UK News
Insights from the UK and beyond
Time for salary cap for bankers?
It’s not a great time to be a banker at the moment with financial apocalypse making the pin-striped gents probably more loathed than estate agents or journalists. Thousands of them have lost their jobs and those that are still in paid employment are finding that their renumeration packages are coming under ever greater public scrutiny.
Over the weekend reports that the Royal Bank of Scotland was about to award its staff a billion pounds in bonuses prompted outrage at a time of soaring unemployment and with a deep recession looming. Most people would agree it is a no-brainer that a company that has just posted the biggest-ever financial loss in British corporate history, required a 20-billion-pound government bail-out to stay afloat last year and is now nearly 70-percent state-owned should not be allowing its staff to be trousering huge bonuses.
The banks say they are bound by contract to pay the bonuses and that they need to retain key staff.
But that argument has got the former deputy prime minister John Prescott so riled he has even launched a public campaign against the bonus payments on Facebook. “This is morally and economically outrageous,” wrote Prescott. “If we hadn’t bailed them out to save homeowners and businesses, their contracts would be worth nothing as they’d be out of work.”
Bumper profits for oil companies – worth picking a fight?
It is not surprising that many people find it thoroughly irritating to read headlines about oil companies, such as Shell and BP, making bumper profits thanks to high oil prices while consumers pay ever more to heat their homes.
With crude oil prices having fallen to around $70 dollars from more than $147 in July even Chancellor Darling felt compelled today to say the recent drop should be passed on swiftly to the consumer,
Spend and spend some more?
Recent headlines alarmed us with news of the country’s budget deficit having risen to its largest in six decades, while top economists ominously declared that we’ve moved beyond merely tipping into a recession, to hurtling towards one.
More crucially, both Chancellor Alistair Darling and Prime Minister Gordon Brown have sought inspiration from revered economist Maynard Keynes’ oft-cited advice – spend and spend some more to fight off the ill effects of an economic slump. Keynesian theory’s greatest principle is the fundamental concept of the circular flow of money. He opined that when individuals rein in money outflow, the government needs to be “priming the pump”.
Has the media made the crisis worse?
Since banks and world financial markets started collapsing over a month ago, politicians, commentators and people in the street have pointed the finger of blame in a variety of directions: at bankers, regulators, hedge fund managers, mortgage lenders, short-sellers and speculators, among others.
Now, it appears, the BBC is also in the firing line.
The broadcaster’s economics correspondent, Robert Peston, has broken several major elements of the unfolding story, from which banks were on the brink of collapse to the details of how the government was going to set about bailing them out. BBC radio interviewer John Humphrys has also been at the forefront of the story, grilling government leaders, especially Chancellor Alistair Darling, about the crisis and how the country, and the rest of the world, ended up in it.
Wednesday’s front pages
The crucial poll win in Pennsylvania by US presidential hopeful Hillary Clinton came too late for many newspapers, who predominantly went instead with rising food prices and fears for a missing boy in Wednesday’s headlines.
THE INDEPENDENT: The Chilling Message From Zimbabwe’s Church Leaders
The paper runs a dramatic quote in red and black letters which says: “If nothing is done to help the people of Zimbabwe, we shall soon be witnessing genocide similar to that in Kenya and Rwanda.” Story here.
Consumers go it alone as storm clouds gather
The dust has settled on Alistair Darling’s first Budget and consumers have been given little reason for celebration. The Chancellor, though announcing various measures designed to increase housing affordability, has done nothing to help the masses.
There were no moves to give a helping hand to hard-pressed householders, already struggling amid rocketing mortgage, food, fuel and tax costs, to ride out an impending recession. Darling did pledge to introduce a savings scheme targeted at low and moderate earners, often least able to save: the “saving gateway” will attract government matching for savings over the duration of people’s participation in the scheme. This has the potential to introduce up to eight million people into mainstream savings in the UK who otherwise might not make thrift a priority.
Another “slap in face with wet kipper” Budget
By Francesca Lagerberg, head of the national tax office, Grant Thornton
Most Budgets have all the attraction of being slapped in the face with a wet kipper and sadly this one is unlikely to reverse the trend. As expected, from today up goes the cost of booze (4p on a pint) and fags (11p on a packet). Also for those who like driving larger less-green new cars there is a “showroom” tax coming in from 2009 that could cost them around 950 pounds.
However, for the entrepreneur there was a little cheer. After strong representations from business, Chancellor Alistair Darling has deferred the “income shifting” rules that were due to start from this April. These were a direct attack on family-owned businesses that include lower tax paying family members who take out dividends or profits but make a less significant contribution to the business. A case last year (Jones v Garnett) went against the government and it was looking to legislate to get the result it wanted. The proposals were wide-ranging and ill-targeted. A deferral will hopefully allow time to revisit this whole approach.
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The Wall
