Recession 2009

Anger grows over large companies’ tax bills as attention turns to eBay and Ikea

chorizorocket — Wed, 24 Oct 2012 10:22:46 +0000

Companies come under pressure after revelation that Starbucks has not paid UK corporation tax for three years

Ikea is said to have legally halved its UK corporation tax bill by siphoning off profits abroad in the form of royalty payments to a sister company. Photograph: Peter Morrison/AP

Pressure is mounting on large multinational companies to pay their fair share of tax following new revelations about the amount of tax paid by eBay and Ikea.

The focus on the tax affairs of the internet auction house and the Swedish retailer comes amid increasing anger about Starbucks, which Reuters exposed last week as not having paid corporation tax in the UK for the past three years. The Liberal Democrat peer Lord Oakeshott called for the chief executive of the US coffee company to appear before a parliamentary committee after notching up £1.2bn of sales in the UK. “[Chief executive Howard] Schultz must come to parliament and come clean on why they pay so little corporation tax,” said Oakeshott.

The internet auction site eBay and Ikea are the latest companies to face scrutiny after the Sunday Times reported that eBay legally channels payments through Luxembourg and Switzerland to avoid paying nearly £50m in tax in Britain. Ikea is said to have legally halved its corporation tax bill in the UK by siphoning off profits abroad in the form of royalty payments to a sister company.

A spokesman for Ikea confirmed there was a 3% so-called franchise fee on Ikea sales worldwide. “Tax authorities in the Netherlands have consistently confirmed that Inter Ikea Systems BV is the beneficial owner of the Ikea retail system and the franchise fee income,” he said. Meanwhile, eBay was quoted as saying it worked with tax authorities and “complies fully with all applicable tax laws and regimes – including national and internationally recognised rules”.

The Sunday Times said eBay had paid barely more than £1m in corporation tax in the UK despite sales of £800m a year. Some £50m in tax had been avoided on the basis of its calculation that eBay’s UK profits would have been £181m in 2010 and corporation tax bill of £51m. It paid just £1.2m that year by channelling sales through Luxembourg and Switzerland.

Oakeshott said there was a simple way for customers to punish companies. “Consumer resistance is one way of going ahead. Don’t go to Starbucks, go to Costa or your local.”

The government, through HM Revenue & Customs, must also send a strong message that aggressive tax avoidance is not acceptable, he said. “HMRC has got to be tougher on cracking down on this. What we need is total transparency on corporation tax actually paid each year by companies and detailed reasons why it is below the headline rate.”

On Saturday an estimated 100,000 protesters took to the streets in huge demonstrations against government cuts, with many shouting “pay your taxes” as they passed Starbucks.

A member of the pressure group UK Uncut said: “Actions such as the huge anti-cuts march show just how angry people are that the government is allowing big business to dodge billions in tax, while destroying public services and the welfare state.”

Police were reportedly lined up around branches of Starbucks along the route after UK Uncut said it planned to start targeting the coffee chain’s stores.

Sourced from the Guardian

King says banks must raise their capital levels

chorizorocket — Wed, 24 Oct 2012 10:01:25 +0000

The UK and other major economies will remain weak until banks have sufficient capital to absorb “likely” future losses from bad loans, the governor of the Bank of England has warned.

Sir Mervyn King said this was because the banks’ current “insufficient capital” was continuing to deter them from lending to households and firms.

He added that banks needed to accept that further bad debts were expected.

Sir Mervyn said only such a change could allow economies to prosper again.

“I am not sure that advanced economies in general will find it easy to get out of their current predicament without creditors acknowledging further likely losses, a significant writing down of asset values and recapitalisation of their financial systems,” he said.

“Only then will it be possible to return to a more normal provision of vital banking services so crucial to an economic recovery”.

‘Encouraging signs’

Speaking at an event in Cardiff, Sir Mervyn said the government and Bank of England’s latest effort to boost bank lending – the Funding for Lending scheme – must be used as a “window of opportunity” to “restore the capital position of the UK banking system”.

Yet he said the initiative could only be “temporary”.

“Start Quote

For what it is worth, some may well see Sir Mervyn’s attack on helicopter money as an attack on a candidate to succeed him as governor”

End Quote

Robert Peston Business editor

Read more from Robert

Under the Funding for Lending scheme, commercial banks can borrow up to £60bn from the Bank of England at a low rate of interest.

Turning his attention to the wider economy, and with the latest UK economic growth figures out on Thursday, Sir Mervyn said the economy was “barely higher than two years ago”.

Yet he added that there were “encouraging signs”, particularly in the jobs market.

He added that the Bank of England would “think long and hard” before it decides to increase its programme of quantitative easing (QE) from the current level of £375bn.

Under QE the Bank pumps fresh money into the banking system to try to boost lending.

Sourced from The BBC

Clegg: Economic recovery ‘slow and fitful’

chorizorocket — Wed, 24 Oct 2012 09:50:35 +0000

Britain’s economic recovery is “slow and fitful” but on the right path, the deputy prime minister will say.

In a speech in the City, Mr Clegg is expected to say that repairing the economy after the 2008 financial crash is a “gradual healing process”.

It comes ahead of the latest GDP figures, to be published on Thursday, which some analysts predict could show the economy has returned to growth.

Mr Clegg will also argue for a “balanced” approach to Europe.

The UK has endured a double-dip recession with three successive quarters of negative growth.

However, forthcoming GDP figures are expected to show the economy grew in the three months from July to September, with the positive impact of the Olympics and a bounce-back after the Diamond Jubilee bank holidays.

‘Sensible and centrist’

The Liberal Democrat leader will tell an audience of those working in financial services: “There’s a lot of speculation about what tomorrow’s GDP figures will bring.

Continue reading the main story

“Start Quote

We should be vigilant against knee-jerk or dogmatic responses to our economic challenges.”

End Quote Nick Clegg

“Whatever they look like, we know that, overall, we’ve set the economy on the right path. But recovery is slow and fitful.

“Repairing the damage following the shock in 2008 is a gradual healing process.

“And the government must remain absolutely focused on the reforms that will drive growth.”

In what will be seen as a response to Foreign Secretary William Hague’s claim that the British public’s disillusionment with Europe is “the deepest it has ever been”, Mr Clegg will argue for a “balanced, engaged approach to Europe”.

“We should be vigilant against knee-jerk or dogmatic responses to our economic challenges.”

Prioritising lending to “sound business” and creating a more responsible corporate culture will help the economic recovery and ensure Britain’s long-term success, Mr Clegg will say.

The Liberal Democrat leader will also use the speech to promote his party as one that supports British business.

He will say: “I want you to be confident that my party is on business’ side.

“That we are determined to put the private sector at the heart of a strong, rebalanced economy.

“That we will be sensible and centrist; pragmatic – not dogmatic – at all times.”

Sourced from The BBC

UK wellbeing still below financial crisis levels

chorizorocket — Tue, 23 Oct 2012 10:40:28 +0000

Government data shows that decline in living standards has been more pronounced and longer lasting than in the UK’s two previous recessions

A high street shop window advertising a sale in Nottingham, England. Living standards have failed to recover since the recession. Photograph: David Sillitoe for the Guardian

A mix of deep recession and high inflation has left national wellbeing in Britain more than 13% down on its level before the global financial crisis, according to new government data.

The Office for National Statistics said the hit to real living standards caused by the worst downturn of the post-war era had been almost double the fall in national output as measured by gross domestic product (GDP).

Data released in the report on wellbeing showed that net national income per head (NNI) – considered the best guide to real living standards – held up in the early stages of the recession but has continued to drop as a result of the squeeze on family budgets from rising prices.

The ONS said that NNI per head fell by 13.2% between the first three months of 2008 – when the economy peaked – and the second quarter of 2012. Over the same period, GDP per head fell by 7%.

According to the study, the decline in living standards has been more pronounced and longer lasting than in the UK’s two previous recessions in the early 1980s and early 1990s.

NNI dropped by around 6% in the slump of the early 1980s but was back to its pre-recession peak within three years. In the early 1990s, the decline was a more modest 4% fall, and the lost ground had been recouped in two-and-a-half years.

The study found that in the early stages of the latest slump, NNI held up better than it did in the early 1990s.

“This was partially a result of unemployment not rising to the same extent as in the previous recession, and historic low interest rates reducing mortgages payments for those on tracker mortgages.

“In contrast to the recovery from the 1990’s recession, however, as the economy emerged from the contraction that started in 2008, real household incomes began to fall; a downwards trend that continued to the start of 2012. The cause of this fall was primarily due to an increase in prices, such as fuel, utility bills and food. The increase in prices eroded the growth of household incomes, meaning real household actual incomes fell and therefore incomes would not stretch as far as they would previously.”

The ONS said real living standards are more closely aligned to NNI than to GDP, which was designed as a yardstick of output and not wellbeing. NNI takes account of income flows to and from other countries and capital depreciation. The ONS said it was possible for GDP to be rising when net national income was falling.

The report comes ahead of the latest quarterly GDP figures due out on Thursday. These are expected to show that national output grew in the third quarter, bringing to an end the UK’s double dip recession.

Sourced from The Guardian

Eurozone crisis live: Greek government meets to agree cuts package

chorizorocket — Tue, 23 Oct 2012 10:23:49 +0000

Guardian/ICM poll finds Ed Miliband and Ed Balls are catching up with PM and chancellor on perceived financial competence

The Conservative party’s prized trust on managing the economy is beginning to crumble, according to a Guardian/ICM poll, which shows that Ed Miliband and Ed Balls are now within touching distance of David Cameron and George Osborne on the all-important question of financial competence.

The regular Guardian/ICM survey finds that Labour retains a solid overall lead on voting intention, although this is somewhat smaller than last month. After Miliband’s well-reviewed “One Nation” speech at his party’s conference, Labour remains on 41%, a score which it has not improved in the series since 2003, when Iain Duncan Smith was Conservative leader. That puts them eight points clear of the Conservatives, who are up by two on 33%. There is no change for the Liberal Democrats, who remain stuck on 14%, while the assorted minor parties’ support adds up to 12%, down one on last month.

The Conservative bounceback suggests that their 31% score last month, worse than anything previously seen under the Cameron leadership, could be a blip. That is good news for the prime minister after a turbulent week at Westminster, which ended with the resignation of the chief whip Andrew Mitchell on Friday. But he is losing ground on the crucial economic terrain.

When voters are asked to put their party preferences aside and consider which team is better placed to manage the economy properly, 31% prefer Cameron and Osborne, as against 27% for Miliband and Balls. The Conservative team thus holds a four-point edge, though this advantage is the lowest on record on a question which ICM has asked repeatedly during the last year. The Tories’ advantage was 21 points last Christmas, and has steadily dwindled since, but during the months since, the gap has never been less than nine.

The survey was conducted at the end of a week in which unemployment and inflation both fell, but Cameron and Osborne’s own 31% score has dropped particularly sharply – down from 40% since the question was last asked in July. The crumb of comfort for the government is that most doubters have moved into the don’t know column, rather than moving over to Labour. Indeed, trust in the Miliband-Balls team is also down since July, albeit only by two points.

Before this week’s feminist lobby of parliament, Labour has notched up a big 46%-32% lead among female voters. Miliband’s party also enjoys solid support of 40% or more across all social classes, although it remains stuck just below this level – at 38%-39% – across the electorally important Midlands and the south.

The small print of the survey provides powerful evidence of a generation gap. Among those aged 25-34, Labour is outpolling the Tories by 59% to 18%, a crushing three to one margin. But among pensioners, who are more likely to turn out and vote, the Conservatives retain a 46%-32% lead.

Labour’s eight-point lead with ICM is at the bottom end of a range of polls published over the weekend, which put the opposition’s lead at everything from eight to 13 points. ICM’s raw figures show a bigger 43%-32% gap, but the pollsters adjust to identify so-called “shy Tory” voters, by assuming that a proportion of those who report voting a particular way last time around but refuse to say who they will back next time will in fact revert to past form. The same adjustment boosts Lib Dem support more substantially, from 11% to 14%, which helps explains why ICM continues to rate the third party more highly than other pollsters, who often put them on 10% or less. Experience has demonstrated that this sort of adjustment in favour of parties who have fallen out of fashion is a valuable way of ironing out wilder political vicissitudes to give a more robust prediction. Support for the individual minor parties was as follows: Ukip 5%, SNP 3%, Greens 2%.

ICM Research interviewed a random sample of 1,000 adults aged 18+ by telephone on 19-22 October 2012. Interviews were conducted across the country and the results have been weighted to the profile of all adults. ICM is a member of the British Polling Council and abides by its rules.

Sourced from The Guardian

Carrots, sticks and banks

chorizorocket — Tue, 23 Oct 2012 10:12:44 +0000

Sourced from BBC: Robert Peston

One of the fault lines in the coalition has for some time been over the extent to which banks should be compelled to lend, especially to small businesses, rather than just being encourage to do so.

My understanding is that Vince Cable, the Business Secretary, remains concerned that the UK’s economic recovery will remain insipid for months and years, unless and until banks provide the credit required by growing businesses.

He has long seen the case for the government to use Royal Bank of Scotland, in which taxpayers have a stake of greater than 80%, as an instrument of policy. This would involve forcing RBS to fill the gaps in credit provision in the UK.

On Cable’s analysis, Royal Bank of Scotland has the capital and liquidity to provide loans needed by the kind of businesses that must thrive for positive momentum in the private sector to be established. What RBS lacks is the appetite for risk.

Nor, should I say, is Cable a lone voice on all of this. In recent months, similar concerns have been raised with me on the refusal of banks to provide credit where it is badly needed by senior executives at the Bank of England and the Financial Services Authority.

However, as of this moment, the government and Bank of England have eschewed the stick in their relations with banks and are instead dangling what the hope will be seen as a plump delicious carrot. The Bank of England is providing cheap loans to banks, under the Funding for Lending Scheme, on the condition that the banks do not reduce credit provision to British households and businesses.

And the FSA is trying to reinforce the impact of all of this by saying that there will be no incremental capital charge on banks that make net new loans to the British economy.

Will it work? It is too early to say – and latest data continues to show that money is tight for businesses.

There are two reasons to be cautious: first, it may well be that banks reluctance to lend is mostly to do with the attached risks, and not the interest or capital costs of making the loans; second, banks have a well-documented history of cynically manipulating the rules attached to schemes such as Funding for Lending, by (for example) increasing the categories of loan nominally favoured by the authorities while simultaneously cutting back on other categories of lending – which can result in unforeseen negative consequences.

All of which is to say that it is certainly too early for the board of Royal Bank of Scotland to be wholly confident that it is on a smooth glide path over the next two to five years to privatisation.

If credit provision remains anaemic, if this recession were to look like a three-humped camel with a further dip in the new year, then voices both within the coalition and without would start clamouring for RBS to become a more explicit instrument of the state – such that RBS would be mandated to increase its tolerance of the risk of lending to wealth-creating businesses.

PS The prime minister has today thrown his weight behind an initiative that began in Cable’s Business Department, to accelerate small business’s access to the money they are owed by their big-company customers.

In Downing Street today, he is gathering together more than 40 of the UK’s biggest businesses, to persuade them to provide administrative help to their small suppliers such that their these suppliers can raise cheap short-term loans from banks against the security of approved invoices.

Here’s how to think about this: if small businesses are owed money by a huge company like Tesco, their banks know that Tesco is good for the money; so the banks would provide cheap loans to those businesses, so long as Tesco has a system for authenticating what it owes these businesses.

In theory, say officials, supply-chain finance of this sort could accelerate small businesses access to £20bn of cash – and could reduce these businesses reliance on more expensive bank funding.

But, to be clear, this would be useful a one-time boost to the cash flow of businesses, rather than a self-reinforcing dynamic process of increasing the supply of credit (see my post How business can bypass banks for more on this).

David Cameron is trying to set an example, by implementing the scheme in relation to what the state buys from small pharmacies – which apparently could free £800m for these pharmacies.

UPDATE 10:45 BST

A former banker who is advising David Cameron on his supply-chain-finance initiative has rung to tell me I have understated its potential benefits.

He believes the effects will be more dynamic, less of a one-off, than I suggest, by cutting the cost of finance for small companies and releasing incremental credit not currently available from traditional invoice-discounting and factoring schemes.

I presume we all hope he is right.

Sourced from The BBC

University postgraduate system ‘failing UK economy’

chorizorocket — Tue, 23 Oct 2012 09:57:43 +0000

The postgraduate system in the UK’s universities is failing to produce the number of highly skilled staff needed by a modern economy, a report warns.

The Higher Education Commission says the system is geared towards attracting overseas students, rather than training more UK students.

The report warns that the UK is falling behind in investing in research.

A Department for Business, Innovation and Skills spokeswoman said: “We recognise there are some concerns.”

The study from the Higher Education Commission calls for urgent reform of the postgraduate sector, saying that in its present state it will cause long-term problems for the UK’s economy.

Postgraduate research has become increasingly important for innovative, hi-tech industries.

Tuition fees

But the Higher Education Commission, an independent group of education and business leaders, warns that the UK’s current system seems to neglect UK students and instead is driven by universities wanting to recruit overseas students who pay high levels of tuition fees.

It says this risks making the UK the “education outsourcing capital of the world” – training international students rather than providing home-grown talent for UK firms.

Continue reading the main story

“Start Quote

The postgraduate sector needs to be brought in from the cold”

End Quote Graham Spittle Higher Education Commission and IMB chief technology officer

Without an expansion of UK postgraduate students, it will mean UK firms will have to recruit more staff from overseas – or even have to re-locate to countries with a higher skilled workforce, the report says.

“We can’t compete with countries like China and India on numbers, but we can compete, and win, on ideas and innovation. The postgraduate sector needs to be brought in from the cold and hardwired into the UK’s strategy for economic growth,” said Graham Spittle, IBM’s chief technology officer, who chaired the group preparing the report.

The report identifies the scale of the growth of overseas postgraduate students – up 200% since 1999 – compared with a rise of 18% for UK students.

Within the group of countries in the wider European education area, it says that apart from England and Wales, the only other countries to have so few home students staying on for postgraduate are Andorra and Kazakhstan.

It calls for a reform of the support available for postgraduate students – so that they will not be deterred by higher tuition fees or difficulties in getting loans.

Earlier this year a report from the 1994 Group of research intensive universities warned of a looming crisis in postgraduate education – with a warning that successive governments had failed to address the problems facing this sector.

The vice chancellor of Oxford University has also highlighted his concerns about the funding of postgraduate studies.

A Department for Business, Innovation and Skills spokeswoman said: “We have asked the Higher Education Funding Council for England to monitor and review participation in postgraduate study as part of a longer-term assessment of the impact of the funding changes.”

Sourced from The BBC

Hundreds of Thousands will protest in London against the Tory cuts

chorizorocket — Sat, 26 Mar 2011 07:39:15 +0000

Thousands march in trade unions’ anti-cuts demonstration

Ed Miliband joins rally to attack government policies and promises to end privatisation of the NHS if Labour are elected

Nurses, firefighters, teachers and prison officers joined an estimated 100,000 protesters on Saturday in huge demonstrations against the government, loudly cheering calls for a 24-hour general strike.

Union officials and politicians, including Labour leader Ed Miliband, bitterly attacked the coalition’s spending cuts, accusing ministers of being more interested in supporting millionaires than ordinary workers.

The events in London, Glasgow and Belfast passed peacefully, although some disabled activists staged a sit-in and cut off traffic close to Hyde Park in London.

The TUC said the turnout was better than expected and sent a strong message to the government about the unpopularity of its policies.

General secretary Brendan Barber said: “We are sending a message that austerity is simply failing. The government is making life desperately hard for millions of people because of pay cuts for workers, while the rich are given tax cuts.”

Barber said chief whip Andrew Mitchell’s resignation and chancellor George Osborne travelling in a first class train carriage with a standard ticket showed how out of touch the government was.

He said: “The chancellor eventually paid for his ticket, but the rest of us are paying the price for his disastrous policies.”

Protesters carried banners which read “Plebs against toffs”, “Cameron has butchered Britain” and “24-hour general strike now” as they marched through Whitehall towards Hyde Park.

They booed at Downing Street and shouted “pay your taxes” as they passed Starbucks.

Police officers stood outside the coffee shop, which has been involved in a row over its tax arrangements.

Activists gathered outside a number of chain stores in central London, some wearing masks.

Dave Prentis, leader of Unison, said hundreds of thousands of public sector jobs were being lost as a result of government policies.

“We are fighting for a better future. We are not here today for the millionaires – we are here for the millions of people who don’t have a voice. We just can’t take any more.”

Unite leader Len McCluskey said millions were being pushed into poverty by a government more interested in supporting the country’s elite.

The biggest cheers of the day came when Bob Crow, leader of the RMT rail union, and Mark Serwotka of the Public and Commercial Services union called for a general strike.

The TUC is consulting unions on the practicalities of a nationwide stoppage, although it will not be in time to take part in a Europe-wide day of action against austerity on 14 November.

Ed Miliband said the prime minister was clueless and was clinging to policies which were not working.

Mr Miliband was booed by a small section of the crowd when he said Labour would have to make hard choices if it was in government.

He pledged that if he became prime minister he would tax bankers’ bonuses, support the building of 100,000 houses and end the privatisation of the NHS.

Sourced from The Guardian

Japan Earthquake

chorizorocket — Tue, 15 Mar 2011 11:49:49 +0000

I would like to sent my deepest sympathise to the Japanese people.

Link to the BBC: Japan Earthquake live update

Link to the BBC: Japan Earthquake latest news

Link to The Guardian: Latest news about Japan Earthquake

Doctors meet over opposition to NHS change plans

chorizorocket — Tue, 15 Mar 2011 11:38:52 +0000

Doctors are to debate toughening their opposition to the government’s plans to overhaul the NHS in England.

The emergency meeting of the British Medical Association (BMA) comes amid grassroots anger about the plans which could see increased competition.

BMA leader Dr Hamish Meldrum said doctors were worried about the “very dangerous” plans.

The Department of Health said it wanted to “work closely” with the union and was committed to the future of the NHS.

‘More pressure’

The union fears increased competition from the private sector could harm hospitals, perhaps even forcing some to close.

Dr Meldrum said he would prefer to see the NHS as the preferred provider instead of having a level playing field with the big health companies.

Ahead of the meeting, he told the BBC it was now time to be “ratcheting up” the concerns.

He said this had not been done before as the full details only recently emerged when the government published the Health Bill earlier this year.

Click to play

BMA leader, Dr Hamish Meldrum: NHS reform is ‘very dangerous’

“We want to put more pressure on the government to change what are flawed and very risky proposals for the NHS,” he said.

The meeting comes after Liberal Democrat delegates rejected the plans at the party’s spring conference last weekend.

Members voted not to support a “damaging and unjustified” shake-up, which will see GPs get control of much of the NHS budget along with the scrapping of primary care trusts and strategic health authorities.

A Department of Health spokeswoman said: “We are absolutely committed to the future of the NHS.

“We hope to continue to work closely with the BMA and all other health professionals to cut bureaucracy and give doctors the power and freedom to make the service more responsive to patient needs.”

Sourced from The BBC