Acromas Holdings, the merged AA and Saga group, has become the latest ­private equity-owned business to abandon plans to float on the stock market this year, reflecting a new militancy among institutions refusing to back businesses with huge debts.

The decision comes amid growing concerns about the future of swaths of British companies that are shouldering debts raised by the private equity ­industry during the boom years, and warnings that tens of thousands of jobs could be at risk.

Acromas has £6bn of borrowings and was widely tipped as a prime candidate for listing, but senior managers have now taken the unusual step for a private equity-financed vehicle of ruling out a float for at least 12 months.

In the past two weeks, three private equity-owned firms have pulled float plans: the retailer New Look, Madame Tussauds owner Merlin Entertainments and hotel bookings business Travelport. Ian Griffiths and Nick Mathiason, The Guardian.

So the question I have is who’s got the money? Into the pockets of bankers, bosses and shareholders and certainly not the workers who are about to pay for the greed of others with their livelihoods.

Barclays call on people to celebrate ‘remarkable’ comeback

The president of Barclays called on ¬people to celebrate the bank’s “remarkable” financial comeback today, striking a defiant tone in the face of questions over a new plan to pay £2.2bn in bonuses.

Announcing record 2009 profits of £11.6bn, Bob Diamond shrugged off charges that the British bank’s performance relied heavily on government support for the financial system and asked why there was “edge” to questions about pay. Jill Treanor, The Guardian.

One question for banker Diamondwhy would I want to celebrate the naked greed that is Barclays?

I’ve been hearing about the Robin Hood Tax.

The Robin Hood Tax is a tiny tax on bankers that would raise billions to tackle poverty and climate change, at home and abroad.

By taking an average of 0.05% from speculative banking transactions, hundreds of billions of pounds would be raised every year.

That’s easily enough to stop cuts in crucial public services in the UK, and to help fight global poverty and climate change. The Robin Hood Tax.

And as Lenin’s Tomb points out

Politically, it taps into a very good instinct. The bankers got rich pursuing speculative profits through various intricate schemes that placed national economies in tremendous danger (example of which), and have been rewarded with bail-outs. If there is going to be a shortfall in funding for public services, they should pay for it. Lenin’s Tomb.

There’s quite an argument against the Tax – the banks won’t pay their customers will have to, it won’t stop banking excess, it discourage good banking as well as bad.

Well to answer a few questions the customer will pay and not the banks – personally we’re already paying and are about to pay a lot more if the Tories get their way – come to that Labours plans look pretty scary too – and as for bank customers paying haven’t people heard of competition if you don’t like the price go elsewhere – market forces and all that. Also to be quite honest this is going to hit the wealthy harder than the poor – they don’t have pensions – let alone stocks and shares. It won’t stop banking excess well if it doesn’t at least we’ve raised a shed load of money or it’ll discourage good banking – you know people will speculate where ever there’s a profit to be made this tax will have a negligible effect on banking.

You know bankers are going to come up with hundreds of reason why they shouldn’t pay and we should – let’s just bit the bullet and tax them what have we got to lose.

The government must act more quickly to cut Britain’s huge budget deficit, a group of economists has said.

In a letter to the Sunday Times, the 20 experts say the lack of a credible plan threatens to push up interest rates and undermine the recovery. BBC.

I don’t know why almost every news service going is treating this letter as gospel:

It is now clear that the UK economy entered the recession with a large structural budget deficit. As a result the UK’s budget deficit is now the largest in our peacetime history and among the largest in the developed world.

In these circumstances a credible medium-term fiscal consolidation plan would make a sustainable recovery more likely.

In the absence of a credible plan, there is a risk that a loss of confidence in the UK’s economic policy framework will contribute to higher long-term interest rates and/or currency instability, which could undermine the recovery.

In order to minimise this risk and support a sustainable recovery, the next government should set out a detailed plan to reduce the structural budget deficit more quickly than set out in the 2009 pre-budget report.

The exact timing of measures should be sensitive to developments in the economy, particularly the fragility of the recovery. However, in order to be credible, the government’s goal should be to eliminate the structural current budget deficit over the course of a parliament, and there is a compelling case, all else being equal, for the first measures beginning to take effect in the 2010-11 fiscal year.

The bulk of this fiscal consolidation should be borne by reductions in government spending, but that process should be mindful of its impact on society’s more vulnerable groups. Tax increases should be broad-based and minimise damaging increases in marginal tax rates on employment and investment.

In order to restore trust in the fiscal framework, the government should also introduce more independence into the generation of fiscal forecasts and the scrutiny of the government’s performance against its stated fiscal goals.

Tim Besley, Sir Howard Davies, Charles Goodhart, Albert Marcet, Christopher Pissarides and Danny Quah, London School of Economics;
Meghnad Desai and Andrew Turnbull, House of Lords;
Orazio Attanasio and Costas Meghir, University College London;
Sir John Vickers, Oxford University;
John Muellbauer, Nuffield College, Oxford;
David Newbery and Hashem Pesaran, Cambridge University;
Ken Rogoff, Harvard University;
Thomas Sargent, New York University;
Anne Sibert, Birkbeck College, University of London;
Michael Wickens, University of York and Cardiff Business School;
Roger Bootle, Capital Economics;
Bridget Rosewell, GLA and Volterra Consulting

Source: The Times.

20 economists don’t make a consensus or the correct answer – economics is a complex issue – and it certainly is influenced by your beliefs and priorities – I am of the opinion that it’s more important to nurture the recovery and jobs than worry about credit ratings and long term interest rates.

For instance Germany’s recovery has stalled with a GDP growth of zero for final quarter of 2009 – which begs the question – is Germany about to enter a double dip recession? Something to be avoided.

Then there is the question of the Euro currency and the Greek economy – if something doesn’t happen soon the Euro is going to come under pressure in Foreign Exchange Markets – and then there is Spain. A falling Euro is likely to have a greater effect on UK interest rates than government deficit.

It makes more sense to get a sustained recovery on the way and then look at the deficit – a promise to solve the problem in one parliament is at best a broken promise. But hey, what do I know I’m not an economist and never attend a prestigious University like those economists that signed the letter.

Research by Richard G Wilkinson of the University of Nottingham and Kate E Pickett of the University of York shows that the greater inequality is linked to more kids dropping out of school; more violent crime; more people ending up in prison; more babies dying and more mental illness – and it’s not just those at the bottom who suffer as this graph of infant deaths against the father’s social class – sexist I know but it does illustrate my point – Sweden which is less divided than the UK does better across all social classes.

Hat Tip: Mark Easton, The BBC.

The gap between rich and poor in the UK is wider now than 40 years ago, a government-commissioned report says. Source: The BBC.

Whilst it’s popular to bash Labour it seems very convenient for Tories and the press to forget who was in power when the biggest rises in inequality occurred. Here’s a clue from the report.

Inequalities in earnings and incomes are high in Britain, both compared with other industrialised countries, and compared with thirty years ago. Over the most recent decade, earnings inequality has narrowed a little and income inequality has stabilised on some measures, but the large inequality growth of the 1980s has not been reversed. Source: Government Equalities Office.

The answer – the Tory government of Margret Thatcher which was in power from 4th May 1979 – to her resignation in 28th November 1990 – her government sold off much of the states wealth at knock down prices from council houses to British telecom as well as carrying out much of the banking de-regulation that helped to allow the recent banking crisis to occur – Labour didn’t actually come to power until 2nd May 1997 – we had another seven years of the Tories under John Major.

It’s easy to blame Labour for failure to close the income gap in society – the trouble is it’s very easy to give someone something it is almost impossible to take it back.

The report also points out some of Labour’s successes.

Some of the widest gaps in outcomes between social groups have narrowed in the last decade, particularly between the earnings of women and men, and in the educational qualifications of different ethnic groups. However, deep-seated and systematic differences in economic outcomes remain between social groups across all of the dimensions we examine. Despite the elimination and even reversal of the qualification differences that often explain them, significant differences remain in employment rates and relative pay between men and women and between ethnic groups. Source: Government Equalities Office.

Still that won’t stop nonsense from the Tories and their supporters.

Theresa May, shadow minister for women and equalities said: “It is unbelievable that Labour thinks it can claim to be the party of aspiration when its failure to tackle the causes of poverty have let down so many lives.” Source: BBC.

So much for Cameron’s much for Tory honesty – a word Cameron loves to use – I suggest he takes a look at his own cabinet ministers before making accusations.

It’s a recovery by the smallest of margins – the Office For National Statistics could easily revise that figure down as Paul Mason at the BBC implies what would have happened if it wasn’t for a) low interest rates, b) numerous micro schemes to stop foreclosures and job losses from spiralling into a deeper recession, c) £200bn quantitative easing, d) the falling pound and e) car scrappage schemes across Europe. Also discretionary public spending and the VAT cut where on earth would we be?

And Cameron wants to start cutting public spending straight away if the opinion polls are bourn out and he gets into office – madness.

Whilst the headline unemployment figures aren’t as bad as we feared what they hide is a reduction in earnings for many workers – the 1.3 million people made redundant during the recession have largely managed to find alternative employment in doing so they’ve reduced their pay by over a quarter.

A perfect storm is brewing – workers are seeing there wages eroded and the state is about to cut expenditure – there’s going to be only one outcome – a recession.

Source: The BBC.

Goldman’s Sachs’ 100 UK-based partners are capping their pay and bonuses for 2009 at £1m each.

For many of them, this represents a significant sacrifice. I am told that in aggregate they are giving up pay worth several hundred million pounds.

They are doing it, according to one executive, because they wanted to be seen to be exercising the restraint on remuneration which the Chancellor of the Exchequer has urged on all bankers. Robert Peston, The BBC.

Most of us won’t earn a million in our lifetime – and how much do they normally earn? And come to that what’s going to happen to that money? I wouldn’t be surprised to find out they’ve saving it for 2010’s pay.

That said, many executives ranked below partner will be earning much more than £1m each. Goldman did not feel it could insist they take a pay cut, because that might have damaged its ability to recruit and retain more able bankers. Robert Peston, The BBC.

So most of the greedy bastards will still be stashing away millions of pounds.

US President Barack Obama has proposed limits to the size of banks to try to prevent future financial crises.

“Never again will the American taxpayer be held hostage by banks that are too big to fail,” Mr Obama said.

He recently announced a $117bn (£72bn) levy on banks to recoup money US taxpayers spent bailing out the banks.

US stocks – especially banks such as JPMorgan Chase and Bank of America – fell sharply as Mr Obama announced the sweeping new rules.

His proposals also include limits on the amount of risk banks can take, and banning retail banks from using their own money into risky financial transactions.

That prevents commercial banks from investing in hedge funds, private equity funds or engaging in so-called proprietary trading. Source: BBC.

At last some proposals which might actually prevent a recurrence of the recent banking crisis – however expect the banks to start using their financial muscle to persuade congress to water down Obama’s proposals. Now will Gordon Brown propose the same for our banks?