Tag Archives: credit crunch

First the Banks – are EU Regs, MOSS VAT & HMRC also trying to kill off UK SMEs?

This is an unscheduled blog because this afternoon I read an article in the Telegraph about a proposed VAT reform which will literally kill off tens of thousands of SMEs. Here’s a link to the article: http://www.telegraph.co.uk/technology/internet/11295953/How-the-EU-is-throttling-online-business-with-idiotic-VAT-reform.html In short, what it says is every SME will have to pay VAT on every digital transaction to EU Countries as of January next year and this will expand to physical transactions in 2016. Therefore, even an aspiring author or musician or photographer selling their ebooks, digital images or mp3s – and maybe with a turnover of £5-£10,000 per annum will have to register for VAT, charge it to their EU customers and submit a mountain of paperwork to HMRC. They will also have to register for UK VAT even although they are exempt and under the threshold.

This begs the question of why we are part of the EU when the adverse consequences seem to outweigh the benefits? And what benefits? Surely one of the biggest benefits was we are free to trade with all our EU partners? Here’s a blog from Andrus Ansip at the EU Commission: https://ec.europa.eu/commission/2014-2019/ansip/blog/euvat_en

The first thing I noticed in the blog was this comment “The change in VAT rules was decided democratically, and after years of discussion, by EU Member States in 2008.” Democratically by who? Given it will affect SMEs so dramatically, I wonder how many SMEs were asked how they felt about it? And assuming it was a democratic process in EU terms, i.e the MEPs sat down over a nice lunch and agreed on this, how democratic were individual Governments and specifically ours, in asking if SMEs agreed? Personally I had no idea this was due to happen – maybe I just missed it? Admittedly I was very tied up exposing bank fraud in 2008 (another crippling tool to destroy SMEs) so I may have over looked it because I couldn’t trade my SME back then (or now). And, trailing through Goggle today, I have found plenty of news about this – although no front page news, so I have been asleep at the wheel but that doesn’t excuse the lunacy of it.

Why have the EU done this? Well according to Andrus, “ As I understand it, one of the aims was to establish a level-playing field for smaller companies. No more picking of low VAT countries by larger companies to gain a competitive advantage over SMEs.” Riggghht! This is to stop companies like Amazon exploiting tax loop holes by basing their digital content sales in Luxembourg. Fair enough, Amazon et.al will now have to pay millions in extra VAT payments. But does anyone really think they will absorb this cost? No. They will simply pass the cost on to the consumer. Not just the cost of the VAT but also the huge accountancy costs involved.

Andrus goes on to say “Now, some small and micro companies are worried about what the VAT changes coming on January 1 mean for them.” You bet they are. “Given that this change was adopted six years ago, Member States should have helped businesses to prepare.” Even if they had – what would that change?

Consider this: Joe Bloggs writes a book, turns it into an e-book and promotes and sells it via his own website. The e-book costs the buyer £2.00 + VAT for EU buyers. He sells 50 books in the UK – that’s OK he doesn’t have to charge VAT although he still has to be registered for VAT if he wants to sell in the EU. He sells 10 books in France, 15 in Germany, 5 in Italy and and 20 in Spain because his Aunty Mavis who lives in Benidorm persuades her friends to buy it. So that’s 100 books and 4 different VAT rates. There is apparently a “one stop shop” which will help with these varying VAT rates but I’m not sure how this works or, if I was Joe (and to an extent I am) whether I would want to take that route or just not sell to EU Countries.

Joe will have to do quarterly UK VAT returns even if he doesn’t charge VAT in the UK (he can just fill in 0 in all the boxes – so that’s not a waste of any one’s time!) and do separate VAT returns for his EU sales (no idea what happens with the rest of the world – is that still zero rated?). But because he does charge VAT for the EU he can deduct any expense relating to his EU sales from his overall VAT. And all this will be broken down and documented in the records of sales Joe must keep for years.

Now Joe, who is an excellent writer but not much of an accountant, could possibly struggle with the various rules and regulations he has to comply with – starting with, does he have to register at all or is what he does exempt? For example, these new rules don’t apply to: “supplies of goods, where the ordering and processing are electronic.”

But they do apply to: “images or text, such as photos, screensavers, e-books and other digitised documents e.g. pdf files, music, films and games…..”

I find that a bit confusing because ordering or processing an e-book is all done electronically isn’t it? So I looked at the section of the HMRC document entitled, “What is meant by electronically supplied?” and it explains: “This covers e-services which are automatically delivered over the internet, or an electronic network, where there is minimal or no human intervention. In practice, this means: Where the sale of the digital content is entirely automatic – for eg a customer clicks the ‘buy now’ button on a website and the: content downloads onto their device – customer receives an automated e-mail containing the content.”

So what part of a customer clicking “Buy Now” on your website and then receiving your e-book to download, isn’t covered in the above? Equally confusing is the section entitled “Examples of Electronic Supplies and Whether They Are Digital Services.” According to the chart, if Joe e-mails a pdf (his book) to someone, that is an E Service but it’s not covered by the new rules. However, if his pdf document is automatically e-mailed by the sellers (his) system or automatically downloaded from his site, then it is an E-Service and he does have to pay EU VAT to sell it in Europe. Hang on – didn’t it also say the new rules don’t apply to “supplies of goods, where the ordering and processing are electronic” or where the customer clicks the “buy now” and automatically downloads?

I won’t go through the rest of the document because I’m confused enough but here it is: https://www.gov.uk/government/publications/revenue-and-customs-brief-46-2014-vat-rule-change-and-the-vat-mini-one-stop-shop-additional-guidance/revenue-and-customs-brief-46-2014-vat-rule-change-and-the-vat-mini-one-stop-shop-additional-guidance

I have a horrible feeling this EU VAT reform will be an absolute disaster for SMEs and it will either cause a lot to just stop trading or, it will cause them to stop bothering to be independent. What will be the point of Joe doing all this hard work (over and above writing his books) when the easiest option will be to sell it on Amazon in the first place and let them do the accountancy exercise? Yes Joe will get less money so Amazon can have a cut and his book will cost more because Amazon will pass on the EU VAT costs to the customers – but at least Joe won’t have a nervous breakdown doing a mountain of paperwork (which will no doubt result in massive fines if he gets it wrong) in order to sell 50 e-books to Europe. And there are 1000’s of Joe Bloggs in this Country who will do the same. I would even advise them to do so. So Amazon et.al could come out of this quite nicely.

Don’t get me wrong, I have two books on Amazon Kindle and it’s a very convenient site for writers. And ironically, I’ve had an e-mail this evening explaining the new charges anyone in Europe will have to pay for my books. But I am very aware small publishers will really struggle with this new system – the same as I would as a music publisher – which I was and would be but for HBOS.

End result? Whereas the internet gave millions of people and SMEs the opportunity to promote and sell their individual downloads all over the world – MOSS VAT + HMRC will now take that ability away. We will end up with half a dozen global platforms to sell digital or physical products across the Europe – and no doubt the world will follow. Sure they will have lots of subsidiaries but ultimately there will be a few Corporates running sales across the internet or to Europe.

The obvious solution was (and you don’t need to be a rocket scientist to work this out) – those digital traders or physical traders in the UK who sell in excess of the UK VAT exemption figure, should charge and, if applicable, pay VAT to the EU in the same way they do in the UK but at a flat rate agreed by the EU community to avoid unnecessary bureaucracy.

I would say to Mr Ansip, Mr Osborne and Mr Darling (who must have agreed this in the first place) that while MOSS VAT may bring in some cash from the big players avoiding tax, it will do them little harm and they’ll simply put prices up. But your new rules will be a disaster for SMEs, for the economy and for the morale of the Country.

For example, I know a young photographer who sells her images digitally and who has already considered the sad fact she will have to put a sign on her site saying – “Apologies, no sales to EU Countries.”

One might almost think our Government’s (present and past) are quite keen to see SMEs throw in the towel. First the banks and now this. What next?

And one last thought, why does Andrus Ansip say “As I understand it….” Surely this is an EU directive drafted in Brussels or Strasbourg wasn’t it? So he should know. Unless it was drafted elsewhere.

p.s If any accountant reading this can clarify what MOSS VAT really means to SMEs, please do post a reply or e-mail smealliance2014@gmail.com . I sincerely hope I have got this all wrong.

Christmas 2014 round up of financial crimes with no one going to jail.

My husband made a very valid point a few days ago and I have been thinking about it every day since. He pointed out that when we (Paul and I) started looking at misconduct in the financial industry and specifically HBOS, we couldn’t get anyone to take our allegations seriously because no one believed us. That was in 2007 and it took until late 2009 to actually get the FSA involved and 2010 before the police got involved – even although we made allegations to the police in November 2007. We’re not a lot further forward now in December 2014 because the criminal trials for that alleged crime won’t start until September 2015 – and even then, I’m not holding my breath.

It was disappointing no one believed us in 2007 but not surprising because the idea banks, or rather bankers, might be crooks, was out of the question back then. Bankers were seen as respectable professionals and your bank manager was so trustworthy, he or she could even sign your passport. The same doesn’t apply now and no one bats an eyelid at the concept of crooked bankers – in fact bad conduct is what we expect from them, to the point even the good guys (yes I do acknowledge there are still many good bankers our there) are tarred with the same brush.

Paul’s point was simple: It was tough back in 2007 because no one believed us, so nothing was done. Now, everyone knows the financial sector is rife with fraud and corruption and still nothing has been done! Not just in the case we reported – right across the board and in thousands of cases. Even more alarming is the fact that, in many instances I know of, where people have tried to report financial crime, the police will not investigate it! In all probability this is because they don’t have the budgets to investigate such a glut of criminality in austerity Britain – but that is of no help to the victims who are frequently told – “it’s a civil matter.” No it’s not – crime is never a ‘civil matter’ and even victims of PPI have a right to report it as a crime, get a crime number and, if applicable, also have it investigated. Of course that might damage crime statistics.

But no. Most financial crime is just swept under the carpet as “mis-selling” or “restructuring” and resolved by bank shareholders’ paying huge fines to the FCA. Think about that for a moment – we all believe bankers have committed criminal acts but nothing has happened. It just beggars belief and is really as scary as hell because, what it actually means is, we can no longer rely on the Law and really do have a two tier criminal justice system. There isn’t another, plausible explanation.

This terrifying thought was brought home again when I read the latest excellent Matt Taibbi article in Rolling Stone magazine: http://www.rollingstone.com/politics/news/the-police-in-america-are-becoming-illegitimate-20141205 where he is talking about the disparities in the US legal system and it reminded me that I still haven’t had a reply to my letter to Mr Cameron of December 2012 when I asked for some clarification about the apparent immunity bankers have from prosecution. In that letter, which I wrote after reading some worrying comments from Andrew Bailey (now head of the PRA), I said:

Mr Cameron, unless I am completely mistaken, Mr Bailey seems to be telling us that banks, and therefore bankers, are now officially considered to be above the law in this country and that, in the interests of confidence in the banking industry (which is already at rock bottom among the British public, and therefore can hardly sink any lower), they cannot be prosecuted.

I am writing to ask you, as Prime Minister, for some clarification.

Does your government endorse the notion that banks and bankers should be given a licence to commit criminal acts without any fear of prosecution? Is this now official government policy? Are the British public now being asked to accept that, despite incontrovertible evidence of multiple criminal acts by banks, including money-laundering, drug-money-laundering, Libor rigging, multiple frauds and assorted Ponzi schemes, bankers are considered to be immune from prosecution? And if so, can I ask on what grounds your government, or indeed the government of any democratic country, can justify such a policy?” Full letter here: http://www.ianfraser.org/dear-mr-cameron-if-bankers-are-above-the-law-we-need-an-urgent-explanation/

I didn’t write the letter to be confrontational – although I must admit I am incredibly disappointed the PM’s strong words in the run up to the last election about what should happen to criminal bankers, turned out to be hot air and no more. This is what he said to Jeff Randall in January 2009:

“I think that we need to look at the behaviour of banks and bankers and, where people have behaved inappropriately, that needs to be identified and if anyone has behaved criminally, in my view, there is a role for the criminal law and I don’t understand why is this country the regulatory authorities seem to be doing so little to investigate it, whereas in America they’re doing quite a lot.”

I wrote the letter because I genuinely wanted some reassurance from the Prime Minister that bankers are not above the law; we don’t have a two tier legal system and; something would be done to redress this inequitable situation.

So what has happened to clarify or allay my concerns since December 2012? Well a few things have happened but not what I was expecting. For example:

  1. I’ve never had a reply.

  2. Several banks have been found guilty of money laundering and even money laundering for drug cartels. And the only penalty has been a huge tax on the bank’s shareholders who have paid massive fines for the conduct of bankers. But no one has gone to jail.

*given that banks (buildings or legal entities) don’t have any physical ability to pick up the phone and negotiate with drug cartels – such deals had to be done by bankers. So why have no bankers been held responsible?

  1. Many banks have been found guilty of making billions of pounds with the PPI scam. They’ve had to pay the money back in many cases but, I assure you, not all cases. So again, the shareholders have lost a fortune. But no one has gone to jail.

* I often wonder who invented PPI? Did senior bankers sit down and plan how best to get thousands of their customers to take out insurance policies which cost them a fortune but could never be used? Or did someone in a bank find a recipe for creating and implementing PPI in a fortune cookie?

  1. As a founder member of SME Alliance, I talk every day to people whose businesses have been totally destroyed with various, ridiculously (and I would suggest deliberately) complicated financial products under the collective name of swaps. I’m not a victim of a swap and I know little about them (I’m learning fast) but even their titles smack of more contempt for businesses e.g. vanilla swaps. Can you have chocolate or strawberry? Probably. The FCA have said many of these products should never have been sold to ‘unsophisticated’ clients and in some cases banks have had to give the money back. However, the years it has taken for this to happen and the devastation these products have caused, apparently do not necessitate banks having to pay out billions in compensation. The redress scheme the FCA has come up with has conveniently been limited to peanuts – and no one has gone to jail.

* A journalist was telling me the other day of a case where someone challenged the FCA decision multiple times and was eventually awarded £500k – but of course the bank interest and charges on his account over the time it took to challenge the bank’s conduct meant the victim got nothing and the bank paid themselves £500k. You couldn’t make it up.

  1. The now infamous business recovery units like RBS/GRG have been merrily acquiring, appropriating, stealing their clients’ assets left right and centre and sadly RBS have not been working in isolation. It has caused outrage – it’s been all over the news, MPs have held debates on the subject, Committees have interviewed senior bankers and regulators and even the ever cautious BBC have suggested some bankers are crooks. http://www.bbc.co.uk/programmes/b04t6jy1 But no one has gone to jail.

* As a victim of HBOS Reading (similar model) I have so much to say on this – but am having to keep quiet for now but not forever.

  1. And while the likes of GRG and HBOS Reading have caused many businesses to fail, a separate scandal has specifically targeted farms across the Country for over 20 years. Repeated allegations have been made against a man called Des Phillips and various of the 59 companies he has been or is a director of including UK Farm Finance, UKCC and UK Acorn Finance. And some of our major banks have been heavily implicated in these allegations as have other ‘professionals’. It’s a sickening story which has resulted in many family farms being repossessed and, sadly, farmers committing suicide. You can hear about it here: http://www.bbc.co.uk/programmes/b040hzz5 or read about here: http://www.publications.parliament.uk/pa/cm201415/cmhansrd/cm141111/halltext/141111h0001.htm No one has been prosecuted so no one has gone to jail.

  2. Bankers or traders have been found guilty of rigging LIBOR. Again, massive fines have been levied – another penalty on shareholders. However, in this instance it looks possible some bankers will go to jail and one banker has even pleaded guilty. But let’s not get too excited that justice might be done. Read this: http://www.theguardian.com/business/2014/oct/07/banker-pleads-guilty-libor-rigging-rate-fixing

As you can see the banker concerned could get up to 10 years in jail but we don’t know who he is or what bank he worked for and reporting on this case is heavily restricted. Presumably, after the other three people charged have had their trials, we might know more. But I wouldn’t bet money on it – especially if the banker in question worked for one of the State subsidised banks. But it’s a start.

I could make the list much longer but, to date and looking at the 6 instances above, money laundering, PPI, Swaps, asset theft including farms and LIBOR rigging, it’s certain 1 person in the UK will go to jail and 4 people might. And when you look at the trail of poverty, misery, desperation and devastation these crimes have caused, it is unbelievably disappointing – not to mention scandalous, that our regulators, justice system and worse still, our Government, have let this happen. In fact it is morally and ethically reprehensible.

Of course individual bankers do go to jail quite regularly – they’re usually quite low down in the pecking order and their offences (with a few noticeable exceptions) just about make it into their local newspapers. But the top dogs – the ones who make policy – the ones who instigate and oversee the kind of conduct which allowed all of the above to happen, seem to remain above the law. Which begs the question – why do we have laws?

Meanwhile, the Government have issued the following figures regarding crimes to businesses:

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/284818/crime-against-businesses-headlines-2013-pdf.pdf

I haven’t read it in any great detail but I’m pretty sure it doesn’t mention the wholesale destruction of SMEs by banks. I sometimes think we should move the Houses of Parliament to Canary Wharf and have done with it before La La Land spreads across the whole of London.

Here in the real world we are in the run up to what will be another very austere festive season for many people in Britain – and I’m not just talking about people or SMEs who have been defrauded by banks. I’m talking about those families who’ve lost jobs and/or benefits and most of all, those people relying on food banks or who have lost their homes and now live on the street. A lot of people would say – me included – our major banks and therefore our most senior bankers, were very instrumental in causing our national austerity. And, post the so called Credit Crunch, those same banks (especially the part State owned ones) have done little to help the economy and much to damage it further. Unbelievably, the people at the top of those banks continue to be heavily rewarded.

For example, yesterday (13th December) I was reading an article about the top paid European Bank CEO’s. http://www.cityam.com/1415705309/which-ceos-european-bank-have-biggest-pay-checks-two-uk-banks-take-second-and-third-place

Hmmm – £7.4M. Even when you deduct 50% tax, that still leaves approximately £71k a week. I think you could have one hell of a Christmas with that remuneration package!

Mind you, every silver lining has its own cloud and I suddenly thought – I bet it’s really tough finding the perfect Christmas gift for these top bankers because, what do you buy for the man or woman who has everything? So maybe La La Land has its own problems at Christmas.

Shame you can’t gift wrap integrity – if we could give some of them that, the whole Country might feel more festive. Still, there’s always the good old standby gift – Monopoly. After all, banks have bought, sold, packaged and mortgaged every property on the board many, many times over – but, to date, they have been very adept at steering clear of the “Go to Jail” square. But then I’m guessing Al Capone thought he would never lose ‘games’ either.

Did the Bank Wreck My Business? Yes – so what happens now?

Did the Bank Wreck My Business? Yes – so what happens now?

I’m pretty sure the ratings for the excellent Panorama programme, ‘Did The Bank Wreck My Business’, were very high last Monday. Certainly most people I know watched it – but then many of them have direct experience of banking abuse at the hands of RBS or Lloyds – so they would. In fact most of them were interviewed by Andy Verity and Jon Coffey although their stories weren’t used in the programme. Some would say (and I would agree) there are many more horrific stories out there that the production team could have used – but it’s not a competition. Every business annihilated by bank misconduct (known to many as fraud), is a tragedy. And, given the Beeb’s generally conservative, establishment stance, I think it’s nothing short of a miracle this programme was as frank and exposing as it was.

As always, when programmes like this are on, I took some notes. I do it mostly to collect quotes for my book (nothing quite like “from the horses mouth”quotes to make points) but I also do it because I’m so staggered at what some people in the banking world say, it has to be captured in black and white for posterity. One day future generations will surely look back and ask “how the hell (being polite there) did a democratic country let that happen?”

I know the transcript of the programme will be available soon (or I hope it will) but here’s some of my favourite quotes from last night:

Jon Pain (RBS) “The whole purpose of GRG is to help customers return to financial health…..”

Vince Cable (BIS) “Well of course I’m very alarmed because good companies appear to have been put at risk or in some cases destroyed by banks behaviour…..”

Stephen Pegge (Lloyds) “our goal is to support businesses (you know) small and medium sized businesses are really important to us….”

Jon Pain (RBS) “(But) I would in no shape or form condone any inappropriate behaviour by anybody acting on behalf of RBS – that’s not part of our agenda in supporting customers.”

Christ Sullivan (RBS) to Andrew Tyrie re GRG “It is absolutely not a profit centre!”

Ross Finch (Lloyds victims) re his meeting with an exec of Cerberus who Lloyds sold his loan to “When I expressed disbelief about their behaviour, um, he said, “what you’ve got to understand is I am a prick” – which I couldn’t believe he would say such a thing!”

I’ve just pulled out those quotes because they are either so absurd or so shocking– and they’ve been broadcast on the BBC, the bastion of British correctness. If even the Beeb is exposing RBS and Lloyds as a bunch of crooks, what can we say? Nine years on from the so called Credit Crunch and where are we? I would say, if anything, we’re walking backwards. As one of the founder members of SME Alliance and a member of Whistleblowers UK ( Paul and I blew the whistle on HBOS Reading – the HBOS equivalent of GRG), I hear horror stories about banks v SMEs every single day. But the exposure of banking atrocities is no longer limited to what banks like to portray as ‘the niche market of poorly performing SMEs’. Everyone knows how bad some of our banks are and Andy Verity’s programme should be one of the final nails in the coffin of bad banking.

But will it be? Big question:

Vince Cable, Andrew Tyrie, the Treasury Select Committee, the FCA, the PRA, Mark Carney, David Cameron, Ed Miliband, Nick Clegg – did you watch “Did The Bank Wreck My Business’? And if you did – what are you going to do about it? They certainly didn’t wreck your businesses so I understand that maybe you don’t understand the consequences of what banks do. However, I do and so do thousands of SME owners, employee’s, shareholders and creditors. We live with the consequences.

I also know Andy Verity and Jon Coffey have done extensive research to make this programme and could have used any number of totally outrageous cases because they interviewed loads of SME owners (or ex SME owners) – and I know some of those stories may have been a step too far for the Beeb. In my own case sub judice was a big problem. But I know they made the programme in the spirit of stopping banks abusing SMEs. So has it worked? Has it helped? Will anything change?

Well the Panorama team have done their bit. David, Ed, Nick, Andrew, Mark – over to you. You are the people who can make the banks behave – or at least you should be. If the reality is you’re not – then wow, we have a serious problem in our democracy.

Best quote of the programme, without doubt, has to be Austin Mitchell MP, talking in Parliament about the Keith Ross case and saying it how it really is:

“What I want to do today is tell the story of the theft of a profitable Yorkshire company and I don’t mean the criminal Mafia we often speak of I mean Britain’s dark suited Mafia which in this case is represented by Lloyd Bank and Price Waterhouse Cooper both acting in collusion….”

Here’s the link from Hansard to Keith Elliot’s case: http://www.theyworkforyou.com/whall/?id=2013-11-12a.212.0

Of course, living in Italy for nearly 20 years, Austin’s comments would strike a chord with me. Well said Austin – there’s not many MP’s who would draw Parliament’s attention to the similarities between the banks and the Mafia but I would just put you straight on one thing – our dark suited Mafiosi are, in many cases, criminal.

I’m posting this on my own blog site because this is my own view – but I believe many people in SME Alliance will appreciate this view and I have to give us a plug because the conduct exposed in the programme is one of the reasons SME Alliance was formed.

#SME Alliance – giving SMEs a voice. #nooneisabovethelaw

Save the Bankers v Save the Pandas – now there’s a choice!

This Sunday has not started well. Beautiful crisp morning but pretty damn cold – the beginning of the ice box scenario for many households who can’t afford heating. Nevertheless, Paul and I were up early and ready to go out to our local car boot which has, over the last few years, become like a weekly social event – regular stall holders with irregular wares and prices ranging from 20p to a couple of pounds, regular visitors chatting away with each other, lots of dogs (and their proud owners) and so multi cultural. I often think the car boot sale we go to, which is held in a farmers field in Cambridgeshire, is one of the best and most amicable examples of multi-cultural Britain.

Unfortunately today’s visit did not go to plan as our elderly car decided it does not want to live through another winter – and refused to start. Hey ho, won’t be the first time a car has died on us over the last few years, so I decided to take another pleasant option – read the papers on line, tweet a bit and listen to the Archers.

It was all going really well until I read an article on the Conservative home site called ‘Save the Bankers’ penned by an A level student. Now don’t get me wrong, everyone is entitled to their view and it’s always good to see young people voicing their opinions. The author even made some good points – especially the point that ‘save the bankers’ is unlikely to be as popular a campaign as ‘save the pandas.’ Yep, I’d say it’s a non starter. And he, Joe, also made the valid point that thousands of people are employed in banks – the figure of 3.8% of the population was muted although I haven’t checked that figure. Obviously it’s a big sector – obviously it employs many ordinary decent people – and even makes many of them redundant and, (I don’t know if Joe knows this) sometimes by the most ungracious of methods, like please all attend a meeting in the car park – you’re fired and don’t go back into the building.

However, the overall tone of the article was to praise the contribution banks and bankers make to society; to criticise those who insist banks are the root of all evil and; to have a pop at the Labour party for their manifesto in relation to bankers’ bonuses. With the arrogance of youth, the author insists we must rise above the ridiculous myth that banks or the City are responsible for society’s ills and we must instead take collective responsibility for economic failures.

Fair enough – not many 18 year old’s will have lost their business because of asset stripping or swaps. They probably won’t have been affected by LIBOR or even PPI at that age. They won’t know how the insolvency laws have been abused and manipulated over the years so that solvent companies are pushed into administration by banks who then acquire those assets for peanuts. So they won’t know how many SMEs have been destroyed by deliberate and immoral policy implemented to benefit an elite minority at a huge cost to the majority. And if you don’t research that side of the coin – you won’t know and you won’t include any of it in your article.

But my problem is not about the content of the article – in a world where social media means everyone can share their views across the internet, why shouldn’t Joe share his? And if he had done so on his own blog, I wouldn’t have batted an eyelid (I probably wouldn’t have even seen it). What I found worrying was that the Conservative party gave this blog/article a huge platform on their home site and in doing so, they’ve used an A level student to promote the bizarre propaganda that banks are fundamentally good, we should recognise their contribution to society, embrace the ambitious nature of bankers and allow them to thrive without the constraints of “iniquitous” legislation being imposed by regulators. Bonkers!!!

There are no doubt many good bankers out there Joe. Every sector has good people – personally I always had a bit of a soft spot for Tony Soprano. Some of my good friends come from the financial sector – although most of those particular friends are now better known as ‘whistleblowers.’ Sadly, there can’t be many good main stream banks in the UK – because unlike other European countries, we only have a handful of banks and even if 50% of them were good – that could still only be a few rather than many. In my experience and after 7 years of research, I would say the majority of the big banks have repeatedly demonstrated utter contempt for society and its laws – spurred on by successive Governments.

I have no idea who to vote for next year – almost certainly it will be the party which demonstrates any inclination to support the 4.9M SMEs in the UK who employ 25M people – if such a party exists. Who knows, that could even turn out to be the Conservative party. Like many SME owners, I would just like to see a Government that redresses the balance of the many and varied issues that have caused SMEs to bat on a totally uneven playing field – and banking is only one of the those issues. All the same, while I respect everyone’s views, I feel slightly apprehensive about any political party that gets teenagers to preach on the subject of how good our financial sector is. Poor etiquette Dave. Unless of course you are also going to let someone else have the same platform to put the other side of the argument? I can think of quite a few volunteers.

Following on from yesterday’s Indy article about the HBOS Rights Issue, can we at least stop subsidising fraudulent conduct in banks?

Tom Harper’s excellent article questioning whether or not investors were given key financial facts regarding the HBOS Rights Issue in 2008, provoked some serious outrage on the ‘Twittersphere’ yesterday – and quite rightly so. http://www.independent.co.uk/news/business/news/hbos-accused-of-misleading-the-public-over-4bn-rescue-9701791.html

I don’t suppose the Government, Lloyds, the Regulator or the BoE will be happy with that line of investigation. Not least because it opens the door to a whole torrent of questions about how many other transactions, involving state subsidised banks, have been less than transparent?

And perhaps the biggest question will be – was the information in the Lloyds/HBOS Merger proposal, as accurate and transparent as it should have been?

I am sure Lloyds bank will say the HBOS Rights Issue was nothing to do with them as it pre-dated the merger. But in order for the Merger Proposal to be correct, it should have contained watertight data about the financial state of HBOS – which, reading Tom’s article, I’m not sure it could have? I’ve looked at the Proposal and it relies on financial accounts for HBOS and Lloyds TSB dating back to 2005 – although conveniently, it only relies on unaudited accounts for HBOS in 2008. Not that it makes much difference because, sadly and to add weight to yesterdays article, the Big 4 auditors appear to have been equally confused as to the solvency of the banks despite the audited accounts, as shown in another excellent article by Ian Fraser, November 2010: http://www.ianfraser.org/connolly-i-do-believe-that-auditors-performed-well/

What I find really upsetting about all this was brought home this morning by an article from the Positive Money site (following up on an article by Jill Treanor in the Guardian). The article dates back to December 2013 and explains, in very clear and simple terms, how banks continue to be subsidised and why. https://www.positivemoney.org/2013/12/uk-banks-benefited-38bn-big-fail-state-subsidy/ And of course, if we are still subsidising the part state owned banks – we are also subsidising bankers’ bonuses – which, considering neither Lloyds nor HBOS have managed to comply with the terms and conditions of the 2008 bailouts, seems entirely unjust not to mention bonkers. In a letter I received from the Treasury dated 15/05/09, Lloyds and HBOS agreed to meet the following terms:

A range of conditions are attached to the recapitalisation package. Lloyds TSB and HBOS have agreed that over the next three years they will maintain the availability and active marketing of competitively priced lending to homeowners and to small businesses at 2007 levels. They will also provide support for schemes to help people struggling with mortgage payments to stay in their homes and the expansion of financial capability initiatives. The remuneration of senior executives will follow strict guidelines – both for 2008 (when the Government expects no cash bonuses to be paid to board members) and for remuneration policy going forward (where incentives schemes will be reviewed and linked to long-term value creation, taking account of risk, and restricting the potential for “rewards for failure”). The Government will also be consulted on the appointment of new independent non-executive directors…”

Joining up all the dots, I begin to get a very clear picture of La La Land and it’s not pretty. As I am definitely a layman in these matters (albeit a fairly well informed one), I thought I’d take this opportunity to share my view of what’s happened over the last few years.

Round up of events in La La Land.

In 2008 and after exceptional spending sprees by both the banks and the public, the proverbial finally hit the fan and many banks ran out of money. The Government, terrified they’d have a repeat of the Northern Rock débâcle, gave the banks billions from the taxpayers’ coffers. As this resulted in mass austerity, the Government were loath to let anyone know exactly how bad a shape some of the banks were in (some were insolvent) and they certainly didn’t want the public to know the exact details of the billions being handed over, so they did their best to keep it all quiet. They (and the banks) even kept it quiet from the people being asked to invest in the banks via rights issues and/or sanction the HBOS-Lloyds merger, although they didn’t have to keep it quiet from institutional investors, because they were ‘in the know’ and had no intention of investing in insolvent banks.

The banks took the money but totally ignored the social responsibility that went with it (terms and conditions) in the same way they ignore little things like money laundering laws or Principle 1 of the FSA Principles of Business: A Firm must conduct its business with integrity. Actually I struggle to see how most banks comply with any of the FCA Principles: http://www.fca.org.uk/static/documents/handbook-releases/high-level-standards136.pdf Section 2.1

However, after the credit crunch the banks could no longer be seen to lend with reckless abandon (which was a bit annoying, as they rather liked basing bonuses on inflated loan books), so they invented other reckless and ingenious ways of making money – e.g crippling the SME sector and stealing assets. Best of all, having totally screwed up and taken everyone’s money, they came up with their most ingenious plan to date – they sold us all the simple concept that – if we didn’t allow bankers to keep taking bonuses, they’d walk away – and then we’d all be screwed. To make sure that dreadful day never comes, we continue to subsidise banks so they all live happily ever after.

That sounds like a pretty dark fairy story and the darkest bit is – it’s not a fairy story. So I hope somewhere, someone in authority (not mentioning any names Mr Tyrie) will have read Tom Harper’s articles, Ian Fraser’s articles and I’m hoping Max Keiser will invite Paul Moore back on the Keiser show to talk about the appalling behaviour of HBOS, Lloyds and other banks. Because, crazy as is it and despite all the rules, laws and regulators we have, I think our best chance of getting banking reform is to report bank misconduct to the media and then spread the word via Twitter? Of course, that could ultimately do enormous damage to some banks but I can see little alternative to this course of action. It’s a huge problem that while we definitely do have regulators, it seems La La land is out of their jurisdiction – which is the obvious reason they cannot do anything to penalise errant bankers.

*Here’s a thought – if we’re going to rely on journalists to clean up the banking world – maybe we should be paying our financial journalists (and their research teams) more and getting rid of regulators? We’d save a fortune and get some results.

Anyway, what upsets me most about all this is how we continue to let ourselves be mugged and my point is: If banks are intent on continuing to cheat their customers, destroy SMEs and refusing to compensate the people they defraud while insisting they still get huge bonuses – fine. It seems there’s little we can do about it. But can we please, please stop subsidising this conduct?

Ming the Merciless v Flash Gordon. What made Britain a ‘State of Anxiety’?

I very rarely watch films in bed – mostly because the television in my bedroom is ancient and prone to turning itself off half way through a film. Or you get the picture but no sound – very frustrating. However last Monday (Bank Holiday), with both daughters and granddaughter away and as it was bucketing down with rain, I ended up staying in bed to watch Flash Gordon and the TV, in charitable mode, actually worked. I’ve never watched this film all the way through and every now and then, I enjoy watching something deliciously ridiculous. So a pleasant morning.

But my mind always strays whatever film I’m watching and something Ming the Merciless said to Flash, made it stray again. Ming suggested he would like to have Flash on his side and he would give him an entire planet of his own where Flash could rule over everyone, in exchange for his loyalty. The planet was Earth and Ming confirmed he would do such terrible things to the planet prior to handing it over, Flash would not recognise the people on Earth. “You’ll make them slaves” Flash suggests? “Let’s just say they’ll be satisfied with less” Ming replies (that’s from memory, so don’t quote me but you get the gist).

It made me think of the relationship we earthlings have with our so called ‘Masters of the Universe’ in the financial sector. There was a time when we, as the customer, expected and even assumed the people running banks were decent, professional, ethical and even helpful people. Just like the people on the adverts and a bank manager was such a pillar of the establishment, he could even sign your passport. As for the CEO or Chairman of a bank? They were, quite naturally, beyond reproach.

Times have changed radically and, while I don’t suggest the majority of employee’s in the financial sector are intentionally bad people, most of us don’t bat an eyelid now even when we hear how banks (bankers) are laundering money for Mexican drug cartels, manipulating LIBOR or screwing their customers every which way. Worse than that, we seem to have accepted the ridiculous myth no-one is personally to blame for any criminal conduct in the banking world and senior bankers should still get bonuses for running what are, in some cases, organised crime syndicates. How did that happen? When did we accept becoming a banana republic?

One of the things we are possibly all agreed on – and even bankers – is how over extended credit was a major contributory factor to the credit crunch. People with low incomes were encouraged to take on mortgages they couldn’t afford; banks were issuing credit cards like they were ‘Smarties’; businesses were getting massive loans and; even students with no incomes were offered big overdrafts. Of course no one had to accept any of these loans but, in a consumer society where “credit is good for the economy” was the motto of the day and, as the rise in house prices became totally out of sync with what people earned, many people did. And while some of the public pushed themselves to the absolute maximum in the borrowing stakes, the banks, who based their bonus structures on loans, went even further.

Then the crunch came and suddenly the huge and fundamental difference between the people (who the banks had willingly lent money to) and the banks, became horribly transparent. The banks got all or most of the money they lost back from the taxpayer (the people) on the grounds they would re-float the economy – which they didn’t do. Meanwhile the people had no one to bail them out and, almost overnight, this situation was exacerbated when the banks started aggressively demanding back the money they’d lent consumers. It was a double whammy – the credit crunch caused mass austerity on the one hand (cuts in every aspect of public funding except MPs and bankers’ wages) and, on the other hand, not only did future credit dry up, the terms for existing credit were harshly altered – although the terms and conditions which enabled this were always in the small print, tucked away discreetly for a rainy day.

I’m not talking about PPI or LIBOR or IRSA or even major bank frauds here – just how the basic principles of the bank / consumer relationship, changed. The banks, who were so eager to extend credit one day, were demanding it back with menaces the next. And the methods they’ve used over the last 6 years are often akin to those used by the playground bully. Here’s a couple of examples:

Bank of Scotland has been ordered to compensate a customer for harassment after it made an astonishing 547 calls to recover a debt. http://www.moneysavingexpert.com/news/banking/2013/07/bullying-bank-ordered-to-pay-up-for-harassing-customer-know-your-rights

‘You have 24 hours’: Devastating tape reveals how RBS accused of bullying warned struggling chain of chemists it could call in the administrators http://www.thisismoney.co.uk/money/news/article-2516063/Tape-reveals-RBS-warned-chain-chemists-administrators.html#ixzz3BaDHrbWr 

(Sorry – the above link, is temporarily not working)

Every bad thing about banks got horribly worse after the historic events of October 2008 when Gordon (Brown that is, not Flash) and his chums created a completely different pecking order in the country he was supposedly running as a democracy. And sadly, I have to conclude the end result has caused Britain to be a ‘State of Anxiety.’

Fear has always been an efficient if immoral tool to control large numbers of people. People who are frightened tend not to ‘rock the boat.’ Most of us don’t have grandiose ambitions and it’s the idea of losing the simple basics in life we’ve worked hard for, that cause the greatest fear. Therefore, regardless of how bad the game has become, we keep playing it. We don’t worry about getting run over by a bus because we don’t think it will ever happen. We don’t worry a meteorite will smash into earth and we’ll be obliterated because we know there’s nothing we could do about it. But the idea of losing your family home for instance, is a situation that cripples people with fear. I know because I’ve been through 22 eviction hearings. My particular case, or cases, were complicated and I can’t go into detail because of Operation Hornet and sub judice. But whatever the reason anyone is staring eviction in the face, the sickening fear of it becoming a reality, is always the same. It’s debilitating and crushing.

So paying your mortgage to keep your house is a number one priority which means, at all costs, you must keep your job (even if you hate your job because the new corporate order means you are asked to do things you feel are morally unacceptable). Paying that mortgage to the bank is definitely going to keep you playing the game.

But what happens if you lose your job because your employer was one of the thousands of SME owners who have been sent to the wall (administration or liquidation) by the banks who have unethically demanded long term loans be paid back overnight? Or if you worked for an SME that was a creditor of a company forced into administration which has, as a consequence, then hit the wall itself? What happens if, through no fault of your own, there is no job to pay the mortgage?

In those instances it’s an amazingly short scenario to the really basic problem of things like food. Benefits are few and far between these days (cutting those on benefits also cuts the numbers of unemployed). Who would have believed hundreds of thousands of people in Britain would have to rely on food banks? How frightening is it when you have to rely on charity to feed your family? And it happened so quickly – austerity, job losses, benefit cuts and food banks.

I could go on – electricity, travel costs, school fees, health care, old age with inadequate pensions…. what it all adds up to is anxiety and fear for a lot of people. And when people live with fear, just keeping your head above water is a priority. Questioning why you are in that situation becomes a secondary consideration – first you have to survive.

Meanwhile, the masters of the universe most responsible for where we are – what’s happened to them? In the majority of cases they have just continued to receive mega fees, bonuses and pension pots for failing with vigour. Should we feel sorry for the likes of James Crosby, who lost his knighthood and even had to forego a third of his six figure pension pot? I think most people don’t even care. Their own personal angst totally and reasonably excludes the bigger picture. Which is very convenient for those who do their best to make us forget how we got to where we are.

The comments from Ming the Merciless made me think – has the aftermath of the credit crunch brow beaten us all to the point we ‘except less’ and ‘accept the unacceptable’? Is this why we don’t shout and scream when shareholders (including the taxpayer), who’ve already lost a fortune in banks like HBOS, RBS and Lloyds, see millions of pounds being paid in fines for criminal conduct in banks as opposed to holding CEOs and Chairmen to account for what happens on their watch? Is this why we unbelievably seem to accept one law for the masses and one for the elite? Much as I hate the very idea, I think that may well be the case and I even wrote to David Cameron asking for him for some clarification on this point:

Dear Mr Cameron,

I and many other people were stunned by the quotes from the chief executive-designate of the Prudential Regulation Authority, which were reported in the Daily Telegraph yesterday (December 14th, 2012).

Mr Bailey seems to have confirmed that, irrespective of their criminal actions, banks are not only “too big to fail”; they are also “too big to prosecute”. In an interview with the Telegraph, Mr Bailey said that prosecuting banks and by implication their executive and non-executive directors,

would be a very destabilising issue. It’s another version of too important to fail. Because of the confidence issue with banks, a major criminal indictment, which we haven’t seen and I’m not saying we are going to see… this is not an ordinary criminal indictment.”

Mr Cameron, unless I am completely mistaken, Mr Bailey seems to be telling us that banks, and therefore bankers, are now officially considered to be above the law in this country and that, in the interests of confidence in the banking industry (which is already at rock bottom among the British public, and therefore can hardly sink any lower), they cannot be prosecuted ……..

…..If justice is indeed now a ‘private members’ club’, then it is to up to you, Mr Cameron, to explain this to the British public. And, as I am sure you are aware, there is a real danger that the country will descend into lawlessness if the law is unevenly applied and enforced. If you really intend proceeding down the path seemingly advocated by Mr Bailey, then you risk going down in history as the Prime Minister who did more than any other to undermine the legitimacy of the British state……

http://www.ianfraser.org/dear-mr-cameron-if-bankers-are-above-the-law-we-need-an-urgent-explanation/

I have never had a reply to my letter and the lack of reply speaks volumes.

My point: Has the so called ‘credit crunch’ worked out badly for everyone? Or has it enabled some very sinister aspects of society to come to the forefront and control us all via economic fear? I think that is exactly what’s happened. “He who pays the piper calls the tune.” Here’s the definition of that saying from the Cambridge Dictionaries on line: “said to emphasize that the person who is paying someone to do something can decide how it should be done”

There is no doubt the banks can afford to pay the piper – and how crazy is it our elected representatives gave the banks that money from the public purse? They gave the banks so much money, it seems even Governments can no longer call up a good tune these days.

Of course, in the film (and the comics), Flash Gordon never gives in to the likes of Ming. He risks everything to save the world. I can’t help feeling our modern day equivalents, who endlessly profess to be fighting for the greater good (especially running up to elections), have gone completely off track – and they only ever seem to save the inhabitants of La La land – which is a very small island somewhere between the Cayman Islands and Monte Carlo. Don’t get me wrong – I’m all for capitalism – who doesn’t want to be rich? I lived in a Communist Country for two years and it was like – well actually it was similar to what we have in Britain now – some very wealthy and very arrogant people suppressing the rights of ordinary people. We have the same kind of lunacy now masquerading as democracy. If it was just happening in a cartoon or a film, I would maybe call it deliciously ridiculous. In real life, it’s not the least bit entertaining and it’s very disturbing. And not least because the authorities we all thought we could rely on (after all we vote for them), are the very people who are allowing this absurd situation to continue. Where will it end?

BTW, you may remember, at the end of the Flash Gordon film, a random hand reaches out and takes the ‘all powerful’ ring Ming wore. Clearly Ming wasn’t really dead and was just biding his time before having another go at world domination (there’s always one). I am reliably informed Ming the Merciless is currently residing in La La Land rent free, in exchange for doing a bit of consultancy work for the great and good.