By Paul Gosling
Saturday, 16 August 2008

Q. I have written to Alliance & Leicester three times with no reply. My son had a “young worker” account that A&L changed to a premier current account, despite his already having one. My son requested that one of these accounts be closed and cut up his card. In January, A&L told him his balance was down to 1p on the account he had closed and that he needed to pay in money. But he was in hospital, after a nervous breakdown. I took him to the bank at the first opportunity. The cashier said that she could not close the account without the card, but if he transferred £5 into the account, there would be no more bank charges. Yet, though he paid in £5, he has been charged another £25. These charges are very unfair on someone who is ill and has been an A&L customer for many years. CL, Nottingham.

A. Alliance & Leicester says it has no record of your son trying to close one of his premier current accounts. A bank spokeswoman says: “Account closures can only be carried out at head office, so if a request was made at a branch, the request would have been forwarded to the relevant area in head office. If this was the case, as we have no record of the request we can only assume that it was lost somewhere between the branch and head office, for which we apologise.” The failure to close the account led to underfunding fees, putting the account into an unauthorised overdraft, triggering the £25 charge. A&L says it did close your son’s duplicate account when you wrote to the bank. It has credited him with £30 as a gesture of goodwill.

Q. I have a holiday home in Italy, which I rent out. I’ve been told that I won’t have to pay tax in Italy as long as the income is less than €7,500 a year. In the last tax year, it was very close to this threshold. I receive the rent in sterling, so the amount of income in euros depends on the exchange rate, which has been constantly changing. What exchange rate should I use? Do I have to pay tax in the UK as well? Can I choose where to pay tax? CP, London.

A. Antonio Risorto, senior tax manager at accountants Grant Thornton, says: “Assuming the owner of the property is UK resident and domiciled, the owner would be liable to UK income tax on their worldwide income. For the purposes of Italian tax, non-resident taxpayers are liable to IRPEF – personal income tax – and must file a tax return for Italian-source income exceeding €185.92. The €7,500 relates to a tax credit that is not available for offset against rental income. Double tax relief is available to prevent individuals being taxed twice on the same income. An individual cannot choose where to pay their tax, other than by moving to another country. Taxing rights are determined by the type of income and the “situs” (location) of the asset. Buy-to-let income is liable to Italian income tax first. HM Revenue and Customs’ strict position is that they require exchange rates to be taken for the date the income arises; in practice, they accept a reasonable approach (if it is consistent). For rental income received over the course of a year, the average exchange rate at www.hmrc.gov.uk appears to be reasonable. Local tax advice should be sought.”

Q. I recently took power of attorney over my mother’s financial affairs. She is entitled to a payment for some shares she holds. How do I obtain this on her behalf? SH, Warwickshire.

A. Stephen Pallister, tax and trust partner at the solicitors Charles Russell, says: “If you have an enduring power of attorney (EPA) and she has lost mental capacity, you must register it with the Office of the Public Guardian (www.publicguardian.gov.uk) before you can use it. If your mother has not lost capacity, the EPA may be worded so that you can use it as an ordinary power of attorney – you can use that straight away, if your mother has not lost capacity. Alternatively, since 1 October 2007 she may have made a lasting power of attorney (relating to “property and affairs”), the EPA replacement. This would have to be registered with the OPG before you could use it.”

Questions of Cash cannot give individual advice. Please do not send original documents. Write to: Questions of Cash, The Independent, 191 Marsh Wall, London E14 9RS; cash@independent.co.uk.

The price of a barrel of oil had just fallen from $147 to $124 a barrel when this sentence was written. But that is no cause for celebration. Almost at the same moment, one of the largest suppliers of energy in the domestic UK market – France’s EDF – raised its prices by 17% for gas and 22% for electricity.

Days before, British Gas warned that gas prices are set to rise 60% in the near future. This is after average rises of 15% in the early part of this year. According to price comparison analysts uSwitch.com, average household energy bills for EDF customers will rise from £1,007 to £1,211 with immediate effect. They were ‘just’ £907 in January. They had risen by a third in seven months.

With extreme understatement – and perhaps misleadingly - uSwitch.com stated that the “days of cheap energy are over”. Actually they were over a while ago, but society is now coming to terms with the permanence of high energy costs. Part of the cause is speculation on the energy markets. But speculators usually make money when there is an underlying problem.

In the energy markets there is not just one problem, but many. The global population is rising sharply. Energy consumption is growing in the developing nations, especially China and India. Oil and gas supplies are diminishing, suppliers are using their negotiating position more effectively and extracting supplies from remaining reserves is becoming more expensive. Coal supplies are diminishing and anyway create high levels of carbon emissions. Carbon taxes are increasing costs for the use of traditional energy sources. Alternative energy supply options – wind, wave, tidal, solar and nuclear – all tend to be more expensive than traditional sources. And gradually the state subsidies of the nuclear industry are being withdrawn, forcing consumers to pay something closer to the real costs of nuclear energy and the long-term storage costs of nuclear waste.

Collective action will be central to society’s response to this global energy crisis, just as it was in the past. Often it was local authorities that established the UK’s gas and electricity supply networks that ultimately merged into the national corporations that Margaret Thatcher privatised. And in the United States, settlers in the more remote rural areas set-up energy co-operatives to supply electricity in places where electricity distribution companies could not make sufficient profit.

Today, co-operatives remain a major force in the US energy sector. There are over 900 energy co-ops in the US. Touchstone, one of the largest electricity distibuting businesses in the US, is a secondary co-operative consisting of 660 local energy co-ops. Its members operate across 46 states and are responsible for electricity distribution across 75% of the US land mass. Together, the energy co-ops have 36 million member-owners. Whenever we think of the US as the home of free market capitalism, we should also remember that it is also a society in which co-operatives provide much of the supporting infrastructure – providing services where the corporations cannot achieve what they regard as adequate returns.

Increasingly, co-operatives are also providing the energy infrastructure in Europe. The largest windfarm in Europe is Copenhagen’s Middelgrunden Wind Turbine Co-operative, which has 8,000 members and provides 4% of the city’s electricity. In Cumbria, the Baywind Energy Co-operative has been a pioneer and is being copied by other co-ops. Italy has a long tradition of energy co-ops, which, as in the US, have provided electricity to villages in remote areas for many decades. We are beginning to see electricity-generating co-ops play a potentially important role in developing nations, with a solar plant established in the Philippines four years ago by the Cagayan de Oro Electric Co-operative.

Co-operatives can and should play a central role in the energy industry globally. Running an energy supply business as a corporation involves a contradiction that does not serve society well. Businesses earn more by selling more. But it is against society’s wider interests for more energy to be sold. For the sake of combatting climate change, there needs to be a reduction in the amount of non-renewable energy generated and consumed. Despite the attempts of the energy giants to portray themselves as socially responsible businesses, ultimately they are no such thing.

Energy supply is an industry perfectly suited for consumer co-operatives. Consumers as owners gain most by reducing their energy expenditure. Energy co-ops can gear themselves most effectively as low energy businesses, taking a cut from reducing customers’ home heating bills achieved by improved energy insulation. They can even – as has already happened – work with credit unions to finance home improvements to reduce energy consumption. Similarly, the employee-owned social enterprise Eaga Partnership manages the Home Energy Efficiency Scheme/Warm Front on behalf of the Government.

My personal conviction is that the sustainable future of electricity generation involves far more micro-generation schemes, backed by government grants – using small wind turbines and solar panels, for example, that meet households’ own needs. The supply, installation and user advice for such schemes present attractive opportunites for co-ops and social enterprises.

Despite the success of energy co-ops in the US as mega-businesses, it is difficult to see any challenging Exxon – the world’s largest company by share value and the most profitable US business ever. But reaching those heights is not the point for a co-op or a social enterprise. Much more significantly, they could help millions of people to keep themselves warm - affordably.

By Paul Gosling
Saturday, 9 August 2008

Q. A few weeks ago I placed an order with Tesco’s online grocery service. There was an error in the pricing and I was charged more than 10 per cent over the prices stated online. I queried this with Tesco, but I did not receive an acceptable reply from them. LK, Bath.

A. Tesco says that there was no error in the amounts charged. Prices shown on the website are indicative and are the prices that apply in the store that day. The price charged is that which applies in the store on the day the goods are delivered. “We change our prices in store and online everyday,” explains a Tesco spokeswoman. “This is explained on our website under the guide price in the basket area. Customers are also advised, prior to payment, on the promotions that will expire before delivery and do have the right to refuse items on the day of delivery with a full refund.”

Q. I have been trying to open a Nationwide InvestDirect account since May in the name of an elderly lady, for whom I hold Power of Attorney. She moved into a nursing home in March and the account was to hold her capital to pay her nursing home fees. Initially there were delays because Nationwide wrongly asked for proof of identity – which it didn’t need because I already hold an account with them. Eventually Nationwide accepted it had been wrong. In June, Nationwide sent two account cards for my friend, for different accounts, to the address she had left three months before. My repeated attempts to find out which card can be used and to get a paying-in book have been unsuccessful. My friend is agitated by my failure to set up a channel to pay her monthly expenses. AW, London.

A. Nationwide staff twice opened your friend’s account using her old address. On each occasion this was spotted and the account balance returned to zero – but without closing the accounts, so two cards were sent to your friend’s old address. A third account was then opened for your friend at her new address and the cheque correctly credited to this account. But then Nationwide got things wrong again and put a “no trace” indicator on this account, preventing the account card and related paperwork going out. Nationwide assured us that the card and paperwork had then been correctly issued. But you phoned us to say that you were holding a cheque of £28,000 that needed to be paid into your friend’s account urgently, before you went on holiday. The paying-in book had still not arrived and the local branch insisted you could not pay the cheque into the account without the correct paperwork. We phoned Nationwide urging it to immediately despatch the account stationery. Nationwide sent the correct paperwork by special courier. It is crediting your friend’s account with £100 as a goodwill gesture.

Q. In May I paid off the remainder of a Barclaycard balance that had grown to £3,630.88. But I was furious the following month when I was charged £15.93 “trailing interest”. I don’t understand how this was calculated and I will never use my Barclaycard again. JK, Westcliff-on-Sea.

A. Interest is charged on credit cards for every day until the payment is received. The trailing interest is the interest due for days charged after the statement is produced, but before the payment is received. Barclaycard promises not to charge further interest on the “trailing interest” balance, providing this is cleared in full by the payment due date.

Q. I booked flights through Expedia for myself and my husband to Abu Dhabi, departing on 19 March and returning on 29 March. My mother-in-law had a stroke on 14 March and died two weeks later, so we cancelled our flights. Expedia supplied a cancellation invoice and promised that the tax of £392 would be refunded in two to 12 weeks. In early June we were promised this would come through within two weeks. I cannot get an answer from Expedia about what has happened. EC, Renfrewshire.

A. The refund was made to your bank account on 9 June. However, because Expedia failed to notify you of the payment, you were unaware that this had been processed. You correctly point out that it would be helpful if companies making refunds told their customers what they were doing. In the case of Expedia, it would also be helpful if it reduced the time it took to make refunds, which, it says, are processed “within three billing cycles”.

Questions of Cash cannot give individual advice. Please do not send original documents. Write to: Questions of Cash, The Independent, 191 Marsh Wall, London E14 9RS; cash@independent.co.uk

A Personal View

Where now for the airport?

By Paul Gosling

Derry City Council is commissioning a master plan for the development of land at the City of Derry Airport. This is part of a flurry of activity around the future of the airport. A new operations manager will take up position soon and the council is in the process of appointing a general manager, responsible for increasing the airport’s commercial income.

All this is to be welcomed, even though it raises questions about why such a dynamic approach was not taken years ago. Meanwhile, discussions continue about how best to run the airport in the future, how it should be managed and who should own it. Despite criticisms of the council’s management, it should be remembered that the most successful regional airport in the UK is Manchester, which is owned by a consortium of ten local councils and managed privately on their behalf.

It is how an airport is managed that is pivotal, not who owns it. We should remember, too, that the largest owner of airports in the UK is the British Airports Authority - condemned for its management of Heathrow. Whatever critisisms Ryanair’s Michael O’Leary makes of Derry airport is nothing compared to what he says about BAA.

Nor should we ignore the significance of the airport as a driver of the local economy. The limited use of Derry’s airport as an industrial and logistics site contrasts with that of other small regional airports, such as Exeter – which has a similarly sized local population, yet much grander plans for local airport-based development.

Airports play a key role in attracting investments. I recently interviewed leading investment managers in England about location decisions and repeatedly they said that the proximity of a quality airport was a major factor, even the major factor. Manchester’s well managed airport is arguably the main reason for the city’s economic growth and social improvement over recent years.

But the task facing Derry’s council in developing our airport in the current economic circumstances is severe. Ryanair has just reported a quarterly loss and expects an annual loss for the first time in 14 years. At least 25 airlines have gone bankrupt in the last nine months. Regional airports in the United States are closing. This is probably the worst crisis for the airline industry ever, because of escalating fuel costs and the consequent fall in demand.

Ryanair is responding with aggression, trying to drive its ‘low cost’ competitors out of the market. “The era of dirt-cheap air travel is almost certainly over,” argued The Times this week. Yes we will see cheap flight offers continue for the time being, but perhaps only until just Ryanair and EasyJet are left standing in their market sector. No frills is here to stay, but with steadily rising prices.

Given the City of Derry’s unhealthy dependence on Ryanair, this is a worry locally. Asked how committed Ryanair is to Derry, an airline spokesman said only: “Our politic regarding route development remains the same: we will raise traffic and fly to airports that are competitive and offer low costs.” In other words, it will continue to push airports – such as Derry and Belfast City – to offer what Ryanair wants, making them compete aggressively.

We must also worry about the sustainability of some Ryanair routes. London Stansted appears to perform well and, I am informed, so does Glasgow, though it took some time to grow. But flights to the East Midlands and Bristol seem under-used and vulnerable, especially when the Birmingham route comes on stream. Ryanair confirmed that its flights into and out of Derry – even to Stansted - are below its 84% average passenger loading. This is partly because some seats must be kept empty for safety reasons, which will cease to be a factor later this year when the safety work at the airport is completed.

So it is both necessary and brave of the city council to look to develop the airport site at the present time. Developments to be considered include a second terminal building, a much larger retail quarter, a hotel, new logistics and other commercial operations on the site and – please, please, please – a second baggage scanner for hand luggage, to reduce queues. But in the current climate we had better keep our fingers crossed that all goes well.

Northern Ireland’s government-owned water company, NI Water, has been ordered by the utility regulator to improve its business planning and corporate governance, following errors predicted to cause an annual £20m shortfall in income.

An investigation by the Northern Ireland Authority for Utility Regulation followed disclosure of the mistake in calculating the amount business customers would pay for their water supplies. Domestic customers might have to pay more to fill the gap.

The utility regulator concluded that there had been ‘serious shortfalls in areas of management’ that amounted to a breach of the water company’s licence. NI Water has promised it will put the failings right.

Regional development minister Conor Murphy said: ‘The company deserves credit for identifying the incorrect data, [but] its handling of the issue after the discovery did not reflect best practice.’ The company and regulator were now working together, said Murphy, to deal with the income shortfall.

NI Water chair and interim chief executive Chris Mellor said: ‘Customers will hopefully be reassured by the fact that the regulator has found no dishonesty by NI Water in this matter.’

By Paul Gosling
Saturday, 2 August 2008

Q. I opened a Lloyds TSB cash ISA in April and arranged to transfer £11,903 from my 30-day Tessa-only ISA at the Britannia Building Society. Ten days later, Britannia asked me to call at a branch to verify my signature with photo ID, which I did on 21 April. Lloyds TSB phoned me on 11 July to say it was unable to get the transfer from Britannia. It said other customers had similar problems. Britannia says it is very busy, but the transfer should be made within a week. I cannot wait any longer because I am about to go away. RA, Newcastle.

A. Following our intervention, Britannia has completed the transfer. It has added on to the amount transferred the lost interest and is also sending you £50 as a goodwill gesture. The company said: “Unfortunately, Britannia’s processes failed on this occasion.”

Q. I signed up with Post Office HomePhone telephone service last October because it appeared to be cheaper than BT. My order was accepted and I have been using the service since then. But now I have become extremely anxious because I have had no bills and when I phone to find out how much I owe I am told that customer services cannot find any trace of my account. I am worried that I may be running up a large bill that I cannot afford to pay and that HomePhone may accuse me of not paying my bills. WJ, Cheshire.

A. The Post Office says: “We have had software issues with our HomePhone Service, which has affected some billing of customers, and we are working hard to solve the problems.” The Post Office apologises for causing you distress. It says that all customers affected will not be charged more than three months prior for line rental and six months prior for call charges. Any debts incurred before this time will be written off. A bill will be sent to you “as soon as possible”.

Q. I have a letter telling me I have won a large sum on the Spanish Sweepstake Lottery. This is very suspicious as I’ve never bought a ticket. I was tempted to phone the Spanish number to learn more, but decided against this. What would have happened had I replied? Is it my money or identity they are after, or both? How did they get my address? AN, by email.

A. This was a scam and you were right not to reply. If you do not enter a lottery, you will not win it. This is a common fraud that can be initiated either by letters or emails. The fraudsters can have several objectives. Some lottery scams claim they need an initial payment to open up a transaction channel – they may even send a cheque to demonstrate the supposed validity of the scheme, but the cheque will bounce. Fraudsters may seek to obtain bank account details for use to commit a fraud against either you or a third party. Con artists may alternatively try to trick people to claim a prize via premium-rate phone calls that can be extremely expensive. Your address may have been obtained from the electoral register, marketing data, or information published on the internet. Email addresses may be obtained from legitimate marketing data – or from a Trojan virus that has extracted data from the computer of someone you have been in contact with.

Q. I migrated from Orange broadband to the Post Office’s HomePhone service, requesting a migration code from Orange. Orange emailed me on 12 February to say this would take up to five days. I received the code on 27 February and was warned it would expire on 14 March. The Post Office told me I was paying for its service only from 14 March. On 9 July, Orange sent me a letter saying it had closed my account, but I owed Orange £22.41 for the month when I was waiting for my migration code. But my last payment to Orange was for a month’s subscription of £17.99 on 29 February, which should have covered anything owed to Orange. GH, by email.

A. Orange accepts it made an administrative error on your account, which it failed to close. It has now done so and written off the small balance shown on the account.

Questions of Cash cannot give individual advice. Please do not send original documents. Write to: Questions of Cash, The Independent, 191 Marsh Wall, London E14 9RS; cash@independent.co.uk.

Tees Valley – a natural MAA

It was natural for Tees Valley’s five unitary authorities to favour the multi-area agreement approach – they have been working together in a similar way for more than a decade. It was back in 1996 that the unitary authorities of Darlington, Hartlepool, Middlesbrough, Redcar and Cleveland, and Stockton-on-Tees set-up the Tees Valley Joint Strategy Unit to provide cross-boundary, but sub-regional, co-operation.

The JSU has now established a successful record in co-ordinating strategic approaches to economic development, transport, spatial planning, waste management and major housing schemes. It also runs a £25m economic development programme for the regional development agency, One NorthEast.

Tees Valley is proud of its success in attracting investment and it has economically outperformed most of northern England. But the JSU and its private sector partners believe it is essential that the sub-regional infrastructure – especially transport – is developed much further to allow growth to accelerate. That planned development now lies at the heart of what the MAA will focus on. This will involve making the most of the new Teesport deep sea container port and expansion of logistics facilities at Durham Tees Valley Airport. The partner councils believe they must also work together to make better use of the existing economic infrastructure to increase local competitiveness and income, which in turn will help the authorities fulfil their enhanced ‘place shaping’ role.

The creation of an ambitous new Tees Valley Metro scheme to improve links between the five towns is one of the key objectives of the sub-regional group. The MAA will cover the three main ‘transformational’ capital funding streams – regeneration, housing and transport –on a sub-regional basis and in doing so, provide greater flexibility in how they are spent and improve the return on investment. Similarly, the MAA itself is intended to be simple and flexible.

In turn, the MAA commits the partners to delivering government departments’ Public Service Agreement targets, Departmental Strategic Objectives and contribute to Regional Performance Indicators. It is recognised, though, that the MAA is neither superior nor inferior to the authorities’ own local area agreements. But the MAA should help councils to achieve their LAAs.

Jonathan Spruce of the JSU says that while the MAA follows on from the work of the JSU, it will achieve more than the JSU would have been able to. “It binds all government departments and all the authorities, and the regional tier as well, together to deliver one plan in a holistic way,” he explains. “It needs the new agreement to do that, so that you get your outputs quicker and that means local people get the outputs quicker and more effectively. It’s about achieving our key priorities quicker and more cost effectively by working together. Because there are different funding streams, it needs this binding framework to achieve that.”

Hartlepool’s mayor Stuart Drummond makes a similar point. “The MAA provides a great opportunity to build on the successful joint working arrangements we have in place in Tees Valley,” he says. “It will be used to help us better deliver on our regeneration, housing and transport projects and long term investment plans for the Tess Valley, improving economic performance and the quality of life for residents. The financial freedoms and flexibilities negotiated through the MAA are unique to the Tees Valley and present a real opportunity to ensure that our large-scale investment priorities get delivered more efficiently and cost effectively.”

To ensure that these ambitions are followed through, strong MAA governance arrangements are in place, including a leadership board with a private sector chair, other representatives of the private and voluntary sectors and all the leaders or elected mayors of the five authorities. The strength of these arrangements is intended to help the five authorities with another objective – to persuade government departments to devolve more responsibilities away from Whitehall and Westminster. The councils want it also to be a means of getting the private sector to work more effectively with statutory bodies.

Hugh Lang, managing director of the privately-owned Durham Tees Valley Airport, is the chair of the leadership board and an enthusiast for the MAA. “We see this as about working more efficiently and quicker for the delivery of projects for the region, that were detailed in the robust business case,” he says. “It’s also about trusting the local authorities to deliver on these projects for the benefit of the region.”

This will lead, Lang believes, to local authorities working “very, very much better” with the local private sector. “A lot of these projects will stimulate further private investment,” he adds. In fact, the airport exemplifies what the MAA is about – it is an asset for all the local authorities in the area and not just one of them. “The airport pulls together people from across the region, both in terms of them supporting the airport, and the airport supporting them,” Lang says.

Nor should it be overlooked that a strong region consists of strong sub-regions. This is certainly the view of the very supportive RDA. One NorthEast’s Assistant Chief Executive (Strategy), Pat Ritchie, explains: “Tees Valley City Region is of significant strategic importance within the North East. The MAA builds on the strong partnerships which already exist in Tees Valley, and sets out how the partners - including One NorthEast - will work together to realise opportunities for growth in this city region.

“One NorthEast has been closely involved in the MAA development process and I can see real benefits emerging, including a clear focus on tackling the barriers to growth in Tees Valley and opportunities to explore new approaches to investment planning and programme development. The process has also allowed the city region to have a serious dialogue with government departments on how they might support it to achieve its ambitions.”

The Tees Valley MAA has already demonstrated not only an impressive ability to bring the key partners to the table, but an even more impressive capacity to get them moving in the same direction. Such unity of purpose suggests they may well achieve their most importatn priority – achieving even stronger economic performance in the future.

Bringing Greater Manchester back together

Greater Manchester’s ability to operate beyond the boundaries of a single local authority has been clearly proved. The 10 metropolitan authorities together own and run a particularly successful regional airport and they have come up with a radical proposal for a peak-time congestion charge that is even more ambitious than that in central London.

So it is no surprise that the Manchester councils are using their existing sub-regional structure of the Association of Greater Manchester Authorities to create a Greater Manchester multi-area agreement. Together the councils - Bolton, Bury, Oldham, Rochdale, Stockport, Tameside, Trafford and Wigan boroughs and the city councils of Manchester and Salford – have a population of 2.6 million, making it the second largest urban area in the UK. They generate about 40% of the North West’s economy and a real driving force both commercially and culturally.

But while the 10 authorities strongly believe that they must work closely together to strengthen the city-region economy further, they are also binding themselves into stronger links with government departments and the private sector, as well. At the top of list of MAA ambitions are to tackle those areas where the sub-region is weakest – the numbers of people who are without jobs, and those who have poor literacy and numeracy. To tackle these problems, the local authorities will operate closely through the MAA with the Learning and Skills Council, the Department for Innovation, Universities and Skills, the Department of Work and Pensions, and others.

The MAA is strengthened by a new sub-regional governance model with an Executive Board of Leaders, backed by the Greater Manchester Business Council playing an advisory role. This approach has been backed by the regional development agency – the North West Development Agency – the Greater Manchester Chamber of Commerce, local NHS bodies and the Greater Manchester Centre for Voluntary Organisations.

At the heart of the MAA lie what it calls its eight ‘building blocks’. These aim to tackle the weak skills base, increase economic productivity, reduce worklessness, increase the supply of homes and provide the other infrastructure needed for economic growth. This will involve the introduction of closer cross-departmental work involving government and local government, more funding flexibilities, better performance management, a more competitive market for providing welfare-to-work support, better education and skills support for 14 to 19 year olds and the development of a Greater Manchester-wide strategic highway network and highways management strategy.

Councillor Mohammad Sharif, cabinet member for regeneration on Rochdale Borough Council, says the new arrangements build on the success of those that are well established. “We find working together with other local authorities through AGMA is massively beneficial – it means that we can share intelligence as well as provide better value for money and deliver more joined-up coherent services,” he says. “We are already doing joint work on individual projects with other authorities – especially our neighbouring councils like Oldham – and it makes absolute sense for us to collaborate more closely with authorities in the sub-region to bring even more of the benefits that we’ve already experienced.

“Rochdale typifies some of the economic challenges and opportunities facing Greater Manchester as a whole so in that respect we’re able to help others get an understanding of the issues that they too may come up against. Economies don’t conform to local authority boundaries, so it’s vital that we have a far more integrated approach to ensure that Greater Manchester as a whole can expand and develop the services and opportunities that it offers to businesses.

“We’re delighted to be working closely with other local authorities in Greater Manchester on new innovative initiatives such as a pilot scheme to look at reducing the numbers of invalidity benefits claimants by getting them into employment. This is just one of many examples of where better collaboration will help to improve our efficiency and service delivery as a sub-region.”

Support from partners

Damien Bourke, the North West Development Agency’s partnership and policy manager for Greater Manchester, explains why the NWDA has endorsed the MAA. “The Agency feels that the MAA for Manchester is definitely the right way to go forward,” he says. “The principles they have put in there are pretty much spot on.”

The MAA approach builds on initiatives previously put in place, he points out, not only through AGMA, but also with NWDA having devolved some sub-regional operations – for example, in tackling worklessness. “From our perspective, dealing with all the Manchester districts as a [single] whole is going to be incredibly beneficial for us, with priorities agreed at sub-regional level – it will help us formulate our regional priorities. It will deliver a greater degree of capacity and expertise within the sub-region.”

Bourke believes that the MAA working has the potential also to lead to other areas of closer, cross-boundary engagement. For example, the member authorities could, he believes, operate more joint commissioning of services. They may also increasingly recognise the benefits of supporting economic and commercial developments beyond their council boundaries – such as all the Greater Manchester authorities seeing the BBC’s move into Salford as an opportunity for a single media and cultural industry cluster that will benefit the whole sub-region.

But, Bourke points out, there will need to be close co-operation between the group of 10 and the RDA to prevent duplication of roles, particularly in regards to attracting inward investment.

Setting the quality bar

Chris Fletcher, the deputy chief executive of the Greater Manchester Chamber of Commerce, welcomes the MAA. “The MAA sets the quality bar at quite a high level, which a sub-region needs to do, and it clarifies where the sub-region needs to get its act together – for example, on worklessness. It identifies the weaker areas that need to be addressed. That is how we will make the Greater Manchester economy stronger. Now there needs to be an engagement process so that people understand what is going on – that it is not seen as just another local government or government initiative. This is fundamentally different.”

By Paul Gosling
Saturday, 26 July 2008

In December 2007 I told Legal & General to cash the investments held by myself and my husband, for whom I hold power of attorney (POA). After months of phone calls and letters I obtained the money from my own investment, but I am still waiting for the investment I hold with my husband. I had to send a certified copy of my POA for my husband and proof of identity.

L&G came back and claimed that the identity of the solicitor who drew up the POA was unclear, yet it was stated on every page of the POA. I still didn’t get the money, so I lodged a formal complaint. In mid-June I had a letter saying L&G were still investigating my complaint. I again phoned L&G, which said that everything was now in order, except it had lost my proof of identity. It seems that my only options are to restate my formal complaint against L&G, or go to the Financial Ombudsman. Can you help? LR, by email.

L&G insists that the statement of the identity of the solicitor on the POA paperwork did not meet its requirements. It also claims that the POA documentation was wrongly drawn up by your solicitor and actually gave your husband POA over you, instead of the other way around. This problem should not have held up L&G selling the investment held in your own name – but it did. It was only in March that L&G sold your investments and sent the proceeds to you. But it seems that L&G then overlooked your instructions to sell the collective investment held with your husband. Recognising its failures to deal with your instructions properly, L&G will settle your instruction to sell your investments by allocating you the best price between 17 December and the date of settlement, provide you with interest on this and pay you an additional £300 as a goodwill gesture. However, you will still need to provide L&G with a corrected POA. According to L&G’s explanation of events, you have been caught between a solicitor and a financial institution that have both failed to provide you with an acceptable service. You may wish now to lodge a complaint with your solicitor, in light of L&G’s allegations of professional errors.

I was recently on holiday in Tenerife, where I found my credit card had been blocked because the card issuer spotted repeated fraudulent attempts to use my card number online. Anyone handling the card can make a note of the three digit security number on the back. Why is this number printed on the card if its main purpose is for web and telephone use? Surely this does not offer any real security. MK, by email.

The security code on the back of a card does not provide an absolute safeguard against fraud – it is merely intended to reduce the frequency of fraud taking place. A spokeswoman for Visa explains: “There are many parties involved in a payment transaction – a cardholder, a merchant, often a processor, and card-issuing and merchant-acquiring banks. Visa secures the global payment system by building multiple layers of protection around each component of the transaction chain. The CVV2 [security code] is just one element of our security regime and its introduction had a significant downward effect on card fraud.” Visa admits that fraudsters can still succeed, but that numerous checks on transactions are designed to quickly spot breaches, including through computer analysis that spot unusual transactions.

I completed forms in April to transfer my £3,172.96 ISA account balance from ING to Nationwide, but the account has still not been opened. My wife is in the same position. MK, London.

Nationwide is dealing with a large backlog of ISA transfers. It says that highly competitive rates – 6.15 per cent on fixed-rate ISA bonds – and a move by savers into building societies from banks led to an unanticipated volume of ISA transfers. According to Nationwide, these were up by nearly 400 per cent over the equivalent period last year. It is taking steps to deal with the backlog; it has also temporarily stopped taking ISA transfers. Nationwide promises that all savers affected will be fully compensated, with interest paid from the date of the cheque issued by the previous institution.

Questions of Cash cannot give individual advice. Please do not send original documents. Write to: Questions of Cash, The Independent, 191 Marsh Wall, London E14 9RS; cash@independent.co.uk.

EU takes action on auditor liability

The European Commission has proposed limits on auditors’ liability to protect the Big Four from further reductions in numbers, threatening the viability of a competitive market for company audits. It hopes the move will also strengthen mid-tier audit firms, enabling them to compete better against the Big Four.

No specific limit is proposed on auditor liability – member states would determine their own national limits and their own method for limiting liability. Instead, the Commission recommends key principles that would underpin liability limitation – that any limitation is fair for auditors, audited companies, investors and other stakeholders. The Commission also specified that the limitation of liability should not apply in the case of intentional misconduct on the part of the auditor, or where the limitation would be insufficient if it did not also cover third parties. It also insists that damaged parties must retain the right to be fairly compensated.

Charlie McCreevy, the Internal Market and Services Commissioner, said: “After in-depth research and extensive consultation, we have concluded that unlimited liability combined with insufficient insurance cover is no longer tenable. It is a potentially huge problem for our capital markets and for auditors working on an international scale. The current conditions are not only preventing the entry of new players in the international audit market, but are also threatening existing firms. In a context of high concentration and limited choice of audit firms, this situation could lead to damaging consequences for European capital markets.”

Three possible methods for liability limitation are listed in the Commission’s ‘recommendation’, but it makes clear that any other equivalent method might be used. Member states should choose the method that best suits their needs. The Commission’s preference is for a cap on liability, or a combination of proportionate liability and a cap, with proportionate liability suggested as a less preferred alternative.

The Commission’s recommendation arises from a mandate for investigation and proposals laid down in the 2006 Statutory Audit Directive.

Time limit on tax refunds to be cut

UK taxpayers will only have four years to claim rebates of overpaid tax, instead of the current five years, under legislation going through Parliament as part of this year’s Budget that amends the Taxes Management Act.

But the change will not affect HM Revenue & Customs’ right to recover underpaid taxes over a much longer period. Where there is fraud or negligence on the part of a taxpayer, HMRC can recover underpaid income tax for a period going back as far as 20 years and 10 months.

According to UHY Hacker Young, the change will particularly affect the elderly, with an estimated 200,000 pensioners paying too much tax last year. Many pensioners overpay tax because of incorrect PAYE codes on pension annuities. A system of taxing pensioners’ annuities with an automatic 22% income tax deduction from most annuities at source regardless of tax liability is currently being replaced. Almost half of claims currently submitted will be debarred or partially debarred under the revised time limit, says the firm. Claims over the period currently permitted for claims are worth an average of £1,963.

Rob Durrant-Walker, of UHY Hacker Young in York, said: “The changes are weighted in HMRC’s favour. If taxpayers are careless, HMRC can demand back tax of more than four years, but if HMRC is careless and collects too much tax, taxpayers will only be able to seek redress for four years overpaid tax. It’s one rule for HMRC, one rule for the taxpayer. In the case of pensioners being overtaxed, the fault lies with HMRC.

“Other taxpayers could also be hit as you can bet that when there is extra tax to be collected HMRC will try to use spin and allege neglectful behaviour from the taxpayer in order to get around their own time limit. HMRC does not proactively identify which taxpayers have overpaid and it can take years for overpaid tax to come to taxpayers’ attention.”

German corporate snooping scandal widens

A corporate culture apparently common to many German companies has been revealed, in which private investigators are hired to investigate journalists who write critically about their businesses.

A criminal investigation is currently taking place into the actions of Deutsche Telekom and its use of customer data. In a statement, Deutsche Telekom said: “According to recent findings, there were cases of misuse of call records at Deutsche Telekom in 2005 and, according to latest allegations, also in 2006. The allegations made against the company do not relate to any unlawful use of the content of calls – in other words they do not concern the tapping of calls.”

Deutsche Telekom is alleged to have examined its call records data to see which employees were in phone contact with journalists who wrote negative stories about the company. René Obermann, the chairman of the board of management and chief executive, said: “ We have called in the public prosecutor’s office and will support them in their full investigation of these allegations.” He added: “I am shaken to the core by these allegations.”

The company accepts that it has internal control “weaknesses”, which allowed private investigators to be engaged without authority from the board. Following an internal investigation into tip-offs of malpractice, the company made “far-reaching staffing and organizational changes in the group security department”. Dr. Gerhard Schäfer, a former Presiding Judge at the Federal Court of Justice, will act as an expert in the company’s own investigations of alleged data misuse and proposed strengthening of procedures.

According to press reports, Deutsche Telekom employed global security experts Control Risks to conduct investigations for it and Control Risks sub-contracted some of its operations to private investigators, including former officers of the notorious East German state security organisation, the Stasi.

In a statement, Control Risks said it was “disappointed to be implicated in the current investigation involving Deutsche Telekom”. It added that “the allegations are completely at odds with Control Risks’ working practices, values and codes of conduct” and that they relate to a period in the past.

Further allegations have emerged suggesting that other German companies have also engaged private investigators to examine links between staff and journalists. The claims are particularly damaging for Deutsche Telekom, which is still over 30% state-owned and whose T-Mobile subsidiary has a growing share of the markets in the US and the UK. Former group chairman Klaus Zumwinkel resigned over allegations of tax evasion that are still being investigated and led to an international row between Germany and Liechtenstein, where Zumwinkel held bank accounts.

Pressure grows on IASB and fair value

The International Accounting Standards Board is to reconsider whether ‘fair values’ should always reflect exit values, or whether in some circumstances they should use entry values.

Ken Wild, global leader of international accounting standards at Deloitte, said the project is “very significant”. While exit price valuations might be the most relevant and fair value of a financial instrument, said Wild, this would not be true, for example, with furniture and fittings, where replacement cost was a more significant issue. “With different items you need different measures,” he suggested.

The setting-up of a review on the use of exit and entry values in the use of fair valuations was disclosed by the IASB in its Annual Report. The decision followed receipt of over a hundred submissions challenging the assumption that exit values should always be used, as is required by SFAS 157.

“When completed, the results of the review will help the Board decide whether to retain the term ‘fair value’ or to redefine it or replace it with a more specific term that is appropriate in the particular circumstances,” said the Annual Report. “The Board expects to publish in 2009 an exposure draft of an IFRS on fair value measurement guidance and hopes to issue the ensuing standard in 2011.”

The IASB is also forming a new group to consider the specific problems of valuing illiquid securities, in response to complaints from banks and insurers that fair value has seriously exacerbated the impact of the credit crunch. Accountants, regulators, banks and insurers have been invited to a founding meeting. Action was urged on the IASB by the Financial Stability Forum, with backing from the G7 governments.

Meanwhile, progress is being made on the creation of an IASB oversight board, with the US Securities and Exchange Commission, International Organisation of Securities Commissions (IOSCO), the European Commission and Japan’s Financial Services Agency meeting together to create an International Accounting Standards Committee Foundation Monitoring Group. European Commissioner Charlie McCreevy said the new body would increase the accountability of the IASB. However, it is also likely to be a forum to play out the major tensions that exist between regulators and the IASB.

Christopher Cox, chairman of the SEC, has hinted that the creation of the oversight body is a condition of the early acceptance of IFRS in the US, which the Federal Accounting Standards Board says it wants in place in about five years.

UK to strengthen financial regulation

A new structure of UK financial regulation has been announced by Chancellor of the Exchequer Alistair Darling. In place of the tripartite system of joint regulation between the Financial Services Authority, the Bank of England and the Treasury, a new structure will give clearer responsibilities to each, with more emphasis on regulatory co-ordination.

An internal review by the FSA of the Northern Rock crisis recognised that it did not regulate Northern Rock sufficiently well and had not anticipated the effects of its excessive use of borrowing on inter-bank borrowing. Key staff at the FSA have subsequently been replaced.

Under the new arrangements, the FSA will remain the sole banking supervisor and will be given extra powers to tackle market abuse and ensure investor confidence. The Bank of England will have stronger powers to carry out a new statutory duty to protect financial stability. A financial stability committee of the Bank will be created and Sir John Gieve, the deputy governor responsible for financial stability, is to retire.

The Chancellor made the announcement of the changes in his annual Mansion House speech, where he also revealed that he had appointed Sir James Crosby, former chief executive of HBOS, to review the funding of mortgages. Darling pointed out that where a decade ago almost all funding for mortgages came from deposits, a third was now financed through inter-bank borrowing and that the implications of this change need to be evaluated.

To deal better in future with threats to the global financial system, the International Monetary Fund and the Financial Stability Forum need to play an increasing role, argued the Chancellor. He said that the UK Government had secured support for “the expanded use of international colleges of supervisors” to provide an international oversight of threats to the financial system.

ACCA publishes fair tax research

Hong Kong has a fair and simple tax regime, while the UK’s is unfair and complex, according to research conducted by ACCA that compared the tax systems of six jurisdictions.

Asked whether their tax system was fair, UK respondents showed the highest level of disapproval. Finance professionals in Hong Kong, Singapore, Canada, the US and Australia all rated their systems as fairer than their counterparts in the UK rated theirs. Only Australia’s system was considered more complex. The UK also performed worst on transparency, with Hong Kong and Singapore rated the best.

UK respondents complained there were too many taxes, adding to the system’s complexity. They expressed unhappiness at the increasing role of employers acting as tax collecting agents for government; retrospective changes to the tax system; stealth taxes, such as the failure to index link thresholds and allowances; and the assumption of additional powers by HM Revenue & Customs.

The results also showed an overwhelming belief from all the countries surveyed that it is the volume of directives, laws and regulations that has the greatest burden on tax complexity. Respondents in all the countries agreed that reducing complexity in the tax system would lead to a reduction in the level of tax avoidance and tax evasion. UK respondents said that lack of clarity, increasing complexity and a seemingly aggressive stance by HMRC were breaking an already fragile trust. The report concludes that trust is an essential requirement for any tax system to work effectively and to ensure widespread compliance.

Professor Francis Chittenden, ACCA professor of small business finance at Manchester Business School and co-author of the report Perspectives on Fair Tax, said: “The message from our research is for governments to reduce the volume of laws, directives and regulations that contributes most to complexity. There is a fundamental issue for governments around the world to decide the purpose and structure of tax systems, and importantly to communicate the rationale behind these decisions.”

Chas Roy-Chowdhury, ACCA’s head of taxation, added: “The report’s findings also show that tax systems lag behind the economic cycle, that it simply can’t keep up with the pace of change. Governments should explore the creation of flexibility in the tax structure to allow for a swift response to changing economic conditions.”

News shorts

France gives up on tax harmonisation

France has abandoned its hopes of pushing progress on either harmonisation of corporate tax rates or a common consolidated approach to calculating corporation tax. France had stated its intention to try to seek agreement from other EU member states during its presidency of the EU, which covers the second half of 2008. The change of position follows the rejection of the Lisbon treaty by the Irish voters.

Heritage asset value disclosures strengthened

Museums and galleries must increase their disclosure of the valuations of heritage assets under a revised Financial Reporting Exposure Draft published by the ASB. While accepting that the valuation of often irreplacable heritage assets is “very difficult and challenging”, the ASB confirmed its belief that there is no better alternative to FRS 15. But it wants this strengthened by requiring public bodies and other organisations owning heritage assets to show the cost or value on their balance sheets. Where this is not practicable, there should still be enhanced disclosure of asset values.

Card fraud protection flaw

The Address Verification System (AVS) designed to prevent online fraud using credit cards is instead being used by criminals to commit fraud, according to a warning issued by fraud protection consultants 3rd Man. AVS is used by credit card companies and banks to verify the identity of a card user, checking their billing address against the address held by the card issuer. But hackers have been able to access retailers’ database to obtain information to circumvent the address controls. 3rd Man suggests the breach of the systems controls could potentially lead to millions of pounds of fraud.

FRC updates Combined Code

The Financial Reporting Council is publishing an updated Combined Code. The revised code no longer restricts an individual from chairing more than one FTSE 100 company and will allow chairmen of listed companies outside the FTSE 350 to also sit on their audit committees, providing they do not chair them and were regarded as independent when initially appointed. Most companies will begin to apply the revised code in 2009, reporting against them for the first time in 2010.

White list of offshore centres published

The Channel Islands and the Isle of Man have been given only qualified status in a European Union approved ‘white list’ of tax havens. The Cayman Islands and other UK Caribbean dependencies have been excluded from the list altogether.

Finance execs dissatisfied with their departments

A mere 10% of finance heads are very satisfied with their departments’ workforces, a survey conducted by Accenture has found. Attracting and retaining good staff was recognised by finance executives as one of their key challenges over the next two years. But they admit that their companies are not good enough at training and development to improve staffs’ skills. Globalisation is named as another challenge, giving rise to demands for new capabilities amongst staff and a need to respond to rapid change and a greater focus on cost control.

Call for more tax staff

The Association of Revenue and Customs has called for the UK Government to increase resources allocated to HM Revenue & Customs, to combat the recruitment of experienced tax inspectors by the private sector. The loss of key staff is causing problems in its work countering tax evasion, says ARC, which represents senior staff. It called for higher pay and more resources to be spent on staff training and development.

ICFR gets backing from Big Four

The new International Centre for Financial Regulation is being backed by donations of £100,000 from a consortium of the Big Four firms. The City of London is putting a million pounds into the initiative, while the Government has promised £2.5m over three years. The ICFR will be a global body based in London, promoting more effective financial regulation. It was proposed last year in a paper written for the Treasury by Lord Currie. The initial chief executive is to be Barbara Ridpath, managing director of Standard & Poor’s in Europe.

IASB and FASB publish revised conceptual framework

The International Accounting Standards Board and the Federal Accounting Standards Board have published an exposure draft, seeking views on the revised conceptual framework. It seeks views on an improved objective of financial reporting, the qualitative characteristics of information provided by financial reporting and constraints on the provision of that information. The draft reflects revisions made to its initial consultation document following previous comments. It proposes that the objective of financial reporting is to provide financial information useful to present and potential equity investors, lenders and other creditors and presents an improved description of ‘faithful representation’.

Woolworths fined

Woolworths has been fined £350,000 by the FSA for failing to disclose market-sensitive information in a timely manner. The breach occurred when there was a variation in the terms of a supply contract held by its subsidiary Entertainment UK, which cut Woolworths’ profits for 2006/7 by £8m. Failure to disclose the information promptly created a false market in Woolworths’ shares for 29 days, breaching listing and disclosure rules.

New Iraq mis-spending claims

Fresh allegations of misuse of US government money in Iraq have been made. A senior US army official in charge of the Pentagon’s largest contract in post-invasion Iraq claimed that he was pushed out of his job after questioning the legitimacy of recharges imposed by the contractor. Army auditors suggested that more than $1bn of spending by the contractor were not supported by adequate records.

Pension funds pessimistic about deficits

Trustees at a quarter of pension schemes currently in deficit expect their schemes still to be in deficit in 10 years time, according to a survey carried out by fund advisers Aon Consulting. Schemes that do not have clear plans to move out of deficit are in breach of the expectations laid down by the Pensions Regulator, under the Pensions Act, 2004. Aon predicts that these schemes can expect to be put under close scrutiny by the regulator.