“Boris Johnson’s Conservative party has received a surge in cash from Russian donors”

“… An OpenDemocracy investigation found that the UK Conservative party received at least £498,850 from Russian business people and their associates between November 2018 and October 2019.

This was a significant increase on the previous year when they received donations amounting to less than £350,000.

It comes despite increased pressure on the party to cut its ties to Russian oligarchs since the poisoning of Sergei and Yulia Skripal in Salisbury last year.

It also comes as Johnson’s chief strategist Dominic Cummings came under the spotlight for alleged Russian ties, after the Sunday Times reported claims from a whistleblower about “serious concerns” about the time he spent in Russia in the 1990s. …”

https://www.businessinsider.com/boris-johnsons-conservatives-receive-surge-in-cash-from-russians-2019-11?

How company debt (and greed and tax avoidance) will sink us all

“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/

The Great Help-to-Buy ripoff

“Building chiefs cash in on Help to Buy”

Bosses at Persimmon, Barratt and Bellway have been handed shares worth more than £12million.

Persimmon chief executive David Jenkinson exercised share options worth £10million under the housebuilder’s controversial bonus scheme, while two top Barratt executives received stock worth nearly £1million, and two Bellway bosses were handed performance-linked shares worth £1.6million.

The bonanza came just a day after Tony Pidgley, the founder and chairman of rival builder Berkeley, sold shares worth £42million.

His deal took the amount he has made from selling stock in the past two and half years to £166m.

Last night critics condemned the share awards, which came just a week after figures showed the rate of house building in the UK had hit a three-year low.

Developers such as Persimmon, Barratt and Bellway – but less so Berkeley – have also raked in record profits off the back of Help to Buy, a taxpayer-funded scheme that lends cash to buyers.

Reuben Young, a spokesman for housing campaign group Priced Out, said: ‘The scandal is these payouts are only made possible by Help to Buy, which has taken developer profits into the stratosphere by investing public money into rising house prices.’

Persimmon’s Jenkinson, 52, received 411,084 shares worth £9.7million at yesterday’s prices. After taxes he received 217,874 shares worth £5.2million and he is required to hold on to them for at last one year.

Barratt chief executive David Thomas received 64,182 shares worth £431,000 through a bonus plan and deputy chief Steven Boyes received 50,795 worth £341,000.

Bellway awarded 30,667 performance-linked shares worth about £1million to boss Jason Honeyman and 17,823 shares worth about £600,000 to finance chief Keith Adey.

The final amount of shares they receive will depend on whether they hit performance targets.

Meanwhile, Pidgley has sold shares in the past six months that have made him £79.2million.

That included 1m he sold in July for £37.2million and a further 1m on Tuesday for £42million, cashing in on his company’s rising share price.

The sales came after Pidgley previously sold a total of 2.5m shares for £86.8million in 2017 – taking the amount he has made since then to a staggering £166million.

The building firms declined to comment.

https://www.thisismoney.co.uk/money/markets/article-7585531/Building-chiefs-cash-Help-Buy.html

“Requiring voter ID in British elections suggests the government is adopting US ‘voter suppression’ tactics”

“This week’s Queen’s Speech revived proposals to introduce photographic ID requirements for voting in British elections. The Democratic Audit team assess the available evidence on the likely consequence of such a measure, and consider whether the legislation tackles the right priorities for improving our elections on which there is consensus, or suggests moves to enhance Tory election chances via excluding voters presumed unfavourable to them….”

Requiring voter ID in British elections suggests the government is adopting US ‘voter suppression’ tactics

Tory donors can, and do, control Prime Ministers

“Two former Conservative prime ministers lobbied a Middle Eastern royal family to award a multi-billion dollar oil contract to a company headed by a major Tory donor, the Guardian has established.

In March 2017, while in Downing Street, Theresa May wrote to the Bahraini prime minister to support the oil firm Petrofac while it was bidding to win the contract from the Gulf state.

Two months earlier, and just six months after stepping down as prime minister, David Cameron promoted the company during a two-day visit to Bahrain where he met the state’s crown prince.

Cameron was flown back to Britain on a plane belonging to Ayman Asfari, Petrofac’s co-founder, chief executive and largest shareholder. Petrofac did not ultimately win the contract.

Asfari and his wife, Sawsan, have donated almost £800,000 to the Conservative party since 2009. The donations were made in a personal capacity.

Documents obtained by the Guardian raise questions about how governments should best manage the perceived potential conflicts of interest generated by donations from business figures to political parties.

The government said it was routine for ministers to support British businesses bidding for major foreign contracts. Petrofac said official support had been obtained through entirely proper channels.

The Serious Fraud Office (SFO) has been investigating Petrofac over suspected bribery, corruption and money laundering for at least two years. …”

https://www.theguardian.com/politics/2019/oct/15/revealed-cameron-and-may-lobbied-bahrain-royals-for-tory-donors-oil-firm?CMP=Share_iOSApp_Other

[Broadclyst] “Parish council with £2,500 in reserves for grass seed will not reduce council tax after bid to cap it fails”

“Broadclyst parish councillor Karl Straw saw his motion to reduce the authority’s precept from £233.83 to no more than £160 per Band D household, be rejected by six votes to two.

Parish council chairman Henry Massey said the authority could not vote to ‘arbitrarily’ slash its precept by one-third, as it would immediately see funding dry up for some services.

Cllr Massey said the population of Broadclyst has increased from 1,000 people to 8,000 people in the last ten years, and the parish council provides services other parish authorities do not.

The vote, taken at Victory Hall on October 7, means Broadclyst remains the fourth most expensive non-unitary parish in the country, and the second most expensive precepting parish in Devon.

Cranbrook is the most expensive precepting parish, due to the maintenance bill for its country park.

Cllr Straw said Broadclyst Parish Council’s precept has ballooned by more than 66 per cent in the last five years.

He said: “Broadclyst pays on average £233.83 against the Devon average of £42.20.

“Seaton pays £101.60, Axminster pays £88.64, Sidmouth pays £72.36, Honiton pays £71.08, Exmouth pays £60, and Ottery pays £49.03

“The average East Devon parish charge is £46.55 and in Devon the parishes charge on average is £42.20.

“My motion was to reduce the precept by at least £75 in 2020/21 and to introduce a policy of continued reductions until the parish as charging no more than the average across Devon.”

Broadclyst Parish Council currently has £2,500 reserved for grass seeds for its bowling green.

However, Cllr Massey said nothing has been spent on grass seeds this year, and the figure would only be spent in full in a worst-case scenario.

Cllr Massey said Broadclyst has grown significantly from a ‘relatively small size’ since 2009.

He said: “We have to balance the needs of the people and groups who use the village as well as at the same time ensuring that we are giving good value for money.

“We provide a huge number of services for a parish council and, due to cutbacks in district and county council, have taken on additional services that otherwise would not be provided.”

Cllr Massey said the council welcomes the input made from Cllr Straw and will be carefully examining its budget in the next two months.

Cllr Straw said he is planning to request the council set up a people’s forum, which will invite residents to discuss what precept they would like to see the authority operate with.”

https://www.midweekherald.co.uk/news/broadclyst-precept-motion-outcome-1-6318881

Persimmon in the deep, deep manure yet again on leasehold houses

“Persimmon is heading for a bitter showdown with families who claim the housebuilder mis-sold them homes on toxic leasehold deals.

Hundreds of its customers bought leasehold houses and now claim they are trapped by ratcheting rent bills that have made it impossible to sell.

But the company, which is the UK’s most profitable developer, is playing hardball and has told desperate customers that it ‘does not accept’ their complaints.

Along with other developers, Persimmon has been banned from selling leasehold houses after a public outcry.

Persimmon and others were accused of charging extortionate ground rents, some of which rose dramatically over time, along with a raft of hidden charges.

Leaseholders effectively buy the right to live in a property for an agreed period, rather than ownership of it outright.

However, an inquiry by MPs earlier this year found that many leaseholders did not appear to have fully understood the deal.

In a recent row with Cardiff council, Persimmon was accused of mis-selling leasehold homes. It offered residents the freeholds to their properties at no charge as part of an out-of-court settlement.

Campaigners now argue all its leasehold customers across the country should receive similar compensation.

But in a letter sent to customers and seen by the Mail, the company rejected claims householders were misled.

It claimed staff would have explained the terms of the homes to customers during the sales process, that their solicitor should have advised them about it and that mortgage lenders would have also assessed the property at the time.

A separate survey by the Solicitors Regulation Authority also found one fifth of people sold leasehold properties were not even told the difference between leasehold and freehold homes.

MPs called for an investigation into possible mis-selling. They lambasted solicitors for being too cosy with developers and failing to warn clients about the rip-off deals.

Following their report, the Competition and Markets Authority (CMA) launched a probe.

Sir Gary Streeter, Tory MP for South West Devon, accused the firm of telling ‘blatant’ lies to leaseholders in Plymouth, part of his constituency, during the sales process.

A Persimmon spokesman insisted the decision to ‘gift’ ownership to leaseholders in Cardiff was ‘not to do with the mis-selling of leasehold properties’, adding: ‘We firmly dispute the fact that the customers were not aware the properties were being sold on a leasehold basis.

Any suggestion that the decision by Persimmon to gift the freeholds was in relation to mis-selling of leaseholds is false and misleading.’

‘All customers buying leasehold properties are informed by the sales team at the time of purchase that the properties are leasehold and not freehold.’

‘It feels like we have been tricked’

Grandparents Noelle and Alf Lutton bought their five-bedroom home three years ago for £250,000 – but they have still been asking for problems to be fixed

Noelle and Alf Lutton claim the punitive terms of their leasehold home were not made clear to them by Persimmon.

The grandparents bought their five-bedroom home three years ago for £250,000 – but they have still been asking for problems to be fixed.

In addition, they face having to pay £150 in ground rent every year – a rate that increases every decade – and must fork out so-called ‘permission fees’ of £250 if they want to make even minor changes to the property.

They claim they were never told they would have to pay these charges. Former customer services worker Mrs Lutton, 75, says the couple had always previously lived in freehold properties but were not given that option when buying their current home in Market Deeping, near Peterborough.

Instead, they say a Persimmon sales representative verbally promised they could buy the freehold for ‘a couple of hundred pounds’ two years after the initial sale.

But Persimmon later quoted them a price of £3,750. And although it later reduced this to £500, the company insists they would still have to pay permission fees even if they now acquired the freehold.

‘Had we known then what we know now, we would never have bought the property,’ Mrs Lutton said. ‘We weren’t told about any of the fees we would have to pay. It feels like we have been tricked.’

A Persimmon spokesman said: ‘The details of the ground rent, associated fees and covenants were included within the contract and documentation at the time of purchase.

‘Following completion, Mr and Mrs Lutton raised a number of snagging issues with their property. The last one of these is due to be addressed shortly.’ “

https://www.thisismoney.co.uk/money/news/article-7560423/Housebuilder-Persimmon-fresh-row-toxic-leases.html?ito=rss-flipboard