Banks Trouser Taxpayers' Money

The Telegraph reports that banks drew down £4.36BN from the Bank of England's Funding for Lending Scheme in its first two months and increased net lending by £496M.

The scheme does not help firms access credit (it should be noted that banks are in fact tightening their lending criteria), it only makes credit cheaper to those successful in their loan applications.

King Denies Fed Warning

In the understatement of the decade, Mervyn King (Governor of The Bank of England) has told the Treasury Committee that there needs to be change of culture at Barclays.

"Barclays has to create a new bank with a new culture to take it forward."

He also denied that the Fed had warned the Bank of England that Libor was being manipulated:

"If the Fed had regulatory concerns they would have shared that with the regulator, [not the Bank of England].

They didn't pass any information to us that Libor was being manipulated.

The Fed could have shared that with us and they did not, all we would have done was pass it on. The Fed is a regulator, we were not; the Fed asked us for advice on how to interact with the BBA."

This denial is rather odd given the following:

"Writing to the head of the Bank of England, among others, Geithner made six recommendations, which included eliminating incentives that could encourage banks to manipulate the rate and establishing a “credible reporting procedure.” 

Not least the fact that King responded and thanked him for his recommendations.

Notwithstanding that apparent conflict between what King said and reality, his statement that the Bank of England was not the regulator may well be technically correct given the appalling tripartite system set up by Brown. However, it surely had more than a passing interest in what was going on with the banking system and, now that it will have "beefed up" powers, most certainly has an even greater "interest".

Barclays Dishes The Dirt and Publishes Document

Barclays have published a document ahead of tomorrow's appearance by Bob Diamond at the Treasury Select Committee.

Here are a few highlights of the full document which can be viewed here:

"Supplementary information regarding Barclays settlement with the Authorities in respect of their investigations into the submission of various interbank offered rates

Context
In anticipation of Bob Diamond’s appearance before the Treasury Committee tomorrow, 4 July, 2012, in the interest of clarity and transparency we set out on behalf of Barclays a brief summary of the salient events and the actions that Barclays has undertaken since becoming aware of them. These explanations are in no way intended to excuse any of the events that occurred. These events should never have taken place, and Barclays deeply regrets that they did....

The investigation
The bank has conducted an exhaustive internal investigation over more than three years supported by external counsel. The bank has reviewed 22 million documents from over 200 custodians, over 1 million audio files and conducted more than 75 interviews. The results of the reviews were shared with the Authorities, who in turn made their own requests for documents and interviews.

In total, the bank has invested nearly £100m to ensure that no stone has been left unturned. The bank’s exceptional level of cooperation was expressly recorded by each of the Authorities, and was described by the DoJ as “extraordinary and extensive, in terms of the quality and types of information provided” and ”the nature and value of Barclays cooperation has exceeded what other entities have provided in the course of this investigation.”

That cooperation has led to Barclays being the first to reach resolution of these issues. It ironic that there has been such an intense focus on Barclays alone, caused by our being first to settle in the midst of an industry-wide, global investigation.....

29 October 2008 Communication from Bank of England
During October 2008, in the wake of the collapse of Lehman Brothers, when liquidity conditions had tightened acutely, Barclays raised its US Dollar LIBOR submissions more significantly than other panel members. In the month of October 2008, in particular, Barclays US Dollar LIBOR submissions for the 3 month maturity were the highest or next highest of the panel on every single day of the month and therefore excluded from the calculation of LIBOR.

Barclays did not understand why other banks were consistently posting lower submissions; Barclays firmly believed that the other panel members were not, in fact, funding at a lower cost than Barclays, and we were disappointed that no effective action was taken, notwithstanding our having raised these issues with various Authorities during the whole financial crisis period as outlined in the attached timeline.


As one would expect, Barclays (including Bob Diamond and Jerry del Missier) was in close contact with the Bank of England and other Authorities about the liquidity crisis generally.

On 29 October 2008, Bob Diamond received a call from Paul Tucker, the Deputy Governor of the Bank of England. The substance of that call was captured by Bob Diamond via a note prepared at the time. A copy of that note is appended to this document; it was circulated to John Varley, then Barclays Chief Executive, and Jerry del Missier, then President of Barclays Capital.


Subsequent to the call, Bob Diamond relayed the contents of the conversation to Jerry del Missier. Bob Diamond did not believe he received an instruction from Paul Tucker or that he gave an instruction to Jerry del Missier. However Jerry del Missier concluded that an instruction had been passed down from the Bank of England not to keep LIBORs so high and he therefore passed down a direction to that effect to the submitters.


There was no allegation by the Authorities that this instruction was intended to manipulate the ultimate rate. The bank’s submissions had consistently been excluded from the LIBOR calculation. Moreover the instruction became redundant in a matter of days as market conditions improved.


The FSA investigated Jerry del Missier personally in relation to these events and closed the investigation without taking any enforcement action.


Chronology of key issues
A. 2005 to 2009 – Trader requests

.....During this period, Barclays was consistently raising concerns with the BBA, questioning why other banks’ LIBOR submissions appeared to be so high compared to those of Barclays. Many of these concerns were based upon Barclays observations that other banks were making submissions which were lower than levels at which they appeared to be undertaking transactions. ......


Barclays also raised concerns with the FSA, the Bank of England and the US Federal Reserve. The documented occasions on which Barclays made such contact are illustrated in the attached document Timeline of regulatory contact..."

Osborne's Statement on Barclays Fraud

I see that the Treasury state that George Osborne is to make a statement on the Barclays fraudulent manipulation of LIBOR:

"HM Treasury ‏@hmtreasury

The Chancellor will be making a statement to Parliament at around 1215 about the FSA investigation into bank borrowing rates, known as LIBOR"

You will observe that they have politely avoided using the word "fraud".

Whilst the avoidance of the word "fraud" may suit the sensibilities of those in Whitehall I suspect that, once people who owe Barclays money (eg mortgages, personal loans etc) wake up to the fact that the rates that they paid were based on the fraudulent manipulation of LIBOR, the word "fraud" will be liberally peppered across the myriad of class action suits that are bound to arise.

The Budget - Summary and Details

Here is a link to the details of today's Budget as per HMT:

Budget

Whilst here are the headlines of today's budget (source):

Tax changes

The personal allowance will rise to £9,205 in April 2013

• The top rate of Income Tax will reduce from 50 per cent to 45 per cent in April 2013.
• The Income Tax personal allowance (the amount you can earn before you pay tax) will increase to £9,205 in April 2013.
• Age related allowances will be frozen from April 2013, moving towards a simpler, single personal allowance for everyone regardless of age.
• From 2014-15, taxpayers will receive a new Personal Tax Statement, telling them how much Income Tax and National Insurance they have paid and what their money is being spent on.
• Income Tax reliefs that aren't already capped will be capped at £50,000 or 25 per cent of income, whichever is higher.
• The main rate of Corporation Tax will reduce by an additional 1 per cent from April 2012.

The new Income Tax rates for the 2012-13 tax year were published in December 2011 and will start on 6 April 2012.

• Budget 2012 - New Income Tax rates 2012-13

Benefits

Child Benefit will be withdrawn for households where someone has an income of more than £50,000

• Child Benefit will be withdrawn when someone in a household has an income of more than £50,000. The benefit will be withdrawn gradually; 1 per cent of Child Benefit for every extra £100 earned over £50,000. Only those with an income of more than £60,000 will lose all their Child Benefit.
• Servicemen and women serving in operations overseas will receive 100 per cent relief on an average Council Tax bill.

The new rates for the State Pension and benefits for 2012-13 were published in December. These rates start in April 2012.

• Budget 2012 - new pension and benefit rates

Alcohol and tobacco

• Duty rates for alcohol will rise on 26 March 2012 at the same rate as last year - two per cent above inflation. The government will shortly be publishing an Alcohol Strategy to address alcohol abuse.
• Duty on tobacco will rise by five per cent above inflation - a rise of 37p on a pack of cigarettes. This will come into force at 6.00 pm on 21 March 2012.

Motoring and travel

• Vehicle Excise Duty (car tax) will increase by inflation only.
• The government will take forward many of the recommendations from Alan Cook’s independent review of the road network, including developing a national roads strategy.
• The government will also consider new ownership and financing models for the national road network.

Housing

• A new Stamp Duty Land Tax rate of 7 per cent will be introduced for residential properties over £2 million from 22 March 2012.
• The Stamp Duty Land Tax charge applied to residential properties over £2 million bought into a corporate envelope will be increased to 15 per cent from 21 March 2012. There will be a consultation on the introduction of an annual charge on £2 million residential properties which are already contained in corporate envelopes.
• A New Buy Scheme was introduced last week to help those who cannot afford the larger deposits that some mortgage companies demand.
• The government will fund an extra £100 million of improvements in the accommodation of the armed forces and their families.

Pensions

• The current system, where pensioners can receive an additional State Pension as well as their basic pension, will be simplified. This means that future pensioners will receive only one single-tier pension, based on contributions. This is currently estimated at around £140.
• There will be an automatic review of the State Pension age to ensure it keeps pace with increases in life expectancy. Details of how this will work will be published this summer.
• There will be no changes to pension relief.

Employment

• The National Minimum Wage will increase by less than inflation, as recommended by the Low Pay Commission, to support employers and help protect jobs.
• Sunday trading laws will be relaxed during the Olympics and Paralympics.
• National Minimum Wage rates to rise in October

Digital economy

• The government has committed to providing 90 per cent of the population with access to superfast broadband.
• There will be improved mobile phone coverage for rural areas and along key roads.
• Belfast, Birmingham, Bradford, Bristol, Cardiff, Edinburgh, Leeds, London, Manchester and Newcastle are to become broadband super-connected cities, as part of the £100 million investment announced at the 2011 Autumn Statement.
• £50 million will be used to fund a second wave of smaller cities.

The economy

The UK economy is predicted to grow by 0.8 per cent this year, and 2 per cent in 2013

• The independent Office for Budget Responsibility’s (OBR) forecasts for UK growth and inflation are broadly unchanged from its November forecasts.
• Growth: its growth forecast for the UK this year is 0.8 per cent; they forecast growth of 2 per cent in 2013, 2.7 per cent in 2014, and 3 per cent in 2015 and 2016.
• Inflation: expected to fall from 2.8 per cent this year to 1.9 per cent next year, and then 2 per cent by 2016
• The OBR’s forecast for the unemployment rate is unchanged from last Autumn - the rate is expected to peak this year at 8.7 per cent and fall to 6.3 per cent by 2016.
• Borrowing: public sector net borrowing (PSNB) is expected to total £126 billion this year, falling to £120 billion next year. It is then forecast to to fall to £98 billion in 2013-14, reaching £21 billion by 2016-17.

Government Waive VAT on Military Wives’ Charity Single

HMT have announced the following:

"The Chancellor of the Exchequer, George Osborne, has today announced that the Government will waive VAT on sales of the Military Wives choir’s Christmas single by making an exceptional one-off charitable donation to the Royal British Legion, and Soldiers, Sailors, Airmen and Families Association (SSAFA), the charities chosen to benefit from sales of the song.   The donation will be equivalent to the sum of the VAT receipts collected on sales. 

Recognising the service of the armed forces and the high levels of public support for the single, as well as the exceptional contribution both charities make through their work with members of the forces and their families, George Osborne and Defence Secretary Philip Hammond want to maximise the donation that the charity receives by adding the VAT equivalent. 

George Osborne said: 

“Our armed forces demonstrate incredible commitment to the nation and make sacrifices for all of us.  The Military Wives choir is doing a great job of raising money for this hugely worthy cause. We will donate the tax collected on the single so that as much as possible of the money spent by the public on this fantastic song goes to charities helping our armed forces and their families this Christmas.”
Philip Hammond said: 

“Christmas can be a particularly difficult time for our brave service personnel deployed on operations, but also for their families at home. I am delighted to be supporting the Military Wives choir in this initiative, who in turn are supporting our Armed Forces community.”

Notes for Editors

The fundraising song (Wherever You Are) is performed by the Military Wives choir.  All net record proceeds are going to the Royal British Legion and SSAFA.  For more information, visit http://www.whereveryouare.co.uk/.

The donation will be equivalent to the sum of the VAT receipts collected on sales before the 31 January 2012 and will be funded by HM Treasury.

Update - On 19 February 2012 the Government announced that the sales deadline of 31 January would be extended to 31 March 2012 in recognition of the fact that the single’s Brit award nomination is likely to result in additional sales.