No-one had heard of Navinder Singh Sarao until on 6 May 2010 he ‘spoofed’ the international stock markets while sitting in his room in his parents’ semi in Hounslow and made $879,000 on that day alone and, it is alleged, $40 millions fraudulently over 5 years. He is now awaiting extradition to the US to face charges. But the crucial points are that one lone individual (though his connections with several big names in finance have been noted) could generate a ‘flash crash’ causing a loss of £1 trillion of stock market value albeit very temporary) and what damage might be done by market operators with bigger financial resources. Continue reading
Industrial scale tax evasion and avoidance is not only symptomatic of the insatiable greed of the hyper-rich and the over-mighty corporations, it also serves another purpose which is much less recognised. The touchstone of the neoliberal ideology is globalisation – let the markets be all-powerful and governments get out of the way. That is served by light-touch (i.e. minimalist) regulation, blind trust in free markets, and the unfettered mobility of capital. But it further demands that the state should be kept deprived of adequate funding so that its capacity for intervention is short-circuited. That is exactly what widespread tax evasion/avoidance achieves. A state starved of tax revenues – even HMRC admits it loses £35bn a year on tax scams, though Richard Murphy of Tax Justice Network argues it’s nearer £120bn a year – cannot deliver the goals of social democracy which a majority of the electorate desire. Increasingly the government falls prey to the markets even to raise its own revenues. Continue reading
When last year multinationals like Starbucks, Google and Amazon came under fire over tax avoidance, the focus naturally turned to the accountancy firms that enabled them to do it. In particular after it was revealed in September that Tesco had over-stated its first-half profits by £250m, the spotlight fell on PricewaterhouseCooper (PwC), Tesco’s auditor for the last 31 years, to explain how it had given the retailer a clean bill of health despite highlighting in its last annual report that recognition of commercial income, where the profit overstatement occurred, was a disturbing area of concern. This is an issue of deception for investors which could be described as corrupt, yet no hint of prosecution of the individual executives concerned has emerged in the ensuing 4 months, though an FCA investigation of the Tesco audit was announced last month, which may or may not yield sufficiently deterrent action. Continue reading
Research on top executive pay over the last decade has found that it had little or no correlation with key performance indicators that companies highlighted to shareholders. The research was undertaken by CFA UK and Lancaster Business School over the 10 years from 2003 to 3013 at 30 of the FTSE-100 companies. It found that executive managers’ pay is still determined by simplistic measures that bore little relation to long-term drivers of companies’ value. As a result, over a period when average incomes across the nation have now fallen in real terms close to 2003 levels, total chief executive remuneration has increased by two-thirds from £2.4 million in 2003 (£46,150 per week) to £4 million in 2013 (£76,900 a week). Continue reading
By chance several events in the few days before Christmas highlighted poignantly how the British Establishment – the small political-economic-financial elite who went to the same public schools and the same universities (usually Oxbridge) – automatically close ranks to protect each other when they come under pressure.
Jonathan Burrows, a former MD of Blackrock Asset Management with a multi-million salary, was exposed as a chiselling fare dodger who had cheated Southeastern Railways out of £43,000 over several years, but because he was allowed to make an out-of-court settlement he avoided prosecution and wasn’t sent to prison. What ordinary employee would have have been allowed such a getaway? The Financial Conduct Authority (FCA) feebly admonished him as “falling short of the standards we expect” – can you imagine that being said to a burglar who had raided houses for several years and got away with £43,000? The FCA is the same toothless body which is supposed to be holding the City to account after a decade of stupendous financial crime, but has yet to send a single City grandee to prison. Continue reading