it illegal for employers to undercut British workers by exploiting migrants 
• Invest £2.3 billion in over 1,400 flood defence schemes to protect 300,000 homes
• Allow a public sector rail operator to bid for and take on new lines
• Scrap Winter Fuel Payment and free TV Licences for pensioners on the 40% income tax rate
• Restrict child benefit to two children and stop paying it all together for children who do not live in Britain 
• Introduce minimum pricing of alcohol
• Maintain the triple lock on the state pension, so it rises by the highest of prices, earnings, or 2.5%
• No increase in the retirement age 
• Give 16-21 year olds two thirds off all bus travel
• Spending increase for the NHS in real terms every year, an extra £8bn a year in England by 2020
• Make greater use of direct democracy, such as local referendums
• Guaranteed job for under-25s unemployed for over a year and for adults unemployed over two years 
• Guaranteed childcare for primary school children from 8am to 6pm 
• Ensure speed cameras are not used for profit by councils 
• No out of work benefits for migrants or child benefit for dependents living outside UK 
• more social housing to be built by local authorities
• Boost police recruitment of black and minority ethnic groups

We won't bore you with long lists of past broken promises in this post. If you are interested, the Mirror newspaper helpfully provides a sample of Conservative mispeakments, and the Telegraph newspaper does the same for mispokements from the last Labour government.

So, what is a voter supposed to do? The Bible would have you "judge them by their fruits": don't look to the promises of the future but to the realities of the past. A view that provides a gloomy prospect for the majority of Britons. 
 
Labour's past includes introducing university tuition fees, curtailing civil liberties, promoting privatisation of public services, and giving the financial services industry a long enough leash to hang us all with. Conservative policy has been about a sharp focus on cutting costs with a blunt axe regardless of the impact.

So how do we know if a government is doing a good job? The prosperous tend to measure the prosperity of Britain by their own personal prosperity. They measure Britain's success with new peaks in the FTSE100 and stronger growth in GDP. However Gavyn Davies, the leading economist and former chairman of the BBC, credited two thirds of company profits to keeping wages low. Davies wrote in the Financial Times:
"If the 10 percentage points decline in the wage share had not occurred, and everything else had (implausibly) stayed the same, then gross profits in the developed economies would have been about one-third lower than they are today and net profits (after depreciation) would have been about two-thirds lower. "

Has Britain's prosperity been built by holding down Britons' prosperity?

If a 'good' government creates the environment to reward an individual citizen's talent and hard work, then Britain's governments of all complexion have done worse than most.

A report by the Office of National Statistics shows in Britain the children of low earning parents tend to go into low earning jobs; the children of high earning parents tend to go into high earning jobs. The report shows this tendency is more so in Britain than in any of a group of 12 large Western countries, from the USA to the Scandinavian nations.

The ONS report states:

"Intergenerational earnings mobility measures the extent to which the economic status of children differs from that of their parents. A report by the OECD (d’Addio, 2007) highlighted that, along with the US and Italy, the UK has a relatively low level of earnings mobility, meaning that there is a strong relationship between the economic position of the parents in the earnings distribution and that of their children. By contrast, intergenerational mobility is a lot higher in the Nordic countries, Canada and Australia, indicating a relatively weak relationship between the economic status of parents and that of their children (Figure 1)."

The report goes on to say:

In 2011, among those aged 25-59 whose parents had a low level of education, 34% had a low level themselves. By comparison, 8% of those whose parents had a medium level of education and 3% of those whose parents had a high level of education had a low level themselves

In the UK, someone in poverty as a teenager in the mid 1980s was almost four times as likely to be in poverty as an adult compared to those who were not in poverty as teenager 

For those who would claim children of unemployed parents get into the lazy habit of being unemployed, the evidence shows this isn’t true. The same ONS report states that if there are jobs to be had, the children of the unemployed go and get them just the same as the children of the employed:

Macmillan (2011) found evidence to suggest that the intergenerational transmission of worklessness is relatively strong in weak labour markets with high unemployment,but there is no relationship where unemployment is low.

So who should we vote for? Perhaps the answer is we should all vote selfishly. Whether it is for left, right, loony, nice, or nationalist. What has happened to others is concealed beneath expensively woven fabrications. But we know for certain what has happened to ourselves, so vote on that.

There are two ways to get an equilibrium:
1) Everyone behave unselfishly, with fair shares for all.
2) Everyone behaves selfishly, taking what they can get.

The second method is very stressful. But if most of the nation behaves "all in it together" unselfishly and some of the nation behaves "in it for me" selfishly, then the flow of prosperity will very predictably be in one direction. Which is what has been happening for decades in the UK.



Perhaps if everyone votes selfishly, then Adam Smith's "invisible hand" will guide the election result to the best of all possible worlds?

To conclude, when it comes to the manifestos and party political promises we refer you to the wisdom of Tom & Jerry:

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Rip-off News round-up. Our pick of the last week's media (Thu 9th April)

Drug firm Novartis tried to 'scupper' trials of a cheaper version of eye medicine

Avastin, which costs just $50 (£34) a dose, could save the NHS £102m if used instead of the standard treatment, ranibizumab, or Lucentis, which costs $1098. The drugs giant Roche holds the intellectual property rights for both, but Novartis has the rights to market Lucentis in Europe. In one of several examples given in a report by the British Medical Journal (BMJ), a senior researcher from Bristol University, who took part in a UK trial of Avastin said that Novartis had “tried to prevent UK ophthalmologists joining [the trial]”. The chief investigator in another trial, known as Tandem, told the BMJ that a Novartis representative had tried to divert him, during the trial’s planning stage in 2009, to trial work funded by Novartis and had opened up the prospect of funding for his future research projects. Despite positive trial evidence, Avastin is not licensed for use to treat wet AMD, a leading cause of blindness. And the General Medical Council has issued guidance telling doctors it is unlawful to prescribe unlicensed medicines on grounds of cost. INDEPENDENT

Has Austerity caused the UK’s first decline in life expectancy in 20 years?

Life expectancies for women aged 65, 75, 85 and 95 all fell in 2012 compared with a year earlier, the first slip in all age groups in nearly two decades. There was also a small drop in life expectancy for men at ages 85 and 95, while longevity for men in the two younger age groups stagnated, according to a report published on Tuesday by Public Health England (PHE). Although the figures for 2013 did not show any further falls, the life expectancies for men and women aged 85 and 95 failed to recover to 2011 levels, which were the highest to date. Age campaigners warned the unexpected decrease in life expectancies was a “canary in the coal mine”, showing how five years of austerity was beginning to take its toll on elderly people. But PHE said it was too early to conclude there was a significant change in the three-decade-old upward trend in life expectancy. Its report suggested the falls could be due to flu or bad weather, or even a statistical blip, although it noted that they were reflected elsewhere in Europe. To take one example, the life expectancy of an average 75-year-old woman in 2013 was 13 years and five weeks, which is five weeks fewer than people of that age in 2011. The falls in life expectancy come after three decades in which life expectancy has on average increased by 1.2% for men aged 65 and 0.7% for women. It is the first time since 1995 that life expectancy has fallen among women of all four age groups studied. GUARDIAN

A&E waiting in England hits new worst level
The NHS in England has missed its four-hour A&E wait target for the past three months with performance dropping to its lowest level for a decade. Just 91.8% of patients were seen in four hours between January and March - below the 95% target. That is the worst three-month performance since the target was introduced at the end of 2004. The figures were widely expected as the weekly performance has been below 95% since September. Figures released in Scotland showed that in the 12 months up to the end of February 92% of patients were seen in four hours. Monthly waiting times have been even worse in Northern Ireland and Wales, although the latest yearly figures are not yet available. Labour immediately linked the figures to cuts in GP services, forcing people to go to A&E instead. BBC NEWS

Kellogg's effectively paid no corporation tax in the UK in 2013
Tax experts said the complex web of companies it uses to do business in the UK generates 'significant opacity' which makes it hard to tell if it is paying its fair share of tax in this country. Other American firms, in the technology sector, such as Google, Apple and Amazon have been heavily criticised in recent years over alleged tax avoidance. Kellogg's is being accused of acting like these 'classic US-owned IT company' with bases in Ireland and Luxembourg rather than as a food manufacturer known around the world for its cereals. Kellogg's has three factories in Britain – two in Wrexham and the third in Manchester – where it makes cereals and snacks. It sells in the UK through two main subsidiaries owned by Irish-based Kellogg Europe Trading Ltd. The two subsidiaries paid corporation tax of £8.4million on profits of nearly £50million in 2013. It also has six Luxembourg-registered companies which paid corporation tax of £210,000 on profits of about £57million. But the £210,000 and £8.4million figures were offset by an £11.8million tax credit at another UK registered operation, Kellogg Group. DAILY MAIL


Kellogg's says tax dodge clampdown will harm profits
The US-based maker of Corn Flakes, Rice Krispies and Coco Pops is worried that international attempts to close tax loopholes would lead to a “material” increase in its income tax bill. The chancellor, George Osborne, promised last month that government measures against tax avoidance would raise £3.1bn for the public purse, including a so-called Google tax aimed at profits that are shifted abroad by multinationals to avoid payments to HM Revenue and Customs. The UK is targeting tax structures used by international companies as part of a broader campaign led by the OECD - the economic thinktank for developed nations - to limit tax avoidance and use of offshore tax havens. The warning from Kellogg’s, thought to be the first of its kind by a multinational, was contained in its latest annual report. “Due to economic and political conditions, tax rates in various foreign jurisdictions may be subject to significant change,” the annual report said. It added: “Contemplated changes in the UK and other countries of long-standing tax principles if finalized and adopted could have a material impact on our income tax expense.” In 2013, UK consumers spent £622m on Kellogg’s products, such as Crunchy Nut Cornflakes and Pringles crisps, buying more cereal per person than any other country in Europe. Kellogg’s two UK subsidiaries paid corporation tax of £8.4m on declared profits of nearly £50m in 2013, but this was offset by a tax credit worth £11.8m, recorded by another UK-registered Kellogg company. GUARDIAN

HSBC is 'cast-iron certain' to breach banking rules again, admits top executive
Global head of sanctions Lee Hale’s comments appear to contrast with public statements from HSBC’s chief executive that the bank has fundamentally transformed itself after recent scandals. CEO Stuart Gulliver and Rona Fairhead, chair of HSBC North America (as well as the BBC Trust), have repeatedly assured the UK parliament that the bank today is markedly different from when its Swiss branch facilitated large-scale tax evasion, or when its Mexican branch was found by US authorities to be complicit in multimillion-dollar money-laundering for drug cartels. The comments come from a recording of a confidential meeting, which lasted several hours. Hale was meeting with independent lawyers monitoring HSBC as part of a controversial 2012 deal with the US Department of Justice, in which the bank avoided prosecution over sanctions-busting and money-laundering in its Mexican branch in exchange for paying a $1.9bn fine and receiving additional regulatory scrutiny for a period of five years. Hale told the monitors that the bank’s size made large-scale breaches a virtual inevitability, and said he was not yet “comfortable” with compliance in some significant areas of its operations. Hale told the regulator that “given the size and scale of HSBC”, in his view “it is a cast-iron certain[ty] this will happen, at some point in the future we’re going to have some big breach, some regulatory breach”. Under pressure from regulators and investors alike, CEO Gulliver has repeatedly insisted HSBC is not too big to manage. GUARDIAN

E.On fined £7.75m for charging illegal exit fees and overcharging on bills
Under Ofgem rules, suppliers have to give customers 30 days' notice of price rises to allow customers to switch before the increase takes effect. If a customer signals their intention to move supplier within the 30 days, they do not incur exit fees or the higher charge even if the switch occurs after the price rise. E.On was found to have billed customers for price rises in error in both January 2013 and January 2014, failing to refund an average of £3.42 on price rises to customers. Ofgem, the energy regulator, has therefore forced the energy company to pay back around £400,000 to customers that may have been affected, issuing refunds of between £8 and £12. The separate £7.75m fine will be paid to Citizens Advice, the community charity, to help vulnerable consumers. In May last year E.On was fined £12m for misselling energy contracts to customers, following a two-year investigation by Ofgem. Up to half a million households were affected. "The level of penalty package today reflects that E.On has made the same error previously as well as making senior level commitments that it rectified its processes," the regulator said. TELEGRAPH

Serious Fraud Office under fire for launching just 12 investigations last year despite 2,500 reports of corruption
The figures, which are for the year ending June 2014, have raised fresh concerns that the SFO does not have enough money to do its job properly. Law firm Pinsent Masons has warned that 'it is possible that large numbers of credible cases are being shelved'. The SFO’s core funding has been cut from £35.1million in 2009-10 to £33.2million in 2014-15. But it has received extra funds from the Treasury for 'blockbuster' cases such as Libor and, more recently, its probe into the manipulation of foreign exchange rates. This has bumped up its total funding last year to £58.3million, which is up from £44.6million in 2009-10. But critics have raised concerns that the SFO is still overstretched, after taking on a number of huge cases, including allegations GlaxoSmithKline paid bribes to doctors in China, Iraq and Poland. Pinsent Masons warned of the danger of failing to properly follow up on leads, pointing out that several high-profile investigations – including the Rolls Royce bribery case and the probe into Barclays' Qatar fundraising during the financial crisis – had to come from tip-offs from whistleblowers instead. The SFO hit back and said it was set up specifically to investigate big fraud cases. It said it hands many leads from whistleblowers to other agencies, such as the Financial Conduct Authority and Action Fraud. DAILY MAIL

Staff shortages are making it harder to tackle Islamic radicalisation in England's prisons, says former terrorism head

Chris Phillips, the former head of the National Counter Terrorism Security Office, said shortages meant extremists were not properly monitored, enabling them to recruit others. The Justice Select Committee recently criticised the government for cutting the number of prison officers by almost 30%, a reduction of 12,530 staff, between 31 March 2010 and 30 June 2014. The committee's report also said the prisoner-to-staff ratio rose from 3.8 in September 2010 to 4.9 in September 2014. It claims that this has led to a significant deterioration in safety - with fewer staff to monitor inmates. More than 100 Muslims are in jail for terrorism offences in Great Britain. The worry particularly concerns converts to Islam, as research from the former chief inspector of prisons, Dame Anne Owers, suggests they are more vulnerable to extremism. But her report also said suspicion of Muslim prisoners could be both unfair and counter-productive, fuelling resentment and causing even more trouble. The latest prison population statistics from the Ministry of Justice show there were 85,681 people in jail in the week ending 27 March, up from 85,252 in the same period last year. BBC NEWS

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Do top income earners pay the top tax rate? Withdrawal of Tax Credits leaves people on low wages paying 73% marginal tax rate, and on moderate wages paying 83% marginal tax rate.

The LibDems and Tories squabbled over who should get credit for the increases in the personal tax free allowance (Personal Allowance), which rose from £6,475 in 2010/11 up to £10,000 in 2014/15.

Whoever did it, did it mean low paid people got to keep all their income to spend as they will? Of course not!

For people receiving Working Tax Credits, who may or may not be getting Child Tax Credits too, their tax credits are clawed back at the rate of 41 pence for every pound (i.e. a 41% withdrawal rate) above an income threshold of £6,420. Note this applies to a household's joint income rather than on an individual basis. 

As a result, people on low and moderate incomes can effectively be taxed at a marginal rate higher than those with the highest incomes.

The following examples are based on a tutorial from the ACCA (Association of Certified Chartered Accountants):
[Note, a pay increase up to £5,000 or a pay decrease up to £2,500 in one year only impacts tax credits in the following tax year].

Example 1) Alex, a single person with no children, works 40 hours per week and earned £10,000 during 2013-14.

• In 2014-15 the maximum tax credit for Alex would be £2,740 (£1,940 basic + £800 working element)
• Working tax credits are clawed back at the rate of 41% above an income threshold of £6,420
• Alex earned £10,000 per annum in 2013-14, which is £3,580 above the income threshold (£10,000 - £6,420 = £3,580).
• Alex’s tax credits are reduced by 41% of £3,580 = £1,468
• This leaves Alex with tax credits = £2,740 - £1,468 =£1,272

What if Alex had earned an extra £1,000 in 2013-14? This affects his tax credits for the next tax year, 2014-15. Therefore for 2014-15 he would lose from this extra £1,000

o       £410 of tax credits = £1,000 x 41%

o       £200 in income tax = £1,000 x 20%

o       £120 in national insurance = £1,000 x 12%

o       Total deduction = £730

Thus Alex pays a marginal tax rate of 73%

Example 2) Zoe, a single person with two children, works 35 hours per week and earned £45,000 during 2013-14.  She pays £300 per week for child care.

• In 2014-15 the maximum tax credit for Zoe would be £21,695
• Working tax credits are clawed back at the rate of 41% above an income threshold of £6,420
• Zoe earned £45,000 per annum in 2013-14, which is £38,580 (£45,000 - £6,420) above the income threshold.
• Zoe’s tax credits are reduced by 41% of £38,580 = £15,818
• This leaves Zoe with tax credits = £21,695 - £15,818 = £5,877

What if Zoe had earned an extra £1,000 in 2013-14?

Then in 2014-15 she would lose

o       £410 of tax credits = £1,000 x 41%

o       £400 in income tax = £1,000 x 40% (higher rate)

o       £20 in national insurance = £1,000 x 2% (NI rate 2% on earnings above £41,444 p.a.)

o       Total deduction = £830

Thus Zoe pays a marginal tax rate of 83%

In April 2015 the Financial Times' article "Million face 60% UK income tax ‘trap’" bleated about those earning over £100k paying a marginal rate of 60%, due to the progressive loss of the Personal Allowance (losing £1 of Personal Allowance for every £2 of income over £100k). 

Evidently taking 60% from the rich is more newsworthy than 73% from the poor.



SOURCE HIGH PAY CENTRE: One Law For Them - The runaway growth of executive pay

Leading economist Gavyn Davies has argued that low wage growth accounts for more than two thirds of corporate profits since the 1980s. As a substantial proportion of these profits have been used to pay dividends to shareholders, executives (who are directly paid in restricted shares) have directly increased their pay at the expense of their workers.

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The way out of a recession is to borrow and invest. It’s text book

Fee, KJ and Chris get confused by Tory and Labour economic policy...

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Workers driven from full to part time work is the only reason employment is holding up

The incomes of the bottom 90% have hardly risen in 20 years, whilst the top 1%’s has doubled

The Top 1% pay more income tax? ‘cos their income’s doubled since 1995 whilst the bottom 90%'s has stagnated

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

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Rip-off News round-up. Our pick of the last week's media (Thu 2nd April)

London’s poorest tenants hit by £50m rent rise as social housing converted to 'affordable' homes

Housing associations quietly switch thousands of tenancies to higher rates to make up a shortfall in government funding. In 2010 the government made a 63% cut in capital investment budgets for housing associations, in effect a £3bn reduction in available funding. The government has also demanded that any taxpayer investment in new housing should be in affordable rather than cheaper social rented homes. Social rents are typically half market rate, while so-called affordable tariffs are up to 80% of private rents, leading to complaints that the definition of affordable is Orwellian. About 11,000 homes in the capital have been converted from “social” housing to “affordable” since 2012, and thousands more are to follow in a policy that has sparked tenants’ rebellions. Annual rents have risen by £29m, but the total cost to tenants over the three years to date has been £49.7m. Over half of the housing associations set the converted rents higher than 70% of market rate in the last recorded period. But others, determined to keep housing genuinely affordable, have charged much lower rents. In the past year Affinity has converted 295 homes across its portfolio. It said it had halted conversions at the estate after a protest by residents and said it would suggest tenants consider moving only if they had surplus room. Among other associations, in the past two years, London and Quadrant switched 1,673 tenancies earning an extra £4.2m a year, Circle Housing switched 1,337 earning £3.8m more a year and Notting Hill Housing Trust switched 853 earning an extra £3.3m annually. The National Housing Federation (NHF), which represents housing associations, said its members were being forced to convert tenancies because of George Osborne’s deep cuts in investment budgets. GUARDIAN

Huge rise in number of families living in temporary accommodation in England

By the end of the year 61,970 homeless households were in temporary lodging, from B&Bs to homes rented from private landlords, of which 46,700 were families with children. The figures, from the Department for Communities and Local Government, had been falling, dropping to 48,190 and 35,950 respectively in the spring of 2011, but have now returned to the levels seen in early 2009. The number of children in temporary housing increased by almost 10,000 year-on-year to 90,450. The housing charity Shelter said the figures were equivalent to four homeless children in every school. Rising private rents and a chronic shortage of affordable homes have helped push the number of families without a permanent home to the highest level in almost six years. GUARDIAN

Anger as bosses of two of Britain’s biggest firms walk away with annual pay packages of over £11m each

Rakesh Kapoor, chief executive of Nurofen and Durex owner Reckitt Benckiser (RB), took home £11.2million last year – an increase of almost 65 per cent – despite the firm having faced a string of fines over its corporate governance practices. And the Prudential chief executive, Tidjane Thiam, enjoyed a 36 per cent pay rise taking his salary to £11.8million after profits jumped 14 per cent to £3.2billion. Thiam, who will soon take the helm at Credit Suisse, was not even the highest paid employee at the Pru. That accolade went to Richard Woolnough, a fund manager at its investment arm M&G, who scooped more than £15.3million despite his funds slipping to the bottom half of the performance tables. RB’s boss’s £11.2million pales into insignificance compared to the £91m that predecessor Bart Becht took home in 2009. While their shares have risen 20.9 per cent over the past 12 months, the firm has suffered the acute embarrassment of being fined for questionable practices. In January RB was fined £539,800 for breaching stock market rules following share deals made by Kapoor and another director. The City watchdog said the household goods giant had ‘inadequate systems and controls’ to monitor dealing by its senior executives in its own shares. The fine came one month after RB was fined £95million for fixing the prices of products in France. In November it admitted its office in America had been raided by the US Attorney in connection with more alleged anti-competitive practices. And a year ago, RB agreed to pay the NHS £90m after it was accused of profiting from its indigestion treatment Gaviscon after the product’s patent had expired. Earlier this month the Institute of Directors issued a stark warning about excessive pay in the investment industry, warning fund managers could replace investment bankers as the target of public anger. And last night leading shareholder group Glass Lewis recommended voting against the pay of BP boss Bob Dudley, who received a 25 per cent jump in pay and perks to £8.6million despite a drop in profits after it was hit by the plunging oil price. DAILY MAIL

UK productivity growth is weakest since second world war, says ONS

The Office for National Statistics said productivity decreased by 0.2% in the third quarter of the financial year, leaving output per hour worked little changed on the previous year and slightly lower than in 2007, before the UK’s longest and deepest modern recession. The ONS figures show that with workers producing less than they did in 2007, Britain’s productivity gap with its major economic rivals, such as the US, Germany and France, has widened. The UK has the second worst productivity record of the G7 leading Western industrial nations. Weak productivity has been the flipside to strong employment growth, since the increase in the number of people working has not been matched by the hourly output of goods and services they have produced. Up until the global economic crisis, the efficiency of UK workers tended to increase by around 2-2.5% a year. Had that trend continued, productivity would have been 15% higher than it was before the recession. An alternative measure of productivity, output per worker, showed some growth in 2014 but only as a result of employees working longer hours. The ONS said, despite Britain’s poor productivity, businesses were keeping their costs in check by keeping a lid on their wage bills. GUARDIAN

Co-op Bank comes under fire over plans to pay boss up to £4.5m - despite third consecutive annual loss, sacking almost 1,000 staff and shutting 72 branches

The troubled lender revealed more than 50,000 of its 1.4million current account holders took their money elsewhere last year, amid the stream of negative publicity about its finances and a drugs scandal surrounding its former chairman Paul Flowers. But the bank still found £3million for chief executive Niall Booker, and announced a generous pay deal which could see him collect up to £4.5million in pay and perks this year. This is an increase on his maximum package of £4.2million last year. Booker is already paid more than Nationwide Building Society boss Graham Beale, who by contrast is on course to post an annual profit of more than £1billion for its latest financial year. The Co-op announced Booker has signed a contract to stay in the job until at least the end of 2016. He described 2014 as a ‘year of stabilisation’ as losses halved to £264million, compared with a £633million loss the previous year. But this was mainly due to a sharp fall in ‘conduct’ charges, such as compensation for mis-selling payment protection insurance, and losses from bad loans. DAILY MAIL

Tesco to reduce number of “unfair” charges imposed on its suppliers

Tesco’s plan reveals just how important fees and charges imposed on suppliers had become to supermarkets, often prompting them to put products on their shelves because they generate payments from those suppliers, rather than because shoppers might want to buy them. Tesco is radically cutting the number of ways in which it charges suppliers from 24 to just three. The plan was outlined by Dave Lewis, the chief executive, as the groceries watchdog investigates Tesco over its dealings with manufacturers and distributors in the wake of a £263m accounting scandal linked to misstatement of income from such suppliers. Lewis said the changes had been made after talking to Tesco’s suppliers “from sheep farming through abattoirs through food processors”. Tesco has added thousands of lines to its range in recent years, a phenomenon that has been blamed on supplier payments. Asda and Sainsbury’s are also trying to reduce their reliance on this source of income so that they are freer to organise their shelves to suit customers rather than suppliers. The new approach is part of their battle to win back shoppers who have been turning to discounters such as Aldi and Lidl. GUARDIAN

UK bank stress tests to cover global economic slump

The Bank has set out the parameters of this year's stress test, which include a collapse in economic growth in China and a sharp downturn in the eurozone. The test imagines a sharp contraction in eurozone economic growth and Chinese expansion of just 1.7%. China's economy expanded by 7.4% in 2014 - the slowest pace for 24 years. Economic growth of just 1.7% would plunge Hong Kong into a deep recession that would cause house prices on the island to collapse by 40%, hitting UK lenders such as HSBC. Bank and building societies will also have to prove they have the capital resources to withstand a 2% fall in economic output in the eurozone. In addition the stress tests imagine a scenario in which the UK economy contracts by 2.3%. Barclays, HSBC, Standard Chartered, Royal Bank of Scotland, Nationwide, Santander UK and Lloyds will be tested this year and the results are due to be published in December. BBC NEWS

McDonald's to raise wages for 90,000 US employees

Fast-food giant McDonald's says it will raise the pay of more than 90,000 US employees to at least $1 above the legal minimum wage. That is currently $7.25 (£4.90) an hour, but individual states can set their own rates. The move will only benefit staff at company-owned outlets - about 10% of McDonald's 14,000 US restaurants. In a statement, the firm said employees covered by the new policy will be paid more than $10 per hour by 2016. Franchisees who run around 90% of outlets set their own pay and benefits but this could prompt some of these to improve their own terms. But one analyst said this could be a way to increase revenues because McDonald's franchisees pay the company royalties based on sales figures, which will rise as the franchisees pass the wage costs onto their customers. "They'll try to paint this as altruistic, but they're increasing their corporate income by doing this. It's not as nice as it sounds," said Richard Adams, a former McDonald's franchisee who now acts as a consultant for current ones. Fast food workers across the US have been demanding that the minimum wage in the sector should be raised to $15 per hour. Workers at various outlets, including McDonald's, have held strikes and there have been street protests in many US cities. BBC NEWS

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Graphs at a glance: Public spending cuts hit the many harder than the few, because the few can buy privately what is cut. But elections are decided by the many!

Defining who is very rich is not straightforward. Some with vast wealth have little income and live in poverty (for example, low income pensioners living in million pound London houses bought for a song decades ago). 

For this post we consider households with more income than 90% of households in the UK. Perhaps not all "rich", but certainly "richer than most". 

We use the Household Disposable Income data from the Office for National Statistics (ONS). 

These ONS figures for 2013 show the top decile (top 10%) of households had 13.4 times more disposable income than the bottom decile of UK households. 

[Disposable Income = income after receiving state benefits and paying direct taxes (e.g. income tax is taken out, but not VAT which is an indirect tax). Disposable Income is effectively a household's "spending money".]

To see if these 'richer' households are all that different to the rest, have a look at what they do with their money. The Office for National Statistics helpfully provides data on that too.


Overall, the main elements of Household Spending averaged for all UK households are:

With 13.4 times more disposable money, the top decile household spends 10 times more on transport than the bottom decile. Which is perhaps what you would expect. However on food and drink they spend only 3 times more than the bottom decile:

Where the top decile's spending does surge away from the  bottom is holidays (43 times more), medical insurance (26 times), and going to the cinema/theatre (19 times). They also have 27 times more surplus money to save than the bottom decile.

Note that 'household income' increases if there are more people in the household receiving incomes. On average there are 3.2 people in a top decile households (including children), and just 1.3 people in a bottom decile. 
 
On this basis the household disposable income per person for the top decile is 5.4 times that of the bottom decile.

On a spend per person basis the top decile spends 17 times more on holidays, and 11 times more on medical insurance. 

Perhaps the most important of these figures is the top decile have 11 times more money per person that they are able to save.

The key difference between the richer and the rest is the amount of discretionary money they have. Money they can choose to spend on medical insurance (less need of the NHS), private education (less need for government schools, and less averse to university fees), culture (less need of the BBC), transport (less need of buses and trains), lawyers (less need of legal aid).


In December 2014 Lord Dyson, the Master of the Rolls (third most senior judge in the UK) told Parliament's Justice Committee cuts to Legal Aid were causing miscarriages of justice. Dyson said about people who can't afford a lawyer and try to represent themselves:

"‘Quite often the hearing is indeed shorter than with lawyers,’ he said. ‘That is not because lawyers are there to indulge in spoiling tactics and get into technicalities for the sake of it, but I’m afraid litigants in person are overawed by the experience and just dry up.’" 

Ursula Brennan, the top civil servant at the Ministry of Justice, admitted to Parliament's Public Accounts Committee that government policy has been to cut regardless of the impact on services.  In a testy exchange between Brennan and the Tory MP Stephen Phillips:

Q50 Stephen Phillips: You have in fact simply described the implementation of a desire to remove £300 million from the budget, without any evidence at all of what that might mean.

Ursula Brennan: I can only repeat that it was quite explicit from the start that we would not be able to do research in advance if we were to make the savings to which the Government committed. Therefore, we would conduct the research on the basis of what happened to people, because we were seeking to make a behavioural change, after it happened.

Q51 Stephen Phillips: We all understand that, but would you please stop describing that as evidence-based policy making, because it isn’t, is it?

Ursula Brennan: I was simply saying in terms of the evidence, the most critical piece of evidence that was relevant to the decision that was made was the size of the spend.

Is justice served when a person unable to afford professional legal representation faces another who has the extra cash needed to pay a lawyer? Where the result depends on how much you can pay, that isn't justice.


We must beware of political and business leaders who urge us to sacrifice what is discretionary for the few, but is a lifeline for the many. Whether it is justice, health, education, security, etc. 
 
For someone on the average UK salary, about £25,000, a 1% increase in income tax would cost £150 a year (£25k - £10k personal allowance in 2014/15 = £15k. £15k x 1% = £150). Individuals buying insurance policies from a commercial provider to cover the cuts in public services will pay more than that.

Virtually all business leaders and many top political leaders come not from the "richer" group referred to in the post above. They are members of the "very rich". F. Scott Fitzgerald, perhaps best known for his novel "The Great Gatsby", wrote:

"Let me tell you about the very rich. They are different from you and me. They possess and enjoy early, and it does something to them, makes them soft where we are hard, and cynical where we are trustful, in a way that, unless you were born rich, it is very difficult to understand. They think, deep in their hearts, that they are better than we are because we had to discover the compensations and refuges of life for ourselves. Even when they enter deep into our world or sink below us, they still think that they are better than we are. They are different."

Take care not to confuse your interests with theirs. Theirs are different.

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