Rip-off News round-up. Our pick of the last week's media (Thu 18th December)

British household debt is £1.7 trillion: we are living further beyond our means than at almost any time in the last 20 years.

The head of the Office for Budget Responsibility (OBR), Robert Chote, told a panel of MPs that consumers have been upping their spending, which in turn helps improve the growth of the economy. But the increased expenditure does not mean that households have more cash to spare – they are just using their savings. He added: ‘We have assumed that it is not plausible [that this could continue].’ Consumer spending grew by 2.1 per cent in the first nine months of this year, even though wages continued to stagnate, figures from the OBR show. The economists estimate that the huge gap between earning and spending is the second largest since the mid-1990s. Total household debt stood at £1,670billion as of the second quarter of this year. The OBR has increased its forecast of unsecured household debt as households continue to spend beyond their means. The forecasts come as debt experts warned that as many as one in four credit card customers are paying the minimum every month or struggling to pay at all. One in five respondents with a credit card said they only made the minimum payment in October, while a further one in 20 said they made no payment or paid off less than the minimum. DAILY MAIL

Luxembourg tax dodge whistleblower charged with theft, says he acted out of conviction

28-year-old Antoine Deltour has been charged in Luxembourg with a string of criminal offences including theft, violation of professional secrecy, violation of trade secrets and illegally accessing a database. Deltour joined PwC from business school in 2008 and resigned two years later. He said: “Normally auditors are a bit like regulators. It is a useful profession, we verify the accounts of companies... But I wasn’t feeling at home in that environment [at PwC]. Bit by bit I discovered how extreme the system was in reality – it was a massive tax optimisation practice. I didn’t want to be part of that.” Last month the Guardian and more than 20 news media around the world, in conjunction with the International Consortium of Investigative Journalists (ICIJ), published detailed investigations into the tax affairs of several multinationals, based on leaked tax rulings secured by PwC for large clients. Luxembourg’s finance minister Pierre Gramegna has described the affair as “the worst attack Luxembourg has experienced in its history”. But his counterparts in France, Germany and Italy suggested the revelations had brought Europe to an “obvious … turning point” in the international debate on unfair tax competition. “Since certain tax practices of countries and taxpayers have become public recently, the limits of permissible tax competition between member states have shifted,” they said in a letter to Pierre Moscovici, European commissioner with responsibility for tax. “This development is irreversible.” The Guardian and other media working with the ICIJ had this month published more revelations and further confidential tax rulings secured by Ernst & Young, KPMG and Deloitte. GUARDIAN

It’s expensive being poor: Poorest households face fastest cost of living rise

The Office for National Statistics (ONS) said that households in the bottom 10% of the income scale had an average annual inflation rate of 2.9% each year from January 2003 to October 2014. This compared with an inflation rate of 2.6% among the wealthiest 10% of UK households. Caroline Abrahams, charity director at charity Age UK, said: "Because older and lower income groups spend a greater proportion of their income on essentials such as food, fuel and energy, they are far more vulnerable to the price increases we have seen to these items since 2003... With 1.6 million pensioners living in poverty and a further one million just above the breadline, many are struggling to afford the basics, let alone anything else." When categorising households by how much they spend, rather than their income, the top 10% of households saw prices rise, on average, by 2.3% over the same period. This compared with 3.7% among the 10% of households which spent the least. Households with children saw the cost of living rise by 2.4% on average each year, compared with 2.7% for those without children. Non-retired households saw prices rise on average by 2.5%, compared with 2.8% for retirees. BBC NEWS

The average UK property price rose more in 2014 than the average worker earns in a year – and London is the worst

The average worker took home £27,271 this year, having seen their wages grow just 0.6 per cent – or £169 - compared to 2013, the study by the Centre for Economics and Business Research for the Post Office found. Yet steep property inflation means the average house price now stands at £272,952, up £29,339 from £243,613 last year. Therefore, more than three in five workers earned less than the average house price rise. To give some examples, starting salaries for junior hospital doctors, graduate nurses, teachers, police officers and soldiers are all less than £23,500. Homeowners in the East, South East and London saw their homes earn far more than average wages in the area. Property values in London, for example, have added an average of £80,452 - almost twice the average salary of £41,095 earned in the capital. In fact, booming property in London earned more than the average fully qualified doctor. Elsewhere, estate agents Marsh and Parsons predicts a slowdown of growth when it comes to prime London property next year, but says London rents will soar by around 10 per cent during the course of 2015. DAILY MAIL

Have you checked your pension recently? Officials reveal companies are charging some savers FOUR TIMES the recommended cost to manage their pot

Some pension companies take more than 3 per cent of savers' money each year as a fee, potentially reducing retirement incomes by tens of thousands of pounds. The charges compare to the capped 0.75 per cent fee that applies to schemes taking in new members under the Government's automatic enrolment policy. The audit of pension charges was made by the Independent Project Board, which was set up after the Office of Fair Trading found evidence in 2013 that savers were not getting value for money from their pensions. The report found that of £67.5billion held in relevant schemes as much as £25.8billion is potentially subject to charges above 1 per cent, accounting for 1.5million savers. Around half of this is could be exposed to charges above 1.5 per cent, between £5.6bn and £8.0bn is exposed to charges above 2 per cent and around £0.9bn exposed to charges above 3 per cent. The report found 38 different types of charge being levelled by schemes, and 291 different combinations of these charges being applied. Some schemes impose penalties as high as 10 per cent of the fund's value if savers want to switch to a better scheme. Others apply monthly cash fees on top of annual percentage ones. This not only takes more money from savers, it can distort the charges so that a scheme with a lower annual charge can work out more expensive than one with a higher fee - depending on how much the saver contributes. The report related to 'defined contribution' pension schemes, which take money from workers and their employer and invest it in order to build a retirement fund. It did not include final salary plans, which are part of defined benefit schemes that guarantee workers a set income in retirement, with firms taking responsibility for this. Tom McPhail, head of pensions research at Hargreaves Lansdown, said: 'Long-standing loyal investors shouldn’t be penalised by getting a worse deal than new customers. This audit has revealed that billions of pounds of investors’ life savings are still languishing in poor value products, and worse still, 407,000 have joined poor value schemes in the last 3 years”. DAILY MAIL

Germany’s Amazon workers strike as Christmas orders peak

Labour union Verdi said almost 2,300 workers joined the action at five of Amazon's nine distribution centers in Germany, and that the action would be extended to a sixth on Tuesday - the most warehouses hit by a strike in the long-running dispute. Amazon itself said that only a small minority of workers had joined the strikes, with around 19,000 employees working normally. Verdi has organized frequent strikes at Amazon since May 2013 as it seeks to force the retailer to raise pay for workers at its distribution centers in accordance with collective bargaining agreements across Germany's mail order and retail industry. Amazon has repeatedly rejected the union's demands, saying it regards warehouse staff as logistics workers and that they receive above-average pay by the standards of that industry. The U.S. company has previously said the long-running dispute has not affected deliveries as the vast majority of workers in Germany have not joined the strikes and it can draw on a European network of 28 warehouses in seven countries. Germany is Amazon’s second largest market after the US. REUTERS

Amazon refuses to compensate sellers for 1p website price glitch

Amazon’s selling partners have lost tens of thousands of pounds after a software glitch led to their stock being sold for 1p. But the company, which had sales of more than $74bn (£48bn) last year, has emailed sellers to tell them that “as of now Amazon will not be providing any reimbursements for this issue”. RepricerExpress, the third-party company behind the faulty software, has also not offered compensation. The Derry-based company has said it is “truly sorry for the distress this has caused our customers”. Daniel Pizzey, who said his baby clothing company Baby Best Buy has lost £25,000-£30,000 as a result of the glitch, said: “I am totally disgusted at the way Amazon has dealt with this matter”. Pizzey said his company was swamped with 30-40 orders a minute during the 1p glitch on Friday night. “Customers were ordering like 40-50 of the same items and just paying 50p for it. Surely Amazon would have picked up on this and questioned it before sending it out?” The Amazon email to Go2Games, which estimates it lost £10,000 as a result of the glitch, signs off with “have a nice day”. GUARDIAN

£10.5bn order for new trains could have left taxpayers ‘badly ripped off’, say MPs

Two fleets of trains ordered for £10.5bn by inexperienced officials at the Department for Transport have put taxpayers’ money at risk, sown confusion in the rail industry and could mean higher fares, a report from MPs claims. Margaret Hodge, who chairs the public accounts committee, said the DfT’s decision to buy the trains itself – rather than keeping with its previous approach of leaving it to rolling stock companies and train operators - had left the taxpayer bearing all the risk. “The department has no previous experience of running a procurement of this kind, let alone two with a combined value of £10.5bn,” she said. Hodge explained that this transferred risk away from the rail industry back to government. If passenger forecasts are wrong and fewer new trains are needed, taxpayers will have to pick up the bill. In addition, the report finds the Intercity Express programme was poorly managed and could have cost billions more without a review in 2010, after Hitachi had already secured the work. Following that review, the manufacturer submitted a bid 38% cheaper than its original offer. Hodge said: “Had it not been for the review the taxpayer could have been badly ripped off. The department had begun the procurement without a clear idea of how many trains would be needed, which routes they would run on and what form of power would be required.” Rail unions backed the MPs’ critical report. Mick Cash, the RMT general secretary, said the committee was “shining some light on the murky racket of train procurement” and “drawing attention to the need to defend and develop train building capacity in this country”. Aslef’s leader, Mick Whelan, said: “A failure to put any long-term strategy for the rail industry in place has once more led to additional burdens, and risk, for the British taxpayer.” GUARDIAN

Energy minister Davey tells 'Big Six' energy suppliers he wants them to lose customers to smaller rivals

Ed Davey said it was a 'fantastic success story' that the Big Six - British Gas, npower, Scottish & Southern Energy, EDF, E.On and Scottish Power - have seen their market share slip this year, with smaller suppliers such as First Utility and Ovo Energy sweeping up customers. Independent energy suppliers' market share has doubled this year to nearly 10 per cent as energy users move away from the incumbent 'Big Six' providers in protest against poor customer service and high bills. He added: 'I want to go further and see them have a 30 per cent market share by the end of the decade,' First Utility is the largest of Britain's independent suppliers, holding 3.1 percent of the dual-fuel market, while others including Ovo Energy and Utility Warehouse, owned by Telecom Plus, make up the rest. The affordability of energy bills rose to the top of the political agenda a year ago when the opposition Labour party promised to freeze energy prices if it wins power in next May's election. The competition watchdog is currently carrying out an in-depth investigation into whether the Big Six have displayed any anti-competitive behaviour, a probe that could lead to the break up of some companies. The Big Six has face long-standing accusations that it raises and lowers prices en masse so that customers have nowhere to go in order to find a cheaper deal. The Big Six have always maintained that retail profit margins are modest at around 5 per cent, but critics say the 'vertical' model for energy - where large retail suppliers also own energy generation arms which make profits - means it is difficult to find out profit levels. DAILY MAIL

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Graphs at a glance: OECD report shows greater inequality is bad for growth. So why are the Tories pushing up inequality by cutting back the welfare state?

J.P.Morgan, in his time a successful banker, said:

“A man always has two reasons for doing anything. The good reason, and the real reason”.

“Doing”: The Tory led government is squeezing benefits by freezing, cutting and capping them.

They claim “the good reason” is to push the feckless unemployed off their dependency on benefits into jobs. Make them economically productive, thereby boosting their own incomes as well as our national GDP.

Now we at Ripped-Off Britons like to think the best of people. It is just about plausible that Tory policy makers actually don’t realise that benefits go mainly to the low paid not the unemployed. Benefits are far more a subsidy to low paying employers than a subsidy to the unemployed. But for this post let’s not go there – we go there in other posts.

For now we take a closer look at whether cutting benefits actually does improve the prospects of the poor and boost Britain's GDP. The Organisation of Economic Cooperation and Development (OECD) published a report in December 2014 which provides a helpful insight.

Benefits are paid by taxes. It is a transfer of money from the richer to the poorer, and therefore reduces the income inequality gap. Office for National Statistics (ONS) figures show UK inequality is reduced by these transfers from a Gini of over 50 (like Brazil, Bolivia, Botswana) to under 35.

ONS Figures

This leaves us less unequal than the US, but more so than France and Germany:

OECD Report

The OECD report shows far from boosting economic growth, high levels of inequality have a significant negative impact:

"Drawing on harmonised data covering the OECD countries over the past 30 years, the econometric analysis suggests that income inequality has a negative and statistically significant impact on subsequent growth."

Interestingly enough, the report shows that it is precisely the people the "Good Reason" claims to be good for that are hurt most. Their graph below shows the impact of inequality on numeracy for three categories of people, based on Parental Educational Background (PEB):

• Low PEB: Neither parent has attained upper secondary education (beyond GCSEs). The report states this constitutes about 5% of the population in the UK.
• Medium PEB: At least one parent has gone beyond GCSE, but not continued beyond secondary school.
• High PEB: At least one parent has attained qualifications beyond secondary school, e.g. a degree.

OECD Report

Greater inequality has no impact on the Numeracy Score for people of High PEB, and a modest negative impact on Medium PEB. But has a strong negative impact on people of Low PEB.


In terms of kids climbing up the ladder and attaining Tertiary (post secondary school) qualifications, the effect is even more startling. Higher inequality actually improves the attainment of those of Medium PEB, has no impact on those of High PEB, but is a disaster for those of Low PEB:

OECD Report

The OECD report states:

"The estimated coefficients imply that lowering bottom inequality by half of a standard deviation (which is the same as changing bottom inequality in the UK to be like that in France, or that of the US to become like that of Japan, or Australia) would increase average annual growth by nearly 0.3 percentage points over the subsequent 25-year period, with a cumulated gain in GDP at the end of the period in excess of 7 per cent."

Evidently trying to starve the poor into being rich doesn't work, neither for the poor nor for the British economy. 

So if the "Good Reason" is in fact b****s. What is the "Real Reason"?

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Graphs at a glance: OECD report shows greater inequality is bad for growth. So why are the Tories pushing up inequality by cutting back the welfare state?

J.P.Morgan, in his time a successful banker, said:

“A man always has two reasons for doing anything. The good reason, and the real reason”.

“Doing”: The Tory led government is squeezing benefits by freezing, cutting and capping them.

They claim “the good reason” is to push the feckless unemployed off their dependency on benefits into jobs. Make them economically productive, thereby boosting their own incomes as well as our national GDP.

Now we at Ripped-Off Britons like to think the best of people. It is just about plausible that Tory policy makers actually don’t realise that benefits go mainly to the low paid not the unemployed. Benefits are far more a subsidy to low paying employers than a subsidy to the unemployed. But for this post let’s not go there – we go there in other posts.

For now we take a closer look at whether cutting benefits actually does improve the prospects of the poor and boost Britain's GDP. The Organisation of Economic Cooperation and Development (OECD) published a report in December 2014 which provides a helpful insight.

Benefits are paid by taxes. It is a transfer of money from the richer to the poorer, and therefore reduces the income inequality gap. Office for National Statistics (ONS) figures show UK inequality is reduced by these transfers from a Gini of over 50 (like Brazil, Bolivia, Botswana) to under 35.

This leaves us less unequal than the US, but more so than France and Germany:

The OECD report shows far from boosting economic growth, high levels of inequality have a significant negative impact:

"Drawing on harmonised data covering the OECD countries over the past 30 years, the econometric analysis suggests that income inequality has a negative and statistically significant impact on subsequent growth."

Interestingly enough, the report shows that it is precisely the people the "Good Reason" claims to be good for that are hurt most. Their graph below shows the impact of inequality on numeracy for three categories of people, based on Parental Educational Background (PEB):

• Low PEB: Neither parent has attained upper secondary education (beyond GCSEs). The report states this constitutes about 5% of the population in the UK.
• Medium PEB: At least one parent has gone beyond GCSE, but not continued beyond secondary school.
• High PEB: At least one parent has attained qualifications beyond secondary school, e.g. a degree.

Greater inequality has no impact on the Numeracy Score for people of High PEB, and a modest negative impact on Medium PEB. But has a strong negative impact on people of Low PEB.


In terms of attaining Tertiary (post secondary school) qualifications, the effect is even more startling. Higher inequality actually improves the attainment of those of Medium PEB, has no impact on those of High PEB, but is a disaster for those of Low PEB:

The OECD report states:

"The estimated coefficients imply that lowering bottom inequality by half of a standard deviation (which is the same as changing bottom inequality in the UK to be like that in France, or that of the US to become like that of Japan, or Australia) would increase average annual growth by nearly 0.3 percentage points over the subsequent 25-year period, with a cumulated gain in GDP at the end of the period in excess of 7 per cent."

Evidently trying to starve the poor into being rich doesn't work, neither for the poor nor for the British economy. 

So if the "Good Reason" is in fact b****s. What is the "Real Reason"?

Read More

Rip-off News round-up. Our pick of the last week's media (Thu 11th December)

Blackmail: Premier Foods promises to rethink controversial 'pay-and-stay' fees imposed on suppliers after widespread condemnation by business leaders

-BBC NEWS Last week, the BBC's Newsnight disclosed that Premier, one of the UK's biggest food manufacturers, had asked for money from its suppliers, otherwise it would end their contracts. One supplier called it "blackmail", and the government said it was "deeply concerned". The employers' association, the Institute of Directors, said the scheme risked adding to the public's loss of faith in business. The Federation of Small Businesses warned that small businesses were being crippled by such practices. Now Premier has said it is willing to alter the scheme, which was part of its Invest for Growth programme, launched last year to revive the company's ailing finances. The practice of pay-and-stay is not unusual in manufacturing and retailing. After a competition inquiry, tighter rules were issued for the supermarkets under the Groceries' Code. But that applies to the relationship between supermarkets and suppliers, not to manufacturers like Premier. 

British workers suffer biggest real-wage fall of major G20 countries

The International Labour Organisation reports that in the three years to 2013 UK wages fared worse than most of the eurozone’s crisis hit economies. According to recent data released by the Office for National Statistics (ONS), wages in the UK fell 1.6% this year compared to 2013, marking a sixth straight year of declining levels of pay. The Bank of England said in its latest quarterly inflation report last month that the fall in pay, while acutest among lower skilled workers, has been registered in most parts of the labour market. Weaker-than-expected pay growth in Britain has generated lower than expected tax revenues for the government. This is a main reason why Chancellor George Osborne did not meet his deficit reduction target. GUARDIAN

MPs accuse PriceWaterhouseCoopers chief Kevin Nicholson of lying over tax dodge deals

Kevin Nicholson is PwC UK’s head of tax, and worked as an HM Revenue and Customs tax inspector in the early 1990s. In January 2014 Nicholson told parliament’s Public Accounts Committee that PwC did not “mass market” tax products or sell tax avoidance “schemes” to clients. But in November this year, new evidence revealed that PwC wrote hundreds of letters - 548 letters relating to 343 companies –to Luxembourg tax authorities to agree on how their clients structured their businesses for tax purposes. “It’s very hard for me to understand that this is anything other than a mass-marketed tax avoidance scheme,” said the committee’s chair, the Labour MP Margaret Hodge. “I think there are three ways in which you lied and I think what you are doing is selling tax avoidance on an industrial scale.” Nicholson denied lying to parliament, and added: “At the heart of the Luxembourg economy now is an economy that is based around businesses going there to finance [and] to hold investments… I’m not here to change the Lux tax regime. If you want to change the Lux tax regime, the politicians could change the Lux tax regime.” Last month’s analyses of the way multinational companies establish businesses in Luxembourg were based on a leaked cache of hundreds of tax rulings secured by PwC Luxembourg that showed major companies – including drugs group Shire Pharmaceuticals and vacuum cleaner firm Dyson – using complex webs of internal loans and interest payments, which have greatly reduced tax bills. GUARDIAN

Lords refused to cut costs by sharing catering services with MPs because they feared the quality of champagne "would not be as good"

Sir Malcolm Jack, the clerk of the Commons between 2006 and 2011, told MPs that there was a proposal to merge the two catering services when he was in office to save taxpayers' money. He said: "It [the proposal] was eventually thrown out because the Lords feared the quality of champagne would not be as good if they chose a joint service." Since 2010, the House of Lords has spent £265,770 on 17,000 bottles of champagne – equivalent to just over five bottle of bubbly for each peer. As of March this year, the house had 380 bottles in stock worth £5,713, predominantly held in its main cellar. The most expensive, the Chassagne-Montrachet premier cru, costs £26 per bottle. The House of Commons has spent even more on champagne, buying a total of 25,000 bottles at a cost of £275,221. As of March it had 582 bottles in stock, worth a total of £6,513. TELEGRAPH

MPs hiring even more relatives: Annual bill soars by 50% in four years to almost £3.8million

New figures show the bill for family members on the public payroll has soared by 50 per cent since the general election to hit almost £3.8million. Several Cabinet ministers are among almost 170 MPs who declare that they have a relative on their staff, with their wages funded by the taxpayer. When the new expenses regime was introduced in 2010, MPs were allowed to hire one relative, with the details declared on a register. The Independent Parliamentary Standards Authority, which is now responsible for policing MPs' claims, has revealed that in 2010 there were 137 MPs employing family members but the figure soared to 167 last year. The total pay bill has rocketed from £2.4million in 2010-11 to almost £3.8million in 2013-14. It means that the average salary paid to family members has risen by a third, from just over £17,101 to just over £22,400. Ipsa does not publish exact pay details, but gives salary bands in £5,000. Records show two Tory MPs pay their wives the most. Peter Bone's wife Jeannette receives between £45,000 and £49,999 a year for working as her husband's office manager. Christopher Chope's wife Christine is in in the same salary bracket. Labour frontbencher Hilary Benn pays his wife Sally up to £24,999. Shadow energy secretary Caroline Flint pays her husband Phil Cole as her senior parliamentary assistant on up to £39,999. Shadow transport secretary Michael Dugher's wife Joanna earns up to £34,999 after moving up three pay bands when she became his office manager. Ipsa said: 'We have introduced a number of restrictions and safeguards to regulate MPs employing family members or other connected parties. 'And, crucially, we think the public should know about these arrangements — which is why we publish all the details including the name, job title and salary range of all connected parties employed by MPs.' DAILY MAIL

OECD report: growing inequality since 1980s cut UK growth by 20%

The OECD, the west’s leading economic thinktank has dismissed the concept of trickle-down economics. Publishing its first clear evidence of the strong link between inequality and growth, the Paris-based Organisation for Economic Cooperation and Development proposed higher taxes on the rich and policies aimed at improving the lot of the bottom 40% of the population. Trickle-down economics was a central policy for Margaret Thatcher and Ronald Reagan in the 1980s, with the Conservatives in the UK and the Republicans in the US confident that all groups would benefit from policies designed to weaken trade unions and encourage wealth creation. The OECD said that the richest 10% of the population now earned 9.5 times the income of the poorest 10%, up from seven times in the 1980s. However, the result had been slower, not faster, growth. The authors added: “It is not just poverty (ie the incomes of the lowest 10% of the population) that inhibits growth … policymakers need to be concerned about the bottom 40% more generally – including the vulnerable lower-middle classes at risk of failing to benefit from the recovery and future growth. Anti-poverty programmes will not be enough.” It concluded that “income inequality has a sizeable and statistically negative impact on growth, and that redistributive policies achieving greater equality in disposable income has no adverse growth consequences.” Rising inequality is estimated to have knocked more than 10 percentage points off growth in Mexico and New Zealand, nearly nine points in the UK, Finland and Norway, and between six and seven points in the United States, Italy and Sweden. GUARDIAN

Food banks: Archbishop of Canterbury Justin Welby urges politicians to face up to Britain's hunger

The Archbishop of Canterbury, Justin Welby, launched a report into the “new phenomenon” that families are driven to relying on food banks because of failures in the welfare system. Many families are so desperate to avoid being evicted for rent arrears, or having their gas or electricity cut off that “they go without food and therefore see food banks as reintroducing that buffer in their finances which many have lost,” the report’s authors warn. They call for government backing to set up a new network called Feeding Britain, to co-ordinate the work of food banks and other voluntary organisations and charities – which currently receive just 2 per cent of the 4.3 million tonnes of waste food generated by the food industry every year. The report, Feeding Britain, by the All-Party Parliamentary Inquiry into Hunger in the UK, is careful to avoid party politics, and so does not mention cuts to the welfare system introduced by the present Government, such as the “bedroom tax” – but it is scathing about the alleged inefficiency of the Department for Work and Pensions. MP Frank Field said: “The most worrying aspect is the sheer inability of the department to deliver benefits efficiently and accurately. Some families wait… 13 weeks for their benefits to be processed, and this is a benefit where people are eligible because they have got no other income.” The inquiry team also criticises the way sanctions are imposed for some claimants who unintentionally fail to follow the rules. While it acknowledges there are people who cheat the system, others have been punished because they did not understand the rules, or for trivial reasons – including one man sanctioned for writing on the wrong side of a form. INDEPENDENT

Whitewash: rip-off pension providers will not be named and shamed

The results of an 18-month review by the UK’s competition watchdog into rip-off pension charges will not name and shame the worst offenders, leaving consumers in the dark about whether their scheme provides value for money. The Competition and Markets Authority (CMA) set up an ‘independent project board’ (IPB) to review pension charges following a report from its predecessor the Office of Fair Trading that revealed £30 billion of savings in pre-2001 defined contribution (DC) workplace pensions may be at risk of high charges and failing to provide value for money. The report goes against the general push towards greater transparency and lower charges in pensions. From April a 0.75% cap will be placed on pension charges so that those being auto-enrolled into a pension scheme will not have to pay extortionate charges. The cap will mean a saver with a pension pot of £30,000 will pay £225 a year for their pension scheme, compared to the £450 they would pay on a scheme that charges 1.5% - previously a typical levy for a pension. Campaign group ShareAction said the review appeared to be 'a stitch-up for savers'. ‘As we always predicted, this so-called inquiry looks like an effort to protect insurers who have exploited innocent savers over a long period, gouging out fees on more than £30 billion in poor-value schemes,' said Catherine Howarth, ShareAction chief executive. ‘This inquiry has no plan for further review or action and we fear it will simply be kicked into the long grass. But the fate of this inquiry deserves scrutiny from parliamentarians, and we will be speaking with MPs over the coming days to ensure that questions are raised in parliament. CITYWIRE

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Global taxpayers and honest businesses stump up to cover the countless billions lost to “industrial scale” tax dodging

SOURCE GUARDIAN: PriceWaterhouseCoopers chief Kevin Nicholson denies lying over tax deals. 

Kevin Nicholson is PwC UK’s head of tax, and worked as an HM Revenue and Customs tax inspector in the early 1990s. In January 2014 Nicholson told parliament’s Public Accounts Committee that PwC did not “mass market” tax products or sell tax avoidance “schemes” to clients. But in November this year, new evidence revealed that PwC wrote hundreds of letters - 548 letters relating to 343 companies –to Luxembourg tax authorities to agree on how their clients structured their businesses for tax purposes. “It’s very hard for me to understand that this is anything other than a mass-marketed tax avoidance scheme,” said the committee’s chair, the Labour MP Margaret Hodge. “I think there are three ways in which you lied and I think what you are doing is selling tax avoidance on an industrial scale.” Nicholson denied lying to parliament, and added: “At the heart of the Luxembourg economy now is an economy that is based around businesses going there to finance [and] to hold investments… I’m not here to change the Lux tax regime. If you want to change the Lux tax regime, the politicians could change the Lux tax regime.” Last month’s analyses of the way multinational companies establish businesses in Luxembourg were based on a leaked cache of hundreds of tax rulings secured by PwC Luxembourg that showed major companies – including drugs group Shire Pharmaceuticals and vacuum cleaner firm Dyson – using complex webs of internal loans and interest payments, which have greatly reduced tax bills.

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Graphs at a glance: NAO report shows public spending cuts are pushing the NHS into a black hole of deficit

The Office of Budget Responsibility's "Economic and Fiscal Outlook 2014", published in December 2014, stated that by 2019-20 public spending as a share of GDP will fall back below its lowest level since the Second World War. 

When questioned about this on BBC Radio4's Today Programme George Osborne retorted "Has the World fallen in? No it has not!". If Osborne's measure of economic success is the World not "falling in", perhaps he isn't doing so badly. Others may use other measures.

We are in a 'low wage recovery', where the rewards of relatively strong GDP growth are being kept by the few. Lower wages for the many and lowering tax rates for the few (top rate income tax and corporation tax) means no increase in government receipts.

The OBR put this planned collapse in spending in pounds and pence:

"Between 2009-10 and 2019-20, spending on public services, administration and grants by central government is projected to fall from 21.2 per cent to 12.6 per cent of GDP and from £5,650 to £3,880 per head in 2014-15 prices."  

The politically non-aligned Institute for Fiscal Studies (IFS) warned of more "colossal" spending cuts to come if the government aims to eliminate the deficit by austerity alone: 

Colossal cuts to come, on top of the colossal cuts that have already happened. The NHS is evidence of what is happening. A report by the National Audit Office shows National Health Service providers are falling into deficit like a row of toppling dominoes. The report states:

"The total number of providers in deficit increased from 25 in 2012-13 (10% of all secondary providers) to 64 in 2013-14 (26% of all secondary providers).

There were 5 NHS trusts in deficit at the end of 2012-13 and 22 at the end of 2013-14 [plus one more trust that was dissolved in October 2013, making a total of 23 trusts in deficit during 2013‑14].

The number of foundation trusts in deficit doubled from 20 in 2012-13 to 41 in 2013‑14."

The graph below shows how the dominoes are falling. 18 trusts which had neither a surplus or deficit in 2012-13 went into deficit in 2013-14. The graph shows another 10 trusts in 2013-14 with neither surplus nor deficit, perhaps to be the next dominoes to fall?

Fuscia and green text in graph above added by us

In November 2014 Colchester Hospital declared a "major incident" in which the hospital implored people not to go to its Accident & Emergency (A&E) unless they really really needed to. A result of the appalling Department of Health "marginal rate rule for emergency admissions"? This rule states a hospital gets 70% cut from its payment for any patients above the number they admitted in 2008/09:

"The 30% marginal rate rule for emergency admissions - under which providers are paid less for admissions over a certain level - was introduced in 2010 following concerns over growing emergency admissions."

This rule was specifically designed as a penalty to make hospitals restrict their A&E services.

Are the Tories fighting a righteous fight to bring down the cost of an excessively expensive health service? Not according to figures from the World Bank they aren't. UK health spending as a percentage of GDP is below the US, France, Germany, and below average for the European Union overall.

World Bank Figures

George Osborne did his best to create a smokescreen until the 2015 election. Until then he lobs occasional wads of cash at the NHS to keep it ticking over. Such as the £300 million announced in November 2014 to help the NHS get through the winter.  Dr. Mark Porter, the British Medical Association committee chair, dismissed this £300 million as a 'sticking plaster' saying there is a £30 billion funding gap opening up in the NHS. 

The National Audit Office report in November 2014, before the £300 million mentioned above was announced, said in 2013-14 another £500 million was lobbed at the NHS to keep the creditors at bay and to pay staff:

"[The] report notes that financial risk is increasing in NHS trusts and foundation trusts, and those in severe financial difficulty continue to rely on in-year cash support from the Department of Health. In 2013-14, over £0.5 billion extra money was issued to 21 NHS trusts and 10 foundation trusts to ensure that organisations in difficulty have the cash they need to pay staff and creditors."

Tossing a few hundred million here and there to plaster over the cracks is evidently the government's short term strategy to stop the World "falling in" before the next election. Will Dave and George pull it off? It's up to us voters, and we'll find out in May 2015.

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Graphs at a glance: NAO report shows public spending cuts are pushing the NHS into a black hole of deficit

The Office of Budget Responsibility's "Economic and Fiscal Outlook 2014", published in December 2014, stated that by 2019-20 public spending as a share of GDP will fall back below its lowest level since the Second World War. 

When questioned about this on BBC Radio4's Today Programme George Osborne retorted "Has the World fallen in? No it has not!". If Osborne's measure of economic success is the World not "falling in", perhaps he isn't doing so badly. Others may use other measures.

We are in a 'low wage recovery', where the rewards of relatively strong GDP growth are being kept by the few. Lower wages for the many and lowering tax rates for the few (top rate income tax and corporation tax) means no increase in government receipts.

The OBR put this planned collapse in spending in pounds and pence:

"Between 2009-10 and 2019-20, spending on public services, administration and grants by central government is projected to fall from 21.2 per cent to 12.6 per cent of GDP and from £5,650 to £3,880 per head in 2014-15 prices."  

The politically non-aligned Institute for Fiscal Studies (IFS) warned of more "colossal" spending cuts to come if the government aims to eliminate the deficit by austerity alone: 

Colossal cuts to come, on top of the colossal cuts that have already happened. The NHS is evidence of what is happening. A report by the National Audit Office shows National Health Service providers are falling into deficit like a row of toppling dominoes. The report states:

"The total number of providers in deficit increased from 25 in 2012-13 (10% of all secondary providers) to 64 in 2013-14 (26% of all secondary providers).

There were 5 NHS trusts in deficit at the end of 2012-13 and 22 at the end of 2013-14 [plus one more trust that was dissolved in October 2013, making a total of 23 trusts in deficit during 2013‑14].

The number of foundation trusts in deficit doubled from 20 in 2012-13 to 41 in 2013‑14."

The graph below shows how the dominoes are falling. 18 trusts which had neither a surplus or deficit in 2012-13 went into deficit in 2013-14. The graph shows another 10 trusts in 2013-14 with neither surplus nor deficit, perhaps to be the next dominoes to fall?

Fuscia and green text in graph above added by us

In November 2014 Colchester Hospital declared a "major incident" in which the hospital implored people not to go to its Accident & Emergency (A&E) unless they really really needed to. A result of the appalling Department of Health "marginal rate rule for emergency admissions"? This rule states a hospital gets 70% cut from its payment for any patients above the number they admitted in 2008/09:

"The 30% marginal rate rule for emergency admissions - under which providers are paid less for admissions over a certain level - was introduced in 2010 following concerns over growing emergency admissions."

This rule was specifically designed as a penalty to make hospitals restrict their A&E services.

Are the Tories fighting a righteous fight to bring down the cost of an excessively expensive health service? Not according to figures from the World Bank they aren't. UK health spending as a percentage of GDP is below the US, France, Germany, and below average for the European Union overall.

World Bank Figures

George Osborne did his best to create a smokescreen until the 2015 election. Until then he lobs occasional wads of cash at the NHS to keep it ticking over. Such as the £300 million announced in November 2014 to help the NHS get through the winter.  Dr. Mark Porter, the British Medical Association committee chair, dismissed this £300 million as a 'sticking plaster' saying there is a £30 billion funding gap opening up in the NHS. 

The National Audit Office report in November 2014, before the £300 million mentioned above was announced, said in 2013-14 another £500 million was lobbed at the NHS to keep the creditors at bay and to pay staff:

"[The] report notes that financial risk is increasing in NHS trusts and foundation trusts, and those in severe financial difficulty continue to rely on in-year cash support from the Department of Health. In 2013-14, over £0.5 billion extra money was issued to 21 NHS trusts and 10 foundation trusts to ensure that organisations in difficulty have the cash they need to pay staff and creditors."

Tossing a few hundred million here and there to plaster over the cracks is evidently the government's short term strategy to stop the World "falling in" before the next election. Will Dave and George pull it off? It's up to us voters, and we'll find out in May 2015.

Read More

Graphs at a glance: Government reforms of Higher Education and Family Health created thousands more Administrator jobs, but no more teachers or nurses.

Some interesting graphs we stumbled across during our general research show how Administrators have been the big winners from reforms in both the Higher Education and the Family Health sectors.

It would be interesting to know if this is the case in other areas of the Public Sector. If you come across any more, please email them to us to graphs@rippedoffbritons.com

1) National Audit Office report, "Further education and skills sector: implementing the Simplification Plan", shows: 
Between 2010/11 and 2012/13 the total number of "Administration and central services" staff rose by 5%. Teaching and teaching support staff together fell by 8%.

2) Health & Social Care Information Centre report shows:
Between 2009 and 2013 the number of GPs remained about constant. However, "Admin & Clerical" rose by about 20%.

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Rip-off News round-up. Our pick of the last week's media (Thu 4th December)

Autumn Statement: George Osborne to shrink the State to its smallest since the 1930s

-TELEGRAPH The Chancellor's spending plans mean the public spending relative to the whole economy would be the smallest in 80 years, the Office for Budget Responsibility (OBR) said. The OBR, the independent government forecaster, said that Mr Osborne's tax and spending policies will require an austerity programme in the next Parliament much bigger that the one implemented by the current Government. That will mean far-reaching new reductions in "day-to-day" public services, including those provided by local councils, the forecasters said. It calculated that between 2009-10 and 2019-20, spending on public services and central government will fall from £5,650 to £3,880 per head in 2014-15 prices. Around 40 per cent of these cuts will be delivered during this Parliament, with around 60 per cent to come during the next, the OBR estimated. With major items of spending like the NHS and the state pension protected from cuts by political promises, independent economists say that the scale of the cuts that would be required in unprotected areas would be unprecedented and potentially leave the State unable to deliver some of its current services. The budget for Whitehall departments, not including health and education, would fall from £188 billion at the start of this decade to £86 billion in 2020, the OBR suggested. If Mr Osborne's plans are realised, public spending in 2019/20 will be 35.2 per cent of gross domestic product. It currently stands at 40.5 per cent. The lowest level achieved by Margaret Thatcher's governments was 37.3 per cent in 1988/89. The current post-war low was set in 1957/58 towards the end of an economic boom that led Harold Macmillan to declare that "most of our people have never had it so good." Mr Osborne has suggested that the Conservatives would try to find many of the post-election cuts from the welfare budget. He also promised to find £10 billion of savings in public sector “efficiency.” He gave few details of how the £10 billion will be found, but signalled it would mean at least another two years of pressure on public sector wages. Matthew Whittaker, an economist at the Resolution Foundation, said that none of the parties has been candid with the electorate about “just how much more fiscal pain there may be to come after the election.” 

Successful publicly owned East Coast Mainline gets the chop: Stagecoach and Virgin joint-venture wins franchise

Unions have condemned the reprivatisation of the service, which has performed well in public hands over the last five years, recording strong customer satisfaction scores while returning all profit to the Treasury – making payments of £1bn in total. The state-owned company, Directly Operated Railways (DOR), stepped in to rescue the London-to-Edinburgh route from National Express in 2009, because it could not deliver the payments it had promised in its contract. The arms-length operator paid £225m to the government in the last financial year. The transport secretary, Patrick McLoughlin, said DOR could not bid, because having the company owned by the Department for Transport running the line was always a “stop-gap measure”. But critics point out that about three-quarters of Britain’s railways are run in full or part by subsidiaries of foreign, state-owned rail firms, including Deutsche Bahn’s Arriva, the Dutch-owned Abellio and Keolis, 70%-owned by SNCF. The government is also preparing to sell its stake in Eurostar, almost certainly to SNCF, the majority owner. GUARDIAN

Lloyds promises to ditch sales targets in bid to snuff out mis-selling and overhaul the bank's tarnished image

Head of Retail, Alison Brittain, described it as a ‘step change’ for the state-backed lender, which has racked up an £11.3bn bill for mis-selling payment protection insurance and was fined £28m last December for its high pressure sales culture. Lloyds were notorious for giving its most prolific salesmen bottles of champagne and ‘grand in the hand’ bonuses. Describing ditching sales targets as an ‘overwhelming symbol of a different way of thinking and running a business’, she said: ‘We’ve managed all the risk out. We knew we were running a clean bank, but this last symbolic gesture says to everybody who works all the way through the line that it’s just about the quality of the conversation you have with the customer, not about sales.’ But the new regime will still open up Lloyds to criticism as it will impose strict targets on salesmen to meet a certain number of customers. A senior personal banking adviser, who asked not to be named, said: ‘The directors always paint a false picture to cover their own backs. Any person knows the sales culture at Lloyds is appalling. Earlier this year the bank increased sales targets and last year the FCA fined Lloyds for mis-selling protection policies.’ The High Street giant said that it will introduce its ‘radical’ new regime at 2,249 Lloyds, Halifax and Bank of Scotland branches from January 1. DAILY MAIL

£50m tuition fees loan scam? Thousands of ‘fake’ students discovered at new private higher education colleges

The report by the National Audit Office (NAO) was prompted by a Guardian investigation into the sector which found that lecturers were teaching to empty or near-empty classrooms. Students and staff alleged that bogus students who were barely literate were using colleges as a “cash point” to access taxpayer-subsidised loans they believed they would never pay back. The new breed of private higher education colleges can charge students £6,000 a year in fees. For two of the largest of these new institutions – London School of Business and Finance, and London School of Science and Technology – the dropout rate rose to about five times the average. By comparing data on those claiming student fees with those registered with exam board Pearson/Edexcel, the spending watchdog identified 2,963 students – 20% of the total studying HNDs – who accessed student funding in 2012-13 without ever being registered to sit exams. This figure excluded students who dropped out that year. In total those students could therefore have accessed over £50m. The auditor found that another group of 5,500 undergraduates from the EU have been unable to prove they were either living in the UK or entitled to public funding. A separate internal government inquiry found that 1,000 of these students, most of whom come from Bulgaria and Romania, were definitely fraudulent and had already claimed £5.4m in student loans before being found out. The government has been able to recover just 7% of that money so far, the NAO said. GUARDIAN

Battersea affordable homes: Mayor Boris attacks 'gloomadon poppers' in row over whether Londoners can afford them

Of the 3,500 homes being built as part of the Battersea Power Station development, 550 will be affordable, though 150 may not come until the final stage in 2025. Mayor Boris Johnson claimed 60 per cent of the homes would go to UK passport holders. Johnson said: “All the gloomadon poppers and those inclined to be negative about that aspect of this wonderful scheme will put that in their pipe and smoke it.” But Labour members of the London Assembly condemned the drive to sell the flats to wealthy foreigners, saying they were “a million miles from affordable to ordinary Londoners”. Asked later by the Standard if he was sure the UK passport holders actually lived in London, Johnson said: “I can’t tell you where their passports were issued.” Estate agency Savills said £7 billion of international money flooded into London for high-end homes last year, with two thirds coming from investors rather than owner-occupiers. Lower down the market, new buyers are being priced out and high rents are squeezing even middle earners. EVENING STANDARD

Trunk and disorderly: tree grows inside squalid, illegally converted house

An illegally converted house in south London with a tree growing through the wall of one room may have been earning a rogue landlord £40,000 a year, according to the council that has repossessed it. The three-bedroom terraced property in Clapham had been transformed into a rental home with eight rooms, each likely to cost around £100 a week at market rate. The house is one of 1,200 “shortlife” properties that were let to housing associations and co-operatives in the 1970s when Lambeth council could not afford bringing them up to a letting standard. Although they were meant to be sublet for only a short time, four decades on the council is still reclaiming them, with more than 40 yet to be recovered. Some fell into the hands of individuals after the original deals were made. Following a court order to the landlord in the latest case, the council repossessed the property last week and workers were astonished to find a tree growing into one of the rooms where a first-floor extension had been built around a branch. An electrical cable passed through a hole drilled into the branch. There were no proper emergency exits and the eight occupants shared a single bathroom. The council is considering taking legal action against the landlord. On Friday, a government-backed bill designed to prevent landlords evicting tenants for complaining about poor condition of homes fell down when not enough MPs turned up to vote. GUARDIAN

Bribery worse in the west than in developing countries, finds OECD

An examination of 400 cases shows 57% of bribes were paid to win public procurement contracts, with most occurring in wealthy countries. Almost two-thirds of cases occurred in four sectors: mining (19%); construction (15%); transportation and storage (15%); and information and communication (10%). More than a quarter of the bribes were promised or given to employees of state-owned companies and a further 11% involved customs officials. Heads of state and ministers were bribed in 5% of cases but received 11% of total bribes. In most cases (57%), bribes were paid to win public procurement contracts, followed by clearance of customs (6%) and attempts to gain preferential tax treatment (6%). In 41% of cases, management-level employees paid or authorised the bribe, whereas chief executives were involved in 12% of cases. Intermediaries were involved in three out of four cases. Contrary to public perceptions, most bribes were to win contracts from state-owned or controlled companies in the west, rather than in the developing world, and most bribe payers and takers were from wealthy countries. “Most international bribes are paid by large companies, usually with the knowledge of senior management,” the study said. The report also revealed it took seven years to conclude corruption cases compared with two years in 1999. “This may reflect the increasing sophistication of bribers, the complexity for law enforcement agencies to investigate cases in several countries or that companies and individuals are less willing to settle than in the past.” The complexity and concealed nature of many deals meant its findings revealed only “the tip of the iceberg”. GUARDIAN

Families spending less than in 2006, says ONS

Family spending rose to £517.30 a week last year - but remains below pre-crisis levels when inflation is taken into account, official figures show. Average household spending stood at £539.80 in 2006. The divide between rich and poor is also clear, with the lowest-earning 10% of households spending an average of £189.80 a week. This compared with an average of £1,119.50 a week for the 10% of highest-earning households in the UK. The Family Spending Survey is compiled every year by the ONS. Housing costs, such as rent and fuel, were top of the expenditure list, ahead of transport costs. It shows that £74.40 a week was spent on average on housing, fuel and power in 2013. This equates to 14% of household spending. However, this figure excludes mortgage interest payments, British council tax or domestic rates in Northern Ireland. A rise in gas and electricity prices pushed this category to the top of the household spending list in 2013, the ONS said. A previous big hit for family finances was transport, which was second on the list last year at £70.40. Nearly half of this was the cost of running a car, namely petrol, diesel, repairs and servicing. Transport remained a significant expense for families in rural areas of the UK. In these areas, it cost £85.50 a week. BBC NEWS

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