Rob Ray | ukwatch.net

Poor get hit as business walks free

tim — Sat, 05 Jul 2008 11:51:39 +0000

Even as the government admits to a £10 billion black hole in its finances caused by its gifting of tax back to businesses to plug their pensions holes, it looks set to U-turn on its policy to close corporation tax loopholes costing the exchequer tens of billions more every year.

Threats from major UK companies to relocate overseas or into tax havens has prompted a move to revise corporation tax rules following high-profile complaints that the UK’s taxation levels are significantly higher than elsewhere in the EU.

Pharmaceuticals giant Shire recently announced it would relocate to Ireland to take advantage of the low tax regime there.

While UK law stipulates a basic corporation tax of 28%, corporations on average pay closer to 22%, with some of the largest paying significantly under this figure.

A simplification of the rules mooted by the treasury last year would have closed loopholes which at present allow huge levels of tax evasion.

The UK has recently come under fire for itself maintaining more tax havens under British rule than anywhere else in the world, something which campaign groups argue has directly led to tens of thousands of deaths.

Corporate tax avoidance is thought to cost £25 billion every year – more than twice the amount these major companies were gifted by the government in tax breaks to allow them to refill the pension pots they themselves had emptied.

In two years, the same amount would pay for the total line of credit currently being offered to major banks as part of the credit crunch – £50 billion is being underwritten in loans to maintain the flow of money through the economy.

The same banks, along with a host of other companies, are already benefiting from government handouts this year to the tune of £10 billion, as they pour money into pension funds to keep them afloat.

This money, rather than coming from profits or business chiefs who were the investors who caused the problem, is being paid in from taxes.

Pension deficits have soared by more than £100bn in the past year, the Pension Protection Fund said recently.

Meanwhile, as the Treasury struggles to maintain its financial balance, fears are rising that the pensioners themselves could be at risk of falling prey to the 10p tax band changes which the government have proposed.

Up to 420,000 pensioners with small private pensions of up to £1,000 a year could start having to pay tax of £200 a year from next April, under new plans – potentially raising around £80 million a year.

Private Equity - a Vicious New Breed?

Alex Doherty — Thu, 24 May 2007 15:34:06 +0000

In scenes reminiscent of the 80s pre-stock market crisis, a major row has blown up over the attempted Private Equity takeovers of high-street giants Sainsbury’s and Boots.

While unions and some sectors of the Labour party have attacked what they see as a rapacious reawakening of asset-stripping for the noughties, Private Equity groups have hailed it as perhaps the next step in providing greater efficiency through competition.

Private Equity takeovers occur when management teams buy out publicly listed companies and take them off the stock market as private entities. The most common use of this system for profit stems from the 70s when business tycoons developed ‘the flip’, where a management team takes over a company, aggressively attacks wages and jobs to ‘cut away fat’, then sells back to the market in a three to five year cycle.

The flip is achieved through what is known as a ‘leveraged buyout’ where the massive funds needed to take over large companies are loaned by banks and investors, and secured with the assets of the company being bought out.

The practice reached its zenith in the 80s when major takeovers were attempted by firms later labelled ‘the asset strippers’, for their practice of taking healthy companies, selling their assets, firing much of the workforce and then selling back a shell to the public markets. The Private Equity market died down in the 90s, as mega-mergers placed many of the big players beyond the reach of even major private equity groups and confidence dimmed in the risks of investing during an economic downturn.

However the rise of the ‘club buyout’ in the last 4-5 years, where several major funds buy in to reach for larger targets, has recently seen some of the biggest companies in the world targeted. Sainsbury’s and Boots are just the tip of a very large iceberg. Other major buyouts in the last few years have included the AA, Debenhams, and the largest yet, TXU for $44.5bn.

The sector has grown at a stunning pace, nearly doubling from $112.5bn invested in 2004 to $215bn invested last year, and an estimated $400bn warchest for further buyouts. One in five workers in the UK are now under the control of some form of private equity.

Unions have launched an attack on the sector following a brutal fight at the AA, where unionists accused the buyers of gutting the business by selling buildings and then leasing them back, outsourcing personnel and where that wasn’t possible, simply cutting staff so roadside coverage was compromised. At Debenhams, the company has posted its third profit warning after being taken public, as the company struggles to shrug off underinvestment and cuts. Unions are accusing Private Equity of continuing the same cycle of the 80s.

Private Equity, and much of the business press, say otherwise. Quoting a report by the Nottingham University centre for buyout research, they point to evidence that while initial cuts do take place, it is a precursor to expansion by the leaner companies that emerge.

However the centre, which was founded by Barclay’s Private Equity Ltd. does not mention where this new employment comes from, or what form it takes. It also fails to say where the initial cuts take place, or to mention the effect of asset sales. It does mention the bankruptcy rate of leveraged buyouts after the flip is finished.

One in eight firms go to the wall.

The union drive looks set to be a flash in the pan, demanding only that private equity be taxed more. But the sector is a clear and present danger to workers, as a model which diverts massive assets away from wages and employment towards the ultra-rich, and produces nothing.

Crisis at the NSPCC

Alex Doherty — Tue, 24 Apr 2007 16:51:58 +0000

Staff are complaining that a new electronic information system installed late last year at the NSPCC is not working properly. The Children’s Recording Information System (CRIS) is designed to record and electronically store information collected by the Services for Children and Young People (SCYP) section of the National Society for the Prevention of Cruelty to Children (NSPCC) on one database. The SCYP deals directly with the protection of vulnerable children, yound people and families, in other words the NSPCC’s core work.

A senior director at the NSPCC has denied claims that the database is not fit for purpose. But information received by Corporate Watch from an insider suggests that the new computer system could be potentially disasterous.

The new system was part of the NSPCC’s response to the outcome of the inquiry into the death of Victoria Climbié. The eight-year old died in 2000 having suffered from severe neglect and physical abuse. Local authority social workers were heavily criticised for a string of short-comings and mistakes and their failure to intervene. At the time, the NSPCC along with other child welfare agencies was also criticised for failures in communication and a lack of information in the months leading to Climbié‘s death.

It seems that NSPCC may now have difficulties keeping its house in order in terms of monitoring its child welfare cases. CRIS was designed by BancTec, a firm specialising in providing IT for financial and commercial organisations. After a short testing period the new system was brought in with the entirety of the NSPCC going online with at the same time.

Our insider informed us that since the new system was set up there have been a wide range of complaints made by staff on the charity.

Updated versions of CRIS, in late December and in early January, have failed to improve matters, according to our source who said that complaints included:

Time wasted due to slow service; some users complaining of entire mornings waiting to load simple files

Lost recordings

Staff needing to keep backups on paper, effectively running two systems for one job (CRIS is supposed to minimise the need for paper files)

Increased staff workload

Search system behaving erratically, and crucially it can give wrong results

Search missing some cases entirely, for example one of two brothers disappearing

Inability to properly attribute case notes of volunteers

Hard drive shutdowns preventing saving of work.

In October and November last year, internal emails from people working with the system concluded that CRIS was ‘dangerous’ and ‘unworkable’. In December, still staff complained that cases are still ‘stuck’ in the system. One staff member said,

‘The bottom line for me is that, apart from the functionality issues, CRIS is clearly not fit for purpose as a casework recording and management tool…In some cases the system won’t take two people working on it at the same time in the same office and it crashes. There’s new special measures in place and people have gone back to using paper records. It won’t be back until February, and that’s official policy. People are saying they have spent half a day to do one entry. In terms of the day-to-day system it seems to be worse since the [January] release. And it’s still not properly searchable, people are looking for things they have put in themselves and it’s not showing up. The most recent talk is of a boycott of the system.’

When questioned on this, Wes Cuell, director of Services for children and young people, denies the system is failing. Cuell, who in an October email said he would ‘take personal responsibility’ for any technical problems with the system said,

‘There were concerns in the first few weeks about CRIS that data wasn’t being found but that’s not the case now. We are very confident that the data is reliable… We have a lot of people saying it works really well now and some saying it’s still got problems. We are increasingly looking at people rather than the software and some people have got themselves
into a bit of a mindset that CRIS won’t work properly. But we do have a lot of people saying it’s a big improvement.’

A message to the internal list on 18th January, handed over by our insider, disagrees with the assessment that it is a staff problem and points out that a search of the system brought up three pages of names that could not be put into alphabetical order because of a glitch even after confirmed the system was updated, a problem confirmed by a support officer who noted it was ‘not currently working’. According to our insider the problems are continuing…

Private Sector Pensions

Alex Doherty — Thu, 19 Apr 2007 17:22:06 +0000

Private sector pension schemes are usually run in larger companies, such as those in the FTSE 100 of Britain’s richest corporations.

Although systems vary, a common factor is the existence of a pension ‘pot’ the workforce pay a percentage of their wages into, which is then matched by the company. The pot theoretically acts as working capital to both pay back to the workforce when they retire, and while it remains in the coffers, as investment money to play the stock exchange.

Problems have risen over the last decade to turn this fairly straightforward deal into a battleground between workers and bosses. Companies claim that the pension deal did not take into account rising standards of living, and increased lifespans on the part of the workforce.

Companies have however been largely responsible for the mess, having notoriously taken ‘pensions holidays’ at the behest of Gordon Brown at the height of the stock market boom. When the market crashed, it is thought that some £30bn was wiped off the value of the various pension funds, plunging the sector into crisis.

Company bosses have also been a major factor in destroying the stability of pension funds outside this context. Pension funds are usually administrated by appointed company board members, who in many cases have pursued a high-risk investment strategy (for example, pension funds were heavily involved in technology companies during the dot com crash).

Combined in many cases with saturated market places requiring attacks on workers’ living standards to increase profit margins, and with tycoons such as Phillip Green taking all profits out of their companies as dividends rather than replace the money, this has led to a raft of measures brought in to reduce pension liabilities by taking cash from workers’ pockets.

One widespread initiative has seen companies close pension schemes to new members, while others have spun their pension schemes off entirely from the main company, clearing immediate debts in order to release themselves from further responsibility to keep the schemes running.

Some companies are raising the age of retirement, while most have attempted to switch over from schemes promising ‘final salary’ pensions, which base pension payments on the wage workers retire at, to working life schemes averaging out workers’ wages throughout their employment at the company. Inflation (and factors such as promotion, low starting points etc) mean that the second option always pays out significantly less.

Further problems have been caused by the de-industrialisation process. As the major industries shut down, contributions to pension pots ceased and schemes quickly went bankrupt. This has left a huge swathe of the manufacturing sector workforce facing, not the comfortable retirement they had planned and paid for, but destitution.

In 1987, progressive figures in the EU, who had foreseen the damage such bankruptcies in European manufacture would do to the long-term prospects of hundreds of thousands of people, passed a resolution stating that protection funds be set up by countries like the UK, to provide relief for funds stripped of company support in this manner.

Britain did not set up its own Pension Protection Fund(PPF) until 2004, leaving, according to Amicus, around 65,000 people without support as their employers went under.

The PPF currently requires companies to pay money into a central store (the payments required add up to around £300m a year at present), which is then used, effectively, as an insurance scheme in case companies are unable to meet their pension obligations.

The scheme is not retroactive, and thus does not cover the costs of de-industrialisation.

The CBI have complained that the amount being paid is too high, and that other means must be found to reduce the pension deficit, primarily more attacks on the pension payouts themselves.