DON'T HOLD YOUR BREATH...

It started as a story in the Gruinad (The Guardian 13.11.2012) stating that the City watchdog, the Financial Services Authority, is now investigating claims by a whistleblower that the UK’s £300 billion wholesale gas market has been "regularly" manipulated by some of the big 6 power companies. The Guardian also notes that Ofgem (the energy regulator)  has been separately warned by a company responsible for setting so-called benchmark prices, ICIS Heren, that it had seen evidence of suspect trading on 28th September (this is end of the gas financial year) and gas prices on this date can have an important influence on future prices.

The claims suggest that dealers made unrealistic bids (on the 28th September) when information was being gathered to set the wholesale gas price, basically to suit their own trading position (maximise profits). The alleged manipulation is said to have reduced the wholesale price, and as such does not imply any knock-on impact on the retail price paid by customers. Later today the Con Dem Energy Secretary Ed Davey will make a statement to the House of Commons later as regulators investigate claims that wholesale gas prices have been manipulated.

Now the wholesale gas market includes everything from the UK's own North Sea gas supplies, to gas from Norway or elsewhere, or arriving in the UK by ship as LNG, liquefied natural gas. Energy companies buy gas at the wholesale price and then sell it on to businesses and domestic users. The cost of wholesale gas makes up the majority of our energy bills - 45% of the average energy bill is made up of the cost of wholesale gas, supply costs and profit margins.

The whistleblower, who worked for ICIS Heren, flagged up their concerns after identifying possible attempts to distort the prices reported by the company. These prices are especially important because many wholesale gas contracts are based on them and even small changes in the gas price can cost or save companies millions. These revelations come at an unfortunate time for UK’s energy sector, with many of the big six suppliers (the cartel) under fire for alleged profiteering on household energy bills and mis-selling on the doorstep. So far four of the UK's big six energy suppliers have released statements denying any involvement.

When it comes to regulation of the energy market the silence from the Con Dem Government has almost deafening. In the heady days of opposition, back in October 2009 the then Tory Energy Spokesman, Greg Clark (now Financial Secretary to the Treasury) stated that the "cartel" of the big 6 energy firms would be referred to the Competition Commission by a Conservative Government. He also  condemned the unacceptable lag between the cost of wholesale gas prices and household energy bills and noted that customers were on average being charged some £74 pound too much for their energy per year.

An 'independent' investigation into the Energy Company’s refusal to pass on reductions in wholesale energy prices to customers would still be welcomed by many hard pressed energy customers. As would the promised 'Energy Revolution' which was supposed to overhaul the energy sector billing structure and charges.

In many ways it is somewhat ironic that we find ourselves here, as a Conservative Government started the whole sorry mess in the first place, by privatising the energy market in the first place. This threw any rational energy pricing structure upon the whims of the 'market' by allowing the newly privatised energy companies to price gouge customers in the first place and since the effective demise of any real competition in the ‘market place’ we have all been regularly fleeced.

As for any inquiry into irregularities in the energy market, it is worth noting that once in Government that was consigned quietly to the too difficult pile. The pre-election pledge for an independent inquiry into the £25 billion-a-year energy industry (which has been subject to lengthy and repeated criticisms surrounding accusations of profiteering on electricity and gas) was quietly dropped by the Com Dem Coalition Government. So I won’t hold my breath.

TAX EVASION.GOV.UK?

Most of us pay tax, one way or another and indirectly via democratic elections we have some form of impact on the way tax within these islands is set, collected and spent. Some people, who hold directorships of companies based or operating in tax havens, also as Peers and MPs, hold office within the UK Parliamentary system and can have impact and influence on the UK Tax system. This surely is a blatant conflict of interest and should not be acceptable anytime, let alone during a recession.

A full list of 68 UK Peers and MPs with directorships or controlling interests in companies linked to tax havens has been published by the Guardian (21.09.2012). It appears that some of the UK’s Parliamentarians who are able to influence tax laws have positions as directors and non executive directors in major companies with offshore links. There are 27 Tories - six of whom are MPs – 17 Labour peers, three Lib Dem peers and another 21 are either crossbench or non-affiliated peers.

The Guardian examined the Parliamentary registers of members' and Lords' interests to identify companies where Parliamentarians are registered as directors or a non-executive directors. They then cross-referenced this with accounts or other financial records to find out if the companies were registered, or had a parent company or subsidiary, in a jurisdiction known as a tax haven.

Tax havens tend to be masked by secrecy and low taxes, and there have been few attempts to identify them. UK Revenue and Customs does not provide a list of tax havens. While there is nothing wrong with a company being based in a tax haven does not necessarily mean that a company is avoiding tax or taking advantage of the secrecy that tends to surround tax havens, even if the tax jurisdictions are closely associated with tax evasion.

Across the pond, in America, there has been a great deal of ongoing irritation with tax evasion, back in March 2009, the 111th US Congress (2009 – 2010) brought in House Resolution 1265 (111th): Stop Tax Haven Abuse Act, which aimed to restrict the use of offshore tax havens and abusive tax shelters to inappropriately avoid Federal taxation, and for other purposes., it originally died (was referred to committee). Yet this issue won’t go away, the bill was reintroduced as HR 2669 on July 27th 2011 and again referred to committee and the report stage is awaited.

One of the things the bill did was list the 34 states and dependent territories seriously involved in tax evasion.

1) Anguilla.
2) Antigua and Barbuda.
3) Aruba.
4) Bahamas.
5) Barbados.
6) Belize.
7) Bermuda.
8) British Virgin Islands.
9) Cayman Islands.
10) Cook Islands.
11) Costa Rica.
12) Cyprus.
13) Dominica.
14) Gibraltar.
15) Grenada.
16) Guernsey/Sark/Alderney.
17) Hong Kong.
18) Isle of Man.
19) Jersey.
20) Latvia.
21) Liechtenstein.
22) Luxembourg.
23) Malta.
24) Nauru.
25) Netherlands Antilles.
26) Panama.
27) Samoa.
28) St. Kitts and Nevis.
29) St. Lucia.
30) St. Vincent and the Grenadines.
31) Singapore.
32) Switzerland.
33) Turks and Caicos.
34) Vanuatu.

Now oddly enough more than a few of them are UK Crown Dependent territories. A couple of months ago the Treasury Minister David Gauke said that it was "morally wrong" to pay tradesmen such as plumbers, builders and cleaners in cash in the hope of avoiding tax. He said that the practice came at "a big cost" to the Treasury and meant other people had to pay more to help balance the books. The Westminster government may have highlighted this in its desire to clamp down on tax avoidance, the problem is that it will hit those who can least affords to tax evade.

US President Obama was 100% right to suggest that the governments of the world should jointly tackle the issue of tax evasion and tax havens. By tackling the tax havens, the tax avoidance and the questionable dealings of the derivative traders, hedge funds and the off balance sheet trading then we might go so way towards dealing with the consequences of the worldwide financial crash. However, I suspect that nice Mr Cameron and the other 18 millionaires in the cabinet will do nothing to close the tax loopholes – so much for all of us  being in it together? Hmmm...over to you George...perhaps not!