British Councils Found Wasting Millions – Another Expenses Scandal

An investigation found British councilors spent millions of pounds on luxuries from credit cards financed by taxpayers.

UK Public Spending

Among the expenditures were first class travel and accommodations in five-star hotels, buying llamas that cost £1,150, a little group of sheep and fish for a council pound that charged £575 on credit cards. This was headed by the Horsham Council in West Sussex.

The data was obtained using a Freedom of Information request.

Town hall chiefs have been told to slash lavish spending, but continue to waste thousands of tax-payer funds on luxuries such as pricey electronic gadgets (ipads and videos games), vacation tours and dinners at expensive restaurants like Michelin and Claridges – all while cutting back jobs.

Leisure trips alone cost more than £2m in total; counting air travels to Thailand, Kenya and Bermuda, and hotel accommodations at the most expensive five star hotels; Athens Hilton, Pan Pacific Singapore, and Four Seasons New York.

The total also included booking tables during award functions, champagne parties, and pork roasts.

A further £300,000 was splurged on online shopping at a general-goods retailer, £150,000 for products bought at Amazon, and another £500,000 on Tiffany jewelry, Gucci merchandise & silk ties.

Councils have used taxpayer-backed plastics of up to £40m. In total, councils are believed to have spent approximately £100m in luxuries during an expenditure exposé of over £500, which implied other expenses in lower-priced items or services were still not declared.

White hall executives gasped with surprised upon knowing of the total credit card sum; one source declared “another MPs-expense style” swindle may be on the rise.

The Communities Secretary Eric Pickles was accused of overlooking the councils’ practices whose spending was called “wild”.  In a statement, he said, “It appears that for years, some councils have been enjoying the high life paid for by you and me.”

He hopes after the spending cost exposé, the “culture of wild overspends and excess”, which “had become the norm under Labour, will become a thing of the past.”

252 councils who were called upon failed to publish their credit card bills despite instructions from the Communities Secretary to issue all costs beyond £500 by January.

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British Chamber of Commerce: Economic Recovery Will Be Slow

The British Chambers of Commerce forecasts the British economy to grow at a much slower rate in the next two years than expected, and predicts interest hike to commence in August.

 

Economic Recovery

Recent forecasts by Office for Budget Responsibility (OBR) propose an optimistic growth of 1.7% next year and 2.5% in 2012.

The BCC states economic progress will be much slower than OBR’s prediction in March, raising its annual consumer price inflation (CPI) to 4.5% in 2011 and 2.7% in 2012 from 4.2% and 2.3%.

Last week, the Bank of England governor Mervyn King stressed the threats of rapidly increasing interest rates.  The Bank forecasts inflation to reach 5% in succeeding months, after wrongly raising price index inflation to 4.5%, which was the highest since October 2008, before it goes down to the original target of 1.9%.

Factors that surged prices were increase in oil, alcohol, and tobacco.

BCC chief economist states, that with the right strategies the UK economy will gradually grow and become stronger; “Main drivers of UK growth over the next two years will be net exports and business investment”.

David Kern is positive that British businesses will be able to fare with the little price increases. However, the Monetary Policy Committee (MPC) should be very careful “not to be too aggressive in it’s tightening.”

The group recognizes problems of unemployment as it expects it to increase around 15,000 over the next 15 months to mid 2012; but is optimistic for even a slight decrease of its numbers from 2.6 instead of 2.65 in March.

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OECD Urges Bank of England to Raise Interest Rates

The Organization for Economic Co-operation and Development addressed The Bank of England to raise interest rates in order to control inflation.

Interest Rates

The Economic body said normalization will start this year in order to prevent inflation expectations from soaring. Currently inflation runs at 4% – double its 2% target.

OECD showed its support for the deficit reduction plans by the Chancellor, and believes the inflation will plummet after next year, 2012. The organization mirrored Andrew Sentance’s call to immediately start tightening policies.

The Monetary Policy Committee member is retiring in June and will be replaced by Ben Broadbent, the former Goldman Sachs economist.

On his final speech Sentance spoke of the need for a sharp change in policies, especially with the ongoing inflation that makes its impact on wage and price-setting that continues to be a threat to the economy’s recovery.

He claimed a possibility of a future “structural scarcity” on energy and commodity prices to occur, leading to further significant price hikes. He predicted prices in fuel could go up to $300 in a span of 20 years, and insisted the Monetary Policy Committee to ““stop considering commodity price moves “one-offs”.

Broadbent shares the same perspective. The former Goldman Sachs economist supports BOE in keeping rates low.

Regardless of decreasing UK growth in 2011 from 1.5% to 1.4% and from 2% to 1.7% for the next year, the international organization kept its global predictions at 4.2% and claimed recovery improving.

Secretary General Angel Gurria, only however, said “The crisis is not over yet, it has just changed its skin.”

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Martin Lewis Urges Borrowers to Reclaim PPI on BBCs Watchdog

Consumer Champion and Money Saving Expert, Martin Lewis, appeared on BBC Watchdog last night to talk about the mis sold PPI scandal and urged borrowers to claim back PPI if they feel they may have been mis sold Payment Protection Insurance.

Payment Protection Insurance or PPI, was widely mis sold by the banks over the past decade alongside loans and other borrowings, generating huge profits for the banks.  Those who were mis sold, are now able reclaim mis sold PPI by contacting their lenders and asking for a full refund.  The banks have now set aside over £5 billion to repay their customers and Martin Lewis was at hand last night to advise on how to proceed with your PPI Claims.

The full interview is available via BBC iPlayer now.

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Bank of Scotland Receives Record Fine for Poor Complaints Handling

The FSA has levied the Bank of Scotland with it’s highest ever fine, £3.5 million, for unsatisfactory complaints handling after the bank incorrectly dismissed 45% of complaints and grievances relating to the sale of it’s retail investment products.

PPI Claims News

The FSA have announced that the Bank of Scotland, which is part of the Lloyds Banking Group, was reprimanded for wrongly rejecting up to 45% of consumer complaints that it believes should have been upheld.  Further stating that to date, the Bank of Scotland, has paid £2.4m in compensation to its customers whose complaints were upheld but they expect a further £17.5m will be paid in compensation.

This is yet another setback for part Government owned Lloyds Banking Group who had, earlier this month, set aside £3.2 billion as their PPI claims provision for customers who have been mis sold Payment Protection Insurance.

FSA Acting Director of Enforcement and Financial Crime, Tracey McDermott, said: “This fine reflects BOS’s serious failure to treat vulnerable customers fairly. The firm’s failure to ensure it had a robust complaint handling process in place led to a significant number of complaints being rejected when they should have been upheld”

This announcement acts as a warning for the banks involved in the mis selling of Payment Protection Insurance, as banks including Lloyds, Barclays, HSBC and RBS had put claims on hold pending the outcome of their Judicial Review about the handling of PPI complaints.

The banks are now under increased pressure to deal with the backlog of complaints, as a result of their hold, and the flood of new complaints received daily.  Some analysts have predicted the the actual cost of compensating the customers with a valid PPI Claim could reach over £9 billion.

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ICB Chief: Total Abolition of Bank Bailouts is Unlikely

Independent Commission on Banking (ICB) Commissioner, Sir John Vickers, is pushing to abolish Government subsidy in the hopes to lift financial institutions from taxpayer funding and establish independence.

Banking Reform

About ten billion pounds are collected off funding costs every year due to bondholders and other loan providers the government is willing to give their aid to.

Vickers is determined to get rid of tax payer subsidies and is hopeful that last month, April’s proposals will give financial institutions stability. He already testified before the Treasury committee before September unveils its final ICB report.

The findings suggest retail savings banks should enhance their capital ratio to 10% and ring fence them from making risky “casino” investments. The report went short to an order of a full separation, which had many speculating if Vickers had anything to do with the break up.

Analysts on the other hand, praised Vickers’ proposals saying it is a “step towards convergence for global banking regulation by bringing the UK rules closer to those of the US and some parts of Europe.”

He however, denied the allegations and defended himself,  “Total abolition [of the taxpayer subsidy] is unlikely. There are always going to be some circumstance in which the government would feel compelled to come to the rescue of at least some parts of the banks”

They also stated that the threat of moving overseas by banks should be viewed as a “lobbying maneuver”.

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Hector Sants Warns Banks to Prepare for Intensive Scrutiny by The Prudential Regulation Authority

Hector Sants, the head of the new city watchdog, the Prudential Regulation Authority (PRA), has stated that supervisors “would be brave in challenging companies” and said that these financial institutions should be allowed to be exposed once PRA has officially operates next year by the Bank of England.  The Prudential Regulation Authority will implement new regulations and warns banks of intensive scrutiny.

Banking Reform - Hector Sants

Sants is currently Chief Executive Offiser at the Financial Services Authority (FSA), which will be divided in to two to form the PRA monitoring firm’s safety, and a new, consumer-focused conduct watchdog.

According to Sants, The FSA has put “too much trust” in banks’ management reports, resulting to a run on Northern Rock and a close down fall of Royal Bank of Scotland and HBOS.

Financial Institutions will be given a tough, “proactive intervention” that will thoroughly examine and judge them against five categories that vary from low risk to imminent and high risk.

Sants stated every big financial firm will be assigned its own supervisor and his team will do check ups on particular companies. Although he believes that this is going to be a long and tedious task considering they still have to find employees who are qualified for the job.

According to Sants, these employees will be able to “reach out” to a more “diverse” group of potential staff than what was practiced with the old workforce.

The PRA will regulate firms with £9 trillion of assets – about seven times Britain’s national output, including many overseas companies.

The City regulator also tightens liquidity reports on non-UK banks and will declare of its non-compliance if its European Union supervisor does not present reports upon requirement.

UK subsidiaries of US and other foreign banking groups will expect full enforcement of the new resolution.

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Clydesdale Bank Sets Aside £100m as PPI Compensation Provision

Following the British Bankers Association or BBA’s decision to abandon their attempts to overturn the policies of selling and handling the controversial payment protection insurance or PPI, Clydesdale Bank PLC has also joined in the redress. Today, the financial institution announced its additional provision of £100 million to its customers.

Financial Reform

Clydesdale, a subdivision of The National Australia Bank (NAB) (alongside Bank of New Zealand, Yorkshire Bank, and Great Western Bank), will continue to work in order to resolve the issue of PPI claims promptly and fairly.

In 2009, announcements of the NAB Group and Clydesdale Bank’s 2009 disclosure on proposals of redress on the issue, its most recent update was included in the group’s March 2011 Half year results announcement.

April 9 of this year, the High court’s decision fell in favor of the Financial Services Authority (FSA) and soon enough, the month after, on May 9, the British Bankers Association decided to withdraw its plea in trying to change PPI handling policies in order to regain consumer trust and confidence.

The National Australia Bank (NAB) said “the provision reflects an assessment of future PPI claims based upon estimates, statistical analysis and assumptions in relation to a wide range of uncertain factors, including how many PPI claims will be made against Clydesdale Bank PLC, for what value, and the prospects of mis-selling being established in relation to those claims”.

PPI originally is meant to cover consumers who are no longer able to make repayments on mortgages, unsecured personal loans and credit cards, and are mostly sold “unknown” to its customers.

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History of Mis Sold PPI by PPI Refunds UK

The mis sold ppi scandal has received a lot of attention over the past few weeks following the banks’ decision to abandon their court appeal.  They have since agreed provisions for PPI refunds with the FSA.  Here we outline what all the fuss was about and how the story unraveled,

1998: The Issue of Payment Protection Insurance being a poor-value product, due to the expense and exclusions, was first raised in Which? magazine.

January 2005: The Financial Services Authority (FSA) took on the regulation and sale of general insurance products and stated that a PPI review would be one of its priorities for that year.

September 2005: The Citizens Advice Bureau (CAB) published “Protection Racket” – a report identifying the problems in the PPI market and issued a Super Complaint to the Office of Fair Trading over PPI sales.

November 2005: The FSA issued its first report on PPI and identified improper sales practices and lack of compliance controls in the PPI market.  Following mystery shopping exercises it wrote to all chief executives of the big banks and highlighted its key findings.

October 2006: The FSA issued a report with more evidence of poor compliance and continued PPI mis selling. 24 companies were entered into “enforcement procedures” for mis selling PPI.

October 2006: The Office of Fair Trading (OFT) issued a report on PPI mis selling, stating that it intends to refer the issue to the Competition Commission.

January/February 2007: The FSA imposed fines on the major PPI providers for treating customers unfairly.

February 2007: The OFT made a  formal referral regarding the mis selling of PPI to the Competition Commission.

January 2008: The Competition Commission published its paper on profitability of Payment Protection Insurance.

April 2008:The Competition Commission then published two further papers highlighting more problems in the PPI market.

May 2008: Which? magazine published research into how PPI was being sold alongside loans. It discovered that up to 2m people may have been sold a PPI policy that they may never be able to claim on.

July 2008: The FSA began to investigate how firms are were handling PPI claims.

September 2008: Which? published research into PPI sold alongside credit card.  It discovered that 1.3m people may have been duped into thinking that they would be approved for credit if they took out PPI.

January 2009: The Competition Commission recommended that banks selling loans should not sell PPI at same time.

February 2009: The FSA wrote second letter to the banks’ chief executives asking them to stop selling single-premium PPI policies with loans.

May 2009: The FSA banned the sale of single-premium PPI policies.

September 2009: The FSA launched a consultation paper outlining how the handling of PPI complaints could be improved.

October 2010: The Banks, led by the British Bakers Association (BBA) requested a Judicial Review of the new guidelines, arguing that they imposed rules retrospectively.

October 2010: The Competition Commission confirmed that PPI could not be sold at point of sale.

January 2011: The PPI Judicial Review began in the British High Court.

April 2011: The High Court Judge, Justice Ouseley, ruled in favour of the FSA and FOS with the banks given 21 days to appeal the ruling.

May 5 2011: The Lloyds Banking Group became the first to withdraw from legal challenge, saying it wanted to “draw a line” under the unsavoury affair.

May 9 2011: The other member banks of the BBA (Barclays, HSBC, RBS) also decided not to appeal against High Court ruling.

May 11 2011: The news of the PPI Compensation provisions that the banks had agreed with the FSA began to filter out.

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More PPI Complaints Reach the FOS

Over half of the 206,000 formal PPI complaints (105,000) have reached the Financial Ombudsman Service (FOS) to date.

The FOS has never received more calls before, said chief executive Natalie Ceeney. The City regulator has already resolved four out of five PPI complaints to over 800,000 people, with more incoming calls and advices given.

Over all, 51% of complaints were settled by the FOS. However the FOS still has concerns on other emerging problems such as: more problems with claims for specialist insurance, like mobile-phone cover, additional complaints about consumer credit deals, and even more complaints about travel and car insurance. FOS expects complaints to become more complicated and hard fought.

The number of cases entailing the FOS’s help grew from 8% to 11% – all of them resolved.

In the past three years, the mis-selling of PPI has launched hundreds of thousands of complaints. Last autumn, the worse of its episode, select banks denied any dealings with any mis sold ppi claims, while the British Bankers’ Association (BBA) appealed to the High Court in its attempt to overturn the policies in selling PPI, as well as handling complaints on past sales.

The High court dismissed the case, and raise hopes of tens and thousands of these complaints to be resolved however the bank’s procrastination has led all these to pile up at the FOS, leaving consumers out of patience and out of money.

Which? Spokesperson Richard Lloyd said over 200,000 people a year are now having to refer their complaint to the Financial Ombudsman Service as last resort.

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