Why despite 3 profit warnings did the Tory Government keep giving Carillion public contracts? Because its Chair was a key supporter?

Not sure he was a donor but Carillion Chair, Philip Green, was an open Conservative supporter. The corruption of public life in national politics (and local politics) is just appalling. Left and right politicians can be corrupt, but this current Tory regime is simply beyond the pale.

I found out at the Newham Governor Forum tonight that the only school in Newham with a Carillion contract is able to carry on (due to a willing subcontractor). Many other public bodies with more exposure to Carillion are running around trying desperately to maintain services.

Just a thought. If we could nationalise the banks in 2008 when they went bust, why can't we nationalise Carillion now?

LOBOs. Cllr Gray's Response to Newham Council’s Annual Treasury Management Report 2014/15

I spoke after Cllr Whitworth raised concerns on this item 14 at Monday evening (7.12.15) at Full
Council.

"Thank you Chair. John Gray, West Ham ward, speaking as a Councillor, expressing concerns on behalf of my constituents about Newham Council’s exposure to LOBO loans, in this report referred to my colleague, Cllr Whitworth. It now appears to be accepted internally that these concerns are to some extent at least justified.

I refer to appendix 4 of the report pages 75-79 which I interpret as a clear acceptance that due to what is called “unforeseen” events after we took out these loans, it now means that they are now quote “expensive” - so my chief issue now, is whether or not, we can do anything about our ongoing exposure to these loans. I think we have to fully admit that we are in a hole and rule number one when you are in a hole, is to stop digging.

This is after all public money, very large amounts of public money, so it is of importance that in the best of times that every penny is spent wisely and now in the worst of times, that this is of even greater importance.

We must learn the lessons from the past. Especially when the Council is considering taking advantage of current low interest rates to invest in capital projects, that are aimed at getting a commercial return in order to try and offset some of the ‎cuts in income.  We have suffered due to savage cuts in Government grants and financial support in Newham. Further loans will not only increase our risk but the cost of existing loans will have a negative impact on our ability to service new ones.

It is clear that even though we are a relatively small outer London borough, we have the single largest exposure to LOBOs in the country. We are paying more for our loans than any other local authority in the country. The correct interest rate comparison is not with the toxic long term fixed rate PWB loans still on our books but with what we would be paying otherwise. We will have this exposure possibly for the next 65 years. ‎

I posted an article yesterday on my website written by a leading solicitor on LOBOs and then was sent the following private message. “John... When I was Treasury Manager at **** we avoided any fancy products. We reasoned that the banks were offering products for their benefit rather than ours, and if we couldn't completely understand and explain it then we didn't want it”.

Before we apply for any new loans,  we must apply in my view, this “fancy products” test.

I was pleased that the audit board has decided to investigate whether or not there is a legal case to be made against ‎the Banks and our advisers. Remember at the same time LOBO salesmen were selling these loans, the Bank traders were conspiring and manipulating interest rates. Remember also that the Banks earned enormous profits from day one of a LOBO sale and that some banks paid some brokers and advisers huge commissions or kickbacks without telling or fully disclosing to clients.

Finally, council, we must clean up the British financial services industry. When will these financial scandals end? It allowed pensions fraud by Robert Maxwell, insurance mis-selling, payment protection insurance fraud and in 2007 and 2008 they almost completely destroyed our economy. We currently face a new the scandal developing of grotesque and hidden fees and charges on our investments.

I fear that I cannot support this report in its current format but shall await the response from Executive before making my decision".

I will post the response from the Executive Member and Mayor later. 

Hat tip photo Joel Benjamin.

Osborne plays a deceiving game

Hat tip to Bob S for his link to Facebook site "Fight Propaganda" who have dissected George Osborne's speech at the Tory Party Conference last week. Check the references below.

"With scores of economists indicating through open letters that Osborne is making bad financial decisions, and indicators of poverty rising sharply, It is impossible to see these parts of his speech as anything other than misleading propaganda.

Market crash not Labour: www.independent.co.uk/news/uk/former-bank-of-england-governor-claims-labour-government-not-to-blame-for-last-financial-crash-9948434.html Crash started in America: http://www.economist.com/news/schoolsbrief/21584534-effects-financial-crisis-are-still-being-felt-five-years-article

More debt than every Labour Government: www.politics.co.uk/comment-analysis/2014/06/17/the-coalition-will-leave-more-debt-than-all-labour-governmen

Slowest economic recovery since 1720: http://www.bankofengland.co.uk/publications/Documents/quarterlybulletin/threecenturiesofdata.xlsx www.independent.co.uk/voices/comment/britain-has-taken-longer-to-recover-from-recession-than-at-any-time-since-the-south-sea-bubble-9645218.html 

Homelessness up 40%: https://www.gov.uk/government/collections/homelessness-statistics 

Food bank use: http://www.trusselltrust.org/stats 

Longest sustained decline in average wages since records began: www.standard.co.uk/news/uk/british-workers-suffering-worst-decline-in-real-wages-on-record-9789942.html 

Economist open letter: http://www.taxresearch.org.uk/Blog/2015/06/12/80-economists-say-osbornes-economics-make-no-sense-in-the-guardian/ 

Transcript of speech: https://www.politicshome.com/party-politics/articles/news/george-osbornes-full-speech-tory-conference"

"We need a reckoning with our banks..."

Great Labour Party political broadcast on "A new approach to Banking". Yes, Ed we do need "a reckoning with our banks". Broken markets need... fixing. That is what real progressive governments do.Go for it!

Payday loans v Bank loans - between a rock and a hard place?

Following this post about Ed Miliband attacking the "wonga economy", I have been having the really important debate below via Facebook private chat with a UNISON member struggling to bring up her kids and pay the bills.

I think it is really important that we don't demonise people who in the real world feel forced to take out pay day loans and instead concentrate more on getting the Banks and credit unions to raise their game.

Name has been removed. Permission given to post.

"Hi John: Hmm ... just
had to pitch an alternative view before Milliband and all do anything stupid with payday loan companies ... of which Wonga is only one! Last month a friend went over her overdraft limit with her Bank by £61 for about 5 days ...got a letter and have been charged £61!!!! Same amount with a payday loan company would have been approx £15-£30!

And yet we're told payday loan companies are taking advantage? Really?! I feel strongly that the focus is being put that payday loan companies are the bad guy in this. Actually they're filling a gap that has been forced between banks and loan sharks. There is no middle ground. You're either using banks or your not. Once you cross the line it's very hard to get back into 'main stream'.

Many of the people making these judgements probably have never been in a place where they can't use the bank, don't have access to easy credit. What happens when you contact your bank to tell them you've been made redundant and ask them for help. Redundancy money is due but won't be in for a few weeks. Their response is far from helping you ... instead they remove your overdraft of £500 with no notice, your mortgage is due out, .. you have £10 in the bank. Your credit card has a couple of hundred left on it. You call them and ask if you can bump up your limit and get told no. .... what are you going to do now? Where can you get money? You have to pay the bills, you need fuel in the car.

You may choose to skip a payment to make ends meet ... now your credit rating is at risk. But choice of food or concern of credit rating? You take the food. But then you start to get on your feet. People now won't lend to you because you're a credit risk. Then your car has a major malfunction. You need it to get to work. It's going to cost £300 to fix. Then you start to look for the alternatives ...

There's a chap down the pub who buys jewellery ... there's a pawn shop in town ... there's a payday loan who can give you £300 now ... it's in the bank in 20 mins and you can pay the bill. It'll cost you about £70 but if you bounce your bills instead each dirct debit will cost you £25 (minimum), if you go over your overdrawn that'll cost you £25 or more ... so actually now £70 sounds quite reasonable.
Instead of painting pay day loans as the enemy they should be being praised for providing a service that the banks aren't prepared to.

Banks are rigid, unhelpful and quite often patronising. They charge massively compared to payday loans ... check out £100 overdrawn /over limit compared to £100 with a payday loan ... it's CHEAPER to use a payday loan (source - Banks vs Wonga). The banks are nothing but bullies who abuse customers because they know we have no choice but to use them. you have to have an account to get salary paid in, to pay direct debits ... they restrict life and cost more than most payday loans.

It really makes me cross that nobody is challenging the banking structure before suggesting whipping the lifeline of payday loans away from people who are using them quite happily and responsibly. Yes Pay Day loans are expensive ... but they're not exploiting people. Loan Sharks and Banks are really the abusers - Pay Day loans offer a lifeline when everyone else would watch you drown. I know some people use them and get into trouble - but there are many thousands of people who use them for the purpose designed.

It's them who would be penalised if regulation is tightened too much - and I am one! you'd be as good as putting the noose around my neck ... I couldn't cope without that occasional help and support from the payday loan companies. I have nowhere else to go ... and if you make it too strict and force credit checks I would be in enormous trouble. I don't know how I would cope. Please help and don't let them strangle the life out of me.

Credit unions are touted as the alternative ... but you have to save with them to build credit ... and even then its normally to a max of £200. They are not a good comparable. Much better would be for banks to offer to clear pay day loans by taking on the debt, help people learn to budget, and a manageable way to reduce the spiral. But while they remain fixated on 6 year out of date credit history that bears no reflection to where you are today banks are nothing but a patronising hindrance for anyone with a poor credit rating. Sorry John but this one makes me SO cross ... people are slating Wonga ... why not the others too? And yet Wonga got me out of a huge mess, no hassle, no patronising, and the highest level of customer service. Banks vs Wonga ... I'd go Wonga everytime. Just had to share a different view xx

John Gray: Hi,  Yes, banks are pretty rubbish as well but they want to lend long term and do set stupid short term rates for customers who fall foul. But Pay Day loans can charge up to 4000% per year 4000% - credit unions do not have a £200 limit? but they do have some restrictions but please, please join one and while you may have to take a pay day loan out don't think anyone is having a go at you, blame the company and the society that forces working families to feel they have to do so in order to survive. Good to hear from you again. Take care. John 

Hi John; Yep apr on pay day loans is mad ... but for a month is often cheaper than bank overdraft or charges. .. banks hide this info away and thats my issue with people attacking pay days. Makes me cross to hear politicians saying ahhh the apr is terrible ... but not looking at what else could be done. The reason pay days get away with it is because there is no practical solution or alternative. I looked into credit union and they genuinely couldn't help me as I couldn't afford to save with them first. They'll only lend a multiple of what you regularly save with them ....and only when you've made several payments. Or that's what it was when I investigated it before .... might have changed since.

I don't feel I'm being blamed for using pay days but I am terrified there will be a knee jerk ban on them. Haven't needed them for a while but they are my security blanket against problems ... to know that in 20 mins I can get no hassle no questions cash boost is reassuring. Sorry this has hit a nerve as you can tell ... I think paydays are greedy on their apr ... but I prefer their open style and approach. They don't judge me. I know what it will cost and its a grown up clear way of borrowing money. Rather than the banks who I find appalling to deal with now I have a bad credit rating ... they patronise, and make me feel like the lowest of the low. I Lol ah bet you've missed by little rants and outbursts really haven't you. Hope you're keeping well. xx

John Gray Hi: I have missed your rants! keep them up! I think we are both right over this. Pay day loans suit some folk but most people would be better off without them. Wonga makes over 50% of its profits from fines and roll over loans. If workers had a fairer share of the income cake and decent pay rises then they would not need such loans in the first place! 

Hi John: Lol ok agree to disagree ... but try not to let them be taken away without a viable alternative being put in place. Eg if banks offered a guaranteed acceptance loan to convert off so people can get off the hamster wheel. Otherwise people will suffer ... and when they're struggling already turning off a source of coping ... even if its far from ideal ... would be catastrophic for some people and families. Keep in touch ... I do keep up with your blogs and posts xx

Why the financial services industry can be so corrupt (and yet so smug?)

Amidst the current media fury about the Barclays Bank LIBOR fiddle and the latest miss- selling scandal to small businesses, the only thing that really astonishes me is the shock and horror about what has gone on?

Already we have excuses that this was a “one off” or “all the fault of the last government” as well as it’s just a few “rogue traders”.   Rubbish. It is not.

Does everyone forget already that we are in the worse recession for 60 years due to either fraudulent or at best reckless behaviour by Banks and financial institutions?

Barclays Bank has been ripping off its customers for years, it not for decades. Does no-one remember the Personal Pension scandal during the 1980’s and 1990’s? When Barclays (and practically all the other Banks and life assurance companies) persuaded its loyal and but completely naive customers to  come out of their guaranteed Company defined benefit pension schemes and buy their expensive personal pensions? When people wanting short term saving plans were sold 25 year life insurance endowment bonds?

When, very like the current debacle over small business interest hedges,  the Banks instructed all their retail staff that they had to make so many sales a week of these products or they were in trouble. All senior management knew exactly what was going on since it made no financial sense whatsoever for anyone to leave their company pension scheme.  But they did nothing to protect their customers nor ultimately their shareholders who had to pick up the bill for compensation. These corrupt practices are due to widespread bad company and industry wide governance.

Yet time after time, whenever I go to governance conferences and meetings, we are told how wonderful UK governance is especially compared to the rest of the world (Which is probably true but if so, then God help the rest of the world). When sensible proposals are made to improve corporate behaviour and governance such as the compulsory publication of Company AGM voting by fund managers or putting employee representatives on remuneration committees then they are too often simply dismissed - often sneeringly.  

This frankly smug and self satisfied attitude has change.  The UK financial services is very, very important to the UK economy. We can argue that maybe it is too important which is another matter. But at the moment it is responsible for 10% of our tax take, employs hundreds of thousands of workers and is the main source of finance for our economy.

While there is some very good people work in finance there is not enough of them to stop us, the principles who own assets (such shareholders in pension and insurance funds) being robbed off by the agents, we employ to look after our assts. 

Cosy crony remuneration committees must stop. Shareholder votes on pay at company AGM’s should be binding and compulsory. Retail and investment banks should be separated to stop casino capitalism.  The Government should retain a significant shareholding in the Banks we own at the moment and we should buy shares in those we do not own.  Better regulation is not enough we need a state holding not to run the Banks but to try and make sure that they are run by grownups who will act in the long term interests of shareholders and customers not the selfish short termism driven by Bollinger Champagne dudes.

The massive life insurance funds and Mastertrust pension schemes which have no beneficiary governance at all should have a trustee structure set up to ensure that they are not being robbed either.  Doing so would help put UK PLC in order as well. 

Finally fraudsters should be brought to book and locked up as well as those higher up who turn a blind eye to matters in order to ensure their own well paid positions and bonuses. Anyone making a deception in order to gain a pecuniary advantage is guilty of a serious criminal offence while aiding and abetting any criminal offence is a crime as well.  These people must be dealt with in the same way we treat rioters.

Rant over. Hat tip great cartoon by Steve Bell from The Guardian

"I believe that banking institutions are more dangerous to our liberties than standing armies".

"I believe that banking institutions are more dangerous to our liberties than standing armies. Already they have raised up a monied aristocracy that has set the government at defiance. The issuing power (of money) should be taken away from the banks and restored to the people to whom it properly belongs."

Thomas Jefferson, third U.S. President (1743 - 1826).

Some things never change!

Hat-tip thingy to my new UNISON Eastern region RO.

Banking lemmings: moral hazard or absolute bloody certainty?

The Walker Review published recently on Banking regulations seems on the face of it to be a bit of a damp squib. Check out Tom P after his initial read and his conclusion here. Will this review even if fully implemented curb our financial sector lemming like urge to throw our money over cliffs from time to time?

The other week I attended a business meeting of LAPFF (see report here on the ever so polite M&S revolt). The first guest speaker was an senior executive from a top credit rating agency. He explained (IMO) how Banks and financial institutions credit worthiness are rated primarily on the support that the central Banks will offer if they run into trouble rather than any other factor including their governance arrangements. Banking failure is relatively commonplace but because of their central importance to the national economy they are not allowed to fail. Their bonds therefore are always safe. It is only the rest of us that suffer from their disastrous actions.

Also there is also no moral hazard to act as a brake since the Banks know that the Government will always bail them out.

So there we have it. If the credit reference industry is not bothered about preventing Banking failures then so who is? The Regulators? We also had at the meeting a pretty convincing presentation that showed how the “City” considers “Regulation” as just a set of rules that you need to find ways of getting around. The financial institutions (including the publicly owned ones) are spending huge amounts of our money on “researching” the new and proposed regulatory measures with the simple aim of evading them. Business as usual then.

So unless something radically changes we are doomed to repeat this disaster again and again.

The solution - only when we have truly independent owner/stakeholder representatives elected on the boards of financial institutions will there be a check and challenge to the lemmings.

BTW – Remember the infamous film of lemmings we probably all saw as kids which appeared to show hundreds of Lemmings throwing themselves off cliffs while on pointless migrations? Despite the fact that this was a “Disney” film apparently the film production crew themselves was responsible for flying in crates of lemmings into the cliff area and throwing them over the cliff with the help of a turntable.

There is a modern day metaphor here somewhere?

UNISON NDC defeats call for Nationalisation without Compensation

Composite I - Economic Crisis and Public Services amendment I.1

Conference, President, John Gray, London Region, Housing Association Branch speaking in favour of Composite I and against amendment I.1.

Conference this amendment may not be a wreaking amendment in the technical sense but if passed it would be an ugly sore on what is otherwise a very good composite.

I am not going to argue about whether of not the Banks should be nationalised. That is a separate question. Nor will I bring up Capital Stewardship issues on how we can properly exercise influence over them. What this amendment seeks to achieve is the nationalization of all the Banks without compensation.

Conference, we are the owners, we own big chunks of these banks even before the current crisis. Our savings which is invested in our pension funds, our life insurance policies, our co-op and mutual companies savings – are all heavily invested in the banks.

I am speaking as a UNISON LGPS scheme member for 18 years. I have been saving the equivalent of nearly 20% of my salary in it each year. My scheme and your schemes are heavily invested in Banks. My fund in Tower Hamlets is relatively small but it has over £16 million invested in Banks - never mind all the other related investments.

If you nationalise the Banks without compensation you in effect rob every single one of us. Arguably Pension schemes themselves would be under threat as well as insurance companies - mutual companies as well as privately run ones.

Conference I think it is known by those misfortune to know me that unlike some others I do not usually bring up the the Russian revolutionary leader - Lenin - but I understand that even he paid compensation to investors when he nationalised the Russian Banks. So conference for the first time in my life – I will say support Comrade Lenin and his actions and vote against this amendment.

(the amendment had a number of speakers against it and was overwhelmingly defeated)

The Evil that Banks still do: Public Housing

There were 1.77 million families (4 million individuals) on local authority waiting lists.

Many of whom live in simply appalling housing conditions. Due to the current financial crisis I think it is fair to say that most folk think this figure will go up dramatically.

However, in the midst of this absolute and already grim housing shortage, the UK Banking sector has effectively stopped many (most?) Housing Associations from building any new public housing developments.

This future development disaster (it’s not merely a crisis any more) is mainly because Banks will not provide new loans for development to housing associations without them agreeing to renegotiate any existing loans they have and significantly increasing the interest rate for these old loans.

The Banks now think that they lent housing associations development money to build new homes in the past too cheaply. They want to rebalance their balance sheets and make more money from their existing loans. So they are effectively blackmailing housing associations by saying if you want new loans from us, pay us more for your old loans or else!

Housing associations who can build new homes at current market interest rates are being stopped from building since the cartel of Banks that provide public housing finance are making new development simply uneconomic.

Banks have refused to agree to even minor changes to loans which do not in any way make these loans less secure. They are just using their powerful bargaining position to veto changes to existing agreements which could have resulted in new homes.

Some associations have even been stopped from using equity in the value of their stock to provide security for new development unless they agree to pay higher interest on their existing loans.

The larger groups are trying to get finance from the bond markets but it is very demanding and restrictive to keep the high credit ratings needed to raise the money at any reasonable rate.

Housing associations have usually not been able for understandable reasons to “attack” their lenders over this situation. So there is no public campaign for change.

The state has nationalised many Banks and owns significant chunks of others at great cost to the taxpayer.

What is happening to future housing developments is arguably nearly as bad as mass repossessions? Due in part to pressure by the Government the Banks have agreed to be sensitive to mortgage repossession cases. What about the 4 million on the overcrowding and homeless register who are being effectively refused future rehousing opportunities by the actions of the Banks?

Land prices have collapsed, building contractors are cutting tenders, higher levels of grant are being made available but unless the Banks play ball desperately needed homes will not be built.

It goes without saying that it was irresponsible and unsustainable lending practices which were of course the reason why the housing market is in the mess it is in the first place!

Things have got to change.