Category Archives: economy

FCA to allow bankers to to do what they want

In the dim and distant past, some bankers were a little bit naughty. In fact, some made it into our evil hall of fame, and one or two even got sent to jail as a result. Some notable examples are the Libor fixing scandal, the PPI mis-selling scandal, money laundering, the rate swap scandal, and manipulation of the foreign exchange rates. In response to the barrage of illegal behaviour, the Financial Conduct Authority was set up to keep an eye on the banks. The FCA is (in theory) an independent body, set up in 2013 to replace the Financial Services Authority, to oversee both high street and wholesale banking.

Unfortunately the FCA has been doing its job too diligently. When it has uncovered potential wrongdoing, it has had the audacity to speak out about it. Now the Treasury has had enough of such ridiculous behaviour, and is seeking to put a stop to the bank-bashing. The first step in that was George Osborne firing the previous FCA chief, Martin Wheatley, and replacing him with Tracey McDermott, who has already promised bankers that she won’t encumber them with more regulations.

One thing that the FCA were investigating was whether pay and bonus structures were encouraging individual bankers to misbehave. Examples are Fred Goodwin, who led RBS in to a situation where the government had to buy it out before it collapsed, yet he still walked away with a £693,000 a year pension. We would imagine that the FCA wondered whether some linking between poor performance and pay might have encouraged better performance. But we’ll never know if that is what they were thinking, because their report has been gagged;

The FCA had previously said that the report would be the most significant thing it did in 2015, but shortly before it was due to be published, they decided to quietly work with banks on a one to one basis, to persuade them to “have a cultural change” instead. In repose, Conservative MP Mark Garnier, who is a member of the Treasury Select Committee, responded to the news by going on Radio 4 to question whether the Treasury had too much influence on the FCA (which the Treasury of course denied). George Osborne, who has met with senior bankers over 90 times since taking office did however say that the age of banker bashing was over, and that the UK would aim to be the best place for global banks to have an HQ. Because that worked so well for us before. Mwhahaha.

Update – 5th Jan 2016

The FCA today announced that it would take no action against HSBC for actively helping clients evade tax;

The FCA concluded that while HSBC did break the rules, they have changed their ways since then, so it didn’t need to take any action against them. That means that the only person who is in trouble over the tax evasion is the whistleblower who brought the wrongdoing to public light – he has been sentenced to 5 years in jail for violating Swiss bank confidentiality rules. Mwhahaha.

In completely unrelated news, HSBC are shortly about to conclude a 9 month review in to whether it should move its headquarters out of the UK (and therefore out of the FCA’s control), with the corresponding loss of city jobs that George Osborne is so keen to avoid.

Deficit up again – blame it on the poor

On Friday the government announced that the deficit was up to the highest monthly level since 2009 – £8.6bn in October alone. This is in part because the UK economy is not particularly growing (inflation was negative last month). Unlike countries, such as the US, who have not engaged in harsh austerity, the UK economic recovery is on a go slow. Countries who have been willing to spend on capital projects have seen their GDP grow far faster than the UK. That means that we don’t have increasing taxes coming in to help balance the books.

Another reason for the increased deficit is pensions. While inflation was negative and wages are stalled, pensioners are taking an ever increasing proportion of the UK’s benefits bill. In order to secure the grey vote, the Tories promised to give pensions a “triple lock” whereby the state pension is guaranteed to go up by price inflation, wage inflation or 2.5% – whichever is greater. Pensions income is racing away from other income and other benefits. From April 2016, the state pension will be worth £119.30 a week (compared to £57.90 jobseekers allowance for a 24 year old for example). Pensions make up £95bn of the state budget thanks to the triple lock, and with people living longer and longer, that super inflationary increase is not going to help the chancellor balance the books.

But don’t worry – there’s a budget this week, and instead of keeping pension inflation in line with everyone else, or injecting work in to the economy, we can cut back some more essential services or screw the poor some more. Mwhahaha.

As benefits are cut, so are wages

The Tories have spent the last 6 years dismantling the welfare state, with a view to improving the economy. Fortunately some employers have realized that when the state doesn’t have employees backs, they are free to screw employees. How do we know this? The ONS has published figures this week about the number of people paid less than the living wage, and how that has changed over time.

Statistics show that the percentage of people (or more accurately the percentage of jobs) paying below the living wage was steady at about 13% until 2010 when the Tory-Lib Dem Collation got in. Since then the percentage has increased to almost 20% in London, and nearly 25% outside London. Employers know that with benefits all but eradicated, unskilled employees in particular in the accommodation, food services and retail sectors have no option but to accept whatever pay they can get. Average pay is also completely failing to keep up with inflation, showing that these issues are not confined to the lowest paid jobs. In fact, the median pay today is worth 10% less in real terms than it was in 2008. Mwhahaha.

There are some other inequalities hiding in the data too – women are far more likely than men to be paid less than the living wage;

Living_Wage_Gender

and the youngest and oldest people are more likely to be underpaid too, with 18-24 year old’s the worst hit. The standard justification for that is that they have less experience, so are worth less, but it’s hard to see how a 24 year old, full of energy and enthusiasm, with a potential 6 years experience under their belt is truly worth so much less than a pensioner.

Living_Wage_Age

The truly evil thing is, I doubt anyone is surprised.

Osborne wants to hamstring future Chancellors

MPs today will vote on whether or not to compel all future governments to always run a surplus rather than a deficit. Osborne sees this as a way to enshrine the Tory philosophy of not spending in to law. While it may seem sensible to not over spend, a law to enforce that is actually pretty evil. First of all, the lack of such a law does not force a government to run a deficit. Any government can choose to run a surplus without there being a law to compel them to. Secondly, the presence of such a law prevents any chancellor from taking steps to control the economy – it’s like doing the job with one hand tied behind your back. Osborne has run a deficit for the past 6 years – and a larger deficit than he said he would. Why? To have had a surplus would have required them to fire half of all public servants (nurses, police, teachers, civil servants, etc.), stop paying pensions and unemployment benefit, and abandon all infrastructure projects. That would cause massive unemployment, cutting tax takings, requiring further cuts, in a viscous cycle to the bottom. That would have plunged the country in to a very dire position where tens of millions of unemployed were on the streets begging for food to feed their families. This law would compel any future government to do exactly that given a similar global economic crisis. Mwahahaha.

Would any government actually do that? No. Even the Tories aren’t evil enough to do such a thing. So what’s the point of the law if it would hurt everyone so badly? Well, it allows two things – first of all it allows Osborne to make swingeing cuts to the public services while saying he has no choice because of the law. Secondly, if any party that believes in spending our way out of a recession ever gets in to power, they will have to repeal this law. That is not impossible, but it’s harder for that government than it otherwise would be – so it puts future obstacles in the way of any government who wants a more flexible economic policy.

Not only is Osborne introducing a thoroughly evil law, he is using this as an opportunity to throw huge amounts of mud at Labour, who appear to be in complete disarray over the issue. Some of the party want to back it simply to appear strong on the economy (which is like being friends with the playground bully just to appear tough yourself), some of the party strongly oppose it, and the party leadership is swinging embarrassingly between the two camps.

So what has Osborne actually said to cause such discontent? First of all, he is quoted as saying that the poor are suffering from “Labour’s Great Recession”. Is this Labour’s Great Recession? It is true that Labour presided over a period of deregulation in the financial sector. But as the Bank Of England confirmed in 2014, this was a “global banking crisis that no single country could have stopped”. Blaming this on Labour is ridiculous, and the evil audacity of doing that must be applauded. Osborne also said “they have confirmed they want to go on borrowing forever – loading debts onto our children that they can never hope to repay”. Clearly that is absurd hyperbole. Opposition politicians are simply saying that they don’t want to work with one hand tied behind their backs, not that they want to increase debt for ever. That doesn’t stop Osborne from exaggerating to produce some nice quotes for the press to get their teeth in to though.

How to pretend to deny something

There can’t be anyone who hasn’t heard of pig-gate. In an acknowledged act of revenge, Lord Ashcroft published salacious gossip about David Cameron porking some pork. Is it evil? No, of course not. If it happened, the pig was dead anyway, and no-one was harmed in any way (other than perhaps Cameron). Was it true? No-one really cares, because it’s funny and is exactly the sort of thing that people could imagine him doing. And he has been pretty unpleasant about laying in to people like Corbyn, so he deserves to take some grief for a change.

But what is more illuminating is the way Cameron has tried to deny it ever happened without actually denying it.

Yesterday when reporters confronted Cameron yet again about the story, he said “a very specific denial was made a week ago and I’ve nothing to add to that”. But a week ago all he said was that he would “not dignify the allegations with a response”. Cameron was hoping that reporters and the public would think that he was denying that it ever happened by claiming to have already made a denial, when in fact he has denied nothing at all. It’s a classic evil trick designed to fool everyone, and judging by some of the headlines, the lazier reporters were taken in. Mwhahaha;

This trick might be simply part of a fake denial of a personal embarrassment that doesn’t impact Cameron’s ability to run the country. But it’s exactly the same evil trick as is used every day by the government. They claimed to have been “the greenest government ever”, but have killed the renewables industry. They claim that austerity is helping the economy and therefore the country, despite sustained evidence that millions of the poorest people are worse off than ever. They claimed to not want to take taxes just to give them back to the same people in benefits, but then only cut the benefits. But just like with the pig, if they keep repeating the claims, eventually someone will believe them.