Saturday, December 10, 2011

A sense of entitlement doesn’t mean wanting a job and a pension , Sir Roger Carr, it means unlimited greed at the expense of others

Many of the same people who are paying themselves  salaries from several hundred thousands to millions every year, plus the same again in bonuses, are condemning public sector employees for their ‘sense of entitlement’ in wanting jobs and pensions; and the unemployed for wanting to have enough money to eat. One of them is Sir Roger Carr, the head of the CBI (Confederation of British Industry).

Last month the Independent reported Sir Roger telling a conference sponsored by Barclays bank’s corporate division that

 “Most of us... have grown up in the West with a sense of entitlement – to jobs, opportunity, wealth,” he said. “What's happening all around us is a cultural cold shower, a move from entitlement, a recognition that things have changed, nothing is by right: we have to earn our place in a vigorously competitive world as individuals and as nations.”

adding that  “We need to encourage all those in positions of authority – government, opposition, regulators and commentators – to stop the demonisation of industry: banking, energy or defence.” (1)

Because of course it’s “demonisation” to place the blame for the crisis on the people who actually caused it, who demanded deregulation, got it and used it to commit fraud on a massive scale – often by buying and selling worthless ‘assets’ like collateral debt obligations and demanding a commission on each sale.

In Carr’s world, if regulators so much as criticise these industries now, never mind actually regulate them (little sign of that) that’s ‘demonisation’.

Demonising energy industry executives’ sense of entitlement

Since 2004 Sir Roger has been chairman of Centrica, which owns British Gas, of which Scottish Gas is a subsidiary.

According to Centrica’s website, Carr’s salary in 2010 was £470,000, up from £450,000 in 2009,  while in 2011 there was an average fall of 4.5% for everyone employed in the UK(far more for those made unemployed). Carr earned an absolute amount 18 times higher than median earnings in the UK of around £26,000 for most people in 2010 and 2011(2) – (4).

That’s only the pay for one of his four paid jobs, which, according to the CBI website, also include ‘deputy chairman & senior independent director of the Court of the Bank of England... senior advisor to KKR - the world's largest private equity company’ and ‘visiting fellow of Said Business School, University of Oxford’.

The Bank of England jobs seem to pay at least £150,000 a year based on the bank’s annual report, bringing Carr’s annual income to a minimum of £620,000 in 2010, or 23 times median earnings, without including his pay from KKR or the University of Oxford (5) .

Sam Laidlaw, the Chief Executive of Centrica, had a basic salary of £2 million in 2010. He also had shares and pension payments worth between £2 millionand £8million. That makes Laidlaw’s pay somewhere between 76 and 380 times median earnings in the UK (6) – (7).

I’d be surprised at his lack of self-consciousness in accusing the majority of people of ‘a sense of entitlement’ in these circumstances, but as the late American economist J.K Galbraith often pointed out, people making huge amounts of money often convince themselves this must be due to their own genius rather than to any unfairness or fault in the system they work in – and that anyone who has far less must have less due to their moral failings.

British Gas is one of the ‘big six’ British energy companies found to have continually increased it’s prices above rises in it’s costs, to have maintained price increases permanently after short term increases in the price of buying gas wholesale and to have failed to pass on anything like the full reduction in wholesale costs when prices fell.

A study by Manchester University found thatIn the first six months of 2004, retail electricity prices were on average £1.93 per 100 kilowatt hour higher than the wholesale measure. By 2010 this gap had more than doubled, to over £4. It narrowed in 2011 as a result of well-publicised cost increases in the wholesale market, but averaged £2.73 in summer – even before the price rises passed on to householders by the big six this autumn….. around 80% of the winter price spike was passed to the consumer price, but when wholesale markets fell in summer, retail prices moved far less – only around 50% of the amount… The data also shows that when wholesale prices suddenly spike – as they did in 2009 – consumer prices rapidly follow suit. However, prices fall back more slowly and to a lesser degree after the wholesale price spike abates.’ (8)

In short, profiteering on gas prices when the majority are suffering pay cuts in real terms and the poorest and pensioners are having to choose whether to heat their homes or eat.

Not only that, but an estimated 2,700 people in Britain will die this winter due to cold – due to being unable to afford to heat their homes(9).

That makes Sir Roger’s condemnation of the ‘sense of entitlement’ of others ring very hollow. In fact it makes it sound like the massive arrogance and smugness of someone who feels entitled to profit at everyone else’s expense – much like the hedge fund managers and the bank chief executives and government ministers.

It also makes his claim that the regulators are demonising the energy industry sound pretty far fetched ; and difficult to understand why a government which claims “we’re all in it together” thought he deserved to be given a knighthood in January this year.

Demonising the Defence Industry

Now I find myself itching at the fingertips to demonise the defence industry some, partly because it’s just so easy.

It has been arming murdering dictatorships like Saddam Hussein’s (in the 1970s and 1980s) and the Saudis (today).  If the dictators fail to pay then the Arms Export Credit Guaranteesystem means the taxpayer in the UK pays the bill, as they did after the 1991 war with Saddam.

Until well into the Arab Spring  British arms companies were also arming the dictatorships shooting protesters across the Arab world, with the approval of the Cameron government (10).

The defence industry gets government subsidies on a scale which most civilian manufacturing companies can only dream of – including the continuation of the construction of two of the largest aircraft carriers ever built by BAEsystems.

The excuse given by David Cameron is that the last government supposedly drafted the contracts in a way that would make cancellation more expensive than paying for both to be completed. Yet when the National Audit Office questioned this and requested documents on the cost and the terms of the contract, Cameron refused to let  them see any of them. When the NAO got hold of some documents, they found the cost has increased from £3.65 billion in 2007 to £6 billion today and probably £10 billion in the end. One will be ‘left in a state of “extended readiness”(i.e left to rust) when it’s finished in 2016, while the other won’t have any planes till 2020, when it’ll have just 6, then 12 in 2023(11) – (14).

That’s just one example of how the MoD subsidises arms companies for billions at taxpayers’ expense every year, using money that could provide services, fund research and development of new technologies and medicines, or provide loans to civilian industries that provide far more jobs.

Here are a couple of others.

The senior management of the banking, financial, energy and defence industries seem to think it’s clever to try to turn accusations of a ‘sense of entitlement’ back onto the majority. It lacks any credibility.

(1) = Independent 22 Nov 2011 ‘CBI president attacks 'sense of entitlement' ’,

(2) = Centrica Annual Report and Accounts 2010 – Financials – Summary Reports -Directors' emoluments, pension benefits and interests in shares’ ,

(3) = 23 Nov 2011 ‘UK incomes fall 3.5% in real terms, ONS reveals’, people in part-time jobs, fall is 4.5% including inflation – a 0.5% rise minus 4.5% inflation)

(4) = Office for National Statistics ‘2011 Annual Survey of Hours and Earning -Median full-time gross annual earnings’,

(5) = Bank of England Annual Report 2010 - Remuneration of Governors, Directors and MPC members, (page 40 under sub-heading ‘Other senior executives’)

(6) = See (2) above

(7) = Centrica – Governance - Aligning rewards with results  - Remuneration mix', (shows salary makes up only about 20% of executives total annual payments)

(8) = 02 Dec 2011 ‘Big six energy firms face fresh accusations of profiteering’,

(9) = 19 Oct 2011 ‘Fuel poverty 'will claim 2,700 victims this winter'’,

(10) = 21 Jul 2011 ‘MP attacks Hague over review of arms sales to Arab regimes’, , ‘Senior MPs have delivered a severe rebuke to the government over its approval of the sale of a wide range of arms, including sniper rifles, machine guns and "crowd control goods" to countries in the Middle East and north Africa……….Britain supplied the weapons despite official guidelines stating that exports of equipment that could be used for internal repression must be blocked. In a damning report earlier this year, the Commons arms export controls committees demanded an urgent review of exports to "authoritarian regimes worldwide"………..They referred specifically to the Mubarak and Gaddafi regimes in Egypt and Libya, to Bahrain, Syria, Yemen and Saudi Arabia. Observers said military trucks sent by the Saudis to help suppress demonstrations in Bahrain were British.’

(11) = Guardian 07 Jul 2011 ‘National Audit Office challenges £6bn project to build aircraft carriers’,

(12) =  11 Jul 2011 ‘David Cameron 'prevented independent watchdog seeing aircraft carrier papers'’,

(13) = Channel 4 News 07 Jul 2011 ‘Guardian 07 Jul 2011 ‘Full fact check : the real cost of cancelling aircraft carriers’; ‘In 2007, the Labour government decided to build two 65,000-ton Queen Elizabeth-class aircraft carriers at an estimated cost of £3.65bn….But since then, costs have spiralled dramatically, with the projected outlay now thought to be £6.24bn for just one fully operational carrier, the Queen Elizabeth…..The second ship – the Prince of Wales – will be built, but left in a state of “extended readiness”, meaning that fighter planes won’t be able to launch from or land on its deck…..It gets worse: the NAOnow thinks the eventual bill for the programme “will significantly exceed £10 billion”.’

(14) = Guardian 29 Nov 2011 ‘MPs warn Royal Navy's carriers will be costly, late, and of limited use’, ; government admits one carrier to be mothballed on construction in 2016, one to have no planes on it till 2020, when it will have only 6, raised to 12 in 2023

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