It has been reported that Lloyds Bank is seeking repayment of some £2 million of the bonuses that were paid in the past to a handful of executives who were responsible for the mis-selling of Payment Protection Insurance (PPI). These repayments are part of the changes that were required by the Banking Industry regulators after the crash of 2008.

PPI was intended to be an insurance policy that covered the costs of your loan or interest payments if you were unable to work through redundancy or ill health. It sounded like a good idea to many people especially those who were self employed and had little financial backup or support if they were to fall ill and be unable to work. It sounded like an insurance policy that was tailored for people in their situation.

Unfortunately for them these policies were designed NOT to be for them and the small print made it clear they would not be able to claim on these policies. Perhaps not surprisingly the banks and other organizations ignored the simple fact that they were useless polices for certain groups of people and sold them to them anyway. Why would they not do that? An insurance policy that can never be required to pay out is going to be extremely profitable isn’t it.

The problem is that it is considered a bit naughty. Some would say it was rather worse than that. If you have a salesperson encouraging you to buy something that is of no use or value when they have a duty to offer you appropriate and honest advice about financial matters you have to wonder what they were thinking when they decided to do this. Maybe they were thinking about their bonuses for making lots and lots of sales?

Finally the real world has caught up with them. The Financial Services Authority (FSA) and the Financial Ombudsman Service (FOS) agreed new rules on PPI and after attempting to fight those new rules through the courts the banks caved in and accepted them. The rules set out how PPI should be sold but also require compensation to be paid for those who were mis-sold PPI in the past.

The claims are expected to amount to Billions of pounds. It is suggested that Lloyds will repay £3.5 billion in compensation to previous customers. No wonder then that the executives responsible should be expected to return some of the bonuses they recieved for the successful selling of these policies. They will not be expected to repay all of their bonuses but it will no doubt be a blow to their prestige and to their future prospects.

You can argue that losing part of your bonus is hardly the end of the world but this is significant. Previously bankers could do pretty much anything to boost their bonuses and invariably once they got their bonus they could walk away and live a life of luxury regardless of the pain and suffering caused to customers or the long term damage done to the bank. The idea that these bonuses can be clawed back at a later date is sure to send a shock wave through the banking industry.

Its been a long time coming. Customers have been badly treated by banks and other financial institutions for far too long so we should welcome this small move to redress the balance and we can hope that the banking industry might stop and think about this in the future, before, they pay out bonuses based on unfair, unreasonable and even downright bad practices in their dealings with their customers.

Money Magic: Seven Simple Steps to True Financial Freedom (Quick Reads)

Today is no smoking day. I am sure all non-smokers will enjoy having a day to themselves to celebrate their health and wealth thanks to not smoking. The government have joined in the excitement and hype and jumped onto the bandwagon by announcing measures intended to help reduce the numbers of people smoking.

Smoking is bad for your health. There is no doubt about that but it is somewhat puzzling and rather worrying that smokers are singled out as a special case when there are so many health issues facing the country.

Smoking is one health issue that costs the NHS and the country a great deal of money but it is also a business that employs lots of people, generates a lot of exports and pays a great deal of money in tax.

The cost to the Health Service for treating smokers is said to be around £2.7 Billion per year.
Lobby group Forest has previously pointed out that smokers pay over £9bn a year in tobacco tax.
(http://www.theywouldsaythat.co.uk/governments-and-hypocrisy/)

According to the think tank, Policy Exchange, the cost of smoking is made up of the cost of treating smokers on the NHS (£2.7 billion); loss in productivity due to smoking breaks (£2.9 billion); increased absenteeism (£2.9 billion); the cost of cleaning up cigarette butts (£342 million); the cost of smoking-related fires (£507 million); and the loss in economic output from the deaths of smokers and passive smokers (£4.1 billion and £713 million respectively).
(http://info.cancerresearchuk.org/news/archive/cancernews/2010-03-22-Tobacco-duty-must-rise-to-reflect-cost-of-smoking-to-society)

There seem to be some figures used there that are questionable at best. As an example, when it is difficult to ascertain a cause of fire it is frequently put down as smoking related because something has to be put in the box and that is an easy solution. The figures for the loss of economic output from those who have died from smoking related causes must be a made up and estimated figure because we have no idea if many of those people would have been on benefits or could have been bankers and people in the financial industry draining money from the economy rather than adding to it.
It should also be pointed out that the figures given for cleaning up cigarette butts refers only to cleaning up cigarette butts and nothing else but I am not aware of many people whose job is to clean up cigarette butts whist leaving other litter on the ground.

NB. If you have ever tried clearing up litter, and I have,  you will know that the biggest problem is caused by chewing gum. It is a nightmare to try to remove and it is absolutely everywhere.

For arguments sake we will assume the figures may be correct and there is a net cost to the country for smoking but these figures ignore many of the financial benefits of smoking to the economy. Goodness only knows how many jobs are created or supported by smoking product sales. We have the factories producing the stuff, transport firms moving it around the country and shops selling smoking products. It is a very big business and no doubt contributes enormous sums to both the economy( £££s unknown) and the exchequer (around £9 Billion). Plus all the extra taxes paid by people working in the industry and the companies that make the products.

So why the drive to reduce smoking yet allow other health problem areas to continue with far less pressure to reduce?

The government intends to make it illegal to display smoking products in public in shops and stores. It would make just as much sense, and probably even more, to require that alcohol to be hidden from display and what about the huge, and growing, problem of obesity? Should we not hide food from public display in supermarkets to cut down on those impulse purchases?

You could argue that financial products should not be allowed to be promoted since they cause immense problems to people all over the country. No doubt we would all have weathered the financial crisis a lot better if we had not been encouraged to take up financial products such as credit cards, loans and huge mortgages. So perhaps Financial Products Should Be Kept Under The Counter and hidden away to prevent people signing up to them and destroying their lives and their financial health.

Where should we draw the line?
Parliamentary report: estimates for 2001:
Cost of Obesity to NHS: £2bn
Cost of Obesity to UK economy: £7bn (3.5 times greater)

Britons spend £30bn on alcohol each year
The government raises £7bn through taxes on alcohol
Alcohol costs £6.4bn in lost productivity
The NHS spends £1.7bn treating alcohol-related illnesses
Alcohol-related crime costs £7.3bn
Another £4.7bn is spent on the human and emotional costs of alcohol-related crime
Some 22,000 people die prematurely each year because of alcohol misuse
(http://news.bbc.co.uk/1/hi/health/3121440.stm)

We don’t know the health effects of financial products on people but there can be little doubt that financial problems cause people to suffer from depression and other physical health issues as a result of the stress caused and we do hear of suicides due to financial problems.

Why stop there. What is the cost of football injuries, or rugby, or cricket, to the National Health Service and how much time is lost from work because of injuries or people simply wanting to watch a special football match on TV? Should these sports be restricted because of their health costs and costs to the economy?

There is no consistency in government thinking. There is a total lack of common sense when they approach these issues. Decisions are made more on the basis of what is politically acceptable and what might score a few points with some of the public rather than on what is right or good for the nation.

Drugs are illegal because they are supposed to be bad for us. If smoking is bad for us, is it any different? Alcohol costs the country a fortune and destroys many peoples lives. Should we ban that too? Obesity is becoming a real and very serious issue. We are building up a time bomb for the health service of the future. What are the government doing about it? I have seen no suggestions whatsoever that supermarkets should be required to hide food displays from the public. Is it really that different to smoking products?

Financial companies have done imense damage to the economy and to people’s lives. For all the talk of more regulation little seems to be happening. Is it acceptable to destroy peoples lives and the economy with financial products but not with cigarettes or drugs?

There needs to be a grown up discussion about what is actually good for people and what does them harm. The government should decide if it is right to ban and control the sale of things it thinks are bad for us but it must be able to demonstrate a consistency of purpose in its actions.

The current crop of smoking related laws are quite ridiculous when you look at the many health issues facing the country. Perhaps the reason we don’t ban alcohol is that so many MPs enjoy drinking and they do no doubt enjoy fine dining and good food. Perhaps, if the majority of MPs were smokers the laws on smoking would be different.

There can be little doubt that while so many ex-MPs go into nice positions in the financial industry their future prospects might cloud their thinking when it comes to being more proactive as regards regulating and controlling the financial industry. Perhaps the fact that few of them plan to go on to work in the tobacco industry affects their judgement?

We need good and wise government. Consistent government policy based on facts and common sense. Current smoking policy simply seems to be a case of jumping on the current bandwagon rather than genuinely trying to improve the health and wealth of the nation. Control of smoking products should be a part of a larger policy that restricts the sales of alcohol, food and financial products in a way that is beneficial for the health and financial well being of the whole nation. I see no sign of that happening.

Money Magic: Seven Simple Steps to True Financial Freedom (Quick Reads)

You would be justified in thinking that if someone is billing you for a service they have not provided they would be committing some sort of criminal offence. You would hope that if caught the people doing this would spend some time in jail.
This is what we like to think is one of the benefits of democracy and the rule of law.

So, you might be rather surprised to hear that this is a business practice that is considered acceptable when it is a big business who then repays the money when they are found out for cheating and stealing money under false pretences.

These companies, TalkTalk and Tiscali pressured their customers into paying even though they were not entitled to charge them. Customers complained about aggressive demands for payment of  bills for services they had not been provided with.

A TalkTalk spokesman told the BBC, “We are pleased that Ofcom has recognised the significant steps we have taken to fix the billing issues,”

Never mind the self congratulation. Why isn’t somebody facing legal charges?

Using the excuse of software problems is no excuse at all. Producing software that commits illegal acts that charge people money for something they either do not want or do not get is, or should be, just as illegal as a mugger demanding money from you in the street.

Ofcom began an investigation back in July 2010 following complaints from customers. The two companies were told to pay compensation to affected customers by December or face the prospects of a financial penalty.

Fines have been ruled out by the regulator, for now, but it has said it would continue to monitor the situation. So the message is once again that big business can do whatever it wants and get away with it when it is found out.

What do you suppose would have happened to you if you sent out letters demanding payment for something you had not provided? Jail time would be a likely result.

Money Magic: Seven Simple Steps to True Financial Freedom (Quick Reads)