Political slaughter

[nightrider]

I am no political animal but it looks as though the Lib dems and Tories have been hammered in yesterdays elections, could it be that the public are sick of these austerity measures?

[malc d]

knight of the road - 2012-05-04 3:42 PM

 

I am no political animal but it looks as though the Lib dems and Tories have been hammered in yesterdays elections, could it be that the public are sick of these austerity measures?

 

 

 

 

Judging by the turnout, I would say that people are just sick of voting.

 

 

:-(

[Dr Dave]

People are probably sick of having to pay for the mistakes of politicians and bankers. Working people are now having to foot the bill for the mistakes made by those who should know better. Whilst the perpetrators generally get a bonus for doing a rubbish job couple this with the fact that the Tories have now rewarded themselves and their mates with a tax cut its no wonder the labour party are having a bit of a renascence. Vat on hot pasties anyone? 

(and just in-case anyone wants to correct me or put me right on anything i may think, i don't want a lecture) 

sorry about that disclaimer but so many have suffered before :-)

[Guest pelmetman]

UKIP did well B-)

[nightrider]

looks like the labour working class are now taking their revenge, me, I cant complain which ever way the voting goes because I vowed never to vote again, not after reading up on the fiddling barstward politicians, much prefer to fend for myself.

[BGD]

On thing that a lot of people tend to overlook is that the Financial industry in the UK is, by a mile, the biggest corporate taxpayer.

 

Additionally, all those high bonus payees in the Investment banking divison of those institutions - who are the people who actually do the work which gets you your investment growth on your pension fund/ISA/unit linked investments etc, DO NOT receive the bonus amounts quoted at all.

Over 60% of all those bonuses goes straight to the Government as income tax and national insurance.

It is then the nett figure that those highly skilled investment analysts spend in the economy, buying goods and services that keep other people in the UK in jobs and wages.

 

Tax those companies and individuals even more highly, and there is a BIG risk of a lot more of them simply relocating out of the UK into more business-friendly countries. They are very geographically mobile; they have no massive factories, production lines, plant etc.

 

I fear that the UK really is in grave danger now of killing the goose that lays the golden egg of profits and thus taxes that are taken by the Government to pay for the NHS, pensions, schools, and every other sort of Public Sector spending and wages.

 

 

 

[Brian Kirby]

Dr Dave - 2012-05-04 4:22 PM

 

People are probably sick of having to pay for the mistakes of politicians and bankers. Working people are now having to foot the bill for the mistakes made by those who should know better. Whilst the perpetrators generally get a bonus for doing a rubbish job couple this with the fact that the Tories have now rewarded themselves and their mates with a tax cut its no wonder the labour party are having a bit of a renascence. Vat on hot pasties anyone? 

(and just in-case anyone wants to correct me or put me right on anything i may think, i don't want a lecture) 

sorry about that disclaimer but so many have suffered before :-)

So this a political debate in which no-one is allowed to debate your point of view - or is this debating rule rule to apply generally, or have I completely misunderstood? Would any reply expressing disagreement with your opinion automatically fall into the "lecture" category, or is it some particular kind of disagreement you have in mind? After all, a debate in which alternative points of view are disallowed is an oxymoron, is it not? Just trying to get the ground-rules clear, that's all. :-D

[Dr Dave]

[QUOTE]Brian Kirby - 2012-05-04 5:38 PM

Dr Dave - 2012-05-04 4:22 PM People are probably sick of having to pay for the mistakes of politicians and bankers. Working people are now having to foot the bill for the mistakes made by those who should know better. Whilst the perpetrators generally get a bonus for doing a rubbish job couple this with the fact that the Tories have now rewarded themselves and their mates with a tax cut its no wonder the labour party are having a bit of a renascence. Vat on hot pasties anyone? 

(and just in-case anyone wants to correct me or put me right on anything i may think, i don't want a lecture) 

sorry about that disclaimer but so many have suffered before :-)

So this a political debate in which no-one is allowed to debate your point of view - or is this debating rule rule to apply generally, or have I completely misunderstood? Would any reply expressing disagreement with your opinion automatically fall into the "lecture" category, or is it some particular kind of disagreement you have in mind? After all, a debate in which alternative points of view are disallowed is an oxymoron, is it not? Just trying to get the ground-rules clear, that's all. :-D

Brian

i was just stood on my soapbox for a minute and i do feel better for it. The disclaimer was not meant for you just for a couple of people who tend to drag any debate into a venomous, personal name calling charade. Having said that politics and religion are a bad area for debate like sex and wives and all that jazz. Debate or Debarcle you decide. :-) off to Flamborough Sunday hope the weather gets better, anyone else there at the Mo?

[Guest pelmetman]

BGD - 2012-05-04 5:33 PM

 

who are the people who actually do the work which gets you your investment growth on your pension fund/ISA/unit linked investments etc,

 

 

 

Judging by what we have been offered for our private pensions annuities and endowment Bruce they haven't done a very good job *-)............

 

Whats more even though the payouts from the above have fallen through the floor 8-)...............their wages have still gone up..........call me old fashion'd but you don't usually get paid more for doing a rubbish job ;-)

[Syd]

 

I do not like to disagree with my friend here in Spain but Bruce these "Experts are the idiots that bought the sub-prime investment packages that was the final straw in triggering the financial meltdown that we are now suffering so badly from.

They were conned by the Yanks into buying investment packages that they did not even understand that turned out to be absolute rubbish.

Yes we really do need overpaid idiots like these, especially when they are now compounding the problems by hoarding the monies instead of lending it to businesses.

 

Just where would we be without them

[laimeduck]

What is worrying is the turnout.

When it's as low as this , it means it's just the zealots & misfits who benefit.

Eg..... A Penguin beat the Lib Dems somewhere down here in the South?

 

[nightrider]

Over the last couple of days I have read of some bright spark saying that in order to combat the overuse of using water in these supposed days of water shortages was to put up the cost of water ?what is it with some people their only answer to a problem is to jack the prices up?

[Guest 1footinthegrave]

laimeduck - 2012-05-04 10:53 PM

 

What is worrying is the turnout.

When it's as low as this , it means it's just the zealots & misfits who benefit.

Eg..... A Penguin beat the Lib Dems somewhere down here in the South?

 

I wonder if every area had a Penguin as a candidate the 68% that did not bother to vote at all would have turned out in droves :D

[Dr Dave]

laimeduck - 2012-05-04 10:53 PM What is worrying is the turnout. When it's as low as this , it means it's just the zealots & misfits who benefit. Eg..... A Penguin beat the Lib Dems somewhere down here in the South?

PPPPickup a Penguin ;-)

[Retread24800]

I am amazed that anyone is still trotting out the 'Financial services are the biggest tax payer ' argument. After their recent showing I would have thought it would be less expensive for GB plc if we hived Financial services to the USA and just printed the difference as we are having to do to keep the 'economy' afloat after the sub prime fiasco.

As for the elections, the incumbents Always get a Drubbing mid term, It will be interesting to see if the Great British electorate begin to equate Bankers with Tory posh boy politics when the time comes round to issue the redundancy notices.

 

[laimeduck]

Just for the record - the Penguin was in Scotland!

 

http://www.dailyrecord.co.uk/news/politics-news/2012/05/04/local-council-elections-2012-penguin-gets-more-votes-than-lib-dem-candidate-86908-23848088/

 

That's as it should be - it's cold up there. :D :D

[BGD]

Syd - 2012-05-04 9:05 PM

 

 

I do not like to disagree with my friend here in Spain but Bruce these "Experts are the idiots that bought the sub-prime investment packages that was the final straw in triggering the financial meltdown that we are now suffering so badly from.

They were conned by the Yanks into buying investment packages that they did not even understand that turned out to be absolute rubbish.

Yes we really do need overpaid idiots like these, especially when they are now compounding the problems by hoarding the monies instead of lending it to businesses.

 

Just where would we be without them

 

 

 

 

Sorry Syd - but I think you have fallen headlong into the trap of sweeping generalisation that many others have done before you.

 

Here's a bit of a gentle weekend ramble through the UK financial industry..................

 

 

 

 

 

The VAST majority of banks in the UK were and remain efficient, prudently run, profitable for their shareholders, never needed any bailout at all.

 

A couple of UK banks...note, just a couple of them only...adopted even more high-risk-high-returns policies than the rest, in order to give their owners ( their shareholders) greater dividends.

RBS under it's then CEO was one of the rare cases in point....for over a decade his aggressive, higher risk profile investment banking policies delivered massive profits for RBS shareholders whom he was responsible to. He was worshipped as God for the high profits he got them year after year after year.

It was only when the US sub-prime mortgage sector imploded that the losses thus suffered exposed how big a risk he and his shareholders and investment customers had been running in order to get such above-average returns on the money they invested with RBS.

 

Now, almost all of the high street banks whose names will be familiar to you in the UK consist of TWO divisions: retail banking and investment banking.

Retail banking (offering bank accounts to individuals and companies) is a total pain in the arse for most banks.

They make almost no profit from it, because of their mistake in following each other and offering "free banking" a couple of decades ago, in order to try to gain market share from one another. This concept simply doesn't exist in most other countries around the world.

"Free banking" is clearly impossible to sustain. After deducting all the costs of staff, premises, FSA compliances etc, the retail divisions of the major banks make utterly tiny profit from these activities.

 

In practice, the retail "free banking" activities are subsidised by the other branch of those banks activities, the bit that the high street punter really doesn't see or understand.........investment banking.

 

Now the two "bad banks" failed because they didn't have enough assets to cover the losses they made when one of their very big investment post went sour. All the other banks DID have enough assets elsewhere to cover those losses.

Those two banks should just have been allowed to go bust, like any other UK business that goes bankrupt. But despite that, the Government has pumped billions of taxpayers money into them....essentially rewarding bad banking, and effectively penalising all the other good, prudently run banks......by also making all of them "hoard" far more of their assets on their balance sheets, rather than lending such monies out/investing them in order to generate profits for their customers and shareholders.

But then the Government has the gall now to slag those good banks off for doing EXACTLY what the "stress test" regulations now say they must, ie lend out a much smaller proportion of assets than in the past.

 

Investment banking is betting. It is taking customers money, and investing it in all sorts of ways in order to make that customer a profit, and taking a bit of that profit or making a charge to the customer for providing that service. The investment banking arms of the big high street banks utterly DWARF the size of their retail activities.

The analysts who make the actual minute by minute decisions every single day about where to put/move/withdraw money to/from funds/shares/properties/ minerals etc all over the globe ONLY make big annual bonuses if they make mind-bogglingly big profits for their customers and their bank.

Thus, as with RBS, the bank overall can make a trading loss, because it's retail arm lost loads of money; and even many of it's investment bank divisions made a losses too, but it is still possible that say George, one of the brightest, cleverest, most well informed financial managers on the planet, and presently the Head Analyst in Asian minerals and oil markets, made the 280 billion pounds of customers money that he was investing there all year, in the " Asian markets" fund that he was in charge of, grow by 40 billion pounds.

Now, if his employment contract says he gets a bonus of 0.001% of the annual profit that the fund he manages generates....then he's still fully entitled to the 0.001% (say) 2 million quid of the fund profit that his efforts and his management generated.

Of course, he won't get the 2 million quid. Because here in the UK he has to pay an instant 60% tax/NI on it. He'll get £800k; the UK Government (and thus the NHS, social security, state pensions etc) will get all the other £1.2 million.

 

You can't have high profit without high risk. He's taking the risks the pressure, to make the profits, for his fund at least. This is how you can have a bank paying out bonuses to some individual investment managers even though the bank overall has made a loss.

If you don't pay him the bonus he's entitled too, he'll just sue you for it (and win) as the few RBS fund managers who DID make big profits on their funds but who were denied the bonuses that their employment contracts said they would thus get, are doing at the moment

Then he'll just get on a plane and move to another investment bank in Hong Kong/Asia/USA etc where he DOES get what his contract entitles him to, and where the customers/shareholders do value the tens of billions of pounds/dollars/yen that he makes for them in profits because of his skills and knowledge every year.

 

 

The average UK punter mostly confuses retail banking with investment banking, and lumps together the very many good and the couple of bad banks, and very many good and the couple of bad investment bank management organisations.

 

 

 

End of weekend ramble - retire to pub.

;-)

[francisgraham]

At last, an intelligent and informative post about banks. The trouble is though that it will make no impression on the usual suspects whose 'lynch mob' mentality is incapable of separating the good from the bad and simply lists everyone under the same heading:

All bankers are spivs and idiots.

All MPs are corrupt and brain dead.

All lawyers are leeches who only participate in 'rip off' personal injury cases.

All successful businessmen and professionals who have spent years at school and university and may well have risked everything and have made money and created jobs are 'money muppets' to be sneered at and denigrated.

Most of these observations are made by people who, quite clearly, appear to have left school at fourteen, haven't a qualification to their name, but feel that they have the right to call everyone else morons or brain-dead idiots. They appear to be motivated by the bitterest envy, usually of anyone more successful than they are.

The British financial industry has made massive contributions to our economy over decades, but all these narrow-minded individuals can focus on is the mistakes of a tiny number of bankers whilst they conveniently ignore Barclays, HSBC and the other banks who have not needed bailing out and have contributed billions in taxes. But perhaps they simply aren't aware of anything beyond the tabloid headlines?

1% of taxpayers pay almost 30% of the entire income tax revenues in the UK, and, when the higher rate tax was 50%, of every £100K available to be paid in a bonus, when employers' and employees' NI was taken into account £42K is left, an effective tax rate of 58%.

But when the government takes the decision to reduce the top rate to 45%, from the hysterical reaction, you'd think that they were committing some war crime, rather than simply taking less of what is an obscene tax regime and deters investment and entrepreneurship.

People should ask themselves how they'd feel if someone gave them £100K, perhaps a legacy or a lottery win and the government asked for £58K in taxes from them. I suspect that they'd suddenly be in favour of a fairer tax regime.

[Guest pelmetman]

If the bankers are so good and generating such huge profits for their shareholders........why are annuity/endowment rates so low?...........As I assume its the same clever people doing the investing............? :D

[Guest pelmetman]

francisgraham - 2012-05-05 3:49 PMBut when the government takes the decision to reduce the top rate to 45%, from the hysterical reaction, you'd think that they were committing some war crime, rather than simply taking less of what is an obscene tax regime and deters investment and entrepreneurship.

People should ask themselves how they'd feel if someone gave them £100K, perhaps a legacy or a lottery win and the government asked for £58K in taxes from them. I suspect that they'd suddenly be in favour of a fairer tax regime.

As DC said we're all in it together.........unless your rich ;-) ............It seems like Fred the shred hasn't done to bad out of bringing the country to its knees *-)

[Retread24800]

How come the strong Banks failed to bail out their weaker brethren? Somewhere I read that each UK Household is now £30,000 in debt due directly to the Banking Balls up.

If the whole problem was down to greed can we not insist that the beneficiaries of this greed repay the dividends so earned or perhaps Bank traders should guarantee their trades against their world wide wealth like Lloyd's names used to do, might make em more circumspect and realise that they are dealing with real money and not just figures on a screen

PS lets admit it HSBC did well but remember it stands for Hong Kong and Shanghai Banking Corp. not so English sounding now?

 

 

[Brian Kirby]

BGD - 2012-05-04 5:33 PM...................Additionally, all those high bonus payees in the Investment banking divison of those institutions - who are the people who actually do the work which gets you your investment growth on your pension fund/ISA/unit linked investments etc, DO NOT receive the bonus amounts quoted at all.......................

Don't entirely agree with this analysis, Bruce. They work yes, and some of them work very hard. But then, so do many others in many other fields. It is a virtue, but it is not that virtue which of itself yields profit.

 

Broadly, they make (or lose! :-)) money by buying and selling shares and securities. It is claimed that this is essential to the functioning of our economy, but I think this gets overstated. Investment capital is raised when a share is issued, thereafter the share is merely traded back and forth depending on its value. Its value, in part, depends on the fortunes of the company that issued the share, and in part on the dividend its board authorises. Dividends are not always paid wisely but, for the sake of simplicity, lets say they are. So, what this trader of shares buys or sells is, in effect, the anticipated performance of the company.

 

That performance depends in turn on decisions taken by its management, and the product, whatever that may be, of its workforce. So I would argue it is the management, directors, and workforces in the companies issuing the shares who are truly those who "actually do the work which gets you your investment growth on your pension fund/ISA/unit linked investments etc". The traders just buy and sell the results of their work.

 

I would also say that IMO, the UK is far too dependent on the stock market as its source of capital, and I think this feeds into our legendary short term-ism that so weakens our manufacturing base. By comparison, other countries (most notably Germany), with economies as successful, or even more so, as the UK, place less reliance on stock markets for investment cash and more on borrowing from banks. This binds the banks closer to the company, often with board representation, which both tempers board decisions but also confronts the bank with the problems its client faces. More difficult to foreclose when your money is tied up in a company you partially direct than one in which you merely hold pieces of paper. This seems to me beneficial because the investor becomes a true investor, having to play the long game for his returns, rather than a trader looking for quick profit today, without regard to the future wellbeing of the company, or the impact on that wellbeing of his buying or selling its shares.

 

So, useful, but not irreplaceable, in need of improvement, and certainly, IMO, not the true source of wealth.

[BGD]

pelmetman - 2012-05-05 4:28 PM

 

If the bankers are so good and generating such huge profits for their shareholders........why are annuity/endowment rates so low?...........As I assume its the same clever people doing the investing............? :D

 

 

Because people are now living far too long.

 

Honestly. That's the key reason.

 

The Actuaries who set/adjust such rates have to take a view up to 80 or 90 years into the future, to estimate how many policy holders are likely to die each year, ie for how long the annuity will be likely paying out.

As longevity has increased far faster than was anticipated, annuity providers have been offering much lower annuities for any given pension pot lump sum, as they are going to have to pay out for a lot longer than was estimated 10, 20 or 30 years ago.

 

[BGD]

Brian - I didn't want to get too far into semantics on this.

 

I did not and do not suggest that the present system overall is, philosophically somehow "good" or "bad" by whatever measures one might use to judge...and of course everyone's measures will be different at any point in time, and will move over time too.

 

I simply endeavoured to provide some detail to try to assist others to understand more about how banks operate, where their profits come from, how analysts and fund managers are incentivised, and a little about the taxes that they pay on bonuses and their employers pay on profits generated....which are what then pays for the "nice" things that the public sector does.

 

It may or may not be a good or bad industry.

That moral judgement is an individual one. As I said before it may well vary over time as personal experience of profit or loss, or even perceived profit or loss, shapes ones view.

I happen to believe that on balance it is a good, and a very necessary, industry. Others are of course free to conclude differently.

 

But without it, UK plc would be sunk overnight, with all the pain and suffering that the removal of about 20% of it's entire tax revenue-public sector spending would entail. It is, for all of us, very much easier to have a pop at the people who achieve such bonuses than to posses the intellect, and to undertake the training, the vast amount of specialist knowledge to by acquired, the enormous amount of information to search out, understand, and extrapolate from, in a global marketplace, every single day.

 

Investment Bank Fund managers will never not be to everyone's moral taste. But without them, and the profits that their investment decisions generate, the majority of people in the UK would be in an awfully big mess. Very very quickly. 8-)

[Guest pelmetman]

BGD - 2012-05-05 4:57 PM

 

pelmetman - 2012-05-05 4:28 PM

 

If the bankers are so good and generating such huge profits for their shareholders........why are annuity/endowment rates so low?...........As I assume its the same clever people doing the investing............? :D

 

 

Because people are now living far too long.

 

Honestly. That's the key reason.

 

The Actuaries who set/adjust such rates have to take a view up to 80 or 90 years into the future, to estimate how many policy holders are likely to die each year, ie for how long the annuity will be likely paying out.

As longevity has increased far faster than was anticipated, annuity providers have been offering much lower annuities for any given pension pot lump sum, as they are going to have to pay out for a lot longer than was estimated 10, 20 or 30 years ago.

I follow that Bruce..........So they got it wrong,doesn't seem to have affected their pay, Which is what annoys us oikes, If I cock up I don't get paid where as these people are able to make monumental cock ups and walk away with a fat bonus............

 

But how about endowments?..........

 

Also Francis mentioned Barclays not needing a bail out............didn't they go cap in hand to the Arabs?........because the government money came with strings attached ie no bonuses ;-)