Goldman Sachs backs down from delayed bonus tax plan

Bank scraps scheme which would have allowed top staff to avoid 50% rate after pressure from Mervyn King and government

Goldman Sachs has been forced into an embarrassing climbdown from plans to allow its highly paid bankers to avoid the 50% top rate of tax, following public intervention by Bank of England governor Sir Mervyn King and pressure from the government.

But the Wall Street firm is expected to spark a fresh row over City bonuses on Wednesday by revealing that its bankers have enjoyed a 10% pay rise when it announces profits for 2012.

Goldman was already facing condemnation about proposals to defer bonuses until after 6 April, when the top rate of income tax falls to 45% from 50%, when King waded in. The Bank of England governor told MPs he regarded such attempts as "depressing".

Further pressure was being exerted behind the scenes by the Treasury minister, Sajid Javid, who spoke to Goldman bankers to seek assurances that the bonuses from 2009, 2010 and 2011 would not be delayed.

King told the Treasury select committee: "I find it a bit depressing that people who earn so much seem to think that it's even more exciting to adjust the timing of it to get the benefit of the lower tax rate …which they will benefit from in the long run to a very great extent knowing this must have an impact on the rest of society, when even now it is the rest of society which is suffering most from the consequences of the financial crisis."

Goldman Sachs is expected to reveal its bankers have enjoyed a 10% pay rise

The phone call between Javid and Goldman bankers had been scheduled late on Monday night and took place on Tuesday afternoon just after the bank's remuneration committee met to discuss bonuses for 2012 and pulled any plan to delay bonuses.

The bank's pay committee was meeting ahead of the bank's full-year results, after which staff will be informed of their bonuses, amid forecasts that the firm will defy the downward trend in the City and raise average payments. Sanford Bernstein analyst Brad Hintz predicted average pay per employee at Goldman would rise from around £238,000 to £260,000 after a wave of redundancies.

The shadow Treasury minister, Chris Leslie, predicted that the bonus season being launched by Goldman this week will be "very lucrative for thousands of bankers" as a result of the cut to the top tax rate.

JP Morgan, hit by the London Whale trading affair, also reports on Wednesday amid expectations its chief executive, Jamie Dimon, will be docked part of his bonuses for the $6bn (£3.7bn) of losses which this week sparked regulatory intervention on both sides of the Atlantic. European banks, including the bailed out Royal Bank of Scotland, do not publish their results for another month.

RBS is facing additional pressure to restrain bonuses as it braces for a fine – possibly £500m – for rigging the Libor interest rate.

The government's private approach to Goldman contrasted with Prime Minister David Cameron's description of the tax affairs of comedian Jimmy Carr as "morally wrong" last summer.

David Hillman, a spokesman for the Robin Hood Tax campaign, which lobbies for a financial transaction tax, urged the government to "get a grip" on the financial sector at the start of the bonus season.

Lord Oakeshott, former Treasury spokesman for the Liberal Democrats in the Lords, said that if Goldman wanted to keep working for the government on major products the bank could not "spit in taxpayers' faces". "It's high time they behaved like good citizens, not barrow boys," Oakeshott said.

Michael Cohrs, who sits on the Bank of England's new financial policy committee, the body charged with stopping systemic risks from overwhelming the financial system, told the Treasury select committee that the government had "probably" overpaid for its stakes in RBS and Lloyds during the 2008 banking crisis. He added that the taxpayer was unlikely to make a profit, even though US taxpayers have made a profit on bailouts across the Atlantic.

Banks are already being told to establish how much more capital they need. When asked for a "ballpark" figure for RBS and Lloyds, Cohrs said it was a "big number" that should not be made public as "it will spin out of control in the journalist community".

Article source :http://www.guardian.co.uk

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HMV calls in administrators with 4,500 high street jobs at risk

Ninety-one-year-old music chain falls victim to online shopping trend after failing to agree on new debt terms with banks

HMV has confirmed it will call in administrators from Deloitte on Tuesday, as the 250-strong chain became the latest casualty of the shift to online shopping, putting 4,500 jobs at risk.

Stores were expected to open on Tuesday but the firm said it would not be accepting gift vouchers or issuing any more.

HMV stores were expected to open on Tuesday and analysts expect a buyer for at least part of the group

HMV held discussions with its banks over the weekend but failed to agree on new terms for its debt.

It said in a statement issued on Monday night: "The board regrets to announce that it has been unable to reach a position where it feels able to continue to trade outside of insolvency protection and in the circumstances therefore intends to file notice to appoint administrators to the company and certain of its subsidiaries with immediate effect."

Nick Edwards, Neville Kahn and Rob Harding of Deloitte will be appointed as administrators. The company said: "The directors understand that it is the intention of the administrators, once appointed, to continue to trade whilst they seek a purchaser for the business."

Analysts expect a buyer for at least part of the group. As the reaction to HMV's demise has shown, the brand, famous for its Nipper the dog trademark, still holds a cachet for many people. HMV had around 35% of the, albeit dwindling, CD market in 2012 and it is thought that around half of its 240 stores could be profitable once the company gets rid of its debt.

Rumours circled on Monday night that the restructuring company Hilco could be interested in buying the group out of administration. Hilco bought HMV Canada from the UK parent in 2011 and has overseen a better-than-expected Christmas at the north American arm, which rang up sales of $65.4m (£40.5m) over the festive period, beating targets.

It was thought that the US vulture fund Apollo Global Management had been considering a bid but is no longer interested in buying the chain. Apollo bought 6% of the company's bank debt two weeks ago.

Neil Saunders, the managing director of the research house Conlumino, said: "The brand certainly has some value, however, while someone could arguably turn a profit in running some of the stores for a period of time they would still be betting against the future. By our own figures, we forecast that by the end of 2015 some 90.4% of music and film sales will be online. The bottom line is that there is no real future for physical retail in the music sector."

The news prompted many to mourn the demise of the 91-year-old chain. Chuka Umunna MP, Labour's shadow business secretary, said: "HMV is a national institution that has been a feature of our high streets for over 90 years so this news is deeply worrying. For the sake of HMV's employees, we hope a way can be found to keep the business going. The demise of HMV – a national institution – would be a sad loss for British retail."

Twitter also saw an outpouring of emotion from fans of the store, with comments such as: "HMV closing is the worst thing that's ever happened to me."

But analysts were philosophical about the chain's collapse. Saunders said: "This outcome was always inevitable. While many failures of recent times have been, at least in part, driven by the economy, HMV's reported demise is a structural failure. In the digital era where 73.4% of music and film are downloaded or bought online, HMV's business model has simply become increasingly irrelevant and unsustainable.

"HMV did not react early enough to the digital trend; it did not give shoppers a reason to keep buying from it. Admittedly, the company has tried to innovate through selling more electricals and gadgets but, unfortunately, these initiatives were never going to be enough to counteract the terminal decline in its core business."

Article source :http://www.guardian.co.uk

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