UK banks defer bonuses to beat top tax rate

Bonuses across the economy were all but flat in the year to March 2013 – but finance payouts up 4% to £38.6bn once April figures are taken into account

Britain's best-paid workers delayed bonus payments worth up to £1.7bn until April to take advantage of George Osborne's 5p cut in the top rate of tax, according to evidence collected by the Office for National Statistics.

Bonuses across the economy were all but flat in the year to March 2013, increasing by 1% compared with the same period a year ago, to £36.9bn, or an average £1,400 per employee.

But the ONS said the picture was distorted by firms deferring payouts until April, when those earning over £150,000 a year would pay income tax at 45p instead of 50p in the pound.

Payouts were £1.7bn higher in April than the same month last year, with the banking and finance sector accounting for £700m of the increase.

Some of the rise since April 2012 is likely to reflect a more generous bonus round – taking January to April together, bonuses in the finance sector were up by 13% on last year, at £10.3bn. But the ONS said businesses had reported deliberately deferring their bonus rounds so that employees could benefit from the tax cut.

If the £1.7bn had been handed over to staff before the 50p top rate was scrapped it would have brought the Treasury an extra £85m.

Reducing the 50p rate of tax brought in by Alistair Darling at the height of the economic crisis in 2009 was the most controversial policy in last year's "omnishambles" budget.

Treasury officials insisted yesterday that the higher rate had generated little, if any, extra revenue. A spokesman said the bonus data were, "broadly in line with the Budget forecast".

However, labour market expert John Philpott, of consultancy the Jobs Economist, said, "I just find it deplorable: there should have been a failsafe built into the policy that allowed for some sort of clawback if that behaviour was seen to occur. I don't see why that's any less immoral than all the tax avoidance practices the coalition have criticised."

Labour said the data helped hammer home its argument that the majority of people in Britain are suffering a "cost of living crisis", while the lucky few are thriving.

Chris Leslie, shadow financial secretary to the Treasury, said, "working people are worse off under the Tories as prices continue to rise faster than wages. But while ordinary families on low and middle incomes are seeing their living standards fall those at the top are reaping the benefits of David Cameron's tax cut for millionaires."

Taking the 2012-13 financial year as a whole – and excluding the April payouts – finance workers banked the biggest bonuses, according to the ONS, taking home an average of £11,900 per employee.

The sector was followed by mining and quarrying, where the average bonus was £6,700; and IT, where it was £4,400.

The Leadenhall Building (the Cheesegrater) & 20 Fenchurch Street (the Walkie Talkie) dominate the City skyline. Finance bonuses are up on 2012.Excluding the financial sector, total bonuses across the rest of the economy in 2012-13 were £23.6bn, almost as high as during 2007-08, before the UK plunged into recession.

Despite high-profile stories about lavish payouts for top public sector bosses, bonuses remain largely a private sector phenomenon, the ONS data shows.

The average bonus in the public sector was £300 per employee – falling to £100 once the bailed-out banks, including Royal Bank of Scotland, are excluded. Private sector employees received bonuses worth on average £1,700.

Tuesday's findings about financial services firms delaying payments to cut their employees' tax bills will fuel controversy about remuneration practices in the sector, after research showed that many firms were planning to increase salaries, to bump up their staff's total pay as the European Union prepares to cap bonuses.

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

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Current account switches made easier as banks plan media blitz

Government promotes new £750m IT system that allows customers to swap banks quickly to promote competition

A cast of animated characters will hit television screens in September as part of a campaign by the banking industry to encourage customers to switch bank accounts.

They will also appear in newspapers, magazines and on billboards as banks strive to prove that they do not need a full-blown competition inquiry to get customers to move current accounts.

Under instruction from a government keen to foster competition on the high street, the banks have spent £750m designing a new computer system that allows them to speed up the time it takes to shift current accounts between each other. The change could break the stranglehold that the big four – Lloyds Banking Group, Royal Bank of Scotland, Barclays and HSBC – have on the current account market.

Such is the sensitivity around the programme and the determination to ensure it is not accused of being behind schedule that the payments council, which is overseeing the process, refuses to disclose when the switching service will begin. But the 30 banks and building societies participating in the project are embarking on last-minute system tests to allow the service to begin on 16 September. The service guarantees that accounts can be transferred in seven days without glitches.

On Monday the payments council wrote to the government to reaffirm that it is on track. Any suggestion that the project is falling behind schedule is quickly quashed by bankers amid rumours that banks have back-up systems where they deploy staff to change direct debits manually. One senior banker said: "We have so little credibility left, this is going to be a big chance to put it right."

The plans hope to encourage customers to move accounts and make banks offer a better serviceThe switching service was spun out of the review by Sir John Vickers in his independent commission on banking, which found there was little movement between customers of the big four, which have a combined market share of 80%. It allowed the banks to head off a move to account portability – more akin to moving a phone number between mobile phone providers – which they argue is expensive.Last month's parliamentary commission on banking standards put portability back on the agenda and the government will commission a new review next year.

A functioning switching system will be the banks' main defence against portability. This government is not the first to try to bolster competition. More than a decade ago Labour tasked Don Cruickshank, former head of the then telecoms regulator, with investigating the banking industry and he, too, highlighted the problem. Since then the business has become even more concentrated in the wake of Lloyds' rescue of HBOS, the main challenger, five years ago.

Ian Gordon, banks analyst at Investec, said: "It has been an objective for ever, with limited success. I see this as a means to attempt increased portability of current accounts. Whether it will succeed I'd be a little bit sceptical because of entrenched consumer behaviour."

Motivating customers to move accounts could be one way to change behaviour. However, a statistic bankers often quote is that people are more likely to divorce than to switch the provider of an account into which salaries are paid and direct debits paid out. Bankers acknowledge there is a danger that customers end up moving their accounts among the big four, doing little to change the market share the government is trying to break, unless new-style products are brought to market. Lloyds will itself inject a new entrant into the market in early September when it spins out TSB – demanded by the EU in return for £20bn of taxpayer money pumped into Lloyds in 2008 – after a sale of the business to the Co-operative Bank fell through. RBS is also carving out a branch network at the behest of Brussels because of its £45bn taxpayer bailout.

Others such as Tesco Bank are not joining the switching service at this stage, but are expected to join a second wave of participants. A spokesperson for Tesco Bank said: "We plan to join the second wave of testing for this service in November 2013, which is expected to support a launch of the product in 2014." Norwich & Peterborough, which is the only one of the second-tier building societies to offer current accounts, has also said it is not taking part in the September launch, but hopes to join the scheme in the future.

However, Sir Richard Branson's Virgin Money is also taking part in the switching service, even though it does not have current account products in its range. Tesco expects to launch a current account next year, but Virgin could have one on the market before year-end.

To encourage customers to shift, the banks may need different products. The big four largely offer free in-credit banking and would face a public backlash if they started to charge for transactions. First Direct, an arm of HSBC, is offering cash rewards to new customers. Nationwide building society is also aiming to win new business through a big push of its existing products. Others may charge for their service. When Marks & Spencer launched into banking, every current account was an "added value" packaged account – offering add-on services – charging £15 to £20 a month. The payments council has told the government it will judge its success on the level of awareness and consumer confidence in switching. But it refuses to set a target. In 2009, around 600,000 accounts were switched, and the total doubled to 1.2m last year.

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

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Shell chief Peter Voser stands down as oil company posts profit rise

Voser announces plan to leave Anglo-Dutch oil giant next year, alongside small rise in first-quarter profits to $8bn

Peter Voser, the chief executive and architect of Shell's recent financial success, has unexpectedly announced plans to stand down, less than four years into the job.

The move came as the Anglo-Dutch oil group unveiled a 4% increase, to $8bn (£5bn), in its first quarter profits and raised the dividend a further 5% to 45 cents per share.

54-year old Voser said he wanted a "change of lifestyle" and to spend more time with his family. He is scheduled to retire from Shell in the first half of next year with a pension pot worth almost $20m.

There was immediate speculation he may be lined up for the job of chairman at Swiss pharmacuetical group Roche, where he is already a non-executive director.

Meanwhile current chief financial officer, Simon Henry, said it would be "inappropriate" to comment on whether he would try to follow Voser's path from finance to the top job.

Peter Voser has been chief executive of Royal Dutch Shell for four years.

 If Henry takes over he would be the first British boss of Shell since Philip Watts left in 2004 in the wake of a scandal over the wrong booking of oil reserves.

Voser, 54, has spent almost 25 years in total at Royal Dutch Shell, having left in the middle of his career there only to return later.

On Thursday he said: "After such an exciting executive career I feel it is time for a change in my lifestyle and I am looking forward to have more time available for my family and private life," he said.

Shell's chairman, Jorma Ollila, said Voser's reign over the past four years had been "impressive", reorganising the company, delivering growth, and developing a clear forward strategy with a strong portfolio of new options.

Analysts generally agreed. Peter Hutton, energy analyst with RBC Capital Markets, said in a research note that the quarerly results were "solid" and he was full of praise for the outgoing chief executive.

"Peter Voser leaves Shell in a much stronger position than when he arrived. The company still needs to steer through LNG optionality to bring greater clarity, in our view, but he has brought real focus to the business. The testament to a strong legacy will be a smooth transition to his successor.

Neill Morton at Investec Securities added that Voser's exit was a surprise: "He is only 54 years old and Shell is portraying this is as a lifestyle choice."

Shell also reported revenues of $115bn in the first three months of 2013, roughly as much as the cost of running the NHS until the end of the year.

The $115bn revenues recorded by Shell were lower than the almost $120bn for the same quarter of 2012, although that was restated for accounting reasons.

Oil and gas production rose 2% to 3.5m barrels of oil equivalents – but that was excluding the impact of divestments, production sharing agreements and security problems onshore Nigeria.

Voser said the company had also spent $1.2bn buying back its shares in the last quarter.

The company has benefited from strong crude prices, although the global price of oil has in recent days fallen through the $100 a barrel level. This was exacerbated by weak manufacturing data from the US and China, prompting fears of a downturn in the global economy.

On a media conference call, Henry said the company was well placed for the recent fall in prices.

"We also think there are quite few players in the market, quite a few companies, who actually have bet the farm on 64.2 pounds-plus oil prices. We don't," he said. "We're structured around a lower oil price so it is not bad for us," he added.

Henry indicated that the lower oil prices might drive down asset values and give opportunities for takeovers. Shell has periodically been linked with a purchase of BP whose share price has continued to lag because of fallout from the US Gulf oil blowout.

But Simon said: "We dont look at larger companies because they come with a smorgasbord of assets that we don't want ... [we are] more focused on smaller companies."

Shell said it was pressing ahead with shale drilling from China to Argentina but was not currently thinking about fracking in Britain or Europe.

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

Barclays' former pay chief argued for Bob Diamond to get no bonus

Alison Carnwath believed that Barclays' former chief executive should have received 'zero' bonus - but her successor, Sir John Sunderland, disagreed

Alison Carnwath, which was previously accountable for setting pay with Barclays, reveal partitions about the lending institution's panel last year when the lady claimed to possess already been the single words inside suggesting previous employer Frank Diamondreceive "zero" reward.

Alison Carnwath said Barclays Bank chief executive Bob Diamond should not have got a bonus in 2011

Yet the girl winner because chairman of the Barclays remuneration panel, Friend John Sunderland, taken aback the particular consumer banking requirements commission while he said that he continued to believe that Diamond - who remaining previous This summer just times after the financial institution has been penalized £290m with regard to rigging Libor -- needs to have been awarded "a type of incentive compensation" .

Sunderland, who's inside discussions along with stakeholders with regards to a bonus with regard to Gem's successor Antony Jenkins, conceded that with hindsight he'd have "debated the particular quantum" from the benefit to Gemstone, although not the leading of giving a single.
Diamond was handed a £2.7m reward with regard to 2011 plus a overall regarding £17m before the lender acquired their goverment tax bill associated with £5.7m.

Carnwath said Gemstone : that she said had been known for their "generous spend packet" : was reluctant to acknowledge pay at the bank was high as well as has been extremely protecting with the purchase financial equip he or she headed before stepping up to chief executive.

Carnwath stop by the end of Come july 1st, just days following Stone, as well as in the particular results of a rebel in opposition to the girl re-election to the table at the once-a-year conference within April.
She'd been unable to show up at the key table achieving last February when Diamond's spend has been rubberized placed and at which usually, the lender demands, the decision over the benefit was unanimous.

Carnwath, chairman of Property Securities, referred to pay from financial institutions occasionally as "obscene". Your woman said inside created data in which Diamond must have established a good example by not taking the power recommended from the previous chairman Marcus Agius.

Carnwath advised MPs and also peers on the commission she considered the "culture regarding entitlement" had surfaced over bankers' bonuses which she'd recently been "amazed" simply by Agius' advice, because of the overall performance from the bank and also political environment. In her created evidence, she said: "Barclays' returns this year were not excellent from the shareholder's point of view with all the key way of measuring [return about equity] ... not necessarily within the expense of funds and also the share price as well as dividends displaying poor returns. It had been because of this that I could not agree with all the board chairman's advice upon Mister Gem's once-a-year reward regarding Next year.Inches
Your woman added: "I advised no. I was by yourself for my part each about the panel which I chaired and on the particular board.Inch
The lady stated the particular payment panel was "aware that pay was a student in the very best conclusion from the scale" together questioned Stone "to take a leadership place as well as make clear the pay lifestyle to staff".

Sunderland rebutted statements how the Barclays' organised funds markets department - best known for its tax deterrence schemes : been in one year created 110% from the bank profits. A member of the Barclays board given that August 2005, his / her protection regarding payment protection insurance - the particular industry's biggest at any time mis-selling scandal -- was called "rubbish" through percentage associate Lord Turnbull.

Carnwath asserted Stone "thought he identified devotion inside individuals around him or her if you are paying these well, for my part a lot more than he required to".
Independently, HSBC set up a brand new boardroom board arrested for breaking upon monetary offense following its £1.2bn acceptable for funds laundering. Amongst the people are usually previous tax examiner Dave Hartnett.

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