How are things in Britain?

Our Prime Minister likes all things British and fancy that Canada should emulate the British in a number of ways. While how are things over there? 

Mounting evidence reveals a marked increase in debt and financial insecurity for many people in the UK. *The Financial Capability of the UK*, a report published by the government-backed Money Advice Service (MAS), surveyed 5,000 people about their finances. The report also examined 72 families who were followed closely over a year, providing a detailed picture of how people are managing their money across the UK.

The report is considered to be one of the most in-depth pieces of this type of research to be carried out since 2006, when the Financial Services Authority (FSA) conducted similar research.

More than half (52 percent) of the 5,000 questioned said they were struggling to keep up with bill and debt repayments, compared with 35 percent in the study carried out by the FSA in 2006. This figure equates to 26 million people across the UK.

More than a third (36 percent of people) said they had experienced a shock to their finances in the last three years, and 21 percent have experienced a large drop in income in the last three years.

Forty-two percent said they would have to think about how to cover an unexpected £300 bill. Many individuals indicated being worried that they would not be able to make their money last until the next pay day, and 21 percent said they had experienced a large drop in income in the last three years.

It is estimated that 18 million UK adults now run out of money before their next payday. Many of these are not, for that matter, in low- to average-income groups; a third of those who earn more than £30,000 a year say they find it tough to live within their means.

Earlier this year, the independent think tank the Resolution Foundation published a report, *Squeezed Britain 2013*, showing the effects the financial squeeze is having on peoples’ living standards in the UK. Nearly 7 out of 10 people said they were cutting back on spending.

The report focused on the UK’s 10 million adults living on low to middle incomes (from £12,000 to £41,000), and did not include the poorest 10 percent of households

According to the findings, low-to middle-income families are having to spend more of their disposable income on essentials such as food, fuel and transport. Families in this group often go without everyday things that the more affluent take for granted: 40 percent said they cannot afford to replace worn-out furniture, and 46 percent said they cannot afford a week’s holiday.

In the UK, one in ten of the adult population (4.7 million people) are “sandwich carers”—i.e., those described as caring for children and older family members simultaneously.

For this group, the situation has become a lot more difficult, with almost one in three struggling to meet basic living costs and one in five in debt and finding it difficult to cope. A quarter of this group have had to reduce working hours, and the same proportion have had to give up work altogether, leading to increased pressure on family budgets.

The Institute for Fiscal Studies recently reported that British workers have suffered unprecedented pay cuts of 6 percent in real terms over the last five years.

Between 2010 and 2011, one third of workers experienced wage freezes and 70 percent experienced real wage cuts. The Trades Union Congress estimates that since the start of the financial crisis, the UK’s annual pay packet had shrunk by £52 billion.

Real wages are falling throughout the UK, with the south and northwest hit the hardest. Real wages fell 10.1 and 10.6 percent, respectively, in these areas, with Scotland and the West Midlands declining by 9.7 percent.

This situation is not expected to improve. Michael Pearce of Capital Economics recently stated, “We’re not expecting this damage [to households’real pay] to be reversed any time soon, highlighting one reason not to get carried away by recent signs of economic recovery”.

In fact, the financial situation is likely to get a lot worse and is very much dependent on interest rates remaining low. The Financial Times reported recently that up to 650,000 households in the UK face “debt peril” if mortgage rates were to rise unexpectedly.

Many people are now completely dependent on interest rates remaining at their current rock-bottom levels. Potential interest rate increases will place many people at risk of entering a spiral of increasing debt, with the real possibility of losing their homes as they struggle to keep up their mortgage repayments.

Matthew Whittaker of the Resolution Foundation told the *Times* newspaper, “There is now the real prospect that a large number of households already burdened with debt could collapse under its weight if economic conditions tighten”.

Total household debt is set to rise to £1.8 trillion by 2018, up from about £1.55 trillion now. A report by Aviva Finances found that average household debt had already risen by more than 40 percent in the past year, with a large chunk being owed to family and friends.

Lets hope they can overcome these problems, and lets hope that harper does not put policy in place that allows us in Canada to get to be more British in this way

A Cyprus-style financial meltdown in Canada is in the works

The following was written by: Thomas Walkom of the Toronto Star  and , Published on Thu Apr 04 2013 and I thought it showed be shared around the world.

If you are a foreign investor in Canada, you need to take note that you could lose your money. If you are a Canadian who is invested in Mutual Funds controlled by your bank you could lose your money. Harper is not a good  fiscal manager and is taking Canada down the wrong path. If you want to keep your money consider this story very seriously.

Be prepared. If you hold the wrong kind of bank accounts, Finance Minister Jim Flaherty may have your savings in his cross-hairs.

That’s the message from the finance department, which has been set the unwelcome task of having to explain the government’s latest attempt to prevent a Cyprus-style financial meltdown in Canada.

Two weeks ago, Flaherty quietly served notice in his budget that Ottawa is preparing a new set of what it called bail-in rules that it could impose should one of the country’s big banks face collapse.

The new rules would allow federal regulators to seize unspecified bank liabilities — including, perhaps, the savings of uninsured depositors — and use them to prop up a faltering institution.

Which, as it turns out, is exactly what Cyprus’ government did to deal with its banking crisis.

In the Cypriot case, the liabilities the government seized were the uninsured bank accounts of those with more than 100,000 euros on deposit.

So is Flaherty taking aim at Canadian savings in the event of a crisis hitting one of this country’s big banks?

That question has been swirling around the edge of financial circles since the budget. And it hasn’t yet been answered.

On Tuesday, Flaherty’s spokesperson told one newspaper that insured deposits — eligible savings up to $100,000 — would be safe from any crisis-induced confiscation scheme.

On Wednesday, I asked another spokesperson if uninsured deposits — including savings over $100,000 and ineligible savings such as mutual funds — would be equally safe.

The answer eventually came back that it would be “premature” to respond to that question until Ottawa has a chance to consult with the banks and others.

That is, there was no answer.

The budget says only that its proposed bail-in regime would allow the “rapid conversion of certain bank liabilities into regulatory capital” in the event of a crisis.

In bank-speak, a liability is money the bank owes to bondholders, creditors, other banks and depositors. A bank’s “regulatory capital” is composed mainly of common stock held by owners.

So a bail-in would, at the stroke of a pen, transform some creditors into owners of a bank, which at that point no one might want to own.

Which creditors? The budget says Flaherty will follow the recommendations set out in a 2011 report by the Financial Stability Board, a new international body headed by Bank of Canada Governor Mark Carney.

And those recommendations are blunt. Insured deposits would be protected. But uninsured deposits, including savings over the $100,000 limit and mutual funds, would be fair game.

At issue is the question of who pays to bail out a bank so big that its failure would trigger panic. In the 2008 meltdown, governments — particularly in Europe and the U.S. — ponied up the cash.

The new rules are designed to put the burden of any bank bailout on not just its stockholders but on those who choose to lend money to that institution without demanding security in return, including uninsured depositors.

Toronto-Dominion Bank chief economist Craig Alexander says that some of the problems can be solved by letting banks issue so-called contingent capital bonds — bonds that, at the point of crisis, would be automatically transformed into riskier share equity.

But as the International Monetary Fund has noted, contingent capital and bail-in capital are difference beasts. Those who buy contingent capital bonds know the risks up front.

A bail-in, however, catches the unwary. Here government uses its legal hammer to make those unwise enough to think their money was safe with a dodgy bank pay handsomely for their foolishness.

The good news is that the Canadian banking system is nowhere near as shaky as that of Cyprus. At their height, Cypriot banks held liabilities worth eight times the island nation’s entire economy.

The bad news is that the Cypriots thought their banks were safe, too.

Boycott of RBC - make this a movement

By now there has been considerable outrage (at least on line) to the story published by the CBC about the Royal Banks snub to Canadians. The original post I saw was on Northern Insights and he had an interesting follow-up to his post of April 7th. The post is interesting but the important point he makes is here:

Back to the RBC, which should be stung by thousands of customers fleeing from their greedy clutches, beginning first thing Monday morning.

The bank's response begins like this,

"RBC wants to address media reports and provide clarification. Contrary to allegations, RBC has not hired temporary foreign workers to take over the job functions of current RBC employees."

No, what they did was hire a company who hired temporary foreign workers to take over the job functions of current RBC employees. However, being honest about that would admit that critics and complainers have been correct.

Allison at Creeksite in her post also reinforces the idea that RBC really does think Canadians are stupid and will believe their hype:
Royal Bank of Canada Chief Human Resources Officer Zabeen Hirji explains here that technically it's not RBC that has hired temporary foreign workers to replace RBC employees. No, rather it's that RBC has hired Indian offshore outsourcing company iGATE to do their own hiring as part of RBC's plan to transition RBC IT jobs overseas to India. 
What about government reaction that this is unacceptable?
Oh, says Hirji, we were already in conversation with relevant government departments last week and besides everybody is outsourcing overseas now.

The Mainstream media has not yet and will not challenging the RBC in its lies nor will they challenge the  government on its position.What I suspect will happen is if the public pressure continues to mount, the government will put the issue under review and the mainstream press that supports this corrupt government will slowly ease the story to the back pages (if in fact they cover it all). I also suspect the CBC will be looking at more budget cuts and attacks by the government for doing its job. 

Norms original post is here and my thanks to Norm at Northern Insights for this story that was published by the CBC on April 6th. 

If you bank at RBC they will only feel the pressure if you boycott them and transfer your money to a different financial institute. Consider transferring to a Credit Union. I belong to Vancity so I agree that they can be a good choice, but any Credit Union would also be a better choice then continuing to bank at a company that fires Canadians and hires foreign workers to replace them. 

RBC replaces Canadian staff with foreign workers, CBC, April 6, 2013

"Dozens of employees at Canada’s largest bank are losing their jobs to temporary foreign workers, who are in Canada to take over the work of their department.

" 'They are being brought in from India, and I am wondering how they got work visas,' said Dave Moreau, one of the employees affected by the move. 'The new people are in our offices and we are training them to do our jobs. That adds insult to injury.' ..."

If this style of business offends you and you are a customer of RBC, visit Vancity or a nearby credit union. They'll help you transfer your banking business and a year from now, you'll wonder why you didn't do it long ago. You'll get better banking services and the community will benefit economically