Essential watching before making your election choice on Thursday. For those of you who can, please circulate as widely as possible.
REMEMBER – VOTING FOR ANYONE BUT TIRELESS NHS CAMPAIGNER CLAIRE WRIGHT WILL BE A VOTE FOR FURTHER KILLING OFF OF THE NHS – AND US:
“Schools in Yorkshire that transferred millions of pounds to a multi-academy trust before it went bust will not get the money back, the area’s schools commissioner has confirmed.
Wakefield City Academies Trust (WCAT), which ran 21 schools, was accused of asset-stripping after it moved its schools’ reserves to centralised accounts before admitting new sponsors would need to be found for them days into the new term in September 2017.
The schools commissioner for Lancashire and West Yorkshire, Vicky Beer, has written to MPs confirming that the trust entered liquidation and was closed on 24 October this year.
“I advised previously that any remaining monies would be determined at the point of closure and that there were still costs to be met including pension liabilities and outstanding invoices,” she wrote.
“These costs have now been met and balances cleared. Unfortunately, this does not leave any remaining funds to distribute amongst the previous WCAT academies and their new trusts.” …”
“The 22-page briefing document is likely to embarrass Conservative HQ as it exposes the party’s strategy for the 12 December poll. …”
A few pages – note fake news like “we are not privatising the NHS … continuing to [de]fund publuc services … the prime Minister’s “Great New Deal” (shades of Trump there and really pretty much May’s old deal – but worse!).
“Corporate addition to high debt threatens to destabilise the world economy. Not my words – those of the International Monetary Fund.
A recent report by the IMF says that “in a material economic slowdown scenario, half as severe as the global financial crisis, corporate debt-at-risk could rise to $19 trillion —or nearly 40 percent of total corporate debt in major economies—above [2008] crisis levels.”
In other words, in an economic slowdown, many firms will be unable to cover even their interest expenses with their earnings. Countries most at risk are US, China, Japan, Germany, Britain, France, Italy and Spain.
One study estimated that in 2018 UK s FTSE 100 companies alone had debt of £406bn.
Sinking in debt
Low interest rates have persuaded companies to pile-up debt in the belief that they will be able to use it to maximise shareholder returns. The key to this is tax relief on interest payments.
Ordinary folk don’t get tax relief on interest payments for mortgages or anything else because successive governments argued that such reliefs distort markets and encourage irresponsible behaviour.
However, corporations get tax relief on all interest payments. Currently for every £100 of interest payment, companies get tax relief of 19%, the prevailing rate of corporation tax, which reduces the net cost to £81. The tax subsidy enables companies to report higher profits.
Companies do not necessarily use debt to finance investment in productive assets. The UK languishes near the bottom of the major advanced economies league table for investment in productive assets and also lags in research and development expenditure.
British companies appease stock markets by paying almost the highest proportion of their earnings as dividends. BHS famously borrowed £1 billion to pay a dividend of £1.3bn. Carillion used its debt to finance executive pay and dividends. Thomas Cook had at least £1.7bn of debt but that did not stop lavish executive pay and bonuses.
Fatal effects
Corporate debt facilitates profiteering and tax avoidance. Water companies have long used ‘intragroup debt‘ to dodge taxes. Typically, they borrow money from an affiliate in a low/no tax jurisdiction. The UK-based company pays interest which qualifies for tax relief and reduces the UK tax liability.
Many a tax haven either does not levy corporation tax or exempts foreign profits from its tax regime. As a result, the affiliate receives the interest payment tax free.
It is important to note that the company is effectively paying interest to another member of the group and no cash leaves the group. The inclusion of interest payments in the paying company’s cost base can also enable it to push up charges to customers, especially if has monopoly rights on supply of goods and services.
Thames Water is an interesting example here. From 2006 to 2017, it was owned by Macquarie Bank and operated through a labyrinth of companies, with some registered in Caymans.
During the period, Thames’ debt increased from £2.4bn to £10bn, mostly from tax haven affiliates, and interest payments swelled the charges for customers. Macquarie and its investors made returns of between 15.5% and 19% a year.
For the period 2007 to 2015, the company’s accounts show that it paid £3.186bn in interest to other entities in the group alone. Tax relief on interest payments reduced UK corporate tax liability. For the years 2007-2016, Thames Water paid about £100,000 in corporation tax.
Private equity entities use debt to secure control of companies and engage in asset-stripping. A good example is the demise of Bernard Mathews, a poultry company.
In 2013, Rutland Partners acquired the company and loaded it with debt, which carried an interest rate of 20%. This debt was secured which meant that in the event of bankruptcy Rutland and its backers would be paid before unsecured creditors.
In 2016, Bernard Matthews’ directors, appointed by Rutland, decided that the business was no longer viable and sought to sell it. However, they only sold the assets of the company which realised enough to pay secured creditors, Rutland and banks.
The big losers were unsecured creditors, which included employee pension scheme, HMRC and suppliers. The purchaser of the assets told the House of Commons Work and Pensions Committee that it offered to buy the whole company, including its liabilities, but the offer was declined by Rutland because by dumping liabilities it collected a higher amount.
What needs to change
There is some recognition that corporate addiction to debt poses a threat to the economy. Following recommendations by the Organisation for Economic Co-operation and Development, the UK has placed some restrictions on the tax relief for interest payments, but that is not enough.
An independent enforcer of company law is needed to ensure that companies maintain adequate capital. Companies need workers on boards to ensure that directors do not squander corporate resources on unwarranted dividends and executive pay.
The insolvency laws need to be reformed to ensure that secured creditors can’t walk away with almost all of the proceeds from the sale of assets and dump liabilities.
And finally, tax relief on debt needs to be abolished altogether.”
https://leftfootforward.org/2019/10/prem-sikka-how-companies-use-debt-to-line-their-pockets/
“Top investors in the water industry have complained to the Treasury that the regulator Ofwat is being politicised and warned of a flood of appeals against its financial demands.
International investors that control suppliers including Anglian, Yorkshire, Affinity, South East and South Staffs led a delegation this month ahead of a crunch ruling on prices by Ofwat, due in December. They are reeling from the toughest draft settlement from the regulator in years and fearful of Labour’s pledge to renationalise the sector at a big discount to market value.
After years of taking huge dividends from water companies and piling debt onto them, while paying minimal corporation tax and overseeing scandals such as sewage spills and water leaks, utility investors have seen the industry and political environment turn toxic.
Ofwat, chaired by former Anglian Water boss Jonson Cox, stunned the sector in July when it rejected the spending plans of all but three companies and sent the other 14 back to the drawing board, demanding more efficiency, faster paydown of debt and better customer service. It will publish its final ruling on their 2020-25 spending plans in December.
The meeting on October 14 is believed to have included blue-chip investors such as German insurer Allianz, Singapore sovereign wealth fund GIC, Deutsche Bank’s wealth division and Australia’s IFM Investors. Among the issues raised was Ofwat’s independence and the dangers of it reacting to political pressure.
Cox has been on a crusade to clean up the sector. In an interview last year, Cox told The Sunday Times: “This industry still doesn’t accept that customers should be at the heart of this business. We are unwinding one of the last bits of the pre-crash bonanza: buying an asset and gearing it up.”
Investors also asked senior mandarins whether the Competition and Markets Authority had the resources to deal with simultaneous appeals against Ofwat’s financial stipulations. At least five suppliers are believed to considering appeals.
The funds called on the Treasury to assess the financial resilience of the sector, after companies including Thames and Northumbrian complained that Ofwat’s demands were “unfinanceable”.
Global investors have ploughed billions of pounds into former state-owned companies since the privatisation wave of the 1980s and 1990s, yet are increasingly reassessing whether the UK is still an attractive place to park their cash.
Ultra-low interest rates and the need for returns inflated asset values and led to a bidding war for infrastructure companies. However, the appetite for water companies has cooled over the past two years. The Sunday Times revealed in April that Labour planned to renationalise the industry at a big discount to market value, making deductions for “asset-stripping since privatisation”.
That and Ofwat’s clampdown have spooked local authority pension funds, which have belatedly begun pouring cash into infrastructure. GLIL, which invests the pensions of council staff, was among the attendees at the Treasury meeting.
Last month, Alain Carrier, European boss of the CAN$400bn (£239bn) Canada Pension Plan Investment Board, which owns a stake in Anglian, said: “It’s difficult for the regulator under the current political climate not to be seen to be very tough. The independence of the regulator is under some pressure.”
Ofwat said: “Our decision-making is independent from government and based on delivering the very best for customers. Investors have always made clear they value the independence of the regulatory regime.”
Source: Sunday Times (pay wall)
“The government has wasted at least £14 billion between 2016 and 2019 on poorly managed outsourcing contracts finds a report from the Reform Think Tank.
The report is based on an analysis of investigations by the National Audit Office NAO), Parliamentary Select Committees and other statutory bodies. The total value of the contracts investigated was £71.1 billion.
The Ministry of Defence accounts for 27 per cent of this waste. This includes a 17 year delay in the full decommissioning of nuclear submarines and a poorly planned army recruitment programme. This saw soldiers forced into backoffice jobs to clear an IT backlog created by an untested IT system created in partnership between the army and Capita.
Other examples include the vastly expensive liquidation of Carrillion, which cost the government at least £148 million as well as involving the time and resources of 14 government departments and public bodies.
Also the Department for Education continued to give Learndirect £105 million after the programme was rated ‘inadequate’ by Ofsted. This should have led to the funding being withdrawn.
A third of the government’s annual budget is spent on outsourced services, at a total of ££292 Billion.
Reform is now calling for an independent regulator of the outsourcing sector which – unlike the NAO or Select Committees would have the power to enforce change and impose sanctions on failing providers.
Senior Researcher and Reform procurement lead, Dr Joshua Pritchard said “Our public services cannot function without outsourcing. But when it goes wrong, it’s taxpayers who end up footing the bill
“The £14.3 billion wasted as a result of poorly drawn up and managed government contracts is inexcusable.
“We need a new regulator with the power to prevent public money being squandered because of totally avoidable mistakes.”
£14 Billion ‘wasted’ by the government on ‘botched’ outsourcing
“Northern rail could be renationalised, says transport secretary.
The Northern rail network could be renationalised after years of late and cancelled trains, according to the transport secretary, who said the current franchise cannot continue as it is.
Grant Shapps told the Commons transport select committee that first steps had been taken towards taking the Northern rail network back into public hands. He said he had asked the Northern franchisee, the German-owned Arriva, and the government’s operator of last resort to draw up proposals to improve the service.
Highlighting that barely one in two Northern trains ran on time, Shapps said: “I consider that it cannot continue delivering in the current delivery method.”
He added: “I entirely believe we cannot carry on thinking it is OK for trains not to arrive, or Sunday services not to be in place – that simply has to change.”
His remarks were welcomed by politicians who have criticised the service, whose vast network runs from Newcastle to Leeds, Liverpool, Hull, Manchester and Stoke. Greater Manchester’s mayor, Andy Burnham, said: “After months of misery it is a relief for us to hear government finally accept what we’ve been saying repeatedly, that things can’t carry on as they are.
“Northern passengers will agree with the transport secretary that the current situation of unreliable, overcrowded trains cannot continue. …
Labour said all rail franchises should come under the state’s wing, joining Network Rail. Andy McDonald, the shadow transport secretary, said: “Northern Rail’s incompetent operator should have been stripped of its contract years ago over its abysmal performance record. The government’s refusal to do so has meant massive inconvenience for rail passengers and damage to the region’s economy. …”
“The regulator has allowed energy network companies to make bigger than expected profits at the expense of household bills, according to its own state of the market report.
Ofgem admitted the companies that run Britain’s energy pipes and wires had earned double-digit returns in the last year despite its efforts to keep a lid on energy bills.
The regulator oversees the business plans of regional gas and electricity networks to keep a rein on how much each firms can spend on their infrastructure, and how much they can claim back through energy bills.
It said that with hindsight it had set the rate of return too high, and that some companies had managed to spend less than planned, to rake in higher profits.
The uncomfortable evaluation has emerged following Ofgem’s decision to appoint its head of networks as its new chief executive. Jonathan Brearley will replace Dermot Nolan when he steps down in February next year.
It said: “The overall costs to consumers of the transmission and distribution networks have turned out to be higher than they needed to be.”
The admission is likely to anger critics of the companies, including UK Power Networks and National Grid, who have warned that networks are hiking up household energy bills while paying bumper shareholder payouts to foreign investors. …”
“Ministers were accused of pretending that Carillion is “no longer their problem” almost 600 days after the collapse of the outsourcing business.
Unite, the trade union, claimed that Whitehall has adopted a “business as normal approach” after the government contractor’s failure, which led to thousands of job losses and delays to key public projects.
It complained that no action has been taken against the company’s former directors as several regulatory investigations continue.
Carillion was a construction and public services giant with an annual turnover of £3.5 billion. It went bust in January 2018, leaving £1 billion of debts and pension liabilities of £2.6 billion. About 3,000 staff lost their jobs and thousands more were transferred to new suppliers and contractors.
Two of its big contracts, the Royal Liverpool and Midland Metropolitan hospitals, remain “years away” from completion, Unite said.
The Official Receiver is trying to determine whether any criminal wrongdoing by those in charge of Carillion led to its collapse. The Financial Reporting Council is examining the accuracy of its auditing processes.
Gail Cartmail, Unite’s assistant general secretary, said it was “totally apparent” that ministers had “failed to learn any lessons from this debacle”.
“Hospital projects are years away from being completed. Meanwhile patients and staff have been left to struggle on in facilities that are no longer fit for purpose.” She added that ministers had “washed their hands of the whole mess”.
A Cabinet Office spokeswoman said:
“We continue to support and fund the NHS Trusts in Liverpool and Birmingham to bring forward their hospital projects as quickly as possible, while making every penny of taxpayers money count.”
“This entertaining novel’s message about the deceitful clandestine plot to dismantle the National Health Service should be shouted from the rooftops.
It exposes the self-serving politicians, medics and compliant media behind an evil venture with hard unpalatable truths. The author draws upon his own career’s experience as a family doctor and his bold approach to writing intertwines real world politics with a compelling story line that is intriguing and scary, but often very funny and touching.
THE DECEIT SYNDROME joins forces with plays, songs and films such as The Great NHS Heist that have all been produced to convince the public of what is happening to healthcare without their knowledge or consent. Paul’s non-profit ethos, sending all royalties to support campaigns to save the NHS, should alone encourage everyone who cares about the best thing this country ever did to buy this powerful and persuasive novel. ~ Dr Bob Gill (GP and film maker)
“Highlights the horrors of NHS privatisation in an imaginative and eye-opening way” ~ Francesca Martinez (comedienne and NHS supporter)” “I cannot wait to promote this wonderful book on our Keep Our St Helier Hospital (KOSHH) campaign stand in southwest London” ~ Sandra Ash (NHS campaigner)”
“Private equity firms buying up small agencies have “set off alarm bells” within England’s foster care system, the Local Government Association says.
Three groups account for 45% of funds spent on independent fostering by English councils, according to new analysis.
The LGA said councils worry about what could happen if one group failed.
The Nationwide Association of Fostering Providers said its members provided a vital and high quality service.
More than 75,000 children are in care in England, compared with about 60,000 a decade ago. Most of these children are in foster care.
Councils manage foster placements themselves as well as commissioning care from independent fostering agencies.
Many of these providers started as local, small-scale operations but private equity firms – essentially, investment companies – have moved into the sector in recent years.
The National Fostering Agency, Compass Fostering and Foster Care Associates are now the dominant independent groups in the industry.
All three run for profit and are backed by private equity. …”
“Councils are warning that a looming shortage in the number of school places across England is being made worse by academies, as last decade’s baby boom enters secondary schools over the next five years.
The Local Government Association (LGA) is calling for the government to restore powers to councils enabling them to open new maintained schools if residents support them, and for new powers for councils to require academies to expand to meet local demand.
Anntoinette Bramble, the chair of the LGA’s children and young people board, said that without such changes children were at risk of not having a secondary school place.
“Our secondary school places crisis is now just one year away and this will be the reality for thousands of families without action,” Bramble said.
Last year, about 20% of families in England failed to gain a place at their first preference school, with the rate rising above 40% in several London boroughs including Lambeth and Lewisham. One in eight families in London failed to gain a place at any of their choices.
Councils say their position is made impossible by conflicting rules, which place a legal duty on them to ensure adequate school places for local children but allow only autonomous academies and free schools to be opened to provide more places, other than in rare circumstances.
With most state secondary schools in England now academies, the problem is made worse because local authorities cannot direct them to expand their intake or offer more places to meet forecast high demand, as they can with maintained schools.
“Councils need to be allowed to open new maintained schools and direct academies to expand. It makes no sense for councils to be given the responsibility to plan for school places but then not be allowed to open schools themselves,” Bramble said.
“The government needs to work closely with councils to meet the challenges currently facing the education system.” …”
No UK jobs, no UK tax, no UK profits … just exploited workers in the Middle East.
“The Home Office has increased its profit on UK visas by millions of pounds a week since outsourcing visa operations to a Dubai-based firm that has been deluged with complaints and accused of exploiting vulnerable applicants for profit, The Independent can reveal.
VFS, which has its headquarters in the UAE but is owned through holding companies in Jersey, the Cayman Islands and Luxembourg, faces claims of “gross maladministration” and “aggressive” selling of optional services since taking the UK government contract in 2014.
During that time, the Home Office has made £1.6bn from applicants looking to visit, study or be reunited with their families – a nine-fold increase on the five years prior to the start of the contract.
A joint investigation by The Independent and Finance Uncovered found the amount the department makes on average per visa application has increased from £28.73 to £122.56.
VFS, which is contracted to process visas from all countries outside Europe and Africa, handles applications to work, study and live in the UK, as well as visit.
People applying through VFS – the majority of whom are from lower-income countries, with a quarter from south Asia – have said they missed flights and were wrongly denied visas due to delays and administrative errors, including apparent failure to scan vital documents.
Others said they had faced a barrage of “optional” services on the VFS website, ranging from document checking for around £5, to a “super priority” visa service costing as much as £1,000, which some said failed to deliver on the fast-tracked service promised. Lawyers said these additional services could exploit vulnerable migrants who may feel pressured to spend more to secure visas.
Meanwhile, VFS has increased its average revenue per applicant by 38 per cent between 2016 and 2018 by selling more premium services, according to an analysis of group accounts filed in Luxembourg.”
In some cases owned by the NATIONAL rail companies of the foreign company! Madness!
https://www.rmt.org.uk/news/70-of-uk-rail-routes-now-owned-by-foreign-states/
“Richard Branson has said he is ‘devastated’ that Virgin Trains’ reign over the West Coast Main Line train route is coming to an end after 22 years.
The Department for Transport has awarded Aberdeen-based First Group and Trenitalia UK, an arm of Italy’s main train operator, the contract to run the London-to-Glasgow rail line from 8 December.
After the contract starts, more than 60 per cent of train journeys made on British railway lines will be made using services partly owned by foreign companies, analysis by the Press Association has revealed. …”
AND
50% of UK fishing quotas are owned by foreign companies:
… but blaming underinvestment – not the privatisation process which was supposed to lead to MORE investment:
“When Grant Shapps was appointed secretary of state for transport last month, he used social media to express his view of the railway network that had become his responsibility. “As a very frustrated 6 trains per day commuter for the past few years, I’m delighted to be appointed transport secretary,” he wrote. He used a screaming-face emoji to convey his horror of travelling by train from his constituency of Welwyn, which was hit by the Thameslink timetable chaos last year.
Mr Shapps’ dread of British trains will be shared by many who rely on the network. Trains in Britain are often extortionately priced, delayed and overcrowded. Compensation forms are too complex. By proportion of salary, British commuters pay five times as much for tickets as the rest of Europe. Little wonder then that passengers (including those who are old enough to remember a pitiful state-run railway industry) are coming out in favour of renationalisation. A poll last year showed that 64 per cent of the public favoured taking the network back into public hands.
Yesterday, the future of Britain’s rail system was cast into further doubt when the government scrapped a competition to run Southeastern, one of the country’s busiest commuter lines. Mr Shapps cancelled the process amid concerns over escalating costs and uncertainty that the operator would achieve benefits for passengers. His decision calls into question other contracts, including the forthcoming competition to run trains on HS2 and the west coast mainline.
Passengers frustrated with Britain’s second-rate railways crave a dramatic solution. In contrast to its constructive ambiguity over Brexit, Labour’s position on the railway network appears clear. If elected the party would bring rail franchises back into public ownership when they expired, if not before.
Yet nationalisation would not release the railways from the morass they find themselves in. The network was beset with problems when it was privatised under John Major’s government after years of underinvestment. To nationalise now would cost a fortune. Taxpayers already bear a large burden of the costs, given that Network Rail, which runs the country’s tracks and biggest stations, is publicly owned. To expect taxpayers to foot the whole bill would be unfair.
Instead, improvements must be made urgently to the system we already have. A review of the railways led by Keith Williams, the former chief executive of British Airways, is expected to be published this year. Mr Williams has previously proposed that a “Fat Controller-type” figure should oversee the day-to-day running of services. That is worth exploring, but he must offer ways to tackle two significant problems facing the rail industry right now.
First, the unsatisfactory relationship between tracks and trains. At present trains run on tracks that operators have no responsibility for. It is the passenger, ultimately, who pays for the lack of joined-up thinking. Second, the problem of dwindling competition. When companies were first allowed to bid for rail franchises they did so in their droves. Now, as few as two companies typically bid to run a franchise, leading to slipping standards. The Department for Transport issues detailed demands for operators, setting out the number of trains they must run per hour. Operators are being micromanaged. Yet overcrowding, disruption and high prices mean that growth in passenger numbers has slowed. The time has come to give them more freedom to innovate.
Mr Shapps should focus now not on cancelling other contests to run rail services, but on making the current system fit for purpose. The public’s faith in the country’s privatised rail network is waning. It is up to the government to remind passengers of why nationalisation is not the solution.”
Source:Times (pay wall)
“An Environment Agency (EA) report on the performance of water companies at managing pollution levels said South West Water (SWW) had a total of 98 incidents in 2018 per 10,000km of sewer.
An FOI request made by the Journal has revealed that 14 of those happened in East Devon.
Four of these incidents happened in Honiton – three of them over a 20 day spell in January 2018.
Axminster had four relating to the River Axe and the River Yarty.
Exmouth and Ottery St Mary had two each while Sidmouth and Woodbury had one.
SWW, which had the most pollution incidents in 2018 of nine companies across the UK, said it achieved the best wastewater performance last year but recognised there is still more work to do. …”
https://www.exmouthjournal.co.uk/news/locations-of-2018-pollution-incidents-revealed-1-6191933
“GSM London, one of the biggest private higher education providers in England, has gone into administration – and will stop teaching students in September.
The college says it has not been able to “recruit and retain sufficient numbers of students to generate enough revenue to be sustainable”.
It teaches about 3,500 students – with degree courses validated by the University of Plymouth.
The college, based in Greenwich and Greenford, says 247 jobs are at risk. …
It was not a university – and not regulated by the higher education watchdog, the Office for Students (OFS).
But a spokesman for the OFS said its “overarching priority is to ensure that students are able to complete their studies”.
“We understand that some students who are nearing the end of their studies will be able to stay at GSM but it is likely that most will need to transfer to another higher education provider.”
The OFS says in 2017-18 the college had 5,440 students, with the latest figures showing 3,500.
A statement from GSM London says that “discussions are under way with other higher education providers to identify alternative courses for our students and we will be supporting them in the application process”.
The college, owned by a private equity firm, says it could not remain financially viable and had been unable to find a buyer to ensure its “longer-term future”.
It says it will teach until September – which for some courses will be the end of term – ahead of an “orderly wind-down and closure of the college”.
A Department for Education spokeswoman said: “We want a broad, sustainable market in higher education, which offers students flexibility and a wide range of high-quality choices for where and what they study.
“Whilst the vast majority of institutions are in good financial health, the Department for Education and the Office for Students have been clear that neither will bail out failing providers.”
East Devon Watch 